Annual report pursuant to Section 13 and 15(d)

Revenue Recognition

v3.20.1
Revenue Recognition
12 Months Ended
Dec. 31, 2019
Revenue From Contract With Customer [Abstract]  
Revenue Recognition

NOTE 2Revenue recognition

 

The following reflect the changes in account balances as a result of the adoptions of ACS 606:

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Reported

 

 

Balances

Without

Adoption

of Topic

606

 

 

Effect of

Change

Higher/(Lower)

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

11,298

 

 

$

11,298

 

 

$

 

Accounts receivable, net

 

 

10,082

 

 

 

10,082

 

 

 

 

Inventory

 

 

19,531

 

 

 

19,531

 

 

 

 

Prepaid expenses and other current assets

 

 

6,430

 

 

 

6,430

 

 

 

 

Total current assets

 

 

47,341

 

 

 

47,341

 

 

 

 

Property and equipment, net

 

 

1,442

 

 

 

1,442

 

 

 

 

Other assets

 

 

6,676

 

 

 

2,337

 

 

 

4,339

 

Total assets

 

$

55,459

 

 

$

51,120

 

 

$

4,339

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

9,821

 

 

$

9,821

 

 

$

 

Accounts payable

 

 

7,234

 

 

 

7,234

 

 

 

 

Accrued expenses

 

 

10,265

 

 

 

10,265

 

 

 

 

Deferred revenue

 

 

291

 

 

 

291

 

 

 

 

Total current liabilities

 

 

27,611

 

 

 

27,611

 

 

 

 

Income tax payable

 

 

1,961

 

 

 

1,931

 

 

 

30

 

Long-term debt, less current portion

 

 

362

 

 

 

362

 

 

 

 

Total liabilities

 

 

29,934

 

 

 

29,904

 

 

 

30

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

20

 

 

 

20

 

 

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

Additional paid-in capital

 

 

191,751

 

 

 

191,751

 

 

 

 

Accumulated deficit

 

 

(166,246

)

 

 

(170,555

)

 

 

4,309

 

Total stockholders’ equity

 

 

25,525

 

 

 

21,216

 

 

 

4,309

 

Total liabilities and stockholders’ equity

 

$

55,459

 

 

$

51,120

 

 

$

4,339

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As Reported

 

 

Balances

Without

Adoption

of Topic

606

 

 

Effect of

Change

Higher/(Lower)

 

Net revenues

 

$

116,251

 

 

$

116,251

 

 

$

-

 

Cost of revenues

 

 

81,742

 

 

 

80,258

 

 

 

1,484

 

Gross profit

 

 

34,509

 

 

 

35,993

 

 

 

(1,484

)

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

26,064

 

 

 

28,742

 

 

 

(2,678

)

Sales and marketing

 

 

13,908

 

 

 

13,908

 

 

 

 

General and administrative

 

 

16,182

 

 

 

16,182

 

 

 

 

Restructuring costs

 

 

736

 

 

 

736

 

 

 

 

Total operating expenses

 

 

56,890

 

 

 

59,568

 

 

 

(2,678

)

Income (loss) from operations

 

 

(22,381

)

 

 

(23,575

)

 

 

1,194

 

Interest expense

 

 

(1,522

)

 

 

(1,522

)

 

 

-

 

Other expense, net

 

 

(543

)

 

 

(543

)

 

 

-

 

Income (loss) before income taxes

 

 

(24,446

)

 

 

(25,640

)

 

 

1,194

 

Income tax expense

 

 

(1,388

)

 

 

(1,388

)

 

 

-

 

Net income (loss)

 

 

(25,834

)

 

 

(27,028

)

 

 

1,194

 

Net loss attributable to common stockholders

 

$

(25,834

)

 

$

(27,028

)

 

$

1,194

 

Net loss per share, basic and diluted

 

$

(1.39

)

 

$

(1.45

)

 

$

0.06

 

Weighted–average shares used in computing

   net loss per share, basic and diluted

 

 

18,603,582

 

 

 

18,603,582

 

 

 

 

 

 

The Company recognizes revenue primarily from the sale of products, including our mobile phones and accessories, and the majority of the Company’s contracts include only one performance obligation, namely the delivery of product. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is defined as the unit of account for revenue recognition under ASC 606. The Company also recognizes revenue from other contracts that may include a combination of products and NRE services or from the provision of solely NRE services. Where there is a combination of products and NRE services, the Company accounts for the promises as individual performance obligations if they are concluded as distinct. Performance obligations are considered distinct if they are both capable of being distinct and distinct within the context of the contract. In determining whether performance obligations meet the criteria for being distinct, the Company considers a number of factors, such as the degree of interrelation and interdependence between obligations, and whether or not the good or service significantly modifies or transforms another good or service in the contract. During the year ended December 31, 2019, the Company did not have any contracts in which the products and NRE services were concluded to be a single performance obligation. In certain cases, the Company may offer tiered pricing based on volumes purchased for specific model phones. To date, all tiered pricing provisions have fallen into observable ranges of pricing to existing customers, thus, not resulting in any material right which could be concluded as its own performance obligation. In addition, the Company does not offer material post-contract support services to its customers.

 

Net revenue for an individual contract is recognized at the related transaction price, which is the amount the Company expects to be entitled to in exchange for transferring the goods and/or services. The transaction price for product sales is calculated as the product selling price net of variable consideration which may include estimates for marketing development funds, sales incentives, and price protection and stock rotation rights. The Company generally does not offer a right of return to its customers. Typically, variable consideration does not need to be constrained as estimates are based on specific contract terms. However, the Company continues to assess variable consideration estimates such that it is probable that a significant reversal of revenue will not occur. The transaction price for a contract with multiple performance obligations is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices for products are determined based on the prices charged to customers, which are directly observable. Standalone selling price of the professional services are mostly based on time and materials. We determine our estimates of variable consideration based on historical collection experience with similar payor classes, aged accounts receivable by payor class, terms of payment agreements, correspondence from payors related to revenue audits or reviews, our historical settlement activity of audited and reviewed claims and current economic conditions using the portfolio approach. Revenue is recognized only to the extent that it is probable that a significant reversal of the cumulative amount recognized will not occur in future periods.

 

Revenue is then recognized for each distinct performance obligation as control is transferred to the customer. Revenue attributable to hardware is recognized at the time control of the product transfers to the customer. Revenue attributable to professional services is recognized at the time the Company has performed the professional services to the customer.

 

Disaggregation of revenue

The following table presents our Net revenue disaggregate by product category for the years ended:

 

 

 

Year Ended December 31,

 

 

 

 

2019

 

 

2018

 

 

 

 

(in thousands)

 

 

Smartphones

 

$

57,981

 

 

$

89,379

 

 

Feature Phones

 

 

52,714

 

 

 

35,510

 

 

Accessories/Other

 

 

5,556

 

 

 

10,776

 

 

Total Revenue

 

$

116,251

 

 

$

135,665

 

 

 

Shipping and handling costs

The Company has elected to account for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the associated products.

 

Contract costs

Applying the practical expedient, the Company recognizes the incremental costs of obtaining contracts as an expense when incurred when the amortization period of the assets that otherwise would have been recognized is one year or less. These costs are included in sales and marketing and general and administrative expenses.

 

The costs associated with design and development non-recurring engineering activities for technical approval represent costs to fulfill a contract pursuant to ASC 340-40. Accordingly, the Company capitalizes these non-recurring engineering costs and amortizes such costs over the estimated period of time over which they are expected to be recovered, which is typically, the estimated life of a particular model phone.

 

As of January 1, 2019, the total costs to fulfill a contract which were deferred and capitalized upon adoption of ASC 606 totaled $3,330 and were recorded in Other Assets. As of December 31, 2019, the total costs to fulfill a contract were $4,524. The increase in the total capitalized costs to fulfill a contract is primarily associated with the Company’s introduction of its new XP8 model phone

 

Contract balances

The Company records accounts receivable when it has an unconditional right to consideration. As of December 31, 2019, the Company does not have a contract receivable balance.  Contract liabilities are recorded when cash payments are received or due in advance of performance. Contract liabilities consist of advance payments and deferred revenue, where the Company has unsatisfied performance obligations. Contract liabilities are presented as a component of deferred revenue on the consolidated balance sheets. As of January1, 2019 and December 31, 2019, the contract liabilities were $770 and $291, respectively, with the contract liabilities as of December 31, 2019 expected to be recognized into revenue in FY 2020.

The following table is a rollforward of contract balances as of December 31, 2019:

 

 

Contractual

 

 

 

Liability

 

Balance at January 1, 2019

 

$

770

 

Recognition of revenue

 

 

(481

)

Addition of revenue

 

 

2

 

Balance at December 31, 2019

 

$

291