Revenue Recognition

6 Months Ended

Jun. 30, 2023

Revenue Recognition

Revenue Recognition

4. Revenue Recognition. Under Accounting Standards Update (“ASU”) 2014-09 Revenue from Contracts with Customers (“Topic 606”), revenue is measured based on consideration specified in the contract with a customer, adjusted for any applicable estimates of variable consideration and other factors affecting the transaction price, including noncash consideration, consideration paid or payable to a customer and significant financing components. Revenue from all customers is recognized when a performance obligation is satisfied by transferring control of a distinct good or service to a customer, as further described below under “Performance Obligations.”

Taxes collected from customers and remitted to governmental authorities are excluded from revenue on the net basis of accounting.

The Company includes shipping and handling fees in revenues. Shipping and handling costs associated with outbound freight after control over a product has been passed to a customer are accounted for as a fulfillment cost and are included in cost of goods sold.

Performance Obligations

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account under Topic 606. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The following is a description of the Company’s performance obligations included in its primary revenue streams and the timing or method of revenue recognition for each:

Display, On-Pack, and Non-POPS Signage Solutions.  The Legacy Business supplied CPG manufacturers with retailer approved promotional services, such as display, on-pack, and signage solutions. These services were more customized than POPS, consisting of variable durations and variable specifications. Due to the variable nature of these services, revenue recognition is primarily at a point-in-time recognition.

POPS Signage Solution Services.  The Legacy Business provided a service of displaying promotional signs in close proximity to the CPG manufacturer’s product in participating stores, which the Company maintained in two-to-four-week cycle increments.

Each of the individual activities under the Legacy Business’ services, including production activities, are inputs to an integrated sign display service. Customers receive and consume the benefits from the promotional displays over the duration of the contracted display cycle. Additionally, the display of the signs does not have an alternative use to the Company and the Company had an enforceable right to payment for services performed through the closing of the sale of the Legacy Business. As a result, the Company has recognized the transaction price for service performance obligations as revenue over time. Given the nature of the Legacy Business’ performance obligations is to provide a display service over the duration of a specified period or periods, the Company recognizes revenue on a straight-line basis over the display service period as it best reflects the timing of transfer of its sign solutions.

Disaggregation of Revenue

In the following table, revenue is disaggregated by timing of revenue recognition.

	Three months ended June 30				Six months ended June 30
	2023		2022		2023		2022
	Services Revenues		Services Revenues		Services Revenues		Services Revenues
Timing of revenue recognition:
Services transferred over time	$	470,000	$	502,000	$	733,000	$	958,000
Services transferred at a point in time		5,741,000		2,752,000		18,309,000		8,444,000
Total	$	6,211,000	$	3,254,000	$	19,042,000	$	9,402,000

Contract Costs

Sales commissions that were paid to internal or external sales representatives are eligible for capitalization as they are incremental costs that would not have been incurred without entering into a specific sales arrangement and are recoverable through the expected margin on the transaction. The Company is applying the practical expedient in Accounting Standards Codification 340-40-25-4 that allows the incremental costs of obtaining a contract to be recorded as an expense when incurred when the amortization period of the asset that would have otherwise been recognized is one year or less. These costs are included in selling expenses.

Deferred Revenue

Deferred revenues represent amounts collected from customers in advance of the satisfaction of performance obligations.  Significant changes in deferred revenue during the period are as follows:

Balance at December 31, 2022	$	2,427,000
Reclassification of beginning deferred revenue to revenue, as a result of performance obligations satisfied		(2,066,000	)
Cash received in advance and not recognized as revenue		793,000
Balance at June 30, 2023	$	1,154,000

Transaction Price Allocated to Remaining Performance Obligations

The Company applies the practical expedient in paragraph 606-10-50-14 and does not disclose information about remaining performance obligations that have original expected durations of one year or less, which reflect the majority of its performance obligations. This practical expedient is being applied to arrangements for certain incomplete services and unshipped custom signage materials. Contracts that had an expected duration of greater than one year were insignificant at June 30, 2023.