| SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Note 3
SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES Principles of
Consolidation The condensed
consolidated financial statements of the Company include the accounts of (i) Medical Outcomes Research Analytics, LLC and its wholly owned subsidiaries COR Analytics, LLC and MOR Analytics, LLC, and (ii) Helix Technologies, Inc. and its wholly
owned subsidiaries Helix TCS, LLC, Security Consultants Group, LLC, Boss Security Solutions, LLC, Security Grade Protective Services, Ltd., Bio-Tech Medical Software, Inc, BT UCS, Inc., Engeni LLC (including Engeni S.A. (“Engeni SA”), Foreign Currency ASC Topic 830-10, Foreign Currency Matters Use of Estimates Preparation of financial statements in conformity with U.S.
GAAP requires management to make estimates, judgements and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses together with amounts disclosed in related notes to the financial statements. Certain of the
Company’s estimates could be affected by external conditions, including those unique to the Company and general economic conditions. It is possible that the external factors could have an effect on the Company’s estimates and could cause actual
results to differ from those estimates. Reclassifications and Corrections Certain reclassifications have been made to the prior
period financial statements to conform to the current period financial statement presentation. The Company previously reported foreign currency related gains and losses related to Engeni SA, which was acquired as part of the acquisition of
Helix, as part of other comprehensive income (loss) in the condensed consolidated financial statements for the three-month periods ended March 31, 2021 and June 30, 2021. The foreign currency gain of $298,170 for the three and nine-month periods ended September 30, 2021 includes $145,250 that was previously reported as other comprehensive income (loss). The Company assessed the impact of this correction and determined it was not material to the current or prior reporting periods.
Please refer to Foreign Currency policy above. Fair
Value of Financial Instruments The Company measures the fair value of financial assets and
liabilities based on the guidance of ASC 820, Fair Value Measurements and Disclosures ASC 820 defines fair value 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 ordinary transaction between market participants on the measurement date. ASC 820 also
establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair
value: Level 1 — quoted prices in active markets for identical
assets or liabilities; Level 2 — quoted prices for similar assets and liabilities
in active markets or inputs that are observable; and Level 3 — inputs that are unobservable. The carrying value of the Company’s financial instruments,
such as cash, marketable securities, accounts receivable and accrued liabilities and other liabilities approximate fair values due to the short-term nature of these instruments. Cash and Cash Equivalents and Credit Risk The Company considers all cash accounts that are not subject to withdrawal
restrictions and highly liquid investments with a maturity of three months or less, when purchased, as cash and cash equivalents. The Company maintains cash with major financial institutions. Cash held at U.S.
bank institutions is currently insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 at each institution. The
portion of deposits in excess of FDIC coverage is not protected by such insurance and represents a credit risk to the Company. At times, the Company’s deposits exceed this coverage. Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded at the invoiced amount,
net of an allowance for doubtful accounts. The Company determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and economic conditions. Outstanding account balances are reviewed individually for
collectability. The allowance for doubtful accounts is the Company’s best estimate of the amount of probable credit losses in the Company’s existing accounts receivable. Allowance for doubtful accounts was $256,767 and $0 at September 30, 2021
and December 31, 2020, respectively. Management charges account balances against the allowance
after all means of collection have been exhausted and the potential for recovery is considered remote. Long-Lived Assets, Including Definite Lived Intangible Assets Long-lived assets, other than goodwill and other
indefinite-lived intangibles, are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable through the estimated undiscounted future cash flows derived from such
assets. Definite-lived intangible assets primarily consist of customer relationships, software technology and trade names. For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount is not
recoverable through its undiscounted, probability-weighted future cash flows. The Company measures the impairment loss based on the difference between the carrying amount and the estimated fair value. When an impairment exists, the related assets
are written down to fair value. Goodwill Goodwill, which represents the excess of purchase price over the fair value of
net assets acquired, is carried at cost. Goodwill is not amortized; rather, it is subject to a periodic assessment for impairment by applying a fair value-based test. The Company reviews goodwill for possible impairment annually during the fourth
quarter, or whenever events or circumstances indicate that the carrying amount may not be recoverable. The impairment model prescribes a two-step method for determining
goodwill impairment. However, an entity is permitted to first assess qualitative factors to determine whether the two-step goodwill impairment test is necessary. The qualitative factors considered by Forian may include, but are not limited to, general economic
conditions, the Company’s outlook, market performance of the Company’s industry and recent and forecasted financial performance. Further testing is only required if the entity determines, based on the qualitative assessment, that it is more
likely than not that a reporting unit’s fair value is less than its carrying amount. Otherwise, no further impairment testing is required. In the first step, the Company determines the fair value of its reporting unit using a discounted cash
flow analysis. If the net book value of the reporting unit exceeds its fair value, the Company then performs the second step of the impairment test, which requires allocation of the reporting unit’s fair value to all of its assets and
liabilities using the acquisition method prescribed under authoritative guidance for business combinations with any residual fair value being allocated to goodwill. An impairment charge is recognized when the implied fair value of the Company’s
goodwill is less than its carrying amount. No impairment losses have been recognized during the periods presented. Business Combinations The Company accounts for its business combinations under the provisions of ASC
Topic 805-10, which requires that the purchase method of accounting be used for all business combinations. Assets acquired and liabilities assumed, including non-controlling interests, are recorded at the date of acquisition at their respective
fair values. ASC 805-10 also specifies criteria that intangible assets acquired in a business combination must meet to be recognized and reported apart from goodwill. Goodwill represents the excess purchase price over the fair value of the
tangible net assets and intangible assets acquired in a business combination. Acquisition-related expenses are recognized separately from the business combinations and are expensed as incurred. If the business combination provides for contingent
consideration, the Company records the contingent consideration at fair value at the acquisition date and any changes in fair value after the acquisition date are accounted for as measurement-period adjustments. Changes in fair value of
contingent consideration resulting from events after the acquisition date, such as earn-outs, are recognized as follows: (i) if the contingent consideration is classified as equity, the contingent consideration is not re-measured and its
subsequent settlement is accounted for within equity; or (ii) if the contingent consideration is classified as a liability, the changes in fair value are recognized in earnings. Revenue Recognition The Company recognizes revenue in accordance with Financial
Accounting Standards Board (“FASB”) Topic 606, - Revenue from Contracts with Customers Under ASC 606, the Company recognizes revenue when the
customer obtains control of promised goods or services, in an amount that reflects the consideration which is expected to be received in exchange for those goods or services. The Company recognizes revenue following the five-step model prescribed
under ASC 606: (i) identify contract(s) with a customer; (ii) identify the performance obligation(s) in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligation(s) in the contract; and
(v) recognize revenues when (or as) the Company satisfies a performance obligation. ASC 606-10-32-32 requires the determination of the price at which the Company would sell individual products or services to a customer. The Company does not
always have sufficient data or experience related to the terms and pricing for products and services when components are sold on a standalone basis. In instances where insufficient data exists, the Company recognizes the contractual fees ratably
over the term of the arrangement. In instances where a customer has limited operating history or the customer has recently been formed, management may determine that it is prudent to recognize only the first year’s fees ratably over the first
year of the term or as amounts are billed and collectability is assured. Performance obligations that are distinct and remain undelivered would not be recognized until the end of the contract provided that the consideration is guaranteed. No
significant judgements affect the determination of the amount and timing of revenue. The Company generates revenue
from three categories of product offerings: Information and Software, Services and Other. In 2020, the revenue generated by the Company was
exclusively from Information and Software relating to MOR. In 2021, the Company also began to recognize Information and Software, Services and Other revenues related to its acquisition of Helix on March 2, 2021. In most Information and Software contracts, payments are
scheduled throughout the term and the contract may include one or more of the following performance obligations: (i) the provision of historical and/or current information as agreed upon, (ii) access to the information through a hosting provider,
(iii) access to and use of software products, (iv) installation and training and (v) access to the Company’s analytical team throughout the term of the agreement, as agreed upon. Information and Software contracts do not always have
distinct pricing assigned to each performance obligation; rather, the price is bundled and the total bundled pricing is invoiced throughout the term of the agreement, with the exception of contracts for software products which provide separate
pricing for implementation and training of such products. The Company recognizes revenue resulting from Information
and Software pursuant to agreements under which the Company receives payments for providing the customer access to its products over the contract period. The Company satisfies its performance obligations throughout the term of the contract. Any
payments received prior to satisfying performance obligations are deferred and recognized as the performance obligations are satisfied. There are no variable considerations or financing component under such contracts. Prices are typically fixed,
but certain contracts can also include royalties in excess of fixed fees. There were $62,500 of royalties in excess of fixed fees for
the nine months ended September 30, 2021. Invoicing under contracts is set forth in an invoicing schedule as part of the contract and payments are typically due within 30 days. Services revenues are primarily from contracts with
government agencies and revenue is recognized upon completion of the various milestones within the contract. In the event that a contract does not specifically allocate revenue to the satisfaction of specific performance obligations or
milestones, the purchase price of the contracts is allocated based on the percentage of time spent, or expected to be spent, to meet each performance obligation. Initial customization of the software to meet state specific requirements and the
training to appropriately utilize the software are generally recognized upon completion of the customization and acceptance by the state agency. Support and service revenues are then recognized over a predetermined period of time as defined in
the contract. Contract renewals may include an annual service fee that is recognized over the time period defined in the contract. Other revenues are primarily from security monitoring
services offerings and the provision of web marketing services. Contracts for these services have a stated transaction price for monthly services and are recognized as the services are provided. Contract acquisition costs, which consist of sales
commissions paid or payable, are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for initial and renewal contracts are deferred and then amortized on a straight-line basis over the contract
term. $45,714 and $53,784
of such costs were capitalized as of September 30, 2021 and December 31, 2020, respectively. There are no significant judgements affecting the determination of the amount and timing of the related revenue. In the event the Company has not satisfied all performance
obligations on its contracts with customers, any amounts of unbilled revenue or excess costs are recorded as contract assets and contract liabilities. Contract assets result when the cumulative revenue
recognized exceeds the cumulative invoicing under a contract. The value of the differential is reflected in Contract assets and represents the value of the revenue that was not billed to customers as of the balance sheet date. Contract liabilities (“Deferred Revenue”) result when
cumulative receipts under a contract for the same performance obligation exceeds the total revenue recognition and such excess is reflected in Deferred Revenue and represents the value of the performance obligations to be satisfied after
September 30, 2021. Contract assets and deferred revenues consist of the following
as of September 30, 2021:
Contract Assets
Contract Liability
Costs of Obtaining Contracts
Unbilled Revenue
Total
Deferred Revenue
Balance at January 1, 2021 $
53,784 $
142,917 $
196,701 $
158,884
Acquired from Helix
—
20,128
20,128
320,936
Acquired balances recognized during period
—
(20,128
)
(20,128
)
(305,340
)
Beginning deferred revenue balance recognized during the period
—
—
—
(158,884
)
Net change due to timing of billings, payments and recognition
(8,070
)
175,849
167,779
666,561
Balance at September 30, 2021 $
45,714 $
318,766 $
364,480 $
682,157 Segment Information ASC 280, Segment Reporting
Customer
Concentration The Company did not have any customers that
exceeded 10% of total revenue for the three and nine months ended September 30, 2021. The Company had a single Concentration of Vendors The Company licenses certain information assets from third
parties as a key input to certain Information and Software Products. While information licensing fees represented less than 10% of the Company’s operating expenses for the three and nine months ended September 30, 2021, respectively, and for the
three and nine months ended September 30, 2020, respectively, any disruption associated with these suppliers could have a material short-term impact on the business while alternate sources are secured. Property and Equipment, Net Property and equipment are stated at cost, net of accumulated depreciation,
which is recorded commencing at the in-service date using the straight-line method at rates sufficient to charge the cost of depreciable assets to operations over their estimated useful lives, which are 1 to 7 years. Maintenance and repairs are charged to
operations as incurred. The Company reviews for the impairment of long-lived assets annually and
whenever events and or changes in circumstances indicate that the carrying value of an asset may not be recoverable. An impairment loss would be recognized when the present value of estimated future cash flows expected to result from the use of
the asset and its eventual disposition is less than the carrying value. There were no impairment losses recognized during the
three and nine months ended September 30, 2021 and 2020, respectively. Software Development Costs The Company accounts for costs incurred in the development of computer software
in accordance with ASC Subtopic 350-40, Intangibles – Goodwill and Other – Internal-Use Software Contingencies Occasionally, the Company may be involved in claims and legal proceedings
arising from the ordinary course of its business. The Company records a provision for a liability when it believes that it is both probable that a liability has been incurred, and the amount can be reasonably estimated. If these estimates and
assumptions change or prove to be incorrect, it could have a material impact on the Company’s condensed consolidated financial statements. Contingencies are inherently unpredictable, and the assessments of the value can involve a series of
complex judgments about future events and can rely heavily on estimates and assumptions. Advertising Advertising costs are expensed as incurred and included in sales and marketing
expenses and amounted to $18,011 and $39,009
for the three and nine months ended September 30, 2021, respectively, and $0 and $0 for the three and nine months ended September 30, 2020, respectively. Net Loss per Share Net loss per share of common stock is computed by dividing net loss by the
weighted average number of common shares outstanding during the period. At September 30, 2021, the Company had potentially dilutive securities that could be exercised or converted into common stock. Refer to Note 14 for the Company’s disclosure
on such potential dilution. Further, as the Company has incurred net losses for the three and nine months ended September 30, 2021 and 2020, respectively, the diluted loss per share is the same as basic loss per share for the periods presented. Distinguishing Liabilities from Equity The Company relies on the guidance provided by ASC Topic
480, Distinguishing Liabilities from Equity Derivatives and Hedging: Contracts in Entity’s Own Equity Once the Company determines that a financial instrument
should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine
temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity. Initial Measurement The Company records its financial instruments classified as liability, temporary
equity or permanent equity at issuance at the fair value, or cash received. Subsequent Measurement – Financial instruments classified as liabilities The Company records the fair value of its financial instruments classified as
liabilities at each subsequent measurement date. The changes in fair value of its financial instruments classified as liabilities are recorded as other expense/income. Stock-based Compensation The Company’s 2020
Equity Incentive Plan (“2020 Plan”) permits the grant of stock options, restricted stock awards and/or restricted stock units. A total of 4,000,000 shares of Company common stock are authorized and reserved for issuance under the 2020 Plan. Income Taxes MOR was organized as a limited liability company and became a wholly owned
subsidiary of the Company upon completion of the Merger with Helix on March 2, 2021. As a result, the Company was treated as a partnership for federal and state income tax purposes through March 2, 2021. Accordingly, the Company’s taxable income,
deductions, assets and liabilities are reported by the members on their respective income tax returns. Therefore, no provision for
federal or state income tax has been made by the Company for all business activity from its inception through March 2, 2021. After March 2, 2021, the Company accounts for income taxes under the asset and
liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, deferred tax assets and liabilities
are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Valuation allowances are established
when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has an incurred net operating loss for financial-reporting and tax-reporting purposes. Accordingly, for federal and state income tax purposes, the
benefit for income taxes has been offset entirely by a valuation allowance against the related federal and state deferred tax asset for the period since March 2, 2021. Tax contingencies are recorded, if needed, to address potential exposure
involving tax positions the Company has taken that could be challenged by tax authorities. These potential exposures could result from applications of various statutes, rules, regulations and interpretations. Any estimates of tax contingencies
contain assumptions and judgments about potential actions by taxing jurisdictions. Any interest and penalties related to uncertain tax positions would be included as part of the income tax provision. The Company’s conclusions regarding uncertain
tax positions may be subject to review and adjustment at a later date based upon ongoing analysis of or changes in tax laws, regulations and interpretations thereof as well as other factors. Recent Accounting Pronouncements In August 2020, the FASB issued ASU No. 2020-06, Debt - Debt with Conversion and Other Options Derivatives and Hedging - Contracts in Entity’s Own Equity In October 2021, the FASB issued Accounting Standards
Update No. 2021-08, Accounting for Contract Assets and Contract Liabilities from Contracts with Customers The Company has considered all other recently issued
accounting pronouncements and does not believe the adoption of such pronouncements will have a material impact on its financial statements. |
