Revenue Recognition and Contracts with Customers
|6 Months Ended|
Jun. 30, 2022
|Revenue Recognition and Contracts with Customers|
|Revenue Recognition and Contracts with Customers||
Note 2 – Revenue Recognition and Contracts with Customers
The Company’s total revenue was comprised of two major product lines: Smart Glasses Sales and Engineering Services. The following table summarizes the revenue recognized by major product line:
Under Topic 606 “Revenue from Contracts with Customers”, we use judgments that could potentially impact both the timing of our satisfaction of performance obligations and our determination of transaction prices used in determining revenue recognized by major product line. Such judgments include considerations in determining our transaction prices and when our performance obligations are satisfied for our standard product sales that include an end-user 30-day right to return if not satisfied with product and general payment terms that are between Net 30 and 60 days. For our engineering services, performance obligations are recognized over time using the input method and the estimated costs to complete each project are considered significant judgments.
Revenues from our performance obligations are typically satisfied at a point in time for Smart Glasses, Waveguides and Display Engines, and our OEM Products, which are recognized when the customer obtains control and ownership, which is generally upon shipment. The Company also records revenue for performance obligations relating to our engineering services over time by using the input method to measure the progress toward satisfying the performance obligations. Satisfaction of our performance obligations related to our engineering services is measured by the Company’s costs incurred as a percentage of total expected costs to project completion as the inputs of actual costs incurred by the Company are directly correlated with progress toward completing the contract. As such, the Company
believes that our methodologies for recognizing revenue over time for our engineering services correlate directly with the transfer of control of the underlying assets to our customers.
Our standard product sales include a(12) month assurance-type product warranty. In the case of certain of our OEM products and waveguide sales, some include a standard product warranty of up to (18) months to allow distribution channels to offer the end customer a full (12) months of coverage. We offer extended warranties to customers, which extend the standard product warranty on product sales for an additional (12) month period. All revenue related to extended product warranty sales is deferred and recognized over the extended warranty period. Our engineering services contracts vary from contract to contract but typically include payment terms of Net 30 days from date of billing, subject to an agreed upon customer acceptance period.
The following table presents a summary of the Company’s sales by revenue recognition method as a percentage of total net sales for the six months ended June 30, 2022:
Remaining Performance Obligations
As of June 30, 2022, the Company had $691,134 of remaining performance obligations under a current waveguide development project, which represents the remainder of the total transaction price of an $800,000 development agreement, less revenue recognized under percentage of completion to date. The Company currently expects to recognize the remaining revenue relating to this existing performance obligation of $691,134 before the end of. Revenues earned less amounts invoiced at June 30, 2022 in the amount of $108,866 are reflected as Accrued Revenues in Excess of Billings in the accompanying Consolidated Balance Sheets.
The Company had no material outstanding performance obligations related to product sales, other than its standard product warranty.
The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.
Reference 1: http://www.xbrl.org/2003/role/disclosureRef