Document and Entity Information
v3.8.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2018
May 01, 2018
Document and Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2018  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2018  
Entity Registrant Name COMMUNICATIONS SYSTEMS INC  
Entity Central Index Key 0000022701  
Current Fiscal Year End Date --12-31  
Entity Filer Category Smaller Reporting Company  
Entity Common Stock, Shares Outstanding   9,128,856

Condensed Consolidated Balance Sheets
v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
Mar. 31, 2018
Dec. 31, 2017
CURRENT ASSETS:    
Cash and cash equivalents $ 11,592,110 $ 12,453,663
Investments 6,018,503 5,540,744
Trade accounts receivable, less allowance for doubtful accounts of $93,000 and $106,000, respectively 11,761,183 12,183,217
Inventories 14,229,052 13,984,428
Prepaid income taxes 441,770 493,834
Other current assets 1,407,051 810,532
TOTAL CURRENT ASSETS 45,449,669 45,466,418
PROPERTY, PLANT AND EQUIPMENT, net 12,233,152 12,624,730
OTHER ASSETS:    
Deferred income taxes 38,136 38,136
Other assets, net 14,557 16,977
TOTAL OTHER ASSETS 52,693 55,113
TOTAL ASSETS 57,735,514 58,146,261
CURRENT LIABILITIES:    
Accounts payable 4,965,069 4,554,683
Accrued compensation and benefits 2,230,356 2,422,083
Other accrued liabilities 2,651,922 1,586,473
Dividends payable 371,545 397,151
TOTAL CURRENT LIABILITIES 10,218,892 8,960,390
LONG TERM LIABILITIES:    
Long-term compensation plans 26,928 11,079
Uncertain tax positions 4,473 4,065
TOTAL LONG-TERM LIABILITIES 31,401 15,144
COMMITMENTS AND CONTINGENCIES (Footnote 8)
STOCKHOLDERS' EQUITY    
Preferred stock, par value $1.00 per share; 3,000,000 shares authorized; none issued
Common stock, par value $.05 per share; 30,000,000 shares authorized; 9,122,986 and 8,973,708 shares issued and outstanding, respectively 456,149 448,685
Additional paid-in capital 42,501,770 42,006,750
Retained earnings 5,113,019 7,328,671
Accumulated other comprehensive loss (585,717) (613,379)
TOTAL STOCKHOLDERS' EQUITY 47,485,221 49,170,727
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 57,735,514 $ 58,146,261

Condensed Consolidated Balance Sheets (Parenthetical)
v3.8.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2018
Dec. 31, 2017
Condensed Consolidated Balance Sheets [Abstract]    
Trade accounts receivable, allowance for doubtful accounts $ 93 $ 106
Preferred stock, par value $ 1.00 $ 1.00
Preferred stock, shares authorized 3,000,000 3,000,000
Preferred stock, shares issued 0 0
Common stock, par value $ 0.05 $ 0.05
Common stock, shares authorized 30,000,000 30,000,000
Common stock, shares issued 9,122,986 8,973,708
Common stock, shares outstanding 9,122,986 8,973,708

Condensed Consolidated Statements of Loss and Comprehensive Loss
v3.8.0.1
Condensed Consolidated Statements of Loss and Comprehensive Loss - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Condensed Consolidated Statements of Loss and Comprehensive Loss [Abstract]    
Sales $ 16,773,685 $ 20,800,079
Cost of sales 11,595,066 14,835,014
Gross profit 5,178,619 5,965,065
Operating expenses:    
Selling, general and administrative expenses 7,152,840 7,037,255
Restructuring expense 0 387,638
Total operating expenses 7,152,840 7,424,893
Operating loss (1,974,221) (1,459,828)
Other income (expenses):    
Investment and other income 104,121 41,686
Gain (Loss) on sale of assets 27,531 (17,800)
Interest and other expense (9,706) (9,559)
Other income, net 121,946 14,327
Loss from operations before income taxes (1,852,275) (1,445,501)
Income tax expense 7,570 70,011
Net loss (1,859,845) (1,515,512)
Other comprehensive income (loss), net of tax:    
Unrealized loss on available-for-sale securities (6,432) (1,784)
Foreign currency translation adjustment 34,094 (4,988)
Total other comprehensive income (loss) 27,662 (6,772)
Comprehensive loss $ (1,832,183) $ (1,522,284)
Basic net loss per share: $ (0.21) $ (0.17)
Diluted net loss per share: $ (0.21) $ (0.17)
Weighted Average Basic Shares Outstanding 9,000,185 8,894,195
Weighted Average Dilutive Shares Outstanding 9,000,185 8,894,195
Dividends declared per share $ 0.04 $ 0.04

Condensed Consolidated Statements of Changes in Stockholders' Equity
v3.8.0.1
Condensed Consolidated Statements of Changes in Stockholders' Equity - 3 months ended Mar. 31, 2018 - USD ($)
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Total
December 31, 2017 at Dec. 31, 2017 $ 448,685 $ 42,006,750 $ 7,328,671 $ (613,379) $ 49,170,727
BALANCE, Shares at Dec. 31, 2017 8,973,708        
Net loss     (1,859,845)   (1,859,845)
Issuance of common stock under Employee Stock Purchase Plan $ 398 27,922     28,320
Issuance of common stock under Employee Stock Purchase Plan, Shares 7,955        
Issuance of common stock to Employee Stock Ownership Plan $ 5,982 419,908     425,890
Issuance of common stock to Employee Stock Ownership Plan, Shares 119,632        
Issuance of common stock under Executive Stock Plan $ 1,485       1,485
Issuance of common stock under Executive Stock Plan, Shares 29,708        
Share based compensation   84,577     84,577
Other share retirements $ (401) (37,387) 9,325   (28,463)
Other share retirements, Shares (8,017)        
Shareholder dividends     (365,132)   (365,132)
Other comprehensive income       27,662 27,662
March 31, 2018 at Mar. 31, 2018 $ 456,149 $ 42,501,770 $ 5,113,019 $ (585,717) $ 47,485,221
BALANCE, Shares at Mar. 31, 2018 9,122,986        

Condensed Consolidated Statements of Cash Flows
v3.8.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (1,859,845) $ (1,515,512)
Adjustments to reconcile net loss to net cash provided by operating activities:    
Depreciation and amortization 631,512 873,357
Share based compensation 84,577 93,018
Deferred taxes   9,415
Loss/(gain) on sale of assets (27,531) 17,800
Changes in assets and liabilities:    
Trade accounts receivables 427,806 780,483
Inventories (218,697) 2,301,681
Prepaid income taxes 52,064 33,794
Other assets, net (591,025) 1,004
Accounts payable 433,148 (1,396,445)
Accrued compensation and benefits 249,526 674,910
Other accrued liabilities 1,057,571 (181,336)
Income taxes payable 408 2,045
Net cash provided by operating activities 239,514 1,694,214
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (263,867) (38,082)
Purchases of investments (3,488,793)  
Proceeds from the sale of property, plant and equipment 29,013  
Proceeds from the sale of investments 3,004,602 3,435,154
Net cash (used in) provided by investing activities (719,045) 3,397,072
CASH FLOWS FROM FINANCING ACTIVITIES:    
Cash dividends paid (390,738) (368,388)
Proceeds from issuance of common stock, net of shares withheld 1,342 21,999
Net cash used in financing activities (389,396) (346,389)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 7,374 (16,910)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (861,553) 4,727,987
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,453,663 10,443,274
CASH AND CASH EQUIVALENTS AT END OF PERIOD 11,592,110 15,171,261
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Income taxes (refunded) paid (44,902) 24,739
Interest paid 9,382 9,448
Dividends declared not paid 371,545 $ 398,467
Capital expenditures in accounts payable $ 61,304  

Summary of Significant Accounting Policies
v3.8.0.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2018
Summary of Significant Accounting Policies [Abstract]  
Summary of Significant Accounting Policies

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Description of Business



Communications Systems, Inc. (herein collectively referred to as “CSI,” “our,” “we” or the “Company”) is a Minnesota corporation organized in 1969 that operates directly and through its subsidiaries located in the United States (U.S.) and the United Kingdom (U.K.). CSI is principally engaged through its Suttle, Inc. (“Suttle”) subsidiary and business unit in the manufacture and sale of connectivity infrastructure products for broadband and voice communications, and through its Transition Networks, Inc. (“Transition Networks” or “Transition”) subsidiary and business unit in the manufacture and sale of core media conversion products, Ethernet switches, and other connectivity and data transmission products. Through its JDL Technologies, Inc. (“JDL Technologies” or “JDL”) business unit, CSI provides technology solutions including virtualization, managed services, wired and wireless network design and implementation, and hybrid cloud infrastructure and deployment. Through its Net2Edge Limited (“Net2Edge”) U.K.-based business unit, the Company develops, manufactures and sells products that enable telecommunications carriers to connect legacy networks to high-speed services.



The Company classifies its businesses into four segments corresponding to the Suttle, Transition Networks, JDL Technologies and Net2Edge business units. Non-allocated general and administrative expenses are separately accounted for as “Other” in the Company’s segment reporting. Intersegment revenues are eliminated upon consolidation.



Financial Statement Presentation



The condensed consolidated balance sheets and condensed consolidated statement of changes in stockholders’ equity as of March 31, 2018 and the related condensed consolidated statements of loss and comprehensive loss, and the condensed consolidated statements of cash flows for the periods ended March 31, 2018 and 2017 have been prepared by Company management.  In the opinion of management, all adjustments (which include only normal recurring adjustments, except where noted) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2018 and 2017 and for the periods then ended have been made.



Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted.  We recommend these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2017 Annual Report to Shareholders on Form 10-K.  The results of operations for the period ended March 31, 2018 are not necessarily indicative of operating results for the entire year.



The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period.  The estimates and assumptions used in the accompanying condensed consolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the time of the financial statements.  Actual results could differ from those estimates.



Except to the extent updated or described below, the significant accounting policies set forth in Note 1 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, appropriately represent, in all material respects, the current status of accounting policies, and are incorporated herein by reference.



Accumulated Other Comprehensive Loss



The components of accumulated other comprehensive loss, net of tax, are as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Foreign Currency Translation

 

Unrealized (loss)/gain on securities

 

Accumulated Other Comprehensive Loss

December 31, 2017

 

$

(625,000)

 

$

12,000 

 

$

(613,000)



 

 

 

 

 

 

 

 

 

Net current period change

 

 

33,000 

 

 

(6,000)

 

 

27,000 



 

 

 

 

 

 

 

 

 

March 31, 2018

 

$

(592,000)

 

$

6,000 

 

$

(586,000)



 


Summary of Significant Accounting Policies (Policy)
v3.8.0.1
Summary of Significant Accounting Policies (Policy)
3 Months Ended
Mar. 31, 2018
Summary of Significant Accounting Policies [Abstract]  
Description of Business

Description of Business



Communications Systems, Inc. (herein collectively referred to as “CSI,” “our,” “we” or the “Company”) is a Minnesota corporation organized in 1969 that operates directly and through its subsidiaries located in the United States (U.S.) and the United Kingdom (U.K.). CSI is principally engaged through its Suttle, Inc. (“Suttle”) subsidiary and business unit in the manufacture and sale of connectivity infrastructure products for broadband and voice communications, and through its Transition Networks, Inc. (“Transition Networks” or “Transition”) subsidiary and business unit in the manufacture and sale of core media conversion products, Ethernet switches, and other connectivity and data transmission products. Through its JDL Technologies, Inc. (“JDL Technologies” or “JDL”) business unit, CSI provides technology solutions including virtualization, managed services, wired and wireless network design and implementation, and hybrid cloud infrastructure and deployment. Through its Net2Edge Limited (“Net2Edge”) U.K.-based business unit, the Company develops, manufactures and sells products that enable telecommunications carriers to connect legacy networks to high-speed services.



The Company classifies its businesses into four segments corresponding to the Suttle, Transition Networks, JDL Technologies and Net2Edge business units. Non-allocated general and administrative expenses are separately accounted for as “Other” in the Company’s segment reporting. Intersegment revenues are eliminated upon consolidation.

Financial Statement Presentation

Financial Statement Presentation



The condensed consolidated balance sheets and condensed consolidated statement of changes in stockholders’ equity as of March 31, 2018 and the related condensed consolidated statements of loss and comprehensive loss, and the condensed consolidated statements of cash flows for the periods ended March 31, 2018 and 2017 have been prepared by Company management.  In the opinion of management, all adjustments (which include only normal recurring adjustments, except where noted) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2018 and 2017 and for the periods then ended have been made.



Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with generally accepted accounting principles in the United States of America have been condensed or omitted.  We recommend these condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2017 Annual Report to Shareholders on Form 10-K.  The results of operations for the period ended March 31, 2018 are not necessarily indicative of operating results for the entire year.



The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period.  The estimates and assumptions used in the accompanying condensed consolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the time of the financial statements.  Actual results could differ from those estimates.



Except to the extent updated or described below, the significant accounting policies set forth in Note 1 to the consolidated financial statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2017, appropriately represent, in all material respects, the current status of accounting policies, and are incorporated herein by reference.

Accumulated Other Comprehensive Loss

Accumulated Other Comprehensive Loss



The components of accumulated other comprehensive loss, net of tax, are as follows:







 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Foreign Currency Translation

 

Unrealized (loss)/gain on securities

 

Accumulated Other Comprehensive Loss

December 31, 2017

 

$

(625,000)

 

$

12,000 

 

$

(613,000)



 

 

 

 

 

 

 

 

 

Net current period change

 

 

33,000 

 

 

(6,000)

 

 

27,000 



 

 

 

 

 

 

 

 

 

March 31, 2018

 

$

(592,000)

 

$

6,000 

 

$

(586,000)




Summary of Significant Accounting Policies (Tables)
v3.8.0.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2018
Summary of Significant Accounting Policies [Abstract]  
Components of Accumulated Other Comprehensive Loss



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 



 

Foreign Currency Translation

 

Unrealized (loss)/gain on securities

 

Accumulated Other Comprehensive Loss

December 31, 2017

 

$

(625,000)

 

$

12,000 

 

$

(613,000)



 

 

 

 

 

 

 

 

 

Net current period change

 

 

33,000 

 

 

(6,000)

 

 

27,000 



 

 

 

 

 

 

 

 

 

March 31, 2018

 

$

(592,000)

 

$

6,000 

 

$

(586,000)




Summary Of Significant Accounting Policies (Narrative) (Details)
v3.8.0.1
Summary Of Significant Accounting Policies (Narrative) (Details)
3 Months Ended
Mar. 31, 2018
segment
Summary of Significant Accounting Policies [Abstract]  
Number of segments 4

Summary of Significant Accounting Policies (Components of Accumulated Other Comprehensive Loss) (Details)
v3.8.0.1
Summary of Significant Accounting Policies (Components of Accumulated Other Comprehensive Loss) (Details)
3 Months Ended
Mar. 31, 2018
USD ($)
Accumulated Other Comprehensive Income (Loss) [Line Items]  
December 31, 2017 $ 49,170,727
March 31, 2018 47,485,221
Foreign Currency Translation [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
December 31, 2017 (625,000)
Net current period change 33,000
March 31, 2018 (592,000)
Unrealized (Loss)/Gain On Securities [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
December 31, 2017 12,000
Net current period change (6,000)
March 31, 2018 6,000
Accumulated Other Comprehensive Income (Loss) [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
December 31, 2017 (613,379)
Net current period change 27,000
March 31, 2018 $ (585,717)

Revenue Recognition
v3.8.0.1
Revenue Recognition
3 Months Ended
Mar. 31, 2018
Revenue Recognition [Abstract]  
Revenue Recognition

NOTE 2 – REVENUE RECOGNITION



The Company adopted ASC 606 on January 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption.  The reported results for 2018 reflect the application of ASC 606 guidance while the reported results for 2017 were prepared under the guidance of ASC 605, Revenue Recognition (ASC 605), which is also referred to herein as "legacy GAAP" or the "previous guidance". The adoption of ASC 606 represents a change in accounting principle that will more closely align revenue recognition with the delivery of the Company's goods and services and will provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration to which the Company expects to be entitled to receive in exchange for these goods or services.



Suttle, Inc. & Transition Networks



The Company’s Suttle business unit manufactures and markets a broad range of products that support broadband and telephone service under the Suttle brand name in the United States and internationally. Suttle markets its outside plant and premise distribution products globally to telecommunications companies, service providers, residential builders, and low-voltage installers through distributors and the Company’s sales staff. Suttle’s customers include telephone, CATV, internet service providers, distributors, and enterprise networks.



The Company’s Transition Networks business unit sells media converter devices, NIDs, Ethernet switches and other connectivity products that make it possible to transmit telecommunications signals across networks and between systems using various types of media. Transition sells its products through distributors, resellers, integrators, and OEMs.



The Company has determined that the performance obligation for its Suttle and Transition Networks divisions is the Company’s connectivity infrastructure and data transmission products. To determine when revenue should be recognized, it is important to determine when the transfer of control has occurred. The Company has determined that control transfers for these products upon shipment or delivery to the customer, in accordance with the agreed upon shipping terms. As such, the timing of revenue recognition occurs at a specific point in time.



JDL Technologies, Inc.



The Company’s JDL Technologies, Inc. division is a managed service provider and a value-added reseller supplying IT solutions focused on IT service and support management; network design, deployment and integration; cloud, hosted and virtualized services; and network operations center management. Major technology solutions include networking, virtualization, cloud and infrastructure services, most of which are available under JDL managed service contracts.



The Company has determined that the following performance obligations identified in its JDL Technologies, Inc. division are transferred over time: managed services and professional services (time and materials (“T&M”) & fixed price). The division’s managed services performance obligation is a bundled solution, a series of distinct services that are substantially the same and that have the same pattern of transfer to the customer and are recognized evenly over the term of the contract. T&M professional services arrangements are measured over time with an input method based on hours expended towards satisfying this performance obligation. Fixed price professional service arrangements under a relatively longer-term service will also be measured over time with an input method based on hours expended.



The Company has also identified the following performance obligations within its JDL Technologies division that are recognized at a point in time which include resale of third-party hardware and software, installation, arranging for another party to transfer services to the customer, and certain professional services. The resale of third-party hardware and software is recognized at a point in time, when the goods are shipped or delivered to the customer’s location, in accordance with the shipping terms. Installation services are recognized at a point in time when the services are completed. The service the Company provides to arrange for another party to transfer services to the customer is satisfied at a point in time as the Company has transferred control upon the service first being made available to the customer by the third party vendor, which are required to be presented on a net basis. Depending on the nature of the service, certain professional services transfer control at a point in time. The Company evaluates these circumstances on a case by case basis to determine if revenue should be recognized over time or at a point in time.



Net2Edge Limited



The Company’s Net2Edge Limited division manufactures and markets Ethernet based network access devices. The Company principally sells its products through approved partners and integrators outside the United States. The Company has determined that the performance obligation in the Net2Edge division is its connectivity infrastructure and data transmission products that are recognized at a point in time.



Significant Judgments



In order to determine the transaction price, the Company estimates the amount of variable consideration at the outset of the contract, depending on the facts and circumstances relative to the contract. The Company may provide credits or incentives to its customers, which are accounted for as either variable consideration or consideration payable to the customer. The Company estimates product returns based on historical return rates. The Company constrains (reduces) the estimates of variable consideration such that it is probable that a significant revenue reversal of previously recognized revenue will not occur throughout the life of the contract. When determining if variable consideration should be constrained, management considers whether there are factors outside the Company’s control that could result in a significant reversal of revenue. In making these assessments, the Company considers the likelihood and magnitude of a potential reversal of revenue. The Company will assess if any incentives it offers to its customer is a consideration payable. The Company accounts for consideration payable to a customer as a reduction of the transaction price, and therefore, of revenue.  For contracts with more than one performance obligation, the consideration is allocated between separate products and services based on their stand-alone selling prices. Judgment is required to determine standalone selling prices for each distinct performance obligation. The Company generally determines standalone selling prices based on the actual prices charged to customers and has an established range of amounts that fall within stand-alone selling price for its distinct performance obligations. The Company evaluates this range quarterly.



Costs to Obtain or Fulfill a Contract



In addition to the new revenue recognition guidance, ASC 340-40 was added to provide guidance on the accounting for certain costs to obtain and fulfill contracts (or, in some cases, an anticipated contract) with a customer.  ASC 340-40 is applicable only to incremental contract costs, those that an entity would not have incurred if the contract had not been obtained, and requires the capitalization of such costs as well as provides guidance on the amortization and impairment considerations. The Company elects the practical expedient and expenses certain costs to obtain contracts when applicable. There were no material costs to obtain a contract in the quarter ended March 31, 2018.



Financial Statement Impact of Adopting ASC 606



The Company adopted ASC 606 using the modified retrospective method.  The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 would require an adjustment to the opening balance of retained earnings as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the Company determined that there were no significant adjustments to be made to its consolidated balance sheet as of January 1, 2018.



Impact of New Revenue Guidance on Financial Statement Line Items



The following table compares the reported condensed consolidated balance sheet, statement of loss and comprehensive loss and cash flows, as of and for the three months ended March 31, 2018, to the pro-forma amounts had the previous guidance been in effect:





 

 

 

 

 

 



 

 

 

 

 

 



 

As of March 31, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Trade accounts receivable

$

11,761,000 

$

10,766,000 

$

995,000 

Inventories

 

14,229,000 

 

14,738,000 

 

(509,000)

Other current assets

 

1,407,000 

 

898,000 

 

509,000 

Other accrued liabilities

 

2,652,000 

 

1,657,000 

 

995,000 



 

 

 

 

 

 







 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended March 31, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Revenue

$

16,774,000 

$

16,899,000 

$

(125,000)

Gross Profit

 

5,179,000 

 

5,304,000 

 

(125,000)

Selling, general and administrative expenses

 

7,153,000 

 

7,278,000 

 

(125,000)

Operating Loss

 

(1,974,000)

 

(1,974,000)

 

 -



 

 

 

 

 

 



Transaction Price Allocated to Future Performance Obligations



In order to determine the allocation of the transaction price and amounts allocated to the performance obligations, the Company first determined the standalone selling price for each distinct performance obligations in the contract in order to determine the allocations of the transaction price in proportion to the standalone selling price for each performance obligation in the contract in accordance with ASC 606-10-32-31 and 32-33. Judgment is required to determine standalone selling price for each distinct performance obligation. The Company generally determines standalone selling prices based on the actual prices charged to customers and has an established range of amounts that fall within stand-alone selling price for its distinct performance obligations. The Company will evaluate this range quarterly.



Practical Expedients and Exemptions



The Company adopted various practical expedients and policy elections related to the accounting for significant finance components, sales taxes, shipping and handling, costs to obtain a contract and immaterial promised goods or services, which will mitigate certain impacts of adopting this new standard. The practical expedient to disclose the unfulfilled performance obligations was not made as they are expected to be fulfilled within one year.



Disaggregation of revenue



Revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that best reflects the consideration we expect to be entitled to in exchange for those goods or services. In accordance with ASC 606-10-50-5, the following tables present how we disaggregate our revenues, which is different for each segment.



For Suttle, we analyze revenues by product and customer group, which is as follows for the three months ended March 31, 2018 and 2017:





 

 

 

 

 



 

 

 

 

 



Suttle Sales by Product Group



 

2018

 

 

2017

Structured cabling and connecting system products

$

6,573,000 

 

$

7,745,000 

DSL and other products

 

400,000 

 

 

1,027,000 



$

6,973,000 

 

$

8,772,000 







 

 

 

 

 



 

 

 

 

 



Suttle Sales by Customer Group



 

2018

 

 

2017

Communication service providers

$

5,947,000 

 

$

8,015,000 

International

 

580,000 

 

 

124,000 

Distributors

 

446,000 

 

 

633,000 



$

6,973,000 

 

$

8,772,000 



For Transition Networks, we analyze revenue by region and product group, which is as follows for the three months ended March 31, 2018 and 2017:





 

 

 

 

 



 

 

 

 

 



Transition Networks Sales by Region



 

2018

 

 

2017

North America

$

7,641,000 

 

$

7,071,000 

Rest of World

 

975,000 

 

 

1,445,000 

Europe, Middle East, Africa ("EMEA")

 

537,000 

 

 

488,000 



$

9,153,000 

 

$

9,004,000 







 

 

 

 

 



 

 

 

 

 



Transition Networks Sales by Product Group



 

2018

 

 

2017

Media converters

$

5,184,000 

 

$

5,484,000 

Ethernet switches and adapters

 

2,260,000 

 

 

1,679,000 

Other products

 

1,709,000 

 

 

1,841,000 



$

9,153,000 

 

$

9,004,000 



For JDL, we analyze revenue by customer group, which is as follows for the three months ended March 31, 2018 and 2017:





 

 

 

 

 



 

 

 

 

 



JDL Revenue by Customer Group



 

2018

 

 

2017

Education

$

109,000 

 

$

2,063,000 

Healthcare and commercial clients

 

601,000 

 

 

801,000 



$

710,000 

 

$

2,864,000 







The Company does not currently analyze revenue for Net2Edge on a disaggregated basis. Revenues from Net2Edge were $165,000 and $357,000 for the three months ended March 31, 2018 and 2017, respectively.



Contract Balances



The Company does not have material costs to obtain a contract or material contract liabilities.


Revenue Recognition (Tables)
v3.8.0.1
Revenue Recognition (Tables)
3 Months Ended
Mar. 31, 2018
Revenue Recognition [Abstract]  
Schedule of Impact from Initial Application Period Cumulative Effect Transition



 

 

 

 

 

 



 

As of March 31, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Trade accounts receivable

$

11,761,000 

$

10,766,000 

$

995,000 

Inventories

 

14,229,000 

 

14,738,000 

 

(509,000)

Other current assets

 

1,407,000 

 

898,000 

 

509,000 

Other accrued liabilities

 

2,652,000 

 

1,657,000 

 

995,000 



 

 

 

 

 

 







 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended March 31, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Revenue

$

16,774,000 

$

16,899,000 

$

(125,000)

Gross Profit

 

5,179,000 

 

5,304,000 

 

(125,000)

Selling, general and administrative expenses

 

7,153,000 

 

7,278,000 

 

(125,000)

Operating Loss

 

(1,974,000)

 

(1,974,000)

 

 -



 

 

 

 

 

 



Schedule of Disaggregation of Revenues

For Suttle, we analyze revenues by product and customer group, which is as follows for the three months ended March 31, 2018 and 2017:





 

 

 

 

 



 

 

 

 

 



Suttle Sales by Product Group



 

2018

 

 

2017

Structured cabling and connecting system products

$

6,573,000 

 

$

7,745,000 

DSL and other products

 

400,000 

 

 

1,027,000 



$

6,973,000 

 

$

8,772,000 







 

 

 

 

 



 

 

 

 

 



Suttle Sales by Customer Group



 

2018

 

 

2017

Communication service providers

$

5,947,000 

 

$

8,015,000 

International

 

580,000 

 

 

124,000 

Distributors

 

446,000 

 

 

633,000 



$

6,973,000 

 

$

8,772,000 



For Transition Networks, we analyze revenue by region and product group, which is as follows for the three months ended March 31, 2018 and 2017:





 

 

 

 

 



 

 

 

 

 



Transition Networks Sales by Region



 

2018

 

 

2017

North America

$

7,641,000 

 

$

7,071,000 

Rest of World

 

975,000 

 

 

1,445,000 

Europe, Middle East, Africa ("EMEA")

 

537,000 

 

 

488,000 



$

9,153,000 

 

$

9,004,000 







 

 

 

 

 



 

 

 

 

 



Transition Networks Sales by Product Group



 

2018

 

 

2017

Media converters

$

5,184,000 

 

$

5,484,000 

Ethernet switches and adapters

 

2,260,000 

 

 

1,679,000 

Other products

 

1,709,000 

 

 

1,841,000 



$

9,153,000 

 

$

9,004,000 



For JDL, we analyze revenue by customer group, which is as follows for the three months ended March 31, 2018 and 2017:





 

 

 

 

 



 

 

 

 

 



JDL Revenue by Customer Group



 

2018

 

 

2017

Education

$

109,000 

 

$

2,063,000 

Healthcare and commercial clients

 

601,000 

 

 

801,000 



$

710,000 

 

$

2,864,000 




Revenue Recognition (Narrative) (Details)
v3.8.0.1
Revenue Recognition (Narrative) (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Segment Reporting Information [Line Items]    
Sales $ 16,773,685 $ 20,800,079
Net2Edge [Member]    
Segment Reporting Information [Line Items]    
Sales $ 165,000 $ 357,000

Revenue Recognition (Schedule of Impact from Initial Application Period Cumulative Effect Transition) (Details)
v3.8.0.1
Revenue Recognition (Schedule of Impact from Initial Application Period Cumulative Effect Transition) (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Dec. 31, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]      
Trade accounts receivable $ 11,761,183   $ 12,183,217
Inventories 14,229,052   13,984,428
Other current assets 1,407,051   810,532
Other accrued liabilities 2,651,922   $ 1,586,473
Revenues 16,773,685 $ 20,800,079  
Gross profit 5,178,619 5,965,065  
Selling, general and administrative expenses 7,152,840 7,037,255  
Operating loss (1,974,221) $ (1,459,828)  
Balances without adoption of ASC 606 [Member]      
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]      
Trade accounts receivable 10,766,000    
Inventories 14,738,000    
Other current assets 898,000    
Other accrued liabilities 1,657,000    
Revenues 16,899,000    
Gross profit 5,304,000    
Selling, general and administrative expenses 7,278,000    
Operating loss (1,974,000)    
Accounting Standards Update 2014-09 [Member] | Effect of ChangeHigher/(Lower) [Member]      
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]      
Trade accounts receivable 995,000    
Inventories (509,000)    
Other current assets 509,000    
Other accrued liabilities 995,000    
Revenues (125,000)    
Gross profit (125,000)    
Selling, general and administrative expenses $ (125,000)    

Revenue Recognition (Schedule of Disaggregation of Revenues) (Details)
v3.8.0.1
Revenue Recognition (Schedule of Disaggregation of Revenues) (Details) - USD ($)
3 Months Ended
Mar. 31, 2018
Mar. 31, 2017
Disaggregation of Revenue [Line Items]    
Sales $ 16,773,685 $ 20,800,079
Suttle [Member]    
Disaggregation of Revenue [Line Items]    
Sales 6,973,000 8,772,000
Suttle [Member] | Communication Service Providers [Member]    
Disaggregation of Revenue [Line Items]    
Sales 5,947,000 8,015,000
Suttle [Member] | International [Member]    
Disaggregation of Revenue [Line Items]    
Sales 580,000 124,000
Suttle [Member] | Distributors [Member]    
Disaggregation of Revenue [Line Items]    
Sales 446,000 633,000
Suttle [Member] | Structured Cabling and Connecting System Products [Member]    
Disaggregation of Revenue [Line Items]    
Sales 6,573,000 7,745,000
Suttle [Member] | DSL and Other Products [Member]    
Disaggregation of Revenue [Line Items]    
Sales 400,000 1,027,000
Transition Networks [Member]    
Disaggregation of Revenue [Line Items]    
Sales 9,153,000 9,004,000
Transition Networks [Member] | North America [Member]    
Disaggregation of Revenue [Line Items]    
Sales 7,641,000 7,071,000
Transition Networks [Member] | Rest of World [Member]    
Disaggregation of Revenue [Line Items]    
Sales 975,000 1,445,000
Transition Networks [Member] | Europe, Middle East, Africa ("EMEA") [Member]    
Disaggregation of Revenue [Line Items]    
Sales 537,000 488,000
Transition Networks [Member] | Media Converters [Member]    
Disaggregation of Revenue [Line Items]    
Sales 5,184,000 5,484,000
Transition Networks [Member] | Ethernet Switches and Adapters [Member]    
Disaggregation of Revenue [Line Items]    
Sales 2,260,000 1,679,000
Transition Networks [Member] | Other Products [Member]    
Disaggregation of Revenue [Line Items]    
Sales 1,709,000 1,841,000
JDL Technologies [Member]    
Disaggregation of Revenue [Line Items]    
Sales 710,000 2,864,000
JDL Technologies [Member] | Education [Member]    
Disaggregation of Revenue [Line Items]    
Sales 109,000 2,063,000
JDL Technologies [Member] | Healthcare and Commercial Clients [Member]    
Disaggregation of Revenue [Line Items]    
Sales $ 601,000 $ 801,000

Cash Equivalents and Investments
v3.8.0.1
Cash Equivalents and Investments
3 Months Ended
Mar. 31, 2018
Cash Equivalents and Investments [Abstract]  
Cash Equivalents and Investments

NOTE 3 – CASH EQUIVALENTS AND INVESTMENTS



The following tables show the Company’s cash equivalents and available-for-sale securities’ amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash and cash equivalents or short and long term investments as of March 31, 2018 and December 31, 2017:  





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2018



Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

 

Cash Equivalents

 

Short-Term Investments

 

Long-Term Investments



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market funds

$

5,751,000 

 

$

 -

 

$

 -

 

$

5,751,000 

 

$

5,751,000 

 

$

 -

 

$

 -

Subtotal

 

5,751,000 

 

 

 -

 

 

 -

 

 

5,751,000 

 

 

5,751,000 

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Paper

 

1,988,000 

 

 

 -

 

 

(2,000)

 

 

1,986,000 

 

 

 -

 

 

1,986,000 

 

 

 -

Corporate Notes/Bonds

 

4,038,000 

 

 

 -

 

 

(5,000)

 

 

4,033,000 

 

 

 -

 

 

4,033,000 

 

 

 -

Subtotal

 

6,026,000 

 

 

 -

 

 

(7,000)

 

 

6,019,000 

 

 

 -

 

 

6,019,000 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

11,777,000 

 

$

 -

 

$

(7,000)

 

$

11,770,000 

 

$

5,751,000 

 

$

6,019,000 

 

$

 -













 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2017



Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

 

Cash Equivalents

 

Short-Term Investments

 

Long-Term Investments



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market funds

$

6,193,000 

 

$

 -

 

$

 -

 

$

6,193,000 

 

$

6,193,000 

 

$

 -

 

$

 -

Subtotal

 

6,193,000 

 

 

 -

 

 

 -

 

 

6,193,000 

 

 

6,193,000 

 

 

 -

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial Paper

 

997,000 

 

 

 -

 

 

 -

 

 

997,000 

 

 

 -

 

 

997,000 

 

 

 -

Corporate Notes/Bonds

 

4,545,000 

 

 

 -

 

 

(1,000)

 

 

4,544,000 

 

 

 -

 

 

4,544,000 

 

 

 -

Subtotal

 

5,542,000 

 

 

 -

 

 

(1,000)

 

 

5,541,000 

 

 

 -

 

 

5,541,000 

 

 

 -



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

$

11,735,000 

 

$

 -

 

$

(1,000)

 

$

11,734,000 

 

$

6,193,000 

 

$

5,541,000 

 

$

 -



The Company tests for other than temporary losses on a quarterly basis and has considered the unrealized losses indicated above to be temporary in nature. The Company intends to hold the investments until it can recover the full principal amount and has the ability to do so based on other sources of liquidity. The Company expects such recoveries to occur prior to the contractual maturities. All unrealized losses as of March 31, 2018 were in a continuous unrealized loss position for less than twelve months and are not deemed to be other than temporarily impaired as of March 31, 2018.

The following table summarizes the estimated fair value of our investments, designated as available-for-sale and classified by the contractual maturity date of the securities as of March 31, 2018: