Quarterly report pursuant to Section 13 or 15(d)

Revenue Recognition

v3.10.0.1
Revenue Recognition
 9 Months Ended
Sep. 30, 2018
Disaggregation of Revenue [Abstract]  
Revenue recognition
REVENUE RECOGNITION

On January 1, 2018, we adopted ASC Topic 606, Revenue from Contracts with Customers, and all of the related amendments and applied it to all contracts using the modified retrospective method. We recognized the cumulative effect of the initial adoption as an adjustment to the opening balance of retained earnings. Comparative financial information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The adoption of the guidance resulted in a change in the accounting for milestone payments. Previously, we recognized revenue upon the achievement of a milestone. Under ASC Topic 606, milestone payments are treated as variable consideration and included in the transaction price for our design services. The cumulative effect of the changes made to our condensed consolidated balance sheet as of January 1, 2018 for the adoption of the new standard was as follows:
BALANCE SHEET
Balance at December 31, 2017
Adjustments Due to ASC 606
Balance at January 1, 2018
ASSETS
 
 
 
Prepaid expenses and other current assets
$
536,000

$
67,000

$
603,000

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Deferred Revenue, current
$
143,000

$
3,000

$
146,000

Retained Earnings
$
(67,812,000
)
$
64,000

$
(67,748,000
)

The following table summarizes the impact of the adoption on our Condensed Consolidated Balance Sheet and Condensed Consolidated Statement of Comprehensive Loss as of and for the periods ended September 30, 2018:
 
September 30, 2018
 
As Reported
Balances Without Adoption of ASC 606
Effect of Change Increase/(Decrease)
BALANCE SHEET
 
 
 
ASSETS
 
 
 
Prepaid expenses and other current assets
$
397,000

$
394,000

$
3,000

LIABILITIES AND STOCKHOLDERS' EQUITY
 
 
 
Deferred revenue, current
$
187,000

$
160,000

$
27,000

Accumulated deficit
$
(85,691,000
)
$
(85,667,000
)
$
(24,000
)



 
Three Months Ended September 30, 2018
 
As Reported
Activity Without Adoption of ASC 606
Effect of Change Increase/(Decrease)
STATEMENT OF COMPREHENSIVE LOSS
 
 
 
Revenue
$
115,000

$
155,000

$
(40,000
)
Net loss
$
(6,275,000
)
$
(6,235,000
)
$
40,000



 
Nine Months Ended September 30, 2018
 
As Reported
Activity Without Adoption of ASC 606
Effect of Change Increase/(Decrease)
STATEMENT OF COMPREHENSIVE LOSS
 
 
 
Revenue
$
396,000

$
484,000

$
(88,000
)
Net loss
$
(17,943,000
)
$
(17,855,000
)
$
88,000



Our contracts with customers primarily relate to the design of filters for radio frequency, or RF, front-ends for the mobile device industry. Design service contracts generally include a modest upfront payment for the design services and a license over the completed design. We retain ownership of our designs, and therefore are also compensated for our design services through royalties based on sales of RFFE filters that incorporate our designs.  We currently do not manufacture or sell any physical products or operate as a contract design company developing designs for a fee. Except for the royalty fees that are recognized as revenue upon use of one of our designs, we recognize revenue related to our design services over the estimated design completion time, on a straight-line basis, as the services are performed. The design development period varies significantly, from 9 to 36 months, depending upon the difficulty of the design.

Other Judgments and Assumptions - We apply the practical expedients available in ASC 606 to not disclose information about 1) remaining performance obligations that have original expected durations of one year or less and 2) variable consideration that is a sales-based or usage-based royalty.

Royalty Revenue- Upon completion of design services, our customers retain a license over the completed design. The license will typically last for a minimum of two years, and in many cases for the life of the design. Royalties are sales-based, and we recognize royalty revenue upon shipment, by our customer, of products that include our licensed design. In some cases, we will receive a reduced royalty amount due to value add, or other taxes, associated with the royalty. Taxes related to royalties are netted against revenues.

Contract Assets - Contract assets, other than accounts receivable, consist of unbilled revenue and generally arise when revenue is recognized on a contract whose transaction price includes an estimate of variable consideration from milestone payments. We do not have material amounts of contract assets as we have relatively few contracts, only modest design service fees and a small number of contracts containing milestone payments. Contract asset balances are included in Prepaid expenses and other current assets in our Condensed Consolidated Balance Sheet.

Contract Liabilities - Our contract liabilities consist of customer deposits and deferred revenue. We classify contract liabilities as current or noncurrent based on the timing of when we expect to recognize revenue. Generally, our contract liabilities are expected to be recognized in one year or less. Customer deposits and deferred revenue are separately stated in our Condensed Consolidated Balance Sheet.

Summary of changes in contract assets and liabilities for the period from January 1, 2018 to September 30, 2018:

Contract asset
 
Contract asset, January 1, 2018
$
67,000

Contract assets at beginning of year transferred to accounts receivable
(43,000
)
Reversal of contract assets due to changes in transaction price
(24,000
)
Contract assets recorded on contracts during the period
3,000

Contract asset, September 30, 2018
$
3,000

 
 
Contract liability
 
Contract liability, January 1, 2018
$
146,000

Recognition of revenue included in beginning of year contract liability
(92,000
)
Contract liability, net of revenue recognized on contracts during the period
132,000

Foreign currency translation
1,000

Contract liability, September 30, 2018
$
187,000



The following table presents our disaggregated revenue by region and source:

 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2017
 
2018
 
2017
 
2018
Revenue by geographic region:
 
 
 
 
 
 
 
United States
$
89,000

 
$
96,000

 
$
415,000

 
$
338,000

Switzerland
17,000

 
19,000

 
67,000

 
58,000

Total revenue
$
106,000

 
$
115,000

 
$
482,000

 
$
396,000

 
 
 
 
 
 
 
 
Revenue by source:
 
 
 
 
 
 
 
Design services
$
99,000

 
$
85,000

 
$
465,000

 
$
276,000

Royalties
7,000

 
30,000

 
17,000

 
120,000

Total revenue
$
106,000

 
$
115,000

 
$
482,000

 
$
396,000