5. REVENUE RECOGNITION

6 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

5. REVENUE RECOGNITION

On July 1, 2018, the Company adopted ASU 2014-09 Revenue from Contracts with Customers (ASC 606) using the modified retrospective method for contracts that were not completed as of July 1, 2018, whereby revenues are recognized as the performance obligations to deliver products or services are satisfied and are recorded based on the amount of consideration the Company expects to receive in exchange for satisfying the performance obligations. Most of the Company’s products and services are marketed to medical device companies almost exclusively in the United States. Products and services are primarily transferred to customers at a point in time based upon when services are performed or product is shipped.

Revenues represent the amount of consideration the Company expects to receive from customers in exchange for transferring products and services. Other selling costs to obtain and fulfill contracts are expensed as incurred due to the short-term nature of a majority of its revenues. The Company extends terms of payment to its customers based on commercially reasonable terms for the markets of its customers, while also considering their credit quality. Shipping and handling costs charged to customers are included in revenues.

The Company disaggregates revenues by product and service types as it believes it best depicts how the nature, amount, timing and uncertainty of revenues and cash flows are affected by economic factors. Revenues are comprised of the following for the three and six months ended December 31, 2019 and 2018:

	Three Months Ended December 31,				Six Months Ended December 31,
	2019		2018		2019		2018
Engineering Design Services	$	478,441	$	318,741	$	888,169	$	830,639
Optical Components		1,532,843		225,967		2,949,087		524,024
Medical Device Products and Assemblies		785,478		933,143		1,474,490		1,682,646
Total Revenues	$	2,796,762	$	1,477,851	$	5,311,746	$	3,037,309

Contract Assets and Liabilities

The nature of the Company’s products and services does not generally give rise to contract assets as it typically does not incur costs to fulfill a contract before a product or service is provided to a customer. The Company’s costs to obtain contracts are typically in the form of sales commissions paid to employees. The Company has elected to expense sales commissions associated with obtaining a contract as incurred as the amortization period is generally less than one year. These costs have been recorded in selling, general and administrative expenses. As of December 31, 2019, there were no contract assets recorded in the Company’s Consolidated Balance Sheets.

The Company’s contract liabilities arise as a result of unearned revenue received from customers at inception of contracts or where the timing of billing for services precedes satisfaction of our performance obligations. The Company generally satisfies performance obligations within one year from the contract inception date.

Contract liabilities, which were recorded as customer advances in the Company’s Consolidated Balance Sheets, and unearned revenue are comprised of the following:

	Three Months Ended December 31,						Six Months Ended December 31,
	2019			2018			2019			2018
Contract liabilities, beginning of period	$	513,623		$	400,704		$	450,192		$	857,842
Unearned revenue received from customers		97,143			–			293,019			24,300
Revenue recognized		(222,260	)		(192,722	)		(354,705	)		(674,160	)
Contract liabilities, end of period	$	388,506		$	207,982		$	388,506		$	207,982