REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES

12 Months Ended

Dec. 31, 2023

Revenue from Contract with Customer [Abstract]

REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES

NOTE 3 - REVENUE, CONTRACT ASSETS AND CONTRACT LIABILITIES

Net Revenue

For the years ended December 31, 2023 and 2022, the components of revenue from contracts with customers and the related timing of revenue recognition is set forth in the table below (in thousands):

	2023			2022
Product revenue:
Appliance sales to VIPs	$	6,081	(1)	$	7,820	(1)
Center revenue		189			561
Total product revenue		6,270			8,381
Service revenue
VIP		3,922			4,838	(2)
Billing intelligence services		887	(3)		1,170	(3)
Sleep testing services		1,185			594
Myofunctional therapy services		861			927
Sponsorship/seminar/other		676			114
Total service revenue		7,531			7,643
Total revenue	$	13,801		$	16,024

(1)	Appliance revenue from the sale of products is typically fixed at inception of the contract and is recognized at the point in time when shipment of the related products occurs.
(2)	VIP revenue disclosed above for the year ended December 31, 2022, includes a cumulative adjustment from prior years of approximately $0.4 million decrease.
(3)	BIS revenue from subscription contracts is typically fixed at inception of the contract and is recognized ratably over time as the services are performed and the performance obligations completed. Revenue disclosed above for year ended December 31, 2022, includes a cumulative adjustment from prior years of approximately $0.1 million increase.

Changes in Contract Liabilities

The key components of changes in contract liabilities for the years ended December 31, 2023 and 2022 are as follows (in thousands):

	2023			2022
Beginning balance, January 1	$	3,038		$	2,399
New contracts, net of cancellations		3,730			6,567
Revenue recognized		(4,341	)		(5,928	)
Ending balance, December 31	$	2,427		$	3,038

Current portion of deferred revenue is approximately $2.1 million, which is expected to be recognized over the next 12 months from the date of the period presented. Additionally, revenue from breakage on contract liabilities was approximately $0.5 and $1.6 million for the years ended December 31, 2023 and 2022.

Changes in Accounts Receivable

Our customers are billed based on fees agreed upon in each customer contract. Receivables from customers were $0.2 million at December 31, 2023, a decrease of $0.3 million from $0.5 million at December 31, 2022. An allowance is maintained for accounts receivable which is generally based on a combination of factors, including the aging of the receivables, historical collection trends, and charge-offs. Adjustment to the allowance are recorded in bad debt expense under general and administrative expenses in the consolidated statement of operations. An allowance of $0.3 and $0.7 million existed as of December 31, 2023 and 2022.

Shipping Costs

Shipping costs for product deliveries to customers are expensed as incurred and totaled approximately $0.2 million for the year ended December 31, 2023, and approximately $0.2 million for the year ended December 31, 2022. Shipping costs for product deliveries to customers are included in cost of goods sold in the accompanying consolidated statement of operations.