Quarterly report pursuant to Section 13 or 15(d)

REVENUE AND CONTRACT ACCOUNTING

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REVENUE AND CONTRACT ACCOUNTING
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
REVENUE AND CONTRACT ACCOUNTING

NOTE 6 - REVENUE AND CONTRACT ACCOUNTING

 

Revenue Recognition and Contract Accounting

 

The Company generates revenue from four sources: (1) Technology Systems; (2) AI Technology which is included in the consolidated statements of operations line-item Technology Systems; (3) Technical Support; and (4) Consulting Services which is included in the consolidated statements of operations line-item Services and Consulting.

 

Contract assets and contract liabilities on uncompleted contracts for revenues recognized over time are as follows:

 

Contract Assets

 

Contract assets on uncompleted contracts represent cumulative revenues recognized in excess of billings and/or cash received on uncompleted contracts accounted for under the cost-to-cost input method, which recognizes revenue based on the ratio of cost incurred to total estimated costs.

 

At September 30, 2023 and December 31, 2022, contract assets on uncompleted contracts consisted of the following:

           
   

September 30,

2023

    

December 31,

2022

  
Cumulative revenues recognized   $ 8,594,322     $ 5,934,205  
Less: Billings or cash received     (7,247,591 )     (5,508,483 )
Contract assets   $ 1,346,731     $ 425,722  

 

Contract Liabilities

 

Contract liabilities on uncompleted contracts represent billings and/or cash received that exceed cumulative revenues recognized on uncompleted contracts accounted for under the cost-to-cost input method, which recognizes revenues based on the ratio of the cost incurred to total estimated costs.

 

Contract liabilities on services and consulting revenues represent billings and/or cash received in excess of revenue recognized on service agreements that are not accounted for under the cost-to-cost input method.

 

At September 30, 2023 and December 31, 2022, contract liabilities on uncompleted contracts and contract liabilities on services and consulting consisted of the following:

           
   

September 30,

2023

    

December 31,

2022

  
Billings and/or cash receipts on uncompleted contracts   $ 972,908     $ 4,355,470  
Less: Cumulative revenues recognized     (199,976 )     (4,144,018 )
Contract liabilities, technology systems     772,932       211,452  
Contract liabilities, services and consulting     815,996       746,545  
Total contract liabilities   $ 1,588,928     $ 957,997  

 

Contract liabilities at December 31, 2022 were $957,997; of which $211,452 for technology systems and $636,822 in services and consulting have been recognized as of September 30, 2023.

 

The Company expects to recognize all contract liabilities within 12 months from the respective consolidated balance sheet date.

 

Disaggregation of Revenue

 

The Company is following the guidance of ASC 606-10-55-296 and 297 for disaggregation of revenue. Accordingly, revenue has been disaggregated according to the nature, amount, timing and uncertainty of revenue and cash flows. We are providing qualitative and quantitative disclosures.

 

Qualitative:

 

  1. We have four distinct revenue sources:

 

  a. Technology Systems (Turnkey, engineered projects);

 

  b. AI Technology (Associated maintenance and support services);

 

  c. Technical Support (Licensing and professional services related to auditing of data center assets); and

 

  d. Consulting Services (Predetermined algorithms to provide important operating information to the users of our systems).

 

  2. We currently operate in North America including the USA, Mexico and Canada.

 

  3. Our customers include rail transportation, commercial, government, banking and IT suppliers.

 

  4. Our services & maintenance contracts are fixed price and fall into two duration types:

 

  a. Turnkey engineered projects and professional service contracts that are less than one year in duration and are typically one to two quarters in length; and

 

  b. Maintenance and support contracts ranging from one to five years in length.

 

Quantitative:

 

For the Three Months Ended September 30, 2023

                             
Segments   Rail     Commercial     Government     Artificial Intelligence     Total  
Primary Geographical Markets                              
                               
North America   $ 1,333,556     $ 19,220     $ —       $ 178,147     $ 1,530,923  
                                         
Major Goods and Service Lines                                        
                                         
Turnkey Projects   $ 705,849     $ —       $ —       $ —       $ 705,849  
Maintenance and Support     627,707       19,220       —         —         646,927  
Algorithms     —         —         —         178,147       178,147  
    $ 1,333,556     $ 19,220     $ —       $ 178,147     $ 1,530,923  
                                         
Timing of Revenue Recognition                                        
                                         
Goods transferred over time   $ 705,849     $ —       $ —       $ —       $ 705,849  
Services transferred over time     627,707       19,220       —         178,147       825,074  
    $ 1,333,556     $ 19,220     $ —       $ 178,147     $ 1,530,923  

 

For the Three Months Ended September 30, 2022

                               
Segments   Rail     Commercial     Government     Artificial Intelligence     Total  
Primary Geographical Markets                              
                               
North America   $ 3,765,312     $ 32,821     $ 23,245     $ 200,860     $ 4,022,238  
                                         
Major Goods and Service Lines                                        
                                         
Turnkey Projects   $ 2,689,393     $ —       $ 3,024     $ —       $ 2,692,417  
Maintenance and Support     1,075,919       32,821       20,221       183,378       1,312,339  
Algorithms     —         —         —         17,482       17,482  
    $ 3,765,312     $ 32,821     $ 23,245     $ 200,860     $ 4,022,238  
                                         
Timing of Revenue Recognition                                        
                                         
Goods transferred over time   $ 2,689,393     $ —       $ 3,024     $ —       $ 2,692,417  
Goods delivered at point in time     —         —         —         17,482       17,482  
Services transferred over time     532,250       32,821       20,221       183,378       768,670  
Services delivered at point in time     543,669       —         —         —         543,669  
    $ 3,765,312     $ 32,821     $ 23,245     $ 200,860     $ 4,022,238  

  

 

For the Nine Months Ended September 30, 2023

                               
Segments   Rail     Commercial     Government     Artificial Intelligence     Total  
Primary Geographical Markets                              
                               
North America   $ 5,247,291     $ 90,432     $ 11,353     $ 596,194     $ 5,945,270  
                                         
Major Goods and Service Lines                                        
                                         
Turnkey Projects   $ 3,390,555     $ 13,552     $ —       $ —       $ 3,404,107  
Maintenance and Support     1,856,736       76,880       11,353       —         1,944,969  
Algorithms     —         —         —         596,194       596,194  
    $ 5,247,291     $ 90,432     $ 11,353     $ 596,194     $ 5,945,270  
                                         
Timing of Revenue Recognition                                        
                                         
Goods transferred over time   $ 3,390,555     $ 13,552     $ —       $ —       $ 3,404,107  
Services transferred over time     1,856,736       76,880       11,353       596,194       2,541,163  
    $ 5,247,291     $ 90,432     $ 11,353     $ 596,194     $ 5,945,270  

 

For the Nine Months Ended September 30, 2022

 

Segments   Rail     Commercial     Government     Artificial Intelligence     Total  
Primary Geographical Markets                              
                               
North America   $ 8,087,759     $ 76,818     $ 214,124     $ 699,995     $ 9,078,696  
                                         
Major Goods and Service Lines                                        
                                         
Turnkey Projects   $ 5,885,477     $ (498 )   $ 153,462     $ —       $ 6,038,441  
Maintenance and Support     2,202,282       77,316       60,662       465,223       2,805,483  
Algorithms     —         —         —         234,772       234,772  
    $ 8,087,759     $ 76,818     $ 214,124     $ 699,995     $ 9,078,696  
                                         
Timing of Revenue Recognition                                        
                                         
Goods transferred over time   $ 5,885,477     $ (498 )   $ 153,462     $ —       $ 6,038,441  
Goods delivered at point in time     —         —         —         234,772       234,772  
Services transferred over time     1,545,578       77,316       60,662       465,223       2,148,779  
Services delivered at point in time     656,704       —         —         —         656,704  
    $ 8,087,759     $ 76,818     $ 214,124     $ 699,995     $ 9,078,696