CareView Communications Inc

NOTE1 – BASIS OF PRESENTATION AND RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

Interim Financial Statements

The accompanying unaudited interim condensed consolidated financial statements of CareView Communications, Inc. (“CareView”, the “Company”, “we”, “us” or “our”) have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and with the instructions to Form10-Q. Accordingly, they donot include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, such financial statements include all adjustments (consisting solely of normal recurring adjustments) necessary for the fair statement of the financial information included herein in accordance with GAAP and the rules and regulations of the Securities and Exchange Commission (the “SEC”). The balance sheet at* December 31, 2024has been derived from the audited consolidated financial statements at that date but doesnot* include all of the information and footnotes required by GAAP for complete financial statements. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Results of operations for interim periods arenot necessarily indicative of results for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form10-K for the year ended* December 31, 2024as filed with the SEC on March 31, 2025.*

Revenue Recognition

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) Topic606 (“ASC606”). For our subscription service contracts, we have employed the practical expedient discussed in ASC606-10-55-18 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 ASC606, 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 ASC606 include afive-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. ASC606 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 hasno 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* mayprovide 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 arenot* distinct at contract inception are combined.

Customer contract fulfillment typically involves multiple procurement promises, which* may*include various equipment, software subscription, project-related installation and training services, and support. We allocate the transaction price to each performance obligation based on estimated relative standalone selling price. Revenue is then recognized for each performance obligation upon transferring control of the hardware, software, and services to the customer and in an amount that reflects the consideration we expect to receive and the estimated benefit the customer receives over the term of the contract.

Generally, we recognize revenue under each of our performance obligations as follows:

The Company earns sales-based contract revenue from services rendered under specific agreements, which hinge on athird-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.

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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 net revenues disaggregated by our business models:

Contract Liabilities

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 sheets and recognized into revenues as either a point in time or over time.

During thethree months ended* March 31, 2025and2024*, a total of $1,149,315 and $613,245, respectively, of sales-based deferred contract liability was recognized as revenue. The table below details the sales-based contract liability activity during thethree months ended* March 31, 2025and2024*.

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As of* March 31, 2025*, 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 $3,158,474 and will be recognized into revenue over time as follows:

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 fromthird 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 periods ended* March 31, 2025and2024*, included in other assets in the accompanying unaudited consolidated balance sheet.

Significant Judgements When Applying Topic606

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.

The contract transaction price is allocated to distinct performance obligations using the estimated standalone selling price. We determine the standalone selling price through maximizing observable inputs such as standalone sales, competitor standalone sales, or substantive renewal prices charged to customers when they exist. In instances where the standalone selling price isnot 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 donot offer paid additional extended or lifetime warranty packages. We determined the limited warranty in our contract isnot a distinct performance obligation. We donot believe our estimates of warranty costs to be significant to our determination of revenue recognition, and therefore, didnot reserve for warranty costs.

Leases

The Company has an operating lease primarily consisting of office space with a remaining lease term of 5 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 (Loss) Per Share

We calculate earnings per share (“EPS”) in accordance with GAAP, which requires the computation and disclosure oftwo 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, and warrants to purchase our Common Stock (the “Warrants”). Potential common shares totaling 71,751,280 and 73,616,280 on* March 31, 2025and2024*, respectively, have been excluded from the diluted earnings per share calculation as they are anti-dilutive due to our reported net loss. The 71,751,280 potential common shares consist of 66,056,835 stock options and 5,694,445 warrants.

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Recently Issued and Newly Adopted Accounting Pronouncements

In* October 2023,the FASB issued ASUNo.* 2023-06, which incorporates14 of the27 SEC disclosures identified in SEC ReleaseNo. 33-10532 (issued* August 17, 2018).This ASU updates disclosure and presentation requirements across various Codification Topics and applies to all entities within the scope of those Topics, unless specified otherwise. The amendments are to be applied prospectively. For public business entities, each amendment becomes effective when the related SEC disclosure is removed from Regulation S-X or S-K; early adoption isnot* permitted. The Company has evaluated ASUNo. 2023-06 and doesnot expect it to impact its unaudited Condensed Consolidated Financial Statements.

In* December 2023,the FASB issued ASU2023*-09, Income Taxes (Topic740): Improvements to Income Tax Disclosures. This update will improve the transparency and usefulness of income tax disclosures. Investors, lenders, and creditors have indicated that current disclosures donot provide enough detailed information to assess how a company's operations, tax risks, and planning affect its tax rate and future cash flows. The requirements take effect for public business entities for fiscal years beginning after* December 15, 2024.*The impact of adopting this standard on the Company’s unaudited Condensed Consolidated Financial Statements is currently being evaluated.

In* November 2024,the FASB issued ASU2024*-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic220-40). This update will enhance disclosures about public business entity’s expenses, responding to investor requests for more detailed information on components such as inventory purchases, employee compensation, depreciation, amortization, and depletion within commonly presented expense captions (e.g., cost of sales, SG&A, and R&D). These amendments are expected to provide investors with a clearer understanding of an entity’s expenses, helping them assess performance, forecast future expenses, and evaluate cash flow prospects. The Company is in the process of evaluating the potential impact of this standard on its unaudited Condensed Consolidated Financial Statements.

In* December 2023,the FASB issued ASUNo.* 2023-08, “Accounting for and Disclosure of Crypto Assets,” which updates and expands disclosure requirements related to crypto assets. The guidance is effective for public business entities for fiscal years beginning after* December 15, 2024,including interim periods within those years. Adoption of this standard as of January 1, 2025,hadno* impact on the Company’s unaudited Condensed Consolidated Financial Statements, as the Company doesnot hold any crypto assets.

In* November 2024,the FASB issued ASUNo.* 2024-04, “Debt with Conversion and Other Options (Subtopic470-20): Induced Conversions of Convertible Debt Instruments,” which clarifies the criteria for determining when a settlement of convertible debt should be accounted for as an induced conversion. The guidance applies only to conversions involving the full issuance of equity securities as originally specified in the debt terms and includes additional clarifications to aid in application. The amendments are effective for all entities for annual periods beginning after* December 15, 2025,including interim periods within those years. Adoption of this standard as of January 1, 2025,hadno* impact on the Company’s unaudited Condensed Consolidated Financial Statements, as the conversion terms of the Company’s convertible debt werenot modified to induce conversion.

There wasno impact on our unaudited Condensed Consolidated Financial Statements from recently adopted accounting standards.

NOTE2 – GOING CONCERN, LIQUIDITY AND MANAGEMENT’S PLAN

Accounting standards require management to evaluate our ability to continue as a going concern for a period ofone year after the date of the filing of this Form10-Q (“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 oftwelve months after the Company issues its financial statements. For thethree months ended* March 31, 2025*, 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 within12 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 Company’s net losses, cash outflows, and working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern. The 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.

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As of* March 31, 2025*, the Company had a working capital deficit of $41,672,427. The Company’s net losses, cash outflows, and working capital deficit raise substantial doubt about the Company’s ability to continue as a going concern. 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 willnot have sufficient funds to meet its obligations withinone year from the date the consolidated financial statements were issued. While management will look to continue funding operations by increased sales volumes and raising additional capital from sources such as sales of its debt or equity securities or loans to meet operating cash requirements, there isno assurance that management’s plans will be successful.

Management continues to monitor the immediate and future cash flows needs of the company in a variety of ways which include forecasted net cash flows from operations, capital expenditure control, new inventory orders, debt modifications, increases in sales outreach, streamlining and controlling general and administrative costs, competitive industry pricing, sale of equities, debt conversions, new product or services offerings, and new business partnerships.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. This basis of accounting contemplates the recovery of the Company’s assets and the satisfaction of liabilities in the normal course of business. A successful transition to attaining profitable operations is dependent upon achieving a level of positive cash flows adequate to support the Company’s cost structure.

NOTE3 – STOCKHOLDERS’** EQUITY**

Warrants to Purchase Common Stock of the Company

We use the Black-Scholes-Merton option pricing model (“Black-Scholes Model”) to determine the fair value of Warrants. The Black-Scholes Model requires the use of a number of assumptions including volatility of the stock price, the weighted average risk-free interest rate, and the weighted average term of the Warrant.

The risk-free interest rate assumption is based upon observed interest rates onzero 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.

A summary of our Warrants activity and related information follows:

Options to Purchase Common Stock of the Company

During thethree months ended* March 31, 2025*, no options to purchase our Common Stock were granted.

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

Share-based compensation expense for Options charged to our operating results for thethree months ended* March 31, 2025and2024* were $154,732 and $53,271, respectively. The estimate of forfeitures is to be recorded at the time of grant and revised in subsequent periods if actual forfeitures differ from the estimates. We havenot included an adjustment to our stock-based compensation expense based on the nominal amount of the historical forfeiture rate. We do, however, revise our stock-based compensation expense based on actual forfeitures during each reporting period.

At* March 31, 2025*, total unrecognized estimated compensation expense related to non-vested Options granted prior to that date was approximately $1,179,978, which is expected to be recognized over a weighted-average period of 1.9 years. No tax benefit was realized due to a continued pattern of operating losses.

NOTE4 – OTHER CURRENT ASSETS

Other current assets consist of the following:

NOTE5 – INVENTORY

Inventory is valued at the lower of cost, determined on afirst-in,first-out (FIFO), or net realizable value. Inventory items are analyzed to determine cost and net realizable value and appropriate valuation adjustments are then established.

Inventory consists of the following:

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NOTE6 – PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Depreciation expense for thethree months ended* March 31, 2025and2024* was $29,234 and $60,327, respectively.

NOTE7 – INTANGIBLE AND OTHER ASSETS, NET

Intangible assets consist of the following:

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Other assets consist of the following:

NOTE8 – OTHER CURRENT LIABILITIES

Other current liabilities consist of the following:

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NOTE9 – 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”).

On* December 11, 2024 (the “Effective Date”), the Company, the Borrower, the Lender, Steven G. Johnson, President and Chief Executive Officer of the Company, and Dr. James R. Higgins, a director of the Company, entered into a Ninth Amendment to Credit Agreement (the “Ninth Credit Agreement Amendment”), pursuant to which the parties agreed to amend the Credit Agreement to (i) provide that the Maturity Date shall be extended to March 31, 2025.*

On* March 21, 2025 (the “Effective Date”), the Company, the Borrower, the Lender, Steven G. Johnson, President and Chief Executive Officer of the Company, and Dr. James R. Higgins, a director of the Company, entered into a Tenth Amendment to Credit Agreement (the “Tenth Credit Agreement Amendment”), pursuant to which the parties agreed to amend the Credit Agreement to (i) provide that the Maturity Date shall be extended to June 30, 2025.The principal remains unchanged, and interest continues to accrue in2025,* just as it did in2024.

Accounting Treatment

In connection with the PDL Credit Agreement, as amended, we issued the PDL Warrant to the Lender. As of* March**31,* 2025, the Amended PDL Warrant hasnot been exercised.

During the year ended* December 31, 2024,the Company entered into the Ninth Credit Agreement (as detailed above). Under ASC470*-60-55-10, a concession is deemed to have been granted, and the agreement is to be accounted for as a troubled debt restructuring by debtors (TDR). The Company didnot have any debt restructuring costs and legal costs were expensed, as appropriate.

On* March 21, 2025,the Company entered into the Tenth Credit Agreement (as detailed above). Under ASC470*-60-55-10, a concession is deemed to have been granted, and the agreement is to be accounted for as a troubled debt restructuring by debtors (TDR). The Company didnot have any debt restructuring costs and legal costs were expensed, as appropriate.

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NOTE10 – LEASE

Under ASC Topic842, Leases (“ASC842”), operating lease expense is generally recognized evenly over the term of the lease. The Company has an operating lease primarily consisting of office space with a remaining lease term of 5 months (Lease through* August 31, 2025).*

On* March 4, 2020**,* we entered into the Fourth Amendment to Commercial Lease Agreement (the “Lease Extension”), wherein we extended the Lease through* August 31, 2025**.* We are currently finalizing afive-year lease renewal agreement.

The Company has further concluded that the Lease Extension hasno effects on the classification of the Lease. Rent expense for thethree months ended* March 31, 2025and2024* was $69,306 and $77,573, respectively.

Undiscounted Cash Flows

Future lease payments included in the measurement of operating lease liability on the condensed consolidated balance sheet as of* March 31, 2025*, for the followingfive fiscal years and thereafter as follows:

NOTE11 – SEGMENT REPORTING

The Company hasone reportable segment as it only reports operating results on an aggregated basis to the Chief Executive Officer who serves as the Chief Operating Decision Maker (CODM). The Company derives revenue and manages the business activities on a consolidated basis. For thethree months ended* March 31**,2025, and*2024*,* all revenues from the Company’s external customers were derived, and all long-lived assets were located, in the United States.

The CODM is regularly provided with financial information, including revenue and expenses, in a format consistent with the Company’s Condensed Consolidated Statements of Operations. The CODM regularly reviews reported consolidated revenues, significant expenses, and consolidated net loss. The CODM considers these measures, as well as other factors, such as an assessment of a new product’s future market potential, when determining how to allocate company-wide resources. The CODM doesnot review assets at a different level or category than those disclosed in the Condensed Consolidated Balance Sheets.

Significant expenses are amounts that are regularly provided to the CODM and included in consolidated net income (loss), the Company’s primary measure of its single segment’s profit or loss.

Segment financial information used by the CODM to assess segment performance and make decisions about resource allocation was as follows:

NOTE12 – SUBSEQUENT EVENTS

The Company has evaluated subsequent events through* May 15, 2025*.

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