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REVENUE RECOGNITION
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
REVENUE RECOGNITION

4. REVENUE RECOGNITION

 

The following is a description of principal activities from which we generate revenue. Revenues are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services. We generate all of our revenue from contracts with customers.

 

We evaluate contracts based on the 5-step model as stated in Topic 606 as follows: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price, and (v) recognize revenue when (or as) performance obligations are satisfied.

 

A contract contains a promise (or promises) to transfer goods or services to a customer. A performance obligation is a promise (or a group of promises) that is distinct, as defined in the revenue standard.

 

The transaction price is the amount of consideration an entity expects to be entitled to from a customer in exchange for providing the goods or services. A number of factors should be considered to determine the transaction price, including whether there is variable consideration, a significant financing component, noncash consideration, or amounts payable to the customer. The determination of variable consideration will require a significant amount of judgment. In estimating the transaction price we will use either the expected value method or the most likely amount method.

 

The transaction price is allocated to the separate performance obligations in the contract based on relative standalone selling prices. Determining the relative standalone selling price can be challenging when goods or services are not sold on a standalone basis. The revenue standard sets out several methods that can be used to estimate a standalone selling price when one is not directly observable. Allocating discounts and variable consideration must also be considered. Allocating the transaction price can require significant judgement on our part.

 

Revenue is recognized when (or as) the customer obtains control of the good or service/performance obligations are satisfied. Topic 606 provides guidance to help determine if a performance obligation is satisfied at a point in time or over time. Where a performance obligation is satisfied over time, the related revenue is also recognized over time.

 

 

Disaggregation of revenue

 

The following table provides information about disaggregated revenue by timing of revenue recognition, (in thousands):

 

 

                 
   Three Months Ended September 30, 2023 
       License and         
   Product   royalty   Contract     
   revenue   revenue   revenue   Total 
Timing of revenue recognition:                    
Products transferred at a point in time  $1,047   $       -   $       -   $1,047 
Product and services transferred over time   -    -    -    - 
Total  $1,047   $-   $-   $1,047 

 

                 
   Nine Months Ended September 30, 2023 
       License and         
   Product   royalty   Contract     
   revenue   revenue   revenue   Total 
Timing of revenue recognition:                    
Products transferred at a point in time  $1,898   $      -   $-   $1,898 
Product and services transferred over time   -    -    260    260 
Total  $1,898   $-   $260   $2,158 

 

                 
    Three Months Ended September 30, 2022  
         License and           
    Product    royalty    Contract      
    revenue    revenue    revenue    Total 
Timing of revenue recognition:                    
Products transferred at a point in time  $-   $-   $-   $- 
Product and services transferred over time   -    -    -    - 
Total  $-   $-   $-   $- 

 

                 
   Nine Months Ended September 30, 2022 
       License and         
   Product   royalty   Contract     
   revenue   revenue   revenue   Total 
Timing of revenue recognition:                    
Products transferred at a point in time  $       -   $664   $         -   $664 
Product and services transferred over time   -    -    -    - 
Total  $-   $664   $-   $664 

 

 

Contract balances

 

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 Balance Sheet.

 

Significant changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands, except percentages):

 

 SCHEDULE OF CONTRACT WITH CUSTOMER, CONTRACT ASSET, CONTRACT LIABILITY, AND RECEIVABLE

   September 30,   December 31,         
   2023   2022   $ Change   % Change 
                 
Contract assets  $-   $-   $-    - 
Contract liabilities   4,958    4,601    357    7.8 
Net contract assets (liabilities)  $4,958   $4,601   $357    7.8 

 

In April 2017, we signed a contract with Microsoft Corporation to develop an LBS display system. Under the agreement, we received an upfront payment of $10.0 million. As of December 31, 2022, we had applied $5.4 million against the contract liability. During the three and nine months ended September 30, 2023, we applied $0 against the contract liability with this customer.

 

In connection with our January 2023 acquisition of assets from Ibeo, we assumed contract liabilities totaling approximately $1.2 million. During the three and nine months ended September 30, 2023, we recognized revenue totaling $787,000 and $926,000 respectively, against the contract liability.

 

Transaction price allocated to the remaining performance obligations

 

The $10.0 million upfront payment received from our customer as noted above was being recognized as revenue as component sales were transferred to the customer. Under the new arrangement reached in March 2020, the royalties we expect to earn will be applied against the remaining prepayment. Because we do not have information on projected future shipments by our customer, we are not able to estimate the timing of revenue recognition related to the remaining performance obligations; however, the underlying agreement is scheduled to expire on December 31, 2023. The $4.6 million contract liability at September 30, 2023 is classified as a current liability on our balance sheet. It is unclear at this time whether recognition of revenue may extend beyond the next twelve months.

 

The remaining balance of the contract liabilities assumed in our acquisition of assets from Ibeo was approximately $252,000 as of September 30, 2023.

 

The following table provides information about the estimated timing of revenue recognition (in thousands):

 

 SCHEDULE OF ESTIMATED TIMING OF REVENUE RECOGNITION

   Remainder of 2023   2024 
           
Revenue  $   347   $     -