3.       Revenue Recognition

Revenue by Service Line

Contract Balances

During the year ended December 31, 2019, the Company recognized capital equipment-related service revenue of approximately $228,000 which was previously included in deferred revenue in the accompanying consolidated balance sheet at December 31, 2018.

In September 2019, the Company entered into a Development Services Agreement with a customer under which the Company was entitled to bill the customer for an upfront payment of $127,600, of which $102,000 is included in deferred revenue in the accompanying December 31, 2019 consolidated balance sheet. In September 2019, the Company entered into a Letter of Intent (the “LOI”) with a customer who is a stockholder and whose Chief Operating Officer is a member of the Company’s Board of Directors. The purpose of the LOI was to permit the commencement of a product development project in anticipation of negotiating a detailed Statement of Work (the “SOW”) which was entered into in November 2019. Under the terms of the LOI, the Company was entitled to bill the customer for an upfront, nonrefundable payment of $500,000, and under the terms of the SOW, the Company was entitled to bill the customer on a quarterly basis, commencing in the fourth quarter of 2019, for service fees of $500,000. The Company recognizes as revenue each of the upfront payments described in this paragraph in proportional relationship to the transaction prices of the performance obligations contained in the related agreements, and recognizes as revenue the quarterly service fees described in this paragraph as stand-by services which commenced during the fourth quarter of 2019. Based on the foregoing, $625,000 of the aggregate amount of all the payments described in this paragraph were included in deferred revenue in the accompanying consolidated balance sheet at December 31, 2019.

During the year ended December 31, 2019, the Company offered an upgraded version of its software at no additional charge to customers purchasing a three-year systems service agreement. The transaction prices of the software and the service agreement were determined through an allocation of the service agreement price based on the standalone prices of the software and the service agreements. The transaction price of the software was recognized as revenue upon its installation and comprised approximately $172,000 of unbilled amounts included in accounts receivable in the accompanying December 31, 2019 consolidated balance sheet.

Remaining Performance Obligations

The Company’s contracts with customers, other than capital equipment-related service agreements discussed below, are predominantly of terms less than one year. Accordingly, the transaction price of remaining performance obligations related to such contracts at December 31, 2019 are not significant.

Revenue with respect to remaining performance obligations related to capital equipment-related service agreements with original terms in excess of one year and the upfront payments discussed under the heading “Contract Balances” above amounted to approximately $1.1 million at December 31, 2019. The Company expects to recognize this revenue within the next three years.