XML 18 R11.htm IDEA: XBRL DOCUMENT v3.24.3
Revenue
 9 Months Ended
Sep. 30, 2024
Revenue from Contract with Customer [Abstract]  
Revenue
3.
Revenue

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers. ASC 606 established a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services. The core principle of ASC 606 is to recognize revenue to depict the transfer of promised goods or services to the Company’s customers.

Under Topic 606, the Company recognizes revenue through the following steps:

•
Identification of a contract with a customer
•
Identification of the performance obligations in the contract, including the evaluation of performance obligations and the distinct goods or services in a contract
•
Determination of the transaction price
•
Analysis of the Standalone Selling Price (SSP) and allocation of the transaction price to the performance obligations in the contract, as appropriate
•
Recognition of revenue when, or as, the performance obligation is satisfied

The Company accounts for a contract when both parties have approved the contract and the Company is committed to perform its obligations, the rights of the parties are identified, payment terms (generally net 30 days) are identified, the contract has commercial substance, and collectability of consideration is probable.

Revenue is recognized upon transfer of control of promised products to the customer in an amount reflecting the consideration that is expected to be received in exchange for those products. The Company enters into contracts that include one or more products that are generally capable of being distinct and accounted for as individual performance obligations, in addition to a monthly subscription fee that is generally capable of being distinct and accounted for as an individual performance obligation.

Identification and Satisfaction of Performance Obligations

The Company’s revenue is derived from the sale of its products to medical groups and hospitals through its direct sales force throughout the U.S. Performance obligations in the Company’s contracts that are satisfied at a point in time include EEG headbands and EEG recorders sold to customers. The Company recognizes revenue for its EEG recorders sold separately from subscriptions and its EEG headbands upon transfer of control to the customer at a point in time. Performance obligations in the Company’s contracts that are satisfied over time include the EEG portal and Clarity software-as-a-service (SaaS) subscription products. For its Clarity and portal subscription products, the Company recognizes revenue ratably over the period in which the customer has the ability to consume and receive benefit from its access to the subscription, which is generally month to month. The Company’s Clarity subscriptions include the use of EEG recorders by the customer over the subscription term. The Company identifies the EEG recorders used in conjunction with a subscription as an operating lease component in its arrangements with its customers and identifies the subscription as a non-lease component in its arrangements with its customers, which the Company determined to be predominant. The lease and non-lease revenue components have similar patterns of revenue recognition, and as such, allows the Company to elect the practical expedient to not separate the lease and non-lease components. Therefore, the overall arrangement is accounted for under ASC 606.

The consideration associated with customer contracts includes both fixed and variable amounts. Variable consideration includes discounts, rebates, credits, incentives, penalties, or other similar items. The amount of consideration that can vary is less than 1% of total annual consideration. Variable consideration estimates are reassessed at each reporting period until the contingency is resolved. The changes to the transaction price due to a change in estimated variable consideration are recorded as an adjustment to revenue in the period the estimate is changed. Changes to variable consideration are tracked and material changes are disclosed. Such changes were immaterial for the three and nine months ended September 30, 2024 and 2023.

The Company excludes sales tax from the transaction price and presents, as an accounting policy election, amounts collected from customers for sales and other taxes net of the related amounts remitted.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the basis of revenue recognition in accordance with GAAP. To determine the proper revenue recognition method for contracts, the Company evaluates whether two or more contracts should be combined and accounted for as one single contract and whether the combined or single contract should be accounted for as more than one performance obligation. This evaluation requires judgment, and the decision to combine a group of contracts or separate the combined or single contract into multiple performance obligations could change the amount of revenue and profit recorded in a given period.

Disaggregation of Revenue

The following table provides information about disaggregated revenue from contracts with customers by the nature of products and services provided (in thousands):

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

EEG recorders and EEG headbands, point in time

 

$

13,321

 

 

$

8,764

 

 

$

35,932

 

 

$

24,561

 

EEG portal and Clarity subscriptions, over time

 

 

3,874

 

 

 

2,847

 

 

 

10,978

 

 

 

7,533

 

Total Revenue

 

$

17,195

 

 

$

11,611

 

 

$

46,910

 

 

$

32,094

 

 

Currently, the Company’s customers are solely in the United States.

Contract Costs

The Company capitalizes sales commissions that are considered to be incremental to the acquisition of customer contracts and amortizes them over an estimated period of benefit. To determine the period of benefit of its deferred commissions, the Company evaluates the type of commissions, the nature of the related benefit, and the specific facts and circumstances of its arrangements. The Company determines the period of benefit for commissions paid for the acquisition of the initial subscription contract by taking into consideration its average customer life, which is generally assumed to be three years. The Company evaluates these assumptions at least annually and periodically reviews whether events or changes in circumstances have occurred that could impact the period of benefit.

The Company has elected to utilize the practical expedient to expense sales commissions with an amortization period of less than one year and capitalize sales commissions that are considered to be incremental costs of obtaining contracts with an amortization period greater than one year.

The following table provides the breakdown of capitalized contract costs (in thousands):

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Contract cost balance beginning of the period

 

$

2,890

 

 

$

2,558

 

 

$

2,753

 

 

$

1,981

 

Contract costs capitalized during the year

 

 

681

 

 

 

569

 

 

 

1,744

 

 

 

1,820

 

Contract costs amortized during the year

 

 

(521

)

 

 

(422

)

 

 

(1,447

)

 

 

(1,096

)

Contract Costs as of period end

 

$

3,050

 

 

$

2,705

 

 

$

3,050

 

 

$

2,705

 

 

Contract Liabilities and Performance Obligations

Contract liabilities consist of up-front payments received from customers primarily for the Clarity SaaS subscriptions. Contract liabilities related to up-front payments received from customers were $138,000 and $240,000 as of September 30, 2024 and 2023, respectively.

The following table provides the breakdown of contract liabilities (in thousands):

 

 

 

Three months ended September 30,

 

 

Nine months ended September 30,

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

Contract Liabilities balance beginning of the period

 

$

349

 

 

$

334

 

 

$

250

 

 

$

343

 

Additional Contract Liabilities revenue during the period

 

 

90

 

 

 

265

 

 

 

704

 

 

 

623

 

Contract Liabilities balance recognized during the period

 

 

(301

)

 

 

(359

)

 

 

(816

)

 

 

(726

)

Balance as of period end

 

$

138

 

 

$

240

 

 

$

138

 

 

$

240

 

 

The Company has elected not to include in unfulfilled performance obligations for contracts in which the amount of revenue it recognizes is equal to the amount which the Company has a right to invoice. No revenue was recognized in the reporting period from performance obligations satisfied in previous periods. The short-term remaining performance obligations are expected to be recognized within 12 months and non-current performance obligations are expected to be recognized within 5 years.