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3. REVENUE RECOGNITION | 12 Months Ended
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Aug. 31, 2019
Revenue Recognition [Abstract] |
REVENUE RECOGNITION | NOTE 3 – REVENUE RECOGNITION Components of revenue The following is a description of principal activities from which the Company generates revenue. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract. Stand-alone selling prices are determined based on the prices at which the Company separately sells its services or goods.
Revenue Components |  | Typical payment terms
Software Revenues: |  |
Software revenues are generated primarily from sales of software licenses at the time the software is unlocked and the term commences. The license period typically is one year or less. Along with the license a di minimis amount of customer support is provided to assist the customer with the software. Should the customer need more than a di minimis amount of support they can choose to enter into a separate contract for additional training. Most software is installed on our customers’ servers and the Company has no control of the software once the sale is made. For certain software arrangements the Company hosts the licenses on servers maintained by the Company, revenue for those arrangements are accounted as Software as a Service over the life of the contract. These arrangements are a small portion of software revenues of the Company. |  | Payments are generally due upon invoicing on a net 30 basis unless other payment terms are negotiated with the customer based on customer history. Typical industry standards apply.
Consulting Contracts: |  |
Consulting services provided to our customers are generally recognized over time as the contracts are performed and the services are rendered. The company measures its consulting revenue based on time expended compared to total estimated hours to complete a project. The Company believes the methods chosen for its contract revenue best depicts the transfer of benefits to the customer under the contracts. |  | Payment terms vary, depending on the size of the contract, credit history and history with the client and deliverables within the contract.
Consortium Member Based Services: |  |
The performance obligation is recognized on a time elapsed basis, by month, for which the services are provided, as the Company transfers control evenly over the contractual period. |  | Payment is due at the beginning of the period, generally on a net 30 or 60 basis.
Remaining performance obligations that do not fall under the expedients require the Company to perform various consulting and software development services and consortium memberships of approximately $6,843,000. It is anticipated these revenues will be recognized within the next two and a half years. Contract liabilities During the year ended August 31, 2019 the Company recognized $767,000 of revenue that was included in contract liabilities as of August 31, 2019. Disaggregation of Revenues
Disaggregation of Revenues: |  | Year Ended August 31, 2019 |
Software licenses |  |  |  |
Point in time |  | $ | 17,425,353 |
Over time |  |  | 1,053,562 |
Consulting services |  |  |  |
Over time |  |  | 15,491,525 |
Total Revenue |  | $ | 33,970,440 |
The following table summarizes the adjustments made to accounts on the condensed consolidated balance sheet as of September 1, 2018 as a result of applying the modified retrospective method to adopt ASC Topic 606:
|  | As Reported August 31, 2018 |  |  | Adjustments to reflect the adoption of ASC Topic 606 |  |  | As Adjusted September 1, 2018 |
Capitalized Software, net |  | $ | 5,152,594 |  |  | $ | (629,100 | ) |  | $ | 4,523,494 |
Deferred revenue |  |  | 381,928 |  |  |  | 28,606 |  |  |  | 410,534 |
Deferred income taxes, net |  |  | 3,195,139 |  |  |  | (164,427 | ) |  |  | 3,030,713 |
Retained Earnings |  | $ | 18,461,540 |  |  | $ | (493,279 | ) |  | $ | 17,968,261 |
The following tables present the amount by which each condensed consolidated financial statement line item is affected as of and for the year ended August 31, 2019 by ASC Topic 606:
|  | Year Ended August 31, 2019 |
|  | As Reported |  |  | Balances Without the adoption of ASC Topic 606 |  |  | Effect of Change |
Revenues |  | $ | 33,970,440 |  |  | $ | 33,992,369 |  |  | $ | (21,929 | )
Cost of revenues |  |  | 9,025,704 |  |  |  | 8,824,474 |  |  |  | 201,230 |
Gross profit |  |  | 24,944,736 |  |  |  | 25,167,895 |  |  |  | (223,159 | )
Income from operations |  |  | 10,648,729 |  |  |  | 10,871,888 |  |  |  | (223,159 | )
Income before provision for income taxes |  |  | 10,556,476 |  |  |  | 10,779,635 |  |  |  | (223,159 | )
Provision for income taxes |  |  | (1,973,147 | ) |  |  | (2,043,571 | ) |  |  | (70,424 | )
Net income |  | $ | 8,583,329 |  |  | $ | 8,736,064 |  |  | $ | (152,735 | )
Earnings per share-diluted |  | $ | 0.48 |  |  | $ | 0.48 |  |  | $ | – |
Weighted-average common shares outstanding, diluted |  |  | 18,057,431 |  |  |  | 18,057,431 |  |  |  | – |
|  | Year Ended August 31, 2019 |
|  | As Reported |  |  | Balances Without the adoption of ASC Topic 606 |  |  | Effect of Change |
Cash Flows From Operating Activities: |  |  |  |  |  |  |  |  |  |  |  |
Net income |  | $ | 8,583,329 |  |  | $ | 8,736,064 |  |  | $ | (152,735 | )
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |  |  |  |  |  |  |  |
Depreciation and amortization |  |  | 2,750,245 |  |  |  | 2,890,389 |  |  |  | (140,144 | )
Changes in operating assets and liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Deferred revenue |  |  | (295,966 | ) |  |  | (274,037 | ) |  |  | 21,929 |
Net cash provided by operating activities |  |  | 11,438,762 |  |  |  | 11,167,812 |  |  |  | (270,950 | )
Cash flows used in investing activities |  |  |  |  |  |  |  |  |  |  |  |
Capitalized computer software development costs |  | $ | (1,767,996 | ) |  | $ | (2,109,369 | ) |  | $ | 341,373 |
Contracts in Progress Contracts in progress are included in the accompanying balance sheets under the following captions:
|  | 2019 |  |  | 2018 |
Revenues in excess of billings |  | $ | 3,233,659 |  |  | $ | 1,985,596 |
Billings in excess of revenues |  |  | (798,549 | ) |  |  | (384,603 | )
|  | $ | 2,435,110 |  |  | $ | 1,600,993 |
Cost, estimated earnings, and billings on uncompleted contracts are summarized as follows as of August 31, 2019 and 2018:
|  | 2019 |  |  | 2018 |
Revenues earned to date on uncompleted contracts |  | $ | 19,254,928 |  |  | $ | 11,794,764 |
Billings to date on uncompleted contracts |  |  | (16,819,818 | ) |  |  | (10,193,771 | )
|  | $ | 2,435,110 |  |  | $ | 1,600,993 |
Balance increases and decreases in these accounts are due to the timing of amounts billed, payments received, and revenue recognized.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 + Details
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