Revenue Recognition Revenues under ASC 606 and related amendments (Topic 606) are required to be recognized either at a point in time or over time, depending on the facts and circumstances of the arrangement, and are evaluated using a five-step model. The Company recognizes revenue after applying the following five steps: 1) Identification of the contract, or contracts, with a customer, 2) Identification of the performance obligations in the contract, including whether they are distinct within the context of the contract 3) Determination of the transaction price, including the constraint on variable consideration 4) Allocation of the transaction price to the performance obligations in the contract 5) Recognition of revenue when, or as, performance obligations are satisfied Revenue is recognized when control of these services is transferred to our customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. Increasingly, the Company derives its revenue from direct billing. The Company also derives revenue from the sale of its products to O&amp;P providers in the U.S. and internationally, the Veterans Administration (VA) and rehabilitation hospitals. Under direct billing, the Company recognizes revenue when all of the following criteria are met: (i) The product has been delivered to the patient, including completion of initial instruction on its use. (ii) Collection is deemed probable and it has been determined that a significant reversal of the revenue to be recognized is not deemed probable when the uncertainty associated with the variable consideration is resolved. As an example, the Company will record revenue if it notified that insurance intends to pay and a payment amount is provided. (iii) The amount to be collected is estimable using the expected value estimation techniques, or the most likely amount as defined in ASC 606. Depending on the timing of product deliveries to customers, which is when cost of revenue must be recorded, and when the Company meets the criteria to record revenue, there may be fluctuations in gross margin. During the three months ended March 31, 2020 and 2019, the Company recognized revenue of approximately $389,500 and $331,000, respectively from O&amp;P providers or third-party payers for which costs related to the completion of the Companys performance obligations were recorded in a prior period. For revenues derived from O&amp;P providers, the VA and rehabilitation hospitals, the Company recognizes revenue when control passes to the customer in an amount that reflects the consideration the Company expects to receive in exchange for those services. Revenues may be recognized upon shipment or upon delivery, depending on the terms of the arrangement, provided that persuasive evidence of an arrangement exists, there are no uncertainties regarding customer acceptance and collectability is deemed probable. In certain cases, the Company ships its products to O&amp;P providers pending reimbursement from non-government, third party payers. As a result of this arrangement, elements of the revenue recognition criteria have not been met upon shipment. In this instance, the Company recognizes revenue when the amount is estimable and the Company determines it is probable that payment will be received. In many cases, the Company is not able to recognize revenue in these situations until payment is received, as then all of the revenue recognition criteria have been met. The Company receives federally-funded grants that require it to perform research activities as specified in each respective grant. The Company is paid based on the fees stipulated in the respective grants which approximate the projected costs to be incurred by the Company to perform such activities. As a result of the adoption of ASC 606 on January 1, 2019, the Companys grant proceeds are not deemed to be received from customers as defined under ASC 606 and are now reported as an offset to research and development expenses. Any amounts allowed for recovery of overhead are recorded as other income in the statements of operations. Such proceeds were immaterial to the financial statements during the three months ended March 31, 2020 and 2019, respectively. The Company has elected to record taxes collected from customers on a net basis and does not include tax amounts in revenue or cost of revenue. Contract Balances The timing of revenue recognition may differ from the timing of payment by customers. The Company records a receivable when revenue is recognized prior to payment and there is an unconditional right to payment. Alternatively, when payment precedes the provision of the related services, the Company records deferred revenue until the performance obligations are satisfied. The Company had an immaterial amount of deferred revenue as of March 31, 2020. Disaggregated Revenue from Contracts with Customers The following table presents revenue by major source: March 31, 2020 March 31, 2019 O&amp;P providers $ 387,888 $ 650,664 Direct to patient 620,257 179,402 Total revenue from contracts with customers $ 1,008,145 $ 830,066 Cost of Revenue In conjunction with the adoption of ASC 606, there are certain cases in which the Company will expense costs when incurred as required by ASC 340-40-25. In certain cases, the Company ships the MyoPro device to O&amp;P providers, or provides the device directly to patients, pending reimbursement from third-party payers. Under ASC 340-40-25, this inventory is expensed to cost of revenue as of the date of shipment. Under direct billing, fees paid to O&amp;P providers for services they provide in conjunction with patient evaluations are expensed as incurred as required by ASC 340-40-25, as a cost of obtaining a contract. These costs are recorded as sales and marketing expense. Fees paid to O&amp;P providers to fit and deliver the device to patients are expensed to cost of revenue.