Document and Entity Information
v3.8.0.1
Document and Entity Information - shares
6 Months Ended
Jun. 30, 2018
Aug. 01, 2018
Document and Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Jun. 30, 2018  
Document Fiscal Period Focus Q2  
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   9,149,924

Condensed Consolidated Balance Sheets
v3.8.0.1
Condensed Consolidated Balance Sheets - USD ($)
Jun. 30, 2018
Dec. 31, 2017
CURRENT ASSETS:    
Cash and cash equivalents $ 8,066,304 $ 12,453,663
Investments 6,105,626 5,540,744
Trade accounts receivable, less allowance for doubtful accounts of $120,000 and $106,000, respectively 11,473,993 12,183,217
Inventories 15,565,210 13,984,428
Prepaid income taxes 459,822 493,834
Other current assets 1,245,903 810,532
TOTAL CURRENT ASSETS 42,916,858 45,466,418
PROPERTY, PLANT AND EQUIPMENT, net 11,972,989 12,624,730
OTHER ASSETS:    
Deferred income taxes 38,136 38,136
Other assets, net 10,761 16,977
TOTAL OTHER ASSETS 48,897 55,113
TOTAL ASSETS 54,938,744 58,146,261
CURRENT LIABILITIES:    
Accounts payable 5,257,225 4,554,683
Accrued compensation and benefits 2,113,655 2,422,083
Other accrued liabilities 2,775,566 1,586,473
Dividends payable 368,222 397,151
TOTAL CURRENT LIABILITIES 10,514,668 8,960,390
LONG TERM LIABILITIES:    
Long-term compensation plans   11,079
Uncertain tax positions   4,065
TOTAL LONG-TERM LIABILITIES   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; 9,142,649 and 8,973,708 shares issued and outstanding, respectively 457,132 448,685
Additional paid-in capital 42,548,812 42,006,750
Retained earnings 2,104,414 7,328,671
Accumulated other comprehensive loss (686,282) (613,379)
TOTAL STOCKHOLDERS' EQUITY 44,424,076 49,170,727
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 54,938,744 $ 58,146,261

Condensed Consolidated Balance Sheets (Parenthetical)
v3.8.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Jun. 30, 2018
Dec. 31, 2017
Condensed Consolidated Balance Sheets [Abstract]    
Trade accounts receivable, allowance for doubtful accounts $ 120 $ 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 9,142,649 8,973,708
Common stock, shares outstanding 9,142,649 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 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Condensed Consolidated Statements of Loss and Comprehensive Loss [Abstract]        
Sales $ 15,038,159 $ 22,068,462 $ 31,811,844 $ 42,868,541
Cost of sales 11,053,074 16,057,822 22,648,140 30,892,836
Gross profit 3,985,085 6,010,640 9,163,704 11,975,705
Operating expenses:        
Selling, general and administrative expenses 6,707,289 7,318,047 13,860,128 14,355,302
Impairment loss   1,617,389   1,617,389
Restructuring expense   1,141,992 0 1,529,630
Total operating expenses 6,707,289 10,077,428 13,860,128 17,502,321
Operating loss (2,722,204) (4,066,788) (4,696,424) (5,526,616)
Other income (expenses):        
Investment and other income (expense) 89,131 (1,667) 193,252 40,019
(Loss) Gain on sale of assets (10,480) (40,446) 17,051 (58,246)
Interest and other expense (9,482) (9,481) (19,188) (19,040)
Other income (expense), net 69,169 (51,594) 191,115 (37,267)
Loss from operations before income taxes (2,653,035) (4,118,382) (4,505,309) (5,563,883)
Income tax (benefit) expense (11,525) (27,685) (3,955) 42,326
Net loss (2,641,510) (4,090,697) (4,501,354) (5,606,209)
Other comprehensive income (loss), net of tax:        
Unrealized loss on available-for-sale securities 4,433 (1,163) (1,998) (2,947)
Foreign currency translation adjustment (104,999) 37,204 (70,905) 32,216
Total other comprehensive (loss) income (100,566) 36,041 (72,903) 29,269
Comprehensive loss $ (2,742,076) $ (4,054,656) $ (4,574,257) $ (5,576,940)
Basic net loss per share: $ (0.29) $ (0.46) $ (0.50) $ (0.63)
Diluted net loss per share: $ (0.29) $ (0.46) $ (0.50) $ (0.63)
Weighted Average Basic Shares Outstanding 9,132,855 8,947,070 9,066,886 8,920,779
Weighted Average Dilutive Shares Outstanding 9,132,855 8,947,070 9,066,886 8,920,779
Dividends declared per share $ 0.04 $ 0.04 $ 0.08 $ 0.08

Condensed Consolidated Statement of Changes in Stockholders' Equity
v3.8.0.1
Condensed Consolidated Statement of Changes in Stockholders' Equity - 6 months ended Jun. 30, 2018 - USD ($)
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Loss [Member]
Total
BALANCE 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     (4,501,354)   (4,501,354)
Issuance of common stock under Employee Stock Purchase Plan $ 691 49,758     50,449
Issuance of common stock under Employee Stock Purchase Plan, Shares 13,825        
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 $ 2,175       2,175
Issuance of common stock under Executive Stock Plan, Shares 43,501        
Share based compensation   109,783     109,783
Other share retirements $ (401) (37,387) 9,325   (28,463)
Other share retirements, Shares (8,017)        
Shareholder dividends     (732,228)   (732,228)
Other comprehensive loss       (72,903) (72,903)
BALANCE at Jun. 30, 2018 $ 457,132 $ 42,548,812 $ 2,104,414 $ (686,282) $ 44,424,076
BALANCE, Shares at Jun. 30, 2018 9,142,649        

Condensed Consolidated Statements of Cash Flows
v3.8.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (4,501,354) $ (5,606,209)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:    
Depreciation and amortization 1,172,556 1,722,382
Share based compensation 109,783 246,266
Deferred taxes   (52,999)
Impairment loss   1,617,389
(Gain) loss on sale of assets (17,051) 58,246
Changes in assets and liabilities:    
Trade accounts receivable 669,937 1,813,679
Inventories (1,604,564) 3,958,892
Prepaid income taxes 34,012 806,070
Other assets, net (439,897) 152,665
Accounts payable 788,435 (644,549)
Accrued compensation and benefits 106,896 1,176,457
Other accrued liabilities 1,204,309 (183,883)
Income taxes payable (4,065) 4,109
Net cash (used in) provided by operating activities (2,481,003) 5,068,515
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (612,273) (138,374)
Purchases of investments (3,488,793)  
Proceeds from the sale of property, plant and equipment 39,263 73,400
Proceeds from the sale of investments 2,921,913 4,357,774
Net cash (used in) provided by investing activities (1,139,890) 4,292,800
CASH FLOWS FROM FINANCING ACTIVITIES:    
Cash dividends paid (761,157) (737,833)
Proceeds from issuance of common stock, net of shares withheld 24,161 46,259
Net cash used in financing activities (736,996) (691,574)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH (29,470) (929)
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (4,387,359) 8,668,812
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 12,453,663 10,443,274
CASH AND CASH EQUIVALENTS AT END OF PERIOD 8,066,304 19,112,086
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Income taxes refunded (33,902) (662,821)
Interest paid 18,969 19,641
Dividends declared not paid 368,222 397,768
Capital expenditures in accounts payable $ 21,310 $ 171,985

Summary of Significant Accounting Policies
v3.8.0.1
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 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 June 30, 2018 and the related condensed consolidated statements of loss and comprehensive loss, and the condensed consolidated statements of cash flows for the periods ended June 30, 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 June 30, 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 June 30, 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

 

 

(71,000)

 

 

(2,000)

 

 

(73,000)



 

 

 

 

 

 

 

 

 

June 30, 2018

 

$

(696,000)

 

$

10,000 

 

$

(686,000)



 


Summary of Significant Accounting Policies (Policy)
v3.8.0.1
Summary of Significant Accounting Policies (Policy)
6 Months Ended
Jun. 30, 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 June 30, 2018 and the related condensed consolidated statements of loss and comprehensive loss, and the condensed consolidated statements of cash flows for the periods ended June 30, 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 June 30, 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 June 30, 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

 

 

(71,000)

 

 

(2,000)

 

 

(73,000)



 

 

 

 

 

 

 

 

 

June 30, 2018

 

$

(696,000)

 

$

10,000 

 

$

(686,000)




Summary of Significant Accounting Policies (Tables)
v3.8.0.1
Summary of Significant Accounting Policies (Tables)
6 Months Ended
Jun. 30, 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

 

 

(71,000)

 

 

(2,000)

 

 

(73,000)



 

 

 

 

 

 

 

 

 

June 30, 2018

 

$

(696,000)

 

$

10,000 

 

$

(686,000)




Summary Of Significant Accounting Policies (Narrative) (Details)
v3.8.0.1
Summary Of Significant Accounting Policies (Narrative) (Details)
6 Months Ended
Jun. 30, 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)
6 Months Ended
Jun. 30, 2018
USD ($)
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE $ 49,170,727
BALANCE 44,424,076
Foreign Currency Translation [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE (625,000)
Net current period change (71,000)
BALANCE (696,000)
Unrealized (Loss)/Gain On Securities [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE 12,000
Net current period change (2,000)
BALANCE 10,000
Accumulated Other Comprehensive Loss [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE (613,379)
Net current period change (73,000)
BALANCE $ (686,282)

Revenue Recognition
v3.8.0.1
Revenue Recognition
6 Months Ended
Jun. 30, 2018
Revenue Recognition [Abstract]  
Revenue Recognition

NOTE 2 – REVENUE RECOGNITION



The Company adopted ASC 606, “Revenue from Contracts with Customers,” 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”) and 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 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.



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.



Costs to Obtain or Fulfill a Contract



In addition to the new revenue recognition guidance, “Other Assets and Deferred Costs” (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 six months ended June 30, 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 June 30, 2018, to the pro-forma amounts had the previous guidance been in effect:





 

 

 

 

 

 



 

 

 

 

 

 



 

As of June 30, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Trade accounts receivable

$

11,474,000 

$

10,407,000 

$

1,067,000 

Inventories

 

15,565,000 

 

16,136,000 

 

(571,000)

Other current assets

 

1,246,000 

 

675,000 

 

571,000 

Other accrued liabilities

 

2,776,000 

 

1,709,000 

 

1,067,000 



 

 

 

 

 

 







 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended June 30, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Revenue

$

15,038,000 

$

15,205,000 

$

(167,000)

Gross Profit

 

3,985,000 

 

4,152,000 

 

(167,000)

Selling, general and administrative expenses

 

6,707,000 

 

6,874,000 

 

(167,000)

Operating Loss

 

(2,722,000)

 

(2,722,000)

 

 -



 

 

 

 

 

 







 

 

 

 

 

 



 

 

 

 

 

 



 

Six Months Ended June 30, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Revenue

$

31,812,000 

$

32,103,000 

$

(291,000)

Gross Profit

 

9,164,000 

 

9,455,000 

 

(291,000)

Selling, general and administrative expenses

 

13,860,000 

 

14,151,000 

 

(291,000)

Operating Loss

 

(4,696,000)

 

(4,696,000)

 

 -



 

 

 

 

 

 





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 and six months ended June 30, 2018 and 2017:





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Suttle Sales by Product Group



Three Months Ended June 30

 

Six Months Ended June 30



 

2018

 

 

2017

 

 

2018

 

 

2017

Structured cabling and connecting system products

$

5,169,000 

 

$

7,823,000 

 

$

11,742,000 

 

$

15,568,000 

DSL and other products

 

704,000 

 

 

757,000 

 

 

1,104,000 

 

 

1,784,000 



$

5,873,000 

 

$

8,580,000 

 

$

12,846,000 

 

$

17,352,000 



 

 

 

 

 

 

 

 

 

 

 







 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Suttle Sales by Customer Group



Three Months Ended June 30

 

Six Months Ended June 30



 

2018

 

 

2017

 

 

2018

 

 

2017

Communication service providers

$

4,500,000 

 

$

7,540,000 

 

$

10,447,000 

 

$

15,555,000 

International

 

766,000 

 

 

247,000 

 

 

1,346,000 

 

 

372,000 

Distributors

 

607,000 

 

 

793,000 

 

 

1,053,000 

 

 

1,425,000 



$

5,873,000 

 

$

8,580,000 

 

$

12,846,000 

 

$

17,352,000 



 

 

 

 

 

 

 

 

 

 

 



For Transition Networks, we analyze revenue by region and product group, which is as follows for the three and six months ended June 30, 2018 and 2017:  





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Transition Networks Sales by Region



Three Months Ended June 30

 

Six Months Ended June 30



 

2018

 

 

2017

 

 

2018

 

 

2017

North America

$

6,450,000 

 

$

8,085,000 

 

$

14,092,000 

 

$

15,156,000 

Rest of World

 

864,000 

 

 

1,005,000 

 

 

1,840,000 

 

 

2,450,000 

Europe, Middle East, Africa ("EMEA")

 

520,000 

 

 

410,000 

 

 

1,056,000 

 

 

898,000 



$

7,834,000 

 

$

9,500,000 

 

$

16,988,000 

 

$

18,504,000 



 

 

 

 

 

 

 

 

 

 

 







 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Transition Networks Sales by Product Group



Three Months Ended June 30

 

Six Months Ended June 30



 

2018

 

 

2017

 

 

2018

 

 

2017

Media converters

$

4,492,000 

 

$

5,570,000 

 

$

9,677,000 

 

$

11,054,000 

Ethernet switches and adapters

 

1,827,000 

 

 

1,809,000 

 

 

4,086,000 

 

 

3,488,000 

Other products

 

1,515,000 

 

 

2,121,000 

 

 

3,225,000 

 

 

3,962,000 



$

7,834,000 

 

$

9,500,000 

 

$

16,988,000 

 

$

18,504,000 



 

 

 

 

 

 

 

 

 

 

 



For JDL, we analyze revenue by customer group, which is as follows for the three and six months ended June 30, 2018 and 2017:





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



JDL Revenue by Customer Group



Three Months Ended June 30

 

Six Months Ended June 30



 

2018

 

 

2017

 

 

2018

 

 

2017

Education

$

280,000 

 

$

3,151,000 

 

$

388,000 

 

$

5,215,000 

Healthcare and commercial clients

 

633,000 

 

 

875,000 

 

 

1,234,000 

 

 

1,676,000 



$

913,000 

 

$

4,026,000 

 

$

1,622,000 

 

$

6,891,000 



 

 

 

 

 

 

 

 

 

 

 

 





The Company does not currently analyze revenue for Net2Edge on a disaggregated basis. Revenues from Net2Edge were $681,000 and $180,000 for the three months ended June 30, 2018 and 2017, respectively. Revenues were $846,000 and $537,000 for the six months ended June 30, 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)
6 Months Ended
Jun. 30, 2018
Revenue Recognition [Abstract]  
Schedule of Impact from Initial Application Period Cumulative Effect Transition



 

 

 

 

 

 



 

 

 

 

 

 



 

As of June 30, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Trade accounts receivable

$

11,474,000 

$

10,407,000 

$

1,067,000 

Inventories

 

15,565,000 

 

16,136,000 

 

(571,000)

Other current assets

 

1,246,000 

 

675,000 

 

571,000 

Other accrued liabilities

 

2,776,000 

 

1,709,000 

 

1,067,000 



 

 

 

 

 

 







 

 

 

 

 

 



 

 

 

 

 

 



 

Three Months Ended June 30, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Revenue

$

15,038,000 

$

15,205,000 

$

(167,000)

Gross Profit

 

3,985,000 

 

4,152,000 

 

(167,000)

Selling, general and administrative expenses

 

6,707,000 

 

6,874,000 

 

(167,000)

Operating Loss

 

(2,722,000)

 

(2,722,000)

 

 -



 

 

 

 

 

 







 

 

 

 

 

 



 

 

 

 

 

 



 

Six Months Ended June 30, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Revenue

$

31,812,000 

$

32,103,000 

$

(291,000)

Gross Profit

 

9,164,000 

 

9,455,000 

 

(291,000)

Selling, general and administrative expenses

 

13,860,000 

 

14,151,000 

 

(291,000)

Operating Loss

 

(4,696,000)

 

(4,696,000)

 

 -



 

 

 

 

 

 



Schedule of Disaggregation of Revenues

For Suttle, we analyze revenues by product and customer group, which is as follows for the three and six months ended June 30, 2018 and 2017:





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Suttle Sales by Product Group



Three Months Ended June 30

 

Six Months Ended June 30



 

2018

 

 

2017

 

 

2018

 

 

2017

Structured cabling and connecting system products

$

5,169,000 

 

$

7,823,000 

 

$

11,742,000 

 

$

15,568,000 

DSL and other products

 

704,000 

 

 

757,000 

 

 

1,104,000 

 

 

1,784,000 



$

5,873,000 

 

$

8,580,000 

 

$

12,846,000 

 

$

17,352,000 



 

 

 

 

 

 

 

 

 

 

 







 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Suttle Sales by Customer Group



Three Months Ended June 30

 

Six Months Ended June 30



 

2018

 

 

2017

 

 

2018

 

 

2017

Communication service providers

$

4,500,000 

 

$

7,540,000 

 

$

10,447,000 

 

$

15,555,000 

International

 

766,000 

 

 

247,000 

 

 

1,346,000 

 

 

372,000 

Distributors

 

607,000 

 

 

793,000 

 

 

1,053,000 

 

 

1,425,000 



$

5,873,000 

 

$

8,580,000 

 

$

12,846,000 

 

$

17,352,000 



 

 

 

 

 

 

 

 

 

 

 



For Transition Networks, we analyze revenue by region and product group, which is as follows for the three and six months ended June 30, 2018 and 2017:  





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Transition Networks Sales by Region



Three Months Ended June 30

 

Six Months Ended June 30



 

2018

 

 

2017

 

 

2018

 

 

2017

North America

$

6,450,000 

 

$

8,085,000 

 

$

14,092,000 

 

$

15,156,000 

Rest of World

 

864,000 

 

 

1,005,000 

 

 

1,840,000 

 

 

2,450,000 

Europe, Middle East, Africa ("EMEA")

 

520,000 

 

 

410,000 

 

 

1,056,000 

 

 

898,000 



$

7,834,000 

 

$

9,500,000 

 

$

16,988,000 

 

$

18,504,000 



 

 

 

 

 

 

 

 

 

 

 







 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



Transition Networks Sales by Product Group



Three Months Ended June 30

 

Six Months Ended June 30



 

2018

 

 

2017

 

 

2018

 

 

2017

Media converters

$

4,492,000 

 

$

5,570,000 

 

$

9,677,000 

 

$

11,054,000 

Ethernet switches and adapters

 

1,827,000 

 

 

1,809,000 

 

 

4,086,000 

 

 

3,488,000 

Other products

 

1,515,000 

 

 

2,121,000 

 

 

3,225,000 

 

 

3,962,000 



$

7,834,000 

 

$

9,500,000 

 

$

16,988,000 

 

$

18,504,000 



 

 

 

 

 

 

 

 

 

 

 



For JDL, we analyze revenue by customer group, which is as follows for the three and six months ended June 30, 2018 and 2017:





 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 



JDL Revenue by Customer Group



Three Months Ended June 30

 

Six Months Ended June 30



 

2018

 

 

2017

 

 

2018

 

 

2017

Education

$

280,000 

 

$

3,151,000 

 

$

388,000 

 

$

5,215,000 

Healthcare and commercial clients

 

633,000 

 

 

875,000 

 

 

1,234,000 

 

 

1,676,000 



$

913,000 

 

$

4,026,000 

 

$

1,622,000 

 

$

6,891,000 



 

 

 

 

 

 

 

 

 

 

 

 




Revenue Recognition (Narrative) (Details)
v3.8.0.1
Revenue Recognition (Narrative) (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Segment Reporting Information [Line Items]        
Sales $ 15,038,159 $ 22,068,462 $ 31,811,844 $ 42,868,541
Net2Edge [Member]        
Segment Reporting Information [Line Items]        
Sales $ 681,000 $ 180,000 $ 846,000 $ 537,000

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 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Dec. 31, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]          
Trade accounts receivable $ 11,473,993   $ 11,473,993   $ 12,183,217
Inventories 15,565,210   15,565,210   13,984,428
Other current assets 1,245,903   1,245,903   810,532
Other accrued liabilities 2,775,566   2,775,566   $ 1,586,473
Revenues 15,038,159 $ 22,068,462 31,811,844 $ 42,868,541  
Gross profit 3,985,085 6,010,640 9,163,704 11,975,705  
Selling, general and administrative expenses 6,707,289 7,318,047 13,860,128 14,355,302  
Operating loss (2,722,204) $ (4,066,788) (4,696,424) $ (5,526,616)  
Balances without adoption of ASC 606 [Member]          
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]          
Trade accounts receivable 10,407,000   10,407,000    
Inventories 16,136,000   16,136,000    
Other current assets 675,000   675,000    
Other accrued liabilities 1,709,000   1,709,000    
Revenues 15,205,000   32,103,000    
Gross profit 4,152,000   9,455,000    
Selling, general and administrative expenses 6,874,000   14,151,000    
Operating loss (2,722,000)   (4,696,000)    
Accounting Standards Update 2014-09 [Member] | Effect of ChangeHigher/(Lower) [Member]          
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]          
Trade accounts receivable 1,067,000   1,067,000    
Inventories (571,000)   (571,000)    
Other current assets 571,000   571,000    
Other accrued liabilities 1,067,000   1,067,000    
Revenues (167,000)   (291,000)    
Gross profit (167,000)   (291,000)    
Selling, general and administrative expenses $ (167,000)   $ (291,000)    

Revenue Recognition (Schedule of Disaggregation of Revenues) (Details)
v3.8.0.1
Revenue Recognition (Schedule of Disaggregation of Revenues) (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2018
Jun. 30, 2017
Jun. 30, 2018
Jun. 30, 2017
Disaggregation of Revenue [Line Items]        
Sales $ 15,038,159 $ 22,068,462 $ 31,811,844 $ 42,868,541
Suttle [Member]        
Disaggregation of Revenue [Line Items]        
Sales 5,873,000 8,580,000 12,846,000 17,352,000
Suttle [Member] | Communication Service Providers [Member]        
Disaggregation of Revenue [Line Items]        
Sales 4,500,000 7,540,000 10,447,000 15,555,000
Suttle [Member] | International [Member]        
Disaggregation of Revenue [Line Items]        
Sales 766,000 247,000 1,346,000 372,000
Suttle [Member] | Distributors [Member]        
Disaggregation of Revenue [Line Items]        
Sales 607,000 793,000 1,053,000 1,425,000
Suttle [Member] | Structured Cabling and Connecting System Products [Member]        
Disaggregation of Revenue [Line Items]        
Sales 5,169,000 7,823,000 11,742,000 15,568,000
Suttle [Member] | DSL and Other Products [Member]        
Disaggregation of Revenue [Line Items]        
Sales 704,000 757,000 1,104,000 1,784,000
Transit