REVENUE RECOGNITION

3 Months Ended

Mar. 31, 2024

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

4. REVENUE RECOGNITION

The following is a description of principal activities from which we generate revenue. Revenues are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

We evaluate contracts based on the 5-step model as stated in Topic 606 as follows: (i) identify the contract, (ii) identify the performance obligations, (iii) determine the transaction price, (iv) allocate the transaction price, and (v) recognize revenue when (or as) performance obligations are satisfied.

A contract contains a promise (or promises) to transfer goods or services to a customer. A performance obligation is a promise (or a group of promises) that is distinct, as defined in the revenue standard.

The transaction price is the amount of consideration an entity expects to be entitled to from a customer in exchange for providing the goods or services. A number of factors should be considered to determine the transaction price, including whether there is variable consideration, a significant financing component, noncash consideration, or amounts payable to the customer. The determination of variable consideration will require a significant amount of judgment. In estimating the transaction price we will use either the expected value method or the most likely amount method.

The transaction price is allocated to the separate performance obligations in the contract based on relative standalone selling prices. Determining the relative standalone selling price can be challenging when goods or services are not sold on a standalone basis. The revenue standard sets out several methods that can be used to estimate a standalone selling price when one is not directly observable. Allocating discounts and variable consideration must also be considered. Allocating the transaction price can require significant judgement on our part.

Revenue is recognized when (or as) the customer obtains control of the good or service/performance obligations are satisfied. Topic 606 provides guidance to help determine if a performance obligation is satisfied at a point in time or over time. Where a performance obligation is satisfied over time, the related revenue is also recognized over time.

Disaggregation of revenue

The following table provides information about disaggregated revenue by timing of revenue recognition (in thousands):

	Three Months Ended March 31, 2024
	Product		License and Royalty		Contract
	revenue		revenue		revenue		Total
Timing of revenue recognition:
Products transferred at a point in time	$	856	$	47	$	53	$	956
Product and services transferred over time		-		-		-		-
Total	$	856	$	47	$	53	$	956

	Three Months Ended March 31, 2023
	Product		License and Royalty		Contract
	revenue		revenue		revenue		Total
Timing of revenue recognition:
Products transferred at a point in time	$	590	$	-	$	-	$	590
Product and services transferred over time		-		-		192		192
Total	$	590	$	-	$	192	$	782

Contract balances

Under Topic 606, our rights to consideration are presented separately depending on whether those rights are conditional or unconditional. We present our unconditional rights to consideration as “accounts receivable” in our Balance Sheet.

Significant changes in the contract assets and the contract liabilities balances during the period are as follows (in thousands, except percentages):

	March 31,			December 31,
	2024			2023			$ Change		% Change
Contract assets	$	1,121		$	949		$	172		18.1
Contract liabilities		(213	)		(300	)		87		(29.0	)
Net contract assets (liabilities)	$	908		$	649		$	259		39.9

Contract acquisition costs

We are required to capitalize certain contract acquisition costs consisting primarily of commissions paid when contracts are signed. We currently do not pay any commissions upon the signing of a contract; therefore, no commission cost has been incurred as of March 31, 2024.

Transaction price allocated to the remaining performance obligations

The remaining balance of the contract liabilities was approximately $0.2 million as of March 31, 2024. The following table provides information about the estimated timing of revenue recognition (in thousands):

	Remainder of 2024		2025
Revenue	$	213	$	-