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REVENUE AND OTHER CONTRACTS WITH CUSTOMERS
 9 Months Ended
Sep. 30, 2025
Revenue from Contract with Customer [Abstract]  
REVENUE AND OTHER CONTRACTS WITH CUSTOMERS

(3) REVENUE AND OTHER CONTRACTS WITH CUSTOMERS

 

Revenues from SaaS service before the end of 2024

 

Revenue recognized for each distinct performance obligation as control is transferred to the customer. Revenue attributable to hardware products bundled with Software-as-a-Service (“SaaS”) offerings are recognized at the time control of the product transfers to the customer. The transaction price allocated to the SaaS offering was recognized ratably beginning when the customer was expected to activate their account and over a three-year period that the Company estimated based on the expected replacement of the hardware.

 

Revenues from SaaS service- MCN Digital Service in 2025

 

The Company expands SaaS operations as a digital service provider, delivering full-cycle services to brand clients through legally binding agreements since March 2025. The Company offers full-service account management, content production, and targeted promotion to grow followers across key platforms. Service packages customizable via the SaaS portal. Customers may purchase value-added services with or after their purchases of basic package. The Company's services comprise two distinct performance obligations: (1) the basic service, which represents a single performance obligation as the promises for account setup, SaaS platform access, account management, and basic digital content creation and publishing are highly interdependent and bundled together; and (2) the value-added services, which represents a performance obligation for additional digital content created and customized to meet the customer's special request. Each with a standalone transaction price. The Company recognizes revenues from basic services ratably over the contract term beginning on the commencement date of each contract. The revenues from value-added services are recognized at a point in time when customers approve or accept the value-added services or system automatically approves whichever is later. The Company requires an upfront payment for the services, which is non-refundable upon execution of the contract. Customers retain the right to terminate the contract prior to its expiration date, subject to the early termination fees, including information transfer fee and fan development fee.

Revenues from Software Service in 2025

 

The Company enters into bundled arrangements that typically include the sale of on-premise software licenses, customized modules, and maintenance and support (“M&S”) services. These arrangements are evaluated to determine whether the promises represent distinct performance obligations. The customized modules are highly interdependent and interrelated with the software license and are therefore combined with the license as a single performance obligation, while the M&S services are capable of being distinct and are accounted for as a separate performance obligation. The M&S services are provided free of charge for a specified contract period, typically encompassing the first year of service following software delivery.

 

The transaction price is allocated to each performance obligation based on their relative stand-alone selling prices (“SSP”). The SSP for the combined software license and customized modules, and M&S services is determined using the adjusted market assessment approach, which considers market conditions, competitive pricing, the Company’s market position, expected profit margins, and cost structure. Contracts include retention fees that represent variable consideration, as their payment is contingent upon no major defects being identified within a specified period. These retention fees are excluded from the initial transaction price. The related revenue is recognized only when it’s probable that a significant reversal will not occur. Contracts for software licensing and M&S services generally include a renewal option for M&S services; however, the renewal option to acquire additional services is neither offered free of charge nor at a discount and accordingly does not represent a material right.

 

The Company provides assurance-type warranties to ensure that the delivered software complies with agreed-upon specifications. These warranties do not constitute a separate performance obligation as they cannot be purchased separately and do not provide a service beyond remedying defects to bring the software to the specified standard.

 

The Company’s contracts typically specify a payment schedule whereby payments from the customer are linked to the signing of the contract and the achievement of specific milestones. Contracts are generally fixed price, and the Company has elected the practical expedient not to adjust the promised consideration for the effects of a significant financing component when the period between transfer of goods or services and customer payment is one year or less.

 

Revenue from the combined software license and customized modules is recognized over time as the Company fulfills its performance obligations by developing and enhancing the software assets throughout the project period. The Company applies the output method to measure progress toward complete satisfaction of this performance obligation, specifically using the achievement of contractual milestones as the basis for recognizing revenue. The amount of revenue recognized reflects a direct measurement of the value transferred upon completion of each milestone. Revenue from maintenance and support services is recognized over time on a straight-line basis over the M&S contract period. This recognition pattern reflects the continuous transfer of services to the customer, who simultaneously receives and consumes the benefits of these services throughout the service period.

 

Remaining Performance Obligations

 

The remaining performance obligations represent the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as of the end of the reporting period. Unsatisfied and partially unsatisfied performance obligations consist of contract liabilities, in-transit orders with destination terms, and non-cancellable backlog. Non-cancellable backlog includes goods for which customer purchase orders have been accepted, that are scheduled or in the process of being scheduled for shipment, and that are not yet invoiced. Prior years’ performance obligations were all satisfied and recognized as revenue in the periods before the end of 2024.

 

As of September 30, 2025, the remaining performance obligation related to MCN digital services purchased and paid for in advance by customers for basic and value-added packages amounted to $2,460,483, equaling the balance of contract liabilities. This amount is expected to be recognized as revenue within the next 12 months.

 

The remaining performance obligation for software service as of September 30, 2025 was $271,654, excluding retention fee. This amount relates to unsatisfied performance obligations for the combined software license and customized modules, which are expected to be recognized as revenue upon the completion and customer acceptance of specific milestones, predominantly within the next 2 months.

 

Contract Costs

 

The Company recognizes the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. The Company has determined that certain sales commissions meet the requirements to be capitalized, and the Company amortizes these costs on a consistent basis with the pattern of transfer of the goods and services in the contract. Total capitalized costs to obtain a contract were immaterial during the periods presented and are included in other current and long-term assets on our condensed consolidated balance sheets if any.

 

The Company applies a practical expedient to expense costs as incurred for costs to obtain a contract when the amortization period is one year or less. These costs include sales commissions on SaaS contracts with a contract period of one year or less as sales commissions on contract renewals are commensurate with those paid on the initial contract.

Contract Balances

 

The Company records accounts receivable when it has an unconditional right to the consideration. The accounts receivable balances were $187,347 and $0 as of September 30, 2025 and December 31, 2024, respectively. Contract liabilities are recorded when customers remit payment prior to revenue recognition, representing the Company’s obligation to transfer services in the future. Liabilities arise upon customer order placement. The Company did not have contract liabilities at December 31, 2024, while the ending balance at September 30, 2025 was $2,460,483.

 

Disaggregation of Revenue

 

The following table sets forth our revenues by distribution channel:

 

Schedule of disaggregation of revenue                        
    Three Months Ended
September 30,		    

Nine Months Ended
September 30,

  
    2025     2024     2025     2024  
Retailers   $ -     $ -     $ -     $ 638,904  
Other online and offline channels     1,939,542       -       1,984,660       989  
    $ 1,939,542     $ -     $ 1,984,660     $ 639,893  

 

The following table sets forth our revenues by product:

 

Schedule of revenues                                
    Three Months Ended
September 30,		     Nine Months Ended
September 30,		  
    2025     2024     2025     2024  
Cable modems & gateways   $ -     $ -     $ -     $ 638,804  
Other networking products     -       -       -       1,089  
SaaS – MCN digital services     1,752,196       -       1,797,314       -  
Software services     187,346       -       187,346       -  
    $ 1,939,542     $ -     $ 1,984,660     $ 639,893