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CONTRACT ASSETS AND LIABILITIES

3 Months Ended

Mar. 28, 2020

10. CONTRACT ASSETS AND LIABILITIES

Contract assets include unbilled amounts typically resulting from sales under contracts when the cost-to-cost method of revenue recognition is utilized and revenue recognized from customer arrangements, including licensing, exceeds the amount billed to the customer, and right to payment is not just subject to the passage of time. Amounts may not exceed their net realizable value. Contract assets are generally classified as current. The Company classifies the noncurrent portion of contract assets under other assets in its condensed consolidated balance sheets.

Contract liabilities consist of advance payments and billings in excess of cost incurred and deferred revenue.

Net contract assets (liabilities) consisted of the following:

March 28, 2020 December 28, 2019 $ Change % Change

Contract assets—current $ 1,394,633 $ 921,082 $ 473,551 51%

Contract liabilities and billings in excess of revenues earned (1,229,396 ) (796,794 ) (432,602 ) 54%

Contract liabilities—noncurrent (2,643 ) (6,557 ) 3,914 (60)%

Net contract assets (liabilities) $ 162,594 $ 117,731 $ 44,863 38%

The $45,000 increase in the Company’s net contract assets (liabilities) at March 28, 2020 as compared to December 28, 2019 was primarily due to an increase in inventory and other costs associated with government contracts which recognize revenue over time, which was partially offset by an increase in billing in excess of revenue earned.

In the three months ended March 28, 2020, the Company recognized revenue of $0.6 million related to our contract liabilities at December 28, 2019. In the three months ended March 30, 2019, the Company recognized revenue of less than $0.1 million related to our contract liabilities at December 29, 2018.

The Company did not recognize impairment losses on our contract assets in the three months ended March 28, 2020 or March 30, 2019.

Performance Obligations

The Company’s revenue recognition related to performance obligations that were satisfied at a point in time and over time were as follows:

Three months ended Three months ended

March 28, 2020 March 30, 2019

Point in time 36% 71%

Over time 64% 29%

Remaining performance obligations represent the transaction price of orders for which work has not been performed and excludes unexercised contract options and potential orders under ordering-type contracts (e.g., indefinite-delivery, indefinite-quantity (“IDIQ”)). As of March 28, 2020, the aggregate amount of the transaction price allocated to remaining performance obligations was $8.6 million which the Company expects to recognize over the next 13 months. The remaining performance obligations represent amounts to be earned under government contracts, which are subject to cancellation.