3.	Revenue Recognition

As of

December 31, 2017,

the Company adopted Accounting Standards Update ("ASU")

2014

09,

Revenue from Contracts with Customers ("ASC

606"

)

using the modified retrospective approach. Revenues are recognized when we satisfy a performance obligation by transferring services promised in a contract to a customer, in an amount that reflects the consideration that we expect to receive in exchange for those services. Performance obligations in our contracts represent distinct or separate service streams that we provide to our customers. The adoption of ASC

606

did

not

result in an adjustment to retained earnings in the Company’s consolidated balance sheet as of

December 31, 2017.

We evaluate our revenue contracts with customers based on the

five

-step model under ASC

606:

(

) Identify the contract with the customer; (

) Identify the performance obligations in the contract; (

) Determine the transaction price; (

) Allocate the transaction price to separate performance obligations; and (

) Recognize revenue when (or as) each performance obligation is satisfied.

The Company derives its revenues from several sources. The Company’s Engineering Services and Information Technology Services segments perform consulting and project solution services. All of the Company’s segments perform staff augmentation services and derive revenue from permanent placement fees. The majority of the Company’s revenues are invoiced on a time and materials basis.

The following table presents our revenues disaggregated by revenue source for the

thirty-nine

weeks periods ended

September 29, 2018

and

September 30, 2017:

	September 29, 2018		September 30, 2017
Engineering:
Time and Material	$	56,639	$	52,843
Fixed Fee		5,773		8,674
Total Engineering	$	62,412	$	61,517

Specialty Health Care:
Time and Material	$	59,457	$	47,554
Permanent Placement Services		1,142		1,658
Total Specialty Health Care	$	60,599	$	49,212

Information Technology:
Time and Material	$	21,875	$	24,671
Permanent Placement Services		195		280
Total Information Technology	$	22,070	$	24,951
	$	145,081	$	135,680

Time and Material

The Company’s IT and Healthcare segments predominantly recognize revenue through time and material work while its Engineering segment recognizes revenue through both time and material and fixed fee work. The Company’s time and material contracts are typically based on the number of hours worked at contractually agreed upon rates, therefore revenues associated with these time and materials contracts are recognized based on hours worked at contracted rates.

Fixed fee

From time to time and predominantly in our Engineering segment, the Company will enter into contracts requiring the completion of specific deliverables. The Company has master services agreements with many of its customers that broadly define terms and conditions. Actual services performed under fixed fee arrangements are typically delivered under purchase orders that more specifically define terms and conditions related to that fixed fee project. While these master services agreements can often span several years, the Company’s fixed fee purchase orders are typically performed over

six

nine

month periods. In instances where project services are provided on a fixed-price basis, revenue is recorded in accordance with the terms of each contract. In certain instances, revenue is invoiced at the time certain milestones are reached, as defined in the contract. Revenues under these arrangements are recognized as the costs on these contracts are incurred. On an infrequent basis, amounts paid in excess of revenues earned and recognized are recorded as deferred revenue, included in accounts payable and accrued expenses on the accompanying balance sheets. In other instances, revenue is billed and recorded based upon contractual rates per hour. Additionally, some contracts contain “Performance Fees” (bonuses) for completing a contract under budget. Performance Fees, if any, are recorded when earned. Some contracts also limit revenues and billings to specified maximum amounts. Provisions for contract losses, if any, are made in the period such losses are determined. For contracts where there is a specific deliverable, the work is

not

complete and the revenue is

not

recognized, the costs incurred are deferred as a prepaid asset. The associated costs are expensed when the related revenue is recognized.

Permanent Placement Services

The Company earns permanent placement fees from providing permanent placement services. These fees are typically based on a percentage of the compensation paid to the person placed with the Company’s client.

There was

deferred revenue balance at

September 29, 2018.

The deferred revenue balance at

December 30, 2017

was

$596

and is included in accounts payable and accrued expense in the accompanying consolidated balance sheet at that date. Revenue is recognized when the service has been performed. Deferred revenue

may

be recognized over a period exceeding

one

year from the time it was recorded on the balance sheet. For the

thirty-nine

week period ended

September 29, 2018,

the Company recognized revenue of

$596

that was included in deferred revenue at the beginning of the reporting period.