Document and Entity Information
v3.10.0.1
Document and Entity Information - shares
3 Months Ended
Mar. 31, 2019
May 01, 2019
Document and Entity Information [Abstract]    
Document Type 10-Q  
Amendment Flag false  
Document Period End Date Mar. 31, 2019  
Document Fiscal Period Focus Q1  
Document Fiscal Year Focus 2019  
Entity Registrant Name COMMUNICATIONS SYSTEMS INC  
Entity Central Index Key 0000022701  
Current Fiscal Year End Date --12-31  
Trading Symbol JCS  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company false  
Entity Common Stock, Shares Outstanding   9,316,576

Condensed Consolidated Balance Sheets
v3.10.0.1
Condensed Consolidated Balance Sheets - USD ($)
Mar. 31, 2019
Dec. 31, 2018
CURRENT ASSETS:    
Cash and cash equivalents $ 9,490,706 $ 11,056,426
Trade accounts receivable, less allowance for doubtful accounts of $168,000 and $136,000, respectively 13,272,257 13,401,042
Inventories 15,353,018 16,175,616
Prepaid income taxes 146,013 148,036
Other current assets 1,643,156 1,553,972
Current assets held for sale 1,029,111  
TOTAL CURRENT ASSETS 40,934,261 42,335,092
PROPERTY, PLANT AND EQUIPMENT, net 9,933,199 10,962,239
OTHER ASSETS:    
Deferred income taxes 19,068 19,068
Operating lease right of use asset 449,995  
Other assets, net 2,017 4,765
Non-current assets held for sale 852,581  
TOTAL OTHER ASSETS 1,323,661 23,833
TOTAL ASSETS 52,191,121 53,321,164
CURRENT LIABILITIES:    
Accounts payable 4,253,169 5,394,981
Accrued compensation and benefits 2,255,964 2,892,199
Operating lease liability 89,435  
Other accrued liabilities 2,917,235 3,168,049
Dividends payable 185,482 184,541
TOTAL CURRENT LIABILITIES 9,701,285 11,639,770
LONG TERM LIABILITIES:    
Long-term compensation plans 40,551  
Uncertain tax positions   28,267
Operating lease liability 348,020  
TOTAL LONG-TERM LIABILITIES 388,571 28,267
COMMITMENTS AND CONTINGENCIES (Footnote 9)
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; 9,308,520 and 9,158,438 shares issued and outstanding, respectively 465,426 457,922
Additional paid-in capital 43,036,333 42,680,499
Accumulated deficit (677,819) (734,001)
Accumulated other comprehensive loss (722,675) (751,293)
TOTAL STOCKHOLDERS' EQUITY 42,101,265 41,653,127
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 52,191,121 $ 53,321,164

Condensed Consolidated Balance Sheets (Parenthetical)
v3.10.0.1
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)
$ in Thousands
Mar. 31, 2019
Dec. 31, 2018
Condensed Consolidated Balance Sheets [Abstract]    
Trade accounts receivable, allowance for doubtful accounts $ 168 $ 136
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 9,308,520 9,158,438
Common stock, shares outstanding 9,308,520 9,158,438

Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
v3.10.0.1
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income (Loss) [Abstract]    
Sales $ 16,723,294 $ 16,773,685
Cost of sales 10,296,329 11,595,066
Gross profit 6,426,965 5,178,619
Operating expenses:    
Selling, general and administrative expenses 6,246,330 7,152,840
Total operating expenses 6,246,330 7,152,840
Operating income (loss) 180,635 (1,974,221)
Other income (expenses):    
Investment and other income 44,890 104,121
(Loss) gain on sale of assets (935) 27,531
Interest and other expense (9,444) (9,706)
Other income, net 34,511 121,946
Income (Loss) from operations before income taxes 215,146 (1,852,275)
Income tax (benefit) expense (24,967) 7,570
Net income (loss) 240,113 (1,859,845)
Other comprehensive income (loss), net of tax:    
Unrealized loss (gain) on available-for-sale securities   (6,432)
Foreign currency translation adjustment 28,618 34,094
Total other comprehensive income 28,618 27,662
Comprehensive income (loss) $ 268,731 $ (1,832,183)
Basic net income (loss) per share: $ 0.03 $ (0.21)
Diluted net income (loss) per share: $ 0.03 $ (0.21)
Weighted Average Basic Shares Outstanding 9,176,093 9,000,185
Weighted Average Dilutive Shares Outstanding 9,176,093 9,000,185
Dividends declared per share $ 0.02 $ 0.04

Condensed Consolidated Statements of Changes in Stockholders' Equity
v3.10.0.1
Condensed Consolidated Statements of Changes in Stockholders' Equity - 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 income (loss)     (1,859,845)   (1,859,845)
Issuance of common stock under Employee Stock Purchase Plan $ 398 27,922     28,320
Issuance of common stock under Employee Stock Purchase Plan, Shares 7,955        
Issuance of common stock to Employee Stock Ownership Plan $ 5,982 419,908     425,890
Issuance of common stock to Employee Stock Ownership Plan, Shares 119,632        
Issuance of common stock under Executive Stock Plan $ 1,485       1,485
Issuance of common stock under Executive Stock Plan, Shares 29,708        
Share based compensation   84,577     84,577
Other share retirements $ (401) (37,387) 9,325   (28,463)
Other share retirements, Shares 8,017        
Shareholder dividends     (365,132)   (365,132)
Other comprehensive income (loss)       27,662 27,662
BALANCE at Mar. 31, 2018 $ 456,149 42,501,770 5,113,019 (585,717) 47,485,221
BALANCE, Shares at Mar. 31, 2018 9,122,986        
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        
Net income (loss)     240,113   240,113
Issuance of common stock under Employee Stock Purchase Plan $ 671 26,574     27,245
Issuance of common stock under Employee Stock Purchase Plan, Shares 13,421        
Issuance of common stock to Employee Stock Ownership Plan $ 6,641 262,995     269,636
Issuance of common stock to Employee Stock Ownership Plan, Shares 132,826        
Issuance of common stock under Executive Stock Plan $ 229       229
Issuance of common stock under Executive Stock Plan, Shares 4,575        
Share based compensation   69,687     69,687
Other share retirements $ (37) (3,422) 1,494   (1,965)
Other share retirements, Shares 740        
Shareholder dividends     (185,425)   (185,425)
Other comprehensive income (loss)       28,618 28,618
BALANCE at Mar. 31, 2019 $ 465,426 $ 43,036,333 $ (677,819) $ (722,675) $ 42,101,265
BALANCE, Shares at Mar. 31, 2019 9,308,520        

Condensed Consolidated Statements of Changes In Stockholders' Equity (Parenthetical)
v3.10.0.1
Condensed Consolidated Statements of Changes In Stockholders' Equity (Parenthetical) - $ / shares
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Condensed Consolidated Statements of Changes in Stockholders' Equity [Abstract]    
Shareholder dividends per share $ 0.02 $ 0.04

Condensed Consolidated Statements of Cash Flows
v3.10.0.1
Condensed Consolidated Statements of Cash Flows - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
CASH FLOWS FROM OPERATING ACTIVITIES:    
Net income (loss) $ 240,113 $ (1,859,845)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:    
Depreciation and amortization 421,563 631,512
Share based compensation 69,687 84,577
Loss (gain) on sale of assets 935 (27,531)
Changes in assets and liabilities:    
Trade accounts receivable 138,418 427,806
Inventories 849,494 (218,697)
Prepaid income taxes 3,300 52,064
Other assets, net (1,115,523) (591,025)
Accounts payable (1,169,546) 433,148
Accrued compensation and benefits (327,617) 249,526
Other accrued liabilities (273,469) 1,057,571
Income taxes payable (28,267) 408
Net cash (used in) provided by operating activities (1,190,912) 239,514
CASH FLOWS FROM INVESTING ACTIVITIES:    
Capital expenditures (226,302) (263,867)
Purchases of investments   (3,488,793)
Proceeds from the sale of property, plant and equipment 9,000 29,013
Proceeds from the sale of investments   3,004,602
Net cash used in investing activities (217,302) (719,045)
CASH FLOWS FROM FINANCING ACTIVITIES:    
Cash dividends paid (184,484) (390,738)
Proceeds from issuance of common stock, net of shares withheld 25,509 1,342
Net cash used in financing activities (158,975) (389,396)
EFFECT OF FOREIGN EXCHANGE RATE CHANGES ON CASH 1,469 7,374
NET DECREASE IN CASH AND CASH EQUIVALENTS (1,565,720) (861,553)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 11,056,426 12,453,663
CASH AND CASH EQUIVALENTS AT END OF PERIOD 9,490,706 11,592,110
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:    
Income taxes refunded   (44,902)
Interest paid 9,369 9,382
Dividends declared not paid 185,482 371,545
Capital expenditures in accounts payable $ 21,701 $ 61,304

Summary of Significant Accounting Policies
v3.10.0.1
Summary of Significant Accounting Policies
3 Months Ended
Mar. 31, 2019
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 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, and through its Suttle, Inc. (“Suttle”) subsidiary and business unit in the manufacture and sale of connectivity infrastructure products for broadband and voice communications. 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 Ethernet-based edge network access products to telecommunications carriers.



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



Financial Statement Presentation



The condensed consolidated balance sheets and condensed consolidated statement of changes in stockholders’ equity as of March 31, 2019 and the related condensed consolidated statements of income (loss) and comprehensive income (loss), and the condensed consolidated statements of cash flows for the periods ended March 31, 2019 and 2018 have been prepared by Company management.  In the opinion of management, all adjustments (which include only normal recurring adjustments, except where noted) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2019 and 2018 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, 2018 Annual Report to Shareholders on Form 10-K.  The results of operations for the period ended March 31, 2019 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, 2018, 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, 2018

 

$

(764,000)

 

$

13,000 

 

$

(751,000)



 

 

 

 

 

 

 

 

 

Net current period change

 

 

28,000 

 

 

 

 

28,000 



 

 

 

 

 

 

 

 

 

March 31, 2019

 

$

(736,000)

 

$

13,000 

 

$

(723,000)



 


Summary of Significant Accounting Policies (Policy)
v3.10.0.1
Summary of Significant Accounting Policies (Policy)
3 Months Ended
Mar. 31, 2019
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 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, and through its Suttle, Inc. (“Suttle”) subsidiary and business unit in the manufacture and sale of connectivity infrastructure products for broadband and voice communications. 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 Ethernet-based edge network access products to telecommunications carriers.



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

Financial Statement Presentation

Financial Statement Presentation



The condensed consolidated balance sheets and condensed consolidated statement of changes in stockholders’ equity as of March 31, 2019 and the related condensed consolidated statements of income (loss) and comprehensive income (loss), and the condensed consolidated statements of cash flows for the periods ended March 31, 2019 and 2018 have been prepared by Company management.  In the opinion of management, all adjustments (which include only normal recurring adjustments, except where noted) necessary to present fairly the financial position, results of operations, and cash flows at March 31, 2019 and 2018 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, 2018 Annual Report to Shareholders on Form 10-K.  The results of operations for the period ended March 31, 2019 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, 2018, 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, 2018

 

$

(764,000)

 

$

13,000 

 

$

(751,000)



 

 

 

 

 

 

 

 

 

Net current period change

 

 

28,000 

 

 

 

 

28,000 



 

 

 

 

 

 

 

 

 

March 31, 2019

 

$

(736,000)

 

$

13,000 

 

$

(723,000)




Summary of Significant Accounting Policies (Tables)
v3.10.0.1
Summary of Significant Accounting Policies (Tables)
3 Months Ended
Mar. 31, 2019
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, 2018

 

$

(764,000)

 

$

13,000 

 

$

(751,000)



 

 

 

 

 

 

 

 

 

Net current period change

 

 

28,000 

 

 

 

 

28,000 



 

 

 

 

 

 

 

 

 

March 31, 2019

 

$

(736,000)

 

$

13,000 

 

$

(723,000)




Summary of Significant Accounting Policies (Narrative) (Details)
v3.10.0.1
Summary of Significant Accounting Policies (Narrative) (Details)
3 Months Ended
Mar. 31, 2019
segment
Summary of Significant Accounting Policies [Abstract]  
Number of segments 4

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)
3 Months Ended
Mar. 31, 2019
USD ($)
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE $ 41,653,127
BALANCE 42,101,265
Foreign Currency Translation [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE (764,000)
Net current period change 28,000
BALANCE (736,000)
Unrealized (Loss)/Gain On Securities [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE 13,000
Net current period change 0
BALANCE 13,000
Accumulated Other Comprehensive Loss [Member]  
Accumulated Other Comprehensive Income (Loss) [Line Items]  
BALANCE (751,293)
Net current period change 28,000
BALANCE $ (722,675)

Revenue Recognition
v3.10.0.1
Revenue Recognition
3 Months Ended
Mar. 31, 2019
Revenue Recognition [Abstract]  
Revenue Recognition

NOTE 2 – REVENUE RECOGNITION



Transition Networks & Suttle, Inc.



The Company has determined that the revenue recognition for its Suttle and Transition Networks divisions 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 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). 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 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 edge network access devices. The Company principally sells these 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.



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 three months ended March 31, 2019 and 2018:





 

 

 

 

 



 

 

 

 

 



Transition Networks Sales by Region



Three Months Ended March 31



 

2019

 

 

2018

North America

$

6,910,000 

 

$

7,641,000 

Rest of World

 

725,000 

 

 

975,000 

Europe, Middle East, Africa ("EMEA")

 

1,255,000 

 

 

537,000 



$

8,890,000 

 

$

9,153,000 



 

 

 

 

 







 

 

 

 

 



 

 

 

 

 



Transition Networks Sales by Product Group



Three Months Ended March 31



 

2019

 

 

2018

Media converters

$

5,378,000 

 

$

5,184,000 

Ethernet switches and adapters

 

2,000,000 

 

 

2,260,000 

Other products

 

1,512,000 

 

 

1,709,000 



$

8,890,000 

 

$

9,153,000 



 

 

 

 

 



For Suttle, we analyze revenues by product and customer group, which is as follows for the three months ended March 31, 2019 and 2018:





 

 

 

 

 



 

 

 

 

 



Suttle Sales by Product Group



Three Months Ended March 31



 

2019

 

 

2018

Structured cabling and connecting system products

$

5,077,000 

 

$

6,573,000 

DSL and other products

 

444,000 

 

 

400,000 



$

5,521,000 

 

$

6,973,000 



 

 

 

 

 







 

 

 

 

 



 

 

 

 

 



Suttle Sales by Customer Group



Three Months Ended March 31



 

2019

 

 

2018

Communication service providers

$

4,591,000 

 

$

5,947,000 

International

 

400,000 

 

 

580,000 

Distributors

 

530,000 

 

 

446,000 



$

5,521,000 

 

$

6,973,000 



 

 

 

 

 



For JDL, we analyze revenue by customer group, which is as follows for the three months ended March 31, 2019 and 2018:





 

 

 

 

 



 

 

 

 

 



JDL Revenue by Customer Group



Three Months Ended March 31



 

2019

 

 

2018

Education

$

1,473,000 

 

$

109,000 

Healthcare and commercial clients

 

735,000 

 

 

601,000 



$

2,208,000 

 

$

710,000 



 

 

 

 

 

 





The Company does not currently analyze revenue for Net2Edge on a disaggregated basis. Revenues from Net2Edge were $448,000 and $165,000 for the three months ended March 31, 2019 and 2018, respectively.




Revenue Recognition (Tables)
v3.10.0.1
Revenue Recognition (Tables)
3 Months Ended
Mar. 31, 2019
Revenue Recognition [Abstract]  
Schedule of Disaggregation of Revenues

For Transition Networks, we analyze revenue by region and product group, which is as follows for the three months ended March 31, 2019 and 2018:





 

 

 

 

 



 

 

 

 

 



Transition Networks Sales by Region



Three Months Ended March 31



 

2019

 

 

2018

North America

$

6,910,000 

 

$

7,641,000 

Rest of World

 

725,000 

 

 

975,000 

Europe, Middle East, Africa ("EMEA")

 

1,255,000 

 

 

537,000 



$

8,890,000 

 

$

9,153,000 



 

 

 

 

 







 

 

 

 

 



 

 

 

 

 



Transition Networks Sales by Product Group



Three Months Ended March 31



 

2019

 

 

2018

Media converters

$

5,378,000 

 

$

5,184,000 

Ethernet switches and adapters

 

2,000,000 

 

 

2,260,000 

Other products

 

1,512,000 

 

 

1,709,000 



$

8,890,000 

 

$

9,153,000 



 

 

 

 

 



For Suttle, we analyze revenues by product and customer group, which is as follows for the three months ended March 31, 2019 and 2018:





 

 

 

 

 



 

 

 

 

 



Suttle Sales by Product Group



Three Months Ended March 31



 

2019

 

 

2018

Structured cabling and connecting system products

$

5,077,000 

 

$

6,573,000 

DSL and other products

 

444,000 

 

 

400,000 



$

5,521,000 

 

$

6,973,000 



 

 

 

 

 







 

 

 

 

 



 

 

 

 

 



Suttle Sales by Customer Group



Three Months Ended March 31



 

2019

 

 

2018

Communication service providers

$

4,591,000 

 

$

5,947,000 

International

 

400,000 

 

 

580,000 

Distributors

 

530,000 

 

 

446,000 



$

5,521,000 

 

$

6,973,000 



 

 

 

 

 



For JDL, we analyze revenue by customer group, which is as follows for the three months ended March 31, 2019 and 2018:





 

 

 

 

 



 

 

 

 

 



JDL Revenue by Customer Group



Three Months Ended March 31



 

2019

 

 

2018

Education

$

1,473,000 

 

$

109,000 

Healthcare and commercial clients

 

735,000 

 

 

601,000 



$

2,208,000 

 

$

710,000 



 

 

 

 

 

 




Revenue Recognition (Narrative) (Details)
v3.10.0.1
Revenue Recognition (Narrative) (Details) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Segment Reporting Information [Line Items]    
Sales $ 16,723,294 $ 16,773,685
Net2Edge [Member]    
Segment Reporting Information [Line Items]    
Sales $ 448,000 $ 165,000

Revenue Recognition (Schedule of Disaggregation of Revenues) (Details)
v3.10.0.1
Revenue Recognition (Schedule of Disaggregation of Revenues) (Details) - USD ($)
3 Months Ended
Mar. 31, 2019
Mar. 31, 2018
Disaggregation of Revenue [Line Items]    
Revenues $ 16,723,294 $ 16,773,685
Transition Networks [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 8,890,000 9,153,000
Transition Networks [Member] | North America [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 6,910,000 7,641,000
Transition Networks [Member] | Rest of World [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 725,000 975,000
Transition Networks [Member] | Europe, Middle East, Africa ("EMEA") [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 1,255,000 537,000
Transition Networks [Member] | Media Converters [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 5,378,000 5,184,000
Transition Networks [Member] | Ethernet Switches and Adapters [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 2,000,000 2,260,000
Transition Networks [Member] | Other Products [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 1,512,000 1,709,000
Suttle [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 5,521,000 6,973,000
Suttle [Member] | Communication Service Providers [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 4,591,000 5,947,000
Suttle [Member] | International [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 400,000 580,000
Suttle [Member] | Distributors [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 530,000 446,000
Suttle [Member] | Structured Cabling and Connecting System Products [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 5,077,000 6,573,000
Suttle [Member] | DSL and Other Products [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 444,000 400,000
JDL Technologies [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 2,208,000 710,000
JDL Technologies [Member] | Education [Member]    
Disaggregation of Revenue [Line Items]    
Revenues 1,473,000 109,000
JDL Technologies [Member] | Healthcare and Commercial Clients [Member]    
Disaggregation of Revenue [Line Items]    
Revenues $ 735,000 $ 601,000

Leases
v3.10.0.1
Leases
3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Leases

NOTE 3 – LEASES



In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASU No. 2016-02, Leases  (ASC Topic 842), which is intended to improve financial reporting of leasing transactions by requiring organizations that lease assets to recognize assets and liabilities for the rights and obligations created by leases that extend more than twelve months on the balance sheet. This accounting update also requires additional disclosures surrounding the amount, timing, and uncertainty of cash flows arising from leases. This standard is effective for financial statements issued for annual and interim periods beginning after December 15, 2018 for public business entities.



The Company adopted this standard with a cumulative-effect adjustment as of January 1, 2019, the beginning of the period of adoption. The Company has elected the package of practical expedients permitted in ASC Topic 842. Adoption of the new standard resulted in the recording of right of use (“ROU”) assets and lease liabilities of approximately $280,000 and $259,000, respectively as of January 1, 2019. ROU assets represent our right to use an underlying asset for the lease term, while lease liabilities represent our obligation to make lease payments arising from the lease. Lease ROU assets and liabilities are recognized at the commencement date of a lease based on the present value of lease payments over the lease term. Because the rate implicit in each individual lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Adoption of the standard did not materially impact the Company’s condensed consolidated balance sheets, consolidated statement of income (loss) and comprehensive income (loss) or condensed consolidated statements of cash flows.



The Company has entered into operating leases for two office locations, including one in February 2019These leases have remaining lease terms of 5 to 8 years.  One of the leases includes two options to extend the lease for 5 years each, and the other lease includes an option to terminate the lease in 2022One of the leases includes a 3% rent adjustment on each anniversary of the lease. As of March 31, 2019, total ROU assets and operating lease liabilities were $450,000 and $437,000, respectively. All operating lease expense is recognized on a straight-line basis over the lease term. In the three months ended March 31, 2019, the Company recognized $29,000 in lease expense.



Information related to the Company’s ROU assets and related lease liabilities were as follows:





 

 



 

 



 

Three Months Ended March 31, 2019



 

 

Cash paid for operating leases

$

17,000 

Right-of-use assets obtained in exchange for new operating lease obligations (1)

 

450,000 

Weighted-average remaining lease term

 

4 years

Weighted-average discount rate

 

4.5% 



 

 

(1)

Includes $262,000 for operating leases existing on January 1, 2019 and $188,000 for operating leases that commenced in the first quarter of 2019.



Maturities of lease liabilities as of March 31, 2019 were as follows:







 

 



 

 

Q2 - Q4 2019

$

93,000 

2020

 

126,000 

2021

 

131,000 

2022

 

89,000 

2023

 

47,000 

Thereafter

 

4,000 

Total lease payments

 

490,000 

Less imputed interest

 

(53,000)

Total operating lease liabilities

$

437,000 



 

 

Future minimum lease commitments under operating leases based on accounting standards applicable as of December 31, 2018 were as follows:





 

 

 



 

 

 

Year Ending December 31:

 

 

 

2019

 

$  

106,000 

2020

 

 

86,000 

2021

 

 

86,000 

2022

 

 

50,000 



 

328,000 



 

 

 



As of March 31, 2019, the Company does not have any additional future operating lease obligations that have not yet commenced.


Leases (Tables)
v3.10.0.1
Leases (Tables)
3 Months Ended
Mar. 31, 2019
Leases [Abstract]  
Information Related to ROU Assets and Related Lease Liabilities





 

 



 

 



 

Three Months Ended March 31, 2019



 

 

Cash paid for operating leases

$

17,000 

Right-of-use assets obtained in exchange for new operating lease obligations (1)

 

450,000 

Weighted-average remaining lease term

 

4 years

Weighted-average discount rate

 

4.5% 



 

 

(1)

Includes $262,000 for operating leases existing on January 1, 2019 and $188,000 for operating leases that commenced in the first quarter of 2019.

Maturities of Lease Liabilities



 

 



 

 

Q2 - Q4 2019

$

93,000 

2020

 

126,000 

2021

 

131,000 

2022

 

89,000 

2023

 

47,000 

Thereafter

 

4,000 

Total lease payments

 

490,000 

Less imputed interest

 

(53,000)

Total operating lease liabilities

$

437,000 



 

 



Future Minimum Lease Commitments under Operating Leases based on ASC 840



 

 

 



 

 

 

Year Ending December 31:

 

 

 

2019

 

$  

106,000 

2020

 

 

86,000 

2021

 

 

86,000 

2022

 

 

50,000 



 

328,000 



 

 

 




Leases (Narrative) (Details)
v3.10.0.1
Leases (Narrative) (Details)
1 Months Ended 3 Months Ended
Feb. 28, 2019
item
Mar. 31, 2019
USD ($)
item
Jan. 01, 2019
USD ($)
Operating lease right of use asset | $   $ 449,995 $ 280,000
Lease liability | $   $ 437,000 $ 259,000
Number of locations 1 2  
Lease expense | $   $ 29,000  
Lease 1 [Member]      
Lease term   5 years  
Number of leases with option to extend   1  
Number of options to extend   2  
Lease renewal term   5 years  
Lease 2 [Member]      
Lease term   8 years  
Date of option to terminate   2022  
Number of leases with annual payment adjustment   1  
Percentage of annual rent adjustment   3.00%  

Leases (Information Related to ROU Assets and Related Lease Liabilities) (Details)
v3.10.0.1
Leases (Information Related to ROU Assets and Related Lease Liabilities) (Details) - USD ($)
3 Months Ended
Mar. 31, 2019
Jan. 01, 2019
Cash paid for operating leases $ 17,000  
Right-of-use assets obtained in exchange for new operating lease obligations $ 450,000  
Weighted-average remaining lease term 4 years  
Weighted-average discount rate 4.50%  
Operating lease right of use asset $ 449,995 $ 280,000
Accounting Standards Update 2016-02 [Member]    
Operating lease right of use asset 262,000  
Commenced During Period [Member]    
Operating lease right of use asset $ 188,000  

Leases (Maturities of Lease Liabilities) (Details)
v3.10.0.1
Leases (Maturities of Lease Liabilities) (Details) - USD ($)
$ in Thousands
Mar. 31, 2019
Jan. 01, 2019
Leases [Abstract]    
Q2 - Q4 2019 $ 93  
2020 126  
2021 131  
2022 89  
2023 47  
Thereafter 4  
Total lease payments 490  
Less imputed interest (53)  
Total operating lease liabilities $ 437 $ 259

Leases (Future Minimum Lease Commitments under Operating Leases based on ASC 840) (Details)
v3.10.0.1
Leases (Future Minimum Lease Commitments under Operating Leases based on ASC 840) (Details)
$ in Thousands
Dec. 31, 2018
USD ($)
Leases [Abstract]  
2019 $ 106
2020 86
2021 86
2022 50
Total minimum future lease commitments $ 328

Cash Equivalents and Investments
v3.10.0.1
Cash Equivalents and Investments
3 Months Ended
Mar. 31, 2019
Cash Equivalents and Investments [Abstract]  
Cash Equivalents and Investments

NOTE 4 – CASH EQUIVALENTS AND INVESTMENTS



The following tables show the Company’s cash equivalents amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash and cash equivalents as of March 31, 2019 and December 31, 2018:  





 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019



Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

 

Cash Equivalents

 

Short-Term Investments

 

Long-Term Investments



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market funds

$

6,974,000 

 

$

 -

 

$

 -

 

$

6,974,000 

 

$

6,974,000 

 

$

 -

 

$

 -

Total

$

6,974,000 

 

$

 -

 

$

 -

 

$

6,974,000 

 

$

6,974,000 

 

$

 -

 

$

 -













 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018



Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

 

Cash Equivalents

 

Short-Term Investments

 

Long-Term Investments



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Market funds

$

8,428,000 

 

$

 -

 

$

 -

 

$

8,428,000 

 

$

8,428,000 

 

$

 -

 

$

 -

Total

$

8,428,000 

 

$

 -

 

$

 -

 

$

8,428,000 

 

$

8,428,000 

 

$

 -

 

$

 -



The Company tests for other than temporary losses on a quarterly basis. The Company intends to hold the investments until it can recover the full principal amount and has the ability to do so based on other sources of liquidity. The Company expects such recoveries to occur prior to the contractual maturities. The Company did not have any unrealized losses as of March 31, 2019.



The Company did not recognize any gross realized gains or losses during either of the three month periods ending March 31, 2019 or 2018, respectively. If the Company had realized gains or losses, they would be included within investment and other income in the accompanying condensed consolidated statement of income (loss) and comprehensive income (loss).

 


Cash Equivalents and Investments (Tables)
v3.10.0.1
Cash Equivalents and Investments (Tables)
3 Months Ended
Mar. 31, 2019
Cash Equivalents and Investments [Abstract]  
Schedule of Cash Equivalents and Available-for-Sale Securities



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2019



Amortized Cost

 

Gross Unrealized Gains

 

Gross Unrealized Losses

 

Fair Value

 

Cash Equivalents

 

Short-Term Investments

 

Long-Term Investments



 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents: