Document and Entity Information
v3.10.0.1
Document and Entity Information - USD ($)
12 Months Ended
Dec. 31, 2018
Mar. 01, 2019
Jun. 30, 2018
Document and Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2018    
Document Fiscal Period Focus FY    
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 Non-accelerated Filer    
Entity Well-known Seasoned Issuer No    
Entity Voluntary Filers No    
Entity Current Reporting Status Yes    
Entity Small Business true    
Entity Shell Company false    
Entity Emerging Growth Company false    
Entity Public Float     $ 27,188,000
Entity Common Stock, Shares Outstanding   9,171,913  

Consolidated Balance Sheets
v3.10.0.1
Consolidated Balance Sheets - USD ($)
Dec. 31, 2018
Dec. 31, 2017
CURRENT ASSETS:    
Cash and cash equivalents $ 11,056,426 $ 12,453,663
Investments   5,540,744
Trade accounts receivable, less allowance for doubtful accounts of $136,000 and $106,000, respectively 13,401,042 12,183,217
Inventories 16,175,616 13,984,428
Prepaid income taxes 148,036 493,834
Other current assets 1,553,972 810,532
TOTAL CURRENT ASSETS 42,335,092 45,466,418
PROPERTY, PLANT AND EQUIPMENT, net 10,962,239 12,624,730
OTHER ASSETS:    
Deferred income taxes 19,068 38,136
Other assets 4,765 16,977
TOTAL OTHER ASSETS 23,833 55,113
TOTAL ASSETS 53,321,164 58,146,261
CURRENT LIABILITIES:    
Accounts payable 5,394,981 4,554,683
Accrued compensation and benefits 2,892,199 2,422,083
Other accrued liabilities 3,168,049 1,586,473
Dividends payable 184,541 397,151
TOTAL CURRENT LIABILITIES 11,639,770 8,960,390
LONG TERM LIABILITIES:    
Long-term compensation plans   11,079
Uncertain tax positions 28,267 4,065
TOTAL LONG-TERM LIABILITIES 28,267 15,144
COMMITMENTS AND CONTINGENCIES (Footnote 7)
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; 9,158,438 and 8,973,708 shares issued and outstanding, respectively 457,922 448,685
Additional paid-in capital 42,680,499 42,006,750
Retained earnings (accumulated deficit) (734,001) 7,328,671
Accumulated other comprehensive loss (751,293) (613,379)
TOTAL STOCKHOLDERS' EQUITY 41,653,127 49,170,727
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 53,321,164 $ 58,146,261

Consolidated Balance Sheets (Parenthetical)
v3.10.0.1
Consolidated Balance Sheets (Parenthetical) - USD ($)
Dec. 31, 2018
Dec. 31, 2017
Consolidated Balance Sheets [Abstract]    
Trade accounts receivable, allowance for doubtful accounts $ 136,000 $ 106,000
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 9,158,438 8,973,708
Common stock, shares outstanding 9,158,438 8,973,708

Consolidated Statements of Loss and Comprehensive Loss
v3.10.0.1
Consolidated Statements of Loss and Comprehensive Loss - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Consolidated Statements of Loss and Comprehensive Loss [Abstract]    
Sales $ 65,762,946 $ 82,322,618
Cost of sales 44,455,697 61,486,379
Gross profit 21,307,249 20,836,239
Operating expenses:    
Selling, general and administrative expenses 27,501,691 28,699,138
Impairment loss   1,617,389
Restructuring expense 363,676 2,284,541
Total operating expenses 27,865,367 32,601,068
Operating loss (6,558,118) (11,764,829)
Other income (expenses):    
Investment and other income 299,555 52,992
Loss on sale of assets (89,550) (76,870)
Interest and other expense (38,355) (71,428)
Other income (expense), net 171,650 (95,306)
Loss from operations before income taxes (6,386,468) (11,860,135)
Income tax expense (benefit) 405,267 (34,503)
Net loss (6,791,735) (11,825,632)
Other comprehensive (loss) income, net of tax:    
Unrealized gains/(losses) on available-for-sale securities 1,061 (4,566)
Foreign currency translation adjustment (138,975) 77,848
Total other comprehensive (loss) income (137,914) 73,282
Comprehensive loss $ (6,929,649) $ (11,752,350)
Basic net loss per share: $ (0.75) $ (1.32)
Diluted net loss per share: $ (0.75) $ (1.32)
Weighted Average Basic Shares Outstanding 9,108,777 8,942,523
Weighted Average Dilutive Shares Outstanding 9,108,777 8,942,523

Consolidated Statements of Changes in Stockholders' Equity
v3.10.0.1
Consolidated Statements of Changes in Stockholders' Equity - USD ($)
Common Stock [Member]
Additional Paid-In Capital [Member]
Retained Earnings (Accumulated Deficit) [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Total
BALANCE at Dec. 31, 2016 $ 443,869 $ 41,279,281 $ 20,596,203 $ (686,661) $ 61,632,692
BALANCE, Shares at Dec. 31, 2016 8,877,379        
Net loss     (11,825,632)   (11,825,632)
Issuance of common stock under Employee Stock Purchase Plan $ 1,183 103,100     104,283
Issuance of common stock under Employee Stock Purchase Plan, Shares 23,660        
Issuance of common stock to Employee Stock Ownership Plan $ 2,362 216,396     218,758
Issuance of common stock to Employee Stock Ownership Plan, Shares 47,248        
Issuance of common stock under Executive Stock Plan $ 1,374       1,374
Issuance of common stock under Executive Stock Plan, Shares 27,471        
Share based compensation   417,489     417,489
Other share retirements $ (103) (9,516) 1,007   (8,612)
Other share retirements, Shares (2,050)        
Shareholder dividends     (1,442,907)   (1,442,907)
Other comprehensive loss       73,282 73,282
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     (6,791,735)   (6,791,735)
Issuance of common stock under Employee Stock Purchase Plan $ 1,481 100,507     101,988
Issuance of common stock under Employee Stock Purchase Plan, Shares 29,614        
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   190,721     190,721
Other share retirements $ (401) (37,387) 9,325   (28,463)
Other share retirements, Shares (8,017)        
Shareholder dividends     (1,280,262)   (1,280,262)
Other comprehensive loss       (137,914) (137,914)
BALANCE at Dec. 31, 2018 $ 457,922 $ 42,680,499 $ (734,001) $ (751,293) $ 41,653,127
BALANCE, Shares at Dec. 31, 2018 9,158,438        

Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical)
v3.10.0.1
Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) - $ / shares
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Retained Earnings (Accumulated Deficit) [Member]    
Shareholder dividends per share $ 0.14 $ 0.16

Consolidated Statements of Cash Flows
v3.10.0.1
Consolidated Statements of Cash Flows - USD ($)
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net loss $ (6,791,735) $ (11,825,632)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:    
Depreciation and amortization 2,214,848 3,186,458
Share based compensation 190,721 417,489
Deferred taxes 19,068 (91,134)
Impairment loss   1,617,389
Loss on sale of assets 89,550 582,317
Changes in assets and liabilities:    
Trade accounts receivables (1,237,986) 2,393,310
Inventories (2,249,296) 8,268,676
Prepaid income taxes 343,381 908,513
Other assets (749,785) 595,869
Accounts payable 944,052 (2,499,232)
Accrued compensation and benefits 888,376 482,324
Other accrued liabilities 1,591,872 (283,628)
Income taxes payable 24,202 (102,799)
Net cash (used in) provided by operating activities (4,722,732) 3,649,920
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (763,627) (773,367)
Purchases of investments (6,580,917) (6,043,715)
Proceeds from the sale of fixed assets 33,763 219,888
Proceeds from the sale of investments 12,122,722 6,303,681
Net cash provided by (used in) investing activities 4,811,941 (293,513)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Cash dividends paid (1,492,871) (1,458,298)
Proceeds from issuance of common stock, net of shares withheld 75,700 97,045
Net cash used in financing activities (1,417,171) (1,361,253)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH (69,275) 15,235
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (1,397,237) 2,010,389
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 12,453,663 10,443,274
CASH AND CASH EQUIVALENTS AT END OF YEAR 11,056,426 12,453,663
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Income taxes refunded (32,596) (693,113)
Interest paid 38,030 38,851
Dividends declared not paid $ 184,541 397,151
Capital expenditures in accounts payable   $ 90,623

Summary of Significant Accounting Policies
v3.10.0.1
Summary of Significant Accounting Policies
12 Months Ended
Dec. 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 called “CSI,” “our” or the “Company”) is a Minnesota corporation organized in 1969 that operates directly and through its subsidiaries located in the United States and the United Kingdom. CSI is principally engaged through its Suttle business unit in the manufacture and sale of connectivity infrastructure products for broadband and voice communications and through its Transition Networks 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 business unit the Company provides technology solutions including virtualization, managed services, wired and wireless network design and implementation, HIPAA-compliant IT services, and converged infrastructure configuration and deployment. Through its Net2Edge business unit, the Company enables telecommunications carriers to connect legacy networks to high-speed networks and services.



The Company classifies its businesses into four segments that correspond to these four 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.



Principles of consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and accounts have been eliminated.



Use of estimates: The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses estimates based on the best information available in recording transactions and balances resulting from operations. Actual results could differ from those estimates. The Company’s estimates consist principally of reserves for doubtful accounts, sales returns, warranty costs, asset impairment evaluations, accruals for compensation plans, self-insured medical and dental accruals, lower of cost or market inventory adjustments, provisions for income taxes and deferred taxes and depreciable lives of fixed assets.

 

Cash equivalents: For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. As of December 31, 2018, the Company had $11,056,000 in cash and cash equivalents. Of this amount, $8,428,000 was invested in short-term money market funds that are not considered to be bank deposits and are not insured or guaranteed by the federal deposit insurance company (FDIC) or other government agency. These money market funds seek to preserve the value of the investment at $1.00 per share; however, it is possible to lose money investing in these funds. The remainder is operating cash and certificates of deposit which are fully insured through the FDIC.



Investments: Investments consist of certificates of deposit, corporate notes and bonds, and commercial paper that are traded on the open market and are classified as available-for-sale. Available-for-sale investments are reported at fair value with unrealized gains and losses excluded from operations and reported as a separate component of stockholders’ equity, net of tax (see Accumulated other comprehensive loss below).



Inventories: Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. Provision to reduce inventories to the lower of cost or net realizable value is made based on a review of excess and obsolete inventories, estimates of future sales, examination of historical consumption rates and the related value of component parts.



Property, plant and equipment: Property, plant and equipment are recorded at cost. Depreciation is computed using the straight-line method. Depreciation included in cost of sales and selling, general and administrative expenses for continuing operations was $2,203,000 and $3,156,000 for 2018 and 2017, respectively. Maintenance and repairs are charged to operations and additions or improvements are capitalized. Items of property sold, retired or otherwise disposed of are removed from the asset and accumulated depreciation accounts and any gains or losses on disposal are reflected in operations.



Intangible Assets: Intangible assets with indefinite useful lives are not amortized, but are tested at least annually for impairment.



Recoverability of long-lived assets: The Company reviews its long-lived assets periodically when impairment indicators exist as required under generally accepted accounting principles. Potential impairment is determined by comparing the carrying value of the assets with expected net cash flows expected to be provided by operating activities of the business or related products. If the sum of the expected future net cash flows is less than the carrying value, an impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the asset.



Warranty:  The Company reserves for the estimated cost of product warranties at the time revenue is recognized. We estimate the costs of our warranty obligations based on our warranty policy or applicable contractual warranty, historical experience of known product failure rates, and use of materials and service delivery costs incurred in correcting product failures. Management reviews the estimated warranty liability on a quarterly basis to determine its adequacy. 



The following table presents the changes in the Company’s warranty liability, included in other accrued liabilities in the consolidated balance sheets, for the years ended December 31, 2018 and 2017, which relate to normal product warranties and a five-year obligation to provide for potential future liabilities for certain network equipment sales:





 

 

 

 

 

 



 

 

 

 

 

 



 

Year Ended December 31



 

 

2018

 

 

2017

Beginning balance

 

$

603,000 

 

$

600,000 

Amounts charged to expense

 

 

77,000 

 

 

93,000 

Actual warranty costs paid

 

 

(86,000)

 

 

(90,000)

Ending balance

 

$

594,000 

 

$

603,000 



Accumulated other comprehensive loss: The components of accumulated other comprehensive loss 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

 

 

(139,000)

 

 

1,000 

 

 

(138,000)



 

 

 

 

 

 

 

 

 

December 31, 2018

 

$

(764,000)

 

$

13,000 

 

$

(751,000)



 

 

 

 

 

 

 

 

 

Revenue recognition: The Company’s manufacturing operations (Suttle, Transition Networks and Net2Edge) recognize revenue upon delivery of 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. Sales are made directly to customers and through distributors. Payment terms for distributors are consistent with the terms of the Company’s direct customers. The Company records a provision for sales returns, sales incentives and warranty costs at the time of the sale based on historical experience and current trends.


The Company has determined that the following performance obligations identified in its JDL Technologies, Inc. business unit are transferred over time: managed services and professional services (time and materials (“T&M”) and fixed price). JDL’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 business unit 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. See Note 2 for further discussion regarding the adoption of the new revenue recognition standard.



Research and development: Research and development costs consist of outside testing services, equipment and supplies associated with enhancing existing products and developing new products. Research and development costs are expensed when incurred and totaled $3,786,000 in 2018 and $3,639,000 in 2017.  



Employee Retirement Benefits: The Company has an Employee Savings Plan (401(k)) and matches a percentage of employee contributions up to six percent of compensation. Contributions to the plan in 2018 and 2017 were $450,000 and $450,000, respectively.



Net income per share: Basic net income per common share is based on the weighted average number of common shares outstanding during each year. Diluted net income per common share adjusts for the dilutive effect of potential common shares outstanding. The Company’s only potential common shares outstanding are stock options and shares associated with the long-term incentive compensation plans, which resulted in no dilutive effect for 2018 and 2017. The Company calculates the dilutive effect of outstanding options and unvested shares using the treasury stock method. Due to the net loss in 2018 and 2017, there was no dilutive impact from outstanding stock options or unvested shares. Options totaling 1,320,492 would have been excluded from the calculation of diluted earnings per share for year ended December 31, 2018, because the exercise price was greater than the average market price of common stock during the year and deferred stock awards totaling 265,491 shares would not have been included because of unmet performance conditions. Options totaling 1,144,159 would have been excluded from the calculation of diluted earnings per share for year ended December 31, 2017, because the exercise price was greater than the average market price of common stock during the year and deferred stock awards totaling 181,224 shares would not have been included because of unmet performance conditions.



Share based compensation: The Company accounts for share based compensation awards on a fair value basis. The estimated grant date fair value of each stock-based award is recognized in income over the requisite service period (generally the vesting period). The estimated fair value of each option is calculated using the Black-Scholes option-pricing model.   



Accounting standards issued:

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which amends existing guidance and requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period, and early adoption is permitted. On January 1, 2019, agreements historically disclosed as operating leases are expected to be recognized on the balance sheet. The Company has engaged a third-party consultant to assist with our assessment of the expected impact of the new standard. The  Company does not expect adoption of the new standard to have a material effect on the Company’s consolidated financial statements.



In June 2016, FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.”  The amendments in this update replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses. This ASU is intended to provide financial statement users with more decision-useful information about expected credit losses and is effective for annual periods and interim periods for those annual periods beginning after December 15, 2019, which for us is the first quarter ending March 31, 2020.  Entities may early adopt beginning after December 15, 2018.  We are currently evaluating the impact of the adoption of ASU 2016-13 on our consolidated financial statements.



Accounting standards adopted:

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” The new guidance replaced all current U.S. GAAP guidance on this topic and eliminated all industry-specific guidance. According to the new guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The guidance is effective for interim and annual reporting periods beginning after December 15, 2017. The Company adopted the accounting standard effective January 1, 2018 using the modified retrospective transition approach. Please see Note 2 for the required disclosures related to the impact of adopting this standard and a discussion of the Company’s updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract.



In August 2016, the FASB issued new accounting guidance regarding the classification of cash receipts and payments in the Statement of Cash Flows. This guidance is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the Consolidated Statement of Cash Flows by providing guidance on eight specific cash flow issues. The Company adopted this standard as of January 1, 2018 with no material impact to its Consolidated Statement of Cash Flows.



In May 2017, FASB issued ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting.”  This ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting.  The amendments in this update should be applied prospectively to an award modified on or after the adoption date.  This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017.  The Company adopted the accounting standard effective January 1, 2018 with no material impact to its consolidated financial statements.




Summary of Significant Accounting Policies (Policy)
v3.10.0.1
Summary of Significant Accounting Policies (Policy)
12 Months Ended
Dec. 31, 2018
Summary of Significant Accounting Policies [Abstract]  
Description of Business

Description of business: Communications Systems, Inc. (herein collectively called “CSI,” “our” or the “Company”) is a Minnesota corporation organized in 1969 that operates directly and through its subsidiaries located in the United States and the United Kingdom. CSI is principally engaged through its Suttle business unit in the manufacture and sale of connectivity infrastructure products for broadband and voice communications and through its Transition Networks 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 business unit the Company provides technology solutions including virtualization, managed services, wired and wireless network design and implementation, HIPAA-compliant IT services, and converged infrastructure configuration and deployment. Through its Net2Edge business unit, the Company enables telecommunications carriers to connect legacy networks to high-speed networks and services.



The Company classifies its businesses into four segments that correspond to these four 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.

Principles Of Consolidation

Principles of consolidation: The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and accounts have been eliminated.

Use Of Estimates

Use of estimates: The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company uses estimates based on the best information available in recording transactions and balances resulting from operations. Actual results could differ from those estimates. The Company’s estimates consist principally of reserves for doubtful accounts, sales returns, warranty costs, asset impairment evaluations, accruals for compensation plans, self-insured medical and dental accruals, lower of cost or market inventory adjustments, provisions for income taxes and deferred taxes and depreciable lives of fixed assets.

Cash Equivalents

Cash equivalents: For purposes of the consolidated statements of cash flows, the Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. As of December 31, 2018, the Company had $11,056,000 in cash and cash equivalents. Of this amount, $8,428,000 was invested in short-term money market funds that are not considered to be bank deposits and are not insured or guaranteed by the federal deposit insurance company (FDIC) or other government agency. These money market funds seek to preserve the value of the investment at $1.00 per share; however, it is possible to lose money investing in these funds. The remainder is operating cash and certificates of deposit which are fully insured through the FDIC.

Investments

Investments: Investments consist of certificates of deposit, corporate notes and bonds, and commercial paper that are traded on the open market and are classified as available-for-sale. Available-for-sale investments are reported at fair value with unrealized gains and losses excluded from operations and reported as a separate component of stockholders’ equity, net of tax (see Accumulated other comprehensive loss below).

Inventories

Inventories: Inventories are stated at the lower of cost or net realizable value. Cost is determined by the first-in, first-out method. Provision to reduce inventories to the lower of cost or net realizable value is made based on a review of excess and obsolete inventories, estimates of future sales, examination of historical consumption rates and the related value of component parts.

Property, Plant And Equipment

Property, plant and equipment: Property, plant and equipment are recorded at cost. Depreciation is computed using the straight-line method. Depreciation included in cost of sales and selling, general and administrative expenses for continuing operations was $2,203,000 and $3,156,000 for 2018 and 2017, respectively. Maintenance and repairs are charged to operations and additions or improvements are capitalized. Items of property sold, retired or otherwise disposed of are removed from the asset and accumulated depreciation accounts and any gains or losses on disposal are reflected in operations.

Intangible Assets

Intangible Assets: Intangible assets with indefinite useful lives are not amortized, but are tested at least annually for impairment.

Recoverability Of Long-Lived Assets

Recoverability of long-lived assets: The Company reviews its long-lived assets periodically when impairment indicators exist as required under generally accepted accounting principles. Potential impairment is determined by comparing the carrying value of the assets with expected net cash flows expected to be provided by operating activities of the business or related products. If the sum of the expected future net cash flows is less than the carrying value, an impairment loss would be measured by comparing the amount by which the carrying value exceeds the fair value of the asset.

Warranty

Warranty:  The Company reserves for the estimated cost of product warranties at the time revenue is recognized. We estimate the costs of our warranty obligations based on our warranty policy or applicable contractual warranty, historical experience of known product failure rates, and use of materials and service delivery costs incurred in correcting product failures. Management reviews the estimated warranty liability on a quarterly basis to determine its adequacy. 



The following table presents the changes in the Company’s warranty liability, included in other accrued liabilities in the consolidated balance sheets, for the years ended December 31, 2018 and 2017, which relate to normal product warranties and a five-year obligation to provide for potential future liabilities for certain network equipment sales:





 

 

 

 

 

 



 

 

 

 

 

 



 

Year Ended December 31



 

 

2018

 

 

2017

Beginning balance

 

$

603,000 

 

$

600,000 

Amounts charged to expense

 

 

77,000 

 

 

93,000 

Actual warranty costs paid

 

 

(86,000)

 

 

(90,000)

Ending balance

 

$

594,000 

 

$

603,000 

Accumulated Other Comprehensive Loss

Accumulated other comprehensive loss: The components of accumulated other comprehensive loss 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

 

 

(139,000)

 

 

1,000 

 

 

(138,000)



 

 

 

 

 

 

 

 

 

December 31, 2018

 

$

(764,000)

 

$

13,000 

 

$

(751,000)



 

 

 

 

 

 

 

 

 

Revenue Recognition

Revenue recognition: The Company’s manufacturing operations (Suttle, Transition Networks and Net2Edge) recognize revenue upon delivery of 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. Sales are made directly to customers and through distributors. Payment terms for distributors are consistent with the terms of the Company’s direct customers. The Company records a provision for sales returns, sales incentives and warranty costs at the time of the sale based on historical experience and current trends.


The Company has determined that the following performance obligations identified in its JDL Technologies, Inc. business unit are transferred over time: managed services and professional services (time and materials (“T&M”) and fixed price). JDL’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 business unit 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. See Note 2 for further discussion regarding the adoption of the new revenue recognition standard.

Research And Development

Research and development: Research and development costs consist of outside testing services, equipment and supplies associated with enhancing existing products and developing new products. Research and development costs are expensed when incurred and totaled $3,786,000 in 2018 and $3,639,000 in 2017.  

Employee Retirement Benefits

Employee Retirement Benefits: The Company has an Employee Savings Plan (401(k)) and matches a percentage of employee contributions up to six percent of compensation. Contributions to the plan in 2018 and 2017 were $450,000 and $450,000, respectively.

Net Income Per Share

Net income per share: Basic net income per common share is based on the weighted average number of common shares outstanding during each year. Diluted net income per common share adjusts for the dilutive effect of potential common shares outstanding. The Company’s only potential common shares outstanding are stock options and shares associated with the long-term incentive compensation plans, which resulted in no dilutive effect for 2018 and 2017. The Company calculates the dilutive effect of outstanding options and unvested shares using the treasury stock method. Due to the net loss in 2018 and 2017, there was no dilutive impact from outstanding stock options or unvested shares. Options totaling 1,320,492 would have been excluded from the calculation of diluted earnings per share for year ended December 31, 2018, because the exercise price was greater than the average market price of common stock during the year and deferred stock awards totaling 265,491 shares would not have been included because of unmet performance conditions. Options totaling 1,144,159 would have been excluded from the calculation of diluted earnings per share for year ended December 31, 2017, because the exercise price was greater than the average market price of common stock during the year and deferred stock awards totaling 181,224 shares would not have been included because of unmet performance conditions.

Share Based Compensation

Share based compensation: The Company accounts for share based compensation awards on a fair value basis. The estimated grant date fair value of each stock-based award is recognized in income over the requisite service period (generally the vesting period). The estimated fair value of each option is calculated using the Black-Scholes option-pricing model.

Accounting Standards Issued

Accounting standards issued:

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)”, which amends existing guidance and requires an entity to recognize both assets and liabilities arising from financing and operating leases, along with additional qualitative and quantitative disclosures. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within that reporting period, and early adoption is permitted. On January 1, 2019, agreements historically disclosed as operating leases are expected to be recognized on the balance sheet. The Company has engaged a third-party consultant to assist with our assessment of the expected impact of the new standard. The  Company does not expect adoption of the new standard to have a material effect on the Company’s consolidated financial statements.



In June 2016, FASB issued ASU 2016-13, “Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments.”  The amendments in this update replace the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses. This ASU is intended to provide financial statement users with more decision-useful information about expected credit losses and is effective for annual periods and interim periods for those annual periods beginning after December 15, 2019, which for us is the first quarter ending March 31, 2020.  Entities may early adopt beginning after December 15, 2018.  We are currently evaluating the impact of the adoption of ASU 2016-13 on our consolidated financial statements.

Accounting Standards Adopted

Accounting standards adopted:

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” The new guidance replaced all current U.S. GAAP guidance on this topic and eliminated all industry-specific guidance. According to the new guidance, revenue is recognized when promised goods or services are transferred to customers in an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. The guidance is effective for interim and annual reporting periods beginning after December 15, 2017. The Company adopted the accounting standard effective January 1, 2018 using the modified retrospective transition approach. Please see Note 2 for the required disclosures related to the impact of adopting this standard and a discussion of the Company’s updated policies related to revenue recognition and accounting for costs to obtain and fulfill a customer contract.



In August 2016, the FASB issued new accounting guidance regarding the classification of cash receipts and payments in the Statement of Cash Flows. This guidance is intended to reduce diversity in practice in how certain cash receipts and cash payments are presented and classified in the Consolidated Statement of Cash Flows by providing guidance on eight specific cash flow issues. The Company adopted this standard as of January 1, 2018 with no material impact to its Consolidated Statement of Cash Flows.



In May 2017, FASB issued ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting.”  This ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting.  The amendments in this update should be applied prospectively to an award modified on or after the adoption date.  This ASU is effective for annual periods and interim periods within those annual periods beginning after December 15, 2017.  The Company adopted the accounting standard effective January 1, 2018 with no material impact to its consolidated financial statements.


Summary of Significant Accounting Policies (Tables)
v3.10.0.1
Summary of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2018
Summary of Significant Accounting Policies [Abstract]  
Schedule of Warranty



 

 

 

 

 

 



 

 

 

 

 

 



 

Year Ended December 31



 

 

2018

 

 

2017

Beginning balance

 

$

603,000 

 

$

600,000 

Amounts charged to expense

 

 

77,000 

 

 

93,000 

Actual warranty costs paid

 

 

(86,000)

 

 

(90,000)

Ending balance

 

$

594,000 

 

$

603,000 



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

 

 

(139,000)

 

 

1,000 

 

 

(138,000)



 

 

 

 

 

 

 

 

 

December 31, 2018

 

$

(764,000)

 

$

13,000 

 

$

(751,000)



 

 

 

 

 

 

 

 

 




Summary of Significant Accounting Policies (Narrative) (Details)
v3.10.0.1
Summary of Significant Accounting Policies (Narrative) (Details)
12 Months Ended
Dec. 31, 2018
USD ($)
segment
$ / shares
shares
Dec. 31, 2017
USD ($)
shares
Summary of Significant Accounting Policies [Line Items]    
Number of segments | segment 4  
Cash and cash equivalents $ 11,056,426 $ 12,453,663
Money market funds $ 8,428,000  
Value of the investment in short-term money market funds sought to be preserved (in dollars per share) | $ / shares $ 1.00  
Depreciation $ 2,203,000 3,156,000
Product warranty period 5 years  
Research and development costs $ 3,786,000 3,639,000
Maximum matching percentage by employer 6.00%  
Contributions to the plan $ 450,000 450,000
Dilutive effect $ 0 $ 0
Employee Stock Option [Member]    
Summary of Significant Accounting Policies [Line Items]    
Shares not included in the computation of diluted earnings per share | shares 1,320,492 1,144,159
Deferred Stock Awards [Member]    
Summary of Significant Accounting Policies [Line Items]    
Shares not included in the computation of diluted earnings per share | shares 265,491 181,224

Summary of Significant Accounting Policies (Schedule of Warranty) (Details)
v3.10.0.1
Summary of Significant Accounting Policies (Schedule of Warranty) (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2018
Dec. 31, 2017
Summary of Significant Accounting Policies [Abstract]    
Beginning balance $ 603 $ 600
Amounts charged to expense 77 93
Actual warranty costs paid (86) (90)
Ending balance $ 594 $ 603

Summary of Significant Accounting Policies (Components of Accumulated Other Comprehensive Loss) (Details)
v3.10.0.1
Summary of Significant Accounting Policies (Components of Accumulated Other Comprehensive Loss) (Details)
12 Months Ended
Dec. 31, 2018
USD ($)
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE $ 49,170,727
BALANCE 41,653,127
Foreign Currency Translation [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE (625,000)
Net current period change (139,000)
BALANCE (764,000)
Unrealized (Loss)/Gain On Securities [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE 12,000
Net current period change 1,000
BALANCE 13,000
Accumulated Other Comprehensive Income (Loss) [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE (613,379)
Net current period change (138,000)
BALANCE $ (751,293)

Revenue Recognition
v3.10.0.1
Revenue Recognition
12 Months Ended
Dec. 31, 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 that the Company expects to receive in exchange for these goods or services.



Transition Networks & Suttle, Inc.



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’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 has determined that revenue recognition for its Transition Networks and Suttle business units occurs upon delivery of 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. business unit 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. business unit are transferred over time: managed services and professional services (time and materials (“T&M”) and fixed price). JDL’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 business unit 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 recognized at a point in time, upon the delivery of its connectivity infrastructure and data transmission products.



Significant Judgments



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 these 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 year ended December 31, 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 year ended December 31, 2018, to the pro-forma amounts had the previous guidance been in effect:







 

 

 

 

 

 



 

 

 

 

 

 



 

As of December 31, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Trade accounts receivable

$

13,401,000 

$

11,778,000 

$

1,623,000 

Inventories

 

16,176,000 

 

17,008,000 

 

(832,000)

Other current assets

 

1,554,000 

 

722,000 

 

832,000 

Other accrued liabilities

 

3,168,000 

 

1,545,000 

 

1,623,000 



 

 

 

 

 

 









 

 

 

 

 

 



 

Year Ended December 31, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Revenue

$

65,763,000 

$

66,352,000 

$

(589,000)

Gross Profit

 

21,307,000 

 

21,896,000 

 

(589,000)

Selling, general and administrative expenses

 

27,502,000 

 

28,091,000 

 

(589,000)

Operating Loss

 

(6,558,000)

 

(6,558,000)

 

 -



 

 

 

 

 

 





Transaction Price Allocated to Future Performance Obligations



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 obligation 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 receive 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 Transition Networks, we analyze revenue by region and product group, which is as follows for the years ended December 31, 2018 and 2017:









 

 

 

 

 



 

 

 

 

 



Transition Networks Revenue by Region



 



 

2018

 

 

2017

North America

$

31,059,000 

 

$

31,261,000 

Rest of World

 

2,017,000 

 

 

2,314,000 

Europe, Middle East, Africa ("EMEA")

 

3,394,000 

 

 

4,966,000 



$

36,470,000 

 

$

38,541,000 



 

 

 

 

 











 

 

 

 

 



 

 

 

 

 



Transition Networks Revenue by Product Group



 



 

2018

 

 

2017

Media converters

$

20,226,000 

 

$

21,670,000 

Ethernet switches and adapters

 

9,694,000 

 

 

8,699,000 

Other products

 

6,550,000 

 

 

8,172,000 



$

36,470,000 

 

$

38,541,000 



 

 

 

 

 



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







 

 

 

 

 



 

 

 

 

 



Suttle Revenue by Product Group



 



 

2018

 

 

2017

Structured cabling and connecting system products

$

21,753,000 

 

$

29,932,000 

DSL and other products

 

1,657,000 

 

 

2,452,000 



$

23,410,000 

 

$

32,384,000 



 

 

 

 

 









 

 

 

 

 



 

 

 

 

 



Suttle Revenue by Customer Group



 



 

2018

 

 

2017

Communication service providers

$

19,370,000 

 

$

29,071,000 

International

 

2,095,000 

 

 

2,557,000 

Distributors

 

1,945,000 

 

 

756,000 



$

23,410,000 

 

$

32,384,000 



 

 

 

 

 



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







 

 

 

 

 



 

 

 

 

 



JDL Revenue by Customer Group



 

2018

 

 

2017

Education

$

2,651,000 

 

$

8,160,000 

Healthcare and commercial clients

 

2,483,000 

 

 

3,050,000 



$

5,134,000 

 

$

11,210,000 



 

 

 

 

 

 





The Company does not currently analyze revenue for Net2Edge on a disaggregated basis. Revenues from Net2Edge were $1,700,000 and $1,079,000 for the years ended December 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)
v3.10.0.1
Revenue Recognition (Tables)
12 Months Ended
Dec. 31, 2018
Revenue Recognition [Abstract]  
Schedule of Impact from Initial Application Period Cumulative Effect Transition





 

 

 

 

 

 



 

 

 

 

 

 



 

As of December 31, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Trade accounts receivable

$

13,401,000 

$

11,778,000 

$

1,623,000 

Inventories

 

16,176,000 

 

17,008,000 

 

(832,000)

Other current assets

 

1,554,000 

 

722,000 

 

832,000 

Other accrued liabilities

 

3,168,000 

 

1,545,000 

 

1,623,000 



 

 

 

 

 

 









 

 

 

 

 

 



 

Year Ended December 31, 2018



 

As Reported

 

Balances without adoption of ASC 606

 

Effect of Change
Higher/(Lower)



 

 

 

 

 

 

Revenue

$

65,763,000 

$

66,352,000 

$

(589,000)

Gross Profit

 

21,307,000 

 

21,896,000 

 

(589,000)

Selling, general and administrative expenses

 

27,502,000 

 

28,091,000 

 

(589,000)

Operating Loss

 

(6,558,000)

 

(6,558,000)

 

 -



 

 

 

 

 

 



Schedule of Disaggregation of Revenues

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









 

 

 

 

 



 

 

 

 

 



Transition Networks Revenue by Region



 



 

2018

 

 

2017

North America

$

31,059,000 

 

$

31,261,000 

Rest of World

 

2,017,000 

 

 

2,314,000 

Europe, Middle East, Africa ("EMEA")

 

3,394,000 

 

 

4,966,000 



$

36,470,000 

 

$

38,541,000 



 

 

 

 

 











 

 

 

 

 



 

 

 

 

 



Transition Networks Revenue by Product Group



 



 

2018

 

 

2017

Media converters

$

20,226,000 

 

$

21,670,000 

Ethernet switches and adapters

 

9,694,000 

 

 

8,699,000 

Other products

 

6,550,000 

 

 

8,172,000 



$

36,470,000 

 

$

38,541,000 



 

 

 

 

 



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







 

 

 

 

 



 

 

 

 

 



Suttle Revenue by Product Group



 



 

2018

 

 

2017

Structured cabling and connecting system products

$

21,753,000 

 

$

29,932,000 

DSL and other products

 

1,657,000 

 

 

2,452,000 



$

23,410,000 

 

$

32,384,000 



 

 

 

 

 









 

 

 

 

 



 

 

 

 

 



Suttle Revenue by Customer Group



 



 

2018

 

 

2017

Communication service providers

$

19,370,000 

 

$

29,071,000 

International

 

2,095,000 

 

 

2,557,000 

Distributors

 

1,945,000 

 

 

756,000 



$

23,410,000 

 

$

32,384,000 



 

 

 

 

 



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







 

 

 

 

 



 

 

 

 

 



JDL Revenue by Customer Group



 

2018

 

 

2017

Education

$

2,651,000 

 

$

8,160,000 

Healthcare and commercial clients

 

2,483,000 

 

 

3,050,000 



$

5,134,000 

 

$

11,210,000 



 

 

 

 

 

 




Revenue Recognition (Narrative) (Details)
v3.10.0.1
Revenue Recognition (Narrative) (Details) - USD ($)
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Segment Reporting Information [Line Items]                    
Sales $ 18,659,000 $ 15,292,000 $ 15,038,000 $ 16,774,000 $ 19,043,000 $ 20,412,000 $ 22,068,000 $ 20,800,000 $ 65,762,946 $ 82,322,618
Net2Edge [Member]                    
Segment Reporting Information [Line Items]                    
Sales                 $ 1,700,000 $ 1,079,000

Revenue Recognition (Schedule of Impact from Initial Application Period Cumulative Effect Transition) (Details)
v3.10.0.1
Revenue Recognition (Schedule of Impact from Initial Application Period Cumulative Effect Transition) (Details) - USD ($)
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]                    
Trade accounts receivable $ 13,401,042       $ 12,183,217       $ 13,401,042 $ 12,183,217
Inventories 16,175,616       13,984,428       16,175,616 13,984,428
Other current assets 1,553,972       810,532       1,553,972 810,532
Other accrued liabilities 3,168,049       1,586,473       3,168,049 1,586,473
Revenues 18,659,000 $ 15,292,000 $ 15,038,000 $ 16,774,000 19,043,000 $ 20,412,000 $ 22,068,000 $ 20,800,000 65,762,946 82,322,618
Gross profit                 21,307,249 20,836,239
Selling, general and administrative expenses                 27,501,691 28,699,138
Operating loss (260,000) $ (1,602,000) $ (2,722,000) $ (1,974,000) $ (1,584,000) $ (4,654,000) $ (4,067,000) $ (1,460,000) (6,558,118) $ (11,764,829)
Balances without adoption of ASC 606 [Member]                    
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]                    
Trade accounts receivable 11,778,000               11,778,000  
Inventories 17,008,000               17,008,000  
Other current assets 722,000               722,000  
Other accrued liabilities 1,545,000               1,545,000  
Revenues                 66,352,000  
Gross profit                 21,896,000  
Selling, general and administrative expenses                 28,091,000  
Operating loss                 (6,558,000)  
Accounting Standards Update 2014-09 [Member] | Effect of ChangeHigher/(Lower) [Member]                    
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]                    
Trade accounts receivable 1,623,000               1,623,000  
Inventories (832,000)               (832,000)  
Other current assets 832,000               832,000  
Other accrued liabilities $ 1,623,000               1,623,000  
Revenues                 (589,000)  
Gross profit                 (589,000)  
Selling, general and administrative expenses                 $ (589,000)  

Revenue Recognition (Schedule of Disaggregation of Revenues) (Details)
v3.10.0.1
Revenue Recognition (Schedule of Disaggregation of Revenues) (Details) - USD ($)
3 Months Ended 12 Months Ended
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2017
Sep. 30, 2017
Jun. 30, 2017
Mar. 31, 2017
Dec. 31, 2018
Dec. 31, 2017
Disaggregation of Revenue [Line Items]                    
Revenues $ 18,659,000 $ 15,292,000 $ 15,038,000 $ 16,774,000 $ 19,043,000 $ 20,412,000 $ 22,068,000 $ 20,800,000 $ 65,762,946 $ 82,322,618
Transition Networks [Member]                    
Disaggregation of Revenue [Line Items]                    
Revenues                 36,470,000 38,541,000
Transition Networks [Member] | North America [Member]                    
Disaggregation of Revenue [Line Items]                    
Revenues                 31,059,000 31,261,000
Transition Networks [Member] | Rest of World [Member]                    
Disaggregation of Revenue [Line Items]                    
Revenues                 2,017,000 2,314,000
Transition Networks [Member] | Europe, Middle East, Africa ("EMEA") [Member]                    
Disaggregation of Revenue [Line Items]                    
Revenues                 3,394,000 4,966,000
Transition Networks [Member] | Media Converters [Member]                    
Disaggregation of Revenue [Line Items]                    
Revenues                 20,226,000 21,670,000
Transition Networks [Member] | Ethernet Switches and Adapters [Member]                    
Disaggregation of Revenue [Line Items]                    
Revenues                 9,694,000 8,699,000
Transition Networks [Member] | Other Products [Member]                    
Disaggregation of Revenue [Line Items]                    
Revenues                 6,550,000 8,172,000
Suttle [Member]                    
Disaggregation of Revenue [Line Items]