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Note 3 - Revenue From Contracts With Customers | 9 Months Ended
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Sep. 30, 2022
Notes to Financial Statements |
Revenue from Contract with Customer [Text Block] |
3. | REVENUE FROM CONTRACTS WITH CUSTOMERS
In accordance with ASC 606, Revenue from Contracts with Customers (“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 periods ended September 30, 2022 and September 30, 2021:
|  | North America |  |  | Africa |  |  | EMESA* |  |  | Asia |  |  | September 30, 2022 |
Services |  | $ | 280,192 |  |  | $ | 22,677 |  |  | $ | 69,087 |  |  | $ | - |  |  | $ | 371,956 |
License fees |  |  | 468,090 |  |  |  | - |  |  |  | 450,170 |  |  |  | - |  |  |  | 918,260 |
Hardware |  |  | 48,226 |  |  |  | 13,800 |  |  |  | 11,412 |  |  |  | 9,895 |  |  |  | 83,333 |
Total Revenues |  | $ | 796,508 |  |  | $ | 36,477 |  |  | $ | 530,669 |  |  | $ | 9,895 |  |  | $ | 1,373,549 |
|  | North America |  |  | Africa |  |  | EMESA* |  |  | Asia |  |  | September 30, 2021 |
Services |  | $ | 259,965 |  |  | $ | 42,000 |  |  | $ | 12,759 |  |  | $ | 3,776 |  |  | $ | 318,500 |
License fees |  |  | 534,775 |  |  |  | 308,000 |  |  |  | 20,678 |  |  |  | 7,006 |  |  |  | 870,459 |
Hardware |  |  | 84,445 |  |  |  | 13,425 |  |  |  | - |  |  |  | 12,000 |  |  |  | 109,870 |
Total Revenues |  | $ | 879,185 |  |  | $ | 363,425 |  |  | $ | 33,437 |  |  | $ | 22,782 |  |  | $ | 1,298,829 |
The following table summarizes revenue from contracts with customers for the nine month periods ended September 30, 2022 and September 30, 2021:
|  | North America |  |  | Africa |  |  | EMESA* |  |  | Asia |  |  | September 30, 2022 |
Services |  | $ | 936,910 |  |  | $ | 60,629 |  |  | $ | 205,274 |  |  | $ | 53 |  |  | $ | 1,202,866 |
License fees |  |  | 1,436,704 |  |  |  | 517,161 |  |  |  | 1,507,051 |  |  |  | 79,676 |  |  |  | 3,540,592 |
Hardware |  |  | 323,338 |  |  |  | 25,833 |  |  |  | 18,342 |  |  |  | 150,864 |  |  |  | 518,377 |
Total Revenues |  | $ | 2,696,952 |  |  | $ | 603,623 |  |  | $ | 1,730,667 |  |  | $ | 230,593 |  |  | $ | 5,261,835 |
|  | North America |  |  | Africa |  |  | EMESA* |  |  | Asia |  |  | September 30, 2021 |
Services |  | $ | 891,856 |  |  | $ | 42,000 |  |  | $ | 41,109 |  |  | $ | 10,198 |  |  | $ | 985,163 |
License fees |  |  | 1,307,265 |  |  |  | 557,484 |  |  |  | 72,205 |  |  |  | 74,656 |  |  |  | 2,011,610 |
Hardware |  |  | 176,414 |  |  |  | 698,264 |  |  |  | 265,996 |  |  |  | 42,110 |  |  |  | 1,182,784 |
Total Revenues |  | $ | 2,375,535 |  |  | $ | 1,297,748 |  |  | $ | 379,310 |  |  | $ | 126,964 |  |  | $ | 4,179,557 |
*EMESA – Europe, Middle East, South America Software licenses Software license revenue consist of fees for perpetual and subscription licenses for one or more of the Company’s biometric fingerprint solutions or identity access management 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, FIDO keys, 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 term of the contract ends. Revenue is recognized over time on a ratable basis over the contract term. Support and maintenance contracts are from one to five years in length and are generally invoiced in advance at the beginning of the term. Support and maintenance revenue for subscription licenses is carved out of the total license cost at 18% and recognized on a ratable basis over the license term. Professional Services Professional services revenue 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 606-10-55-18. 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 upon shipment of hardware and availability of download of software. Accounts receivable from customers are typically due within 30 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 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 of September 30, 2022. The Company’s contracts satisfy the following applicable guidance that limits this requirement:
| ● | The performance obligation is part of a contract that has an original expected duration of one year or less, in accordance with ASC 606-10-50-14.
Deferred revenue represents the Company’s remaining performance obligations related to prepaid support and maintenance, all of which is expected to be recognized from one to five years. 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. Deferred Revenue Deferred revenue includes customer advances and amounts that have been paid by customer for which the contractual maintenance terms have not yet occurred. The majority of these amounts are related to maintenance contracts for which the revenue is recognized ratably over the applicable term, which is generally 12-60 months. Maintenance revenue which would be recognized based on contract periods that extend beyond 12 months from the balance sheet date, is segregated as long term deferred revenue. Maintenance contracts include provisions for unspecified when-and-if available product updates and customer telephone support services. At September 30, 2022 and December 31, 2021, amounts in deferred revenue were approximately $676,000 and $633,000, respectively. Revenue recognized during the three and nine-months ended September 30, 2022 from amounts included in deferred revenue at the beginning of the period was approximately $62,000 and $448,000, respectively. Revenue recognized during the three and nine-months ended September 30, 2021 from amounts included in deferred revenue at the beginning of the period was approximately $72,000 and $502,000, respectively. The Company did not recognize any revenue from performance obligations satisfied in prior periods.

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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 https://asc.fasb.org/topic&trid=49130388 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 10 -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 13 -Subparagraph (b)(2) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130556-203045 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (b) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 9 -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130550-203045 Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (e) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (a) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (d) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 15 -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045 Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -SubTopic 10 -Section 50 -Paragraph 12 -Subparagraph (c) -URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045 + Details
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