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REVENUE AND CONTRACT ACCOUNTING
 9 Months Ended
Sep. 30, 2024
Revenue from Contract with Customer [Abstract]  
REVENUE AND CONTRACT ACCOUNTING

NOTE 7 - REVENUE AND CONTRACT ACCOUNTING

 

Revenue Recognition and Contract Accounting

 

The Company generates revenue from four sources: (1) Technology Systems; (2) AI Technology which is included in the consolidated statements of operations line-item Technology Systems; (3) Technical Support; and (4) Consulting Services which is included in the consolidated statements of operations line-item Services and Consulting.

 

Contract assets and contract liabilities on uncompleted contracts for revenues recognized over time are as follows:

 

Contract Assets

 

Contract assets on uncompleted contracts represent cumulative revenues recognized in excess of billings and/or cash received on uncompleted contracts accounted for under the cost-to-cost input method, which recognizes revenue based on the ratio of cost incurred to total estimated costs.

 

At September 30, 2024 and December 31, 2023, contract assets on uncompleted contracts consisted of the following:

        
  

September 30,

2024

  

December 31,

2023

 
Cumulative revenues recognized  $9,889,995   $8,820,256 
Less: Billings or cash received   (9,280,987)   (8,178,309)
Contract assets  $609,008   $641,947 

 

Contract Liabilities

 

Contract liabilities on uncompleted contracts represent billings and/or cash received that exceed cumulative revenues recognized on uncompleted contracts accounted for under the cost-to-cost input method, which recognizes revenues based on the ratio of the cost incurred to total estimated costs.

 

Contract liabilities on services and consulting revenues represent billings and/or cash received in excess of revenue recognized on service agreements that are not accounted for under the cost-to-cost input method.

 

At September 30, 2024 and December 31, 2023, contract liabilities on uncompleted contracts and contract liabilities on services and consulting consisted of the following:

        
  

September 30,

2024

  

December 31,

2023

 
Billings and/or cash receipts on uncompleted contracts  $1,264,658   $1,264,658 
Less: Cumulative revenues recognized   (856,743)   (199,976)
Contract liabilities, technology systems, current   407,915    1,064,682 
Contract liabilities, services and consulting, current   2,574,298    601,561 
Total contract liabilities, current  $2,982,213   $1,666,243 
Total contract liabilities, services and consulting, non-current  $7,947,755   $— 

   

Contract liabilities at December 31, 2023 were $1,666,243; of which $656,767 for technology systems and $582,877 in services and consulting have been recognized as of September 30, 2024.

 

The Company expects to recognize all current contract liabilities within 12 months from the respective consolidated balance sheet date.

 

In May 2024, the Company recorded an initial deferred revenue as a contract liability in the amount of $11,161,428 of which $199,008 related to a pilot program was immediately recognized as revenue (See Note 3). This contract liability resulted from a five-year contract with a customer where the Company received non-monetary consideration recorded as intangible assets (See Note 3). This transaction was accounted for under ASC 606-10-32-21 through ASC-606-10-32-24, Non-Cash Consideration. The performance obligations, which include various support and maintenance services will be recognized as revenue pro-rata over time during the five-year contract term. The current contract liabilities of $2,192,484 for just this contract as of September 30, 2024 relate to the portion of the contract value the Company expects to recognize pro-rata within the next twelve months. The non-current contract liabilities of $7,947,755 as of September 30, 2024 represent the portion of the contract value that is expected to be recognized pro-rata beyond the next twelve months. If the Digital Image License Agreement is terminated prior to the completion of the five-year term, then the customer will pay for the maintenance and support services annually in cash.

As of September 30, 2024 the balance in contract liabilities pertaining to the above agreement is as follows:

       
Calendar Year      Amount  
  2024     $ 548,120  
  2025       2,192,484  
  2026       2,192,484  
  2027       2,192,484  
  2028       2,192,484  
  2029       822,182  
  Total Contract Liabilities     $ 10,140,238  

 

 

 

Disaggregation of Revenue

 

The Company is following the guidance of ASC 606-10-55-296 and 297 for disaggregation of revenue. Accordingly, revenue has been disaggregated according to the nature, amount, timing and uncertainty of revenue and cash flows. We are providing qualitative and quantitative disclosures.

 

Qualitative:

 

  1. We have four distinct revenue sources:

 

  a. Technology Systems (Turnkey, engineered projects);

 

  b. AI Technology (Associated maintenance and support services);

 

  c. Technical Support (Licensing and professional services related to auditing of data center assets); and

 

  d. Consulting Services (Predetermined algorithms to provide important operating information to the users of our systems).

 

  2. We currently operate in North America including the USA, Mexico and Canada.

 

  3. Our customers include rail transportation, commercial, government, banking and IT suppliers.

 

  4. Our services & maintenance contracts are fixed price and fall into two duration types:

 

  a. Turnkey engineered projects and professional service contracts that are less than one year in duration and are typically one to two quarters in length; and

 

  b. Maintenance and support contracts ranging from one to five years in length.

 

Quantitative:

 

For the Three Months Ended September 30, 2024

                    
Segments  Rail   Commercial   Government   Artificial Intelligence   Total 
Primary Geographical Markets                    
                     
North America  $2,732,928   $505,982   $—   $—   $3,238,910 
                          
Major Goods and Service Lines                         
                          
Turnkey Projects  $1,686,456   $—   $—   $—   $1,686,456 
Maintenance and Support   913,228    505,982    —    —    1,419,210 
Algorithms   133,244    —    —    —    133,244 
   $2,732,928   $505,982   $—   $—   $3,238,910 
                          
Timing of Revenue Recognition                         
                          
Goods transferred over time  $1,686,456   $—   $—   $—   $1,686,456 
Services transferred over time   1,046,472    505,982    —    —    1,552,454 
   $2,732,928   $505,982   $—   $—   $3,238,910 

 

 

For the Three Months Ended September 30, 2023

                     
Segments  Rail   Commercial   Government   Artificial Intelligence   Total 
Primary Geographical Markets                    
                     
North America  $1,333,556   $19,220   $—   $178,147   $1,530,923 
                          
Major Goods and Service Lines                         
                          
Turnkey Projects  $705,849   $—   $—   $—   $705,849 
Maintenance and Support   627,707    19,220    —    —    646,927 
Algorithms   —    —    —    178,147    178,147 
   $1,333,556   $19,220   $—   $178,147   $1,530,923 
                          
Timing of Revenue Recognition                         
                          
Goods transferred over time  $705,849   $—   $—   $—   $705,849 
Services transferred over time   627,707    19,220    —    178,147    825,074 
   $1,333,556   $19,220   $—   $178,147   $1,530,923 

 

 

 For the Nine Months Ended September 30, 2024

                     
Segments  Rail   Commercial   Government   Artificial Intelligence   Total 
Primary Geographical Markets                    
                     
North America  $5,314,104   $505,982   $—   $—   $5,820,086 
                          
Major Goods and Service Lines                         
                          
Turnkey Projects  $2,221,310   $—   $—   $—   $2,221,310 
Maintenance and Support   2,556,512    505,982    —    —    3,062,494 
Algorithms   536,282    —    —    —    536,282 
   $5,314,104   $505,982   $—   $—   $5,820,086 
                          
Timing of Revenue Recognition                         
                          
Goods transferred over time  $2,221,310   $—   $—   $—   $2,221,310 
Services transferred over time   3,092,794    505,982    —    —    3,598,776 
   $5,314,104   $505,982   $—   $—   $5,820,086 

 

For the Nine Months Ended September 30, 2023

                     
Segments  Rail   Commercial   Government   Artificial Intelligence   Total 
Primary Geographical Markets                    
                     
North America  $5,247,291   $90,432   $11,353   $596,194   $5,945,270 
                          
Major Goods and Service Lines                         
                          
Turnkey Projects  $3,390,555   $13,552   $—   $—   $3,404,107 
Maintenance and Support   1,856,736    76,880    11,353    —    1,944,969 
Algorithms   —    —    —    596,194    596,194 
   $5,247,291   $90,432   $11,353   $596,194   $5,945,270 
                          
Timing of Revenue Recognition                         
                          
Goods transferred over time  $3,390,555   $13,552   $—   $—   $3,404,107 
Services transferred over time   1,856,736    76,880    11,353    596,194    2,541,163 
   $5,247,291   $90,432   $11,353   $596,194   $5,945,270