Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition and Contracts with Customers

v3.20.1
Revenue Recognition and Contracts with Customers
3 Months Ended
Mar. 31, 2020
Revenue Recognition and Contracts with Customers  
Revenue Recognition and Contracts with Customers

Note 2 – Revenue Recognition and Contracts with Customers

Disaggregated Revenue

The Company’s total revenue was comprised of three major product lines: Smart Glasses Sales, Waveguide and Display Engine Sales, and Engineering Services. The following table summarizes the revenue recognized by major product line:

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

    

2020

    

2019

 

 

 

 

 

 

 

Revenues

 

 

 

 

 

 

Smart Glasses Sales

 

$

1,371,509

 

$

1,278,371

Waveguide and Display Engine Sales

 

 

 —

 

 

95,000

Engineering Services

 

 

160,206

 

 

 

 

 

 

 

 

 

Total Revenue

 

$

1,531,715

 

$

1,373,371

 

Significant Judgments

Under Topic 606 “Revenue from Contracts with Customers”, there are 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 considerations in determining our transaction prices for our standard product sales that include an end-user 30‑day right to return if not satisfied with product and include 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.

Performance Obligations

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 measuring progress toward satisfying the performance obligations. Satisfaction of our performance obligations related to our Engineering Services is 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 Engineering Services correlate directly with the transfer of control of the underlying assets to our customers.

Our standard product sales include a twelve (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 eighteen (18) months to allow distribution channels to offer the end customer a full twelve (12) months of coverage.  We offer extended warranties to customers, which extend the standard product warranty on product sales for an additional twelve (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 net sales by revenue recognition method as a percentage of total net sales for the three months ended March 31, 2020:

 

 

 

 

 

 

    

% of Total Net Sales

 

Point-in-Time

 

90

%

Over Time - Input Method

 

10

%

Total

 

100

%

 

Remaining Performance Obligations

As of March 31, 2020, the Company had $695,000 of remaining performance obligations under two current waveguide development projects with two global aerospace and defense firms, which represents the total transaction price of these development agreements of $855,000, less revenue recognized under percentage of completion in the three months ended March 31, 2020. The Company currently expects to recognize the remaining revenue relating to these existing performance obligations of $695,000 in the second quarter of 2020. Revenues earned less amounts paid at March 31, 2020 in the amount of $160,206 are reflected as Accrued Project Revenue in the accompanying Consolidated Balance Sheets.

As of March 31, 2020, the Company had $86,000 of remaining performance obligations related to its extended warranties, which are included in deferred revenue on our Consolidated Balance Sheets. The Company is recognizing this deferred revenue on a straight-line basis ending on September 30, 2020.