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REVENUE RECOGNITION - Note 3 | 12 Months Ended
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Dec. 31, 2018
Revenue from Contract with Customer [Abstract] |
REVENUE RECOGNITION - Note 3 | 3. REVENUE RECOGNITION In May 2014, the FASB issued Accounting Standards Update 2014-09 (ASU 2014-09), Revenue from Contracts with Customers (Topic 606), an updated standard on revenue recognition. The core principle of the new standard is for companies to recognize revenue to depict the transfer of goods or services to customers in amounts that reflect the consideration to which the company expects to be entitled in exchange for those goods or services. The new standard also will result in enhanced disclosures about revenue, provide guidance for transactions that were not previously addressed comprehensively, and improve guidance for multiple-element arrangements. We implemented ASU 2014-09 as of January 1, 2018 using the full retrospective approach, meaning we restated each prior reporting period presented. We performed a review of our revenue generating contracts with customers subject to ASU 2014-09, and implementation of this standard has the following material impacts on our financial statements: i. Timing of revenue recognition under the PicoP® scanning technology license agreement we signed with Sony in March 2015. Under previous guidance, we had been recognizing the upfront license fee payment of $8.0 million on a straight-line basis over a period of eight years. Under the new guidance, the entire $8.0 million upfront license fee payment was recognized in the first quarter of 2015. The result of this change in timing resulted in a decrease of $6.1 million in our beginning 2017 accumulated deficit balance and a reduction in our short-term deferred revenue balance of $999,000 and long-term deferred revenue balance of $5.1 million. License and royalty revenue for the year ended December 31, 2017 was reduced by approximately $999,000. ii. Timing of revenue recognition on product sales. Previously, we recognized revenue after expiration of the contractual acceptance period. Under the new guidance, we recognize revenue when control of the product transfers to the buyer, which may occur before the expiration of the contractual acceptance period. The result of this change was a net decrease in our beginning 2017 accumulated deficit of $527,000, as well as a shift in revenue and cost recognition to earlier quarters in 2017. Disaggregation of revenue The following table provides information about disaggregated revenue by timing of revenue recognition, (in thousands):
|  |  | Year Ended December 31, 2018
|  |  |  |  |  | License and |  |  |  |  |  |
|  |  | Product |  |  | royalty |  |  | Contract |  |  |
|  |  | revenue |  |  | revenue |  |  | revenue |  |  | Total
Timing of revenue recognition: |  |  |  |  |  |  |  |  |  |  |  |
Products transferred at a point in time |  | $ | - |  | $ | 10,011 |  | $ | 189 |  | $ | 10,200
Product and services transferred over time |  |  | - |  |  | - |  |  | 7,407 |  |  | 7,407
Total |  | $ | - |  | $ | 10,011 |  | $ | 7,596 |  | $ | 17,607
|  |  | Year Ended December 31, 2017
|  |  |  |  |  | License and |  |  |  |  |  |
|  |  | Product |  |  | royalty |  |  | Contract |  |  |
|  |  | revenue |  |  | revenue |  |  | revenue |  |  | Total
Timing of revenue recognition: |  |  |  |  |  |  |  |  |  |  |  |
Products transferred at a point in time |  | $ | 2,300 |  | $ | 350 |  | $ | 1,616 |  | $ | 4,266
Product and services transferred over time |  |  | - |  |  | - |  |  | 5,368 |  |  | 5,368
Total |  | $ | 2,300 |  | $ | 350 |  | $ | 6,984 |  | $ | 9,634
Contract balances The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers (in thousands):
|  |  | December 31, |  |  | December 31,
|  |  | 2018 |  |  | 2017
Accounts receivable, net |  | $ | 476 |  | $ | 15
Costs and estimated earnings in excess of billings on uncompleted contracts |  |  | 987 |  |  | 680
Other current assets |  |  | - |  |  | 70
Billings on uncompleted contracts in excess of related costs |  |  | - |  |  | 5
Other current liabilities |  |  | 10,000 |  |  | 10,000
Under Topic 606, our rights to consideration are presented separately depending on whether those rights are conditional or unconditional. We present our unconditional rights to consideration as "accounts receivable" in our Consolidated Balance Sheet. Contract assets represent rights to consideration that are subject to a condition other than the passage of time, and are comprised primarily of costs and estimated profits in excess of billings on uncompleted contracts and estimated accrued sales-based royalty revenue. Contract costs in excess of billing are included in the "Costs and estimated earnings in excess of billings on uncompleted contracts" line of our Consolidated Balance Sheet. This does not represent a change in presentation for contract fulfillment costs; however, for sales-based royalty revenue, revenue was previously not recognized until quarterly royalty reporting had been received from our customer. Under Topic 606, in the event that reports are not received, we estimate the number of royalty-bearing products sold by our customers and are included in "Other current assets". Once quarterly royalty reporting has been received, the related contract assets will be transferred to accounts receivable. Significant changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands, except percentages):
|  |  | December 31, |  |  | December 31, |  |  |  |  |
|  |  | 2018 |  |  | 2017 |  |  | $ Change |  | % Change
Contract assets |  | $ | 987 |  | $ | 680 |  | $ | 307 |  | 45.1
Contract liabilities |  |  | - |  |  | (5) |  |  | 5 |  | 100.0
Net contract assets (liabilities) |  | $ | 987 |  | $ | 675 |  | $ | 312 |  | 46.2
During the year ended December 31, 2018, we billed $7.1 million on our development contracts. Of this amount, $680,000 was included in contract assets at December 31, 2017. We also recognized revenue of $7.4 million during the year ended December 31, 2018, resulting in a contract asset of $987,000. Contract acquisition costs Regarding the adoption of Topic 606, we are required to capitalize certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. We currently do not pay any commissions upon the signing of a contract; therefore, no commission cost has been incurred as of December 31, 2018. Transaction price allocated to the remaining performance obligations The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied at the end of the reporting period. The estimated revenue does not include the $10.0 million upfront payment received from a major technology company to develop an LBS display system due to uncertainty around the timing of recognition. Additionally, the estimated revenue does not include amounts of variable consideration attributable to royalties or unexercised contract renewals (in thousands):
|  |  | 2019 |  |  | 2020
Product revenue |  | $ | - |  | $ | -
License and royalty revenue |  |  | - |  |  | -
Contract revenue |  |  | 2,513 |  |  | -
Impacts to Previously Reported Results In accordance with Topic 606, the disclosure of the impact of adoption to our condensed consolidated statements of operations and balance sheets was as follows (in thousands, except per share data):
|  |  | Year Ended December 31, 2017
|  |  | As previously |  |  | New revenue |  |  | As
|  |  | reported |  |  | standard adjustment |  |  | restated
Product revenue |  | $ | 2,300 |  | $ | - |  | $ | 2,300
License and royalty revenue |  |  | 1,568 |  |  | (1,218) |  |  | 350
Contract revenue |  |  | 7,023 |  |  | (39) |  |  | 6,984
Cost of product revenue |  |  | 4,359 |  |  | - |  |  | 4,359
Cost of contract revenue |  |  | 5,517 |  |  | (14) |  |  | 5,503
Net loss |  |  | (24,243) |  |  | (1,243) |  |  | (25,486)
Net loss per share - basic and diluted |  |  | (0.33) |  |  | (0.02) |  |  | (0.35)
|  |  | December 31, 2017
|  |  | As previously |  |  | New revenue |  |  | As
|  |  | reported |  |  | standard adjustment |  |  | restated
Costs and estimated earnings incurred on uncompleted contracts |  | $ | 680 |  | $ | - |  | $ | 680
Other current assets |  |  | 945 |  |  | 70 |  |  | 1,015
Billings on uncompleted contracts |  |  | 5 |  |  | - |  |  | 5
Deferred revenue - current |  |  | 999 |  |  | (999) |  |  | -
Deferred revenue - noncurrent |  |  | 4,151 |  |  | (4,151) |  |  | -
Shareholders' equity: |  |  |  |  |  |  |  |  |
Accumulated deficit |  |  | (524,086) |  |  | 5,220 |  |  | (518,866)
Adoption of the standards related to revenue recognition had no impact to cash from or used in operating, investing, or financing activities on our condensed consolidated statements of cash flows.

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- Definition 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. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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