Note

– Revenue

The Company’s significant accounting policies are disclosed in Note

to the Consolidated Financial Statements included in its Annual Report on Form

-K for the year ended

December 31, 2017.

Significant changes to the Company’s accounting policies as a result of adopting ASC

606

are discussed below:

Revenue Recognition

The Company provides quality, quick-turn prototyping and on-demand manufacturing services. As a result, the majority of revenue recognized in a reporting period is based on completed, invoiced contracts. The Company accounts for revenue in accordance with ASC

606,

which the Company adopted on

January 1, 2018,

using the modified retrospective method. Results for reporting periods beginning after

January 1, 2018

are presented under ASC

606,

while prior period amounts are

not

adjusted and continue to be reported in accordance with the Company’s historic accounting under ASC

605.

The Company recorded a net increase of

$1.5

million to its retained earnings balance on

January 1, 2018

due to the cumulative impact of adopting ASC

606.

The impact of adopting ASC

606

was to increase revenue by

$1.3

million and increase cost of revenue by

$0.6

million for the

three

months ended

September 30, 2018,

and to increase accounts receivable by

$1.3

million and decrease inventory by

$0.6

million as of

September 30, 2018.

For the

nine

months ended

September 30, 2018

the impact of adopting ASC

606

was to increase revenue by

$1.5

million and increase cost of revenue by

$0.7

million, as well as increase accounts receivable by

$4.0

million and decrease inventory by

$1.8

million as of

September 30, 2018,

which includes the transition adjustment of

$1.5

million noted above.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of account in ASC

606.

The majority of the Company’s CNC machining,

printing, and sheet metal contracts have a single performance obligation. The majority of the Company’s injection molding contracts have multiple performance obligations including

one

obligation to produce the mold and a

second

obligation to produce parts. For injection molding contracts with multiple performance obligations, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling price based on the price charged to customers.

The Company manufactures parts that have

alternative use to the Company since the parts are custom made to specific customer orders, and the Company believes there is a legally enforceable right to payment for performance completed to date on these manufactured parts. For manufactured parts that meet these

two

criteria, the Company will recognize revenue over time. Revenue is recognized over time using the input method based on time in production to measure progress toward satisfying performance obligations.

Revenue by geographic region for the

three

and

nine

months ended

September 30, 2018

and

2017

was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2018		2017		2018		2017
Revenue:
United States	$	90,732	$	67,490	$	261,253	$	191,019
Europe		21,273		18,094		61,431		51,224
Japan		3,425		2,521		10,143		8,069
Total revenue	$	115,430	$	88,105	$	332,827	$	250,312

Revenue by product line for the

three

and

nine

months ended

September 30, 2018

and

2017

was as follows:

	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2018		2017		2018		2017
Revenue:
Injection Molding	$	53,681	$	49,480	$	156,610	$	144,187
CNC Machining		40,845		27,166		115,364		73,318
3D Printing		13,845		11,102		39,418		32,061
Sheet Metal		6,452		-		19,002		-
Other Revenue		607		357		2,433		746
Total revenue	$	115,430	$	88,105	$	332,827	$	250,312

The Company generally expenses sales commissions when incurred because the amortization period would have been

one

year or less. These costs are recorded within marketing and sales expenses. The value of unsatisfied performance obligations for contracts with an original expected length of

one

year or less is

not

material.