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 adoption of ASC 606 represented a change in accounting principle that was expected to more closely align revenue recognition with the delivery of the Company's products and services and was 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 to which the Company expects to be entitled to receive in exchange for these products and services.

During the three months ended September 30, 2019, the Company identified an out-of-period immaterial error related to the implementation and application of ASC 606 with respect to the recognition of revenue associated with sales-type leases. During the implementation of ASC 606 effective January 1, 2018, the Company treated the leased products and services for these contracts as single performance obligations as if they were not distinct in the context of the contract; however, the leased product portion should have continued to have been accounted for under ASC 840 (now ASC 842). In general, the error was to defer recognition of product revenue and associated expenses for sales-type leases rather than to recognize those items upon shipment. In accordance with ASC 250, Accounting Changes and Error Corrections, the immaterial cumulative correction was recorded during the three and nine months ended September 30, 2019. During the nine months ended September 30, 2019, the Company corrected 2019 sales-type leases deferred as of March 31, 2019 and June 30, 2019 by adjusting product sales, cost of product sales and net loss for each of the three months ended March 31, 2019 and June 30, 2019. During the three months ended September 30, 2019, the Company corrected the amount of revenue not previously recognized related to the deferral of the 2018 sales-type leases. During the three and nine months ended September 30, 2019, the Company also corrected sales-type leases in effect on January 1, 2018 through an adjustment to accumulated deficit as of January 1, 2019, because during the ASC 606 implementation, sales-type lease revenue and the associated cost had been deferred on the balance sheet as contract liabilities and assets. The cumulative correction of the immaterial error for the the three months ended September 30, 2019 had the effect of increasing net loss by $336, comprised primarily of a $514 increase in product sales, a $818 increase in costs of product sales, and a $20 increase in sales, marketing and support expenses. The cumulative correction for the nine months ended September 30, 2019 comprised of corrections made to earlier interim periods in 2019 as well as the impact discussed above related to the three months ended September 30, 2019, which had the effect of increasing net loss by $250, comprised primarily of a $1,350 increase in product sales, a $1,591 increase in costs of product sales, and a $15 increase in sales, marketing and support expenses. The portion of the correction for the nine months ended September 30, 2019 impacting earlier interim periods in 2019 was made by adjusting the three months ended March 31, 2019 and June 30, 2019, which had the effect of increasing net loss by $75 and decreasing net loss by $161 for the three months ended March 31, 2019 and June 30, 2019, respectively, comprised of a $341 and $495, respectively, increase in product sales and a $431 and $341, respectively, increase in costs of product sales. The following table reflects these financial statement line items as of and for the three months ended March 31, 2019 and June 30, 2019, as reported and as adjusted (in thousands):



	Three Months Ended						Three Months Ended
	March 31, 2019						June 30, 2019
	As reported			As adjusted			As reported			As adjusted
Product sales	$	12,874		$	13,215		$	14,694		$	15,189
Cost of product sales	7,853			8,284			12,308			12,649
Net loss	(6,179		)	(6,254		)	(3,454		)	(3,293		)

For the balance sheet impact of correcting January 1, 2019 sales-type leases in effect as of January 1, 2018, accumulated deficit was reduced by $1,680, comprised of a reduction in current contract assets of $2,132, non-current contract assets of $3,110, current contract liabilities of $2,970, non-current contract liabilities of $4,018 and non-current deferred income tax asset of $66. The following table reflects these financial statement line items as of March 31, 2019 and June 30, 2019, as reported and as adjusted:




	At March 31, 2019						At June 30, 2019
	As reported			As adjusted			As reported		As adjusted
Current contract assets	$	3,678		$	1,439		$	3,834	$	1,655
Non-current contract assets	7,342			3,912			7,577		3,747
Current contract liabilities	12,211			9,252			8,119		5,153
Non-current contract liabilities	9,634			5,263			10,056		5,198
Non-current deferred tax asset	1,747			1,692			868		820
(Accumulated deficit) retained earnings	(21,576		)	(19,971		)	25,600		27,365

The Company has evaluated this error and does not believe the amounts are material to any of the periods impacted.

Disaggregation of Revenue

The following table summarizes net sales from contracts with customers for the three and nine months ended September 30, 2019:



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2019		2018		2019		2018
Mobile connectivity product, transferred at point in time	$	7,540	$	6,297	$	22,536	$	19,698
Mobile connectivity product, transferred over time (a)	537		1,259		1,507		3,881
Mobile connectivity service	23,565		21,664		67,982		62,698
Inertial navigation product	6,731		8,811		19,169		22,942
Inertial navigation service	938		1,281		4,223		4,130
Total net sales	$	39,311	$	39,312	$	115,417	$	113,349

a- Reflects the correction discussed above.

Revenue recognized during the three months ended September 30, 2019 and 2018 from amounts included in contract liabilities at the beginning of the period was $453 and $1,117, respectively. Revenue recognized during the nine months ended September 30, 2019 and 2018 from amounts included in contract liabilities at the beginning of the period was $1,360 and $3,525, respectively.

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.

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.

No single customer accounted for 10% or more of the Company's consolidated net sales for three or nine months ended September 30, 2019 or 2018 or accounts receivable at September 30, 2019 or December 31, 2018.

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.