Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition and Contracts with Customers

v3.8.0.1
Revenue Recognition and Contracts with Customers
3 Months Ended
Mar. 31, 2018
Revenue from Contract with Customer [Abstract]  
Revenue Recognition and Contracts with Customers
Note 2 – Revenue Recognition and Contracts with Customers
 
Adoption
 
On January 1, 2018, the Company adopted the new guidance on Revenue from Contracts with Customers under Topic 606 using the modified retrospective transition method. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historic accounting treatment under Topic 605. We recorded a net decrease to opening accumulated deficit of $81,724, as of January 1, 2018 due to the cumulative impact of adopting Topic 606, with the impact primarily related to our post contract support (PCS deferred revenue). Refer to the following table for the detailed effect to our consolidated balance sheet upon adoption:
 
 
 
Balance at December
31, 2017
 
New Revenue Standard
Adjustment
 
Balance at January 1,
2018
 
Liabilities
 
 
 
 
 
 
 
 
 
 
Unearned Revenue
 
$
81,724
 
$
(81,724)
 
$
 
 
 
 
 
 
 
 
 
 
 
 
Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
Accumulated Deficit
 
$
(96,472,452)
 
$
81,724
 
$
(96,390,728)
 
  
Under the modified retrospective method of adoption, we are required to disclose the impact to revenues had we continued to follow our accounting policies under the previous revenue recognition guidance. We estimate that the impact to revenues for the quarter ended March 31, 2018, primarily due to deferrals of PCS amounts for product shipped offset by the amortization of the unearned revenue related to our prior PCS deferred revenue under Topic 605, would have been immaterial.
 
Disaggregated Revenue
 
During the quarter ended March 31, 2018, the Company’s total revenue was comprised of four major product lines: Smart Glasses and Video Eyewear sales, OEM product sales, Waveguide sales, and Engineering services. The following table summarizes the revenue recognized by major product line for the quarter ended March 31, 2018:
 
 
 
Three Months Ended March 31,
 
 
 
2018
 
2017
 
Revenues
 
 
 
 
 
 
 
Smart Glasses and Video Eyewear Sales
 
$
1,212,771
 
$
959,383
 
OEM Product Sales
 
 
114,170
 
 
 
Waveguide Sales
 
 
36,438
 
 
 
Engineering Services
 
 
180,516
 
 
251,280
 
Total Revenue
 
$
1,543,895
 
$
1,210,663
 
 
Significant Judgments
 
In applying the new guidance under Topic 606, we performed an assessment of judgments used 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. Judgments made include variable consideration in determining our transaction prices for our standard product sales that include a 30-day right to return and payment terms are Net 30 - 60 days. For our Engineering Services performance obligations recognized over time using the input method, the estimated costs to complete each project is considered a significant judgment. For the three months ended March 31, 2018 and the year ended December 31, 2017, the significant judgments previously mentioned did not have a material effect on the timing or the amount of revenue recognized under the new guidance.
 
Performance Obligations
 
Revenues from our performance obligations satisfied at a point in time are typically for standard goods (Smart Glasses, Video Eyewear and Waveguides) and are recognized when the customer obtains control, which is generally upon delivery and acceptance. The Company also records revenue for performance obligations relating to our OEM Product Sales and Engineering Services over time by using either the input method or output method measuring progress toward satisfying the performance obligations. Satisfaction of our performance obligations related to our OEM Products are measured using the output method measured by units delivered to the customer, which appropriately reflects the transfer of control to the customer and are directly observable by both parties. Satisfaction of our performance obligations related to our Engineering Services are measured using the input method measured by the Company’s cost 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 of completing the contract. As such, the Company believes that our methodologies for recognizing revenue over time for our OEM Products and Engineering Services, correlates directly with the transfer of control of the underlying assets to our customers.
 
Our standard product sales include a twelve (12) month standard, assurance-type product warranty, not covered by this subtopic. Or in the case of our OEM product and waveguide sales, some may have standard product warranties of up to eighteen (18) months. 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 net sales by revenue recognition method as a percentage of total net sales for the quarter ended March 31, 2018:
 
 
 
% of Total Net Sales
 
Point in Time
 
 
81
%
Input Method
 
 
12
%
Output Method
 
 
7
%
Total
 
 
100
%
 
Remaining Performance Obligations
 
As of March 31, 2018, the Company had $944,000 of remaining performance obligations under our OEM product purchase agreement, which represents the transaction price of firm orders less inception to date sales recognized. The Company expects to recognize sales relating to this existing performance obligation of $944,000 during the remainder of 2018.