Significant accounting policies

9 Months Ended

Sep. 30, 2022

Significant accounting policies

Significant accounting policies

3. Significant accounting policies

Change in accounting for TRUFORMA instruments

As of September 30, 2022, the company changed its policy of recognizing TRUFORMA instruments as inventory and reclassified $3,364 to property and equipment, depreciable over 10 years. The instruments will remain undepreciated until they are placed with customers.

Estimates and assumptions

In preparing these financial statements, management was required to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses. These estimates and assumptions are based on our historical experience, the terms of existing contracts, our evaluation of trends in the industry, information provided by our customers and suppliers and information available from other outside sources, as appropriate. These estimates and assumptions are subject to an inherent degree of uncertainty. We are not presently aware of any events or circumstances that would require us to update such estimates and assumptions or revise the carrying value of our assets or liabilities. Our estimates may change, however, as new events occur, and additional information is obtained. As a result, actual results may differ significantly from our estimates, and any such differences may be material to our financial statements.

Investment Securities

Our investment securities, which are comprised of corporate bonds/notes and US treasuries, are accounted for in accordance with ASC 320, “Investments – Debt and Equity Securities” (“ASC 320”). The company considers all of its securities for which there is a determinable fair market value, and there are no restrictions on the Company’s ability to sell within the next 12 months, as available for sale. We classify these securities as both current and non-current depending on their time to maturity. Available-for-sale securities are carried at fair value, with unrealized gains and losses reported as a component of stockholders’ equity

Inventories

Inventories are stated at the lower of cost or net realizable value. The Company utilizes the specific identification and First in, First out (“FIFO”) methods to track inventory costs. The Company records reserves, when necessary, to reduce the carrying value of inventory to its net realizable value. Management considers forecast demand in relation to the inventory on hand, competitiveness of product offerings, market conditions, and product life cycles when determining excess and obsolescence and net realizable value adjustments. At the point of loss recognition, a new, lower-cost basis for that inventory is established, and any subsequent improvements in facts and circumstances do not result in the restoration or increase in that newly established cost basis.

Intangible assets

Expenditures related to the planning and operation of the Company’s website are expensed as incurred. Expenditures related to website application and infrastructure development are capitalized and amortized over the website’s estimated useful life.

Costs related to acquired trademarks, tradenames, customer relationships and developed technology have been capitalized and amortized over the estimated useful life.

Revenue recognition and liabilities due to customers

The Company enters into agreements which may contain multiple promises where customers purchase products, services, or a combination thereof. Determining whether products and services are considered distinct performance obligations that should be accounted for separately requires judgment. We determine the transaction price for a contract based on the total consideration we expect to receive in exchange for the transferred goods or services.

The Company allocates revenue to each performance obligation in proportion to the relative standalone selling prices and recognizes revenue when control of the related goods or services is transferred for each obligation. We utilize the observable standalone selling price when available, which represents the price charged for the performance obligation when sold separately.

The Company's contracts with customers are generally comprised of purchase orders for the sale of the point of care instrument, consumable products, and extended warranties, or some variation thereof. The instrument and consumables each represent a single performance obligation when sold separately, that is satisfied at a point in time upon transfer of control of the product to the customer which is typically upon receipt of the goods by the customer. The extended warranties are also a separate performance obligation, whereby revenue is recognized over time.

The nature of the Company’s business gives rise to variable consideration, including discounts and applicator (“trode”) returns. Credits are issued for unused shocks on returned trodes, which can be used toward the purchase of replacement trodes. Discounts and the estimated unused shock credits decrease the transaction price, which reduces revenue. Variable consideration related to unused shock credits is estimated using the expected value method, which estimates the amount that is expected to be earned. Estimated amounts are included in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Estimates of variable consideration are based upon historical experience and known trends. These estimated credits are nonrefundable and may only be used towards the purchase of future trode refurbishments. This practice encourages refurbishment purchase prior to complete utilization of the previous trode, so the customer will always have a trode on hand with ample capacity to perform treatments.

At times the Company receives consideration prior to when the performance obligation is completed, giving rise to a contract liability. Sales are recorded net of sales tax. Sales tax is charged on sales to end users and remitted to the appropriate state authority.

Segmented revenue for the three and nine months ended, September 30, 2022 was as follows:

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		Diagnostic				Therapeutics				Diagnostic				Therapeutics
		2022		2021		2022		2021		2022		2021		2022		2021
Consumables	$	94	$	23	$	1,011	$	-	$	242	$	52	$	1,011	$	-
Instruments		-		-		1,272		-		-		-		4,374		-
Trodes		-		-		2,319		-		-		-		6,545		-
Other (e.g., Warranty and Repairs)		-		-		80		-		-		-		601		-
Total Revenue	$	94	$	23	$	4,682	$	-	$	242	$	52	$	12,531	$	-

Accounts receivable are recorded at net realizable value and have payment terms of 30 days. The Company recorded an allowance for doubtful accounts of $36 and $34, as of September 30, 2022 and December 31, 2021, respectively, which is recorded net in trade receivables.

Cost of revenue

Cost of revenue consists of materials, labor, and shipping costs incurred internally to produce and receive the products. Shipping and handling costs incurred by the Company are included in cost of revenue.

Comparative figures  

Construction in progress is separately stated in the current period balance sheet for $202. The consolidated balance sheets for the year ended December 31, 2021 have been adjusted for $420 of construction in progress that was included in intangible assets and property and equipment. This amount has been reclassified to a separate line in the balance sheet to conform to the current year presentation. The change in presentation had no effect on the reported results of operations. These changes in classification do not affect previously reported cash flows from operating activities in the consolidated statements of cash flows.