Revenue Recognition

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

Revenue Recognition

NOTE 4 - REVENUE RECOGNITION

The Company’s revenue is derived from: (i) sales of our wireless asset management systems and spare parts; (ii) remotely hosted SaaS agreements and post-contract maintenance and support agreements; (iii) services, which includes training and technical support; and (iv) periodically, leasing arrangements. Amounts invoiced to customers which are not recognized as revenue are classified as deferred revenue and classified as short-term or long-term based upon the terms of future services to be delivered.

The following table presents our revenues disaggregated by revenue source for the years ended December 31, 2016, 2017 and 2018.

	Year Ended December 31,
	2016		2017		2018
Industrial truck management
Products	$	14,299,000	$	17,481,000	$	22,653,000
Services		5,543,000		6,224,000		7,348,000
		19,842,000		23,705,000		30,001,000

	Year Ended December 31,
	2016		2017		2018
Connected vehicles
Products	$	-	$	43,000	$	8,491,000
Services		1,142,000		2,930,000		1,086,000
		1,142,000		2,973,000		9,577,000

	Year Ended December 31,
	2016		2017		2018
Logistics visibility solutions
Products	$	7,067,000	$	6,028,000	$	5,753,000
Services		8,771,000		8,252,000		7,733,000
		15,838,000		14,280,000		13,486,000

The balances of contract assets, and contract liabilities from contracts with customers as of December 31, 2017 and 2018 are as follows:

	December 31,
	2017		2018
Current assets:
Deferred sales commissions to employees	$	-	$	585,000
Deferred costs	$	8,598,000	$	9,069,000
Current liabilities:
Deferred revenue -other (1)	$	2,589,000	$	305,000
Deferred maintenance and SaaS revenue (1)		3,296,000		4,607,000
Deferred logistics visibility solutions product revenue (1)		11,564,000		12,176,000
		17,449,000		17,088,000
Less: Current portion		9,711,000		7,902,000
Deferred revenue - less current portion	$	7,738,000	$	9,186,000

(1) We record deferred revenues when cash payments are received or due in advance of our performance. For the years ended December 31, 2017 and 2018, the Company recognized revenue of 10,751,000 and $11,813,000, respectively, that was included in the deferred revenue balance at the beginning of each reporting period. The Company expects to recognize as revenue before year 2023, when it transfers those goods and services and, therefore, satisfies its performance obligation to the customers. We do not separately account for activation fees since no good or service is transferred to the customer. Therefore, the activation fee is included in the transaction price and allocated to the performance obligations in the contract and deferred/amortized over the life of the contract.

Development projects with Avis Budget Car Rental, LLC

In April 2015, we entered into a development project with Avis Budget Car Rental, LLC (“ABCR”), a subsidiary of Avis Budget Group Inc. (“Avis”), that included certain contractual milestones. This development project was completed during 2016 and the Company recognized milestone revenue of $255,000 for the year ended December 31, 2016 from the completion of milestones in accordance with the milestone method of revenue recognition. Milestone payments are recognized as revenue upon achievement of the milestone only if the following conditions are met: (i) there is substantive uncertainty at the date of entering into the arrangement that the milestone would be achieved; (ii) the milestone is commensurate with either the vendor’s performance to achieve the milestone or the enhancement of the value of the delivered item by the vendor; (iii) the milestone relates solely to past performance; and (iv) be reasonable in relation to the effort expended to achieve the milestone.

On March 18, 2017 (the “SOW#4 Effective Date”), the Company entered into a statement of work (the “SOW#4”) with ABCR for 50,000 units of the Company’s cellular-enabled rental fleet car management system (the “System”) and maintenance and support of the System (“Maintenance Services”) for sixty months from installation of the equipment for the consideration of approximately $21,270,000. ABCR has an option to purchase additional units and has the option to renew the Maintenance Services period for an additional twelve months upon its expiry, and then after such 12-month period, ABCR can purchase additional Maintenance Services on a month-to-month basis (during which ABCR can terminate the Maintenance Services) for up to forty-eight additional months.

The SOW#4 may be terminated by ABCR for cause (which is generally the Company’s material breach of its obligations under the SOW#4), for convenience (subject to a termination fee), upon a material adverse change to the Company, or for intellectual property infringement. The Company does not have the right to unilaterally terminate the SOW#4. In the event that ABCR terminates the SOW#4, then ABCR would be liable to the Company for the net present value of all future remaining charges under the SOW#4 at a negotiated discount rate per annum, with the payment due on the effective date of termination.

The SOW#4 provides for a period of exclusivity commencing on the SOW#4 Effective Date and ending fourteen months after the SOW#4 Effective Date, which may be extended in six-month increments by Avis under certain conditions. Exclusivity under the SOW#4 ended on May 18, 2018. Avis has the right to cancel or accept the System and pay a lower price if the System cannot retrieve the necessary vehicle data from twenty-five makes and models six months after the SOW#4 Effective Date.

The Company received an upfront payment of $3,290,000, consisting of a $2,000,000 initial payment for the units to be delivered, $902,000 for development of additional system enhancements and $388,000 for production readiness development. The upfront payment for the units is included in current deferred revenue at December 31, 2017. In September 2017, the Company and ABCR amended SOW#4 for out-of-scope system enhancements performed by the Company. The Company recognizes revenue on the development project, which was completed and approved in December 2017, on a proportional method performance basis, as determined by the relationship of actual labor and material costs incurred to date compared to the estimated total project costs. Estimates of total project costs are reviewed and revised during the term of the project. Revisions to project costs estimates, where applicable, are recorded in the period in which the facts that give rise to such changes become known. The Company recognized SOW#4 development project revenue of $2,470,000 and $-0- during the years ended December 31, 2017 and 2018, respectively. The Company recognized SOW#4 product revenue of $-0- and $8,491,000 during the years ended December 31, 2017 and 2018, respectively.

The following is the amount of the transaction price that has not yet been recognized as revenue as of December 31, 2018, which is expected to be recognized by year 2023:

	2019		2020		2021		2022		2023		Total
Revenue expected to be recognized December 31,	$	1,887,000	$	1,887,000	$	1,887,000	$	1,887,000	$	801,000	$	8,349,000

Part of the performance credit earnbacks and incentive payments (“performance bonus”) have been excluded from the disclosure table above because it was not included in the transaction price. That part of the performance bonus was excluded from the transaction price in accordance with the accounting guidance in Topic 606 on constraining estimates of variable consideration, including the following factors:

● The susceptibility of the consideration amount to factors outside the Company’s influence, including weather conditions and the risk of obsolescence of the promised goods and services.

● Whether the uncertainty about the consideration amount is not expected to be resolved for a long period of time.

● The Company’s experience with similar types of contracts.

● Whether the Company expects to offer price concessions or change the payment terms.

● The range of possible consideration amounts.

On December 3, 2018 (the “SOW#5 Effective Date”), the Company entered into a statement of work (the “SOW#5”) with ABCR for 75,000 units of the Company’s System, Maintenance Services for sixty months from installation of the equipment and the development of additional features and functionality for the consideration of approximately $33,000,000. ABCR has an option to purchase additional units and has the option to renew the Maintenance Services period for an additional twelve months upon its expiry, and then after such 12-month period, ABCR can purchase additional Maintenance Services on a month-to-month basis (during which ABCR can terminate the Maintenance Services) for up to forty-eight additional months.

The SOW#5 may be terminated by ABCR for cause (which is generally the Company’s material breach of its obligations under the SOW#5), for convenience (subject to a termination fee), upon a material adverse change to the Company, or for intellectual property infringement. The Company does not have the right to unilaterally terminate the SOW#5. In the event that ABCR terminates the SOW#4, then ABCR would be liable to the Company for the net present value of all future remaining charges under the SOW#5 at a negotiated discount rate per annum, with the payment due on the effective date of termination.

The SOW#5 provides for a period of exclusivity commencing on the SOW#5 Effective Date and ending twelve months after the SOW#5 Effective Date, which may be extended in six-month increments by Avis under certain conditions.

The Company did not recognize SOW#5 revenue during the year ended December 31, 2018.

Arrangements with multiple performance obligations

Our contracts with customers may include multiple performance obligations. For such arrangements, we allocate revenue to each performance obligation based on its relative standalone selling price. We generally determine standalone selling prices based on observable prices charged to customers or adjusted market assessment or using expected cost-plus margin when one is available. Adjusted market assessment price is determined based on overall pricing objectives taking into consideration market conditions and entity specific factors.

Practical expedients and exemptions

We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.