| REVENUE RECOGNITION | 6. REVENUE RECOGNITION The Company determines revenue recognition for arrangements that
we determine are within the scope of Accounting Standards Codification Topic 606, “Revenue from Contracts with Customers,”
or ASC 606, by performing the following five steps: (i) identify the contract with a customer; (ii) identify the performance obligations
in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract;
and (v) recognize revenue when, or as, we satisfy the performance obligations. At contract inception, once the contract is determined
to be within the scope of ASC 606, we assess the goods or services promised within the contract and determine those that are performance
obligations and assess whether each promised good or service is distinct based on the contract. The Company disaggregates revenues by product and service types as it believes
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 nine months ended March 31, 2024 and 2023:
Schedule of disaggregation of revenues
Three Months Nine Months
2024 2023 2024 2023
Engineering Design Services $ 2,274,679 $ 1,400,780 $ 6,440,895 $ 4,745,358
Optical Components 2,402,622 2,609,983 6,285,808 7,842,804
Medical Device Products and Assemblies 565,278 1,037,302 1,661,420 2,832,165
Technology Rights – – – 600,000
Total Revenues $ 5,242,579 $ 5,048,065 $ 14,388,123 $ 16,020,327 Other selling costs to obtain and fulfill contracts are expensed as incurred
due to the short-term nature of a majority of contracts. 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 revenue. Revenue recognition policies for each of the four product and service types
appear below. Engineering Design Services The Company enters into contractual agreements with
our customers, including design services agreements, statements of work and receive purchase orders for development projects. These agreements
provide costs on an estimated basis for the services we have agreed to provide. Engineering Design Services are rendered on a time and
materials basis. The Company recognizes revenue as customers are invoiced for the actual engineering services provided in the period.
Revenue is also recognized on materials purchased for development projects at the time of receipt. Engineering Design Services are provided
on a best-efforts basis; no warranty is provided as there is no guarantee that the work will result in the attainment of the customer’s
project objectives. The Company may obtain customer deposits in advance of rendering engineering design services. Customer deposits are
treated as contractual liabilities until the terms of customer agreements are satisfied and are not a component of revenue. Optical Components, Finished Products and Assemblies The Company provides fixed price quotations to our
customers and requires purchase orders for all purchased optical components, finished devices and assemblies. Revenue is recognized at
the time title passes to our customer based on our review of the customer contract, generally at the time of shipment from our facilities.
Occasionally the Company may enter into “bill and hold” contractual arrangements where title is held by our customers while
goods are stored at our facilities for their convenience. Technology Rights and Royalties The Company may recognize revenue for the sale of technology
rights and through the receipt of royalties obtained under a license of our intellectual property. These revenues are recognized in the
period in which, in our judgment, they are earned and no longer contingent under the terms and conditions of the relevant customer contract. 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 March 31, 2024, there were
no contract assets recorded in the Company’s Consolidated Balance Sheets. The Company’s contract liabilities arise from
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’s 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:
Schedule of contract liabilities
Three Months Nine Months
2024 2023 2024 2023
Contract liabilities, beginning of period $ 1,158,242 $ 794,981 $ 1,174,690 $ 905,113
Unearned revenue received from customers 625,913 1,020,669 1,331,604 1,917,755
Revenue recognized (319,230 ) (427,844 ) (1,041,369 ) (1,435,082 )
Contract liabilities, end of period $ 1,464,925 $ 1,387,806 $ 1,464,925 $ 1,387,806 |
