3.	REVENUE FROM CONTRACTS WITH CUSTOMERS

In accordance with ASC

606,

revenue is recognized when a customer obtains control of promised services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these services. To achieve this core principle, the Company applies the following

five

steps:

●

Identify the contract with a customer

●

Identify the performance obligations in the contract

●

Determine the transaction price

●

Allocate the transaction price to performance obligations in the contract

●

Recognize revenue when or as the Company satisfies a performance obligation

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers for the

three

-month period:

	North America		South America		EMEA*		Asia		March 31, 2020

License fees	$	165,235	$	-	$	-	$	70,110	$	235,345
Hardware		56,354		-		-		23,263		79,617
Support and Maintenance		196,316		375		3,767		7,065		207,523
Total Revenues	$	417,905	$	375	$	3,767	$	100,438	$	522,485

	North America		South America		EMEA*		Asia		March 31, 2019

License fees	$	14,208	$	-	$	-	$	69,000	$	83,208
Hardware		45,981		400		32,918		147,506		226,805
Support and Maintenance		196,076		2,116		36,418		7,000		241,610
Total Revenues	$	256,265	$	2,516	$	69,336	$	223,506	$	551,623

*EMEA – Europe, Middle East, Africa

All of the Company's performance obligations, and associated revenue, are generally transferred to customers at a point in time, with the exception of support and maintenance, and professional services, which are generally transferred to the customer over time.

Software licenses

Software license revenue consist of fees for perpetual and software as a service (SaaS) software licenses for

one

or more of the Company’s biometric fingerprint solutions. Revenue is recognized at a point in time once the software is available to the customer for download. Software license contracts are generally invoiced in full on execution of the arrangement.

Hardware

Hardware revenue consists of fees for associated equipment sold with or without a software license arrangement, such as servers, locks and fingerprint readers. Customers are

not

obligated to buy

third

party hardware from the Company, and

may

procure these items from a number of suppliers. Revenue is recognized at a point in time once the hardware is shipped to the customer. Hardware items are generally invoiced in full on execution of the arrangement.

Support and Maintenance

Support and Maintenance revenue consists of fees for unspecified upgrades, telephone assistance and bug fixes. The Company satisfies its Support and Maintenance performance obligation by providing “stand-ready” assistance as required over the contract period. The Company records deferred revenue (contract liability) at time of prepayment until the contracts term occurs. Revenue is recognized over time on a ratable basis over the contract term. Support and Maintenance contracts are up to

one

year in length and are generally invoiced either annually or quarterly in advance. Support and Maintenance revenue for SaaS license is carved out of the total license cost at

18%

and recognized on a ratable basis over the license term.

Professional services revenues consist primarily of fees for deployment and optimization services, as well as training. The majority of the Company’s consulting contracts are billed on a time and materials basis, and revenue is recognized based on the amount billable to the customer in accordance with practical expedient ASC

606

18.

For other professional services contracts, the Company utilizes an input method and recognizes revenue based on labor hours expended to date relative to the total labor hours expected to be required to satisfy its performance obligation.

Contracts with Multiple Performance Obligations

Some contracts with customers contain multiple performance obligations. For these contracts, the Company accounts for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The standalone selling prices are determined based on overall pricing objectives, taking into consideration market conditions and other factors, including the value of the contracts, the cloud applications sold, customer demographics, geographic locations, and the number and types of users within the contracts.

The Company considered several factors in determining that control transfers to the customer upon shipment of hardware and availability of download of software. These factors include that legal title transfers to the customer, the Company has a present right to payment, and the customer has assumed the risks and rewards of ownership.

Accounts receivable from customers are typically due within

days of invoicing. The Company does

not

record a reserve for product returns or warranties as amounts are deemed immaterial based on historical experience.

Costs to Obtain and Fulfill a Contract

Costs to obtain and fulfill a contract are predominantly sales commissions earned by the sales force and are considered incremental and recoverable costs of obtaining a contract with a customer. These costs are deferred and then amortized over a period of benefit determined to be

four

years. These costs are included as capitalized contract costs on the balance sheet. The period of benefit was determined by taking into consideration customer contracts, technology, and other factors based on historical evidence. Amortization expense is included in selling, general and administrative expenses in the accompanying condensed consolidated statements of operations.

Transaction Price Allocated to the Remaining Performance Obligations

ASC

606

requires that the Company disclose the aggregate amount of transaction price that is allocated to performance obligations that have

not

yet been satisfied as at

March 31, 2020.

The guidance provides certain practical expedients that limit this requirement, which the Company’s contracts meet as follows:

●

The performance obligation is part of a contract that has an original expected duration of

one

year or less, in accordance with ASC

606

14.

March 31, 2020

and

December 31, 2019,

deferred revenue represents the Company's remaining performance obligations related to prepaid support and maintenance, all of which is expected to be recognized within

one

year.

Revenue recognized during the

three

months ended

March 31, 2020

from amounts included in deferred revenue at the beginning of the period was approximately

$72,000.

The Company did

not

recognize any revenue from performance obligations satisfied in prior periods. Total deferred revenue (contract liability) was

$413,345

and

$359,212

March 31, 2020

and

December 31, 2019,

respectively.