UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

ANNUAL REPORT UNDERPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended: December 31, 2021

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

For the fiscal year ended: December 31, 2017

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from________ to ___________

Commission File No.: 000-54090

Commission File No.: 000-54090

CAREVIEW COMMUNICATIONS, INC.

CAREVIEW COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

NevadaNevada95-4659068

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

405 State Highway 121, Suite B-240, Lewisville, TX 75067

405 State Highway 121, Suite B-240, Lewisville, TX75067

(Address of principal executive offices)

Registrant’s telephone number, including area code: (972)943-6050

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Title of Each Class

Registrant’s telephone number, including area code: 

Trading Symbol

(972) 943-6050Name of Each Exchange on Which
Registered

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:   Common Stock, Par Value $0.001 par value per share      
CRVW(Title of class)OTC Markets

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No

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 ☐ No

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes ☒ No ☐

Indicate by check mark 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’sregistrant'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, or a smaller reporting company, or an emerging growth company. See the definitions of “large"large accelerated filer,” “accelerated filer”" "accelerated filer", "smaller reporting company," and “smaller reporting company”"emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐Accelerated filer ☐
Non-accelerated filerSmaller reporting company
(Do not check if 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 ☐ No

The aggregate market value of the voting common stock held by non-affiliates of the registrant (93,066,061 shares) based on the closing price of the registrant’s common stock as reported on OTCQB onat June 30, 2017, which was the2021 (the last business day of the registrant’sregistrant's most recently completed second fiscal quarter,quarter) was $9,771,936.approximately $16,700,000. For purposes of this computation, all officers, directors, and 10% beneficial owners of the registrant are deemed to be affiliates.

The number of shares outstanding Such determination should not be deemed to be an admission that such officers, directors, or 10% beneficial owners are, in fact, affiliates of the registrant’sregistrant.

As of March 31, 2022, the registrant had 139,380,748 outstanding shares of common stock, as$0.001 par value, which is its only class of March 30, 2018 was 139,380,748.common stock.

DOCUMENTS INCORPORATED BY REFERENCE:

None.

 

Table of Contents

TABLE OF CONTENTS
Page No.
ITEM 1.BUSINESSBUSINESS.3
ITEM 1A.RISK FACTORSFACTORS.1813
ITEM 1B.UNRESOLVED STAFF COMMENTSCOMMENTS.1813
ITEM 2.PROPERTIESPROPERTIES.1813
ITEM 3.LEGAL PROCEEDINGSPROCEEDINGS.1813
ITEM 4.MINE SAFETY DISCLOSURESDISCLOSURES.1813
ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED  STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY  SECURITIESSECURITIES.1914
ITEM 6.SELECTED FINANCIAL DATA[Reserved]2015
ITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSOPERATIONS.2115
ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKRISK.2820
ITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATADATA.2820
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREDISCLOSURE.2820
ITEM 9A.CONTROLS AND PROCEDURESPROCEDURES.2821
ITEM 9B.OTHER INFORMATIONINFORMATION.2922
ITEM 10.DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCEGOVERNANCE.3023
ITEM 11.EXECUTIVE COMPENSATIONCOMPENSATION.3932
ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERSMATTERS.4335
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEINDEPENDENCE.4537
ITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICESSERVICES.4537
ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULESSCHEDULES.4638
ITEM 16.FORM 10-K SUMMARY10K SUMMARY.5042


Statement Regarding Forward-Looking Information

 

This Annual Report on Form 10-K contains forward-looking statements. For example, statements regarding our financial position, business strategy, product development, and other plans and objectives for future operations, and assumptions and predictions about future product demand, research and development, marketing, expenses and revenue are all forward-looking statements. These statements may be found in the items of this Annual Report entitled “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” as well as in this Annual Report generally. These statements are generally accompanied by words such as “intend,” “anticipate,” “believe,” “estimate,” “potential(ly),” “plan,” “may,” “will,” “continue,” “forecast,” “predict,” “could,” “would,” “should,” “expect,” or the negative of such terms or other comparable terminology.

INTRODUCTORY COMMENT

Throughout these Notes to the Consolidated Financial Statements, the terms “we,” “us,” “our,” “CareView,” or the “Company” refers to CareView-NV, and unless otherwise specified, includes our wholly owned subsidiaries, CareView Communications, Inc., a Texas corporation (“CareView-TX”) and CareView Operations, LLC, a Nevada limited liability company (“CareView Operations”). For the year ended December 31, 2016 we also included CareView-Hillcrest, LLC (“CareView-Hillcrest”) and CareView-Saline, LLC (“CareView-Saline”), collectively, (the “Project LLCs”). During 2016 we owned 50% of CareView-Hillcrest and CareView-Saline, with each determined to be variable interest entities (“VIEs”) in which we exercise control and are deemed the Primary Beneficiary. Concurrent with the execution, and pursuant to the terms, of a Settlement and LLC Interest Purchase Agreement between Rockwell Holdings I, LLC and the Company (the “Settlement Agreement), as discussed in NOTE 13 of the Notes to Consolidated Financial Statements attached hereto, all assets and liabilities of the Project LLCs were transferred to our wholly owned subsidiary, CareView Communications, Inc. a Texas corporation, effective January 1, 2017. On June 12, 2017 we filed Form 510-Limited Liability Company Articles of Dissolution with the State of Wisconsin resulting in the dissolution of the Project LLCs effective that date.

PART I

ITEM 1.BUSINESS.

Our BusinessCautionary Note Regarding Forward Looking Statements

Our missionThis 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 guaranties 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 beplace undue reliance on forward-looking statements contained herein, which speak only as of the leading providerdate hereof. We assume no responsibility to update any forward-looking statements because of productsnew 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 on-demand application services forin the healthcare industry, specializingother 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,” “CareView,” or the “Company” refers to CareView Communications, Inc., a Nevada corporation, originally formed in bedsideCalifornia 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”) and CareView Operations, LLC, a Nevada limited liability company (“CareView Operations”).

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 software toolssolutions, 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 improve hospital communications and operations, andincrease patient education and entertainment packages. Our proprietary, high-speed data network system is theprotection, providing next generation solutions that lower operational costs and foster a culture of safety among patient, staff, and hospital leadership. With installations in more than 150 hospitals, CareView has proven that its innovative technology is creating a culture of patient care monitoring that allows real-time bedside and point-of-care video monitoring designedsafety 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 improvefit any facility while significantly increasing patient safety and overalloperational savings. All configurations feature HD cameras, high-fidelity 2-way audio/video, LCD displays for the ultimate in capability, flexibility, and affordability.


SitterView® and TeleMedView allows hospital costs. 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.

COVID-19

The entertainment packagesCompany has considered the effects of COVID-19 in the preparation of the financial statements as of and patient education enhancefor the patient’s qualityperiod ended December 31, 2021. We have been able to continue providing services to our current customer base and have not yet experienced a slowdown in collections.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (the “Act”) was enacted. The CARES Act is an approximately $2 trillion emergency economic stimulus package in response to the coronavirus outbreak, which among other things contains numerous income tax provisions. Some of stay. Reported results from CareView-driven facilities prove that our products reduce falls, reducethese tax provisions were retroactively effective for years ending before the costdate of sitter fees, increase patient satisfactionenactment.

Current Products and reduce bed turnaround timeServices

CareView Patient Safety System

Our CareView Patient Safety System provides innovative ways to increase patient flow. Forprotection, provides advanced solutions that lower operational costs, and helps hospitals foster a culture of safety among patients, we have a convenient in-room, entertainment package that includes high-speed Internet, access to first-run on-demand moviesstaff, and visual connectivity to family and friends from anywhere in the world. For the hospital we offer tools to provide superior patient care, peace of mind and customer service satisfaction.

Our CareView System® suite of video monitoring, guest services and related applications connect patients, families and healthcare providers. Through the use of telecommunications technology and the Internet, our evolving products and on-demand services greatly increase the access to quality medical care and education for patients/consumers and healthcare professionals.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 informative and satisfying. Our suite of products and services can simplify and streamline the task of preventing and managing patients’ falls, enhance patient safety, improve quality of care, and reduce costs associated with bringing information technology directly to patients, families and healthcare providers.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 home 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.


CareView’s secure video monitoring system connects

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, room tothe 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 touch-screen monitor atgeneral care unit, the nursing station or a mobile handheld device, allowingCareView Portable Controller can be easily removed from mounts and moved where the nursing staff to maintain a level of visual contact with each patient. This configuration enhances the use of the nurse call system, reduces unnecessary steps to and fromworkflow dictates, making this application perfect for general use. For high-risk patient rooms where behavior and facilitatesself-harm may be a host of modules forfactor, or where a patient safety and workflow improvements. must be continuously monitored, the CareView fixed Controller can be installed seamlessly in the ceiling tiles leaving no exposed wiring making it ligature resistant.

The CareView Patient Safety System suite can be easily configured to meet the individual privacy and security requirements of any hospital or nursing facility. The Health Insurance Portability and Accountability Act of 1996CareView is (“HIPAA’HIPAA”) compliant patient approved video record can be included as part of the patient’s medical record and serves as additional documentation of bedside care, procedures performed, patient and hospital ancillary activities, safety or care incidents, support to necessitate additional clinical services, and, if necessary, as evidence.HITRUST certified. Additional HIPAA-complianceHIPAA-compliant features allow privacy options to be enabled at any time by the patient, nurse, or physician.

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

Our Products and Services

We offer a variety of products and services designed to meet individual hospital needs to enhance quality patient care and safety. Our services are offered with no capital expenditure by the hospital and do not require extensive integration with the facility’s management information system. For healthcare facilities looking for an effective, affordable and innovative way to improve performance throughout the facility, our products are the answer. CareView-driven facilities have shown documented success in reducing patient falls and sitter costs, improving overall patient satisfaction, streamlining and documenting patient education at the bedside, and improving patient flow and overcrowding. These successes protect the facilities’ reimbursement from loss due to never events and poor patient satisfaction.

The CareView Patient Safety System offers the following service packages:

PRIMARY PACKAGE

1.NurseView®. The NurseView module allows authorized users to view monitored rooms from the nurse’s station. All privacy and access options are determined and configured by the hospital.
2.PhysicianView®. The PhysicianView module enables the admitting physicians and non-physician staff members to view their patients from any personal computer. All privacy and access options are determined by the hospital.
3.Virtual Bed Rails®. The Virtual Bed Rails fall prevention module allows the hospital to activate a safety feature that will notify the nursing station or the caregiver’s mobile device when a patient breaches a defined area in the patient room.
4.Virtual Chair Rails®. The Virtual Chair Rails fall prevention module allows the hospital to activate a safety feature that will notify the nursing station or the caregiver’s mobile device when a patient breaches a defined area in the patient room.

5.Fall Management Program™. The Fall Management Program allows the hospital to separately file, identify and research the activity of patients for whom the Virtual Bed Rails or Virtual Chair Rails fall prevention modules were engaged.
6.Sitter Management Program. The CareView Sitter Management Program allows authorized users to monitor an unlimited number of patient rooms from one nursing station or mobile device.
7.Rounding. We offer a timed rounding module to help nursing staff monitor patients.
8.SecureView®. The SecureView module monitors and records bedside activity in the patient’s room. All privacy and access options are determined and configured by the hospital.

ADDITIONAL CAREVIEW PRODUCTS

1.BedView®. The BedView module allows authorized users to monitor the status and availability of facility beds remotely.
2.Patient Education. We provide a delivery mechanism for patient education materials.
3.FacilityView®. The FacilityView module monitors and records activity in any area that the hospital would desire security cameras to be placed. All privacy and access options are determined and configured by the hospital.
4.Nurse Alerts and Reminders. The CareView System monitoring system can be configured to provide nursing alerts and reminders.
5.Ulcer Management. The CareView System can be configured to ensure that patients who are at risk for developing pressure ulcers are turned from position to position.
6.CareView Connect™. This communications device and mobile monitoring system allows all CareView modules to be utilized with handheld mobile devices. CareView Connect can be used to deliver voice communication between mobile devices, patient rooms, and the hospital’s phone infrastructure.
7.CareView Connect App. The CareView Connect App (the “App”) can be used by the customer on an Apple or android mobile device used in connection with the CareView System. The App will display video feeds from NurseView as well as give caregivers the ability to receive and resolve Virtual Bed Rail and Virtual Chair Rail alarms.
8.NICUView®. The NICUView module provides a live, continual feed from the Neo-Natal Intensive Care Unit (“NICU”) to allow parents who have been discharged from the hospital, or friends and family, to view the newborn and obtain clinical information from home.
9.Patient Feedback Applications. CareView provides a delivery mechanism for patient feedback applications.
10.The CareView Broadcast System. We provide the hospitals with the capability to broadcast to each room a variety of educational, informational and service communications to patients and guests alike. We do not provide educational content. The hospitals are allowed to access the system for:
a.Welcome message – a pre-recorded message welcoming the patient to the facility.
b.Pre-procedure Education – to inform and educate the patient regarding a procedure to be performed (i.e. angioplasty, hip replacement, spine surgery, etc.).
c.Patient Condition Education – to inform and educate the patient regarding a condition they have and suggested lifestyle improvements to live with those conditions (i.e. high blood pressure, diabetes, etc.).
d.SerenityView - to select scenes and sounds to create a relaxing atmosphere for patients during their stay.

GUEST SERVICES PACKAGE

1.PatientView®. The PatientView module enables patients to allow family members and friends to monitor and videoconference with them in their private rooms. All privacy and access options are determined and configured by the hospital.
2.NetView®. The NetView module allows the patient access to the internet using the wireless keyboard and the television in the room or personal laptop computers.

3.MovieView®. The MovieView module provides the connectivity to allow the patient, family and/or friends access to a wide selection of movies for their viewing pleasure while they are in their hospital room. We do not provide the movies or other content.
4.BabyView®. The BabyView module allows mothers to view their newborn child from their hospital bed in the nursery or NICU.

Pricing Structure and Revenue Streams

The CareView System suite is provided and installed in healthcare facilities at no charge to the facility after which we generate revenue from subscriptions to its services. We work with each hospital on pricing to offer an affordable package based on the demographics of the hospital’s patients. The pricing structure with each hospital is negotiated separately and may vary depending on the hospital’s desire to include premium services at no charge to the patient. Typically, we offer the Primary Package at a price per bed with varying price structures based on number of beds in each facility. The Guest Services Package is generally offered to the patient as a complimentary service of the hospital; however, hospitals have the option to charge their patients for these services. The hospital may elect to charge a package price for all services for any combination of days, including a package for the patient’s entire stay. Each facility may decide to bundle products for specialty pricing to the patients or may offer any or all services at no charge to the patient. All of our revenue generated during the years ended December 31, 2017 and 2016 was derived from the sale of the Primary Package, Additional CareView Products, Guest Services Package and related services to hospitals.

Products in Development

1.CareView Connect. We are continuing development on a platform targeted at assisted living and independent living. The system uses sensors, including accelerometers and motion detectors, to convey information about patient safety without the use of cameras. The system provides a portal for caregivers and family to check in on the resident.
2.Alternative Sensors. Based on our research and development efforts, we see value in using alternative sensors, such as thermal cameras, to improve automated monitoring of patient safety, as well as other services.
3.Improving Detection Algorithms. We are continuing to develop and hone new techniques and algorithms geared towards improving system functionality in the Virtual Rails product. Advances include techniques based on machine learning and statistical probability.
4.Improving Asset Management and Tracking Module. We are continuing to develop the Asset Management and Tracking Module, based on new technology that provides improved precision, better performance, and is more accessible.
5.Business Intelligence Module. We are continuing to develop the Business Intelligence module. This module collects data and identifies trends in patient safety and staff performance, as well as and industry trends.

Products and Services Agreement with Healthcare Facilities

We offer our products and services through aCareView’s subscription-based model withis 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 System’sPatient Safety System products and services deployed to a healthcare facility, and maintain and service all equipment installed by us. TermsUnder the subscription-based model, terms of each P&S Agreement require the healthcare facility to pay us a monthly subscription fee based on the number of selected, installed, and activated services. None of the services provided through the Primary Package or GuestView module 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 facilities that are a part of these healthcare companies enter into individual facility level agreements that are substantially similar tolike 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 similar tolike P&S Agreements, are generally three or six-months in length and can be extended on a month-to-month basis as required. WeRegarding 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 non-exclusivenonexclusive license to use the software, network facilities, content, and documentation on and in the CareView Patient Safety System suite to the extent, and only to the extent, necessary to access, explore and otherwise use the CareView Patient Safety System suite in real time. Such non-exclusive license expires upon termination of the P&S Agreement.

We use specific terminology in an effort to better define and track the staging and billing of the individual components of the CareView System suite.Patient Safety System. The CareView Patient Safety System suite includes three components which are separately billed; the Room Control Platform (the “RCP”)CareView Controller (previously known as RCP), the Nurse Station,CareView SitterView Monitor, and mobile devicesthe 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 “RCP” or “Room Control Platform”“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 Nurse StationsSitterView 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.

 

Update

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 Significant Customer Agreementsacceptance 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 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.

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 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 reason for alerts and provides metrics around response time. CareView Connect’s solution involves several passive sensors that monitor the resident.

 

HealthTrustCaregiver 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.

 

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.

Group Purchasing Agreement with HealthTrust Purchasing Group, LP

On December 14, 2016, the Company entered into 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.

Hospital Corporation of America

West Florida Division

On April 26, 2016, we entered into a Master Agreement withOctober 1, 2018, the West Florida Division of Health Corporation of America (“HCA”), the nation’s leading provider of healthcare services. The West Florida Division has approximately 2,600 beds. The three-year divisional Master Agreement follows the successful P&S Pilot Agreement with HCA’s Blake Medical Center. Currently, we are billing 693 units monthly.


Mountain Division

On December 20, 2016 we entered into a P&S Agreement with HCA Mountain Division pursuantCompany added CareView Connect to the HealthTrust GPO Agreement. Under this agreement, our products and services will be available to all 12 facilities in

On November 1, 2020, the division, totaling approximately 1,600 staffed beds.

Capital Division

On January 1, 2017, we entered into a P&S Agreement with HCA Capital Division pursuantupdated contracting model has been added to the HealthTrust GPO Agreement. We now have signed P&S Agreements for three facilities in the Capital Division, Lewis-Gale Medical Center, CJW Medical Center and Henrico Doctor’s Hospital totaling 169 units. There are 14 facilities in the division totaling approximately 3,200 staffed beds.

East Florida Division

On January 25, 2017, we entered into a P&S Agreement with HCA East Florida Division pursuant to the HealthTrust GPO Agreement. Under this agreement, our products and services will be available to all 13 facilities in the division, totaling approximately 3,600 staffed beds. Currently, we have 42 units in place at one facility.

Research Medical Center

In February 2015, we executed a six-month P&S Pilot Agreement for 280 beds with HCA to install the CareView System in their Research Medical Center facility located in Kansas City, Missouri. Currently we are billing 262 units monthly under the P&S Pilot Agreement and are continuing to work with Research Medical Center.

Community Health Systems, Inc.

On April 1, 2015, we closed a Master Agreement with Community Health Systems, Inc. (“CHS”). Under the terms of the Master Agreement, currently, we are billing 1,016 units monthly in 17 hospitals. In early 2016, Mat-Su Regional Medical Center, a legacy CHS facility completed policy revision for patient video monitoring for CHS. With the policy revision complete, we have approval to contact all CHS facilities. We have had meetings with CHS market leaders and their Chief Nursing Officer and have their support, which could result in a potential roll-out of approximately 15,000 additional beds out of their estimated 27,000 staffed beds.

The Community Medical Centers HealthCare Network-Central California

On July 7, 2016, we signed a P&S Pilot Agreement with Clovis Community Medical Center, owned by The Community Medical Centers HealthCare Network-Central California (“Community Medical HealthCare”), which owns approximately 1,120 beds. We have completed the initial rollout of 64 units at Clovis Community Medical Center and 84 units at Community Regional Medical Center. Both facilities became billable in May 2017. Community Medical HealthCare plans on expanding the CareView System rollout over time.

Tenet Healthsystem Medical, Inc.

In February 2014, we entered into a Master Agreement with Tenet Healthsystem Medical, Inc. (“Tenet”). The terms of the Master Agreement provide for the execution of a facilities level agreement with each hospital. We are currently billing 1,057 units monthly.


Kaiser Permanente

We currently are billing 589 units monthly in seven Kaiser Permanente (“Kaiser”) facilities. In April and May 2014, we executed P&S Pilot Agreements with Kaiser’s Baldwin Park and Panorama City facilities, respectively. This is in addition to our P&S Pilot Agreement with Kaiser Orange County covering its facilities in Anaheim and Irvine, California which was executed in October 2013. The P&S Pilot Agreements for these four facilities provide for a monthly renewal until termination or replacement by a Master Agreement or individual P&S Agreements. We finalized a P&S Agreement with the Irvine facility in October 2016 and we are now in the process of finalizing a conversion from a P&S Pilot Agreement to a P&S Agreement with the Anaheim facility. Both of these facilities are in the process of determining their needs as it relates to adding additional units.

On August 2, 2015, we signed a P&S Agreement with Kaiser’s San Diego Medical Center. We currently have 28 installed units at this facility and anticipate adding additional beds once use and need has been determined.

In early 2016 we commenced discussions with Kaiser Northwest Region for deployment of the CareView System in Kaiser’s hospitals in Oregon. On August 10, 2016, we signed a P&S Pilot Agreement with the Northwest Division of Kaiser Permanente. Execution of this agreement signals our expanded growth within the Kaiser system. The agreement calls for the installation of 81 units at the Westside Medical Center.

After a successful pilot, in February 2016 we executed a P&S Agreement with Kaiser’s Los Angeles Medical Center for a total of 136 units. We are also in pilot discussions with other Kaiser facilities in the San Diego area. While we are continuing our sales efforts at the hospital and regional level, there are still discussions regarding a possible Master Agreement. Notwithstanding those discussions we will continue to sell into other Kaiser Regions and look to convert our P&S Pilot Agreements into P&S Agreements that can be replaced by a Master Agreement if and when one is finalized.

Parkland

On October 31, 2014, we signed a P&S Pilot Agreement with Dallas County Hospital District d/b/a Parkland Health & Hospital System (“Parkland”) to install 100 units with the CareView System. In June 2015 we signed a P&S Agreement with Parkland and are currently billing 425 units.

Geisinger Health System

In 2015 we signed a P&S Pilot Agreement with Geisinger Medical Center (“GMC”). Currently there are 144 monthly billable units at GMC. The results of the pilot were favorable and we have finalized the terms of a Master Agreement with GMC. There are approximately 1,800 beds within Geisinger System Services (“GSS”). Upon completion of the Master Agreement, we anticipate rolling out product and services to all owned and affiliated facilities. Currently we are in discussions with two GSS facilities who have expressed interest in installing the CareView System. We will also continue our sales efforts to the balance of GSS.

Baptist Health South Florida

Baptist Health South Florida (“BHSF”) is a system comprised of 6 hospitals with 1,700 beds in the Miami area. They entered into a P&S Pilot Agreement in January 2016 to cover 99 beds. We are currently billing 103 units monthly. After a successful pilot BHSF has decided to move forward with a Master Agreement which was finalized in July 2017. We received a contract for 314 additional units in October 2017. CareView is in discussions with two additional BHSF facilities.


Adventist Health

In March 2017 we entered into a P&S Agreement with White Memorial Hospital for 78 units (“White Memorial”) following a successful pilot. White Memorial is part of the Adventist Health. There are a total of 16 facilities in the Adventist Health network. We are working on collecting data in anticipation of setting up a meeting to discuss a Master Agreement and system-wide roll-out. To that end, on July 24, 2017 we signed a P&S Agreement with Glendale Adventist for 68 units and on November 14, 2017 we began billing Adventist Health Bakersfield for 58 units.

Baylor Scott & White Health

Under the terms of a P&S Agreement with Baylor Scott & White Medical Center Frisco, we are currently billing 156 units monthly. On June 30, 2017 we executed a Master Agreement with Baylor Scott & White Health (“BSW”) corporate. We have had meetings with the following BSW facilities as we move toward a corporate roll-out, which include: BSW Temple, BSW All-Saints, BSW Hillcrest, BSW Round Rock, BSW Waxahachie, and BSW White Rock. These facilities are gathering data so we can generate proposals.

VA Central Arkansas Veterans Healthcare System

The Company accomplished its first contract with a VA facility, specifically the Central Arkansas Veterans Healthcare System. The CareView System is now completely installed at John L. McClellan Memorial Veterans Hospital in Little Rock with 103 units installed and billable. Central Arkansas Memorial Veterans Hospital is in process of adding approximately 125 beds including 40 in their Community Living Center, a VA Nursing Home.

This agreement is pursuant to the Company’s General Service Administration (“GSA”) Multiple Award Schedule contract (“MAS”). The MAS allows us to sell the CareView System at a negotiated rate toproprietary hardware and license the approximate 169 VA facilities with over 39,000 licensed beds and the approximate 42 DOD hospitals with over 2,600 licensed beds. 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. We are hopeful that once installation and training is complete, the other VA hospitals will also want to participate. Our products and services representsoftware on an enormous opportunity to improve the health and safety of our Nation’s veterans.annualized basis.

Other VA Opportunities

The Company is currently in discussions with several other large VA Hospitals and anticipates additional orders under its MAS in the first half of 2018. Specifically, the Company is in the contracting process with other VA facilities, including the Mountain Home VA Healthcare System in Tennessee, the VA Puget Sound Health Care System in Seattle Washington, the Oklahoma City VA Health Care System, in Oklahoma City, Oklahoma and the Lexington VA Medical Center in Lexington Kentucky.

Steward Healthcare

On April 13, 2017 the Company signed a Master Agreement under the HealthTrust GPO Agreement with Steward Health Care (“Steward”). Steward is headquartered in Boston, Massachusetts. Steward recently announced the acquisition of IASIS Healthcare and eight hospitals from CHS bringing its total to 35 hospital facilities in its network. Under the Master Agreement, CareView will install approximately 867 units in 11 hospitals in Massachusetts and 66 units in one hospital in Pennsylvania. CareView is already installed in 19 facilities and anticipates being rolled-out to the additional 5 hospitals in 2018. All totaled, we anticipate being installed in all 35 of the Steward Hospital facilities with a total of over 3,200 units installed. There have been unexpected delays unrelated to the Company. We anticipate installation to commence within 60 days of this filing.


Atlantic Health System

On January 24, 2017 the Company executed a Purchase Agreement under its HealthTrust GPO Agreement with Atlantic Health System (“AHS”). AHS is headquartered in Morristown, New Jersey and one of the leading non-profit health care systems in the state of New Jersey. The agreement calls for installation of 41 units. We anticipate a further roll-out within AHS which consists of 5 hospitals and approximately 893 staffed beds.

Baptist Southeast Texas

On May 15, 2017 we executed a Purchase Agreement under its HealthTrust GPO Agreement with Baptist Southeast Texas. Billing for 105 units began on November 1, 2017.

Montefiore

On June 8, 2017 the Company executed a P&S Pilot Agreement with Montefiore Medical Center located in New York City. The Agreement calls for the installation of 46 units. After the 6-month pilot, which began on October 31, 2017, we anticipate converting to a Master P&S Agreement and expanding within the Montefiore Health System, which is comprised of 6 hospitals and approximately 2,000 staffed beds. On December 18, 2017, CareView executed a P&S Agreement with a Montefiore rehabilitation hospital for 31 units.

LifePoint

On September 29, 2017 the Company executed a P&S Pilot Agreement with Jackson Purchase Medical Center located in Mayfield, Kentucky. This is our first agreement in the LifePoint Health System. The agreement is for 42 units and following a successful pilot we expect to convert this into a P&S Agreement. We also anticipate expansion into other hospitals in the LifePoint Health system. The Company is in the process of finalizing a P&S Agreement with LifePoint and anticipates having it in place during the 2nd Quarter of 2018.

Kootenai Health

On October 3, 2017, the Company executed a P&S Pilot Agreement with Kootenai Health located in Coeur d’ Alene, Idaho. The agreement calls for the installation of 48 units. Kootenai Health provides a comprehensive range of medical services to patients in north Idaho, eastern Washington, Montana and the Inland Northwest at several facility locations. Following positive results, we anticipate future growth in the Kootenai Health system.

Hays Medical Center

On August 10, 2017, the Company executed a P&S Agreement with Hays Medical Center located in Hays, Kansas. The agreement calls for the installation of 53 units. The Hays Medical Center was founded in 1942 and is part of the University of Kansas Health System.

Franciscan Missionaries of Our Lady Health System

On November 22, 2017, we executed a 6-month P&S Pilot Agreement with Franciscan Missionaries of Our Lady Health System’s (“FMOL”) Our Lady of the Lake Regional Medical Center for 139 units. Following positive results, we anticipate future growth in the FMOL which consists of six hospitals and 1,735 staffed beds.


Texas Health Resources

On December 13, 2017, we executed a Master Agreement with Texas Health Resources (“THR”) and a 6-month P&S Pilot Agreement with Texas Health Presbyterian Hospital Dallas for 53 units. Following positive results, we anticipate future growth in the THR system which consists of 14 hospitals and 2,853 staffed beds.

Strategic Expansion into Nursing Homes, Skilled Nursing and Assisted Living Center Markets

We always intended to expand into the skilled nursing and assisted living center markets. With the adoption of our technology, the traction of our products in the healthcare facility space and the combined interest from new and existing customers, our management believes that it is time to pursue this market.

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. To service this intended expansion, we have hired sales staff to pursue new business in these markets and we anticipate that we will sign new contracts in these markets before the end of the year.

Strategic Expansion With New Sensor Product

In the 1st quarter of 2018, the Company anticipates introducing a new sensor product that will have application in both the residential assisted living center market and the home health market. The Company has developed a sensor product, called CareView Connect TM – Quality of Life System that leverages both passive active sensors to track the activities of daily life of its subscribers.

CareView’s Quality of Life System provides peace of mind by using data from the resident’s activity, existing conditions, and environment to notify your staff or loved ones of potential emergencies and identify the need for dignified support. CareView’s Quality of Life System consists of a small emergency assist button, up to four motion sensors, one bed sensor, and one toilet sensor. Resident activity levels, medication administration, sleep patterns, and toileting can all be monitored depending on which options are selected.

The Company anticipates marketing this new product to the residents of its Independent Living and Assisted Living Center customers as well as direct sales to home health customers.


Summary of Product and Service UsageContracts

The following table shows the numberOur contracts typically include multiple combinations of healthcare facilities using our products, software solutions, and related services includingwith 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 numberend of deployed units, installed unitseach 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, 2021, and billable units as2020, the Company executed sales-based contracts with an aggregated contract sales price of February 28, 2018. The table also shows the number of pilot programs in place$5,600,000 and hospital proposals pending approval, estimated bed count if the pilot programs and pending proposals result in executed contracts, and the estimated total number of licensed beds available under the pilot programs and hospital proposals. There are no assurances that the pilot programs will be extended or the pending proposals will be approved to ultimately result in the number of estimated beds. Further, there are no assurances that we will have access to the total number of licensed beds in each healthcare facility.$1,800,000.

Installed HospitalsInstalled UnitsBillable UnitsTotal Staffed Beds in Contracted/ Pilot HospitalsPotential Units Available Under Current Contract/ Pilot Contracts(*)Units in Negotiation Prior to Contract/ Pilot
12610,1228,281162,73665,74365,396

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

Availability of Suppliers

We are not dependent on, nor do we expect to become dependent on, any one 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 into 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,seasonal; however, the availability of hospital staff is typically less available in December which impacts our ability to sale/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. In 2013, we expanded ourOur sales process to includeincludes an inside sales team and we have expanded our capabilities of providing web-based demonstrations and presentations. In addition, weWe 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.


We ensure high levels of customer service through our account representatives and through 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 RCPsCareView Controllers should they need repair or replacement. Historically, our RCPsCareView 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,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 oneanyone 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 take into accountconsider patent rights of third parties.

Joint VentureAgreement with Rockwell Holdings I, LLC

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

 

On January 31, 2017, under the terms of the Rockwell Agreement, wherein we hadhave the option to purchase Rockwell’s interest in the Project LLCs, we exercised that right by entering into a Settlement and LLC Interest Purchase Agreement with Rockwell (the “Settlement Agreement”)Agreement). Pursuant to the terms of the Settlement Agreement, we paid Rockwell the aggregate amount of $1,213,786 by the issuance of a promissory note to Rockwell for $1,113,786 (the “CareView“Rockwell Note”) and a cash payment of $100,000. Pursuant to the terms of the CareViewRockwell Note, we will make quarterly principal payments of $100,000, with each payment being made on the last day of each calendar quarter beginning with the first payment date of March 31, 2017 and continuing on the last business day of each subsequent calendar quarter through September 30, 2019. We were not in default of any conditions under the Settlement Agreement as of December 31, 2017. The final payment due on December 31, 2019 was to be a balloon payment of $13,786 representing the remaining principal balance plus all accrued and unpaid interest. Effective February 2, 2018,The Company entered an amendment (the “Rockwell Note Amendment”) to the Company’s Promissory Note to Rockwell Holdings I, LLC (“Rockwell”) dated as of January 31, 2017 (the “Rockwell Note”), pursuant to the termswhich Rockwell agreed to defer $50,000 of the modification agreement with PDL BioPharma, Inc. (“PDL”) and (“PDL Modification Agreement”), theeach $100,000 quarterly paymentspayment due under the Rockwell Note were reducedfrom January 1, 2018 through the present termination of the Modification Period. On December 31, 2019, the Company and Rockwell entered a Second Amendment to $50,000 per quarter duringthe Rockwell Note (the “Second Rockwell Note Amendment”) pursuant to which Rockwell agreed to extend the term of the PDL Modification Agreement, withRockwell Note by one year, to December 31, 2020, and agreed to extend the finaltime to make the quarterly payment that would otherwise be due on December 31, 2019 to January 31, 2020.

Effective as of January 31, 2020, the Company and Rockwell entered a Third Amendment to the Rockwell Note (the “Third Rockwell Note Amendment”), pursuant to which Rockwell agreed to extend the time to make the quarterly payment that would otherwise be due on December 31, 2019 from January 31, 2020 to February 10, 2020. The final balloon payment of $513,786 representing the remaining principal balance plus all accrued and unpaid interest. See NOTE 13 interest is due on December 31, 2020.

Effective as of March 31, 2020, the Company and Rockwell entered a Fourth Amendment to the Rockwell Note (the “Fourth Rockwell Note Amendment”), pursuant to which Rockwell agreed to extend the time to make the quarterly payment that would otherwise be due on March 31, 2020 to April 16, 2020.

Effective as of December 31, 2020, the Company and Rockwell entered a Fifth Amendment to the Rockwell Note (the “Fifth Rockwell Note Amendment”), pursuant to which Rockwell agreed to extend the term of the NotesRockwell Note by one year, to Consolidated Financial Statements attached hereto for additional details.December 31, 2021, and agreed to extend the time to make the quarterly payment that would otherwise be due on December 31, 2020 to March 31,2021. The final balloon payment representing the remaining principal plus all accrued and unpaid interest is due on December 31, 2020. We have evaluated the Fifth Amendment to the Rockwell Note under ASC 470 and determined that the amendment should be treated as a debt modification. We were not in default of any conditions under the Settlement Agreement and the Rockwell Note as amended as of December 31, 2020.


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 additional consideration to Rockwell for entering into the Rockwell Agreement, we granted Rockwell Warrants to purchase 1,151,206 shares of our Common Stock on the date of the Rockwell Agreement, and, using the Black-Scholes Model, valued the Warrants at $1,124,728 (the “Project Warrant”), which amount was fully amortized at December 31, 2015. Pursuant to the terms of the Settlement Agreement, the expiration date of the Project Warrant was extended from November 16, 2017 to November 16, 2022. All other provisions of the Project Warrant remained unchanged. At the time of the extension, the Project Warrant were revalued resulting in a $11,512 increase in fair value, which has been recorded as non-cash costs included in general and administration expense in the accompanying consolidated financial statements.statements for the year ended December 31, 2017. Effective February 2, 2018, pursuant to the terms of the PDL Modification Agreement, we entered an amendment to the Project Warrant wherein the Project Warrant’s exercise price was changed from $0.52 to $0.05, resulting in a $13,814 increase in fair value, this transaction will bewas recorded as non-cash costs included in general and administration expense in the condensed consolidated financial statements for the 1st Quarter ofyear ended December 31, 2018. See NOTE 13 of the Notes to Consolidated Financial Statements attached hereto for additional details.

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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 products in four distinct categories:a unique solution to clinical video monitoring, sitter reduction, and fall prevention patient educationby leveraging our patented Virtual Bed Rails and entertainment, patient flow, and mobile communications.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 each of these product areas;clinical video monitoring; however, we believe that we offer the only integrated suite of productsa superior solution that combines all of these areas into one cost-effective platform. Some of our competitors may be larger, may have greater financial resources,provides for best ROI, reduction in patient falls, and may have a longer history than us.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.

Clinical Video Monitoring and Fall Prevention: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 offersand 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 also 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.


Patient Education and Entertainment: There are many vendors who offer patient entertainment products, and most of them also provide a portal for accessing patient educational content either authored by themselves or by third parties. Our major competitors include The GetWellNetwork (privately held by Welsh, Carson, Anderson and Stowe), Skylight Healthcare Systems, and Sonifi Solutions, Inc., all of which offer interactive patient communications systems.

Patient Flow: These systems may be called patient flow, census, bed tracking, patient tracking, or “bed board” applications. Our major competitors include companies that offer focused solutions such as TeleTracking Technologies, Inc., Aionex, Inc., and BedWatch, Inc. Additionally, some Electronic Medical Record vendors offer similar products which may compete with our patient flow product.

Mobile Communications: Some competitors offer mobile communications on smart phones or voice-activated pendants which operate over the hospitals Wi-Fi system, including Vocera, Inc., and Voalte, Inc. Other competitors offer special-purpose phones that operate on the cellular network or other wireless technology and provide notifications to caregivers within the hospital.

In addition to favorable economics and enhanced patient care, safety and satisfaction, we also compete on the basis of quality of services provided. Our management believes that our GuestView patient services suite will provide revenue protection for our contracted hospitals under the Value Based Purchasing initiative which is part of the Patient Protection and Affordable Care Act, prompting hospitals to focus on Patient Satisfaction and Hospital Consumer Assessment of Healthcare Providers and Systems to (i) prompt each healthcare facility to promote patients’ use of NetView, MovieView, and PatientView, and (ii) encourage the hospital to expand its use of pre-procedure and condition videos, welcome videos, and other ancillary services.

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 and pressure ulcers,
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.

• 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.

 

Domain Names

11 

 

The Company’s maintains a website at www.care-view.com.


Major Customers

For the years ended December 31, 2017 and 2016, 103 and 93 hospitals accounted for allDuring 2021, there were no major customers comprised of more than 10% or our revenue. During 2017 four customers2020, one customer comprised 57%of approximately $1,179,000, or 18% of our revenue, while no other customer during 2020 comprised more than 10%. During 2016 three customers comprised 58% of our revenue, while no other customer comprised more than 10%.

Backlog

Our estimated backlog is driven by signed Master and PProduct & Service Agreements (P&S Agreements.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 RCPs,Controllers, Nursing Stations and mobile devices are billed on a per unit basis. Most Master and P&S Agreements are for fivethree years, but include options to cancel aftercontinue in perpetuity on a minimum of two or three years.monthly basis. Backlog, which covers the non-cancellablenon- cancellable period, as of December 31, 20172021 is approximately $8,500,000,$5,800,000, of which approximately $5,300,000$3,400,000 is expected to be billed during 2018.2022. Most of the current backlog will have future value as the Master and P&S Agreements continue beyond the minimum two or three years and the Master and P&S Agreements move toward expiration and potential renewal. The amount of the non-cancellable backlog to be billed beyond December 31, 20182021, is approximately $3,200,000.$2,381,000.

Research and Development ActivitiesGovernment Approval

The cost of our research and development activities for the years ended December 31, 2017 and 2016 totaled approximately $1,649,000 and $1,253,000, respectively. None of the cost of such activities was borne directly by our customers. To date, we have not performed any customer-sponsored research and development activities relating to any new products or services.

Governmental 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 30, 2018,31, 2022, we employed 69 persons55 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.


Financial Information about Segments and Geographic Areas

Our business consists of a single segment of products and services all of which are sold and provided within the United States.

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 http://www/sec.gov.

12 

 

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: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.care-view.com.www.careview.com.

We have adopted a Code of Business Conduct and Ethics for all of 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.

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.COMMENTS.

N/A.

ITEM 2.PROPERTIES.PROPERTIES.

We lease approximately 16,610On September 8, 2009, we entered into a Commercial Lease Agreement (the “Lease”) for 10,578 square feet of office and warehouse space at 405 State Highway 121, Suite B-240, Lewisville, TX 75067.space. On December 8, 2014,March 4, 2020, we entered into a Fourth Amendment to Commercial Lease Extension Agreement (the “Lease Extension”), wherein we extended the Lease through June 30, 2020.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. The current base lease rate through June 30, 2018 is $15,052 monthly. The average base lease rate for the Lease Extension is $15,465. We believe that these premises are adequate and sufficient for our current needs. See NOTE 12 in accompanying consolidated financial statements.

ITEM 3.LEGAL PROCEEDINGS.PROCEEDINGS.

None.

ITEM 4.MINE SAFETY DISCLOSURE.DISCLOSURE.

N/A.


13 

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.” The following table shows the high and low sales prices of our Common Stock for each full quarterly period within the two most recent fiscal years. The below market quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not necessarily represent actual transactions."CRVW."

Quarter Ended High  Low 
Fiscal Year 2017      
Fourth Quarter $0.06  $0.02 
Third Quarter $0.11  $0.04 
Second Quarter $0.22  $0.09 
First Quarter $0.10  $0.06 
         
Fiscal Year 2016        
Fourth Quarter $0.10  $0.04 
Third Quarter $0.18  $0.07 
Second Quarter $0.26  $0.14 
First Quarter $0.38  $0.22 

Holders

Holders

Records of our stock transfer agent indicate that as of March 15, 2018,28, 2022 we had approximately 9091 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"street name." We estimate that there are approximately 1,000913 beneficial shareholders who hold their shares in street name. As of the date of this Report, we had 139,380,748 shares of Common Stock issued and outstanding.

Dividends

Historically, we have not paid dividends on our Common Stock and we currently do not intend to pay any dividends on our Common Stock in the foreseeable future. We currently plan to retain any earnings to finance the growth of our business rather than to pay cash dividends.


Securities Authorized for Issuance under Equity Compensation Plans

As of December 31, 2017,2021, 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  3,914,444  $0.53    
Equity compensation plan not approved by security holders:  2015 Plan  3,828,500  $0.29   580,055 
Equity compensation plan not approved by security holders:  2016 Plan  13,953,525  $0.07   910,611 
Equity compensation plan not approved by security holders:  2020 Plan  4,539,008  $0.04   6,102,967 
     Total  26,235,477  $0.23   7,593,633 

14 

 

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  25,000  $0.52    
Equity compensation plan approved by security holders: 2009 Plan  6,390,760  $0.61    
Equity compensation plan not approved by security holders: 2015 Plan  4,492,666  $0.28    
Equity compensation plan not approved by security holders: 2016 Plan  11,752,033  $0.09   7,737,967 
Total  22,660,459  $0.27   7,737,967 

Recent Sales of Unregistered Securities

None.

Cancellation and Expiration of Options

During the year ended December 31, 2017,2021, options to purchase an aggregate of 817,997370,500 shares of our Common Stock were cancelled due to resignation and termination of employees.employees of which 107,000 were made available for reissue. In addition, during the same time period, options to purchase an aggregate of 449,52135,000 shares of our Common Stock expired.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

None.

ITEM 6.SELECTED FINANCIAL DATA.[Reserved]

We are a smaller reporting company as defined by Rule 229.10(f)(1) and are not required to provide information under this item.


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.

Company Overview

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

Going Concern, Liquidity, and Capital Resources

Our cash position at December 31, 2017 was approximately $2,066,000. We also have $2,500,000 recorded as restricted cash related to a debt covenant in our credit agreement with PDL BioPharma, Inc. as discussed below.

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

Accounting standards require management to evaluate ourwhether 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, 2021, 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 31, 2023.

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, 2021, the Company had an accumulated deficit of approximately $197,890,000, a loss from operations of approximately $(10,080,000), net cash provided by operating activities of $678,766 and an ending cash balance of $659,226.

As of December 31, 2021, the Company had cash and a working capital deficit of approximately $87,000,000 consisting primarily of notes payables and senior secured notes. 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 subsequent tofrom the date of the filing of the Form 10-Q (“evaluation period”). As such, we have evaluated if cash and cash equivalents on hand and cash generated through operating activities would be sufficient to sustain projected operating activities through March 30, 2019. We anticipate that our current resources, along with cash generated from operations, will not be sufficient to meet our cash requirements throughout the evaluation period, including funding anticipated losses and scheduled debt maturities. In February 2018, we raised $2,050,000 through the sale and issuance of Senior Secured Convertible Notes (see NOTE 11 in the accompanying consolidated financial statements for further details). We expectwere issued. While management will look to seekcontinue funding operations by increased sales volumes and raising additional fundscapital 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.

15 

Management continues to monitor the immediate and future cash flows needs of the company in a combinationvariety of dilutive and/or non-dilutive financings in the future. Because such transactions have not been finalized, receipt of additional funding is not considered probable under current accounting standards. If we do not generate sufficientways which include forecasted net cash flows from operations, capital expenditure control, new inventory orders, debt modifications, increases sales outreach, streamlining and obtain sufficient funds when needed, we expect that we would scale back our operating plan by deferringcontrolling general and administrative costs, competitive industry pricing, sale of equities, debt conversions, new product or limiting some, or all, of ourservices offerings, and new business partnerships.

The Company’s net losses, cash outflows, and working capital spending, reducing our spending on travel, and/or eliminating planned headcount additions, as well as other cost reductions to be determined. Because such contingency plans have not been finalized (the specifics would depend on the situation at the time), such actions also are not considered probable for purposes of current accounting standards. Because, under current accounting standards, neither future cash generated from operating activities, nor management’s contingency plans to mitigate the risk and extend cash resources through the evaluation period, are considered probable,deficit raise substantial doubt is deemed to existexists about the Company’s ability to continue as a going concern 12 months from the date the financial statement are issued. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As we continue to incur losses, ourThis 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 profitabilityattaining profitable operations is dependent upon achieving a level of revenuespositive cash flows adequate to support itsthe Company’s cost structure. We may never achieve profitability, and unless and until doing so, we intend to fund future operations through additional dilutive or non-dilutive financings. There can be no assurances, however, that additional funding will be available on terms acceptable to us, if at all.


As of December 31, 2017, our working capital deficit was approximately $5,786,000, our accumulated deficit was approximately $145,909,000, and our stockholders’ deficit was approximately $62,151,000.

Operating loss was approximately $6,616,000$1,147,000 and $6,309,000$1,878,000 for the years ended December 31, 20172021, and 2016,2020, respectively. Our net loss attributable to CareView was approximately $19,911,000$10,080,000 and $18,613,000$11,683,000 for the years ended December 31, 20172021, and 2016,2020, respectively.

The following is a summary of cash flow activity for the years ended December 31, 20172021, and 2016.2020.

  2017  2016 
  (000’s) 
Net cash flows used in operating activities $(6,260) $(6,069)
Net cash flows used in investing activities  (1,262)  (1,517)
Net cash used in financing activities  (500)  (5)
Decrease in cash  (8,022)  (7,591)
Cash at beginning of period  10,088   17,679 
Cash at end of period $2,066  $10,088 
  2021  2020 
  (000’s) 
Net cash flows provided by (used in) operating activities $678  $(791)
Net cash flows used in investing activities  (227)  (302)
Net cash provided by (used in) financing activities  (150)  1,181 
Increase in cash  301   88 
Cash, cash equivalents and restricted cash at beginning of period  358   270 
Cash, cash equivalents and restricted cash at end of period $659  $358 

 

Net increase in cash during the year ended December 31, 2021 was approximately $301,000. The principal use of cash in operating activities for the year ended December 31, 20172021 was to fund our current expenses primarily related to research and development activities and administrative changes, adjusted for non-cash items. The increasechange in cash flows used in operating activities between 2021 and 2020 of approximately $191,000$1,469,000 is primarily a result of changes in the components of working capital.increased revenue from our sales-based contracts, reducing net loss by $1,602,000. The decreasechange in cash flows used in investing activities between 2021 and 2020 of approximately $255,000$75,000 is primarily a result of the reduction of purchases and installation of CareView Patient Systems and costs associated with patents and trademarks. The increasechange in cash used inflows provided by financing activities between 2021 and 2020 of approximately $495,000 reflects payments made$1,331,000 is primarily due to Rockwell Holdings I, LLC (see NOTE 13receiving funds from our payroll protection program loan in the accompanying consolidated financial statements for further details).2020.

16 

 

Results of Operations

Year ended December 31, 20172021 compared to year ended December 31, 20162020

  Year Ended December 31,    
  2021  2020  Change 
  (000’s)    
Revenue, gross $7,802  $6,488  $1,314 
Operating expenses:            
  Network operations  2,603   2,738   (135)
  General and administration  3,226   2,722   504 
  Sales and marketing  550   575   (25)
  Research and development  1,711   1,708   3 
  Depreciation and amortization  680   597   83 
  Cost of equipment  179   26   153 
Operating expenses  8,949   8,366   583 
     Operating loss $(1,147) $(1,878) $731 

 

  Year Ended December 31,    
  2017  2016  Change 
  (000’s)     
Revenue, net  6,264  $5,974   290 
Operating expenses:            
Network operations  4,640   4,679   (39)
General and administration  4,013   3,758   255 
Sales and marketing  691   777   (86)
Research and development  1,649   1,253   396 
Depreciation and amortization  1,887   1,816   71 
Operating expenses  12,879   12,283   597 
Operating loss $(6,616) $(6,309) $(307)

Revenue, net

Revenue increased approximately $290,000$1,314,000 for the year ended December 31, 20172021 as compared to the year ended December 31, 2016. Hospitals with billable units increased to 103 forsame period in 2020. The increase in revenue results from the year ended December 31, 2017 as compared to 93 forincrease in our sales-based contracts. In 2021, just the comparable period for the prior year. Of the 103 hospitals with billable units on December 31, 2017, four hospitals groups accounted for 69 hospitals or 67%equipment portion of the total. Billable units (RCPs and Nurse Stations) for all hospitals totaled 8,400 (7,852 and 548, respectively) on December 31, 2017 as compared to 7,762 (7,276 and 486, respectively) on December 31, 2016.ten sales-based contracts provided approximately 1,950,000 of revenue.

Operating Expenses

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

  Year Ended  
December 31,
 
  2017  2016 
Human resource costs, including benefits  48%  45%
Depreciation and amortization expense  15%  15%
Travel and entertainment  9%  10%
Other expenses  8%  6%
Other product deployment costs, excluding human resources and travel and entertainment expense  7%  9%
Professional fees and consulting expenses  6%  5%
Non-cash expense related to option grants  3%  6%
Research and development costs  3%  2%
Other sales and marketing costs, excluding human resources costs, travel and entertainment expense, and consulting expenses  1%  2%
  Year Ended
December 31,
 
  2021  2020 
Human resource costs, including benefits and non-cash compensation  56%  56%
Professional and consulting costs  8%  10%
Depreciation and amortization expense  7%  7%
Other product deployment costs, excluding human resources and travel and entertainment costs  4%  5%
Travel and entertainment expense  3%  4%
Cost of equipment                                                                                                      2%  .5%
Other expenses  20%  17.5%

 

Operating expenses increased by approximately $597,000 (5%$583,000 (or 6.96%) as a result of the following items:

  (000’s) 
Increase:    
Human resource costs, including benefits $686 
Other expenses  225 
Professional and consulting expenses  123 
Research and development costs  111 
Depreciation and amortization  71 
Decrease:    
Non-cash expense related to option grants  (319)
Travel and entertainment  (138)
Other product deployment costs, excluding human resources and travel and entertainment expense  (136)
Other sales and marketing costs, excluding human resources costs, travel and entertainment expense, and consulting expenses  (26)
  $597 
   (000’s)
Human resource costs, including benefits and non-cash compensation  372 
Professional and consulting costs  (101)
Depreciation and amortization expense  85 
Other product deployment costs, excluding human resources and travel and entertainment costs  (82)
Travel and entertainment expense  (42)
Equipment cost  153 
Other expenses  198 
  $583 

Human resource related costs (including salaries and benefits)benefits and non-cash compensation) increased approximately $372,000 primarily as a resultbecause of a higher average head count in 2017 compared to 2016. While we had 72 employees atadditional sales and marketing and research and development staffing during the twelve months ended December 31, 20172021 as compared to 78 for the comparable date for the prior year, on average we employed 81 employees over the coursetwelve months ended December 31, 2020. This includes an increase of 2017 as compared to 75 for the comparable prior year period. Other expenses increased primarily as a result of common area maintenance costs incurred during 2017.employee commissions, paid upon sales-based contracts. Professional and consulting expenses increasedfees decreased approximately $101,000, primarily because of lower legal costs in obtaining and defending patents as a result of legal expenseswell as increase in staff to reduce consulting costs. Depreciation and consulting expense related to investor relation services. Other research and developmentamortization expense increased primarily as a resultby approximately $85,000, due to the purchase of new product research.


Non-cash expense related to option grants decreasedadditional assets being placed in 2017 compared to 2016 as a result of a decrease in amortization expense related to options granted in periods prior to 2016.service, including deployable network equipment and company vehicle for network operations. Travel and entertainment expense decreased approximately $42,000 due to lower product installations and a greater range of technicians to handle service calls during the twelve months ended December 31, 2021 as a result of decreasescompared to the same period in product deployment and installation efforts partially offset by increases in meetings with hospital administrators and training efforts related to supporting our existing installed base.2020. Other product development costs decreased approximately $82,000 primarily as a resultbecause of decreases in product deployment and installation costs and related non-capital equipment costs. Other salesThe increase of approximately $198,000 in other expense is due to a number of factors, including increased insurance premium costs, higher software license costs and marketing expense decreased primarily as a result of reduced attendance at trade shows, seminar and other marketing expense over 2016.utility 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.

● 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.

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: share-based compensation expense, income taxes, complex derivative financial instruments and impairment of long-lived assets.assets, sales-based revenue recognition and credit agreement amendments.

Share-Based Compensation Expense. We calculate share-based compensation expense for option awards and certain warrant issuances (“Share-based Award(s)”) based on the estimated grant/issue date fair value using the Black-Scholes-Merton option pricing model (“Black-Sholes Model”) and recognize the expense on a straight-line basis over the vesting period, net of estimated forfeitures. We have not included an estimate for forfeitures due to our limited history and we revise based on actual forfeitures each period. 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 vesting period of the Share-based Award in determining the fair value of Share-based Awards. Although we believe our assumptions used to calculate share-based compensation expense are reasonable, these assumptions can involve complex judgments about future events, which are open to interpretation and inherent uncertainty. In addition, significant changes to our assumptions could significantly impact the amount of expense recorded in a given period.

Income Taxes.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 NoteNOTE 5 in the accompanying Notes to Consolidated Financial Statements for the 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. In spite ofDespite 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.

18 

 

Complex Derivative Financial Instruments. From time to time we sell common stock and we issue convertible debt, both with common stock purchase warrants, which may include terms requiring conversion price or exercise price adjustments based on subsequent issuance of securities at prices lower than those in the agreements of such securities. In these situations, the instruments may be accounted for as liabilities and recorded at fair value each reporting period. Due to the complexity of the agreement, we use an outside expert to assist in providing the mark to market fair valuation of the liabilities over the reporting periods in which the original agreement was in effect. It was determined that a Binomial Lattice option pricing model using a Monte Carlo simulation would provide the most accuracy given all the potential variables encompassing a future dilutive event. This model incorporated transaction assumptions such as our stock price, contractual terms, maturity, risk free rates, as well as estimates about future financings, volatility, and holder behavior. Although we believe our estimates and assumptions used to calculate the fair valuation liabilities and related expense were reasonable, these assumptions involved complex judgments about future events, which are open to interpretation and inherent uncertainty. In addition, significant changes to our assumptions could significantly impact the amount of expense recorded in a given period.

Impairment of Long-Lived Assets. 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: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 are 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 estimates needed to establish specific dates of contract fulfillment. We allocate the transaction price to each performance obligation based on estimated relative standalone selling price. General assessment must be made to establish the standalone selling price of our equipment and services based on limited comparable market values, 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.

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 AdoptedIssued Accounting Pronouncements

In MarchJune 2016, the FASB issued ASU 2016-09, Compensation2016-13, Financial InstrumentsStock Compensation: ImprovementsCredit Losses: Measurement of Credit Losses on Financial Instruments, which requires entities to Employee Share-Based Paymentrecord expected credit losses for certain financial instruments, including trade receivables, as an allowance that reflects the entity’s current estimate of credit losses expected to be incurred. For available-for-sale debt securities in unrealized loss positions, the new standard requires allowances to be recorded instead of reducing the amortized cost of the investment. The Company does not currently hold or plan to invest in available-for-sale securities and has not historically experienced collection issues or bad debts with trade receivables. Accordingly, 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, 2023.

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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 (“ASU 2016-09”). This guidance for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies several aspects of the accounting for employee share-based payment transactionsconvertible instruments by reducing the number of accounting models available for bothconvertible 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 August 2018, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework- Changes to the Disclosure Requirements for Fair Value Measurement that eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information and nonpublic entities, includingmodifies some disclosure requirements. The FASB developed the accounting for income taxes, forfeitures, and statutory tax withholding requirements,amendments to Accounting Standards Codification (“ASC”) 820 as well as classificationpart of its broader disclosure framework project, which aims to improve the effectiveness of disclosures in the statementnotes to financial statements by focusing on requirements that clearly communicate the most important information to users of cash flows.the financial statements. The new guidance is effective for public businessall entities for fiscal years beginning after December 15, 2016,2019 and for interim periods within those fiscal years. Early adoptionAn entity is permitted in any annualto early adopt either the entire standard or interim period for which financial statements have notonly the provisions that eliminate or modify requirements. With the adoption of Topic 820, there has been issued or made available for issuance, but all of the guidance must be adopted in the same period. If an entity early adopts the guidance in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. There was no material effect on the 2017 consolidated financial statements upon adoption.

Recently Issued Accounting Pronouncements

In August 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows (Topic 230) (“ASU 2016-15”). ASU 2016-15 is intended to reduce the diversity in practice regarding how certain transactions are classified within the statement of cash flows. ASU 2016-15 is effective for public business entities for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted with retrospective application. We are currently evaluating the impact of this guidance on our consolidated financial statements and disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU sets forth an “expected credit loss” impairment model to replace the current “incurred loss” method of recognizing credit losses. The standard requires measurement and recognition of expected credit losses for most financial assets held. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for periods beginning after December 15, 2018. We are currently evaluating the impact of this guidance on our consolidated financial statements and disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases (“ASU 2016-02”). The new standard establishes a right-of-use (“ROU”) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. While we are continuing to assess all potential impacts of the standard, we currently believe, the impact of this standard will be primarily related to the accountingchange for our operating lease.company’s fair value measurements as defined by U.S. GAAP and required disclosures included herein above, for each asset class.


In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services

There have been no material changes to customersour significant accounting policies as summarized in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under previous guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB approved the proposal to defer the effective date of ASU 2014-09 standard by one year. Early adoption is permitted after December 15, 2016, and the standard is effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. In 2016, the FASB issued final amendments to clarify the implementation guidance for principal versus agent considerations (ASU 2016-08), accounting for licenses of intellectual property and identifying performance obligations (ASU 2016-10), narrow-scope improvements and practical expedients (ASU 2016-12) and technical corrections and improvements to topic 606 (ASU 2016-20) in its new revenue standard. Our services are performed over the termNOTE 2 of our contracts and customers are billed for those services as they are performedAnnual Report on a monthly basis. Revenue is recognized each monthForm 10-K for the services that have been provided to our customers. Additionally, weyear ended December 31, 2021. We do not have significant exposure related to uncollectible accounts. We have performed a review ofexpect that the requirements of the new revenue standard and have performed our analysis of our customer contracts on a portfolio basis (by each hospital group) utilizing the five-step model of the new standard. We have compared the results of our analysis to our current accounting practices. Upon adoption, effective January 1, 2018, we plan to use the full retrospective transition method for recognizing revenue. The adoption of this standardany recent accounting pronouncements will not have a material effectimpact on the timing and recognition of revenue for the services provided to our customers.accompanying consolidated financial statements.

Recent Events Since December 31, 20172021

PDL Modification Agreement and AmendmentOn March 8, 2022, we agreed with the HealthCor Parties to PDL Credit Agreement

On February 2, 2018,(i) amend the Company and PDL Investment Holdings, LLC (as assignee2011 HealthCor Notes to extend the maturity date of PDL) (“PDL Investment”) enteredthe 2011 HealthCor Notes from April 20, 2022 to April 20, 2023 by entering into a Modification Agreement (the “PDL Modification Agreement”), with respectAllonge No. 4 to the PDL Credit Agreement which reiterated2011 HealthCor Notes (the “Fourth 2011 Note Allonges”) and (ii) amend the terms included in a Binding Forbearance Term Sheet dated December 28, 2017 also entered into by2012 HealthCor Notes to extend the Company and PDL Investment. The purposematurity date of the PDL Modification Agreement is2012 HealthCor Notes from April 20, 2022 to amend the PDL Credit Agreement to prevent any Event of Default from occurring. See NOTES 12 and 13 for further details.

On February 23, 2018, the Company and PDL Investment enteredApril 20, 2023 by entering into the Second AmendmentAllonge No. 4 to the PDL Credit Agreement, wherein2012 HealthCor Notes (the “Fourth 2012 Note Allonges”) .. In connection with the PDL Modification Agreement was amendedFourth 2011 Note Allonges and restatedthe Fourth 2012 Note Allonges, we issued warrants to allow for the reduction of certain funding requirements from $2,500,000 to $2,050,000, which funding was completed on February 23, 2018.

Eighth Amendment to HealthCor Purchase Agreement

On February 23, 2018, the Company, HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fun, LP (“HealthCor”), an entity, and certain officers and directors of the Company (collectively, but not including HealthCor, the “2018 Investors”) entered into the Eighth Amendment to the HealthCor Purchase Agreement wherein we agreed to sell and issue (i) additional notes in the aggregate principal amount of $2,050,000,with a conversion price per share of $0.05 (subject to adjustment as described therein) and (ii) additional Warrants forpurchase an aggregate of 512,5003,000,000 shares of our Common Stock at an exercise price equal to $0.09 per share and with an expiration date of $0.05 (subject to adjustment as described therein)March 8, 2032 to the 2018 Investors.HealthCor Parties.

Off-Balance Sheet Arrangements

As of December 31, 2017, we had no material off-balance sheet arrangements.


Contractual Arrangements

Provided in the table below are our known contractual obligations as of December 31, 2017 for the future periods as indicated.

Contractual Obligations  
(000’s)
 
  As of December 31, 
  Total  2018  2019 and 2020  2021 and 2022  Beyond 2022 
Notes and Loans Payable $91,273  $8,533  $12,181  $53,882  $16,677 
Operating Lease 462   183   279       
Total $91,735  $8,716  $12,460  $53,882  $16,677 

ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

We are a smaller reporting company as defined by Rule 229.10(f)(1)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.

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ITEM 9A.CONTROLS AND PROCEDURES.

Evaluation of 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.

AsEvaluation of December 31, 2017, managementDisclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), we carried out an evaluation, under the supervision and with the participation of our chiefmanagement, 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. Based uponprocedures (as defined under Rule 13a-15(e) under the evaluation, our chief executive officer and principal financial officer concluded that,Exchange Act) as of December 31, 2017, our disclosure controls and procedures were effective at the reasonable assurance level.

There are inherent limitations to the effectiveness of any system of disclosure controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurances of achieving their control objectives.


Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f)end of the Exchange Act, is a process designedperiod covered by or under the supervision of, the chief executive officer and chief financial officer, or persons performing similar functions, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that: (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.this Report.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Our management, underUnder the supervision and with the participation of our chief executive officerCEO and principal financial and chief accounting officer, conducted an evaluation ofour management evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2021. 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, 2021 due to the continuing existence of a material weakness in internal control over financial reporting using the criteria set forth in 2013 by the Committeedescribed below (which we view as an integral part of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Frameworkour 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 evaluationAnnual Report on Form 10-K fairly present, in all material respects, our management concludedfinancial 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”).

Material Weakness and Remediation Plan

A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that ourthere 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 wasas of the year ended December 31, 2021 due to the existence of the material weaknesses described below.

Management determined that the Company did not maintain effective internal control over financial reporting as of December 31, 2017.2021, due to the existence of the following material weaknesses:

It was determined that the Company does not have effective controls over the identification and evaluation of the GAAP accounting for certain complex transactions in the areas of revenues, debt, and income taxes, due to a lack of technical expertise.

Due to a lack of accounting resources, it was determined that the Company had inadequate segregation of duties in place related to its financial reporting and other management oversight. Specifically, the accounting personnel had responsibility for initiating transactions in the financial statement areas of revenues, equity, payroll, debt, and financial reporting, recording transactions, and preparing financial reports.

Additionally, during the year ended December 31, 2021, management identified a material weakness in the segregation of duties and user access in certain information technology (“IT”) systems that support the Company’s financial reporting processes due to a lack of IT resources.


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 is in the process of hiring a certified public accountant (“CPA”) as its Controller, and has recently hired a senior-level accountant CPA eligible, and staff-level accountant pursuing CPA eligibility.

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.

 

Changes in Internal Control Over Financial ReportingReporting:

 

ThereOther than as described above, there were no material changes in our internal control over financial reporting that occurredidentified in management’s evaluations pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the fourth quarter of 2017ended December 31, 2021 that have materially affected, or are reasonably 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.

ITEM 9B.OTHER INFORMATION.

NoneNone.


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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. Johnson5862Chief Executive Officer, President, Secretary, Treasurer, DirectorApril 11, 2006April 11, 2006
Jason T. Thompson4347Director, Principal Financial Officer, Chief Accounting OfficerJanuary 1, 2014January 24, 2018
Sandra K. McRee6266Chief Operating OfficerN/ANovember 1, 2013
L. Allen Wheeler8589Chairman of the BoardJanuary 26, 2006N/A
Jeffrey C. Lightcap5963DirectorApril 21, 2011N/A
David R. White7074DirectorJanuary 1, 2014N/A
Steven BB. Epstein7478DirectorApril 1, 2014N/A
Dr. James R. Higgins6872DirectorApril 1, 2014N/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-managementnonmanagement 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.

Family Relationships

There are no family relationships between our officers and members of our Board of Directors.


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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 infocused on late stage venture and early and near commercial stage healthcare companies in the diagnostic, therapeutic medtech, and HCITmed 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. in charge of leverage buyout coverage for Merrill Lynch’s mergers and acquisitions group. 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 Chairman of the Board of Directors at Corindus Vascular Robotics, Inc. (NYSE: CVRS), a robotic medical device company and serves as a director of the following companies: Practice Partners in HealthCare, a privately-held company specializing in management and operation of ambulatory surgical centers; Paradigm Spine, LLC, a leader in the field of non-fusion, spinal implant technology; Heartflow Inc., a medical technology company focused onredefining the non-invasive diagnosis of coronary artery disease;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 BB. 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 1211 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 currently also serveshas previously served as a director of the following companies: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; and currently serves as a director of Restorix Health, a private wound care company; and Solis Women’s Health,Syft, a private mammographyclinical supply chain software 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 specialtysub-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 CompanyCompany.

26 

 

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 onean 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 additional pendingissued patent application 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. Prior to joining the Company, Mr. Jackson practiced as a civil trial lawyer specializing in business litigation and transactional law. Mr. Jackson graduated from the University of Santa Barbara with a Bachelor of Science in Geology and earned his Juris Doctor from Whittier Law School. 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 No. 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.

27 

 

For the year ended December 31, 2017,2021, 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.

Compensation Committee

Our Compensation Committee’s function is to provide assistance toaid 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, 2017,2021, and as of the filing date of this Report, our Compensation Committee consisted of three members of ours 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.

28 

 

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.

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.

29 

 

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.


Board Meetings and Committees; Annual Meeting Attendance

We held 6 (six)5 meetings of the Board of Directors during the year ended December 31, 20172021 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.


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, 20172021, and 2016.2020. 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.)
2021$   265,046     $     17,232$     282,278
2020$   250,046$     16,997$     267,043
 
Sandra K McRee (2)
(COO)
2021$   216,045     $       8,232$     224,277
2020$   216,045$       7,997$     224,042
 
Jason T. Thompson (3)
(Principal Financial Officer)
2021
2020
 

 

Name and
Principal Position
 Year  Salary
($)
  Bonus ($)  Stock Awards
($)
  Option Awards ($)(1)  Non-Equity Incentive Plan Compensation
($)
  Nonqualified Deferred Compensation Earnings ($)  All Other Compensation
($)
  Total
($)
 
Steven G. Johnson(2) 2017  $255,112                 $14,100  $269,212 
(President, CEO, Sec., Treas.) 2016  $255,228        $114,000        $18,711  $387,939 
                                    
Sandra K McRee(3) 2017  $215,111        $50,000        $4,895  $270,006 
(COO) 2016  $212,507        $114,000        $5,145  $331,652 
                                    
L. Allen Wheeler(4) 2017                         
(Principal Financial Officer) 2016                         
                                    
Jon E. Freeman(5) 2017  $106,036                  $3,062  $109,098 
Chief Financial Officer (CFO)                                   
                                    

 

(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 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)For 2017: Option Awards includes an Option to purchase 666,667 shares of our Common Stock. This Option was awarded for services as a member of the Board of Directors and is included in the Directors Compensation table below.2021: All Other Compensation includes $9,000 for car allowance and $5,110$8,232 for health insurance premiums paid on Mr. Johnson’s behalf. For 2016: All Other Compensation includes $9,000 for car allowance and $9,711 for health insurance premiums paid on Mr. Johnson’s behalf.

For 2020: All Other Compensation includes $9,000 for car allowance and $7,997 for health insurance premiums paid on Mr. Johnson’s behalf.

(3)(2)For 2016: Option Awards includes Options to purchase 2,000,000 shares of our Common Stock.2021 and 2020: All Other Compensation is for health insurance premiums paid on Ms. McRee’s behalf. For 2016: Option Awards includes Options to purchase 2,000,000 shares of our Common Stock. All Other Compensation is for health insurance premiums paid on Ms. McRee’s behalf.

(4)(3)Mr. WheelerThompson was named Principal Financial Officer and Chief Accounting Officer effective September 6, 2013January 1, 2018, upon the resignation of our former CFO. Upon the hiring of Jon E. Freeman as Chief Financial Officer, Mr. Wheeler vacated his position as Principal Financial Officer and Chief Accounting Officer. Option Awards include Options to purchase 666,667 and 150,000 shares of our Common Stock during 2017 and 2016, respectively. These Options were awarded for services as Chairman of the Board of Directors and is included in the Directors Compensation table below.
(5)For 2017: Option Awards includes Options to purchase 500,000 shares of our Common Stock. On December 29, Mr. Freeman resigned this position as Chief Financial Officer, at which time all Options to purchase share of our Common Stock were canceled.

32 

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, 2017,2021, which equity awards consists solely of ten-year, non-qualified stock options (the “Options”). No executive officers have exercised any of their Options.

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)$0.1012/05/26
666,667(2)$0.0611/28/27
400,000800,000(3)$0.0408/08/30

Sandra K McRee (COO)

 

2,000,000(4)$0.5110/30/23
1,000,000(5)$0.5302/22/25
2,000,000(6)$0.1012/05/26
2,000,000(7)$0.1012/02/27
2,466,6674,933,333(8)$0.0408/08/30

Jason T. Thompson
(Principal Financial Officer)

 

150,000(9)$0.4012/31/23
235,295(10)$0.1708/29/26
666,667(11)$0.0611/28/27
400,000800,000(12)$0.0408/08/30
   
              

 

  Option Awards Stock Awards 
Name and Office Number of Securities Underlying Unexercised Options
(#) Exercisable
  Number of Securities Underlying Unexercised Options
(#) Unexercisable
  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.)  

  50,000(1)       $0.52   01/05/20             
  50,000(2)       $0.52   03/25/20             
  666,666(3)  1,333,334(3)    $0.10   12/27/26             
     666,667(4)    $0.11   11/30/27             

Sandra K McRee 

(COO) 

  2,000,000(5)        $0.51   11/01/23             
  666,666(6)  333,334(6)    $0.53   02/25/25             
  666,666(3)  1,333,334(3)    $0.10   12/27/26             
     2,000,000(7)    $0.10   12/04/27             
L. Allen Wheeler (Principal Financial Officer)  75,000(1)       $0.52   01/05/20             
  75,000(2)       $0.52   03/25/20             
  100,000(8)  50,000(8)    $0.53   02/25/25             
  78,432(9)  156,863(9)    $0.17   08/31/26             
     666,667(10)    $0.11   11/30/27             

 
(1)All underlying shares vested on January 6, 2010.
(2)All underlying shares vested on December 31, 2010.
(3)An aggregate of 666,666 underlying shares vested on December 7, 2017, and 666,667 vest on each of December 7, 2018 and 2019.
(4)An aggregate of 222,222 underlying shares vest on each of November 30, 2018 and 2019, and 222,223 underlying shares vest on November 30, 2020. This Option were awarded for services as a member of the Board of Directors and is included in the Directors Compensation table below.
(5)An aggregate of 666,666 underlying shares vested on November 1, 2014, and 666,667 vested on each of November 1, 2015 and 2016.
(6)An aggregate of 333,333 underlying shares vested on each of February 25, 2016 and 2017, and 333,334 vest on February 25, 2018.
(7)An aggregate of 666,666 underlying shares vest on December 4, 2018, and 666,667 vested on each of December 4, 2019 and 2020.
(8)An aggregate of 50,000 underlying shares vested on each of February 25, 2016 and 2017 and 50,000 underlying shares vest on February 25, 2018. This Option were awarded for services as Chairman of the Board of Directors and is included in the Directors Compensation table below.
(9)An aggregate of 78,432 underlying shares vested August 31, 2017, 78,432 underlying shares vest August 31, 2018, and 78,431 underlying shares vest on August 31, 2019. This Option were awarded for services as Chairman of the Board of Directors and is included in the Directors Compensation table below.
(10)An aggregate of 222,222 underlying shares vest on each of November 30, 2018 and 2019, and 222,223 underlying shares vest on November 30, 2020. This Option were awarded for services as a member of the Board of Directors and is included in the Directors Compensation table below.

(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 November 1, 2016.

(5) All underlying shares vested on February 25, 2018.

(6) All underlying shares vested on December 7, 2019.

(7) All underlying shares vested on December 3, 2020.

(8) One third of the underlying shares vested on August 10, 2021.

(9) All underlying shares vested on January 2, 2017

(10) All underlying shares vested on August 31, 2019.

(11) All underlying shares vested on November 20, 2020. 

(12) 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.

33 

 

Director Compensation

We do notOur 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 feesretainers. No cash retainers were paid in 2021 or 2020 per the terms of the Directors Compensation Policy as the Company was not in a financial position to directors who attend regularly scheduled and special board meetings; however, we may reimburse out-of-state directors for costs associated with travel and lodging to attendpay such meetings. cash retainers.

Our directorsDirectors have also been granted non-qualified stock options from time to time as detailed in the table below. Beginning in November 2017, and annually in August thereafter, directors will be granted ten-year, non-qualified stock options equal to $40,000 based onDuring the closing price of our Common Stock as reported on www.yahoofinance.com on the date of the quote. Beginning in March 31, 2018 and annually thereafter, our directors will be compensated as follows: All Directors $10,000, Board Chair $3,000, Committee Chairpersons $2,000, and Committee Members $1,000.


We paid no compensation to our directors for services rendered for the yearperiod ended December 31, 2017. 2021, 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.

Name Fees Earned or Paid in Cash  Stock Awards ($)  Option Awards ($)(1)  Non-Equity Incentive Plan Compensation ($)  Nonqualified Deferred Compensation Earnings ($)  All Other Compensation ($)  Total ($) 
L. Allen Wheeler(2)         $52,650              $52,650 
          $49,650              $49,650 
          $50,700              $50,700 
          $24,000              $24,000 
        $24,000           $24,000 
Steve G. Johnson(3)       $24,000           $24,000 
Steven B. Epstein(4)         $221,500              $221,500 
          $16,900              $16,900 
          $24,000              $24,000 
        $24,000           $24,000 
Dr. James R. Higgins(5)         $66,450              $66,450 
          $24,000              $24,000 
        $24,000           $24,000 
Jeffery C. Lightcap                     
                             
Jason T. Thompson(6)         $39,000              $39,000 
          $24,000              $24,000 
        $24,000           $24,000 
David R. White(7)         $130,000              $130,000 
          $24,000              $24,000 
        $24,000           $24,000 

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
   $221,500   $221,500
   $16,900   $16,900
   $24,000   $24,000
   $24,000   $24,000
Steven B. Epstein (3)$36,000$36,000
   $66,450   $66,450
   $24,000   $24,000
 $24,000$24,000
Dr. James R. Higgins (4)  $36,000   $36,000

Jeffery C. Lightcap(5)

   $130,000   $130,000
   $24,000   $24,000
   $24,000   $24,000
David R. White (6)$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 75,000 underlying shares1,451,962 are vested on eachas of January 6, 2010 and December 31, 2010. An aggregate 50,000 underlying shares vested2021. The remaining 800,000 granted on February 25, 2016August 10, 2020, will vest evenly on August 10, 2022 and 2017 and 50,000 vest on February 25, 2018. August 10, 2023.

(3)An aggregate of 78,432 underlying shares1,851,962 are vested on eachas of AugustDecember 31, 2017, 78,432 underlying shares vest2021. The remaining 800,000 granted on August 31, 2018 and 78,431 underlying shares10, 2020, will vest evenly on August 31, 2019. 10, 2022 and August 10, 2023.

(4)An aggregate of 222,222 underlying shares1,451,962 are vested as of December 31, 2021. The remaining 800,000 granted on August 10, 2020, will vest evenly on each of November 30, 2018August 10, 2022 and 2019, and 222,223 underlying shares vest on November 30, 2020.August 10, 2023.

(5)No granted options.

(3)(6)An aggregate of 222,222 underlying shares vest on each1,801,962 are vested as of November 30, 2018 and 2019, and 222,223 underlying shares vest on November 30, 2020.
(4)An aggregate of 166,667 underlying shares vested on each of April 1, 2015 and 2016 and 166,666 underlying shares vested on April 1, 2017. An aggregate of 16,666 underlying shares vested on February 25, 2016, 16,667 underlying shares vested on February 25, 2017, and 16,667 underlying shares vest on each of February 25, 2018. An aggregate of 78,432 underlying shares vestedDecember 31, 2021. The remaining 800,000 granted on August 31, 2017, 78,432 underlying shares10, 2020, will vest evenly on August 31, 2018,10, 2022 and 78,431 underlying shares vest on August 31, 2019. An aggregate of 222,222 underlying shares vest on each of November 30, 2018 and 2019, and 222,223 underlying shares vest on November 30, 2020.10, 2023.
(5)An aggregate of 50,000 underlying shares vested on each of April 1, 2015, 2016 and 2017. An aggregate of 78,432 underlying shares vested on each of August 31, 2017, 78,432 underlying shares vest on August 31, 2018 and 78,431 underlying shares vest on August 31, 2019. An aggregate of 222,222 underlying shares vest on each of November 30, 2018 and 2019, and 222,223 underlying shares vest on November 30, 2020.
(6)An aggregate of 50,000 underlying shares vested on each of April 1, 2015, 2016 and 2017. An aggregate of 78,432 underlying shares vested on each of August 31, 2017, 78,432 underlying shares vest on August 31, 2018 and 78,431 underlying shares vest on August 31, 2019. An aggregate of 222,222 underlying shares vest on each of November 30, 2018 and 2019, and 222,223 underlying shares vest on November 30, 2020.
(7)An aggregate of 166,667 underlying shares vested on each of April 1, 2015 and 2016 and 166,666 underlying shares vested on April 1, 2017. An aggregate of 78,432 underlying shares vested on August 31, 2017, 78,432 underlying shares vest on August 31, 2018, and 78,431 underlying shares vest on August 31, 2019. An aggregate of 222,222 underlying shares vest on each of November 30, 2018 and 2019, and 222,223 underlying shares vest on November 30, 2020. From April 1, 2015 through May 31, 2016, Mr. White’s was under contract with us to assist in sales and marketing activities. His compensation for this service was $5,000 per month.


34 

ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Beneficial Security Ownership Table

As of the date of this filing, the following table sets forth certain information 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”), common stock purchase warrants (“Warrants”), and convertible securities that are currently exercisable or convertible 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, Warrants, or convertible securities for the purpose of computing the percentage ownership of the person, but are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Convertible securities are valued as of the most practical date, March 31, 2022. Unless otherwise noted, the address for all officers and directors listed below is 405 State Highway 121, Suite B-240, Lewisville, Texas 75067.

Title of Class

Name and Address of Officer and Directors

Amount and
Nature of
Beneficial
Ownership(1)

Percent

of

of

Class

Common Stock

Steve G. Johnson (Chief Executive Officer, President, Secretary, Treasurer, Director)58,706,950 (2)

31,071,981  (2)

20.09%32.20%

Common Stock

L. Allen Wheeler (Chairman of the Board, Principal Financial Officer)

24,337,828  (3)

16.49%

Common StockSandra K. McRee (Chief Operating Officer)7,154,272  14,639,055 (4)(3)4.91%9.55%
Common StockJeffrey C. Lightcap (Director)92,913,417  (5)40.00%
Common StockDavid R. White (Director)848,432  (6)0.61%
Common StockJason T. Thompson (Director and Chief Accounting Officer, Principal Financial Officer)3,187,8335,850,482 (7)(4)

2.25%4.05%

Common StockL. Allen Wheeler (Chairman of the Board) 30,301,931 (5)19.73%
Common StockSteven B. Epstein (Director)5,301,272  10,143,865 (8)(6)3.71%6.87%
Common StockDr. James R. Higgins (Director)23,302,659  40,090,295 (9)(7)15.37%23.85%
Common StockJeffrey C. Lightcap (Director)80,220,315 (8)36.53%
Common StockDavid R. White (Director)2,071,962 (9)1.47%
Common StockAll Officers & Directors as a Group (8 persons)    188,117,694  242,024,854(10)66.95%

Name and Address of Shareholders

Common Stock

Robert J. Smith

13650 Fiddlesticks Blvd., Suite 202-324

Ft. Myers, FL 33912

9,590,506 (11)

6.88%

72.32%

______________

(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 139,380,748 shares of Common Stock currently outstanding, as adjusted for each shareholder.

(2)This amount includes (i) 208,977 shares directly owned by Johnson, (ii) 766,6673,066,667 shares due to Johnson upon exercise of vested Options, (iii) 550,001 shares due to Johnson upon exercise of vested warrants, (iv) 13,984,72039,319,689 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 30, 2018)31, 2022), and (v) 15,561,616 shares beneficially owned by SJ Capital, LLC, a company controlled by Johnson. The percentage of class for Johnson is based on 154,682,136182,317,105 shares which would be outstanding if all of Johnson’s vested Options and Warrants were exercised, and convertible debt was converted.

(3)This amount includes (i) 750,000 shares directly owned by McRee, (ii) 9,466,667 shares due to McRee upon exercise of vested Options, (iii) 148,076 shares due to McRee upon exercise of vested warrants, and (iv) 4,274,312 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 31, 2022). The percentage of class for McRee is based on 153,269,803 shares which would be outstanding if all of McRee’s vested Options and Warrants were exercised, and convertible debt was converted.


(3)(4)This amount includes (i) 737,500 shares directly owned by Thompson, (ii) 1,451,962 shares due to Thompson upon exercise of vested Options, (iii) 55,769 shares due to Thompson upon exercise of vested warrants, and (iv) 3,605,251 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 31, 2022). The percentage of class for Thompson is based on 144,493,730 shares which would be outstanding if all of Thompson’s vested Options and Warrants were exercised, and convertible debt was converted.

(5)This amount includes (i) 1,856,345 shares directly owned by Wheeler, (ii) 378,4321,451,962 shares due to Wheeler upon exercise of Options, (iii) 382,692 shares due to Wheeler upon exercise of vested warrants (iv) 7,486,32312,376,896 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 30,2018)31, 2022), (v) 14,201,820 shares beneficially owned by Dozer Man, LLC, an entity controlled by Wheeler, and (vi) 32,216 shares beneficially owned by Global FG, LLC, an entity of which Wheeler owns 50%. The percentage of class for Wheeler is based on 147,628,195153,592,298 shares which would be outstanding if all of Wheeler’s vested Options and Warrants were exercised, and convertible debt was converted.

(4)(6)This amount includes (i) 750,0001,780,000 shares directly owned by McRee,Epstein, (ii) 3,666,6671,851,962 shares due to McReeEpstein upon exercise of vested Options, (iii) 148,076178,846 shares due to McReeEpstein upon exercise of vested warrants, and (iv) 2,589,5296,333.057 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 30,2018)31, 2022). The percentage of class for McReeEpstein is based on 145,785,020147,744,613 shares which would be outstanding if all of McRee’sEpstein’s vested Options and Warrants were exercised, and convertible debt was converted.

(5)(7)This amount includes (i) 4,731,445 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) 1,051,962 shares due to Higgins upon exercise of vested Options, (v) 1,682,692 shares due to Higgins upon exercise of vested warrants, and (vi) 25,592,174 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 31, 2022). The percentage of class for Higgins is based on 168,107,576 shares which would be outstanding if all of Higgins’ vested Options and Warrants were exercised and convertible debt was converted.

(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 92,913,41780,220,315 shares, representing (i) 9,860,99872,111,662 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 30, 2018),31, 2022) and (ii) 20,977,387 shares that may be acquired upon conversion of the 2014 Notes, (iii) 8,306,877 shares that may be acquired upon conversion of the 2012 Notes, (iv) 35,876,643 shares that may be acquired upon conversion of the 2011 Notes, and (v) 17,891,5128,108,653 shares that may be acquired upon exercise of Warrants. The amounts detailed above include (i) 493,269 shares due to Lightcap upon exercise of vested Warrants and (ii) 7,038,35235,369,958 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 30, 2018)31, 2022). The percentage of class for Reporting Persons and Lightcap as an individual is based on 232,294,165219,601,063 shares which would be outstanding if the Reporting PersonsPersons’ notes and convertible debt held by Lightcap were converted and all Warrants held by the Reporting Persons and Lightcap were exercised.

(6)(9)This amount includes (i) 578,432270,000 shares directly owned by White (ii) 1,801,962 shares due to White upon exercise of vested Options. The percentage of class for White is based on 139,959,180141,182,710 shares which would be outstanding if all of White’s vested Options were exercised.

(7)(10)This amount includes (i) 737,500 shares directly owned by Thompson, (ii) 228,432 shares due to Thompson upon exercise of vested Options, (iii) 55,769 shares due to Thompson upon exercise of vested warrants, and (iv) 2,166,132 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 30, 2018). The percentage of class for Thompson is based on 141,831,081 shares which would be outstanding if all of Thompson’s vested Options and Warrants were exercised and convertible debt was converted.
(8)This amount includes (i) 1,780,000 shares directly owned by Epstein, (ii) 611,765 shares due to Epstein upon exercise of vested Options, (iii) 178,846 shares due to Epstein upon exercise of vested warrants, and (iv) 2,730,661 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 30, 2018). The percentage of class for Epstein is based on 142,902,020 shares which would be outstanding if all of Epstein’s vested Options and Warrants were exercised and convertible debt was converted.
(9)This amount includes (i) 4,731,445 shares directly owned by Higgins, (ii) 1,361,538 shares jointly owned by Higgins and his wife, (iii) 5,012,229 shares held in trust by Higgins’ wife, (iv) 228,432 shares due to Higgins upon exercise of vested Options, (v) 432,692 shares due to Higgins upon exercise of vested warrants, and (vi) 11,536,323 shares that may be acquired upon conversion of convertible debt (including interest paid in kind through May 30,2018). The percentage of class for Higgins is based on 151,578,195 shares which would be outstanding if all of Higgins' vested Options and Warrants were exercised and convertible debt was converted.
(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 and Warrants and upon conversion of convertible securities. The percentage of class for all officers and directors is based on 280,994,756334,643,661 shares which would be outstanding if all the aforementioned Options, Warrants and convertible securities were exercised or converted.
(11)This amount includes: (i) 265,000 shares directly owned by Smith, (ii) 60,000 shares held in trust for Smith’s minor children, (iii) 6,210,723 shares beneficially owned by Plato & Associates, LLC, a company controlled by Smith, and (iv) 3,054,783 shares beneficially owned by Energy Capital, LLC, a company controlled by Smith. The percentage of class for Smith is based on 139,380,748 shares which would be outstanding if all Warrants owned by Plato & Associates, LLC 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.

36 

 

Section 16(a) Beneficial Ownership Reporting Compliance

During the year ended December 31, 2017,2021, 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.

Exclusive of the Fifth Amendment discussed aboveparticipation of certain funding activity in Item 7,February and July 2018, May 2019, February 2020, and April 2021 (for more detail, see NOTE 13 of the Notes to Consolidated Financial Statements attached hereto), none of our directors, officers, or principal shareholders, nor any associate or affiliate of the foregoing, has any interest, direct or indirect, in any transaction or in any proposed transaction, which materially affected us during the year ended December 31, 2017.2021.

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 BDO USA, LLP (“BDO”) for the 20172021 quarterly reviews and the annual audit for the year ended December 31, 2017 is $285,000.2021 were approximately $309,000. BDO billed us $273,735approximately $300,000 for professional services rendered for the annual audit for the year ended December 31, 20162020 and for quarterly review of our financial statements for 2016, and other services that are normally provided by an accountant in connection with statutory and regulatory filings or engagements for the fiscal year.2020.

Tax Fees. The aggregate amount expected to be billed for tax return preparation for the year ended December 31, 20172021 rendered by BDO is $35,500.approximately $50,000. BDO billed us $38,700approximately $50,000 for tax return preparation for the year ended December 31, 2016.2020.

All Other Fees. We incurred no other fees for the years ended December 31, 20172021, and 2016.2020.

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 BDO USA, LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions.


37 

ITEM 15.EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Exhibit
No.
Date of
Document

Name of Document

3.8

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)
3.93.0911/06/07Articles of Incorporation for CareView Communications, Inc. filed in State of Nevada(1)
3.123.1006/26/19Certificate 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))
3.11n/aBylaws of CareView Communications, Inc., a Nevada corporation(1)
10.003.1202/28/0504/11/19Subscription and Investor Rights Agreement(1)
10.01n/aProducts and Services Agreement (a/k/a Hospital Agreement), formAmendments to the Bylaws of(1)
10.0912/03/07CareView Communications, Inc. 2007 Stock Incentive Plan(1)
10.1012/03/07Non-Qualified Stock Option, form of(1)
10.1112/13/07Audit Committee Charter(1)
10.1212/13/07Compensation Committee Charter(1)
10.1402/13/08Advisory Board Charter(1)
10.4209/11/09CareView Communications, Inc. 2009 Stock Incentive Plan(1)
10.4310/01/09Commercial Lease Agreement (for Lewisville location) (1)
10.4411/16/09Rockwell JV – Master Investment Agreement(1)
10.4511/16/09Rockwell JV – Project Hospital Contract Assignment, form of(1)
10.4611/16/09Rockwell JV – Project Escrow Deposit Agreement, form of(1)
10.4711/16/09Rockwell JV – Limited License of Intellectual Property Rights, form of(1)
10.4811/16/09Rockwell JV – Project Note, form of (1)
10.4911/16/09Rockwell JV – Amended and Restated Project Note, form of(1)
10.5011/16/09Rockwell JV – Project LLC Operating Agreement, form of(1)
10.5111/16/09Rockwell JV – Project Security Agreement, form of(1)
10.5211/16/09Rockwell JV – Project Services Subcontract Agreement, form of(1)
10.5311/16/09Rockwell JV – Project Warrant, form of(1)
10.6206/29/10First Amendment to Commercial Lease Agreement(1)

10.72

04/21/11

Note and Warrant Purchase Agreement between the Company and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP(4)
10.7304/21/11Senior Secured Convertible Note of the Company payable to HealthCor Partners Fund, LP(4)

10.74

04/21/11

Senior Secured Convertible Note of the Company payable to HealthCor Hybrid Offshore Master Fund, LP(4)
10.7504/21/11Warrant to Purchase 5,488,456 shares of the Company issued to HealthCor Partners Fund, LP(4)

10.76

04/21/11

Warrant to Purchase 6,293,403 shares of the Company issued to HealthCor Hybrid Offshore Master Fund, LP(4)

10.77

04/21/11

Registration Rights Agreements between the Company and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP(4)

10.78

04/21/11

Pledge and Security Agreement between the Company and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP(4)

10.79

04/21/11

Intellectual Property Security Agreement between the Company and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP(4)

10.83

08/31/11

Loan and Security Agreement between Comerica Bank and Bridge Bank and CareView Communications, Inc., a Nevada corporation CareView Communications, Inc., a Texas corporation, and CareView Operations, LLC, a Texas limited liability company(6)(incorporated herein by reference to the Company’s Current Report on Form 8-K filed on May 20, 2019 (File No. 000-54090))

10.8410.01

08/31/11

Prime Referenced Rated Addendum between the Company and Comerica Bank as Collateral Agent for the Banks(6)

10.85

08/31/11

Subordination Agreement between Comerica Bank and HealthCor Partners Fund, L.P. and HealthCor Hybrid Offshore Master Fund, L.P. (6)
10.8608/31/11Intellectual Property Security Agreement, form of(6)
10.8708/31/11Warrant issued to Comerica Bank to purchase 714,286 shares of the Company’s Common Stock(6)
10.8808/31/11Warrant issued to Bridge Bank to purchase 714,286 shares of Company’s Common Stock(6)
10.9012/31/11Note and Warrant Amendment Agreement with HealthCor(8)

10.9101/09/12Binding Term Sheet with HealthCor(9)
10.9212/31/11Note and Warrant Amendment Agreement(2)
10.9401/31/12Second Amendment to Note and Warrant Purchase Agreement(10)
10.9501/31/12Senior Secured Convertible Note of the Company payable to HealthCor Partners Fund, LP(10)
10.9601/31/12Senior Secured Convertible Note of the Company payable to HealthCor Hybrid Offshore Master Fund, LP(10)
10.9701/31/12First Amendment to Loan and Security Agreement among the Company, certain of its subsidiaries, Comerica Bank and Bridge Bank, National Association(10)
10.9801/31/12Amendment to and Affirmation of Subordination Agreement(10)
10.100n/aInsider Trading Policy,  form of(11)
10.101n/aWhistleblower Policy(11)
10.102n/aRelated Party Transactions Policy(11)
10.10603/20/11Master Agreement with Health Management Associates, Inc. (15)
10.10803/27/13Securities Purchase Agreement, form of(16)
10.109n/aCommon Stock Purchase Warrant, form of(16)
10.11101/15/13Second Amendment to Loan and Security Agreement among the Company, certain of its subsidiaries, Comerica Bank and Bridge Bank, National Association(17)
10.11201/15/13Amendment to and Affirmation of Subordination Agreement(17)
10.11305/24/13Extension of Maturity Date for Promissory Note and Investment Interest (related to Hillcrest) (18)
10.11407/19/13Extension of Maturity Date for Promissory Note and Investment Interest (related to Saline) (18)
10.11508/20/13Third Amendment to Note and Warrant Purchase Agreement between the Company and HealthCor(19)
10.11608/20/13Third Amendment to Loan and Security Agreement among the Company, certain of its subsidiaries, Comerica Bank and Bridge Bank, National Association(19)
10.11708/20/13Affirmation of Subordination Agreement(19)
10.11912/31/13Separation Agreement and General Release between the Company and Samuel A. Greco(21)
10.12012/31/13Consulting Agreement between the Company and Samuel A. Greco (attached as Exhibit “A” to Separation Agreement and General Release (Exhibit 10.119 herein))(21)
10.12112/31/13Resignation of Samuel A. Greco (attached as Exhibit “A” to Separation Agreement and General Release (Exhibit 10.119 herein))(21)
10.12212/31/13Warrant, form of (attached as Exhibit “C” to Separation Agreement and General Release (Exhibit 10.119 herein))(21)
10.12306/21/10Indemnification Agreement between the Company and Samuel A. Greco (attached as Exhibit “D” to Separation Agreement and General Release (Exhibit 10.119 herein))(21)
10.12412/31/13Resignation of Tommy G. Thompson(21)
10.12601/16/14Fourth Amendment to Note and Warrant Purchase Agreement between the Company and HealthCor(22)
10.12701/16/14Fourth Amendment to Loan and Security Agreement among the Company, certain of its subsidiaries, Comerica Bank and Bridge Bank, National Association(22)
10.12801/16/142014 Supplemental Closing Note of the Company payable to HealthCor Partners Fund, LP(22)
10.12901/16/142014 Supplemental Closing Note of the Company payable to HealthCor Hybrid Offshore Master Fund, LP(22)
10.13001/16/142014 Supplemental Warrant issued to HealthCor Partners Fund, LP to purchase 1,863,200 shares of the Company’s Common Stock(22)
10.13101/16/142014 Supplemental Warrant issued to HealthCor Hybrid Offshore Master Fund, LP to purchase 2,136,800 shares of the Company’s Common Stock(22)
10.13201/16/14Amendment to and Affirmation of Subordination Agreement(22)
10.13301/16/14Replacement 2011  Senior Secured Convertible Note of the Company payable to HealthCor Partners Fund, LP(22)
10.13401/16/14Replacement 2011 Senior Secured Convertible Note of the Company payable to HealthCor Hybrid Offshore Master Fund, LP(22)
10.13501/16/14Replacement 2012  Senior Secured Convertible Note of the Company payable to HealthCor Partners Fund, LP(22)

47

10.136

01/16/14

Replacement 2012 Senior Secured Convertible Note of the Company payable to HealthCor Hybrid Offshore Master Fund, LP(22)

10.137

12/04/14

Fifth Amendment to Note and Warrant Purchase Agreement between the Company and HealthCor(23)
10.13812/04/14Form of Fifth Amendment Supplemental Closing Note(23)
10.13912/04/14Form of Fifth Amendment Supplemental Warrant(23)

10.140

12/04/14

Amended Pledge and Security Agreement between the Company and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP(25)

10.141

12/04/14

Amended Intellectual Property Security Agreement between the Company and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP(25)
10.14202/19/15Extension of Maturity Date for Promissory Note and Investment Interest (related to Hillcrest)(25)
10.14302/19/15Extension of Maturity Date for Promissory Note and Investment Interest (related to Saline)(25)
10.14402/25/15CareView Communications, Inc. 2015 Stock Option Plan(24)

10.145

03/31/15

Sixth Amendment to Note and Warrant Purchase Agreement between the Company and HealthCor Funds(25)
10.14603/31/15Sixth Amendment Supplemental Warrant, form of(25)
10.14706/26/15Credit Agreement between the Company and PDL BioPharma, Inc.(26)

10.148

06/26/15

Subordination and Intercreditor Agreement between the Company, PDL BioPharma, Inc., the HealthCor Funds and the Second Lien Claimholders(26)
10.14906/26/15Guarantee and Collateral Agreement between the Company and PDL BioPharma, Inc. (26)
10.15006/26/15Registration Rights Agreement between the Company and PDL BioPharma, Inc. (26)

10.151

06/26/15

Warrant to purchase 4,444,445 shares of the Company’s common stock issued to PDL BioPharma, Inc. (26)

10.152

06/26/15

Seventh Amendment to Note and Warrant Purchase Agreement between the Company and the HealthCor Funds and the Investors named therein(26)
10.15306/26/15Amendment to Registration Rights Agreement the Company and the HealthCor Fund(26)
10.15410/07/15First Amendment to Credit Agreement between the Company and PDL BioPharma, Inc. (27)
10.15510/07/15Tranche One Term Note in the Principal amount of $20 million issued to PDL BioPharma, Inc.(27)

10.156

10/17/15

Amended and Restated Warrant to purchase 4,444,445 shares of the Company’s common stock issued to PDL BioPharma, Inc.(27)

10.157

01/13/17

Settlement and LLC Interest Purchase Agreement between the Company and Rockwell Holdings I, LLC(28)
10.15801/13/17Interest Transfer Agreement between the Company and Rockwell Holdings I, LLC(28)
10.15901/13/17CareView Communications Inc. Promissory Note to Rockwell Holdings I, LLC(28)
10.16001/13/17Amended Warrant to Rockwell Holdings I, LLC(28)

10.161

12/28/17

Binding Forbearance Term Sheet 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*

10.162

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 (29)(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))

10.16310.02

02/02/18

Second Amended and Restated Warrant to Purchase Common Stock of the Company, issued to PDL Investment Holdings, LLC(29) (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))

10.16410.03

02/02/18

Amended and Restated Registration Rights Agreement by and between the Company and PDL Investment Holdings, LLC(29)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))

10.16510.04

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(29) (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))

10.16610.05

02/02/18

Consent to Credit Agreement by and among the Company, CareView Communications, Inc., a Texas corporation, and PDL Investment Holdings, LLC(29) (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))
10.16710.0602/02/18Amendment to Promissory Note to Rockwell Holdings I, LLC(29) (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))
10.16810.0702/02/18Amendment to Common Stock Purchase Warrant issued to Rockwell Holdings I, LLC(29)

48

(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))

10.16910.08

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(30) (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))
10.17010.0902/23/18Form of Eighth Amendment Supplemental Closing Note(30) (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))
10.17110.1002/23/18

Form of Eighth Amendment Supplemental Warrant(30) (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))

10.17210.11

02/23/18

Second Amendment to Credit Agreement, by and among the Company, CareView Communications, Inc., and PDL Investment Holding, LLC(30) (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))
14.0010.12n/a05/31/182010 Code of Business ConductAmendment to Modification Agreement, by and Ethics, form of(1)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))


10.1306/14/18Second 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))
14.0110.14n/a06/28/182010 Code of Business Ethics for Financial Executives, form of(1)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))
21.0010.1503/30/07/10/18Ninth 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))
10.1607/13/18Tenth 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))
10.1707/13/18Form 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))
10.1807/13/18Third 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))
10.1908/31/18Fourth 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))
10.2009/28/18Fifth 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))
10.2111/12/18Sixth 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))
10.2211/19/18Seventh 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))
10.2312/03/18Eighth 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))
10.2412/17/18Ninth 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))
10.2501/31/19Tenth 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))
10.2602/28/19Eleventh 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))


10.2703/27/19Eleventh 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))
10.2803/29/19Twelfth 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))
10.2904/09/19Fourth 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))
10.3004/09/19Amended 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))
10.3104/29/19Thirteenth 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))
10.3205/15/19Fourteenth 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))
10.3305/15/19Twelfth 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))
10.3405/15/19Form 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))
10.3505/15/19Fifth 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))
10.3605/15/19Form 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))
10.3705/15/19Form 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))
10.3809/30/19Fifteenth 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))
10.3911/29/19Sixteenth 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))
10.4012/31/19Seventeenth 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))
10.4112/31/19Second 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))
10.4201/17/20Eighteenth 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))
10.4301/28/20Nineteenth 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))
10.4401/31/20Third 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))

40 

10.4502/06/20Sixth 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))
10.4602/06/20Form 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))
10.4703/31/20Fourth 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))
10.4804/17/20Twentieth 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))
10.4909/30/20Twenty-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))
10.5011/30/20Twenty-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))
10.5112/31/20Fifth 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, 2021 (File No. 000-54090))
10.521/31/21Twenty-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, 2021 (File No. 000-54090))
10.535/25/21Twenty-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, 2021 (File No. 000-54090))
10.5411/29/21Twenty-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, 2021 (File No. 000-54090))
10.5511/30/21Sixth 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, 2021 (File No. 000-54090))
10.5603/08/22Allonge 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))
10.5703/08/22Allonge 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))
10.5803/08/22Allonge 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))
10.5903/08/22Allonge 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))

41 

10.6003/08/22Form 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))
10.6103/08/22Consent 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))
10.6203/08/22Consent 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))
2103/31/22Subsidiaries of the Registrant*
23.103/31/22Consent of BDO USA, LLP*

31.1

03/30/1831/22 

Certification of Chief Executive Officer of Periodic Report pursuant to Rule 13a-14a and Rule 14d-14(a).*

31.2

03/30/1831/22 

Certification of Chief Financial Officer of Periodic Report pursuant to Rule 13a-14a and Rule  15d-14(a)15d-4(a).*

32.103/30/1831/22Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350.*
32.203/30/1831//22Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350.*
101.INSn/aXBRL Instance Document*
101.SCHn/aXBRL Taxonomy Extension Schema Document*
101.CALn/aXBRL Taxonomy Extension Calculation Linkbase Document*
101.DEFn/aXBRL Taxonomy Extension Definition Linkbase Document*
101.LABn/aXBRL Taxonomy Extension Label Linkbase Document*
101.PREn/aXBRL Taxonomy Extension Presentation Linkbase Document*

___________________

(1)Filed as an exhibit to our Form 10 filed with the SEC on August 23, 2010.
(2)Filed as an exhibit to our quarterly report on Form 10-Q/A filed with the SEC on December 7, 2010.
(3)Filed as an exhibit to our annual report on Form 10-K filed with the SEC on April 15, 2011.
(4)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on April 27, 2011.
(5)Filed as an exhibit to our quarterly report on Form 10-Q filed with the SEC on August 22, 2011.
(6)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on September 7, 2011.
(7)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on November 10, 2011.
(8)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on January 6, 2012.
(9)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on January 11, 2012.
(10)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 2, 2012.
(11)Filed as an exhibit to our annual report on Form 10-K filed with the SEC on March 15, 2012.
(12)Filed as an exhibit to our quarterly report on Form 10-Q filed with the SEC on May 9, 2012.
(13)Filed as an exhibit to our quarterly report on Form 10-Q filed with the SEC on August 8, 2012.
(14)Filed as an exhibit to our quarterly report on Form 10-Q filed with the SEC on November 8, 2012.
(15)Filed as an exhibit to our quarterly report on Form 10-Q, Amendment No. 1, filed with the SEC on February 15, 2013. Certain information in this exhibit has been omitted and filed separately with the Securities and Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.
(16)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on March 28, 2013.
(17)Filed as an exhibit to our annual report on Form 10-K filed with the SEC on April 1, 2013.
(18)Filed as an exhibit to our quarterly report on Form 10-Q filed with the SEC on August 9, 2013.
(19)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on August 26, 2013.
(20)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on September 10, 2013.
(21)Filed as an exhibit to our Current Report on Form, 8-K filed with the SEC on January 3, 2014.
(22)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on January 22, 2014.
(23)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on December 19, 2014.
(24)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on March 19, 2015.
(25)Filed as an exhibit to our annual report on Form 10-K filed with the SEC on March 31, 2015
(26)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on June 30, 2015.
(27)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on October 13, 2015.
(28)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 2, 2017.
(29)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 5, 2018.
(30)Filed as an exhibit to our Current Report on Form 8-K filed with the SEC on February 26, 2018.
*Filed herewith.


 *Filed herewith.

ITEM 16.FORM 10-K SUMMARY.

None.

42 

 

50

SIGNATURES

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 30, 2018

DATE:    March 31, 2022
CAREVIEW COMMUNICATIONS, INC.
By:By:/s/ Steven G. Johnson
 Steven G. Johnson
 Chief Executive Officer
 Principal Executive Officer
By: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.

SignatureTitleTitleDate

/s/ Steven G. Johnson

Steven G. Johnson

Chief Executive Officer, President, Secretary, Treasurer, Director

March 31, 2022

Steven G. JohnsonMarch 30, 2018

/s/ Jason T. Thompson

Jason T. Thompson

Director, Principal Financial Officer, Chief Accounting Officer

March 31, 2022

Jason T. ThompsonMarch 30, 2018

/s/ Sandra K. McRee

Sandra K. McRee

Chief Operating Officer

March 30, 201831, 2022

/s/ L. Allen Wheeler

L. Allen Wheeler

Chairman of the Board,

March 30, 201831, 2022

/s/ Jeffrey C. Lightcap

Jeffrey C. Lightcap

Director

Director

March 30, 201831, 2022

/s/ David R. White

David R. White

Director

Director

March 30, 201831, 2022

/s/ Steven B. Epstein

Steven B. Epstein

Director

Director

March 30, 201831, 2022

/s/ Dr. James R. Higgins

Dr. James R. Higgins

Director

Director

March 30, 201831, 2022


44 

INDEX TO FINANCIAL STATEMENTS

Page
  
Page

Report of Independent Registered Public Accounting Firm (BDO USA, LLP; Dallas, Texas; PCAOB ID#243)

F-1

Consolidated Balance Sheets as of December 31, 20172021 and 20162020F-2F-3
Consolidated Statements of Operations for the years ended December 31, 20172021 and 20162020F-3F-4
Consolidated Statements of Stockholders’Changes in Equity for the years ended December 31, 20172021 and 20162020F-4F-5
Consolidated Statements of Cash Flows for the years ended December 31, 20172021 and 20162020F-5F-6
Notes to Consolidated Financial StatementsF-6F-7

 

 

 

Report of Independent Registered Public Accounting Firm

TheShareholders and Board of Directors and Shareholders

CareView Communications, Inc.

Lewisville, TX

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of CareView Communications, Inc. and subsidiaries (the “Company”) as of December 31, 20172021 and 2016,2020, the related consolidated statements of operations, stockholders’ deficit,changes in equity, and cash flows for each of the two years inthen ended, and the period ended December 31, 2017.related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 20172021 and 2016,2020, and the results of theirits operations and theirits cash flows for each of the two years in the periodthen ended, December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Uncertainty

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations and has accumulated losses since inception that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated 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 consolidated 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 consolidated 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 consolidated 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 consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated 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 consolidated 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 consolidated 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.

Amendments to the PDL Credit Agreement and the HealthCor 2011 and 2012 Agreements

As described in Note 13 and Note 14 to the consolidated financial statements, the Company has credit agreements with PDL BioPharma, Inc. (“PDL Credit Agreement”) and HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP (“HealthCor 2011 and 2012 Agreements”), collectively, the “Agreements”. As of December 31, 2021, outstanding balances under the PDL Credit Agreement and HealthCor 2011 and 2012 Agreements were $20,000,000 and $56,302,303, respectively. During the year ended December 31, 2021, the Company entered into amendments to the Agreements. Management applies significant judgment in determining whether amendments are a Troubled Debt Restructuring (“TDR”).

F-1 

 

/s/

We identified the accounting for the Amendments, specifically related to management’s determination of the effective borrowing rate in assessing if a concession is granted, as a critical audit matter. The principal consideration for our determination is the complexity in the identification and application of relevant terms and provisions of each amendment to the calculation of the effective borrowing rate. Auditing this element was especially challenging due to the volume of amendments and effort required to address this matter, including the extent of specialized skill and knowledge needed.

The primary procedures we performed to address this critical audit matter included:

Utilizing personnel with specialized knowledge and skill to assist in: (i) identifying and evaluating relevant terms and provisions of each amendment that affect the accounting for the modification; (ii) and assessing the appropriateness of conclusions reached by management.

Evaluate the effective borrowing rates of the notes by running independent calculations.

Identification of performance obligations and allocation of transaction price to the performance obligations for sales-based contracts

As described in Note 2 to the consolidated financial statements, sales-based contract revenue was $2.4 million for the year ended December 31, 2021. At contract inception, the Company assesses the goods and services promised to the customer and identifies the performance obligation for each promise to transfer a good or service that is distinct. The Company considers all performance obligations whether they are explicitly stated in the contract or are implied by customary business practices. In determining revenue, the Company allocates the aggregate transaction price to the performance obligation depending on the relative standalone selling price of the performance obligations.

We identified the identification of distinct performance obligations and the allocation of transaction price to each identified performance obligation as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate the terms of the contracts to identify the distinct performance obligations, as well as to evaluate certain key unobservable inputs used to determine the relative standalone selling price, specifically the market values of the in-house developed cameras and the software monitoring.

The primary procedures we performed to address this critical audit matter included:

Testing a sample of sales-based contracts, by performing the following: (i) reading contract source documents for each selection, (ii) testing the Company’s identification of distinct performance obligations, (iii) evaluating implicit terms within the contracts, (iv) sending contract confirmations directly to customers to confirm the terms and conditions of the selected arrangements.

Testing management's determination of relative standalone selling price for each performance obligation by assessing the appropriateness of the methodology applied, the mathematical accuracy of management’s calculations, and testing a sample of the underlying data and comparing to pricing for similar services the Company has historically provided, along with assessing industry benchmarks.

Utilizing personnel with specialized knowledge and skill to assist in: (i) evaluating the terms and provisions of each contract that affect the determination of distinct performance obligations; (ii) and assessing the appropriateness of conclusions reached by management.

(Signed BDO USA, LLP)

We have served as the Company's auditor since 2010.

Dallas, Texas

March 30, 2018 31, 2022

F- 1

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

       
  December 31, 
  2017  2016 
ASSETS   
Current Assets:        
Cash and cash equivalents $2,066,392  $10,088,258 
Accounts receivable  1,210,968   1,069,304 
Other current assets  585,622   114,717 
Total current assets  3,862,982   11,272,279 
         
Property and equipment, net  3,321,541   4,152,414 
         
Other Assets:        
Restricted cash  2,500,000   3,250,000 
Intangible assets, net  665,918   612,337 
Other assets  1,767,909   2,168,894 
Total other assets  4,933,827   6,031,231 
Total assets $12,118,350  $21,455,924 
         
 LIABILITIES AND STOCKHOLDERS’ DEFICIT        
Current Liabilities:        
Accounts payable $365,300  $195,472 
Notes payable, current portion  8,533,334   439,173 
Mandatorily redeemable equity in joint venture     439,173 
Accrued interest     328,979 
Other current liabilities  750,056   485,850 
Total current liabilities  9,648,690   1,888,647 
         
Long-term Liabilities:        
Senior secured convertible notes, net of debt discount and debt costs of $18,161,723 and $21,267,829, respectively  52,397,089   42,271,224 
Loan payable  11,666,666   20,000,000 
Note payable  513,786    
Accrued interest  43,583    
Total long-term liabilities  64,621,124   62,271,224 
Total liabilities  74,269,814   64,159,871 
         
Commitments and Contingencies        
         
Stockholders’ Deficit:        
Preferred stock - par value $0.001; 20,000,000 shares authorized; no shares issued and outstanding      
Common stock - par value $0.001; 300,000,000 shares authorized; 139,380,748 issued and outstanding  139,381   139,381 
Additional paid in capital  83,617,896   84,119,834 
Accumulated deficit  (145,908,741)  (126,408,409)
Total CareView Communications Inc. stockholders’ deficit  (62,151,464)  (42,149,194)
Noncontrolling interest     (554,753)
Total stockholders’ deficit  (62,151,464)  (42,703,947)
Total liabilities and stockholders’ deficit $12,118,350  $21,455,924 

         
  December 31,  December 31, 
  2021  2020 
ASSETS
    Current Assets:        
      Cash and cash equivalents $659,228  $357,950 
      Accounts receivable  933,200   1,146,486 
      Inventory  349,216   408,450 
      Other current assets  235,521   244,307 
    Total current assets  2,177,165   2,157,193 
         
    Property and equipment, net  1,138,891   1,592,484 
         
 ��  Other Assets:        
      Intangible assets, net  910,398   897,712 
      Operating lease asset  555,150   659,099 
      Other assets, net  299,563   197,121 
    Total other assets  1,765,111   1,753,932 
  Total assets $5,081,167  $5,503,609 
         
LIABILITIES AND STOCKHOLDERS' DEFICIT        
    Current Liabilities:        
      Accounts payable $414,333  $442,004 
      Notes payable  20,013,786   20,163,786 
      Notes payable - related parties  700,000   700,000 
      Senior secured notes - related parties, net of debt discount and debt costs of $307,832 and $1,083,599, respectively  56,302,303   44,883,349 
      Operating lease liability  162,470   150,087 
      Other current liabilities  11,740,218   7,858,480 
    Total current liabilities  89,333,110   74,197,706 
         
    Long-term Liabilities:        
      Senior secured notes - related parties, net of debt discount and debt costs of $0, and $749,069, respectively     9,894,117 
      Senior secured convertible notes - related parties; net of debt discount and debt costs of $2,562,161 and $3,514,921, respectively  24,302,135   20,717,036 
      Senior secured convertible notes, net of debt discount and debt costs of $240,125 and $136,810, respectively  3,661,617   3,394,478 
      Operating lease liability  445,033   561,202 
      Other liability  37,570    
    Total long-term liabilities  28,446,355   34,566,833 
    Total liabilities  117,779,465   108,764,539 
         
Commitments and Contingencies (Note 11)        
         
    Stockholders' Deficit:        
      Preferred stock - par value $0.001; 20,000,000 shares authorized; 0 shares issued and outstanding      
      Common stock - par value $0.001; 500,000,000 shares authorized; 139,380,748 issued and outstanding  139,381   139,381 
      Additional paid in capital  85,052,367   84,409,372 
      Accumulated deficit  (197,890,046)  (187,809,683)
    Total stockholders' deficit  (112,698,298)  (103,260,930)
  Total liabilities and stockholders' deficit $5,081,167  $5,503,609 

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


CAREVIEW COMMUNICATIONS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

         
  Year Ended 
  December 31, 2021  December 31, 2020 
Revenues:        
   Subscription-based lease revenue  5,404,623   6,473,800 
   Sales-based equipment package revenue  1,950,386    
   Sales-based software bundle revenue  447,217   14,515 
   Total revenues  7,802,226   6,488,315 
         
Operating expenses:        
    Cost of equipment  179,531   26,320 
    Network operations  2,603,407   2,738,120 
    General and administration  3,226,310   2,721,552 
    Sales and marketing  549,419   575,195 
    Research and development  1,711,211   1,708,296 
    Depreciation and amortization  679,428   597,119 
  Total operating expenses  8,949,306   8,366,602 
         
  Operating income (loss)  (1,147,080)  (1,878,287)
         
  Other income and (expense)        
    Interest expense  (8,950,418)  (10,595,598)
    Interest income  138   400 
    Gain on extinguishment of debt     786,889 
    Other expense     (37,917)
    Other income  16,997   41,867 
  Total other income (expense)  (8,933,283)  (9,804,359)
         
  Loss before taxes  (10,080,363)  (11,682,646)
         
  Provision for income taxes      
         
  Net Loss $(10,080,363) $(11,682,646)
         
  Net loss per share $(0.07) $(0.08)
         
  Weighted average number of common shares outstanding, basic and diluted  139,380,748   139,380,748 

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


CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2021 AND 2020

                     
        Additional       
  Common Stock  Paid in  Accumulated    
  Shares  Amount  Capital  Deficit  Total 
Balance, December 31, 2019  139,380,748   139,381   84,244,343   (176,127,037)  (91,743,313)
                     
Options granted as compensation        156,342      156,342 
Issuance of warrants to purchase common stock        8,687      8,687 
Net loss           (11,682,646)  (11,682,646)
                     
Balance, December 31, 2020  139,380,748   139,381   84,409,372   (187,809,683)  (103,260,930)
                     
Options granted as compensation        222,995      222,995 
Issuance of warrants to purchase common stock        420,000      420,000 
Net loss           (10,080,363)  (10,080,363)
                     
Balance, December 31, 2021  139,380,748   139,381   85,052,367   (197,890,046)  (112,698,298)

 

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

F-5 

 

F- 2

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONSCASH FLOWS

  Year Ended December 31, 
  2017  2016 
       
Revenues, net $6,263,810  $5,973,985 
         
Operating expenses:        
Network operations  4,639,738   4,679,297 
General and administration  4,012,553   3,757,816 
Sales and marketing  691,095   776,961 
Research and development  1,648,985   1,252,850 
Depreciation and amortization  1,887,377   1,816,093 
Total operating expense  12,879,748   12,283,017 
         
Operating loss  (6,615,938)  (6,309,032)
         
Other income and (expense)        
Interest expense  (13,474,891)  (12,592,998)
Change in fair value of warrant liability  (10,528)  168,176 
Interest income  9,073   17,267 
Other income  20,270   50,828 
Total other income (expense)  (13,456,076)  (12,356,727)
         
Loss before taxes  (20,072,014)  (18,665,759)
         
Provision for income taxes      
         
Net loss  (20,072,014)  (18,665,759)
        
Net loss attributable to noncontrolling interest     (53,062)
        
Net loss attributable to CareView Communications, Inc. $(20,072,014) $(18,612,697)
        
Net loss per share attributable to CareView Communications, Inc., basic and diluted $(0.14) $(0.13)
        
Weighted average number of common shares outstanding, basic and diluted  139,380,748   139,380,748

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

F- 3

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

FOR THE YEARS ENDED DECEMBER 31, 20172021 AND 20162020

        Additional          
  Common Stock  Paid in  Accumulated  Noncontrolling    
  Shares  Amount  Capital  Deficit  Interest  Total 
                   
Balance, December 31, 2015  139,380,748   139,381   82,434,461   (107,795,712)  (501,691)  (25,723,561)
                         
Options granted as compensation        717,385         717,385 
                        
Beneficial conversion features for senior secured convertible notes        967,988         967,988 
                         
Net loss           (18,612,697)  (53,062)  (18,665,759)
                         
Balance, December 31, 2016  139,380,748   139,381   84,119,834   (126,408,409)  (554,753)  (42,703,947)
                         
Options granted as compensation        398,338         398,338 
                        
Beneficial conversion features for senior secured convertible notes        153,274         153,274 
                         
Adjustment to fair value of warrants for extension of exercise period        11,512         11,512 
                         
Adjustment to fair value of warrants for modification of loan agreement        44,445         44,445 
                         
Cost associated with closure of joint ventures        (1,109,507)  571,682   554,753   16,928 
                         
Net loss           (20,072,014)     (20,072,014)
                         
Balance, December 31, 2017  139,380,748  $139,381  $83,617,896  $(145,908,741) $  $(62,151,464)

         
  Year Ended 
  December 31 2021  December 31 2020 
CASH FLOWS FROM OPERATING ACTIVITIES        
    Net loss $(10,080,363) $(11,682,646)
    Adjustments to reconcile net loss to net cash used in operating activities:        
      Depreciation  578,745   531,098 
      Amortization of intangible assets  56,271   66,021 
      Amortization of deferred installation costs  44,414   31,759 
      Amortization of debt discount  2,395,036   4,552,751 
      Amortization of deferred debt issuance and debt financing costs  43,352  57,803 
      Non-cash lease expense  12,383  (11,955)
      Gain on extinguishment of debt     (786,889)
      Interest incurred and paid in kind  3,002,790   2,743,734 
      Stock based compensation related to options granted  642,995   165,029 
      Loss on disposal of intangible assets     (2,885)
      Write off of deferred installation costs     21,886 
      Changes in operating assets and liabilities:        
        Accounts receivable  213,286   519,852 
        Inventory  59,234   (408,450)
        Other current assets  10,292   (23,842)
        Patent license     16,393 
        Accounts payable  (27,669)  2,152 
        Accrued interest  3,203,226   3,227,058 
        Other current liabilities  640,942   131,005 
        Operating lease liability  (116,168)  58,724 
Net cash provided by operating activities  678,766   (791,402)
         
CASH FLOWS FROM INVESTING ACTIVITIES        
    Purchase of property and equipment  (99,241)  (142,679)
    Payment for deferred installation costs  (59,312)  (26,459)
    Patent, trademark, and other intangible assets costs  (68,935)  (133,051)
Net cash used in investing activities  (227,488)  (302,189)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
    Proceeds from senior secured convertible promissory notes     100,000 
    Proceeds from payroll protection program loan     781,800 
    Proceeds from promissory notes     500,000 
    Repayment of notes payable  (150,000)  (200,000)
Net cash flows provided used in financing activities  (150,000)  1,181,800 
         
Increase in cash  301,278   88,209 
Cash and cash equivalents, beginning of period  357,950   269,741 
Cash and cash equivalents, end of period $659,228  $357,950 
         
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITES:        
   Additions to vehicles financed by vehicle loan $37,570  $ 
   Remeasurement of operating lease $  $46,769 

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

 

F- 4

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

       
  Year Ended December, 31, 
  2017  2016 
       
CASH FLOWS FROM OPERATING ACTIVITES        
Net loss $(20,072,014) $(18,665,759)
Adjustments to reconcile net loss to net cash flows used in operating activities:        
Depreciation  1,840,606   1,759,016 
Amortization of debt discount and debt costs  3,259,381   2,741,522 
Amortization of deferred installation costs  304,712   7,576 
Amortization of deferred debt issuance and debt financing costs  291,084   291,084 
Amortization of intangible assets  46,771   57,077 
Interest incurred and paid in kind  7,019,758   6,768,597 
Stock based compensation related to options granted  398,338   717,385 
Stock based costs related to warrants issued  11,512    
Loss on disposal of assets  1,716   2,825 
Change in fair value of warrant liability  10,528   (168,176)
Changes in operating assets and liabilities:        
Accounts receivable  (141,664)  107,100 
Other current assets  (470,906)  359,533 
Other assets  766,394   16,394 
Accounts payable  169,828   (136,930)
Accrued expenses and other current liabilities  303,722   73,523 
Net cash flows used in operating activities  (6,260,234)  (6,069,233)
         
CASH FLOWS FROM INVESTING ACTIVITIES        
Purchase of property and equipment  (994,521)  (1,430,814)
Payment for deferred installation costs  (166,759)  (173,657)
Patent and trademark costs  (100,352)  (291,824)
Recovery of unused deferred installation costs     379,467 
  Net cash flows used in investing activities  (1,261,632)  (1,516,828)
         
CASH FLOWS FROM FINANCING ACTIVITIES        
Repayment of notes payable  (500,000)  (4,650)
  Net cash flows provided by financing activities  (500,000)  (4,650)
         
  Increase (decrease) in cash  (8,021,866)  (7,590,711)
  Cash and cash equivalent, beginning of period  10,088,258   17,678,969 
  Cash and cash equivalents, end of period $2,066,392  $10,088,258 
         
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:        
         
  Cash paid for interest $2,700,000  $2,722,149 
         
  Cash paid for income taxes $  $ 
         
SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES:        
        
  Beneficial conversion features for senior secured convertible notes $153,274  $967,988 
         
  Revaluation of warrants for modification of loan $44,445  $ 

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

F- 5

CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

Our mission is to be the leading provider of products and on-demand application services for the healthcare industry, specializing in bedsideCareView’s video monitoring software toolssolutions include the following:

SitterView® and TeleMedView allows hospital staff to improve hospital communicationsuse CareView’s video cameras to observe and operations,communicate with patients remotely. TeleMedView leverages the CareView Mobile Controller’s built-in monitor and patient education and entertainment packages. Our proprietary, high-speed data network system iscan work with the next generation of patient care monitoring that allows real-time bedside and point-of-care video monitoring designed to improve patient safety and overall hospital costs. The entertainment packages and patient education enhance the patient’s quality of stay. Reported results from CareView-driven facilities prove that our products reduce falls, reduce the cost of sitter fees, increase patient satisfaction and reduce bed turnaround time to increase patient flow. For patients, we have a convenient in-room, entertainment package that includes high-speed Internet, access to first-run on-demand movies and visual connectivity to family and friends from anywhere in the world. For the hospital, we offer tools to provide superior patient care, peace of mind and customer service satisfaction.CareView Portable Controller as well.

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

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

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

In addition to patient safety and security, weWe also provide a suite of services to increase patient satisfaction scores and enhance the overall image of the hospital including first-run on-demand movies, Internet access via the patient’s television, and video visits with family and friends from most places throughout the world. Through continued investment in patient care technology, ourfriends.

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 and services help hospitals and assisted living facilities build a safe, high quality healthcare delivery system that best serves the patient, while strivingare designed for the highest levellong-term care market, including Nursing Care, Home Care, Assisted Living and Independent Living.

Coronavirus Aid, Relief, and Economic Security Act

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act (the “Act”) was enacted. The CARES Act is an emergency economic stimulus package in response to the Coronavirus outbreak, which among other things contains numerous income tax provisions. Some of satisfactionthese tax provisions were retroactively effective for years ending before the date of enactment.

In April 2020, the Company applied for, and comfort.received, funds under the Paycheck Protection Program in the amount of $781,800. The Company applied for forgiveness, and on November 20, 2020, received confirmation that the amount had been forgiven. The loan balance plus accrued interest of $786,889 was recorded as a gain on extinguishment of debt in the December 31, 2020 consolidate statement of operations. Refer to Note 11.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of CareView and CareView Communications, Inc., a Texas corporation and CareView Operations, LLC, a Nevada limited liability company (our wholly owned subsidiaries). Also included for the year ended December 31, 2016 were CareView-Hillcrest, LLC and CareView-Saline, LLC, both Wisconsin limited liability companies (the “Project LLCs”) and variable interest entities (“VIEs”) (see below). All material inter-company balances and transactions have been eliminated in consolidation.

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During 2016 we reported noncontrolling interests in our variable interest entities (“VIEs”) as a component of stockholders’ deficit in the Consolidated Balance Sheets and the loss attributable to noncontrolling interests as an adjustment to net loss to arrive at net loss attributable to us in the Consolidated Statements of Operations. As of and for the year ended December 31, 2017, we did not maintain any variable interests in any entities requiring consolidation in our financial statements.

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

Concurrent with the execution, and pursuant to the terms, of the Settlement Agreement, as discussed in NOTE 13, all assets and liabilities of the Project LLCs were transferred to our wholly owned subsidiary, CareView Communications, Inc., effective January 1, 2017. On June 12, 2017, we filed Form 510- Limited Liability Company Articles of Dissolution with the State of Wisconsin resulting in the dissolution of the Project LLCs effective that date.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Cash and Cash Equivalents

We consider all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. We maintain cash at financial institutions that at times may exceed federally insured limits.

Restricted Cash

At December 31, 2017, we had $2,500,000 included in restricted cash in other assets on the consolidated balance sheet. On December 28, 2017, the minimum cash requirement in the credit agreement with PDL BioPharma, Inc. was modified to reduce the minimum cash requirement from $3,250,000 to $2,500,000. See NOTES 12 and 15 for further discussion.

Trade Accounts Receivable

Trade accounts receivable are customer obligations due under normal trade terms. We provide an allowance for doubtful accounts, 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, 2021 and 2020, an allowance for doubtful accounts of $0 and $0, respectively, was recorded.

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

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 Equipmentnetwork equipment in fixed assets upon receipt and begin depreciating the Network Equipmentsuch equipment when such equipmentit passes our incoming inspection and is available for use. We attribute no salvage value to the Network Equipmentnetwork equipment and depreciation is computed using the straight-line method based on the estimated useful life of seven years.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

We wouldOn occasion, the Company will remove the CareView Systemsubscription equipment from its larger customer premises due to a number of factors; including, but not limited to, collection/revenue performance issues and contract expiration/non-renewal. We regularly evaluate the installed CareView Systems for such factors andWhen equipment is removed an allowance is set upestablished based on the estimated cost of removal. As ofAt December 31, 20172021 and 2016,2020, an allowance of $176,750$54,802 and $116,350,$36,500, respectively, was recorded.recorded in other assets 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:

Significantsignificant declines in an asset’s market price;

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Significantsignificant deterioration in an asset’s physical condition;

Significantsignificant changes in the nature or extent of an asset’s use or operation;

Significantsignificant adverse changes in the business climate that could impact an asset’s value, including adverse actions or assessments by regulators;

Accumulationaccumulation of costs significantly in excess of original expectations related to the acquisition or construction of an asset;

Current-periodcurrent-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

Expectationsexpectations 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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 assetsasset 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 assetsasset 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:include market size and growth, market share, projected selling prices, manufacturing cost and discount rate. Our estimates are based upon our historicalpast 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. During the years ended December 31, 20172021 and 2016,2020, no impairment was recognized.

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, 20172021, and 2016.2020.

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 accounting principles generally accepted in the United States of America (“GAAP”).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.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, 20172021, and 2016.2020.

During the years ended December 31, 20172021, and 2016,2020, we capitalized no additional intellectual property costs.

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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.

Derivative Financial Instruments

Derivatives are recorded on the balance sheet at fair value and changes in fair value are recorded in earnings at each reporting date in accordance with GAAP. See Fair Value of Financial Instruments below, and NOTES 11 and 12 for further details regarding derivative activity during the years ended December 31, 2017 and 2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 approximatesapproximate 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 shortshort- and long-term debt with similar terms and remainingterms. Remaining maturities are used to estimate the fair value of our shortshort- 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.

The Company’s financial assetsAt December 31, 2021, and liabilities recorded at fair value on a recurring basis include the warrant liability discussed in NOTE 4. The fair value of this warrant liability is included in other current liabilities on the accompanying consolidated financial statements.

The following table provides the2020, we had no financial assets and liabilities reported at fair value and measured on a recurring basis at December 31:value.

Description Assets/
 (Liabilities)
 Measured at Fair Value
 Quoted Prices in Active Markets for Identical Assets
 (Level 1)
 Significant Other Observable Inputs
 (Level 2)
 Significant Other Unobservable Inputs
 (Level 3)
         
Fair value of warrant liability              
2017 $(11,157) $ $ $(11,157)
2016 $(629) $ $ $(629)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table provides a summary of changes in fair value associated with the Level 3 liabilities for the year ended December 31:

  

Fair Value Measurements Using Significant Unobservable Inputs (Level 3) 

 
   2017   2016 
         
Balance, beginning of period $(629) $(168,805)
Issuances of derivative liabilities      
Change in fair value of warrant liability  (10,528)  168,176 
Transfers in and/out of Level 3      
Balance, end of period $(11,157) $(629)

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

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 statementstatements 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 judgmentjudgement occur. We recognize both interest and penalties related to uncertain tax positions as part of the income tax provision.

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CAREVIEW COMMUNICATION,COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Revenue Recognition

RevenueWe 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 persuasive evidencea 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 arrangement exists,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.

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”).

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Disaggregation of Revenue

The following presents gross revenues disaggregated by our business models:

         
  For the years ended
December 31,
 
  2021  2020 
Sales-based contract revenue        
Equipment package (point in time) $1,950,386  $ 
Software bundle (over time)  447,217   14,515 
Total sales-based contract revenue  2,397,603   14,515 
         
Subscription-based lease revenue  5,404,623   6,473,800 
Gross revenue $7,802,226  $6,488,315 

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, 2021, and 2020, a total of $172,056 and $137,866, respectively, of the beginning balance of the subscription-based contract liability was recognized as revenue. The table below details the subscription-based contract liability activity during the years ended December 31, 2021, and 2020.

        
  For the years ended
December 31,
 
  2021  2020 
Balance, beginning of period $238,263  $255,398 
Additions  290,620   256,534 
Transfer to revenue  (297,742)  (273,669)
Balance, end of period $231,141  $238,263 

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During the years ended December 31, 2021, and 2020, a total of $226,861 and $0, respectively, of the beginning balance of the sales-based contract liability was recognized as revenue. The table below details the sales-based contract liability activity during the years ended December 31, 2021, and 2020.

        
  For the years ended
December 31,
 
  2021  2020 
Balance, beginning of period $226,861  $ 
Additions  820,854   237,236 
Transfer to revenue  (295,189)  (10,375)
Balance, end of period $752,526  $226,861 

As of December 31, 2021, 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 $983,667 and will be recognized into revenue over time as follows:

Years Ending December 31,  Amount 
2022  $710,893 
2023   136,387 
Thereafter   136,387 
   $983,667 

Based on our contracts, with exception to 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 selling price is fixed or determinable, whenright to consideration becomes unconditional and are reported accordingly our consolidated financial statements.

We defer and capitalize all costs associated with the installation and official acceptance by the facility occurs, and when collection is probable.

We offer CareView’s services through a subscription-based contract with each facility for a standard term of three to five years. We begin to bill monthly subscription fees to the facility upon official acceptance of the CareView System into a healthcare facility until the CareView System is fully operational and accepted by the healthcare facility. The contract requiresInstallation costs are specifically identifiable based on the facility to pay usamounts we are charged from third party installers or directly identifiable labor hours incurred for each installation. Upon acceptance, the subscription fee monthly. Duringassociated costs are expensed on a straight-line basis over the termlife 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, 2021, and 2020, included in other assets in the accompanying consolidated balance sheet.

        
  For the years ended
December 31,
 
  2021  2020 
Balance, beginning of period $54,002  $81,188 
Additions  59,312   26,459 
Transfer to expense  (44,413)  (53,645)
Balance, end of period $68,901  $54,002 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 provide continuous monitoringutilize 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 CareView Systemcontract 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 are requiredcreation of a new contract, a cumulative catch-up adjustment to maintain and service all CareView System equipment. If the customer requiresoriginal contract, or a combination.

Contracts with our customers include a limited warranty on our products covering materials, workmanship, or design for the duration of contract. We do not offer paid additional productsextended or services,lifetime warranty packages. We determined the limited warranty in our contract is amended accordingly.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 43 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

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 133,000,000 226,000,000 and 122,000,000 207,000,000 at December 31, 20172021, and 2016,2020, respectively, have been excluded from the diluted earnings per share calculation as they are anti-dilutive due to our reported net loss.

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

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. 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.

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO 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 financial statements.

Variable Interest Entities

We use a qualitative analysis to determine if we are the primary beneficiary of a VIE. We consider whether the enterprise’s variable interest or interests give it a controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE as the enterprise that has both of the following characteristics, among others: (a) the power to direct the activities of a VIE that most significantly impacts the entity’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits from the entity, that could potentially be significant to the VIE.

Installation Costs

We defer all costs associated with the installation of the CareView System into a particular hospital until the CareView System is fully operational and accepted by the hospital. Upon acceptance, the associated costs are expensed ratably over the life of the hospital contract. These costs are included in network operations 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 financial statements.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, 20172021, and 20162020, totaled approximately $99,000$33,000 and $168,000,$30,000, respectively.

Concentration of Credit Risks and Customer Data

For the years ended December 31, 2017 and 2016, 103 and 93 hospitals accounted for allDuring 2021, no customer comprised more than 10% of our revenue. During 2017 four2020 one customer comprised 57%$1,179,000 or 18% of our revenue, while no other customer comprised more than 10%. During 2016 three customers comprised 58% of our revenue, while no other customer comprised more than 10%.

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 

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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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Recently Issued and Newly Adopted Accounting Pronouncements

In March 2016,August 2020, the FASB issued ASU 2016-09, Compensation2020-06, DebtStock Compensation: Improvements to Employee Share-Based Payment AccountingDebt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2016-09”2020-06”). This guidanceASU 2020-06 simplifies several aspects of the accounting for employee share-based payment transactions for both publiccertain financial instruments with characteristics of liabilities and nonpublic entities,equity, including the accounting for income taxes, forfeitures,convertible instruments and statutory tax withholding requirements, as well as classification in the statement of cash flows.contracts on an entity’s own equity. The guidance isASU 2020-06 amendments are effective for public business entities for fiscal years beginning after December 15, 2016,2023, and interim periods within those fiscal years. Early adoption is permitted, in any annual orbut no earlier than fiscal years beginning after December 15, 2020, including interim period for which financial statements have not been issued or made available for issuance, but allperiods within those fiscal years. The Company is currently evaluating the impact of the guidance must be adopted in the same period. If an entity early adopts the guidance in an interim period, any adjustments must be reflected as of the beginning of the fiscal year that includes that interim period. There was no material effect on the 2017 consolidated financial statements upon adoption.adopting this standard.

Fair Value of Financial Instruments

In AugustJune 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-15, Statement of Cash Flows 2016-13, Financial Instruments — Credit Losses (Topic 230)326) (“ASU 2016-15”2016-13”). ASU 2016-15 is intended2016-13 modifies the measurement of expected credit losses of certain financial instruments, requiring entities to reduceestimate an expected lifetime credit loss on financial assets. The ASU amends the diversity in practice regarding how certain transactions are classified withinimpairment model to utilize an expected loss methodology and replaces the statement of cash flows. ASU 2016-15 is effectiveincurred loss methodology for public businessfinancial instruments including trade receivables. The amendment requires entities for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted with retrospective application. We are currently evaluating the impact of this guidance on our consolidated financial statementsto consider other factors, such as historical loss experience, current conditions and disclosures.

reasonable and supportable forecasts. In June 2016,November 2019, the FASB issued ASU 2016-13, No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): MeasurementEffective Dates, which deferred the effective date of Credit Losses on Financial Instruments (“ASU 2016-13”). The ASU sets forth an “expected credit loss” impairment modelthe new guidance by one year to replace the current “incurred loss” method of recognizing credit losses. The standard requires measurement and recognition of expected credit losses for most financial assets held. The ASU is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early2022, with early adoption permitted. The Company is permitted for periods beginning after December 15, 2018. We are currently evaluating the impact of this guidanceadopting the new accounting standards on ourits consolidated financial statements and disclosures.statements. 

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606). The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under previous guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB approved the proposal to defer the effective date of ASU 2014-09 standard by one year. Early adoption is permitted after December 15, 2016, and the standard is effective for public entities for annual reporting periods beginning after December 15, 2017 and interim periods therein. In 2016, the FASB issued final amendments to clarify the implementation guidance for principal versus agent considerations (ASU 2016-08), accounting for licenses of intellectual property and identifying performance obligations (ASU 2016-10), narrow-scope improvements and practical expedients (ASU 2016-12) and technical corrections and improvements to topic 606 (ASU 2016-20) in its new revenue standard. Our services are performed over the term of our contracts and customers are billed for those services as they are performed on a monthly basis. Revenue is recognized each month for the services that have been provided to our customers. Additionally, we do not have significant exposure related to uncollectible accounts. We have performed a review of the requirements of the new revenue standard and have performed our analysis of our customer contracts on a portfolio basis (by each hospital group) utilizing the five-step model of the new standard. We have compared the results of our analysis to our current accounting practices. Upon adoption, effective January 1, 2018, we plan to use the full retrospective transition method for recognizing revenue. The adoption of this standard will not have a material effect on the timing and recognition of revenue for the services provided to our customers.

NOTE 3 – GOING CONCERN, LIQUIDITY AND MANAGMENTS PLAN

Our cash position at December 31, 2017 was approximately $2,066,000. At December 31, 2017, we also had $2,500,000 included in restricted cash in other assets on the consolidated balance sheet.

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

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting standards require management to evaluate our ability to continue as a going concern for a period of one year subsequent toafter the date of the filing of thethis 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, 2021, 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 such, we have evaluated ifof the year ended December 31, 2021, the Company had cash and cash equivalents on handa working capital deficit of approximately $87,062,000 consisting primarily of notes payables and cash generated through operating activities would be sufficientsenior secured notes. Management has evaluated the significance of the conditions described above in relation to sustain projected operating activities through March 31, 2019. We anticipatethe Company’s ability to meet its obligations and concluded that, our current resources, along with cash generated from operations,without additional funding, the Company will not behave sufficient funds to meet ourits 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, throughoutthere is no assurance that management’s plans will be successful.

Management continues to monitor the evaluation period, including funding anticipated lossesimmediate and scheduled debt maturities. In February 2018, we raised $2,050,000 throughfuture cash flows needs of the sale and issuancecompany in a variety of Senior Secured Convertible Notes (see Note 11 for further details). We expect to seek additional funds from a combination of dilutive and/or non-dilutive financings in the future. Because such transactions have not been finalized, receipt of additional funding is not considered probable under current accounting standards. If we do not generate sufficientways which include forecasted net cash flows from operations, capital expenditure control, new inventory orders, debt modifications, increases sales outreach, streamlining and obtain sufficient funds when needed, we expect that we would scale back our operating plan by deferringcontrolling general and administrative costs, competitive industry pricing, sale of equities, debt conversions, new product or limiting some, or all, of ourservices offerings, and new business partnerships.

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s net losses, cash outflows, and working capital spending, reducing our spending on travel, and/or eliminating planned headcount additions, as well as other cost reductions to be determined. Because such contingency plans have not been finalized (the specifics would depend on the situation at the time), such actions also are not considered probable for purposes of current accounting standards. Because, under current accounting standards, neither future cash generated from operating activities, nor management’s contingency plans to mitigate the risk and extend cash resources through the evaluation period, are considered probable,deficit raise substantial doubt is deemed to exist about the Company’s ability to continue as a going concern. As weThe accompanying consolidated financial statements have been prepared assuming that the Company will continue to incur losses, ouras 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 profitabilityattaining profitable operations is dependent upon achieving a level of revenuespositive cash flows adequate to support itsthe Company’s cost structure. We may never achieve profitability, and unless and until doing so, we intend to fund future operations through additional dilutive or non-dilutive financings. See NOTE 15 for further details. There can be no assurances, however, that additional funding will be available on terms acceptable to us, if at all.

NOTE 4 – STOCKHOLDERS’ EQUITY

Preferred Stock

At December 31, 20172021, and 2016,2020, we had 20,000,000 shares of Preferred Stock, par value $0.001$0.001 authorized, and nonezero shares outstanding, which can be designated by our Board of Directors.

Common Stock

At December 31, 20172021, and 2016,2020, we had 300,000,000500,000,000 shares of Common Stock, $0.001$0.001 par value, respectively, authorized, and 139,380,748 shares of Common Stock issued and outstanding. There was no Common Stock issued during the years ended December 31, 2017 or 2016.2021, and 2020.

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 (except certain Warrants issued to HealthCor in 2011 as discussed in NOTE 11 and the warrants issued in connection with a private placement completed in April 2013 “Private Placement Warrants”. The Private Placement Warrants contain provisions that protect the holders from a decline in the issue price of our common stock or “down round” provisions. In accordance with the accounting standards, we determined that these instruments qualify as derivative liabilities and should be recorded at their fair value on the date of issuance and re-measured at fair value each reporting period with the change reported in earnings). The Black-Scholes Model is an acceptable model in accordance with the GAAP.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 fair value of the Warrants issued to HealthCor and the Private Placement Warrants was computed using the Binomial Lattice model, incorporating transaction details such as the price of our Common Stock, contractual terms, maturity and risk-free rates, as well as assumptions about future financings, volatility, and holder behavior. Due to the down round provisions associated with the exercise price of these Warrants, we determined that the Binomial Lattice model was the most appropriate model for valuing these instruments. The Warrants issued to HealthCor in 2011 were substantially amended and no longer contain down round provisions.

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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. Where appropriate we used the historical volatility of peer entities due to the lack of sufficient historical data of our stock price during 2007-2009.

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

No Warrants were granted during 2017 or 2016.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 Average
Exercise Price
  Weighted 
Average
Remaining
Contractual  
Life
 
Balance at December 31, 2015  35,197,698   $0.33-$1.65  $0.82   5.6 
   Granted               
   Exercised               
   Expired  (500,000)            
Balance at December 31, 2016  34,697,698   $0.33-$1.65  $0.82   4.7 
   Granted               
   Exercised               
   Expired  (4,643,309)            
Balance at December 31, 2017  30,054,389   $0.33-$1.65  $0.85   4.6 
Vested and Exercisable at December 31, 2017  30,054,389   

$0.33-$1.65 

  $0.85   4.6 
   

Number of Shares
Under Warrant

  

Range of

Warrant Price

Per Share

  

Weighted
Average
Exercise
Price

  

Weighted

Average

Remaining

Contractual

Life

 
              

Balance at December 31, 2019

   

16,534,030

  $

0.03-$1.10

  $

0.49

   

4.4

 
Granted   1,000,000  $0.01  $0.01   9.1 
Expired   (1,483,572)            
Canceled                
Balance at December 31, 2020   16,050,458  $0.01-$0.53  $0.76   4.3 
Granted   2,000,000  $0.23  $0.74   9.3 
Expired                
Canceled                
Ending Balance at December 31, 2021   18,050,458  $0.01-$0.53  $0.74   4.2 

 

As of December 31, 2017 and 2016, we had no unamortized costs associated with capitalized Warrants, excluding the HealthCor Warrants and Private Placement Warrants.

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Warrant Activity During 20172021 (see Note 14)

NoIn April 2021, we issued 931,600ten-year Warrants were granted during 2017. (with a fair value of $195,636) at an exercise price of $0.23 per share to HealthCor Partners Fund, LP.

In May, June and December 2017, 50,000, 290,000 and 4,303,309April 2021, we issued 1,068,400ten-year Warrants expired.(with a fair value of $224,364) at an exercise price of $0.23 per share to HealthCor Hybrid Offshore Master Fund, LP.

Warrant Activity During 20162020

NoIn February 2020, we issued 1,000,000ten-year Warrants were granted during 2016. In April and May 2016, 400,000 and 100,000 Warrants expired.(with a fair value of $10,000) at an exercise price of $0.01 per share to a director.

Stock Options

Effective December 3, 2007, we establishedThe 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 8,000,000, 10,000,000, 5,000,000, 20,000,000 and 20,000,000 shares of Common Stock were reserved for issuance upon the exercise of options, (“2007 Plan Option(s)”).respectively. The 2007 Plan wasStock 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 2007 PlanStock Options vest over three years and have an exercise period of ten years from the date of issuance.

At December 31, 2017, 20072021, Plan Options to purchase 8,000,000 shares of our Common Stock have been issued with 25,0000 remaining outstanding.

Effective September 30, 2009, we establishedoutstanding under the CareView Communications, Inc. 2009 Stock Incentive2007 Plan, (the “2009 Plan”) pursuant to which 10,000,000 shares of Common Stock was reserved for issuance upon the exercise of options (“2009 Plan Option(s)”). The 2009 Plan was designed to serve as an incentive for retaining our qualified and competent key employees, officers and directors. The 2009 Plan Options vest over three years and have an exercise period of ten years from the date of issuance. As of December 31, 2017, 2009 Plan Options to purchase 10,000,000 shares of our Common Stock have been issued with 6,390,7600 remaining outstanding.

On February 25, 2015, we establishedoutstanding under the CareView Communications, Inc. 2015 Stock Option2009 Plan, (the “2015 Plan”) pursuant to which 5,000,000 shares of Common Stock was reserved for issuance upon the exercise of options (“2015 Plan Option(s)”). The 2015 Plan was designed to serve as an incentive for retaining our qualified and competent key employees, officers and directors. The 2015 Plan Options vest over three years and have an exercise period of ten years from the date of issuance. As of December 31, 2017, 2015 Plan Options to purchase 5,000,0004,419,945 shares of our Common Stock have been issued with 4,492,666580,055 remaining outstanding.

On December 7, 2016, we establishedoutstanding under the CareView Communications, Inc. 2016 Stock Option2015 Plan, (the “2016 Plan”) pursuant to which 20,000,000 shares of Common Stock was reserved for issuance upon the exercise of options (“2016 Plan Option(s)”). The 2016 Plan was designed to serve as an incentive for retaining our qualified and competent key employees, officers and directors. The 2016 Plan Options vest over three years and have an exercise period of ten years from the date of issuance. As of December 31, 2017, 2016 Plan Options to purchase 12,262,03319,089,389 shares of our Common Stock have been issued 11,752,033with 910,611 remaining outstanding.outstanding under the 2016 Plan, and Plan Options to purchase 13,897,033 shares have been issued with 6,102,967 remaining outstanding under the 2020 Plan.

F-18 

 

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CAREVIEW COMMUNICATION,COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The valuation methodology used to determine the fair value of the 2007 Plan Options 2009 Plan Options, 2015 Plan Options and 2016 Plan Options, collectively, (the “Option(s)”) issued during the year was the Black-ScholesBlack- 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.

The assumptions used in the Black-Scholes Model during the years ended December 31, 2017 and 2016 are set forth in the table below.

  2017  2016 
Risk-free interest rate  1.17-2.15%  1.13-1.84%
Volatility  78.40-89.93%  63.49-73.73%
Expected life  6   6 
Dividend yield  0.00%  0.00%

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the expected term of the stock option and is calculated by using the average daily historical stock prices through the day preceding the grant date.

Estimated volatility is a measure of the amount by which our stock price is expected to fluctuate each year during the expected life of the award. Our estimated volatility is an average of the historical volatility of our stock prices (and that of peer entities whose stock prices were publicly available) over a period equal to the expected life of the awards. Where appropriate we used the historical volatility of peer entities due to the lack of sufficient historical data of our stock price during 2007-2009.

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

  Number of Shares Under Option  Weighted Average Exercise Price  Weighted
Average
Remaining
Contractual
Life
  Aggregate Intrinsic Value 
Balance at December 31, 2015  9,350,667  $0.58   7.6  $15,705 
   Granted  6,907,975  $0.11         
   Exercised               
   Expired  (206,664)            
   Forfeited  (141,003)            
Balance at December 31, 2016  15,910,975  $0.37   8.0  $ 
   Granted  8,017,002  $0.08   9.9  $ 
   Exercised               
   Expired  (449,521)            
   Forfeited  (817,997)            
Balance at December 31, 2017  22,660,459  $0.27   8.1  $ 
Vested and Exercisable at December 31, 2017  10,018,489  $0.46   6.4  $ 

F- 19
  Number of
Shares
Under
Option
  Weighted
Average
Exercise
Price
  Weighted 
Average
Remaining 
Contractual
Life
  Aggregate
Intrinsic
Value
 
Balance at December 31, 2020  40,688,968  $0.13   7.6  $526,724 
Granted  362,000             
Expired  (425,491)            
Canceled               
Balance at December 31, 2021  40,625,477  $0.12   6.7   1,283,975 
Vested and Exercisable at December 31, 2021  26,235,477  $0.17   5.6  $1,280,435 

 

CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The weighted-average grant date fair value of Options granted during the years ended December 31, 2017 and 2016 was $0.03 and $0.06 per share, respectively.

Share-based compensation expense for Options charged to our operating results for the yearstwelve months ended December 31, 20172021, and 2016 (approximately $398,0002020 were $222,995 and $717,000, respectively) is based on awards vested.156,342, respectively. The estimate of forfeitures areis to be estimatedrecorded at the time of grant and revised in subsequent periods if actual forfeitures differ from the estimates. We have not included an estimate for forfeitures dueadjustment to our limited history and westock-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, 2017,2021, total unrecognized estimated compensation expense related to non-vested Options granted prior to that date was approximately $543,000,$371,237, which is expected to be recognized over a weighted-averageweighted- average period of 2.21.6 years. No tax benefit was realized due to a continued pattern of operating losses.

Option Activity During 2017

In March 2017, we granted 2016 Plan Options to purchase 20,000 shares with an exercise price of $0.09 per share to an employee,
In May 2017, we granted 2016 Plan Options to purchase 5,000 shares with an exercise price of $0.17 per share to an employee,
In June 2017, we granted 2016 Plan Options to purchase 520,000 shares with an exercise price of $0.11 per share to certain employee,
In November 2017, we granted 2016 Plan Options to 5 directors (666,667 each, totaling 4,000,002): to purchase shares with an exercise price of $0.06 per share.
In December 2017, we granted 2016 Plan Options to purchase 472,000 shares with an exercise price of $0.10 per share to certain employees, and
In December 2017, we granted 2016 Plan Options to an officer/director (2,000,000), and an officer (1,000,000) to purchase shares with an exercise price of $0.10 per share.

Option Activity During 2016

In March 2016, we granted 2015 Plan Options to purchase 20,000 shares with an exercise price of $0.30 per share to an employee,
In August 2016, we granted 2015 Plan Options to 5 directors (235,295 each, totaling 1,176,475) and 35,000 to an employee to purchase shares with an exercise price of $0.17 and $0.18 per share, respectively,
In September 2016, we granted 2015 Plan Options to purchase 50,000 shares with an exercise price of $0.08 per share to an employee,
In December 2016, we granted 2015 Plan Options to purchase 1,381,469 shares with an exercise price of $0.08 per share to certain employees and 754,969 shares with an exercise price of $0.10 to an employee, and
In December 2016, we granted 2016 Plan Options to an officer/director (2,000,000), an officer (2,000,000) and 245,031 to an employee to purchase shares with an exercise price of $0.10 per share.

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – INCOME TAXES

At December 31, 2017, we had approximately $77 millionIn assessing the realizability of federaldeferred tax asset, including the net operating tax loss carry-forward which beginscarryforwards (NOLs), the Company assesses the available positive and negative evidence to expire in 2029 and approximately $17 million of state net operating losses which beginsestimate if sufficient future taxable income will be generated to expire in 2029.

utilize its existing deferred assets. The differences between the actual income tax benefit and the amount computed by applying the statutory federal tax rate (35%) to the loss before taxes are as follows:

  Years Ended December 31, 
  2017  2016 
       
Expected income tax benefit at statutory rate $(6,968,974) $(6,514,444)
Debt discount amortization  701,472   701,240 
Permanently disallowed interest  671,234   801,750 
Other permanent differences  24,458   30,818 
State income tax benefit, net of tax effect at state statutory rate      
Deferred pool true-ups/corrections related to:        
     Net operating losses     45,138 
Other  (83,190)  (43,369)
Change in federal tax rate  14,245,571    
Change in valuation account  (8,590,571)  4,978,867 
Income tax expense (benefit) $  $ 

The components of the deferred tax assets and liabilities are as follows:

  December 31, 
  2017  2016 
Deferred Tax Assets:        
Tax benefit of net operating loss carry-forward $16,247,978  $23,966,537 
Accrued interest  5,195,193   6,525,289 
Stock based compensation  1,166,081   1,804,050 
Amortization of intangible assets  191,457   389,695 
Depreciation of property and equipment  305,987   223,211 
Accrued expenses and other liabilities  94,619   105,674 
Research and development credit carry-forward  29,084   29,084 
Donations  7,102   11,241 
Beneficial conversion feature debt discount  (1,840,060)  (3,066,771)
Total deferred tax assets  21,397,441   29,988,010 
Valuation allowance for deferred tax assets  (21,397,441)  (29,988,010)
Deferred tax assets, net of valuation allowance $  $ 

As a result of certain income tax accountingultimate realization requirements with respect to accounting for share-based compensation, the table of deferred tax assets shown above does not include certainis dependent upon the generation of future taxable income during the period when those temporary difference 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 December 31, 2017 that arose directly from tax deductions related to equity compensation that is greater than the compensation recognized for financial reporting. If such deferred tax assets are subsequently realized, they will be recorded to contributed capital in the amount of approximately $1,166,000.

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

this time. In 2017 the deferred tax valuation allowance decreased by $8,590,571. In 20162021, the deferred tax valuation allowance increased by $4,978,867. The realization$1,581,507. In 2020, the deferred tax valuation allowance increased by $1,649,389.

At December 31, 2021, we had approximately $89,000,000 of federal net operating tax loss carryforward which begins to expire in 2028. At December 31, 2020, we had approximately $89,000,000 of federal net operating tax loss carryforward which begins to expire in 2028. In accordance with Section 382 of the tax benefits is subject toInternal Revenue code, the sufficiencyusage of taxable incomethe Company’s Federal Carryforwards could be limited in future years. The combined deferred tax assets represent the amounts expected to be realized before expiration.

We periodically assess the likelihood that we will be able to recover our deferred tax assets. We consider all available evidence, both positive and negative, including historical levelsevent of income, expectations and risks associated with estimates of future taxable income and ongoing prudent and feasible profits.

a change in ownership. As of December 31, 2017 and 2016, we established valuation allowances equal2021, the Company has not completed an analysis as to the full amount of the net deferred tax assets due to the uncertainty of the utilization of the operating losses in future periods.

For the years ended December 31, 2017 and 2016, no amounts have been recognized for uncertain tax positions and no amounts have been assessedwhether or recognized related to interest or penalties related to uncertain tax positions. We have determined that it is not reasonably likely for the amounts of unrecognized tax benefits to significantly increase or decrease within the next twelve months.an ownership change has occurred. We are currently subject to the general three-year statutestate of limitation for federal tax. Under this general rule, the earliest period subject to potential audit is 2014.2018. For years into which the companyCompany 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.

F-19 

 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Tax CutsCompany 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 Jobspenalties associated with uncertain tax positions as a component of income tax expense.

As of December 31, 2021, 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 CARES Act, (the “Act”) was signed into” includes tax provisions relevant to businesses that will impact taxes related to 2018, 2019, and 2020. Some of the significant tax law changes are to increase the limitation on December 22, 2017. Among its numerous changes todeductible business interest expenses for 2019 and 2020, allow for the Internal Revenue Code, the Act reduces U.S. corporate rates from 35% to 21%. Additionally, the Act limits the usefive-year carryback of net operating loss carry backs, however any future net operating losses will instead be carried forward indefinitely. Only 80%for 2018-2020, suspend the 80% limitation of currenttaxable income will be able to be offset with afor net operating, loss carryforward, withcarryforwards for 2018-2020, provide for the remainderacceleration of depreciation expense from 2018 and forward on qualified improvement property, and accelerate the net operating loss continuingability to carry forward. Based on an initial assessmentclaim refunds of AMT credit carryforwards. The Company is required to recognize the Act, the Company believes that the most significant impacteffect on the Company’s consolidated financial statements will be reductionin the period the law was enacted.

The provision for income taxes consists of the following:

  2021  2020 
Current:        
Federal $  $ 
State income tax, net of federal benefit  9,672   9,635 
Sub-total:  9,672   9,635 
         
Deferred:        
Federal      
State income tax, net of federal benefit      
Sub-total:      
Total $9,672  $9,635 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Schedule of income tax reconciliation

        
  Years Ended December 31, 
  2021  2020 
Expected income tax benefit at statutory rate $(2,113,665) $(2,453,962)
Debt discount amortization  274,596   688,950 
Permanently disallowed interest  258,736   238,673 
PPP loan     (164,178)
Other permanent differences     4,390 
State income tax, net of federal benefit  9,672   

9,635

 
Other reconciling items  (1,174)  36,738 
Change in valuation account  1,581,507   1,640,389 
Income tax expense (benefit) $9,672  $9,635 

The components of the deferred tax assets relatedand liabilities are as follows:

         
  December 31, 
  2021  2020 
Deferred Tax Assets:        
Tax benefit of net operating loss carry-forward $18,726,731  $18,588,968 
Accrued interest  8,581,832   7,450,680 
Stock based compensation  1,341,514   1,298,120 
Amortization  46,658   314,022 
Depreciation  307,610   52,965 
Accrued expenses  75,895   71,402 
Donations  5,947   5,947 
Inventory reserve  237,527   237,527 
Bad debt allowance  (2)  (2)
Research and development credit carry-forward  29,084   29,084 
BCF debt discount  (166,585)  (444,009)
Total deferred tax assets  29,186,211   27,604,704 
Valuation allowance for deferred tax assets  (29,186,211)  (27,604,704)
Deferred tax assets, net of valuation allowance $  $ 


CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 operating lossesrealizable value and research and development tax credits. Such reduction is expected to be largely offset by changes toappropriate valuation adjustments are then established.

Inventory consists of the Company’s valuation allowancefollowing:

         
  December 31, 
  2021  2020 
Inventory $349,216  $408,450 
TOTAL INVENTORY $349,216  $408,450 

 

NOTE 67OTHER CURRENT ASSETS

Other current assets consist of the following:

  December 31, 
  2017  2016 
Prepaid expenses $564,503  $102,601 
Other current assets  21,119   12,116 
TOTAL OTHER CURRENT ASSETS $585,622  $114,717 

F- 22

CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

         
  December 31, 
  2021  2020 
Other prepaid expenses $235,521  $211,751 
Other current assets     32,556 
TOTAL OTHER CURRENT ASSETS $235,521  $244,307 

 

NOTE 7 – 8 - PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

   
 December 31,  December 31, 
 2017 2016  2021 2020 
Network equipment $13,610,280  $12,632,559  $12,620,258  $12,536,423 
Office equipment  291,003   243,267   229,240   229,240 
Vehicles  217,004   161,584   232,411   217,004 
Test equipment  177,386   166,484   204,455   204,455 
Furniture  90,827   87,646   92,846   92,846 
Warehouse equipment  9,524   9,524   9,524   9,524 
Leasehold improvements  5,121   5,121   5,121   5,121 
  14,401,145   13,306,185   13,393,855   13,294,613 
Less: accumulated depreciation  (11,079,604)  (9,153,771)  (12,254,964)  (11,702,129)
TOTAL PROPERTY AND EQUIPMENT $3,321,541  $4,152,414  $1,138,891  $1,592,484 

 

Depreciation expense for the years ended December 31, 20172021, and 20162020, was $1,840,606$578,744 and $1,759,016,531,098, respectively.

F-22 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 89OTHER ASSETS

Intangible assets consist of the following:

  December 31, 2021 
  Cost  Accumulated
Amortization
  Net 
Patents and trademarks $1,254,327  $343,929  $910,398 
Other intangible assets  83,745   83,745    
TOTAL INTANGIBLE ASSETS $1,338,072  $427,674  $910,398 

 

  December 31, 2017 
  Cost  Accumulated Amortization  Net 
Patents and trademarks $806,279  $146,246  $660,033 
Other intangible assets  59,122   53,237   5,885 
     TOTAL INTANGIBLE ASSETS $865,401  $199,483  $665,918 

  December 31,2016 
  Cost  Accumulated Amortization  Net 
Patents and trademarks $711,961  $104,574  $607,387 
Other intangible assets  53,088   48,138   4,950 
     TOTAL INTANGIBLE ASSETS $765,049  $152,712  $612,337 

F- 23
  December 31, 2020 
  Cost  Accumulated Amortization  Net 
Patents and trademarks $1,131,581  $238,625  $892,956 
Other intangible assets  83,745   78,989   4,756 
TOTAL INTANGIBLE ASSETS $1,215,326  $317,614  $897,712 

 

CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other assets consist of the following:

  December 31, 2021 
  Cost  Accumulated Amortization  Net 
Deferred installation costs $1,352,041  $1,283,140  $68,901 
Deferred Sales Commissions  122,778   18,841   103,937 
Prepaid license fee  249,999   169,398   80,601 
Security deposit  46,124      46,124 
TOTAL OTHER ASSETS $1,770,942  $1,471,379  $299,563 

 

 December 31, 2017  December 31, 2020 
 Cost Accumulated Amortization Net  Cost Accumulated Amortization Net 
Deferred debt issuance costs $1,257,778  $451,216  $806,562 
Deferred financing costs  850,363   296,863   553,500 
Deferred installation costs  1,748,818   1,533,270   215,548  $1,292,729  $1,238,727  $54,002 
Prepaid license fee  249,999   103,824   146,175   249,999   153,004   96,995 
Security deposit  46,124      46,124   46,124      46,124 
TOTAL OTHER ASSETS $4,153,082  $2,385,173  $1,767,909  $1,588,852  $1,391,731  $197,121 

 

  December 31,2016 
  Cost  Accumulated Amortization  Net 
Deferred debt issuance costs $1,257,778  $271,528  $986,250 
Deferred financing costs  805,917   185,466   620,451 
Deferred installation costs  1,582,059   1,228,558   353,501 
Prepaid license fee  249,999   87,431   162,568 
Security deposit  46,124      46,124 
TOTAL OTHER ASSETS $3,941,877  $1,772,983  $2,168,894 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 910OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

Schedule of other current liabilities

        
  December 31, 
  2021  2020 
Accrued interest $9,947,730  $6,843,290 
Accrued interest, related parties  

228,528

   

129,742

 
Allowance for system removal  54,802   36,500 
Accrued paid time off  173,904   146,342 
Deferred officer compensation(1)  139,041   139,041 
Deferred revenue  983,667   465,124 
Insurance premium financing(2)  103,791   67,927 
Other accrued liabilities  108,755   30,514 
TOTAL OTHER CURRENT LIABILITIES $11,740,218  $7,858,480 

 

  December 31, 
  2017  2016 
Allowance for system removal $176,750  $116,350 
Accrued professional services  137,018   25,000 
Accrued taxes  127,225   182,122 
Accrued rent expense  120,433    
Accrued paid time off  112,577   126,486 
Other accrued liabilities  76,053   35,892 
TOTAL OTHER CURRENT LIABILITIES $750,056  $485,850 

(1)Salary for Steve Johnson, CEO, between February 15, 2018, and September 30, 2020.

(2)Renewal of directors and officer’s insurance.

 

NOTE 10– 11– COMMITMENTS AND CONTINGENCIES

Debt Maturity

As of December 31, 2021, future debt payments due are as follows:

Schedule of future debt payments

Years 
Ending
December 31,
    Total  Loan Payable  

Senior
Secured
Convertible
Notes(1)

  

Senior
Secured
Notes(2)

 
2022  Related Party $57,310,135  $700,000  $  $56,610,135 
   Other  20,013,786   20,013,786       
2023  Related Party            
   Other            
2024  Related Party  12,391,062      12,391,062    
   Other            
2025  Related Party  9,618,186      9,618,186    
   Other  3,741,102      3,741,102    
Thereafter  Related Party  4,859,871      4,859,871    
   Other  155,818      155,818    
Total    $108,089,960  $20,713,786  $30,766,039  $56,610,135 

(1)Senior Secured Convertible Notes are included on the accompanying consolidated financial statements as $27,963,752, which represents this amount less debt discount of $2,802,286.
(2)Senior Secured Notes are included on the accompanying consolidated financial statements as $56,302,303, which represents this amount less debt discount of $307,832.
(1)Senior Secured Convertible Notes are included on the accompanying consolidated financial statements as $27,963,752, which represents this amount less debt discount of $2,802,286.
(2)Senior Secured Notes are included on the accompanying consolidated financial statements as $56,302,303, which represents this amount less debt discount of $307,832.

F-24 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Payroll Protection Program

On April 10, 2020, the Company received loan proceeds in the amount of $781,800 pursuant to a promissory note agreement (the “Promissory Note”) with a bank under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The Promissory Note has a loan maturity of April 10, 2022, a stated interest rate of 1.0% per annum, and has payments of principal and interest that are due monthly after an initial six-month deferral period where interest accrues, but no payments are due. The Promissory Note provides for customary events of default, including, among others, those relating to failure to make payment when due and breaches of representations. The Company may prepay the principal of the Promissory Note at any time without incurring any prepayment charges. The loan is subject to all the terms and conditions applicable under the PPP and is subject to review by the Small Business Association (the “SBA”) for compliance with program requirements, including the Company’s certification that the current economic

uncertainty made the PPP loan request necessary to support ongoing operations and the Company’s obtaining approval from the SBA for the private placement equity transaction.

In June 2020, the Payroll Protection Program Flexibility Act (“PPPFA”) was signed into law adjusting certain key terms of loans issued under the PPP. In accordance with the PPPFA, the initial deferral period may be extended from six to up to ten months and the loan maturity may be extended from two to five years. The PPPFA also provided for certain other changes, including the extent to which the loan may be forgiven.

The loan’s principal and accrued interest were forgivable to the extent that the Company initially qualified for the loan and the proceeds were used for eligible purposes, subject to certain limitations, and that the Company maintains its payroll levels over a twenty-four-week period following the loan date.

As the legal form of the Promissory Note was a debt obligation, the Company accounted for it as debt under Accounting Standards Codification (ASC) 470, Debt and recorded a liability of $781,800 in the consolidated balance sheet upon receipt of the loan proceeds.

The Company applied for forgiveness, and on November 20, 2020, we received confirmation from our bank that the Promissory Note was forgiven by the SBA. The loan balance plus accrued interest of $786,889 was recorded as a gain on extinguishment of debt in the December 31, 2020, consolidated statement of operations.

The SBA has created an audit safe harbor for any PPP loan borrower that, together with its affiliates, received PPP loans with an original amount of less than $2 million. The safe harbor is designed to protect a small borrower from a PPP audit based on its good faith certification. However, the government may still decide to audit a PPP loan for other purposes, such as possible misuse of PPP funds. The Company has not been notified of an audit by the SBA.

NOTE 12– LEASE

Operating Lease

The Company has an operating lease primarily consisting of office space with remaining lease of 18 months.

On September 8, 2009,March 4, 2020, we entered into athe Fourth Amendment to Commercial Lease Agreement (the “Lease”) for 10,578 square feet of office and warehouse space expiring on June 30, 2015. On December 8, 2014, we entered into a Lease Extension Agreement (the “Lease Extension”), wherein we extended the Lease through June 30, 2020.August 31, 2025. The Lease Extension contains a renewal provision under which we may renew the Lease has been extended for an additional five-yearfive-year period under the same terms and conditions.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.

F-25 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 expense for the twelve months ended December 31, 2021, and 2020 was $286,358 and $295,692, respectively.

Lease Position

Operating lease asset and liability for our operating lease were recorded in the consolidated balance sheet as follows:

  December 31, 2021 
Assets   
Operating lease asset $555,150 
Total lease asset $555,150 
     
Liabilities    
Current liabilities:    
Operating lease liability $162,470 
     
Long-term liabilities:    
Operating lease liability, net of current portion $445,033 
Total lease liability $607,504 

Undiscounted Cash Flows

Future lease payments included in the measurement of operating lease liability on the consolidated balance sheet as of December 31, 2021, for the following five fiscal years and thereafter as follows:

Year ending
December 31,

 

Operating Leases

 
2022  208,379 
2023  214,631 
2024  221,069 
2025 and thereafter  150,679 
Total minimum lease payments  794,758 
Less effects of discounting  (187,254)
Present value of future minimum lease payments $607,504 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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, 2021:

  Twelve Months Ended
December 31, 2021
 
Cash paid for amounts included in the measurement of lease liabilities:    
Operating cash flows for operating leases $103,785 

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.

From October 8, 2015 through May 14, 2019, the outstanding borrowings under the Tranche One Loan bore interest at the rate of 13.5% per annum, payable quarterly. On May 15, 2019, pursuant to the terms of the Fifth Amendment to the PDL Credit Agreement (see below for additional details), the interest increased to 15.5% per annum, payable quarterly. Also, on May 15, 2019, pursuant to the terms of the Fourteenth Amendment to the PDL Modification Agreement (see below for additional details), the minimum cash balance requirement of $750,000 was reduced to $0.

On January 31, 2019, February 28, 2019, March 29, 2019 and April 29, 2019, the Company and Lender entered into the Tenth, Eleventh, Twelfth, and Thirteenth Amendments to the PDL Modification Agreement, as previously amended, respectively, pursuant to which the parties agreed to amend the PDL Modification Agreement to provide that (A) 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, pursuant to the Thirteenth Amendment to the PDL Modification Agreement, May 15, 2019 (rather than January 31, February 28, June 30, and April 30, respectively) (with each such date permitted to be extended by the Lender in its sole discretion); (B) the Company could satisfy its obligations under the PDL Modification Agreement, as amended, to obtain financing by obtaining (a) at least $2,050,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to February 23, 2018 and (b) an additional (i) $750,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to July 13, 2018 and (ii) $750,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to May 15, 2019 (rather than January 31, February 28, June 30, and April 30, respectively) (resulting in aggregate net cash proceeds of at least $3,550,000); and (C) the Company’s quarterly interest payments that would otherwise have been due to Lender on December 31, 2018 and June 30, 2019 would be deferred until May 15, 2019 (the end of the extended Modification Period) and that such deferral would be a Covered Event.

On April 9, 2019, the Company, PDL Investment entered into a Fourth Amendment to PDL Credit Agreement (the “Fourth Amendment to the PDL Credit Agreement”), wherein the Company executed an Amended and Restated Tranche One Term Note in the principal amount of $20,000,000 to PDL Investments (the “Amended Tranche One Loan”), pursuant to which the parties agreed, among other things, to amend the note from registered to unregistered form.

F-27 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 15, 2019, the Company, the Lender, Steven G. Johnson (our Chief Executive Officer, President, Secretary and Treasurer), individually, and Dr. James R. Higgins (a member of our board of directors), individually (Mr. Johnson and Dr. Higgins, collectively, the “Tranche Three Lenders”) entered into a Fifth Amendment to the PDL Credit Agreement (the “Fifth PDL Credit Agreement Amendment”), pursuant to which the parties agreed to amend the PDL Credit Agreement to, among other things, (i) provide for a new tranche of term loan in the aggregate principal amount of $200,000, from the Tranche Three Lenders, with a maturity date of October 7, 2020 and bearing interest at the rate of 15.5% per annum, payable quarterly in arrears (subject to the terms of the PDL Modification Agreement, as amended) (the “Tranche Three Loan”); (ii) increase the interest rate for outstanding borrowings under the Amended Tranche One Loan from 13.5% per annum to 15.5% per annum, payable quarterly in arrears (subject to the terms of the PDL Modification Agreement, as amended), effective May 15, 2019,; and (iii) provide for the issuance of the Twelfth Amendment Note, pursuant to the terms of the Twelfth Amendment to the HealthCor Agreement (see NOTE 10 for details). Under the accounting standards, we determined that the restructuring of the Tranche One Loan 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. Also on May 15, 2019, upon the execution of the Fifth PDL Credit Agreement Amendment, (i) the Company sold and issued the Tranche Three Lenders term notes in the aggregate principal amount of $200,000, payable in accordance with the terms of the PDL Credit Agreement (the “Tranche Three Loans”), $150,000 from Mr. Johnson and $50,000 from Dr. Higgins, and (ii) the Company issued a warrant for the purchase of 250,000 shares of Common Stock, with an exercise price per share equal to $0.03 (subject to adjustment as described therein) and an expiration date of May 15, 2029 (the “Tranche Three Loan Warrant”), to Dr. Higgins in connection with his Tranche Three Loan. Mr. Johnson declined to be issued a Tranche Three Loan Warrant.

On May 15, 2019 the Company and the Lender entered into the Fourteenth Amendment to the PDL Modification Agreement (the “Fourteenth Amendment to the PDL Modification Agreement”), pursuant to which, in connection with the Twelfth Amendment to the HealthCor Purchase Agreement (see NOTE 10 for further details) and the Fifth Amendment to the PDL Credit Agreement, the parties agreed to amend the PDL Modification Agreement, as previously amended, to provide that (A) the dates on which the Lender may elect, in the Lender’s sole discretion, to terminate the Modification Period would be July 31, 2018 and September 30, 2019 (with each such date permitted to be extended by the Lender in its sole discretion); (B) the Borrower could satisfy its obligations under the PDL Modification Agreement, as amended, to obtain financing by obtaining (a) at least $2,050,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to February 23, 2018 and (b) an additional (i) $1,000,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to July 13, 2018 and (ii) $250,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to May 15, 2019 (resulting in aggregate net cash proceeds of at least $3,300,000); (C) the Liquidity required during the Modification Period would be lowered to $0 from $750,000; and (D) the Company’s interest payments that would otherwise be due to Lender on December 31, 2018, June 30, 2019 and June 30, 2019 would be deferred until September 30, 2019 (the end of the extended Modification Period) and that such deferrals would be a Covered Event.

On September 30, 2019, the Company, the Borrower, the Subsidiary Guarantor and the Lender entered into a Fifteenth Amendment to Modification Agreement (the “Fifteenth 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 November 30, 2019 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s interest payments that would otherwise be due to Lender on December 31, 2018, June 30, 2019, June 30, 2019, and September 30, 2019 would be deferred until November 30, 2019 (the end of the extended Modification Period) and that such deferrals would be a Covered Event.

F-28 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On November 29, 2019, the Company, the Borrower, the Subsidiary Guarantor and the Lender entered into a Sixteenth Amendment to Modification Agreement (the “Sixteenth 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 December 31, 2019 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s interest payments that would otherwise be due to Lender on December 31, 2018, June 30, 2019, June 30, 2019, and September 30, 2019 would be deferred until December 31, 2019 (the end of the extended Modification Period) and that such deferrals would be a Covered Event.

On December 31, 2019, the Company, the Borrower, the Subsidiary Guarantor and the Lender entered into a Seventeenth Amendment to Modification Agreement (the “Seventeenth 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 January 17, 2020 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s interest payments that would otherwise be due to Lender on December 31, 2018, June 30, 2019, June 30, 2019, September 30, 2019, and December 31, 2019 would be deferred until January 17, 2020 (the end of the extended Modification Period) and that such deferrals would be a Covered Event.

On January 17, 2020, the Company, the Borrower, the Subsidiary Guarantor and the Lender entered into an Eighteenth Amendment to Modification Agreement (the “Eighteenth 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 January 28, 2020 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s interest payments that would otherwise be due to Lender on December 31, 2018, June 30, 2019, June 30, 2019, September 30, 2019, and December 31, 2019 would be deferred until January 28, 2020 (the end of the extended Modification Period) and that such deferrals would be a Covered Event.

On January 28, 2020, the Company, the Borrower, the Subsidiary Guarantor and the Lender entered into a Nineteenth Amendment to Modification Agreement (the “Nineteenth 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 (i) April 30, 2020 (provided that Borrower obtains at least $600,000 in cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt subordinated to the Tranche One Loan (as defined in the Credit Agreement) pursuant to the terms of the Intercreditor Agreement (as defined in the Credit Agreement) on or prior to February 11, 2020) or (ii) February 11, 2020 (if Borrower has not obtained such cash proceeds by such date) (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s interest payments that would otherwise be due to Lender on December 31, 2018, June 30, 2019, June 30, 2019, September 30, 2019, December 31, 2019, and June 30, 2020 would be deferred until the end of the extended Modification Period (but with respect to the June 30, 2020 interest payment, such payment would be deferred only in the event that the end of the extended Modification Period is April 30, 2020 rather than February 11, 2020; otherwise the Borrower will make the interest payment due under the Credit Agreement on June 30, 2020), and that such deferrals would be a Covered Event.

F-29 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company has evaluated the Eighteenth and Nineteenth Modification Agreement Amendments 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 6, 2020, the Company, the Borrower, the Lender (in its capacity as administrative agent and lender) and the Tranche Three Lenders entered into a Sixth Amendment to Credit Agreement (the “Sixth Credit Agreement Amendment”), pursuant to which the parties agreed to amend the Credit Agreement to, among other things, (i) provide for additional funding under the Tranche Three Loan, in the aggregate principal amount of $500,000, from the Tranche Three Lenders (the “Additional Tranche Three Loan”), with a maturity date of October 7, 2020 (the fifth anniversary of the funding date of the Tranche One Loan (as defined in the Credit Agreement)), with outstanding borrowings bearing interest at the rate of 15.5% per annum, payable quarterly in arrears (subject to the terms of the Modification Agreement, as amended), and with payment of the Additional Tranche Three Loan and any other Obligations (as defined in the Credit Agreement) incurred in connection with the Additional Tranche Three Loan subordinated and subject in right and time of payment to the Payment in Full (as defined in the Credit Agreement) of the Tranche One Loan and any other Obligations incurred in connection with the Tranche One Loan, to the extent and in the manner set forth in the Credit Agreement; and (ii) provide for the issuance of the Thirteenth Amendment Supplemental Closing Note.

Also on February 6, 2020, upon the execution of the Sixth Credit Agreement Amendment, (i) the Borrower borrowed the Additional Tranche Three Loan and issued to the Tranche Three Lenders term notes in the aggregate principal amount of $500,000, payable in accordance with the terms of the Credit Agreement (the “Additional Tranche Three Term Notes”), $250,000 from Mr. Johnson and $250,000 from Dr. Higgins, and (ii) the Company issued a warrant for the purchase of 1,000,000 shares of Common Stock, with an exercise price per share equal to $0.01 (subject to adjustment as described therein) and expiration date of February 6, 2030 (the “Additional Tranche Three Loan Warrant”), to Dr. Higgins in connection with his Additional Tranche Three Loan. Mr. Johnson declined to be issued an Additional Tranche Three Loan Warrant. Mr. Johnson is our Chief Executive Officer, President, Secretary and Treasurer and is one of our directors. Dr. Higgins is one of our directors.

On April 17, 2020, the Company and PDL Investment Holdings, LLC, entered into a Consent and Agreement Regarding SBA Loan Agreement (the “PDL Consent Agreement”), pursuant to which the Lender (i) consented under the Credit Agreement to the Borrower’s issuing the Promissory Note and borrowing the SBA Loan and (ii) agreed that the SBA Loan would be deemed to be debt that is permitted under the Credit Agreement and Loan Documents.

On April 17, 2020, the Company and the Lender entered into a Twentieth Amendment to the PDL Modification Agreement (the “Twentieth 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 September 30, 2020 (with each such date permitted to be extended by the Lender in its sole discretion); and that the Borrower’s interest payments that would otherwise be due to Lender on December 31, 2018, June 30, 2019, June 30, 2019, September 30, 2019, December 31, 2019, June 30, 2020 and June 30, 2020 would be deferred until September 30, 2020 (the end of the extended Modification Period), and that such deferrals would be a Covered Event. The Company has evaluated the Twentieth 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-30 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On September 30, 2020, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-First Amendment to Modification Agreement (the “Twenty- First 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 November 30, 2020 (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 November 30, 2020 (the end of the extended Modification Period), and that such deferrals would be a Covered Event. The Company has evaluated the Twenty-First 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 November 30, 2020, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Second Amendment to Modification Agreement (the “Twenty-Second 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 January 31, 2021 (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 January 31, 2021 (the end of the extended Modification Period) and that such deferrals would be a Covered Event. The Company has evaluated the Twenty-Second 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 January 31, 2021, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Third Amendment to Modification Agreement (the “Twenty-Third 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 January 31, 2021 (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, 2021 (the end of the extended Modification Period) and that such deferrals would be a Covered Event. The Company has evaluated the Twenty-Third 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 was accounted for as a troubled debt restructuring by debtors (TDR) under ASC 470-60.

F-31 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On May 25, 2021, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Fourth Amendment to Modification Agreement (the “Twenty-Fourth 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 November 30, 2021 (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 (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 November 30, 2021 (the end of the extended Modification) and that such deferrals would be a Covered Event. The Company has evaluated the Twenty-Fourth 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 November 29, 2021, the Company, the Borrower, the Subsidiary Guarantor, the Lender and the Tranche Three Lenders entered into a Twenty-Fifth Amendment to Modification Agreement (the “Twenty-Fifth 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 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 June 30, 2022 (the end of the extended Modification) and that such deferrals would be a covered event. The Company has evaluated the Twenty-Fifth 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.

Accounting Treatment

In connection with the PDL Credit Agreement, as amended, we issued the PDL Warrant to the Lender. The fair value of the PDL Warrant at issuance was $1,600,000 which has been recorded as deferred issuance costs in the accompanying consolidated financial statements. As of December 31, 2021, the Amended PDL Warrant has not been exercised.

As of December 31, 2021, the Company and Lender had entered into 25 amendments to the PDL Modification Agreement (as detailed above), resulting in restructuring of the PDL Credit Agreement and the accounting treatment of the related costs. The amendments entered into during the years ended December 31, 20172020 and 2016 was $386,4292021 qualified for troubled debt restructuring accounting. As appropriate, we expensed the legal costs paid to third parties. For the years ended December 31, 2021, and $199,553, respectively.

F- 24

CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A summary2020, pursuant to the terms of the monthly base rent per the LeasePDL Modification Agreement, as amended, $3,100,000 and the Lease Extension follows:

Years Ending  
June 30,
    
2018  $15,052 
2019  $15,503 
2020  $15,968 

As of December 31, 2017, future minimum rental payments are$3,100,000, respectively, was recorded as follows:

Years Ending  
December 31,
    
2018  $183,330 
2019   183,330 
Through June 30, 2020   95,810 
Total  $462,470 

Debt Maturity

As of December 31, 2017, future debt payments due are as follows:

Years  
Ending December 31,
  Total  Loan Payable  

Senior Secured Convertible Notes(1) 

  Notes Payable 
2018  $8,533,334  $8,333,334  $  $200,000 
2019   5,513,786   5,000,000      513,786 
2020   6,666,666   6,666,666       
2021   43,752,003      43,752,003    
2022   10,130,338      10,130,338    
Thereafter   16,676,471      16,676,471    
Total  $91,272,598  $20,000,000  $70,558,812  $713,786 

(1) Senior Secured Convertible Notes are includedinterest expense on the accompanying consolidated financial statements as $70,558,812, which represents this amount less debt discount of $18,161,723.statements.

F-32 

 

F- 25

 

CAREVIEW COMMUNICATION,COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1114AGREEMENT 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”) with HealthCor.. 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$9,316,000 and $10,684,000,$10,684,000, respectively (collectively the “2011 HealthCor Notes”). The 2011 HealthCor Notes have a maturity date of April 20, 2021.2021. We also issued Warrants to HealthCor for the purchase of an aggregate of up to 5,488,456 and 6,294,403 shares, respectively, of our Common Stock at an exercise price of $1.40$1.40 per share (collectively the “2011 HealthCor Warrants”).

So long as no event of default has occurred, the outstanding principal balances of the 2011 HealthCor Notes accrue interest from April 21, 2011 through April 20, 2016 (the “First Five-Year Note Period”) at the rate of 12.5%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%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 December 31, 2017September 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%(5%) per annum. HealthCor has the right, upon an event of default, to declare due and payable any unpaid principal amount of the 2011 HealthCor Notes then outstanding, plus previously accrued but unpaid interest and charges, together with the interest then scheduled to accrue (calculated at the default rate described in the immediately preceding sentence) through the end of the First Five Year Note Period or the Second Five Year Note Period, as applicable.

At any time after April 21, 2011, HealthCor is entitled 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 non-assessablenonassessable shares of our Common Stock at a conversion rate of $1.25 per share, subject to adjustment in accordancehas been eliminated. The warrants issued with anti-dilution provisions set forth inthis Note were cancelled with the 2011 HealthCor Notes. As of December 31, 2017, the underlying shares of our Common Stock related to the 2011 HealthCor Notes totaled approximately 35,000,000.Ninth-Amendment dated July 10, 2018.

On January 31, 2012, we entered into the Second Amendment to the HealthCor Purchase Agreement with HealthCor (the “Second Amendment”) amending the HealthCor Purchase Agreement and sold Senior Secured Convertible Notes to HealthCor in the principal amounts of $2,329,000$2,329,000 and $2,671,000,$2,671,000, respectively (collectively the “2012 HealthCor Notes”). As provided by the Second Amendment, the 2012 HealthCor Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five-Year Note Period” and other terms to take into accountconsider the timing of the issuance of the 2012 HealthCor Notes. The 2012 HealthCor Notes have a maturity date of January 30, 2022. In addition, the provisions regarding interest payments, interest acceleration, optional conversion, negative covenants, and events of default, preemptive rights and registration rights are the same as those of the 2011 HealthCor Notes. At any time after January 30, 2012, HealthCor is entitled to convert any portion of the outstanding and unpaid accrued interest on and principal balances of the 2012 HealthCor Notes into fully paid and non-assessable shares of our Common Stock at a conversion rate of $1.25 per share, subject to adjustment in accordance with anti-dilution provisions set forth in the 2012 HealthCor Notes. For the period from January 31, 2017 through December 31, 2017 interest has been added to the outstanding principal balance. As of December 31, 2017, the underlying shares of our Common Stock related to the 2012 HealthCor Notes totaled approximately 8,000,000.

F- 26

CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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

On January 16, 2014, we entered into a Fourth Amendment to the HealthCor Purchase Agreement with HealthCor (the “Fourth Amendment”) and sold Senior Secured Convertible Notes to HealthCor in the principal amounts of $2,329,000$2,329,000 and $2,671,000$2,671,000 (collectively the “2014‘‘2014 HealthCor Notes”Notes’’). As provided by the Fourth Amendment, the 2014 HealthCor Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five-Year Note Period” and other terms to take into accountconsider the timing of the issuance of the 2014 HealthCor Notes. The 2014 HealthCor Notes have a maturity date of January 15, 2024. In addition, the provisions regarding interest payments, interest acceleration, optional conversion, negative covenants, and events of default, preemptive rights and registration rights are the same as those of the 2011 HealthCor Notes. At any time after January 16, 2014, HealthCor is entitled to convert any portion of the outstanding and unpaid accrued interest on and principal balances of the 2014 HealthCor Notes into fully paid and non-assessable shares of our Common Stock at a conversion rate of $0.40 per share, subject to adjustment in accordance with anti-dilution provisions set forth in the 2014 HealthCor Notes. Additionally, we issued Warrants to HealthCor for the purchase of an aggregate of up to 4,000,000 shares of our Common Stock at an exercise price of $0.40 per share (collectively the “2014 HealthCor Warrants”)2024. As of December 31, 2017, the underlying shares of our Common Stock related to the 2014 HealthCor Notes totaled approximately 20,000,000.

On December 4, 2014, we entered into a Fifth Amendment to the HealthCor Purchase Agreement (the “Fifth Amendment”) with HealthCor and certain additional investors (such additional investors, the “New“2015 Investors” and, collectively with HealthCor, Partners Fund, LP, the “Investors”) and agreed to sell and issue (i) additional notes in the initial aggregate principal amount of $6,000,000,$6,000,000,with a conversion price per share of $0.52$0.52 (subject to adjustment as described therein) (the “Fifth Amendment Notes”) and (ii) additional Warrants for an aggregate of up to 3,692,308 shares of our Common Stock at an exercise price per share of $0.52$0.52 (subject to adjustment as described therein) (the “Fifth Amendment Warrants”). As provided by the Fifth Amendment, the Fifth Amendment Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five-Year Note Period” and other terms to take into accountconsider the timing of the issuance of the Fifth Amendment Notes. The Fifth Amendment Notes have a maturity date of February 16, 2025.2025.

F-33 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On February 23, 2018, we entered into an Eighth Amendment to the HealthCor Purchase Agreement (the “Eighth Amendment”) with HealthCor, the 2015 Investors and certain investors (such additional investors, the “February 2018 Investors”) and agreed to sell and issue (i) additional notes in the initial aggregate principal amount of $2,050,000,with a conversion price per share of $0.05 (subject to adjustment as described therein) (the “Eighth Amendment Notes”) and (ii) additional Warrants for an aggregate of up to 512,500 shares of our Common Stock at an exercise price per share of $0.05 (subject to adjustment as described therein) (the “Eighth Amendment Warrants”). As provided by the Eighth Amendment, the Eighth Amendment Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five-Year Note Period” and other terms to consider the timing of the issuance of the Eighth Amendment Notes. The Eighth Amendment Notes have a maturity date of February 22, 2028.

On July 10, 2018, we entered into the Ninth Amendment to the HealthCor Purchase Agreement (the “Ninth Amendment”) with HealthCor, the 2015 Investors and the February 2018 Investors, pursuant to which the parties agreed to amend the HealthCor Purchase Agreement, the 2011 HealthCor Notes, the 2012 HealthCor Notes, the 2014 HealthCor Notes, the Fifth Amendment Notes and the Eighth Amendment Notes, as applicable, to (i) remove the rights of the holders of the 2011 HealthCor Notes and the 2012 HealthCor Notes to convert such notes to Common Stock after September 30, 2018; (ii) suspend the accrual of interest on the 2011 HealthCor Notes and the 2012 HealthCor Notes for periods after September 30, 2018; (iii) provide for the potential earlier repayment of the 2011 HealthCor Notes and the 2012 HealthCor Notes by the Company, 120 calendar days following a written demand for payment by the holder of such notes; provided, however, that such written demand may not be given prior to the twelve-month anniversary of the date on which the obligations of the Company under the PDL Credit Agreement are repaid in full; (iv) cancel the 2011 HealthCor Warrants; (v) provide for the seniority of the 2011 HealthCor Notes and the 2012 HealthCor Notes in right of payment over notes subsequently issued pursuant to the Purchase Agreement, including the 2014 HealthCor Notes, the Fifth Amendment Notes and the Eighth Amendment Notes; (vi) amend the terms of the 2014 HealthCor Notes, the Fifth Amendment Notes and the Eighth Amendment Notes to reflect the seniority in payment of the 2011 HealthCor Notes and 2012 HealthCor Notes; and (vii) reduce the number of shares of Common Stock that the Company must at all times have authorized and reserved for the purpose of issuance upon conversion of the notes issued pursuant to the HealthCor Purchase Agreement (collectively, the “Notes”) and exercise of the warrants issued pursuant to the HealthCor Purchase Agreement (collectively, the “Warrants”), from at least 120% of the aggregate number of shares of Common Stock then issuable upon full conversion of the Notes and exercise of the Warrants to at least 100% of such aggregate number of shares. In addition, on July 10, 2018, along with PDL, HealthCor, the 2015 Investors and the February 2018 Investors, we entered into a Second Amendment to the Subordination and Intercreditor Agreement, to amend the Subordination and Intercreditor Agreement dated as of September 26, 2015, as amended to provide that, in the event of a sale of the Company’s hospital assets, after the net proceeds are first applied to repay obligations under the PDL Credit Agreement, as amended, until paid in full, up to the next $5,000,000 of such net proceeds may be retained by the Company for working capital purposes before all remaining net proceeds are then applied to repay the obligations under the Notes in accordance with the priorities set forth in the HealthCor Purchase Agreement and the Notes.

F-34 

CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On July 13, 2018, we entered into the Tenth Amendment to the HealthCor Purchase Agreement with HealthCor, the 2015 Investors, the February 2018 Investors and certain investors (all of which are directors of the Company) (such additional investors, the “July 2018 Investors”), pursuant to which we sold and issued convertible secured promissory notes for an aggregate of $1,000,000 to the July 2018 Investors with a conversion price per share equal to $0.05 (subject to adjustment as described therein) (the “Tenth Amendment Notes”). As provided by the Tenth Amendment, the Tenth Amendment Notes are in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five-Year Note Period” and other terms to consider the timing of the issuance of the Tenth Amendment Notes. The Tenth Amendment Notes have a maturity date of July 12, 2028.

On May 15, 2019, we entered into the Twelfth Amendment to HealthCor Purchase Agreement with HealthCor, the 2015 Investors, the February 2018 Investors, the July 2018 Investors, and an investor (a member of our board of directors) (such additional investor, the “2019 Investor”), pursuant to which we sold and issued a convertible secured promissory note for $50,000 to the 2019 Investor with a conversion price per share equal to $0.03 (subject to adjustment as described therein) (the “Twelfth Amendment Note”). As provided by the Twelfth Amendment, the Twelfth Amendment Note is in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five-Year Note Period” and other terms to take into account the timing of the issuance of the Twelfth Amendment Note. The Twelfth Amendment Note has a maturity date of May 15, 2029. In addition, the provisions regarding interest payments, interest acceleration, optional conversion, negative covenants, and events of default, preemptive rights and registration rights are the same as those of the 2011 HealthCor Notes. The New Investors are composed of all but one of our current directors and one of our officers. On February 17, 2015, the Company and the Investors closed on the transactions contemplated by the Fifth Amendment.

F- 27

CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In connection with this closing, the Company and the Investors entered into an Amended and Restated Pledge and Security Agreement (the “Amended Security Agreement”), amending and restating that certain Pledge and Security Agreement dated as of April 20, 2011, and an Amended and Restated Intellectual Property Security Agreement (the “Amended IP Security Agreement”), amending and restating that certain Intellectual Property Security Agreement dated as of April 20, 2011. As of December 31, 2017,2020, the underlying shares of our Common Stock related to the FifthTwelfth Amendment NotesNote totaled approximately 3,000,000 to HealthCor and 14,000,0002,000,000 to the New Investors.2019 Investor.

On March 31, 2015,February 6, 2020, we entered into the SixthThirteenth Amendment to the HealthCor Purchase Agreement (the “Sixth Amendment”with HealthCor, the 2015 Investors, the February 2018 Investors, the July 2018 Investors, the 2019 Investor and an investor (a member of our board of directors) (such additional investor, the “February 2020 Investor”), pursuant to which among(i) we sold and issued a convertible secured promissory note for $100,000 to the February 2020 Investor with a conversion price per share equal to $0.01 (subject to adjustment as described therein) (the “Thirteenth Amendment Note”). As provided by the Twelfth Amendment, the Twelfth Amendment Note is in substantially the same form as the 2011 HealthCor Notes, with changes to the “Issuance Date,” “Maturity Date,” “First Five-Year Note Period” and other things, (i)terms to take into account the requirementtiming of the issuance of the Thirteenth Amendment Note. The Thirteenth Amendment Note has a maturity date of February 5, 2030. In addition, the provisions regarding interest payments, interest acceleration, optional conversion, negative covenants, and events of default, preemptive rights and registration rights are the same as those of the 2011 HealthCor Notes. As of December 31, 2020, the underlying shares of our Common Stock related to maintain a minimum cash balance of $5,000,000 was reducedthe Thirteenth Amendment Note totaled approximately 11,200,000 to a minimum cash balance of $2,000,000 and (ii) the amendment provision was revised to permit the HealthCor Purchase Agreement to be amended by2020 Investor.

On April 17, 2020, the Company and the holders of theat least a majority of the Common Stock underlying the outstanding notes and warrants to purchase shares of our Common Stock, on an as-converted basis, sold pursuant to the HealthCor Purchase Agreement. On March 31, 2015, we also issued a warrant to HealthCor to purchase up to an aggregate of 1,000,000 shares of our Common Stock in consideration for certain prior waivers of the minimum cash balance requirement in the HealthCorNote and Warrant Purchase Agreement dated April 21, 2011, as amended, by and among HealthCor Partners Fund, LP, HealthCor Hybrid Offshore Master Fund, LP and the other investors party thereto (the “Sixth Amendment Warrant”“Majority Holders”). The Sixth Amendment Warrant has an exercise price per share of $0.53 (subject to adjustment as described therein) and an expiration date of March 31, 2025.

On June 26, 2015, we (i) (the “Purchase Agreement”), entered into a Seventh Amendment to the HealthCor PurchaseConsent and Agreement Regarding SBA Loan Agreement (the “Seventh Amendment”“NWPA Consent Agreement”), pursuant to which the HealthCorMajority Holders (i) consented under the Purchase Agreement was amended to permit the CompanyBorrower’s issuing the Promissory Note and borrowing the SBA Loan and (ii) agreed that the SBA Loan would be deemed to enter into and perform its obligationsbe Permitted Indebtedness under the CreditPurchase Agreement entered into with PDL, as administrative agent and lender (the “Lender”) (the “PDL Credit Agreement”); (ii) executed an Amendment to the Registration Rights Agreement between the Company and HealthCor dated(as defined therein).

On April 21, 2011 (the “RR Agreement”) pursuant to which the RR Agreement was amended to make its priority of registration consistent20, 2021, we agreed with the Registration Rights Agreement executed by the Company and Lender (as detailed in NOTE 12); (iii) amendedHealthCor Parties to (i) amend the 2011 HealthCor Notes to extend the maturity date in the event that Tranche Two of the PDL Credit Agreement is funded, for such notes2011 HealthCor Notes from April 20, 2021 to 90 days after April 20, 2022 by entering into Allonge No. 3 to the earlier of the Tranche Two maturity date or repayment date, but not later than December 31, 2022, (iv) amended2011 HealthCor Notes (the “Third 2011 Note Allonges”) and (ii) amend the 2012 HealthCor Notes to setextend the maturity date at of the 2012 HealthCor Notes from January 30, 2022 to April 20, 2022 by entering into Allonge No. 3 to the 2012 HealthCor Notes (the “Third 2012 Note Allonges”) (such amendments to the 2011 HealthCor Notes and in2012 HealthCor Notes together, the event that Tranche Two of the PDL Credit Agreement is funded, to extend such maturity date to 90 days after the earlier of the Tranche Two maturity date or repayment date, but later than December 31, 2022; and (v) amended each of the Senior Secured Convertible Notes issued under“HealthCor Note Extensions”). In connection with the HealthCor Purchase Agreement (the “HealthCor Notes”)Note Extensions, we issued warrants to among other things, subordinate the HealthCor Notes to the loans under the PDL Credit Agreement (as detailed in NOTE 12) and to increase certain event of default acceleration and payment thresholds.

On February 23, 2018, the Company, HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP (“HealthCor”), an entity, and certain officers and directors of the Company (collectively, but not including HealthCor, the “2018 Investors”) entered into the Eighth Amendment to the HealthCor Purchase Agreement wherein we agreed to sell and issue (i) additional notes in the aggregate principal amount of $2,050,000,with a conversion price per share of $0.05 (subject to adjustment as described therein) and (ii) additional Warrants forpurchase an aggregate of 512,5002,000,000 shares of our Common Stock at an exercise price per share of $0.05equal to $0.23 per share (subject to adjustment as described therein) and with an expiration date of April 20, 2031, to the 2018 Investors.HealthCor Parties (collectively the “2021 HealthCor Warrants”). 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.

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CAREVIEW COMMUNICATION,COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

Also on April 20, 2021, in connection with the HealthCor Note Extensions and the issuance of the 2021 HealthCor Warrants, we entered into a Consent and Agreement Pursuant to Note and Warrant Purchase Agreement (the “2021 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 HealthCor Note Extensions, (ii) the Majority Holders consented to the issuance of the 2021 HealthCor Warrants and (iii) the parties agreed that the holders of the 2021 HealthCor Warrants would have registration rights for the shares of Common Stock issuable upon exercise of the 2021 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”).

Below is a summary of the total underlying shares of common stock related to HealthCor and related investors:

Investor GroupUnderlying Shares of
Common Stock
2014 HealthCor Notes30,977,654
2015 Investors21,401,384
2015 HealthCor Notes4,280,279
February 2018 Investors65,862,518
July 2018 Investors30,638,385
2019 Investor2,302,972
February 2020 Investor12,637,716
TOTAL168,100,907

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CAREVIEW COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 $2,734,688 and $4,403,770 in interest for the years ended December 31, 2021 and 2020, respectively, related to these transactions. For the years ended December 31, 2021, and 2020, we recorded $3,002,790 and $2,743,735, respectively, of PIK related to the notes included in the HealthCor Purchase Agreement. The face amount of the 2012 andHealthCor Notes, 2014 HealthCor Notes, the Fifth Amendment Notes and the Eighth Amendment Notes and all accrued PIK interest also qualify for thisBCF treatment as discussed above. Under the accounting treatment.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. During the years ended December 31, 20172021, and 2016,2020, we recorded a BCF of $153,274$0 and $967,988,$0, respectively. The BCF was recorded as a charge to debt discount and a credit to additional paid in capital, with the debt discount, using the effective interest method, amortized to interest expense over the term of the notes. As

Warrants were issued with the 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. The warrants issued withAt each amendment date, the Sixth Amendment also did not contain features requiring liability accounting andwarrants were recorded at fair value onas debt discount, as a reduction of the datenet carrying amount of issuance with the offsetting credit recorded in equity.debt. The debt discounts are amortized into interest expense each period under the effective interest method. The value allocated to the FifthNinth Amendment Warrants was $1,093,105, which was recorded as debt discount with the credit to additional paid in capital.$378,000. The value allocated to the SixthAllonge 3 Amendment WarrantWarrants was $378,000, which was recorded as debt costs with the credit to additional paid in capital. The discount associated with the Fifth Amendment Notes ($98,555) and the expense related to the Sixth Amendment ($8,669) are amortized to interest expense using the effective interest method.$420,000.

We recorded an aggregate of $3,201,598 and $2,683,719 in interest expense for the years ended December 31, 2017 and 2016, respectively, related to these transactions. The carrying value of the debt with HealthCor and the New Investors at December 31, 2017 approximates fair value as the interest rates used are those currently available to us and would be considered level 3 inputs under the fair value hierarchy.

NOTE 12 – AGREEMENT WITH PDL BIOPHARMA, INC.

On June 26, 2015, we entered into a Credit Agreement with PDL BioPharma, Inc. (“PDL”), as administrative agent and lender (“the Lender”) (the “PDL Credit Agreement”). Under the PDL Credit Agreement the Lender made available to us up to $40 million in two tranches of $20 million each. Tranche One was funded on October 8, 2015 (the “Tranche One Loan’). Pursuant to the terms of the PDL Credit Agreement and having not met the Tranche Two Milestones by July 26, 2017, the Tranche Two funding was terminated in full. Outstanding borrowings under the Tranche One Loan bears interest at the rate of 13.5% per annum, payable quarterly in arrears. The PDL Credit Agreement, as modified, includes a minimum cash balance requirement of $2,500,000, which has been recorded as restricted cash on the consolidated balance sheet at December 31, 2017, and should we drop below $2,500,000, it will trigger a default.

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On October 7, 2015, we entered into a First Amendment to the PDL Credit Agreement (the “First Amendment”). The First Amendment modified the conditions precedent to the funding of each tranche, such that, among other things, we no longer need to attain a specified milestone relating to the placement of our products in order for the Lender to fund us the Tranche One Loan. Contemporaneously with the execution of the First Amendment we borrowed the Tranche One Loan and issued to the Lender a term note in the principal amount of $20 million (the “Tranche One Term Note”), payable in accordance with the terms of the PDL Credit Agreement, as amended.

On December 28, 2017, the Company and PDL Investment Holdings, LLC (as assignee of PDL) (“PDL Investment”) entered into a Binding Forbearance Term Sheet (the “Forbearance Term Sheet”) in order to modify certain provisions of the PDL Credit Agreement to prevent any Events of Default from occurring on December 31, 2017. This Forbearance Term Sheet was the governing document until February 2, 2018, at which time, the Company and PDL Investment entered into a Modification Agreement (the “PDL Modification Agreement”), effective December 28, 2017, with respect to the PDL Credit Agreement which reiterated the terms included in the Forbearance Term Sheet and effective February 2, 2018, entered into certain consents and amendments with respect to other existing agreements. In accordance with GAAP, we accounted for this transaction as a debt modification, wherein consideration given to PDL was recorded as deferred closing costs and all third-party payments were considered an expense and record as such on the accompany consolidated financial statements.

In consideration of the Lender’s entry into the PDL Modification Agreement, we agreed:

to concurrently amend and restate the warrant to purchase 4,444,445 shares of the Company’s common stock that we issued to the Lender on June 26, 2015 (the “PDL Warrant”) (amended and restated on October 7, 2015 (the “Amended PDL Warrant”)), reducing the exercise price per share from $0.40 to $0.0273, all other provisions of the Amended PDL Warrant remained unchanged (the “Second Amendment to the PDL Warrant”);

to concurrently make a conforming amendment and restatement (the “Amended Registration Rights Agreement”) of the registration rights agreement dated June 26, 2015 pursuant to which the Company had agreed to provide the Lender with certain registration rights with respect to the shares of common stock issuable upon exercise of the Second Amendment to the PDL Warrant;

to concurrently provide a written consent and acknowledgement from each holder of the notes issued pursuant to the HealthCor Debt Documents (as defined in the PDL Credit Agreement), in the form of the Consent and Amendment to Note and Warrant Purchase Agreement and Subordination and Intercreditor Agreement (the “Intercreditor Amendment”) by and among the Company, the Lender and such noteholders (i) confirming, on the terms set forth therein, that any lien of such noteholders would be automatically released in the event of a sale of the Company’s hospital assets, (ii) reaffirming such noteholders’ obligations under the Subordination and Intercreditor Agreement dated as of June 26, 2015 and (iii) consenting to certain potential issuances of the Company’s capital stock and cash payments to the Lender pursuant to the PDL Modification Agreement;

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

that we will obtain (i) at least $2,250,000 (reduced to $2,050,000 on February 23, 2018 pursuant to the terms of the Second Amendment to the PDL Credit Agreement, wherein the PDL Modification Agreement was amended and restated) in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt (each such term as defined in the Credit Agreement) on or prior to February 23, 2018 (we are in compliance with this covenant as of the date of this filing) and (ii) an additional $3,000,000 in net cash proceeds from the issuance of Capital Stock (other than Disqualified Capital Stock) or Debt on or prior to May 31, 2018 (resulting in aggregate net cash proceeds of at least $5,250,000); provided that any Debt will be subordinated to the Loans (as defined in the PDL Credit Agreement) under the PDL Credit Agreement;

that in the event of any sale or transfer of assets of the Company other than a sale of all or substantially all of the assets of Company, all of the net proceeds of such sale or transfer will be first applied to repay all amounts owed under the PDL Credit Agreement;

that in the event that the Company separates or transfers its senior care business, including but not limited to a sale to, or merger with, a third party of the senior care business or otherwise establishes a senior care business, or in the event that the Company disposes of substantially all business divisions other than the senior care business such that the Company’s remaining assets consist substantially of the Company’s senior care business, the Lender will be issued 7.5% of the equity in such senior care business on a fully diluted basis (the “Equity Grant”), which Equity Grant will be in addition to any interests represented by warrants held by the Lender; provided, however, that in the event of a sale of the senior care business to an unrelated third party, the Lender will be paid 7.5% of the equity value of such business in cash or in the same equity securities received by the Company or its equity holders from the purchaser of the senior care business;

that if all amounts owed to the Lender under the PDL Credit Agreement have been paid in full on or prior to December 31, 2018 (even if the Equity Grant has occurred first), then the Equity Grant (or, as the case may be, a payment in cash or equity received from a purchaser) will have a value, or will be equitably adjusted to have a value, that is equal to the lesser of 7.5% of the equity in the senior care business or $5,000,000;

that in the event of any sale of all or substantially all of the assets of the Company and its subsidiaries at a time when amounts under the PDL Credit Agreement remain outstanding, then (i) the net proceeds of such sale or transfer will be applied to repay all amounts owed under the PDL Credit Agreement and (ii) the Lender will be paid $5,000,000 in cash from the proceeds of such sale or transfer; provided, however, that no such payment will be made if the Lender has previously received a cash payment or equity from a purchaser in respect of the Equity Grant; and, provided, further, that the Equity Grant will be automatically terminated if such a $5,000,000 cash payment is made;

that we will reduce our operating expenses compared to those incurred in October 2017 by at least (i) $113,000 for January 2018, (ii) $148,000 for February 2018 and (iii) $167,000 for each other month for the duration of the Modification Period we are in compliance with this covenant as of the date of this filing; and

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to grant the Lender observation rights with respect to meetings of the board of directors of the Company and to have the Chief Executive Officer of the Company and a specified member of the board of directors participate in monthly calls with the Lender to discuss updates with respect to the Company’s business.

In accordance with the PDL Credit Agreement, as amended, interest only payments of $675,000 for each of the first nine interest payment dates (December 31, 2015, March 31, June 30, September 30, and December 31, 2016, March 31, June 30, September 30, 2017 and December 31, 2017) were made timely. Pursuant to the terms of the Forbearance Term Sheet, the first principal payment on the Tranche One Loan due on December 31, 2017 in the amount of $1,666,667, and similar principal payments due on March 31, 2018, June 30, 2018 and September 31, 2018 have been delayed to be included in the payment due on December 31, 2018. Quarterly payments under the PDL Credit Agreement subsequent to the PDL Modification Agreement will be due as detailed in the PDL Credit Agreement. We may elect to prepay the Loans at any time without any premium or penalty, subject to certain conditions.

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

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

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

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Accounting Treatment

In connection with the PDL Credit Agreement, we issued the PDL Warrant to the Lender. The fair value of the PDL Warrant at issuance was $1,257,778, which has been recorded as deferred issuance costs in the accompanying consolidated financial statements. The deferred debt issuance costs associated with the PDL Credit Agreement are recorded as assets in accordance with the accounting standards as the PDL Credit Agreement is considered to be a credit facility and the warrants were payment for the facility and not the drawdowns. These costs are amortized to interest expense using the straight-line method over the term of the PDL Credit Agreement. Upon amendment of the PDL Warrant (the “Amended Warrant”), we evaluated whether there was an increase in fair value which would require recognition of additional costs. No such increase in fair value was noted and no adjustment to the PDL Warrant valuation was necessary. The Second Amendment to the PDL Warrant resulted in an increase in fair value of $44,445, which was recorded as financing costs in the accompanying consolidated financial statements. For both years ended December 31, 2017 and 2016, $179,688 was amortized to interest expense. The PDL Warrant has not been exercised. We also incurred certain financing costs related to the PDL Credit Agreement totaling $805,917 in the accompanying consolidated financial statements. These costs have been recorded as deferred financing costs and are being amortized to interest expense over the term of the PDL Credit Agreement. For both years ended December 31, 2017 and 2016, $111,396 was amortized to interest expense.

NOTE 1315JOINT VENTURE AGREEMENT

On November 16, 2009, weDecember 31, 2019, the Company and Rockwell entered into a Master Investment Agreement (the “Rockwell Agreement”) with Rockwell Holdings I, LLC, a Wisconsin limited liability (“Rockwell”). Under the terms ofSecond Amendment to the Rockwell Agreement, we used funds fromNote (the “Second Rockwell Note Amendment”) pursuant to fully implementwhich Rockwell agreed to extend the CareView System™ in Hillcrest Medical Center in Tulsa, Oklahoma (“Hillcrest”) and Saline Memorial Hospital in Benton, Arkansas (“Saline”) (the “Project Hospital(s)”). CareView-Hillcrest, LLC and CareView-Saline, LLC were created as the operating entities for the Project Hospitals under the Rockwell Agreement (the “Project LLC(s) ”).

On January 31, 2017, under the terms of the Rockwell Agreement, wherein we have the option to purchase Rockwell’s interest in the Project LLCs, we exercised that right by entering into a Settlement and LLC Interest Purchase Agreement with Rockwell (the “Settlement Agreement”). Pursuant to the terms of the Settlement Agreement, we paid Rockwell the aggregate amount of $1,213,786 by the issuance of a promissory note to Rockwell for $1,113,786 (the “Rockwell Note”) and a cash payment of $100,000. Pursuant to the termsterm of the Rockwell Note we will make quarterly principal payments of $100,000, with each payment being made on the last day of each calendar quarter beginning with the first payment date of March 31, 2017 and continuing on the last business day of each subsequent calendar quarter through September 30, 2019. We were not in default of any conditions under the Settlement Agreement as of by one year, to December 31, 2017. The final 2020, and agreed to extend the time to make the quarterly payment that would otherwise be due on December 31, 2019 was to be a balloon payment of $13,786 representingJanuary 31, 2020. We have evaluated the remaining principal balance plus all accrued and unpaid interest. Effective February 2, 2018, pursuant to the terms of the modification agreement with PDL and PDL Modification Agreement, we entered into an amendmentSecond Amendment to the Rockwell Note whereinunder ASC 470 and determined that the quarterly payments underamendment should be treated as a debt modification.

On January 31, 2020, the Company and Rockwell entered into a Third Amendment to the Rockwell Note were reduced(the “Third Rockwell Note Amendment”), pursuant to $50,000 per quarter duringwhich Rockwell agreed to extend the time to make the quarterly payment that would otherwise be due on January 31, 2020 (per the Second Rockwell Note Amendment) to February 10, 2020. We have evaluated the Third Amendment to the Rockwell Note under ASC 470 and determined that the amendment should be treated as a debt modification.

Effective as of March 31, 2020, the Company and Rockwell entered into a Fourth Amendment to the Rockwell Note (the “Fourth Rockwell Note Amendment”), pursuant to which Rockwell agreed to extend the time to make the quarterly payment that would otherwise be due on March 31, 2020 to April 16, 2020. We have evaluated the Fourth Amendment to the Rockwell Note under ASC 470 and determined that the amendment should be treated as a debt modification.

On December 31, 2020, the Company and Rockwell entered a Fifth Amendment to the Rockwell Note (the “Fifth Rockwell Note Amendment”), pursuant to which Rockwell agreed (i) to extend the term of the PDL Modification Agreement,Promissory Note by one (1) year and continue the quarterly principal payments through September 30, 2021 with the final balloon payment due on December 31, 2019 a2021 and (ii) that the quarterly principal payment that would otherwise be due on December 31, 2020 will not be required to be made until the final balloon payment due date. We have evaluated the Fourth Amendment to the Rockwell Note under ASC 470 and determined that the amendment should be treated as a debt modification.

On 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 $513,786 representing the remainingRockwell Note by three months, to March 31, 2022, and agreed that the quarterly principal balance plus all accrued and unpaid interest.payment that would otherwise be due on December 31, 2021 will not be required to be made until March 31, 2022.

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CAREVIEW COMMUNICATION,COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

As additional consideration to Rockwell for entering into the Rockwell Agreement, we granted Rockwell Warrants to purchase 1,151,206 shares of our Common Stock on the date of the Rockwell Agreement, and, using the Black-Scholes Model, valued the Warrants at $1,124,728 (the “Project Warrant”), which amount was fully amortized at December 31, 2015. Pursuant to the terms of the Settlement Agreement, the expiration date of the Project Warrant was extended from November 16, 2017 to November 16, 2022. All other provisions of the Project Warrant remained unchanged. At the time of the extension, the Project Warrant were revalued resulting in a $11,512 increase in fair value, which has been recorded as non-cash costs included in general and administration expense in the accompanying consolidated financial statements. Effective February 2, 2018, pursuant to the terms of the PDL Modification Agreement, we entered into an amendment to the Project Warrant wherein the Project Warrant’s exercise price was changed from $0.52 to $0.05, resulting in a $13,814 increase in fair value, this transaction will be recorded as non-cash costs included in general and administration expense in the condensed consolidated financial statements for the 1st Quarter of 2018.

NOTE 14 – VARIABLE INTEREST ENTITIES

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

Concurrent with the execution, and pursuant to the terms, of the Settlement Agreement, as discussed in NOTE 13, all assets and liabilities of the Project LLCs were transferred to our wholly owned subsidiary, CareView Communications, Inc., effective January 1, 2017. On June 12, 2017, we filed Form 510- Limited Liability Company Articles of Dissolution with the State of Wisconsin resulting in the dissolution of the Project LLCs effective that date.

The total consolidated VIE assets and liabilities reflected on our consolidated balance sheets at December 31, 2017 and 2016 are as follows:

  2017  2016 
Assets        
Cash $  $1,270 
Receivables     2,579 
 Total current assets     3,849 
Property, net     22,555 
 Total assets $  $26,404 
         
Liabilities        
Accounts payable $  $141,782 
Notes payable     439,173 
Mandatorily redeemable interest     439,173 
Accrued interest     328,978 
Other current liabilities     8,747 
 Total liabilities $  $1,357,853 

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CAREVIEW COMMUNICATION, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The financial performance of the consolidated VIEs reflected on our consolidated statements of operations for the years ended December 31, 2017 and 2016 is as follows:

  Year Ended
December 31, 2017
  Year Ended
December 31, 2016
 
       
Revenue, net $  $28,388 
Network operations expense     16,655 
General and administrative expense (recovery)     (19,466)
Depreciation     48,794 
Total operating costs     45,983 
Operating loss     (17,595)
Other expense     (88,529)
Loss before taxes     (106,124)
Provision for taxes      
Net loss     (106,124)
Net loss attributable to noncontrolling interest     (53,062)
Net loss attributable to CareView Communications, Inc. $  $(65,082)

 

NOTE 1516SUBSEQUENT EVENTS

PDL Modification Agreement2022 Amendment of 2011 HealthCor Notes and Amendment2012 HealthCor Notes; Issuance of 2022 HealthCor Warrants

On March 8, 2022, we agreed with the HealthCor Parties to PDL Credit Agreement

On February 2, 2018,(i) amend the Company and PDL Investment Holdings, LLC (as assignee2011 HealthCor Notes to extend the maturity date of PDL) (“PDL Investment”) enteredthe 2011 HealthCor Notes from April 20, 2022 to April 20, 2023 by entering into a Modification Agreement (the “PDL Modification Agreement”), with respectAllonge No. 4 to the PDL Credit Agreement which reiterated2011 HealthCor Notes (the “Fourth 2011 Note Allonges”) and (ii) amend the terms included in a Binding Forbearance Term Sheet dated December 28, 2017 also entered into by2012 HealthCor Notes to extend the Company and PDL Investment. The purposematurity date of the PDL Modification Agreement is2012 HealthCor Notes from April 20, 2022 to amend the PDL Credit Agreement to prevent any Event of Default from occurring. See NOTES 12 and 13 for further details.

On February 23, 2018, the Company and PDL Investment enteredApril 20, 2023 by entering into the Second AmendmentAllonge No. 4 to the PDL Credit Agreement, wherein the PDL Modification Agreement was amended and restated to allow for the reduction of certain funding requirements from $2,250,000 to $2,050,000, which funding was completed on February 23, 2018.

Eighth Amendment to2012 HealthCor Purchase Agreement

On February 23, 2018, the Company, HealthCor Partners Fund, LP and HealthCor Hybrid Offshore Master Fund, LP (“HealthCor”), an entity, and certain officers and directors of the Company (collectively, but not including HealthCor, the “2018 Investors”Notes (the “Fourth 2012 Note Allonges”) entered into the Eighth Amendment(such amendments to the 2011 HealthCor Purchase Agreement whereinNotes and 2012 HealthCor Notes together, the “2022 HealthCor Note Extensions”). In connection with the 2022 HealthCor Note Extensions, we agreedissued warrants to sell and issue (i) additional notes in the aggregate principal amount of $2,050,000,with a conversion price per share of $0.05 (subject to adjustment as described therein) and (ii) additional Warrants forpurchase an aggregate of 512,5003,000,000 shares of our Common Stock at an exercise price per share of $0.05equal to $0.09 per share (subject to adjustment as described therein) and with an expiration date of March 8, 2032to the 2018 Investors.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 3,000,000 shares of Common Stock at an exercise price of $0.09 per share and with an expiration date of March 8, 2032.

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