Laser Photonics Corp Revenue Disclosure

Revenue Recognition Policy

 

Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine  revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations and assess whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

 

Revenue is then recognized for the transaction price allocated to each respective performance obligation when (or as) the performance obligation is satisfied. For our products, revenue is generally recognized on a free on-board basis (FOB Origin) basis. This means that revenue is recognized when our products have been manufactured, crated, and placed in the company’s collection warehouse for customer pick-up in accordance with the Customer Quote and Company Terms and Conditions of Sale. Our manufacturing process is controlled by a Manufacturing Resource Planning (MRP) software - DBA Manufacturing, and fulfilled and closed Job order triggering the product readiness to be transferred to the customer. At that stage we fulfill all our obligations, as per our Terms and Conditions of sale, inform Customer by email or phone that his product order is ready for the scheduled pickup, and transfer the title on the manufactured equipment to the customer, and the customer is responsible for transportation expenses, insurance, and any transport-related damage to the equipment in transit. We do not hold any obligation to deliver beyond the collection warehouse, and it is the customers’ contractual responsibility to ensure their goods reach their destination.

 

For projects that are considered custom in nature like most of what we see at Control Micro systems, and we’ve determined the obligation will be six months to a year or more, the company will recognize revenue as a percentage of completion basis.  The percentage of completion method recognizes income as work on a project progresses.  The recognition of revenues and profits is generally related to costs incurred in providing the services required under the project.

 

For the year ending December 31, 2024, there was one customer whose revenue was more than 10% of the total revenue. and for the year ending December 31, 2023, reporting period there were no customers whose revenue was more than 10% of the total revenue.

 

 

Payments received as deposits for specific purchase orders or future laser equipment sales to customers are recognized as customer deposits and included in liabilities on the balance sheet. Customer deposits are recognized as revenue when control over the ordered equipment is transferred to the customer.

 

Contract Assets and Contract Liabilities

 

Account receivable are recognized in the period when the Company’s right to consideration is unconditional. Accounts receivable are recognized net of an allowance for credit losses. A considerable amount of judgement is required in assessing the likelihood of realization of receivables.

 

The timing of revenue may differ from timing of invoicing customers.

 

Contract assets include unbilled amounts from long-term construction services when revenue recognized under the cost-to-cost measure of progress exceeds the amounts invoiced to customers, as the amounts cannot be billed under the terms of the contracts. Such amounts are recoverable from customers based upon various measures of performance, including achievement of certain milestones, completion of specified units or completion of contract. Contracts assets are generally classified as current within the consolidated balance sheet.

 

Contract liabilities from construction contracts occur when amounts invoiced to customers exceed revenues recognized under the cost-to-cost measures of progress. Contract liabilities additionally include advance payments from customers on certain contracts. Contract liabilities decrease as the Company recognizes revenue from the satisfaction of the related performance obligation. Contract liabilities are generally classified as current within the consolidated balance sheet.

 

Although the Company believes it has established adequate procedures for estimating costs to complete on open contracts, it is at least reasonably possible that additional significant costs could occur on contracts prior to completion. The Company periodically evaluates and revises its estimates and makes adjustments when they are considered necessary.

 

The Company recognizes revenue by applying the following 5 step model:

 

1. Identifying the Contract(s) with a Customer. The Company enters into written contract with customers that create enforceable rights and obligations. Contracts are assessed to ensure they meet criteria for being considered legally binding and capable of being accounted for.

 

2. Identify the Performance Obligations in the Contract. Performance obligations are identified as distinct promises to transfer goods or services to a customer. The Company identifies their scope of work and creates a schedule of values (SOV) outlining each individual scope of the project.

 

3. Determine the Transaction Price. The transaction price is the amount of considerations the Company expects to be entitled to in exchange for transferring promised services. The transaction price may include fixed amounts or cost-plus percentage method.

 

4. Allocate the Transaction Priced to Performance Obligations. The transaction price is allocated to each performance obligation (SOV) based on its stand-alone selling price. The stand-alone selling price is the price which the Company would sell its service separately to a customer.

 

5. Recognize Revenue when (or as) the Company Satisfies a Performance Obligation. The Company recognizes revenue over time based on the progress towards completion of performance obligation. Revenue recognized during this reporting period is derived from the total contract value as allocated to performance obligations satisfied during that period.

 

Contract assets are $759,658 and zero as of December 31, 2024 and 2023, respectively.  Contract liabilities are $1,042,090 and zero as of December 31, 2024 and 2023, respectively.  Revenue from contracts with customers are $721,185 and zero as of December 31, 2024 and 2023, respectively. 

 

Other Distributor related Revenue Recognition Matters

 

Distributors generally have no right to return unsold equipment. However, in limited circumstances, if the company determines that distributor stock is morally aging beyond the company’s new model releases, it may accept returns and provide the distributor with credit against their trading account at the company’s discretion under its warranty policy. This revenue is recognized on a consignment basis and transfer of control is when item is sold to end customer at which time the company recognizes revenue.