| Description of Business, Basis of Presentation and Significant Accounting Policies | Note 1 – Description of Business, Basis of Presentation
and Significant Accounting Policies
Cryo-Cell International, Inc. (“the Company” or
“Cryo-Cell”) was incorporated in Delaware on
September 11, 1989 and is headquartered in Oldsmar, Florida.
The Company is organized in three reportable segments, cellular
processing and cryogenic cellular storage, with a current focus on
the collection and preservation of umbilical cord blood stem cells
for family use, the manufacture of PrepaCyte CB units, the
processing technology used to process umbilical cord blood stem
cells and cellular processing and cryogenic storage of umbilical
cord blood stem cells for public use. Revenues recognized for the
cellular processing and cryogenic cellular storage represent sales
of the umbilical cord blood stem cells program to customers and
income from licensees selling the umbilical cord blood stem cells
program to customers outside the United States. Revenues recognized
for the manufacture of PrepaCyte CB units represent sales of the
PrepaCyte CB units to customers. Revenue recognized for the
cryogenic storage of umbilical cord blood stem cells for public use
is generated from the sale of the cord blood units to the National
Marrow Donor Program (“NMDP”), which distributes the
cord blood units to transplant centers located in the United States
and around the world. The Company’s headquarters facility in
Oldsmar, Florida handles all aspects of its U.S.-based business
operations including the processing and storage of specimens,
including specimens obtained from certain of its licensees’
customers. The specimens are stored in commercially available
cryogenic storage equipment.
The unaudited consolidated financial statements including the
Consolidated Balance Sheets as of February 28, 2019, the
related Consolidated Statements of Comprehensive Income (Loss),
Cash Flows and Stockholders’ Deficit for the three months
ended February 28, 2019 and February 28, 2018 have been
prepared by Cryo-Cell International, Inc. and its subsidiaries
pursuant to the rules and regulations of the Securities and
Exchange Commission for interim financial reporting. Certain
financial information and note disclosures, which are normally
included in annual financial statements prepared in accordance with
accounting principles generally accepted in the United States of
America, have been condensed or omitted pursuant to those rules and
regulations. It is suggested that these consolidated financial
statements be read in conjunction with the financial statements and
notes thereto included in the Company’s November 30,
2018 Annual Report on Form 10-K.
Revenue Recognition
Effective December 1, 2018, the Company adopted Accounting
Standards Codification (“ASC”) Topic 606, Revenue from
Contracts with Customers (“ASC 606”), using the
modified retrospective transition method. The Company recognized
the cumulative effect of applying the new revenue standard to all
contracts with customers that were not completed as of
December 1, 2018 as an adjustment to the opening balance of
stockholders’ deficit at the beginning of fiscal year 2019.
The reported results for 2019 reflect the application of ASC 606
guidance while the reported results for 2018 were prepared under
the guidance of ASC 605, Revenue
Recognition
The adoption of ASC 606 did not have an impact on the amount of
reported revenues with respect to the Company’s product or
service revenues. In connection with the adoption of ASC 606, the
Company is required to capitalize certain contract acquisition
costs consisting primarily of commissions paid when contracts are
signed and amortize these costs on a systematic basis, consistent
with the pattern of transfer of the storage services provided over
time for which the asset relates. As of December 1, 2018, the
Company capitalized in deposits and other assets, net, $329,231 in
incremental contract acquisition costs related to sales commissions
on prepaid storage contracts and reversed $18,408 of its variable
consideration that the Company determined to be fully constrained,
with a corresponding change in the opening balance of
stockholders’ deficit of $253,447, net of tax, of
$94,192.
Under ASC 606, revenue is recognized when, or as, obligations under
the terms of a contract are satisfied, which occurs when control of
the promised services are transferred to the customers. Revenue is
measured as the amount of consideration the Company expects to
receive in exchange for transferring services to a customer
(“transaction price”).
At contract inception, if the contract is determined to be within
the scope of ASC 606, the Company evaluates its contracts with
customers using the five-step model: (1) identify the contract
with the customer; (2) identify the performance obligations in
the contract; (3) determine the transaction price;
(4) allocate the transaction price to separate performance
obligations; and (5) recognize revenue when (or as) each
performance obligation is satisfied. The Company evaluates its
contracts for legal enforceability at contract inception and
subsequently throughout the Company’s relationship with its
customers. If legal enforceability with regards to the rights and
obligations exist for both the Company and the customer, then the
Company has an enforceable contract and revenue recognition is
permitted subject to the satisfaction of the other criteria. If, at
the outset of an arrangement, the Company determines that a
contract with enforceable rights and obligations does not exist,
revenues are deferred until all criteria for an enforceable
contract are met. The Company only applies the five-step model to
contracts when it is probable that collection of the consideration
that the Company is entitled to in exchange for the goods or
services being transferred to the customer, will occur.
Contract modifications exist when the modification either creates
new or changes in the existing enforceable rights and obligations.
The Company’s contracts are occasionally modified to account
for changes in contract terms and conditions, which the Company
refers to as an upgrade or downgrade. An upgrade occurs when a
customer wants to pay for additional years of storage. A downgrade
occurs when a customer originally entered into a long-term contract
(such as twenty-one one-year catch-up
Performance Obligations
At contract inception, the Company assesses the goods and services
promised in the contracts with customers and identifies a
performance obligation for each promise to transfer to the customer
a good or service (or bundle of goods or services) that is
distinct. The Company then recognizes as revenue the amount of the
transaction price that is allocated to the respective performance
obligation when (or as) the performance obligation is satisfied. To
identify the performance obligations, the Company considers all of
the goods or services promised in the contract regardless of
whether they are explicitly stated or are implied by customary
business practices. The Company determined that the following
distinct goods and services represent separate performance
obligations involving the sale of its umbilical cord blood
product:
•
Collection and processing services
•
Storage services
•
Public cord blood banking
•
License and royalties
•
Sale of PrepaCyte CB product
a)
Processing and Storage Fees:
Processing and storage fees include the Company providing umbilical
cord blood and tissue cellular processing and cryogenic cellular
storage for private use. Revenues recognized for the cellular
processing and cryogenic cellular storage represent sales of the
umbilical cord blood stem cells program to customers and income
from licensees who are selling the umbilical cord blood stem cells
program to customers outside the United States.
The Company recognizes revenue from processing fees at the point in
time of the successful completion of processing and recognizes
storage fees over time, which is ratably over the contractual
storage period as well as other income from royalties paid by
licensees related to long-term storage contracts which the Company
has under license agreements. Contracted storage periods
are annual, twenty-one twenty-one-year
Significant financing
When determining the transaction price of a contract, an adjustment
is made if payment from a customer occurs either significantly
before or significantly after performance, resulting in a
significant financing component. For all plans
being annual, twenty-one years one-time twenty-one pre-paid pre-paid twenty-one
The Company has determined that the majority of plans that are paid
over time are paid in less than a year. When considered over a
twenty-four-month payment plan, the difference between the cash
selling price and the consideration paid is nominal. As such, the
Company believes that its payment plans do not include significant
financing components as they are not significant in the aggregate
when considered in the context of all contracts entered into nor
significant at the individual contract level.
The Company elected to apply the practical expedient where the
Company does not need to assess whether a significant financing
component exists if the period between when it performs its
obligations under the contract and when the customer pays is one
year or less.
As of February 28, 2019, the total aggregate transaction price
allocated to the unsatisfied performance obligations was recorded
as deferred revenue amounting to $29,392,197, which will be
recognized ratably on a straight-line basis over the contractual
period of which $8,267,997 will be recognized over the next twelve
months.
Variable consideration
In December 2005, the Company began providing its customers that
enrolled after December 2005 a payment warranty under which the
Company agrees to pay $50,000 to its client if the umbilical cord
blood product retrieved is used for a stem cell transplant for the
donor or an immediate family member and fails to engraft, subject
to various restrictions. Effective February 1, 2012, the
Company increased the $50,000 payment warranty to a $75,000 payment
warranty to all of its new clients. Effective June 1, 2017,
the Company increased the payment warranty to $100,000 to all new
clients who choose the premium processing method, Prepacyte CB.
Additionally, under the Cryo-Cell CaresTM program, the Company will
pay $10,000 to the client to offset personal expenses if the
umbilical cord blood product is used for bone marrow reconstitution
in a myeloblative transplant procedure. The product warranty and
the Cryo-Cell Cares program are available to clients who enroll
under this structure for as long as the specimen is stored with the
Company. In the processing and storage agreements, the Company
provides limited rights which are offered to customers
automatically upon contract execution. The Company has determined
that the payment warranty represents variable consideration payable
to the customer.
Based on the Company’s historical experience to date, the
Company has determined the payment warranty to be fully constrained
under the most likely amount method. Consequently, the transaction
price does not currently reflect any expectation of service level
credits. At the end of each reporting period, the Company will
update the estimated transaction price related to the payment
warranty including updating its assessment of whether an estimate
of variable consideration is constrained to represent faithfully
the circumstances present at the end of the reporting period and
the changes in circumstances during the reporting period.
Allocation of transaction price
As the Company’s processing and storage agreements contain
multiple performance obligations, ASC 606 requires an allocation of
the transaction price based on the estimated relative standalone
selling prices of the promised services underlying each performance
obligation. The Company has selected an adjusted market assessment
approach to estimate the stand-alone selling prices of the
processing services and storage services and concluded that the
published list price is the price that a customer in that market
would be willing to pay for those goods or services. The Company
also considered the fact that all customers are charged the list
prices current at the time of their enrollment where the Company
has separately stated list prices for processing and storage.
Costs to Obtain a Contract
Prior to the adoption of ASC 606, the Company expensed in the
period, all commissions paid to its internal and external sales
representatives the Company employs and to its customers for
generating new contracts. With the adoption of ASC 606 as of
December 1, 2018, the Company capitalizes commissions that are
incremental in obtaining customer contracts and the costs incurred
to fulfill a customer contract if those costs are not within the
scope of another topic within the accounting literature and meet
the specified criteria. These costs are deferred in other current
or long-term assets and are expensed to selling, general and
administrative expenses as the Company satisfies the performance
obligations by transferring the service to the customer. These
assets will be periodically assessed for impairment. As a practical
expedient, the Company elected to recognize the incremental costs
of obtaining its annual contracts as an expense when incurred, as
the amortization period of the asset recognized would have been one
year.
The Company has determined that payments under the
Company’s refer-a-friend
b)
Public banking revenue:
The Company sells and provides units not likely to be of
therapeutic use for research to qualified organizations and
companies operating under Institutional Review Board approval.
Control is transferred at the point in time when the shipment has
occurred, at which time, the Company records revenue.
c)
Licensee and royalty income:
Licensee and royalty income consist of royalty income earned on the
processing and storage of cord blood stem cell specimens by an
affiliate where the Company has a License and Royalty Agreement.
The Company records revenue from processing and storage of
specimens and pursuant to agreements with licensees. The Company
records the royalty revenue in same period that the related
processing and storage is being completed by the affiliate.
d)
Product Revenue
The Company records revenue from the sale of the PrepaCyte CB
product line upon shipment of the product to the Company’s
customers.
e)
Shipping and handling
The Company elected to apply the practical expedient to account for
shipping and handling activities performed after the control of a
good has been transferred to the customer as a fulfillment cost.
Shipping and handling costs that the Company incurs are therefore
expensed and included in cost of sales.
The adoption of ASC 606 did not have an impact on the timing of
revenue recognition for any of the Company’s revenue
streams.
Disaggregation of Revenue
The following table provides information about disaggregated
revenue by products and services:
Three months ended
February 28, 2019 February 28, 2018
Processing and storage fees $ 7,335,027 $ 6,200,067
Public banking revenue 134,365
—
Licensee and royalty income
—
—
Product revenue 25,720 28,051
$ 7,495,112 $ 6,228,118
The following table provides information about assets and
liabilities from contracts with customers:
February 28, 2019 At Adoption
Contract assets (sales commissions) $ 345,757 $ 329,231
Accounts receivables $ 5,694,162 $ 5,867,335
Short-term contract liabilities (deferred revenue) $ 8,266,997 $ 8,365,284
Long-term contract liabilities (deferred revenue) $ 21,124,200 $ 20,317,231
The Company, in general, requires the customer to pay for
processing and storage services at the time of processing. Contract
assets include deferred contract acquisition costs, which will be
amortized along with the associated revenue. Contract liabilities
include payments received in advance of performance under the
contract and are realized with the associated revenue recognized
under the contract. Accounts receivable consists of amounts due
from clients that have enrolled and processed in the umbilical cord
blood stem cell processing and storage programs related to renewals
of annual plans and amounts due from license affiliates, and
sublicensee territories. The Company did not have asset impairment
charges related to contract assets in the three months ended
February 28, 2019.
The following table presents changes in the Company’s
contract assets and liabilities during the three months ended
February 28, 2019:
Balance at Additions Deductions Balance at
Contract assets (sales commissions) $ 329,231 $ 20,954 $ (4,428 ) $ 345,757
Accounts receivables 5,867,335 9,017,603 (9,190,776 ) 5,694,162
Contract liabilities (deferred revenue) 28,682,515 4,467,979 (3,759,297 ) 29,391,197
Accounts Receivable
Accounts receivable consist of uncollateralized amounts due from
clients that have enrolled and processed in the umbilical cord
blood stem cell processing and storage programs and amounts due
from license affiliates, and sublicensee territories. Accounts
receivable are due within 30 days and are stated at amounts net of
an allowance for doubtful accounts. Accounts outstanding longer
than the contractual payment terms are considered past due. The
Company determines its allowance by considering the length of time
accounts receivable are past due, the Company’s previous loss
history, and the client’s current ability to pay its
obligations. Therefore, if the financial condition of the
Company’s clients were to deteriorate beyond the estimates,
the Company may have to increase the allowance for doubtful
accounts which could have a negative impact on earnings. The
Company writes-off
Inventories
As part of the Asset Purchase Agreement, (see Note 2), the Company
has an agreement with Duke University (“Duke”) expiring
on January 31, 2020 for Duke to receive, process, and store
cord blood units for the Public Cord Blood Bank (“Duke
Services”). As of February 28, 2019, the Company had
5,974 cord blood units in inventory. These units are valued at the
lower of cost or net realizable value. Costs include the cost of
collecting, transporting, processing and storing the unit. Costs
charged by Duke for their Duke Services are based on a monthly
fixed fee for storing 12 blood units per month. The Company
computes the cost per unit for these Duke Services and capitalizes
the unit cost on all blood units shipped and stored in a year at
Duke. If the Company ships and stores less than 144 blood units
with Duke in a one-year
Income Taxes
Deferred income tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences
between financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred income tax
assets and liabilities are measured using enacted tax rates
expected to be recovered or settled. The Company has recorded a
valuation allowance of $1,634,000 and $1,634,000 as of
February 28, 2019 and November 30, 2018, respectively, as
the Company does not believe it is “more likely than
not” that all future income tax benefits will be realized.
When the Company changes its determination as to the amount of
deferred income tax assets that can be realized, the valuation
allowance is adjusted with a corresponding impact to income tax
expense in the period in which such determination is made. The
ultimate realization of the Company’s deferred income tax
assets depends upon generating sufficient taxable income prior to
the expiration of the tax attributes. In assessing the need for a
valuation allowance, the Company projects future levels of taxable
income. This assessment requires significant judgment. The Company
examines the evidence related to the recent history of losses, the
economic conditions in which the Company operates and forecasts and
projections to make that determination.
The Company recorded U.S. income taxes of approximately $105,000
and $3,203,000 during the three months ended February 28, 2019
and February 28, 2018, respectively. Included in the
$3,203,000 tax expense for the three months ended February 28,
2018 is approximately $2,985,000 of expense related to the
reduction of the federal tax rate to 21% as of January 1, 2018
as a result of the Tax Cuts and Jobs Act that was signed into law
on December 22, 2017. The decrease in the federal tax rate
caused a decrease in the Company’s deferred tax asset which
resulted in an increase in the income tax expense.
The Company records foreign income taxes withheld from installment
payments of non-refundable up-front
The Company recognizes the financial statement benefit of a tax
position only after determining that the relevant tax authority
would more likely than not sustain the position following an audit.
For tax positions meeting the more-likely-than-not
The Company recognizes interest and penalties related to uncertain
tax positions in income tax expense. For the three months ended
February 28, 2019 and February 28, 2018, the Company had
no provisions for interest or penalties related to uncertain tax
positions.
Long-Lived Assets
The Company evaluates the realizability of its long-lived assets,
which requires impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment, such as
reductions in demand or when significant economic slowdowns are
present. Reviews are performed to determine whether the carrying
value of an asset is impaired, based on comparisons to undiscounted
expected future cash flows. If this comparison indicates that there
is impairment and carrying value is in excess of fair value, the
impaired asset is written down to fair value, which is typically
calculated using: (i) quoted market prices or
(ii) discounted expected future cash flows utilizing a
discount rate. The Company did not note any impairment for the
three months ended February 28, 2019 and February 28,
2018.
Goodwill
Goodwill represents the excess of the purchase price of the assets
acquired from Cord:Use (Note 2) over the estimated fair value of
the net tangible and identifiable assets acquired. The annual
assessment of the reporting unit is performed as of September 1st,
and an assessment is performed at other times if an event occurs or
circumstances change that would more likely than not reduce the
fair value of the asset below its carrying value. Step one of the
impairment assessment compares the fair value of the reporting unit
to its carrying value and if the fair value exceeds its carrying
value, goodwill is not impaired. If the carrying value exceeds the
fair value, the implied fair value of goodwill is compared to the
carrying value of goodwill. If the implied fair value exceeds the
carrying value then goodwill is not impaired; otherwise, an
impairment loss would be recorded by the amount the carrying value
exceeds the implied fair value. As of February 28, 2019, and
November 30, 2018, goodwill, is reflected on the consolidated
balance sheets at $1,941,411 and $1,941,411.
Stock Compensation
As of February 28, 2018, the Company has two stock-based
compensation plans, which are described in Note 7 to the
consolidated financial statements. The Company’s stock-based
employee compensation plan that became effective December 1,
2011 was approved by the Board of Directors and approved by the
stockholders at the 2012 Annual Meeting. The Company recognized
approximately $139,000 and $556,000 for the three months ended
February 28, 2019 and February 28, 2018, respectively, of
stock-based compensation expense.
The Company recognizes stock-based compensation based on the fair
value of the related awards. Under the fair value recognition
guidance of stock-based compensation accounting rules, stock-based
compensation expense is estimated at the grant date based on the
fair value of the award and is recognized as expense over the
requisite service period of the award. The fair value of
service-based vesting condition and performance-based vesting
condition stock option awards is determined using the Black-Scholes
valuation model. For stock option awards with only service-based
vesting conditions and graded vesting features, the Company
recognizes stock compensation expense based on the graded-vesting
method. To value awards with market-based vesting conditions the
Company uses a binomial valuation model. The Company recognizes
compensation cost for awards with market-based vesting conditions
on a graded-vesting basis over the derived service period
calculated by the binomial valuation model. The use of these
valuation models involves assumptions that are judgmental and
highly sensitive in the determination of compensation expense and
include the expected life of the option, stock price volatility,
risk-free interest rate, dividend yield, exercise price, and
forfeiture rate. Forfeitures are estimated at the time of valuation
and reduce expense ratably over the vesting period.
The estimation of stock awards that will ultimately vest requires
judgment and to the extent that actual results or updated estimates
differ from current estimates, such amounts will be recorded as a
cumulative adjustment in the period they become known. The Company
considered many factors when estimating forfeitures, including the
recipient groups and historical experience. Actual results and
future changes in estimates may differ substantially from current
estimates.
The estimation of stock awards that will ultimately vest requires
judgment and to the extent that actual results or updated estimates
differ from current estimates, such amounts will be recorded as a
cumulative adjustment in the period they become known. The Company
considered many factors when estimating forfeitures, including the
recipient groups and historical experience. Actual results and
future changes in estimates may differ substantially from current
estimates.
The Company issues performance-based equity awards which vest upon
the achievement of certain financial performance goals, including
revenue and income targets. Determining the appropriate amount to
expense based on the anticipated achievement of the stated goals
requires judgment, including forecasting future financial results.
The estimate of the timing of the expense recognition is revised
periodically based on the probability of achieving the required
performance targets and adjustments are made as appropriate. The
cumulative impact of any revision is reflected in the period of the
change. If the financial performance goals are not met, the award
does not vest, so no compensation cost is recognized and any
previously stock-recognized stock-based compensation expense is
reversed.
The Company issues equity awards with market-based vesting
conditions which vest upon the achievement of certain stock price
targets. If the awards are forfeited prior to the completion of the
derived service period, any recognized compensation is reversed. If
the awards are forfeited after the completion of the derived
service period, the compensation cost is not reversed, even if the
awards never vest.
Fair Value of Financial Instruments
Management uses a fair value hierarchy, which gives the highest
priority to quoted prices in active markets. The fair value of
financial instruments is estimated based on market trading
information, where available. Absent published market values for an
instrument or other assets, management uses observable market data
to arrive at its estimates of fair value. Management believes that
the carrying amount of cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximate fair
value due to the short-term nature of these instruments. The
Company believes that the fair value of its Revenue Sharing
Agreements (”RSA”) liability recorded on the balance
sheet is between the recorded book value and up to the
Company’s previous settlement experience, due to the various
terms and conditions associated with each RSA.
The Company uses an accounting standard that defines fair value as
an exit price, representing the amount that would be received to
sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date. As
such, fair value is a market-based measurement that should be
determined based on assumptions that market participants would use
in pricing an asset or liability. As a basis for considering such
assumptions, the standard establishes a three-level fair value
hierarchy that prioritizes the inputs used to measure fair value.
The three levels of inputs used to measure fair value are as
follows:
Level 1 Quoted prices in active markets for identical
assets or liabilities.
Level 2 Observable inputs other than quoted prices
included in Level 1, such as quoted prices for similar assets
and liabilities in active markets; quoted prices for identical or
similar assets and liabilities in markets that are not active; or
other inputs that are observable or can be corroborated by
observable market data.
Level 3 Unobservable inputs that are supported by little
or no market activity and that are significant to the fair value of
the assets or liabilities. This includes certain pricing models,
discounted cash flow methodologies and similar techniques that use
significant unobservable inputs.
The following table summarizes the financial assets and liabilities
measured at fair value on a recurring basis as of February 28,
2019 and November 30, 2018, respectively, segregated among the
appropriate levels within the fair value hierarchy:
Fair Value at Fair Value Measurements
Description Level 1 Level 2 Level 3
Assets:
Marketable Securities $ 808,510 $ 808,510
—
—
$ 808,510 $ 808,510
—
—
Liabilities:
Contingent consideration $ 4,650,032 $
—
— $ 4,650,032
Total $ 4,650,032 $
—
— $ 4,650,032
Contingent Consideration:
Beginning Balance as of November 30, 2018 $ 4,282,975
Additions – Cord:Use earnout
—
Fair value adjustment as of February 28, 2019 367,057
Ending balance as of February 28, 2019 $ 4,650,032
Fair Value
Measurements
Fair Value at at November 30, 2018 Using
Description November 30, Level 1 Level 2 Level 3
Assets:
Trading Securities $ 68,816 $ 68,816
—
—
Available-for-sale 806,873 806,873
—
—
$ 875,689 $ 875,689
—
—
Liabilities:
Contingent consideration $ 4,282,975 $
—
— $ 4,282,975
Total $ 4,282,975 $
—
— $ 4,282,975
The following is a description of the valuation techniques used for
these items, as well as the general classification of such items
pursuant to the fair value hierarchy:
Trading Securities –
Available-for-sale securities
Marketable securities
Contingent consideration -
Product Warranty and Cryo-Cell Cares TM
In December 2005, the Company began providing its customers that
enrolled after December 2005 a payment warranty under which the
Company agrees to pay $50,000 to its client if the umbilical cord
blood product retrieved is used for a stem cell transplant for the
donor or an immediate family member and fails to engraft, subject
to various restrictions. Effective February 1, 2012, the
Company increased the $50,000 payment warranty to a $75,000 payment
warranty to all of its new clients. Effective June 1, 2017,
the Company increased the payment warranty to $100,000 to all new
clients who choose the premium processing method, Prepacyte CB.
Additionally, under the Cryo-Cell CaresTM program, the Company will
pay $10,000 to the client to offset personal expenses if the
umbilical cord blood product is used for bone marrow reconstitution
in a myeloblative transplant procedure. The product warranty and
the Cryo-Cell Cares program are available to clients who enroll
under this structure for as long as the specimen is stored with the
Company. The Company has not experienced any claims under the
warranty program nor has it incurred costs related to these
warranties.
As discussed above, the Company has determined that the payment
warranty represents variable consideration payable to the customer.
Upon the adoption of ASC 606, the Company has concluded the payment
warranty be fully constrained under the most likely amount method,
therefore, the transaction price does not reflect any expectation
of service level credits at February 28, 2019. At the end of
each reporting period, the Company shall update the estimated
transaction price related to the payment wuarantee including
updating its assessment of whether an estimate of variable
consideration is constrained to represent faithfully the
circumstances present at the end of the reporting period and the
changes in circumstances during the reporting |
