| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES Cash and Restricted Cash During 2022,
the Company maintained $100,000 $794,000 $250,000 Trade Accounts Receivable Trade accounts receivable are customer obligations
due under normal trade terms. We provide an allowance for credit losses, which is based upon a review of outstanding receivables, historical
collection information and existing economic conditions. Trade accounts receivable past due more than 90 days are considered delinquent.
Delinquent receivables are written off based on individual credit evaluations, results of collection efforts, and specific circumstances
of the customer. Recoveries of accounts previously written off are recorded as reductions of bad debt expense when received. At December
31, 2023 and 2022, an allowance for credit losses of $ 0 0 Property and Equipment Property and equipment is stated at cost, net
of accumulated depreciation. Maintenance costs, which do not significantly extend the useful lives of the respective assets, and repair
costs are charged to operating expense as incurred. We include network equipment in fixed assets upon receipt and begin depreciating such
equipment when it passes our incoming inspection and is available for use. We attribute no salvage value to the network equipment and
depreciation is computed using the straight-line method based on the estimated useful life of seven years three years five years Inventories Inventory is valued at the lower of cost, determined
on a first-in, first-out (FIFO), or net realizable value. Inventory items are analyzed to determine cost and net realizable value, and
appropriate valuation adjustments are then established. See Note 6 for more details. Allowance for System Removal On occasion, the Company will remove subscription
equipment from its larger customer premises due to contract expiration/non-renewal. When the equipment is removed, the costs for removal
are calculated and recorded against the allowance. At December 31, 2023 and 2022, an allowance of $ 54,802 54,802 Impairment of Long-Lived Assets Carrying values of property and equipment and
finite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying values
may not be recoverable. Such events or circumstances include, but are not limited to:
● significant declines in an asset’s market price;
● significant deterioration in an asset’s physical condition;
● significant changes in the nature or extent of an asset’s use or operation;
● significant adverse changes in the business climate that could impact an asset’s value, including
adverse actions or assessments by regulators;
● accumulation of costs significantly in excess of original expectations related to the acquisition or construction
of an asset;
● current-period operating, or cash flow losses combined with a history of such losses, or a forecast that
demonstrates continuing losses associated with an asset’s use; and
● expectations that it is more likely than not that an asset will be sold or otherwise disposed of significantly
before the end of our previously estimated useful life. If impairment indicators are present, we determine
whether an impairment loss should be recognized by testing the applicable asset or asset groups’ carrying value for recoverability.
This test requires long-lived assets to be grouped at the lowest level for which identifiable cash flows are largely independent of the
cash flows of other assets and liabilities, the determination of which requires judgment. We estimate the undiscounted future cash flows
expected to be generated from the use and eventual disposal of the assets and compare that estimate to the respective carrying values
in order to determine if such carrying values are recoverable. This assessment requires the exercise of judgment in assessing the future
use of and projected value to be derived from the eventual disposal of the assets to be held and used. Assessments also consider changes
in asset utilization, including the temporary idling of capacity and the expected timing for placing this capacity back into production.
If the carrying value of the asset is not recoverable, then a loss is recorded for the difference between the assets’ fair value
and respective carrying value. The fair value of the asset is determined using an “income approach” based upon a forecast
of all the expected discounted future net cash flows associated with the subject assets. Some of the more significant estimates and assumptions
include market size and growth, market share, projected selling prices, manufacturing cost and discount rate. Our estimates are based
upon our past experience, our commercial relationships, market conditions and available external information about future trends. We believe
our current assumptions and estimates are reasonable and appropriate; however, unanticipated events and changes in market conditions could
affect such estimates resulting in the need for an impairment charge in future periods. For the year ended December 31, 2023, $ 334,359 Research and Development Research and development costs are expensed as
incurred. Costs regarding the development of software to be sold, leased or otherwise marketed are subject to capitalization beginning
when a product’s technological feasibility has been established and ending when a product is available for general release to customers.
We did not capitalize any such costs during the years ended December 31, 2023, and 2022. Intellectual Property We capitalize certain costs of developing software
upon the establishment of technological feasibility and prior to the availability of the product for general release to customers for
our CareView Patient Safety System in accordance with GAAP. Capitalized costs are reported at the lower of unamortized cost or net realizable
value and are amortized over the estimated useful life of the CareView Patient Safety System not to exceed five year Patents and Trademarks We amortize our intangible assets with a finite
life on a straight-line basis, over 10 years 20 years Fair Value of Financial Instruments Our financial instruments consist primarily of
receivables, accounts payable, accrued expenses and short and long-term debt. The carrying amount of receivables, accounts payable and
accrued expenses approximate our fair value because of the short-term maturity of such instruments, and they are considered Level 1 assets
under the fair value hierarchy. We have elected not to carry our debt instruments at fair value. The carrying amount of our debt approximates
fair value. Interest rates that are currently available to us for issuance of short- and long-term debt with similar terms. Remaining
maturities are used to estimate the fair value of our short- and long-term debt and would be considered Level 3 inputs under the fair
value hierarchy. We have categorized our assets and liabilities
that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with GAAP. Fair value is defined
as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy
gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable
inputs (Level 3). Assets and liabilities recorded in the consolidated
balance sheets at fair value are categorized based on a hierarchy of inputs, as follows: Level
1 Level 2 Level 3 At December 31, 2023, and 2022, we had no financial
assets and liabilities reported at fair value. Income Taxes Income taxes are accounted for under the asset
and liability method. Deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences
between the financial statements carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the related temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized when
the rate change is enacted. Valuation allowances are recorded to reduce deferred tax assets to the amount that will more likely than not
be realized. In accordance with GAAP, we recognize the effect of uncertain income tax positions only if the positions are more likely
than not of being sustained in an audit, based on the technical merits of the position. Recognized uncertain income tax positions are
measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected
in the period in which those changes in judgement occur. We recognize both interest and penalties related to uncertain tax positions as
part of the income tax provision. Revenue Recognition We recognize revenue in accordance with Accounting
Standards Codification (“ASC”) Topic 606 (“ASC 606”). For our subscription service contracts, we have employed
the practical expedient discussed in ASC 606-10-55-18 related to invoicing as we have the right to consideration from our customers in
the amount that corresponds directly with the value to the customer of our performance completed to date and therefore, we recognize revenue
upon invoicing as further discussed below. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue
recognized reflects the consideration to which we expect to be entitled to receive in exchange for these goods or services. The provisions
of ASC 606 include a five-step process by which we determine revenue recognition, depicting the transfer of goods or services to customers
in amounts reflecting the payment to which we expect to be entitled in exchange for those goods or services. ASC 606 requires us to apply
the following steps: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine
the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognize revenue when,
or as, we satisfy the performance obligation. For those customers for which we are required to collect sales taxes, we record such sales
taxes on a net basis which has no effect on the amount of revenue or expenses recognized as the sales taxes are a flow through to the
taxing authority. We enter into contracts with customers that may
provide multiple combinations of our products, software solutions, and other related services, which are generally capable of being distinct
and accounted for as separate performance obligations. Performance obligations that are not distinct at contract inception are combined. Customer contract fulfillment typically involves
multiple procurement promises, which may include various equipment, software subscription, project-related installation and training services,
and support. We allocate the transaction price to each performance obligation based on estimated relative standalone selling price. Revenue
is then recognized for each performance obligation upon transferring control of the hardware, software, and services to the customer and
in an amount that reflects the consideration we expect to receive and the estimated benefit the customer receives over the term of the
contract. Generally, we recognize revenue under each of
our performance obligations as follows:
● Subscription services – We recognize subscription revenues monthly over the contracted license period.
● Equipment packages – We recognize equipment revenues when control of the devices has been transferred
to the client (“point in time”).
● Software bundle and related services related to sales-based contracts – We recognize our software
subscription, installation, training, and other services on a straight-line basis over the estimated contracted license period (“over
time”). The
Company earns sales-based contract revenue from services rendered under specific agreements, which hinge on a third-party reseller who
possesses the exclusive authority to engage directly with veteran-owned hospitals. Evaluating the Company's role in these contracts necessitates
assessing whether it functions as the principal or agent, a determination that involves analyzing the extent of control the Company wields
over the contracts. Following
its assessment, the Company reports revenue from services provided under such contracts on a gross basis. This decision is justified
by the Company's primary responsibility to fulfill the contractual obligations, including delivery and installation of equipment and
software, training, and its control over other services within the contract period. Furthermore, the Company directly sets the contract
price with its customers based on the services outlined in the statement of work. As the Company is responsible for fulling this promise
and maintains control, the Company is acting as the principal. Disaggregation of Revenue The following presents gross revenues disaggregated
by our business models:
For the years ended
December 31,
Sales-based contract revenue 2023 2022
Equipment package (point in time) $ 3,407,263 $ 1,437,758
Software bundle (over time) 1,894,777 1,349,096
Total sales-based contract revenue 5,302,040 2,786,854
Subscription-based license revenue 4,382,578 5,114,487
Gross revenue $ 9,684,618 $ 7,901,341 Contract Liabilities Our subscription-based contracts payment arrangements
are required to be paid monthly which are recognized into revenue when received. Some customers choose to pay their subscription fee in
advance. Customer payments received in advance of satisfaction of the related performance obligations are deferred as contract liabilities.
These amounts are recorded as “deferred revenue” in our condensed consolidated balance sheet and recognized into revenues
over time. Our sales-based contract payment arrangements
with our customers typically include an initial equipment payment due upon signing of the contract and subsequent payments when certain
performance obligations are completed. Customer payments received in advance of satisfaction of related performance obligations are deferred
as contract liabilities. These amounts are recorded as “deferred revenue” in our condensed consolidated balance sheet and
recognized into revenues as either a point in time or over time. During the years ended December 31, 2023, and
2022, a total of $ 21,145 240,302 The table below details the subscription-based contract liability activity during the years ended December 31, 2023, and
2022, included in the Other current liabilities.
For the years ended
2023 2022
Balance, beginning of period $ 21,145 $ 231,141
Additions — 30,306
Transfer to revenue (21,145) (240,302)
Balance, end of period $ — $ 21,145 During the years ended December 31, 2023, and 2022, a total of $ 1,894,777 1,838,056
For the years ended December 31,
2023 2022
Balance, beginning of period $ 869,485 $ 752,526
Additions 2,948,217 1,955,015
Transfer to revenue (1,894,777 ) (1,838,056 )
Balance, end of period $ 1,922,925 $ 869,485 As of December 31, 2023, the aggregate amount
of deferred revenue from subscription-based contracts and sales-based contracts allocated to performance obligations that are unsatisfied
or partially satisfied is approximately $ 1,922,925
Years Ending December 31, Amount
2024 $ 1,752,061
2025 170,864
Thereafter —
$ 1,922,925 Based on our contracts, except for initial equipment
sales, we invoice customers once our performance obligations have been satisfied, at which point payment is unconditional. Accounts receivable
is recorded when the right to consideration becomes unconditional and are reported accordingly our consolidated financial statements. We defer and capitalize all costs associated with
the installation of the CareView System into a healthcare facility until the CareView System is fully operational and accepted by the
healthcare facility. Installation costs are specifically identifiable based on the amounts we are charged from third party installers
or directly identifiable labor hours incurred for each installation. Upon acceptance, the associated costs are expensed on a straight-line
basis over the life of the contract with the healthcare facility. These costs are included in network operations on the accompanying consolidated
statements of operations. The table below details the activity in these
deferred installation costs during the years ended December 31, 2023, and 2022, included in other assets in the accompanying consolidated
balance sheet.
For the years ended
2023 2022
Balance, beginning of period $ 33,461 $ 68,901
Additions 45,679 —
Transfer to expense (30,831) (35,440)
Balance, end of period $ 48,309 $ 33,461 Significant Judgements When Applying Topic
606 Contracts with our customers
are typically structured similarly and include various combinations of our products, software solutions, and related services. Determining
whether the various contract promises are considered distinct performance obligations that should be accounted for separately versus
together may require significant judgment. Contract transaction price is allocated to distinct
performance obligations using estimated standalone selling price. We determine standalone selling price maximizing observable inputs such
as standalone sales, competitor standalone sales, or substantive renewal prices charged to customers when they exist. In instances where
standalone selling price is not observable, we utilize an estimate of standalone selling price. Such estimates are derived from various
methods that include cost plus margin, and historical pricing practices. Judgment may be required to determine standalone selling prices
for each performance obligation and whether it depicts the amount we expect to receive in exchange for the related good or service. Contract modifications occur when we and our customers
agree to modify existing customer contracts to change the scope or price (or both) of the contract or when a customer terminates some,
or all, of the existing services provided by us. When a contract modification occurs, it requires us to exercise judgment to determine
if the modification should be accounted for as a separate contract, the termination of the original contract and creation of a new contract,
a cumulative catch-up adjustment to the original contract, or a combination. Contracts with our customers include a limited
warranty on our products covering materials, workmanship, or design for the duration of the contract. We do not offer paid additional
extended or lifetime warranty packages. We determined the limited warranty in our contract is not a distinct performance obligation. We
do not believe our estimates of warranty costs to be significant to our determination of revenue recognition and, therefore, did not reserve
for warranty costs. Leases The Company has an
operating lease primarily consisting of office space with a remaining lease term of 20 months 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 44,178,422 488,511,922 44,178,422 38,483,977 5,694,445 Stock Based Compensation We recognize compensation expense for all share-based
payments granted and amended based on the grant date fair value estimated in accordance with GAAP. Compensation expense is generally recognized
on a straight-line basis over the employee’s requisite service period based on the award’s estimated lives for fixed awards
with ratable vesting provisions. Debt Discount Costs Costs incurred with parties who are providing
long-term financing, with Warrants issued with the underlying debt, are reflected as a debt discount based on the relative fair value
of the debt and Warrants. These discounts are generally amortized over the life of the related debt, using the effective interest rate
method or other methods approximating the effective interest method. Additionally, convertible debt issued with a beneficial conversion
feature is recorded at a discount based on the difference in the effective conversion price and the fair value of the Company’s
stock on the date of issuance, if any. Outstanding debt is presented net of any such discounts on the accompanying consolidated financial
statements. Deferred Debt Issuance and Debt Financing Costs Costs incurred through the issuance of Warrants
to parties who are providing long-term financing availability, which includes revolving credit lines, are reflected as deferred debt issuance
based on the fair value of the Warrants issued. Costs incurred with third parties related to issuance of debt are recorded as deferred
financing costs. These costs are generally amortized over the life of the financing instrument using the effective interest rate method
or other methods approximating the effective interest method. Amounts associated with our senior secured convertible notes are netted
with the outstanding debt on the accompanying consolidated financial statements while amount associated with credit facilities are presented
in other assets on the accompanying consolidated statements of operations. Shipping and Handling Costs We expense all shipping and handling costs as
incurred. These costs are included in network operations on the accompanying consolidated statements of operations. Advertising Costs We consider advertising costs as costs associated
with the promotion of our products through the various media outlets and trade shows. We expense all advertising costs as incurred. Our
advertising expense for the years ended December 31, 2023, and 2022, totaled approximately $ 335,000 111,000 Concentration of Credit Risks and Customer
Data In 2023, our revenue was driven significantly
by two customers, accounting for 17 13 12 21 Use of Estimates Our financial statements have been prepared in
accordance with GAAP. The preparation of these financial statements requires us to make significant estimates and judgments that affect
the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingent assets and liabilities. We evaluate
our estimates, including those related to contingencies, on an ongoing basis. We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments
about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. Recently Issued and Newly Adopted Accounting
Pronouncements In August 2020, the FASB issued ASU 2020-06, Debt
– Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity
(Subtopic 815-40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics
of liabilities and equity, including convertible instruments and contracts on an entity’s own equity. The ASU 2020-06 amendments
are effective for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted,
but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is
currently evaluating the impact of adopting this standard. In June 2016, the Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses
(Topic 326) (“ASU 2016-13”). ASU 2016-13 modifies the measurement of expected credit losses of certain financial instruments,
requiring entities to estimate an expected lifetime credit loss on financial assets. The ASU amends the impairment model to utilize an
expected loss methodology and replaces the incurred loss methodology for financial instruments including trade receivables. The amendment
requires entities to consider other factors, such as historical loss experience, current conditions and reasonable and supportable forecasts.
In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments - Credit Losses (Topic 326), Derivatives and Hedging (Topic 815),
and Leases (Topic 842): Effective Dates, which deferred the effective date of the new guidance by one year to fiscal years beginning after
December 15, 2022, with early adoption permitted. In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments – Credit
Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures, which eliminate the accounting guidance for TDRs by creditors
in Subtopic 310-40. Rather than applying the recognition and measurement guidance for TDRs, an entity must apply the loan refinancing
and restructuring guidance in paragraphs 310-20-35-9 through 35-11 to determine whether a modification results in a new loan or a continuation
of an existing loan. The effective date for this amendment is upon adoption of ASU 2016-13 and should be applied prospectively, with option
of a modified retrospective transition method. The Company has successfully implemented Accounting Standard 2016-13, Topic 326, and after
careful consideration, management has concluded that the adoption did not result in a material impact on the financial position, results
of operations, or cash flows of the Company. The Company will continue to monitor and assess the impact of this standard in subsequent
reporting periods and provide any necessary updates as required by accounting regulations. |
