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CONTRACT ASSETS AND LIABILITIES

9 Months Ended

Sep. 28, 2024

11. 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:

	September 28, 2024			December 30, 2023			$ Change		% Change
Contract assets and unbilled receivables —current	$	8,274,538		$	3,409,809		$	4,864,729		143	%
Contract liabilities and billings in excess of revenues earned		(268,468	)		(916,826	)		648,358		(71	)%
Contract liabilities—noncurrent		—			(23,198	)		23,198		(100	)%
Net contract assets	$	8,006,070		$	2,469,785		$	5,536,285		224	%

The $5.5 million increase in the Company’s net contract assets at September 28, 2024 as compared to December 30, 2023 was primarily due to an increase in amounts owed from customers for whom we produce products for defense applications.

In the three and nine months ended September 28, 2024, the Company recognized revenue of less than $0.1 million and $0.9 million, respectively, related to its contract liabilities at December 30, 2023. In the three and nine months ended September 30, 2023, the Company recognized revenue of less than $0.1 million and $0.7 million, respectively, related to its contract liabilities at December 31, 2022.

The Company did not recognize impairment losses on its contract assets in the three or nine months ended September 28, 2024 or September 30, 2023.

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			Nine months ended			Nine months ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Point in time		11	%		24	%		16	%		27	%
Over time		89	%		76	%		84	%		73	%
Performance obligation percentage		89	%		76	%		84	%		73	%

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 September 28, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $25.4 million which the Company expects to recognize over the next 12 months. The remaining performance obligations represent amounts to be earned under government contracts, which are subject to cancellation.