Document and Entity Information
Document and Entity Information - USD ($) |
12 Months Ended | ||
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Dec. 31, 2018 |
Mar. 01, 2019 |
Jun. 30, 2018 |
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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
Consolidated Balance Sheets (Parenthetical)
Consolidated Balance Sheets (Parenthetical) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
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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
Consolidated Statements of Changes in Stockholders' Equity
Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical)
Consolidated Statements Of Changes In Stockholders' Equity (Parenthetical) - $ / shares |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Retained Earnings (Accumulated Deficit) [Member] | ||
Shareholder dividends per share | $ 0.14 | $ 0.16 |
Consolidated Statements of Cash Flows
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies |
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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:
Accumulated other comprehensive loss: The components of accumulated other comprehensive loss are as follows:
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 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.
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Summary of Significant Accounting Policies (Policy)
Summary of Significant Accounting Policies (Policy) |
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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.
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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.
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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.
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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.
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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).
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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.
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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.
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Intangible Assets | Intangible Assets: Intangible assets with indefinite useful lives are not amortized, but are tested at least annually for impairment.
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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.
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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:
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Accumulated Other Comprehensive Loss | Accumulated other comprehensive loss: The components of accumulated other comprehensive loss are as follows:
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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 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.
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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.
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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.
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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.
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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.
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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.
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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.
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Summary of Significant Accounting Policies (Tables)
Summary of Significant Accounting Policies (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Warranty |
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Components of Accumulated Other Comprehensive Loss |
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Summary of Significant Accounting Policies (Narrative) (Details)
Summary of Significant Accounting Policies (Schedule of Warranty) (Details)
Summary of Significant Accounting Policies (Schedule of Warranty) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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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)
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
Revenue Recognition |
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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:
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:
For Suttle, we analyze revenues by product and customer group, which is as follows for the years ended December 31, 2018 and 2017:
For JDL, we analyze revenue by customer group, which is as follows for the years ended December 31, 2018 and 2017:
The Company does not currently analyze revenue for Net2Edge on a disaggregated basis. Revenues from Net2Edge were $1,700,000 and $1,079,000 for the years ended December 31, 2018 and 2017, respectively. Contract Balances The Company does not have material costs to obtain a contract or material contract liabilities.
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Revenue Recognition (Tables)
Revenue Recognition (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue Recognition [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Impact from Initial Application Period Cumulative Effect Transition |
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Schedule of Disaggregation of Revenues | For Transition Networks, we analyze revenue by region and product group, which is as follows for the years ended December 31, 2018 and 2017:
For Suttle, we analyze revenues by product and customer group, which is as follows for the years ended December 31, 2018 and 2017:
For JDL, we analyze revenue by customer group, which is as follows for the years ended December 31, 2018 and 2017:
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Revenue Recognition (Narrative) (Details)
Revenue Recognition (Narrative) (Details) - USD ($) |
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 |
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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)
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 |
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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)
Cash Equivalents and Investments
Cash Equivalents and Investments |
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Cash Equivalents and Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash Equivalents and Investments | NOTE 3 –CASH EQUIVALENTS AND INVESTMENTS The following tables show the Company’s cash equivalents and available-for-sale securities’ amortized cost, gross unrealized gains, gross unrealized losses and fair value by significant investment category recorded as cash equivalents or short and long term investments as of December 31, 2018 and December 31, 2017:
The Company tests for other than temporary losses on a quarterly basis and has considered the unrealized losses indicated above to be temporary in nature. The Company intends to hold the investments until it can recover the full principal amount and has the ability to do so based on other sources of liquidity. The Company expects such recoveries to occur prior to the contractual maturities. There were no unrealized losses as of December 31, 2018. The Company did not recognize any gross realized gains or gross realized losses during the years ending December 31, 2018 and 2017, respectively. If the Company had realized gains or losses, they would be included within investment and other income in the accompanying consolidated statements of loss.
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Cash Equivalents and Investments (Tables)
Cash Equivalents and Investments (Tables) |
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Cash Equivalents and Investments [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Cash Equivalents and Available-for-Sale Securities |
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Cash Equivalents and Investments (Narrative) (Details)
Cash Equivalents and Investments (Narrative) (Details) - USD ($) |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Cash Equivalents and Investments [Abstract] | ||
Gross unrealized losses | $ 0 | $ 1,000 |
Gross realized gains (losses) | $ 0 | $ 0 |
Cash Equivalents and Investments (Schedule of Cash Equivalents and Available-for-Sale Securities) (Details)
Inventories
Inventories |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories | NOTE 4 - INVENTORIES Inventories consist of:
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Inventories (Tables)
Inventories (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2018 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Inventories [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventories |
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Inventories (Schedule of Inventories) (Details)
Inventories (Schedule of Inventories) (Details) - USD ($) |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Inventories [Abstract] | ||
Finished goods | $ 9,608,000 | $ 8,056,000 |
Raw and processed materials | 6,568,000 | 5,928,000 |
Inventories | $ 16,175,616 | $ 13,984,428 |
Property, Plant And Equipment
Property, Plant And Equipment |
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Property, Plant And Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant And Equipment | NOTE 5 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment and the estimated useful lives are as follows:
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Property, Plant And Equipment (Tables)
Property, Plant And Equipment (Tables) |
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Dec. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property, Plant And Equipment [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Property, Plant And Equipment |
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Property, Plant And Equipment (Schedule Of Property, Plant And Equipment) (Details)
Goodwill and Intangible Assets
Goodwill and Intangible Assets |
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Goodwill and Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | NOTE 6 –GOODWILL AND INTANGIBLE ASSETS Goodwill is required to be evaluated for impairment on an annual basis and between annual tests upon the occurrence of certain events or circumstances. In January 2017, the FASB issued new accounting guidance simplifying the goodwill impairment test. The new standard eliminates the quantitative goodwill impairment analysis requirement to determine the fair value of individual assets and liabilities of a reporting unit to determine the amount of any goodwill impairment and instead permits an entity to recognize goodwill impairment loss as the excess of a reporting unit’s carrying value over the estimated fair value of the reporting unit, to the extent this amount does not exceed the carrying amount of goodwill. The Company chose to adopt this standard early for the annual impairment analysis in 2017. The Company performed the first step of the previous two-step process, which requires that the fair value of the reporting unit be compared to its book value including goodwill. If the fair value is higher than the book value, no impairment is recognized. If the fair value is lower than the book value, an impairment adjustment must be recorded. The Company performs its annual impairment analysis as of April 1 each year. During 2017, the Company analyzed the reporting unit that had the goodwill and also analyzed the Company as a whole, including the Company’s four separate reporting units. Although JDL Technologies had been profitable for the prior eight quarters, the cyclical and unpredictable nature of revenues from its education sector raised issues in forecasting cash flows in future quarters used to estimate the reporting unit’s fair value. Based on this analysis of comparing the fair value of each reporting unit to the book value, and comparing the Company’s overall book value with its market capitalization, the Company determined that the book value exceeded the overall fair value of the reporting units as well as the Company’s overall market value. As a result, the Company recorded a goodwill impairment charge totaling $1,463,000 during the second quarter of 2017. As part of the overall annual impairment analysis noted above, the Company also reviewed other intangible assets for potential impairment. Based on this analysis, the Company deemed the intangible assets at Net2Edge related to customer relationships to be impaired and recorded a $154,000 impairment loss during the second quarter of 2017. The Company’s identifiable intangible assets with finite lives are being amortized over their estimated useful lives and are included within other assets in the consolidated balance sheets and were as follows:
Amortization expense on these identifiable intangible assets was $12,000 and $30,000 in 2018 and 2017 respectively. The amortization expense is included in selling, general and administrative expenses. The estimated future amortization expense for identifiable intangible assets during the next five fiscal years is as follows:
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Goodwill and Intangible Assets (Tables)
Goodwill and Intangible Assets (Tables) |
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Goodwill and Intangible Assets [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Finite-Lived Intangible Assets |
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Schedule of Estimated Future Amortization Expense |
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Goodwill and Intangible Assets (Narrative) (Details)
Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
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Jun. 30, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Goodwill and Intangible Assets [Abstract] | |||
Goodwill impairment loss | $ 1,463 | ||
Impairment of intangible assets | $ 154 | ||
Amortization expense | $ 12 | $ 30 |
Goodwill and Intangible Assets (Schedule of Finite-Lived Intangible Assets) (Details)
Goodwill and Intangible Assets (Schedule of Estimated Future Amortization Expense) (Details)
Goodwill and Intangible Assets (Schedule of Estimated Future Amortization Expense) (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
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Goodwill and Intangible Assets [Abstract] | |
2019 | $ 2 |
2020 | 2 |
2021 | $ 1 |
Commitments and Contingencies
Commitments and Contingencies |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Commitments and Contingencies [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Commitments And Contingencies | NOTE 7 – COMMITMENTS AND CONTINGENCIES Operating leases: The Company leases land, buildings and equipment under operating leases with original terms from 1 to 5 years. Total rent expense was $255,000 and $474,000 in 2018 and 2017, respectively. At December 31, 2018, the Company was obligated under non-cancelable operating leases to make minimum annual future lease payments as follows:
Line of credit: The Company has a $15,000,000 credit facility from Wells Fargo Bank. The Company had no outstanding borrowings against the credit facility at December 31, 2018 and 2017. Due to the revolving nature of loans under our credit facility, additional borrowings and periodic repayments and re-borrowings may be made until the maturity date. The total amount available for borrowings under this credit facility at December 31, 2018 was $9,728,000, based on the borrowing base calculation. Interest on borrowings on the credit facility is set at LIBOR plus 2.0% (4.5% at December 31, 2018). The credit agreement expires August 12, 2021 and is secured by assets of the Company. The credit agreement contains financial covenants including a minimum liquidity balance of $10,000,000. Liquidity is defined as the sum of unrestricted cash, marketable securities and the availability on the line of credit. As of December 31, 2018, the Company had no other material commitments (either cancelable or non-cancelable) for capital expenditures or other purchase commitments related to ongoing operations. Long-term compensation plans: The Company has a long term incentive plan that provides long-term competitive compensation to enable the Company to attract and retain qualified executive talent and to reward employees for achieving goals and improving company performance. The plan provides grants of “performance units” made at the beginning of performance periods and paid at the end of the period if performance goals are met. Awards were previously made every other year and are paid following the end of the cycle with annual vesting. Payment in the case of retirement, disability or death will be on a pro rata basis. The Company recognized (income)/expense of $(11,000) and $ (5,000) in 2018 and 2017, respectively. Accrual balances for long-term compensation plans at December 31, 2018 and 2017 were $0 and $11,000, respectively. There were no award payouts in 2018 and 2017. Awards under the 2016 to 2018, 2017 to 2019, and 2018 to 2020 plans will be paid out 50% in cash and 50% in stock. The stock portion of these awards are treated as equity plans and included within the Stock Compensation footnote within the Deferred Stock Outstanding section below. Other contingencies: In the ordinary course of business, the Company is exposed to legal actions and claims and incurs costs to defend against these actions and claims. Company management is not aware of any outstanding or pending legal actions or claims that would materially affect the Company’s financial position, results of operations, or cash flows.
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Commitments and Contingencies (Tables)
Commitments and Contingencies (Tables) |
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Commitments and Contingencies [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Minimum Future Lease Payments |
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Commitments and Contingencies (Narrative) (Details)
Commitments and Contingencies (Minimum Future Lease Payments) (Details)
Commitments and Contingencies (Minimum Future Lease Payments) (Details) $ in Thousands |
Dec. 31, 2018
USD ($)
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Commitments and Contingencies [Abstract] | |
2019 | $ 106 |
2020 | 86 |
2021 | 86 |
2022 | 86 |
2023 | 86 |
Thereafter | 293 |
Total minimum future lease payments | $ 743 |
Stock Compensation
Stock Compensation |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Stock Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Compensation | NOTE 8 – STOCK COMPENSATION 2011 Executive Incentive Compensation Plan On March 28, 2011 the Board adopted and on May 19, 2011 the Company’s shareholders approved the Company’s 2011 Executive Incentive Compensation Plan (“2011 Incentive Plan”). The 2011 Incentive Plan authorizes incentive awards to officers, key employees and non-employee directors in the form of options (incentive and non-qualified), stock appreciation rights, restricted stock, restricted stock units, performance stock units (“deferred stock”), performance cash units, and other awards in stock, cash, or a combination of stock and cash. The 2011 Incentive Plan, as amended, allows the issuance of up to 2,500,000 shares of common stock. During 2018, stock options covering 278,665 shares were awarded to key executive employees and non-employee directors, which options expire seven years from the date of award and generally vest 25% each year beginning one year after the date of award. The Company also granted deferred stock awards of 163,002 shares to key employees during 2018 under the Company’s long-term incentive plan for the 2018 to 2020 period. The actual number of shares of deferred stock, if any, that are ultimately earned by the respective employees will be determined based on achievement against performance goals for each of the three years ending December 31, 2020 and the shares earned will be issued in the first quarter of 2021 to those key employees still with the Company at that time. At December 31, 2018, 208,555 shares have been issued under the 2011 Incentive Plan, 1,614,558 shares are subject to currently outstanding options, deferred stock awards, and unvested restricted stock units, and 676,887 shares remained available for future issuance under the 2011 Incentive Plan. Stock Option Plan for Directors Shares of common stock are reserved for issuance to non-employee directors under options granted by the Company prior to 2011 under its Stock Option Plan for Non-Employee Directors (the “Director Plan”). Under the Director Plan nonqualified stock options to acquire 3,000 shares of common stock were automatically granted to each non-employee director concurrent with annual meetings of shareholders in 2010 and earlier years and vested immediately. The exercise price of options granted was the fair market value of the common stock on the date of the respective shareholder meetings. Options granted under the Director Plan expire 10 years from date of grant. No options have been granted under the Director Plan since 2011 when the Company amended the Director Plan to prohibit future option grants. As of December 31, 2018, there were 36,000 shares subject to outstanding options under the Director Plan. Stock Options Outstanding The following table summarizes changes in the number of outstanding stock options under the Director Plan, Stock Plan and the 2011 Incentive Plan during the two years ended December 31, 2018.
The fair value of awards issued under the Company’s stock option plan is estimated at grant date using the Black-Scholes option-pricing model. The following table displays the assumptions used in the model.
Total unrecognized compensation expense was $164,000 as of December 31, 2018, which is expected to be recognized over the next 1.9 years. The aggregate intrinsic value of all outstanding options, exercisable options, and options expected to vest (the amount by which the market price of the stock on the last day of the period exceeded the market price of the stock on the date of grant) was $0 based on the Company’s stock price at December 31, 2018. The intrinsic value of options exercised during the year was $0 in 2018 and 2017. There were no stock options exercised in 2018 and 2017. The following table summarizes the status of stock options outstanding at December 31, 2018:
The Company receives an income tax benefit related to the gains received by officers and key employees who make disqualifying dispositions of stock received on exercise of qualified incentive stock options and on non-qualified options. The amount of tax benefit received by the Company was $0 in both 2018 and 2017. The tax benefit amounts have been credited to additional paid-in capital. Deferred Stock Outstanding The following table summarizes the changes in the number of deferred stock shares under the Stock Plan and 2011 Incentive Plan over the period from December 31, 2016 to December 31, 2018:
The grant date fair value is calculated based on the Company’s closing stock price as of the grant date. As of December 31, 2018, the total unrecognized compensation expense related to the deferred stock shares was $2,000 and is expected to be recognized over a weighted-average period of 0.2 years. Restricted Stock Units Outstanding The following table summarizes the changes in the number of restricted stock units under the 2011 Incentive Plan over the period December 31, 2016 to December 31, 2018:
The grant date fair value is calculated based on the Company’s closing stock price as of the grant date. As of December 31, 2018, the total unrecognized compensation expense related to the restricted stock units was $0. Compensation Expense Share-based compensation expense is recognized based on the fair value of awards granted over the vesting period of the award. Share-based compensation expense recognized for 2018 and 2017 was $191,000 and $417,000 before income taxes and $151,000 and $271,000 after income taxes, respectively. Share-based compensation expense is recorded as a part of selling, general and administrative expenses. Employee Stock Purchase Plan Under the Company’s Employee Stock Purchase Plan (“ESPP”), employees are able to acquire shares of common stock at 85% of the price at the end of each current quarterly plan term. The most recent term ended December 31, 2018. The ESPP is considered compensatory under current rules. At December 31, 2018, after giving effect to the shares issued as of that date, 23,591 shares remain available for purchase under the ESPP. Employee Stock Ownership Plan (ESOP) All eligible employees of the Company participate in the ESOP after completing one year of service. Contributions are allocated to each participant based on compensation and vest 20% after two years of service and incrementally thereafter, with full vesting after six years. At December 31, 2018, the ESOP held 784,463 shares of the Company’s common stock, all of which have been allocated to the accounts of eligible employees. Contributions to the plan are determined by the Board of Directors and can be made in cash or shares of the Company’s stock. The 2018 ESOP contribution was $256,462 for which the Company issued 126,336 shares in March 2019. The 2017 ESOP contribution was $425,890 for which the Company issued 119,632 shares in 2018.
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Stock Compensation (Tables)
Stock Compensation (Tables) |
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Stock Compensation [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Number of Outstanding Stock Options Under Director Plan, Stock Plan and 2011 Incentive Plan |
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Valuation Assumptions Of Stock Option Plan |
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Summary Of The Status Of Stock Options Outstanding |
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Schedule of Changes in the Number of Deferred Stock Shares Under the Incentive Plan |
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Schedule of Changes in Restricted Stock Units Outstanding |
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Stock Compensation (Narrative) (Details)
Stock Compensation (Schedule of Changes in Number of Outstanding Stock Options Under Director Plan, Stock Plan and 2011 Incentive Plan) (Details)
Stock Compensation (Valuation Assumptions Of Stock Option Plan) (Details)
Stock Compensation (Valuation Assumptions Of Stock Option Plan) (Details) |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Stock Compensation [Abstract] | ||
Expected volatility | 28.60% | 30.40% |
Risk free interest rate | 2.70% | 2.00% |
Expected holding period | 6 years | 6 years |
Dividend yield | 4.10% | 3.70% |
Stock Compensation (Summary Of The Status Of Stock Options Outstanding) (Details)
Stock-Based Compensation (Schedule of Changes in the Number of Deferred Stock Shares Under the Incentive Plan) (Details)
Stock-Based Compensation (Schedule of Changes in the Number of Deferred Stock Shares Under the Incentive Plan) (Details) - Performance Units [Member] - $ / shares |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares, Outstanding - December 31, | 190,524 | 149,260 |
Shares, Granted | 163,002 | 100,239 |
Shares, Vested | (29,708) | (14,130) |
Shares, Forfeited | (53,752) | (44,845) |
Shares, Outstanding - December 31, | 270,066 | 190,524 |
Weighted Average Grant Date Fair Value, Outstanding - December 31, | $ 6.60 | $ 9.55 |
Weighted Average Grant Date Fair Value, Granted | 3.56 | 4.42 |
Weighted Average Grant Date Fair Value, Vested | 10.51 | 10.61 |
Weighted Average Grant Date Fair Value, Forfeited | 5.31 | 10.28 |
Weighted Average Grant Date Fair Value, Outstanding - December 31, | $ 4.48 | $ 6.60 |
Stock Compensation (Schedule of Changes in Restricted Stock Units Outstanding) (Details)
Stock Compensation (Schedule of Changes in Restricted Stock Units Outstanding) (Details) - Restricted Stock Units (RSUs) [Member] - $ / shares |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Shares, Outstanding - December 31, | 13,793 | 27,134 |
Shares, Vested | (13,793) | (13,341) |
Shares, Outstanding - December 31, | 13,793 | |
Weighted Average Grant Date Fair Value, Outstanding - December 31, | $ 6.33 | $ 8.65 |
Weighted Average Grant Date Fair Value, Vested | $ 6.33 | 11.05 |
Weighted Average Grant Date Fair Value, Outstanding - December 31, | $ 6.33 |
Common Stock
Common Stock |
12 Months Ended |
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Dec. 31, 2018 | |
Common Stock [Abstract] | |
Common Stock | NOTE 9 – COMMON STOCK PURCHASES OF COMMUNICATIONS SYSTEMS, INC. COMMON STOCK In October 2008, the Company’s Board of Directors authorized the repurchase of shares of the Company’s stock pursuant to Exchange Act Rule 10b-18 on the open market, in block trades or in private transactions. At December 31, 2018, 411,910 additional shares could be repurchased under outstanding Board authorizations. SHAREHOLDER RIGHTS PLAN On December 23, 2009 the Board of Directors adopted a shareholders’ rights plan under which the Board declared a distribution of one right per share of common stock. Each right entitles the holder to purchase 1/100th of a share of a new series of Junior Participating Preferred Stock of the Company at an initial exercise price of $41. The rights expire on December 23, 2019. The rights will become exercisable only following the acquisition by a person or group, without the prior consent of the Board, of 16.5% or more of the Company’s voting stock, or following the announcement of a tender offer or exchange offer to acquire an interest of 16.5% or more. If the rights become exercisable, each rightholder will be entitled to purchase, at the exercise price, common stock with a market value equal to twice the exercise price. Should the Company be acquired, each right would entitle the holder to purchase, at the exercise price, common stock of the acquiring company with a market value equal to twice the exercise price. Any rights owned by the acquiring person or group would become void.
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Common Stock (Narrative) (Details)
Common Stock (Narrative) (Details) - $ / shares |
Dec. 31, 2018 |
Dec. 23, 2009 |
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Common Stock [Abstract] | ||
Remaining number of shares authorized to be repurchased | 411,910 | |
Number of rights distributed for each share of common stock | 1 | |
Number of securities into which each right may be converted | 0.01 | |
Exercise price of right | $ 41 | |
Percentage of common stock required to be purchased for rights to become exercisable | 16.50% |
Income Taxes
Income Taxes |
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Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | NOTE 10 - INCOME TAXES Income tax (benefit) expense from continuing operations consists of the following:
The Company’s Austin Taylor Communications, Ltd. unit operated in the United Kingdom (U.K.) and is subject to U.K. rather than U.S. income taxes. Austin Taylor had no activity in 2018 and 2017. At the end of 2018, Austin Taylor’s net operating loss carry-forward was $7,462,000. The Company remains uncertain whether it will be able to generate the future income needed to realize the tax benefit of the carry-forward. Accordingly, the Company has continued to maintain its deferred tax valuation allowance against any potential carry-forward benefit from Austin Taylor. Net2Edge, Ltd., formally known as Transition Networks EMEA, Ltd., operates in the U.K. and is subject to U.K. rather than U.S. income taxes. Net2Edge, Ltd. had pretax losses of $2,772,000 and $2,616,000 in 2018 and 2017, respectively. At the end of 2018, Net2Edge, Ltd.’s net operating loss carry-forward was $7,231,000. In 2007, Transition Networks China began operations in China and is subject to Chinese taxes rather than U.S. income taxes. Transition Networks China had no activity in 2018 and 2017. At the end of 2018, Transition Networks China's net operating loss carry-forward was $374,000. Due to the history of losses in China, the Company remains uncertain whether it will be able to generate the future income needed to realize the tax benefit of the carry-forward. Accordingly, the Company has continued to maintain its deferred tax valuation reserve against any potential carry-forward benefit. Transition Networks China ceased operations in 2014 and incurred minor non-operating expenditures in 2015 to close the operations. As of 2016, Transition Networks China no longer has any operational activity. Suttle Costa Rica operated in Costa Rica and was subject to Costa Rica income taxes. In 2005, the Board of Directors of Suttle Costa Rica declared a dividend in the amount of $3,500,000 payable to the Company. The dividend and related “dividend reinvestment plan” qualify under Internal Revenue Code Sec. 965, which allows the Company to receive an 85% dividend-received deduction if the amount of the dividend is reinvested in the United States pursuant to a domestic reinvestment plan. The Company made the required qualified capital expenditures in 2006. No deferred taxes have been provided for the undistributed earnings. As of December 31, 2018, the amount of unremitted earnings outside of the United States was not significant to the Company’s liquidity and was available to fund investments abroad. The Company closed its Costa Rica facility in 2017 and no longer has any operational activity in Costa Rica. Suttle Costa Rica had pretax losses of $45,000 and $1,582,000 in 2018 and 2017. At the end of 2018, Suttle Costa Rica’s net operating loss carry-forward was $0. In April 2016, we received notification from the Internal Revenue Service that they would be performing an examination of our 2012 and 2013 federal consolidated income tax returns. As of December 31, 2017, the examination was complete. The settlement and payment that resulted from the examination did not have a material effect on our results of operations. The provision for income taxes for continuing operations varied from the federal statutory tax rate as follows:
Deferred tax assets and liabilities as of December 31 related to the following:
The Company assesses available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets. A significant piece of objective negative evidence evaluated was the cumulative loss incurred over the three-year period ending December 31, 2018. This objective evidence limits the ability to consider other subjective evidence such as the projections for future growth. On the basis of this evaluation, as of December 31, 2018, a valuation allowance of $9,834,000 has been recorded to reflect the portion of the deferred tax asset that is more likely to not be realized. The amount of the deferred tax asset considered realizable, however, could be adjusted if estimates of future taxable income during the carryforward period are reduced or increased or if objective negative evidence in the form of cumulative losses is no longer present and additional weight may be given to subjective evidence such as the Company’s projections for growth. At December 31, 2018, the Company has a federal net operating loss carryforward from 2015 through 2018 activity of approximately $15,264,000 that is available to offset future taxable income and begins to expire in 2035. During 2015, the Company engaged in a research and development tax credit study for the tax years 2011 to 2014. As a result of this study, the Company claimed $1,554,000 of federal and $1,024,000 of state research and development credits. The Company amended prior year tax returns to claim these credits and offset prior year taxes paid. Credits not used to reduce taxes are available to be carried forward. At December 31, 2018, the Company has an estimated federal research and development credit carryforward of approximately $467,000 and a state research and development credit carryforward of approximately $594,000. The Company assesses uncertain tax positions in accordance with ASC 740. Under this method, the Company must recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from these uncertain tax positions are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. The Company’s practice is to recognize interest and penalties related to income tax matters in income tax expense.
Changes in the Company’s uncertain tax positions are summarized as follows:
Included in the balance of uncertain tax positions at December 31, 2018 are $61,000 of tax benefits that if recognized would affect the tax rate. The Company’s unrecognized tax benefits will be reduced by $0 in the next twelve months due to statute of limitations expirations. There are no other expected significant changes in the Company’s uncertain tax positions in the next twelve months. The Company’s income tax liability accounts included accruals for interest and penalties of $0 at December 31, 2018. The Company’s 2018 income tax expense decreased by $4,000 due to net decreases for accrued interest and penalties. The Company’s federal and state tax returns and tax returns it has filed in Costa Rica and the United Kingdom are open for review going back to the 2015 tax year.
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Income Taxes (Tables)
Income Taxes (Tables) |
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Income Taxes [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax (Benefit) Expense By Jurisdiction |
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Reconciliation Of Effective Tax Rate, By Percentage |
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Schedule Of Deferred Tax Assets And Liabilities |
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Schedule Of Unrecognized Tax Benefits |
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Income Taxes (Narrative) (Details)
Income Taxes (Income Tax (Benefit) Expense By Jurisdiction) (Details)
Income Taxes (Income Tax (Benefit) Expense By Jurisdiction) (Details) - USD ($) |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Income Taxes [Abstract] | ||
Current year income taxes: Federal | $ 3,000 | $ (36,000) |
Current year income taxes: State | 134,000 | 56,000 |
Current year income taxes: Foreign | 249,000 | 36,000 |
Current year income taxes | 386,000 | 56,000 |
Deferred income taxes (benefit): Federal | 19,000 | (86,000) |
Deferred income taxes (benefit): State | (5,000) | |
Deferred income taxes (benefit) | 19,068 | (91,134) |
Income tax (benefit) expense | $ 405,267 | $ (34,503) |
Income Taxes (Reconciliation Of Effective Tax Rate, By Percentage) (Details)
Income Taxes (Reconciliation Of Effective Tax Rate, By Percentage) (Details) |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Income Taxes [Abstract] | ||
Tax at U.S. statutory rate | 21.00% | 35.00% |
Surtax exemption | (0.20%) | |
State income taxes, net of federal benefit | (0.60%) | 0.50% |
Foreign income taxes, net of foreign tax credits | (4.40%) | (12.80%) |
Other nondeductible items | (0.60%) | (1.00%) |
Effect of increase in uncertain tax positions | (0.30%) | 1.50% |
Change in valuation allowance | (20.30%) | 3.10% |
Change in federal deferred tax rate | (25.70%) | |
Expense of prior year tax receivable | (3.90%) | |
Other | 2.80% | (0.10%) |
Effective tax rate | (6.30%) | 0.30% |
Income Taxes (Schedule Of Deferred Tax Assets And Liabilities) (Details)
Income Taxes (Schedule Of Deferred Tax Assets And Liabilities) (Details) - USD ($) $ in Thousands |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Income Taxes [Abstract] | ||
Allowance for doubtful accounts | $ 25 | $ 22 |
Inventory | 1,718 | 1,836 |
Accrued and prepaid expenses | 348 | 245 |
Domestic net operating loss carry-forward | 3,425 | 2,240 |
Long-term compensation plans | 233 | 238 |
Nonemployee director stock compensation | 499 | 454 |
Other stock compensation | 19 | 106 |
Intangible assets | 275 | 292 |
Foreign net operating loss carry-forwards and credits | 2,885 | 3,063 |
Federal and state credits | 845 | 857 |
Other | 17 | 16 |
Gross deferred tax assets | 10,289 | 9,369 |
Valuation allowance | (9,834) | (8,713) |
Net deferred tax assets | 455 | 656 |
Depreciation | (436) | (618) |
Net deferred tax liability | (436) | (618) |
Total net deferred tax asset | $ 19 | $ 38 |
Income Taxes (Schedule Of Unrecognized Tax Benefits) (Details)
Income Taxes (Schedule Of Unrecognized Tax Benefits) (Details) - USD ($) $ in Thousands |
12 Months Ended | |
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Dec. 31, 2018 |
Dec. 31, 2017 |
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Income Taxes [Abstract] | ||
Unrecognized tax benefits - January 1 | $ 41 | $ 207 |
Gross increases - current period tax positions | 28 | |
Settlements | (101) | |
Expiration of statute of limitations | (9) | (65) |
Uncertain tax positions - December 31, 2018 | $ 60 | $ 41 |
Information Concerning Industry Segments and Major Customers
Information Concerning Industry Segments and Major Customers |
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Information Concerning Industry Segments and Major Customers [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Information Concerning Industry Segments and Major Customers | NOTE 11- INFORMATION CONCERNING INDUSTRY SEGMENTS AND MAJOR CUSTOMERS The Company classifies its businesses into four segments as follows:
Management has chosen to organize the enterprise and disclose reportable segments based on products and services. Intersegment revenues are eliminated upon consolidation. Transition Networks manufactures its products in Asia and the United States and makes sales in both the U.S. and international markets. Suttle products are sold principally to U.S. customers. Suttle operates manufacturing facilities in the U.S. JDL Technologies operates in the U.S. and makes sales in the U.S. Net2Edge operates in the U.K. and primarily makes sales in the international markets. Net long-lived assets held in foreign countries were approximately $159,000 and $93,000 at December 31, 2018 and 2017, respectively. Consolidated sales to U.S. customers were approximately 83% and 83% of sales from continuing operations in 2018 and 2017 respectively. In 2018, sales to one of Transition Networks’ customers accounted for 11.3% of consolidated sales and sales to one of Suttle’s customers accounted for 10.3% of consolidated sales. In 2017, sales to one of Suttle’s customers accounted for 10.3% of consolidated sales. At December 31, 2018, Transition Networks had two customers that made up 16% and 14% of consolidated accounts receivable, JDL had one customer that made up 15% of accounts receivable, and Suttle had one customer that made up 14% of consolidated accounts receivable. At December 31, 2017, Suttle had one customer that made up 21% of consolidated accounts receivables and Transition Networks had two customers that made up 17% and 15% of consolidated accounts receivable. Information concerning the Company’s operations in the various segments for the twelve-month periods ended December 31, 2018 and 2017 is as follows:
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Information Concerning Industry Segments and Major Customers (Tables)
Information Concerning Industry Segments and Major Customers (Tables) |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Information Concerning Industry Segments and Major Customers [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Segment Information |
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Information Concerning Industry Segments and Major Customers (Narrative) (Details)
Information Concerning Industry Segments and Major Customers (Schedule of Segment Information) (Details)
Information Concerning Industry Segments and Major Customers (Schedule of Segment Information) (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 |
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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 |
Cost of sales | 44,455,697 | 61,486,379 | ||||||||
Gross profit | 21,307,249 | 20,836,239 | ||||||||
Selling, general and administrative expenses | 27,501,691 | 28,699,138 | ||||||||
Impairment loss | 1,617,389 | |||||||||
Restructuring expense | 363,676 | 2,284,541 | ||||||||
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) |
Other income (expense) | 171,650 | (95,306) | ||||||||
Loss from operations before income taxes | (6,386,468) | (11,860,135) | ||||||||
Depreciation and amortization | 2,214,848 | 3,186,458 | ||||||||
Capital expenditures | 764,000 | 773,000 | ||||||||
Assets | 53,321,164 | 58,146,261 | 53,321,164 | 58,146,261 | ||||||
Intersegment Eliminations [Member] | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Sales | (951,000) | (891,000) | ||||||||
Cost of sales | (89,000) | (91,000) | ||||||||
Gross profit | (862,000) | (800,000) | ||||||||
Selling, general and administrative expenses | (862,000) | (800,000) | ||||||||
Assets | (27,000) | (27,000) | (27,000) | (27,000) | ||||||
Transition Networks [Member] | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Sales | 36,470,000 | 38,541,000 | ||||||||
Cost of sales | 19,775,000 | 21,779,000 | ||||||||
Gross profit | 16,695,000 | 16,762,000 | ||||||||
Selling, general and administrative expenses | 14,812,000 | 15,371,000 | ||||||||
Operating loss | 1,883,000 | 1,391,000 | ||||||||
Other income (expense) | (31,000) | 10,000 | ||||||||
Loss from operations before income taxes | 1,852,000 | 1,401,000 | ||||||||
Depreciation and amortization | 420,000 | 705,000 | ||||||||
Capital expenditures | 81,000 | 232,000 | ||||||||
Assets | 19,228,000 | 12,543,000 | 19,228,000 | 12,543,000 | ||||||
Suttle [Member] | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Sales | 23,410,000 | 32,384,000 | ||||||||
Cost of sales | 19,725,000 | 30,964,000 | ||||||||
Gross profit | 3,685,000 | 1,420,000 | ||||||||
Selling, general and administrative expenses | 8,393,000 | 8,900,000 | ||||||||
Pension liability adjustment gains | 364,000 | 2,285,000 | ||||||||
Operating loss | (5,072,000) | (9,765,000) | ||||||||
Other income (expense) | (52,000) | (123,000) | ||||||||
Loss from operations before income taxes | (5,124,000) | (9,888,000) | ||||||||
Depreciation and amortization | 1,551,000 | 2,155,000 | ||||||||
Capital expenditures | 542,000 | 397,000 | ||||||||
Assets | 12,298,000 | 18,359,000 | 12,298,000 | 18,359,000 | ||||||
JDL Technologies [Member] | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Sales | 5,134,000 | 11,210,000 | ||||||||
Cost of sales | 3,830,000 | 8,437,000 | ||||||||
Gross profit | 1,304,000 | 2,773,000 | ||||||||
Selling, general and administrative expenses | 1,879,000 | 2,101,000 | ||||||||
Impairment loss | 1,463,000 | |||||||||
Operating loss | (575,000) | (791,000) | ||||||||
Other income (expense) | 3,000 | |||||||||
Loss from operations before income taxes | (572,000) | (791,000) | ||||||||
Depreciation and amortization | 179,000 | 269,000 | ||||||||
Capital expenditures | 8,000 | |||||||||
Assets | 2,572,000 | 1,073,000 | 2,572,000 | 1,073,000 | ||||||
Net2Edge [Member] | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Sales | 1,700,000 | 1,079,000 | ||||||||
Cost of sales | 1,215,000 | 398,000 | ||||||||
Gross profit | 485,000 | 681,000 | ||||||||
Selling, general and administrative expenses | 3,279,000 | 3,127,000 | ||||||||
Impairment loss | 154,000 | |||||||||
Operating loss | (2,794,000) | (2,600,000) | ||||||||
Other income (expense) | 22,000 | (15,000) | ||||||||
Loss from operations before income taxes | (2,772,000) | (2,615,000) | ||||||||
Depreciation and amortization | 65,000 | 57,000 | ||||||||
Capital expenditures | 127,000 | 69,000 | ||||||||
Assets | 1,894,000 | 1,229,000 | 1,894,000 | 1,229,000 | ||||||
Other [Member] | ||||||||||
Segment Reporting Information [Line Items] | ||||||||||
Other income (expense) | 230,000 | 33,000 | ||||||||
Loss from operations before income taxes | 230,000 | 33,000 | ||||||||
Capital expenditures | 14,000 | 67,000 | ||||||||
Assets | $ 17,356,000 | $ 24,969,000 | $ 17,356,000 | $ 24,969,000 |
Fair Value Measurements
Fair Value Measurements |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | NOTE 12 – FAIR VALUE MEASUREMENTS Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Assets and liabilities measured at fair value are classified using the following hierarchy, which is based upon the transparency of inputs to the valuation as of the measurement date: Level 1 – Observable inputs that reflect unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access at the measurement date. Level 2 – Observable inputs such as quoted prices for similar instruments and quoted prices in markets that are not active, and inputs that are directly observable or can be corroborated by observable market data. The types of assets and liabilities included in Level 2 are typically either comparable to actively traded securities or contracts, such as treasury securities with pricing interpolated from recent trades of similar securities, or priced with models using highly observable inputs, such as commodity options priced using observable forward prices and volatilities. Level 3 – Significant inputs to pricing that have little or no observability as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as the complex and subjective models and forecasts used to determine the fair value of financial instruments. As discussed in Note 6, we tested our goodwill for impairment as of April 1, 2017. As part of this impairment testing, the Company determined the fair value of the net assets of the JDL Technologies reporting unit, based primarily on discounted cash flows and forecasted future operating results, which represent Level 3 inputs. As a result of our analysis, the Company recorded a non-cash impairment charge of $1,463,000 to fully impair goodwill. Financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2018 and 2017, are summarized below:
We record transfers between levels of the fair value hierarchy, if necessary, at the end of the reporting period. There were no transfers between levels during 2018 and 2017.
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Fair Value Measurements (Tables)
Fair Value Measurements (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Fair Value Measurements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis |
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Fair Value Measurements (Narrative) (Details)
Fair Value Measurements (Narrative) (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Jun. 30, 2017 |
Dec. 31, 2018 |
Dec. 31, 2017 |
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Fair Value Measurements [Abstract] | |||
Goodwill impairment loss | $ 1,463,000 | ||
Transfers between levels | $ 0 | $ 0 |
Fair Value Measurements (Schedule of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis) (Details)
Restructuring Charges
Restructuring Charges |
12 Months Ended |
---|---|
Dec. 31, 2018 | |
Restructuring Charges [Abstract] | |
Restructuring Charges | NOTE 13 – RESTRUCTURING CHARGES During the year ended December 31, 2017, the Company recorded $2,285,000 in restructuring expense. This included severance and related benefits costs due to the restructuring within the Suttle business segment, including costs related to the closure of the Costa Rica facility. The facility was completely closed during 2017. During the year ended December 31, 2018, the Company recorded $364,000 in restructuring expense. This consisted of severance and related benefits costs due to organizational restructuring within the Suttle business segment. The Company paid $0 in restructuring charges during 2018 and had $364,000 in restructuring accruals recorded at December 31, 2018.
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Restructuring Charges (Narrative) (Details)
Restructuring Charges (Narrative) (Details) - USD ($) |
12 Months Ended | |
---|---|---|
Dec. 31, 2018 |
Dec. 31, 2017 |
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Restructuring Charges [Abstract] | ||
Restructuring expense | $ 363,676 | $ 2,284,541 |
Restructuring payments | 0 | |
Restructuring accruals | $ 364,000,000 |
General Commitments
General Commitments |
12 Months Ended |
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Dec. 31, 2018 | |
Commitments and Contingencies [Abstract] | |
General Commitments | NOTE 14 – GENERAL COMMITMENTS On August 2, 2018, the Company entered into a purchase agreement with Launch Properties, LLC for the sale of the Company’s building located at 10900 Red Circle Drive, Minnetonka, MN for $10,000,000. The building currently includes the Company’s corporate administrative offices, as well as some operations for Transition Networks, Suttle and JDL Technologies. The closing of the transaction is subject to a number of closing conditions, including the buyer’s ability to complete due diligence within 180 days and the buyers ability to obtain regulatory approval for its intended use of the property. The due diligence period lapsed on January 29, 2019 and the buyer met certain required obligations. If the sale proceeds, the Company currently expects the transaction to close in the second half of 2019 or early 2020.
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General Commitments (Narrative) (Details)
General Commitments (Narrative) (Details) |
Aug. 02, 2018
USD ($)
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Commitments and Contingencies [Abstract] | |
Sale of building, purchase agreement, consideration amount | $ 10,000,000 |
Purchase agreement, buyer to complete due diligence, period | 180 days |
Subsequent Events
Subsequent Events |
12 Months Ended |
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Dec. 31, 2018 | |
Subsequent Events [Abstract] | |
Subsequent Events | NOTE 15 – SUBSEQUENT EVENTS The Company has evaluated subsequent events through the date of this filing. We do not believe there are any material subsequent events which would require further disclosure.
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Quarterly Operating Results
Quarterly Operating Results |
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Quarterly Operating Results | Quarterly Operating Results (in thousands except per share amounts) Unaudited
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Quarterly Operating Results (Tables)
Quarterly Operating Results (Tables) |
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Schedule Of Quarterly Operating Results |
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Quarterly Operating Results (Schedule Of Quarterly Operating Results) (Details)
Quarterly Operating Results (Schedule Of Quarterly Operating Results) (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||||||||
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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 |
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Quarterly Operating Results [Abstract] | ||||||||||
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 |
Operating income (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) |
Net loss | $ (745,000) | $ (1,545,000) | $ (2,642,000) | $ (1,860,000) | $ (1,697,000) | $ (4,522,000) | $ (4,091,000) | $ (1,516,000) | $ (6,791,735) | $ (11,825,632) |
Basic net (loss) income per share | $ (0.08) | $ (0.17) | $ (0.29) | $ (0.21) | $ (0.19) | $ (0.50) | $ (0.46) | $ (0.17) | $ (0.75) | $ (1.32) |
Diluted net (loss) income per share | $ (0.08) | $ (0.17) | $ (0.29) | $ (0.21) | $ (0.19) | $ (0.50) | $ (0.46) | $ (0.17) | $ (0.75) | $ (1.32) |