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REVENUE AND CONTRACT ACCOUNTING

v3.23.4
REVENUE AND CONTRACT ACCOUNTING
9 Months Ended 12 Months Ended
Sep. 30, 2023
Dec. 31, 2022
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  

 

 

NOTE 8 – REVENUES 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 costs incurred to total estimated costs.

 

At December 31, 2022 and 2021, contract assets on uncompleted contracts consisted of the following:

 

             
    2022     2021  
Cumulative revenues recognized   $ 5,934,205     $ 5,266,930  
Less: Billings or cash received     (5,508,483 )     (5,263,481 )
Contract Assets   $ 425,722     $ 3,449  

 

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.

 

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.

 

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

 

At December 31, 2022 and 2021, contract liabilities on uncompleted contracts consisted of the following:

 

               
    2022     2021  
Billings and/or cash receipts on uncompleted contracts   $ 4,355,470     $ 4,473,726  
Less: Cumulative revenues     (4,144,018 )     (3,041,088 )
Contract liabilities, technology systems   $ 211,452     $ 1,232,638  
Contract Liabilities, services and consulting     746,545       596,673  
Total Contract Liabilities   $ 957,997     $ 1,829,311  

 

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 technology systems and equipment projects fall into two types:

a. Transfer of goods and services are over time.

b. Goods delivered at point in time.

5. 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 Year Ended December 31, 2022

 

                                                 
Segments   Rail     Commercial     Petrochemical     Government     Banking/Other     IT
Suppliers
    Artificial
Intelligence
    Total  
Primary Geographical Markets                                                
North America   $ 13,710,777     $ 115,443     $     $ 237,414     $     $     $ 948,732     $ 15,012,366  
                                                                 
Major Goods and Service Lines                                                                
Turnkey Projects   $ 10,789,693     $ 9,297     $     $ 156,530     $     $     $ 234,772     $ 11,190,292  
Maintenance & Support     2,921,084       106,146             80,884                         3,108,114  
Data Center Auditing Services                                                
Software License                                                
Algorithms                                         713,960       713,960  
    $ 13,710,777     $ 115,443     $     $ 237,414     $     $     $ 948,732     $ 15,012,366  
                                                                 
Timing of Revenue Recognition                                                                
Goods transferred over time   $ 10,789,693     $ 9,297     $     $ 156,530     $     $     $ 234,772     $ 11,190,292  
Services transferred over time     2,921,084       106,146             80,884                   713,960       3,822,074  
    $ 13,710,777     $ 115,443     $     $ 237,414     $     $     $ 948,732     $ 15,012,366  

 

Quantitative:

 

For the Year Ended December 31, 2021

 

Segments   Rail     Commercial     Petrochemical     Government     Banking     IT
Suppliers
    Artificial
Intelligence
    Total  
Primary Geographical Markets                                                
North America   $ 6,883,670     $ 213,517     $ (867 )   $ 314,030     $ 23,340     $ 134,717     $ 691,510     $ 8,259,917  
                                                                 
Major Goods and Service Lines                                                                
Turnkey Projects   $ 5,255,491     $ 27,831     $     $ 233,145     $ 1,537     $     $     $ 5,518,004  
Maintenance & Support     1,628,179       185,686       (867 )     80,885       21,803             341,915       2,257,601  
Data Center Auditing Services                                   131,537             131,537  
Software License                                   3,180             3,180  
Algorithms                                         349,595       349,595  
    $ 6,883,670     $ 213,517     $ (867 )   $ 314,030     $ 23,340     $ 134,717     $ 691,510     $ 8,259,917  
                                                                 
Timing of Revenue Recognition                                                                
Goods transferred over time   $ 5,255,491     $ 27,831     $     $ 233,145     $ 1,537     $ 131,537     $ 349,595     $ 5,999,136  
Services transferred over time     1,628,179       185,686       (867 )     80,885       21,803       3,180       341,915       2,260,781  
    $ 6,883,670     $ 213,517     $ (867 )   $ 314,030     $ 23,340     $ 134,717     $ 691,510     $ 8,259,917  

 

Segment Information

 

The Company operates in one reportable segment.