Note 2 – Revenue Recognition and Contracts with Customers

Disaggregated Revenue

The Company’s total revenue was comprised of four major product lines: Smart Glasses and iWear Video Headphone Sales, OEM Product Sales, Waveguide and Display Engine Sales, and Engineering Services. The following table summarizes the revenue recognized by major product line:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018

Revenues
Smart Glasses and iWear Video Headphone Sales	$	1,049,207	$	1,839,250	$	3,163,425	$	4,959,496
OEM Product Sales		—		—		951,570		766,065
Waveguide and Display Engine Sales		10,000		3,250		152,499		127,900
Engineering Services		99,675		80,900		450,621		261,416

Total Revenue	$	1,158,882	$	1,923,400	$	4,718,115	$	6,114,877

Significant Judgments

Under Topic 606, there are judgments used that could potentially impact both the timing of our satisfaction of performance obligations and our determination of transaction prices used in determining revenue recognized by major product line. Judgments made include considerations in determining our transaction prices for our standard product sales that include an end-user 30‑day right to return if not satisfied with product and include general payment terms that are between Net 30 and 60 days. For our Engineering Services, performance obligations are recognized over time using the input method and the estimated costs to complete each project are considered significant judgments.

Performance Obligations

Revenues from our performance obligations are typically satisfied at a point in time for Smart Glasses, iWear Video Headphones, Waveguides and Display Engines, and our OEM Products, which are recognized when the customer obtains control and ownership, which is generally upon shipment. The Company also records revenue for performance obligations relating to our Engineering Services over time by using the input method measuring progress toward satisfying the performance obligations. Satisfaction of our performance obligations related to our Engineering Services is measured by the Company’s cost incurred as a percentage of total expected costs to project completion as the inputs of actual costs incurred by the Company are directly correlated with progress of completing the contract. As such, the Company believes that our methodologies for recognizing revenue over time for our Engineering Services correlate directly with the transfer of control of the underlying assets to our customers.

Our standard product sales include a twelve (12) month assurance-type product warranty, except in certain European countries where it can be twenty-four (24) months for some consumer-focused products. In the case of our OEM products and waveguide sales, some include a standard product warranty of up to eighteen (18) months. In 2018, we began offering extended warranties to customers, which extend the standard product warranty on product sales for an additional twelve (12) month period. All revenue related to extended product warranty sales is deferred and recognized over the extended warranty period. Our engineering services contracts vary from contract to contract but typically include payment terms of Net 30 days from date of billing, subject to an agreed upon customer acceptance period.

The following table presents a summary of the Company’s net sales by revenue recognition method as a percentage of total net sales for the nine months ended September 30, 2019:


	% of Total Net Sales
Point-in-Time	90	%
Over Time - Input Method	10	%
Total	100	%

Remaining Performance Obligations

As of September 30, 2019, the Company had $215,000 of remaining performance obligations under our current waveguide development agreements with a global aerospace firm, which represents the total transaction price of these development agreements of $666,000, less revenue recognized under percentage of completion in the nine months ended September 30, 2019. The Company expects to recognize the remaining revenue relating to these existing performance obligations of $215,000 in the fourth quarter of 2019. Revenues earned less amounts paid at September 30, 2019 in the amount of $145,882 are reflected as Accrued Project Revenue in the accompanying balance sheet.

As of September 30, 2019, the Company had $148,000 of remaining performance obligations related to its extended warranties. The Company expects to recognize this deferred revenue on a twelve (12) month straight-line basis beginning on October 1, 2019.