The Company had product and product-related services revenue consisting of revenue from the sale of RUO and MDx instruments and consumables and the use of the HTG EdgeSeq proprietary technology to process samples and design custom RUO assays for the three months ended March 31, 2019 and 2018 as follows:

	Three Months Ended March 31,
	2019		2018
Product revenue:
RUO instruments	$	47,866	$	11,358
MDx instruments		92,550		—
RUO consumables		304,231		205,813
MDx consumables		96,587		46,199
Total product revenue		541,234		263,370
Product-related services revenue:
Custom RUO assay development		367,859		127,027
RUO sample processing		1,753,412		1,343,149
Total product-related services revenue		2,121,271		1,470,176
Total product and product-related services revenue	$	2,662,505	$	1,733,546

Because the Company’s agreements for product and product-related services revenue have an expected duration of one year or less, the Company has elected the practical expedient in ASC 606-10-50-14(a) to not disclose information about its remaining performance obligations.

The delivery of each instrument and related installation and calibration are considered to be a single performance obligation, as the HTG EdgeSeq instrument must be professionally installed and calibrated prior to use. Instrument product revenue is generally recognized upon installation and calibration of the instrument by field service engineers, which represents the point at which the customer has the ability to use the instrument and has accepted the asset. Installation generally occurs within one month of instrument shipment.

The delivery of each consumable is a separate performance obligation. Consumables revenue is recognized upon transfer of control, which represents the point when the customer has legal title and the significant risks of ownership of the asset. The Company’s standard terms and conditions provide that no right of return exists for instruments and consumables, unless replacement is necessary due to delivery of defective or damaged product. Customer payment terms vary but are typically between 30 and 90 days of revenue being earned from shipment or delivery, as applicable.

Shipping and handling fees charged to the Company’s customers for instruments and consumables shipped are included in the accompanying condensed consolidated statements of operations as part of product and product-related services revenue. Shipping and handling costs for sold products shipped to the Company’s customers are included in the accompanying condensed consolidated statements of operations as part of cost of product and product-related services revenue.

For sales of consumables in the United States, standard delivery terms are FOB shipping point, unless otherwise specified in the customer contract, reflecting transfer of control to the customer upon shipment. The Company has elected the practical expedient to account for shipping and handling as activities to fulfill the promise to transfer the consumables.

Product revenue includes four categories of instrument and consumable revenue, all accounted for under the policies outlined above. RUO instrument and consumable revenue includes the sale of our RUO profiling products, including instruments, instrument support contracts and RUO assay kits to biopharmaceutical companies, academic research centers and molecular testing laboratories to be used for research use only. MDx instrument and consumable revenue is revenue generated from the sale of CE/IVD labeled diagnostic products and the sale of our RUO instrument and consumable products to customers using these products for diagnostic purposes.

The Company recognized revenue of $68,820 and $0 of product revenue from performance obligations that were satisfied in previous periods for the three months ended March 31, 2019 and 2018, respectively.

The Company also provides sample preparation and processing services and molecular profiling of retrospective cohorts for its customers through its VERI/O laboratory, whereby the customer provides samples to be processed using HTG EdgeSeq technology specified in the order. Customers are charged a per sample fee for sample processing services which is recognized as revenue upon delivery of a data file to the customer showing the results of testing and completing delivery of the agreed upon service. This is when the customer can use and benefit from the results of testing and the Company has the present right to payment.

The Company enters into custom RUO assay design agreements that may generate up-front fees and subsequent payments that might be earned upon completion of design process phases. The Company measures progress toward complete satisfaction of its performance obligation to perform custom RUO assay design using an output method based on the costs incurred to date compared to total expected costs, as this is representative of the delivery of outputs under the arrangements and the best measure of progress. However, because in most instances the assay development fees are contingent upon completion of each phase of the design project and the decision of the customer to proceed to the next phase, the amount to be included in the transaction price and recognized as revenue is limited to that which the customer is contractually obligated to pay upon completion of that phase, which is when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Changes in estimates of total expected costs are accounted for prospectively as a change in estimate. From period to period, custom RUO assay design service revenue can fluctuate substantially based on the completion of design-related phases.

The Company recognized revenue of approximately $41,137 and $0 of custom RUO assay design revenue from performance obligations that were satisfied in previous periods for the three months ended March 31, 2019 and 2018, respectively.

See Note 15 for discussion of collaborative development services contracts with related parties. There was no collaborative development services revenue generated from the Company’s companion diagnostic development services agreements with non-related party customers for the three months ended March 31, 2019 or 2018.

The Company receives up-front payments from customers for custom RUO assay design services, and occasionally for sample processing services. Payments for instrument extended warranty contracts are made in advance as are payments for certain agreed-upon capital purchases required for collaborative development service projects. The Company recognizes such up-front payments as a contract liability. The contract liability is subsequently reduced at the point in time that the data file is delivered for sample processing services or as the Company satisfies its performance obligations over time for RUO assay design, collaborative development and extended warranty services. Contract liabilities of $355,702 and $410,947 were included in contract liabilities – current and other non-current liabilities in the accompanying condensed consolidated balance sheets as of March 31, 2019 and December 31, 2018, respectively. The Company expects approximately $246,009 of deferred revenue to be realized within the next twelve months and the remaining $109,693 to be realized prior to March 31, 2021.

Changes in the Company’s contract liability were as follows as of the dates indicated:

	Product Revenue			Custom RUO Assay Design			Sample Processing			Total Contract Liability
Balance at January 1, 2019	$	116,547		$	50,000		$	244,400		$	410,947
Deferral of revenue		50,667			11,685			48,327			110,679
Recognition of deferred revenue		(36,544	)		(11,685	)		(117,695	)		(165,924	)
Balance at March 31, 2019	$	130,670		$	50,000		$	175,032		$	355,702

	Product Revenue			Custom RUO Assay Design			Sample Processing			Collaborative Development Services			Total Contract Liability
Balance at January 1, 2018	$	39,426		$	197,606		$	490,536		$	110,317		$	837,885
Deferral of revenue		55,476			135,250			53,770			—			244,496
Recognition of deferred revenue		(65,345	)		(127,027	)		(261,561	)		(23,639	)		(477,572	)
Balance at March 31, 2018	$	29,557		$	205,829		$	282,745		$	86,678		$	604,809