Note

Revenue Recognition

We design, manufacture, market, sell, and maintain quality control instruments, consumables, and services driven primarily by the regulatory requirements of niche markets. Our consumables, such as biological indicator test strips and packaging materials, are typically used on a standalone basis; however, some, such as calibration solutions, are also critical to the ongoing use of our instruments. Instruments sales, such as medical meters, wireless sensors, and data loggers are generally driven by our acquisition of new customers, growth of existing customers, or customer replacement of existing equipment. We generally generate service revenues from

three

categories:

) discrete installation of our hardware,

) discrete but recurring calibration and maintenance of our hardware or

) contracted and recurring testing and maintenance services. We evaluate our revenues internally both by product line as well as by timing of revenue generation and nature of goods and services provided. Typically, discrete revenue is recognized at the shipping point or upon completion of the service, while contracted revenue is recognized over a period of time reflective of the performance obligation period in the applicable contract.

Substantially all of our revenues and related receivables are generated from contracts with customers that are

months or less in duration. For both discrete and contracted revenue, evidence of an arrangement is typically in the form of a formal contract and/or purchase order. Prices are fixed at the time of the order and

price protections or variables are offered. Collectability is reasonably assured through our customer credit and review process, and payment is typically due within

days or less. Revenue is recognized when performance obligations under the terms of the contracts with our customers are satisfied. We elected to use the practical expedient that allows us to expense commission costs as incurred.

Our performance obligations related to the sale of instruments and consumables generally consist of the promise to sell tangible goods to distributors or end users. Ownership of these goods is typically transferred at time of shipment, at which point we have satisfied our performance obligation and we recognize revenue.

Our performance obligations related to services

may

include testing, installation, and/or maintenance of our products, either on-site at our customers’ facilities or in our own calibration laboratories. Performance obligations arise from the service contracts when discrete services are contracted in advance and performed at a future time, often at the time of the customer’s choosing. In this case, the performance obligation is satisfied, and revenue is recognized, upon the customer’s acceptance of the completion of the specified work. Alternately, service revenue

may

be recognized for contracted services or maintenance provided continually over a period of time, and our performance obligations are satisfied by completing any service that is contractually required, if applicable, or simply by the passage of time if

services are required or requested. For contracted services, revenue is recognized on a straight-line basis over the life of the service contract, which is a faithful depiction of these annual service contracts, which

may

not

be invoked.

The following tables present disaggregated revenues for the

three

months ended

June 30, 2018

and

June 30, 2017,

respectively:

Three Months Ended June 30, 2018
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete revenues:
Consumables	$	9,570	$	792	$	64	$	1,740	$	12,166
Hardware		204		5,540		1,340		--		7,084
Services		351		2,399		543		100		3,393

Contracted revenues:
Services		1,223		--		1,276		--		2,499
Total Revenues	$	11,348	$	8,731	$	3,223	$	1,840	$	25,142

Three Months Ended June 30, 2017
	Sterilization and Disinfection Control		Instruments		Cold Chain Monitoring		Cold Chain Packaging		Total
Discrete revenues:
Consumables	$	8,669	$	944	$	31	$	887	$	10,531
Hardware		133		5,540		1,172		--		6,845
Services		209		2,119		726		83		3,137

Contracted revenues:
Services		1,172		--		988		--		2,160
Total Revenues	$	10,183	$	8,603	$	2,917	$	970	$	22,673

Contract Balances

Our contracts have varying payment terms and conditions. Some customers prepay for services, resulting in unearned revenues or customer deposits, called contract liabilities, which are included within other accrued expenses and unearned revenues in the accompanying condensed consolidated balance sheets. Contract assets would exist when sales are recorded (i.e. the control of the goods or services has been transferred to the customer), but customer payment is contingent on a future event besides the passage of time (such as satisfaction of additional performance obligations). We do

not

have any contract assets. Unbilled receivables, which are

not

classified as contract assets, represent arrangements in which sales have been recorded prior to billing and right to payment is unconditional.

A summary of contract liabilities is as follows:

Contract liabilities balance as of March 31, 2018	$	4,147
Prior year liabilities recognized in revenues during the three months ended June 30, 2018		(1,765	)
Contract liabilities added during the three months ended June 30, 2018, net of revenues recognized		1,836
Contract liabilities balance as of June 30, 2018	$	4,218