Revenue

3 Months Ended

Mar. 31, 2019

Revenue from Contract with Customer [Abstract]

Revenue

NOTE 7—REVENUE

The core principle of ASC 606 is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. ASC 606 defines a five-step process to achieve this core principle, which includes: (1) identifying contracts with customers, (2) identifying performance obligations within those contracts, (3) determining the transaction price, (4) allocating the transaction price to the performance obligation in the contract, which may include an estimate of variable consideration, and (5) recognizing revenue when or as each performance obligation is satisfied.

Sales of OmniMetrix monitoring systems include the sale of equipment (“HW”) and of monitoring services (“Monitoring”). Revenue (and related costs) associated with sale of equipment are recorded to deferred revenue (and deferred charges) upon shipment for PG and CP monitoring units. Revenue and related costs with respect to the sale of equipment are recognized over the estimated life of the units which are currently estimated to be three years (two years up to December 31, 2017). Revenues from the prepayment of monitoring fees (generally paid twelve months in advance) are initially recorded as deferred revenue upon receipt of payment from the customer and then amortized to revenue over the monitoring service period.

The following table disaggregates the Company’s revenue for the three-month periods ended March 31, 2019 and 2018:

	HW		Monitoring		Total
Three months ended March 31, 2019:
PG Segment	$	290	$	706	$	996
CP Segment		271		60		331
Total Revenue	$	561	$	766	$	1,327

	HW		Monitoring		Total
Three months ended March 31, 2018:
PG Segment	$	293	$	593	$	886
CP Segment		274		49		323
Total Revenue	$	567	$	642	$	1,209

Deferred revenue activity for the three months ended March 31, 2019 can be seen in the table below:

	HW			Monitoring			Total
Balance at December 31, 2018	$	2,432		$	1,629		$	4,061
Additions during the period		417			813			1,230
Recognized as revenue		(474	)		(766	)		(1,240	)
Balance at March 31, 2019	$	2,375		$	1,676		$	4,051
Amounts to be recognized as revenue in the year ending:
March 31, 2020		1,229			1,450			2,679
March 31, 2021		842			218			1,060
March 31, 2022 and thereafter		304			8			312
	$	2,375		$	1,676		$	4,051

Other revenue of approximately $87 is related to accessories, repairs, and other miscellaneous charges that are recognized to revenue when sold and are not deferred.

Deferred charges relate only to the sale of equipment. Deferred charges activity for the three months ended March 31, 2019 can be seen in the table below:

Balance at December 31, 2018	$	1,438
Additions during the period		211
Recognized as cost of sales		(282	)
Balance at March 31, 2019	$	1,367
Amounts to be recognized as cost of sales in the year ending:
March 31, 2020	$	712
March 31, 2021		483	*
March 31, 2022 and thereafter		172	*
	$	1,367

* Amounts included in other assets in the Company’s unaudited condensed consolidated balance sheets at March 31, 2019.

The Company pays its employees sales commissions for sales of HW and for first sales of monitoring services (not for renewals). In accordance with Topic 606, Revenue from Contracts with Customers, of the FASB Accounting Standards Codification (“ASC 606”), the Company capitalizes as a contract asset the sales commissions on these sales. Contract assets associated with HW are amortized over the estimated life of the units which are currently estimated to be three years (two years up to December 31, 2017). Contract assets associated with monitoring services are amortized over the expected monitoring life including renewals.

The following table provides a reconciliation of the Company’s sales commissions contract assets for the three-month period ended March 31, 2019:

	HW			Monitoring			Total
Balance at December 31, 2018	$	107		$	36		$	143
Additions during the period		16			5			21
Amortization of sales commissions		(22	)		(3	)		(25	)
Balance at March 31, 2019	$	101		$	38		$	139

The capitalized sales commissions are included in other current assets ($70) and other assets ($69) in the Company’s unaudited condensed consolidated balance sheets at March 31, 2019. The capitalized sales commissions are included in Other Current Assets ($76) and Other Assets ($67) in the Company’s Consolidated Balance Sheets at December 31, 2018.