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Revenue from Contracts with Customers (ASC 606) | 12 Months Ended
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Dec. 31, 2018
Revenue from Contract with Customer [Abstract] |
Revenue from Contracts with Customers (ASC 606) | Revenue from Contracts with Customers (ASC 606) The Company adopted ASC 606 on January 1, 2018 using the modified retrospective method for all contracts not completed as of the date of adoption. The reported results for the year ended December 31, 2018 reflect the application of ASC 606 guidance while the reported results for the years ended December 31, 2017 and 2016 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 is expected to more closely align revenue recognition with the delivery of the Company's products and services and is expected to provide financial statement readers with enhanced disclosures. In accordance with ASC 606, revenue is recognized when a customer obtains control of promised products and services. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these products and services. Disaggregation of Revenue The following table summarizes net sales from contracts with customers for the year ended December 31, 2018:
Mobile connectivity product, transferred at point in time |  | $ | 26,086 |
Mobile connectivity product, transferred over time |  | 5,265 |
Mobile connectivity service |  | 102,307 |
Inertial navigation product |  | 31,926 |
Inertial navigation service |  | 5,177 |
Total net sales |  | $ | 170,761 |
For mobile connectivity product sales, the delivery of the Company’s performance obligations, and associated revenue, are generally transferred to the customer at a point in time, with the exception of certain mini-VSAT contracts which are transferred to customers over time. For mobile connectivity service sales, the delivery of the Company’s performance obligations and associated revenue are transferred to the customer over time. For inertial navigation product sales, the delivery of the Company’s performance obligations, and associated revenue, are generally transferred to the customer at a point in time. For inertial navigation service sales, the Company's performance obligations, and associated revenue, are generally transferred to customers over time. 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 was recorded as an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt the new revenue guidance, the following adjustments were made to accounts on the consolidated balance sheet as of January 1, 2018:
| As Reported |  | Adjustments |  | Adjusted
| December 31, 2017 |  | mini-VSAT Product |  | January 1, 2018
Cash, cash equivalent and marketable securities | $ | 42,915 |  |  | $ | — |  |  | $ | 42,915 |
Accounts receivable, net | 28,316 |  |  | — |  |  | 28,316 |
Inventories | 22,732 |  |  | — |  |  | 22,732 |
Contract assets | — |  |  | 3,205 |  |  | 3,205 |
Prepaid expenses and other current assets | 3,816 |  |  | — |  |  | 3,816 |
Long-lived assets | 92,513 |  |  | — |  |  | 92,513 |
Other non-current assets | 5,927 |  |  | — |  |  | 5,927 |
Contract assets, long-term | — |  |  | 5,963 |  |  | 5,963 |
Non-current deferred income tax asset | 20 |  |  | 202 |  |  | 222 |
Total assets | $ | 196,239 |  |  | $ | 9,370 |  |  | $ | 205,609 |
Accounts payable, accrued expenses, and other current liabilities | $ | 36,430 |  |  | — |  |  | $ | 36,430 |
Deferred revenue, current | 6,919 |  |  | (6,919 | ) |  | — |
Contract liabilities | — |  |  | 11,039 |  |  | 11,039 |
Long-term contract liabilities | — |  |  | 7,998 |  |  | 7,998 |
Other long-term liabilities | 2,653 |  |  | — |  |  | 2,653 |
Long-term debt, excluding current portion | 44,572 |  |  | — |  |  | 44,572 |
Total liabilities | $ | 90,574 |  |  | $ | 12,118 |  |  | $ | 102,692 |
Accumulated deficit | (4,417 | ) |  | (2,748 | ) |  | (7,165 | )
Common stock, additional paid-in capital, and accumulated other comprehensive loss | 110,082 |  |  | — |  |  | 110,082 |
Total stockholders’ equity | $ | 105,665 |  |  | $ | (2,748 | ) |  | $ | 102,917 |
Total liabilities and stockholders’ equity | $ | 196,239 |  |  | $ | 9,370 |  |  | $ | 205,609 |
mini-VSAT Broadband Under the previous guidance, promised products and services under certain contracts were determined to be separate units of accounting. Under ASC 606, the products and services for these contracts are not considered separate performance obligations because they are not distinct in the context of the contract. As a result, under ASC 606 this product revenue will be recognized over the estimated customer's life rather than at a point in time under the previous guidance. In conjunction with the January 1, 2018 adoption of ASC 606, the Company increased its accumulated deficit by $2,748, reflecting the deferral of $12,118 in revenue and $9,370 of cost of revenues, for contracts that were not complete as of the date of adoption. Cost to Obtain a Customer Contract Prior to the adoption of ASC 606, the Company expensed commissions paid to internal sales representatives and external sales representatives for obtaining mini-VSAT product contracts in the period the commissions were earned. Under ASC 606, for certain contracts in which the products and services are not considered separate performance obligation, the Company currently capitalizes these incremental costs of obtaining customer contracts and amortizes them over the estimated customer life of 5 years. The net impact of these changes to the treatment of commissions resulted in a $191 adjustment to accumulated deficit as of January 1, 2018. Income Taxes The adoption of ASC 606 primarily resulted in a deferment of revenue as of December 31, 2017, which in turn generated additional deferred tax assets that ultimately increased the Company's net deferred tax asset position by $202 as of January 1, 2018 related to sales made in certain international jurisdictions. As the Company fully reserves its net deferred tax assets generated in the U.S., this impact was offset by a corresponding increase to the valuation allowance. Impact of New Revenue Guidance on Financial Statement Line Items The following tables compare the reported consolidated balance sheet, statement of operations and cash flows, as of and for the year ended December 31, 2018, to the pro forma amounts that would have been reported if the previous guidance had been in effect:
|  | As of December 31, 2018
Balance Sheet |  | As reported |  | Pro forma as if the previous accounting guidance had been in effect
Cash, cash equivalent and marketable securities |  | $ | 18,075 |  |  | $ | 18,075 |
Accounts receivable, net |  | 29,663 |  |  | 29,663 |
Inventories |  | 22,942 |  |  | 22,942 |
Contract assets |  | 3,566 |  |  | — |
Prepaid expenses and other current assets |  | 3,494 |  |  | 3,494 |
Long-lived assets |  | 95,979 |  |  | 95,979 |
Other non-current assets |  | 6,736 |  |  | 6,736 |
Contract assets, long-term |  | 6,971 |  |  | — |
Non-current deferred income tax asset |  | 226 |  |  | 86 |
Total assets |  | $ | 187,652 |  |  | $ | 176,975 |
Accounts payable, accrued expenses, and other current liabilities |  | $ | 46,817 |  |  | $ | 46,817 |
Deferred revenue, current |  | — |  |  | 4,833 |
Contract liabilities |  | 9,193 |  |  | — |
Long-term contract liabilities |  | 9,070 |  |  | — |
Other long-term liabilities |  | 3,620 |  |  | 3,620 |
Long-term debt, excluding current portion |  | 19,437 |  |  | 19,437 |
Total liabilities |  | $ | 88,137 |  |  | $ | 74,707 |
Accumulated deficit |  | (15,397 | ) |  | (12,644 | )
Common stock, additional paid-in capital, and accumulated other comprehensive loss |  | 114,912 |  |  | 114,912 |
Total stockholders’ equity |  | $ | 99,515 |  |  | $ | 102,268 |
Total liabilities and stockholders’ equity |  | $ | 187,652 |  |  | $ | 176,975 |
Total reported assets and reported liabilities were $10,677 and $13,430, respectively, greater than the pro forma balance sheet, which assumes that the previous guidance remained in effect as of December 31, 2018. This difference was largely due to the deferral of revenue and associated contract costs in connection with the treatment of certain mini-VSAT customer contracts in which the products and services were not distinct in the context of the contract.
|  | Year Ended December 31, 2018
Consolidated Statement of Operations |  | As reported |  | Pro forma as if the previous accounting guidance had been in effect
Sales: |  |  |  |
Product |  | $ | 63,277 |  |  | $ | 64,588 |
Service |  | 107,484 |  |  | 107,484 |
Net Sales |  | 170,761 |  |  | 172,072 |
Costs and expenses: |  |  |  |
Costs of product sales |  | 39,510 |  |  | 40,767 |
Costs of service sales |  | 60,590 |  |  | 60,590 |
Research and development |  | 14,951 |  |  | 14,951 |
Sales, marketing and support |  | 34,910 |  |  | 35,022 |
General and administrative |  | 27,964 |  |  | 27,964 |
Total operating expenses |  | 177,925 |  |  | 179,294 |
Loss from operations |  | (7,164 | ) |  | (7,222 | )
Other income (expense), net |  | (503 | ) |  | (503 | )
Loss before income tax expense |  | (7,667 | ) |  | (7,725 | )
Income tax expense |  | 565 |  |  | 502 |
Net loss |  | $ | (8,232 | ) |  | $ | (8,227 | )
Net loss per common share: |  |  |  |
Basic and diluted |  | $ | (0.48 | ) |  | $ | (0.48 | )
The following paragraphs summarize the significant changes to the Company’s consolidated statement of operations for the year ended December 31, 2018 resulting from the adoption of ASC 606 on January 1, 2018 compared to the results the Company would have reported under the prior guidance:
• | ASC 606 deferred the recognition of revenue and fulfillment costs related to mini-VSAT contracts in which the performance obligations for products and services are not distinct in the context of the contract. The deferred revenue and associated fulfillment costs will be recognized over the estimated customer life of five years. Under the previous guidance, these promised products and services were determined to be separate units of accounting, as a result of which the product revenue was recognized at the time of sale. As a result of the adoption of ASC 606, revenues and related cost of revenues were $1,311 and $1,257 lower, respectively, for the year ended December 31, 2018 than they would have been under legacy GAAP as a result of the adoption of ASC 606.
• | ASC 606 resulted in the amortization of capitalized commission costs that were recorded as part of the cumulative effect adjustment upon adoption. Amortization of these capitalized costs to selling and marketing expenses, net of commission costs that were capitalized in the quarter, resulted in no meaningful impact on selling and marketing expenses in the quarter.
The net impact of accounting for revenue under the new guidance increased net loss by $5 for the year ended December 31, 2018. For the year ended December 31, 2018, there was no change in basic and diluted loss per share.
|  | Year Ended December 31, 2018
Statement of Cash Flows |  | As reported |  | Pro forma as if the previous accounting guidance had been in effect
Net loss |  | $ | (8,232 | ) |  | $ | (8,227 | )
Non-cash adjustments to reconcile net loss to net cash used in operating activities |  | 15,694 |  |  | 15,631 |
Changes in operating assets and liabilities: |  |  |  |
Accounts receivable and inventories |  | (2,357 | ) |  | (2,357 | )
Prepaid expenses, other assets, and contract assets |  | (2,340 | ) |  | (971 | )
Deferred revenue, contract liabilities, and long-term contract liabilities |  | (498 | ) |  | (1,809 | )
Accounts payable, accrued compensation, warranty, other, and other long-term liabilities |  | 2,917 |  |  | 2,917 |
Net cash used in operating activities |  | $ | 5,184 |  |  | $ | 5,184 |
The adoption of ASC 606 had no impact on the Company’s cash flows from operations. The aforementioned impacts resulted in offsetting shifts in cash flows throughout net loss and various changes in working capital balances.
|  | Contract Assets |  | Contract Liabilities
|  | Current | Non-Current |  | Current | Non-Current
Balance at January 1, 2018 |  | $ | 3,205 |  | $ | 5,963 |  |  | $ | 11,039 |  | $ | 7,998 |
Balance at December 31, 2018 |  | $ | 3,566 |  | $ | 6,971 |  |  | $ | 9,193 |  | $ | 9,070 |
Revenue recognized during the year ended December 31, 2018 from amounts included in deferred revenue at the beginning of the fiscal year was approximately $4,670. Business and Credit Concentrations Concentrations of risk with respect to trade accounts receivable are generally limited due to the large number of customers and their dispersion across several geographic areas. Although the Company does not foresee that credit risk associated with these receivables will deviate from historical experience, repayment is dependent upon the financial stability of those individual customers. The Company establishes allowances for potential bad debts and evaluates, on a monthly basis, the adequacy of those reserves based upon historical experience and its expectations for future collectability concerns. The Company performs ongoing credit evaluations of the financial condition of its customers and generally does not require collateral. The Company had no customers that accounted for 10% or more of its consolidated net sales for the years ended December 31, 2018, 2017, and 2016, respectively, or accounts receivable as of years ended December 31, 2018, 2017, and 2016. Certain components from third parties used in the Company’s products are procured from single sources of supply. The failure of a supplier, including a subcontractor, to deliver on schedule could delay or interrupt the Company’s delivery of products and thereby materially adversely affect the Company’s revenues and operating results.

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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