Data I/O (DAIO) 10-Q 13 Aug 20 2020 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2020	Jul. 30, 2020
Cover [Abstract]
Entity Registrant Name	DATA I/O CORP
Entity Central Index Key	0000351998
Document Type	10-Q
Document Period End Date	Jun. 30, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	false
Entity Small Business	true
Entity Shell Company	false
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	WA
Entity File Number	0-10394
Entity Common Stock, Shares Outstanding		8,390,943
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2020

CONSOLIDATED BALANCE SHEETS (in

CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
CURRENT ASSETS:
Cash and cash equivalents	$ 13,273	$ 13,936
Trade accounts receivable, net of allowance for doubtful accounts of $73 and $80, respectively	2,840	4,099
Inventories	4,731	5,020
Other current assets	2,000	924
Total current assets	22,844	23,979
Property, plant and equipment - net	1,602	1,668
Income tax receivable	0	640
Other assets	1,717	1,994
Total assets	26,163	28,281
CURRENT LIABILITIES:
Accounts payable	908	1,151
Accrued compensation	1,304	1,541
Deferred revenue	1,334	1,387
Other accrued liabilities	1,259	1,372
Income taxes payable	64	31
Total current liabilities	4,869	5,482
Operating lease liabilities	834	1,178
Long-term other payables	150	91
Commitments	0	0
STOCKHOLDERS' EQUITY
Preferred stock - authorized, 5,000,000 shares, including 200,000 shares of Series A Junior Participating, issued and outstanding, none	0	0
Common stock, at stated value - authorized, 30,000,000 shares, Issued and outstanding, 8,390,943 shares as of June 30, 2020 and 8,212,748 shares as of December 31, 2019	19,319	18,748
Accumulated earnings	897	2,508
Accumulated other comprehensive income (loss)	94	274
Total stockholders' equity	20,310	21,530
Total liabilities and stockholders' equity	$ 26,163	$ 28,281

CONSOLIDATED BALANCE SHEETS (_2

CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
CURRENT ASSETS:
Trade accounts receivable, net of allowance	$ 73	$ 80
STOCKHOLDERS' EQUITY
Preferred stock, authorized shares	5,000,000	5,000,000
Preferred stock, issued shares	0	0
Preferred stock, outstanding shares	0	0
Common stock, authorized shares	30,000,000	30,000,000
Common stock, issued shares	8,390,943	8,212,748
Common stock, outstanding shares	8,390,943	8,212,748
Series A Junior Participating
STOCKHOLDERS' EQUITY
Preferred stock, authorized shares	200,000	200,000

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Income Statement [Abstract]
Net sales	$ 4,655	$ 5,834	$ 9,440	$ 11,892
Cost of goods sold	2,216	2,250	4,217	4,623
Gross margin	2,439	3,584	5,223	7,269
OPERATING EXPENSES:
Research and development	1,614	1,680	3,196	3,361
Selling, general and administrative	1,703	1,829	3,514	3,803
Total operating expenses	3,317	3,509	6,710	7,164
Operating income (loss)	(878)	75	(1,487)	105
NON-OPERATING INCOME (LOSS):
Interest income	1	10	9	22
Gain on sale of assets	0	0	0	60
Foreign currency transaction gain (loss)	(83)	69	(31)	(36)
Total non-operating income (loss)	(82)	79	(22)	46
Income (loss) before income taxes	(960)	154	(1,509)	151
Income tax (expense) benefit	(97)	(27)	(102)	2
Net income (loss)	$ (1,057)	$ 127	$ (1,611)	$ 153
Basic earnings (loss) per share	$ (0.13)	$ 0.02	$ (0.19)	$ 0.02
Diluted earnings (loss) per share	$ (0.13)	$ 0.02	$ (0.19)	$ 0.02
Weighted-average basic shares (in thousands)	8,302	8,257	8,261	8,280
Weighted-average diluted shares (in thousands)	8,302	8,332	8,261	8,375

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Statement of Other Comprehensive Income [Abstract]
Net income (loss)	$ (1,057)	$ 127	$ (1,611)	$ 153
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation gain (loss)	85	(118)	(180)	10
Comprehensive income (loss)	$ (972)	$ 9	$ (1,791)	$ 163

CONSOLIDATED STATEMENT OF STOCK

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Common Stock	Retained Earnings (Deficit)	Accumulated Other Comprehensive Income (Loss)	Total
Beginning balance, shares at Dec. 31, 2018	8,338,628
Beginning balance, amount at Dec. 31, 2018	$ 19,254	$ 3,695	$ 408	$ 23,357
Repurchased shares, shares	(57,612)
Repurchased shares, amount	$ (313)			(313)
Stock awards issued, net of tax withholding, shares	4,046
Stock awards issued, net of tax withholding, amount	$ (9)			(9)
Issuance of stock through Employee Stock Purchase Plan, shares	2,763
Issuance of stock through Employee Stock Purchase Plan, amount	$ 15			15
Share-based compensation	287			287
Net income (loss)		26		26
Other comprehensive income (loss)			128	128
Ending balance, shares at Mar. 31, 2019	8,287,825
Ending balance, amount at Mar. 31, 2019	$ 19,235	3,721	536	23,492
Beginning balance, shares at Dec. 31, 2018	8,338,628
Beginning balance, amount at Dec. 31, 2018	$ 19,254	3,695	408	23,357
Net income (loss)				153
Ending balance, shares at Jun. 30, 2019	8,261,702
Ending balance, amount at Jun. 30, 2019	$ 18,463	3,848	418	22,729
Beginning balance, shares at Mar. 31, 2019	8,287,825
Beginning balance, amount at Mar. 31, 2019	$ 19,235	3,721	536	23,492
Repurchased shares, shares	(188,194)
Repurchased shares, amount	$ (908)			(908)
Stock awards issued, net of tax withholding, shares	162,071
Stock awards issued, net of tax withholding, amount	$ (228)			(228)
Share-based compensation	364			364
Net income (loss)		127		127
Other comprehensive income (loss)			(118)	(118)
Ending balance, shares at Jun. 30, 2019	8,261,702
Ending balance, amount at Jun. 30, 2019	$ 18,463	3,848	418	22,729
Beginning balance, shares at Dec. 31, 2019	8,212,748
Beginning balance, amount at Dec. 31, 2019	$ 18,748	2,508	274	21,530
Stock awards issued, net of tax withholding, shares	5,190
Stock awards issued, net of tax withholding, amount	$ (10)			(10)
Issuance of stock through Employee Stock Purchase Plan, shares	3,509
Issuance of stock through Employee Stock Purchase Plan, amount	$ 14			14
Share-based compensation	249			249
Net income (loss)		(554)		(554)
Other comprehensive income (loss)			(265)	(265)
Ending balance, shares at Mar. 31, 2020	8,221,447
Ending balance, amount at Mar. 31, 2020	$ 19,001	1,954	9	20,964
Beginning balance, shares at Dec. 31, 2019	8,212,748
Beginning balance, amount at Dec. 31, 2019	$ 18,748	2,508	274	21,530
Net income (loss)				(1,611)
Ending balance, shares at Jun. 30, 2020	8,390,943
Ending balance, amount at Jun. 30, 2020	$ 19,319	897	94	20,310
Beginning balance, shares at Mar. 31, 2020	8,221,447
Beginning balance, amount at Mar. 31, 2020	$ 19,001	1,954	9	20,964
Stock awards issued, net of tax withholding, shares	169,496
Stock awards issued, net of tax withholding, amount	$ (163)			(163)
Share-based compensation	481			481
Net income (loss)		(1,057)		(1,057)
Other comprehensive income (loss)			85	85
Ending balance, shares at Jun. 30, 2020	8,390,943
Ending balance, amount at Jun. 30, 2020	$ 19,319	$ 897	$ 94	$ 20,310

CONSOLIDATED STATEMENT OF CASH

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$ (1,611)	$ 153
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization	446	424
Gain on sale of assets	0	(60)
Equipment transferred to cost of goods sold	52	(26)
Share-based compensation	730	651
Net change in:
Trade accounts receivable	1,262	(63)
Inventories	273	(28)
Other current assets	(1,076)	3
Accounts payable and accrued liabilities	(541)	(2,223)
Deferred revenue	(77)	(62)
Other long-term liabilities	(264)	(312)
Deposits and other long-term assets	912	88
Net cash provided by (used in) operating activities	106	(1,455)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment	(432)	(365)
Net proceeds from sale of assets	0	60
Cash provided by (used in) investing activities	(432)	(305)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock, less payments for shares withheld to cover tax	(159)	(222)
Repurchase of common stock	0	(1,220)
Cash provided by (used in) financing activities	(159)	(1,442)
Increase (decrease) in cash and cash equivalents	(485)	(3,202)
Effects of exchange rate changes on cash	(178)	24
Cash and cash equivalents at beginning of period	13,936	18,343
Cash and cash equivalents at end of period	13,273	15,165
Supplemental disclosure of cash flow information:
Cash paid during the period for: income taxes	$ 69	$ 101

NOTE 1 - FINANCIAL STATEMENT PR

NOTE 1 - FINANCIAL STATEMENT PREPARATION	6 Months Ended
	Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
NOTE 1 - FINANCIAL STATEMENT PREPARATION	Data I/O Corporation (“Data I/O”, “We”, “Our”, “Us”) prepared the financial statements as of June 30, 2020 and June 30, 2019 according to the rules and regulations of the Securities and Exchange Commission ("SEC"). These statements are unaudited but, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the results for the periods presented. The balance sheet at December 31, 2019 has been derived from the audited financial statements at that date. We have condensed or omitted certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America according to such SEC rules and regulations. Operating results for the six months ended June 30, 2020 are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. These financial statements should be read in conjunction with the annual audited financial statements and the accompanying notes included in our Form 10-K for the year ended December 31, 2019. Revenue Recognition Topic 606 provides a single, principles-based five-step model to be applied to all contracts with customers. It generally provides for the recognition of revenue in an amount that reflects the consideration to which the Company expects to be entitled, net of allowances for estimated returns, discounts or sales incentives, as well as taxes collected from customers when control over the promised goods or services are transferred to the customer. We have elected the practical expedient to expense contract acquisition costs, primarily sales commissions, for contracts with terms of one year or less and will capitalize and amortize incremental costs with terms that exceed one year. During 2020 and 2019, the impact of capitalization of incremental costs for obtaining contracts was immaterial. We have made a sales tax policy election to exclude sales, use, value added, some excise taxes and other similar taxes from the measurement of the transaction price. We recognize revenue upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We have determined that our programming equipment has reached a point of maturity and stability such that product acceptance can be assured by testing at the factory prior to shipment and that the installation meets the criteria to be a separate performance obligation. These systems are standard products with published product specifications and are configurable with standard options. The evidence that these systems could be deemed as accepted was based upon having standardized factory production of the units, results from batteries of tests of product performance to our published specifications, quality inspections and installation standardization, as well as past product operation validation with the customer and the history provided by our installed base of products upon which the current versions were based. The revenue related to products requiring installation that is perfunctory is recognized upon transfer of control of the product to customers, which generally is at the time of shipment. Installation that is considered perfunctory includes any installation that is expected to be performed by other parties, such as distributors, other vendors, or the customers themselves. This considers the complexity, skill and training needed as well as customer expectations regarding installation. We enter into arrangements with multiple performance obligations that arise during the sale of a system that includes an installation component, a service and support component and a software maintenance component. The transaction price is allocated to the separate performance obligations on relative standalone sales price. We allocate the transaction price of each element based on relative selling prices. Relative selling price is based on the selling price of the standalone system. For the installation and service and support performance obligations, we use the value of the discount given to distributors who perform these components. For software maintenance performance obligations, we use what we charge for annual software maintenance renewals after the initial year the system is sold. Revenue is recognized on the system sale based on shipping terms, installation revenue is recognized after the installation is performed, and hardware service and support and software maintenance revenue is recognized ratably over the term of the agreement, typically one year. Deferred revenue includes service, support and maintenance contracts and represents the undelivered performance obligation of agreements that are typically for one year. When we sell software separately, we recognize revenue upon the transfer of control of the software, which is generally upon shipment, provided that only inconsequential performance obligations remain on our part and substantive acceptance conditions, if any, have been met. We recognize revenue when there is an approved contract that both parties are committed to perform, both parties’ rights have been identified, the contract has substance, collection of substantially all the consideration is probable, the transaction price has been determined and allocated over the performance obligations, the performance obligations including substantive acceptance conditions, if any, in the contract have been met, the obligation is not contingent on resale of the product, the buyer’s obligation would not be changed in the event of theft, physical destruction or damage to the product, the buyer acquiring the product for resale has economic substance apart from us and we do not have significant obligations for future performance to directly bring about the resale of the product by the buyer. We establish a reserve for sales returns based on historical trends in product returns and estimates for new items. Payment terms are generally 30 days from shipment. We transfer certain products out of service from their internal use and make them available for sale. The products transferred are typically our standard products in one of the following areas: service loaners, rental or test units; engineering test units; or sales demonstration equipment. Once transferred, the equipment is sold by our regular sales channels as used equipment inventory. These product units often involve refurbishing and an equipment warranty, and are conducted as sales in our normal and ordinary course of business. The transfer amount is the product unit’s net book value and the sale transaction is accounted for as revenue and cost of goods sold. The following table represents our revenues by major categories: Three Months Ended Six Months Ended Net sales by type June 30, Change June 30, June 30, Change June 30, (in thousands) Equipment Sales $ 2,476 (30.0%) $ 3,537 $ 5,063 (30.1%) $ 7,247 Adapter Sales 1,324 (6.8%) 1,421 2,669 (7.4%) 2,882 Software and Maintenance Sales 855 (2.4%) 876 1,708 (3.1%) 1,763 Total $ 4,655 (20.2%) $ 5,834 $ 9,440 (20.6%) $ 11,892 Share-Based Compensation All stock-based compensation awards are measured based on estimated fair values on the date of grant and recognized as compensation expense on the straight-line single-option method. Our share-based compensation is reduced for estimated forfeitures at the time of grant and revised as necessary in subsequent periods if actual forfeitures differ from those estimates. Income Tax Income taxes are computed at current enacted tax rates, less tax credits using the asset and liability method. Deferred taxes are adjusted both for items that do not have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, and any changes in the valuation allowance caused by a change in judgment about the realization of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. The CARES Act, enacted in Q1 2020, accelerated the AMT credit refund of $640,000 to be a current asset instead of non-current. Recently Adopted Accounting Pronouncements None.

NOTE 2 - INVENTORIES

NOTE 2 - INVENTORIES	6 Months Ended
	Jun. 30, 2020
Inventory Disclosure [Abstract]
NOTE 2 - INVENTORIES	Inventories consisted of the following components: June 30, December 31, (in thousands) Raw material $ 2,122 $ 2,416 Work-in-process 1,667 1,832 Finished goods 942 772 Inventories $ 4,731 $ 5,020

NOTE 3 - PROPERTY, PLANT AND EQ

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET	6 Months Ended
	Jun. 30, 2020
Property, Plant and Equipment [Abstract]
NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET	Property and equipment consisted of the following components: June 30, December 31, (in thousands) Leasehold improvements $ 390 $ 395 Equipment 5,666 5,606 Sales demonstration equipment 905 778 6,961 6,779 Less accumulated depreciation 5,359 5,111 Property and equipment, net $ 1,602 $ 1,668

NOTE 4 - OTHER ACCRUED LIABILIT

NOTE 4 - OTHER ACCRUED LIABILITIES	6 Months Ended
	Jun. 30, 2020
Accrued Liabilities [Abstract]
NOTE 4 - OTHER ACCRUED LIABILITIES	Other accrued liabilities consisted of the following components: June 30, December 31, (in thousands) Lease liability - short term $ 692 $ 678 Product warranty 341 367 Sales return reserve 67 77 Other taxes 98 126 Other 61 124 Other accrued liabilities $ 1,259 $ 1,372 The changes in our product warranty liability for the six months ending June 30, 2020 are as follows: June 30, (in thousands) Liability, beginning balance $ 367 Net expenses 341 Warranty claims (341 ) Accrual revisions (26 ) Liability, ending balance $ 341

NOTE 5 - LEASES

NOTE 5 - LEASES	6 Months Ended
	Jun. 30, 2020
Leases [Abstract]
NOTE 5 - LEASES	Our leasing arrangements are primarily for facility leases we use to conduct our operations. The following table presents our future lease payments for long-term operating leases as of June 30, 2020: Operating (in thousands) 2020 (remaining) $ 381 2021 711 2022 317 2023 91 2024 83 Thereafter 141 Total $ 1,724 Less Imputed interest (198 ) Total operating lease liabilities $ 1,526 Cash paid for operating lease liabilities for the three and six months ended June 30, 2020 was $189,000 and $374,000, respectively. There was one new or modified leases during the six months ended June 30, 2020 included in the lease liability for approximately $15,000 relating to a new three-year automobile lease. The following table presents supplemental balance sheet information related to leases as of June 30, 2020: Balance at June 30, 2020 Balance at December 31, 2019 (in thousands) Right-of-use assets (Long-term other assets) $ 1,297 $ 1,574 Lease liability-short term (Other accrued liabilities) 692 678 Lease liability-long term (Long-term other payables) 834 1,178 At June 30, 2020, the weighted average remaining lease term is 3.08 years and the weighted average discount rate used is 5%. The components of our lease expense for the three and six months ended June 30, 2020 include operating lease costs of $164,000 and $326,000, respectively, and short-term lease costs of $8,000 and $16,000, respectively. Our real estate facility leases are described below: During the third quarter of 2017, we amended our lease agreement, extending the lease for the Redmond, Washington headquarters facility through July 31, 2022. This lease is for approximately 20,460 square feet. We signed a lease agreement effective November 1, 2015 that extends the lease for a facility located in Shanghai, China through October 31, 2021. This lease is for approximately 19,400 square feet. During the fourth quarter of 2016, we signed a lease agreement for a new facility located near Munich, Germany which was effective March 1, 2017 and extends the lease through February 28, 2022. This lease is for approximately 4,895 square feet.

NOTE 6 - OTHER COMMITMENTS

NOTE 6 - OTHER COMMITMENTS	6 Months Ended
	Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
NOTE 6 - OTHER COMMITMENTS	We have purchase obligations for inventory and production costs as well as other obligations such as capital expenditures, service contracts, marketing, and development agreements. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transaction. Most arrangements are cancelable without a significant penalty, and with short notice, typically less than 90 days. At June 30, 2020, the purchase commitments and other obligations totaled $1.2 million of which all but $228,000 are expected to be paid over the next twelve months.

NOTE 7 - CONTINGENCIES

NOTE 7 - CONTINGENCIES	6 Months Ended
	Jun. 30, 2020
Commitments and Contingencies Disclosure [Abstract]
NOTE 7 - CONTINGENCIES	As of June 30, 2020, we were not a party to any legal proceedings or aware of any indemnification agreement claims, the adverse outcome of which in management’s opinion, individually or in the aggregate, would have a material adverse effect on our results of operations or financial position.

NOTE 8 - EARNINGS PER SHARE

NOTE 8 - EARNINGS PER SHARE	6 Months Ended
	Jun. 30, 2020
Earnings Per Share [Abstract]
NOTE 8 - EARNINGS PER SHARE	Basic earnings per share is calculated based on the weighted average number of common shares outstanding during each period. Diluted earnings per share is calculated based on these same weighted average shares outstanding plus the effect of potential shares issuable upon assumed exercise of stock options based on the treasury stock method. Potential shares issuable upon the exercise of stock options are excluded from the calculation of diluted earnings per share to the extent their effect would be anti-dilutive. The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, (in thousands except per share data) Numerator for basic and diluted earnings (loss) per share: Net income (loss) $ (1,057 ) $ 127 $ (1,611 ) $ 153 Denominator for basic earnings (loss) per share: Weighted-average shares 8,302 8,257 8,261 8,280 Employee stock options and awards 46 75 51 95 Denominator for diluted earnings (loss) per share: Adjusted weighted-average shares & assumed conversions of stock options 8,348 8,332 8,312 8,375 Basic and diluted earnings (loss) per share: Total basic earnings (loss) per share $ (0.13 ) $ 0.02 $ (0.19 ) $ 0.02 Total diluted earnings (loss) per share $ (0.13 ) $ 0.02 $ (0.19 ) $ 0.02 Weighted average options to purchase 25,000 shares for both the three and six month periods ending June 30, 2020 and weighted average options to purchase 35,422 and 30,240 shares for the three and six months ending June 30, 2019, respectively, were excluded from the computation of diluted earnings per share for the periods then ended because the options were anti-dilutive.

NOTE 9 - SHARE-BASED COMPENSATI

NOTE 9 - SHARE-BASED COMPENSATION	6 Months Ended
	Jun. 30, 2020
Share-based Payment Arrangement, Noncash Expense [Abstract]
NOTE 9 - SHARE-BASED COMPENSATION	For share-based awards granted, we have recognized compensation expense based on the estimated grant date fair value method. For these awards we have recognized compensation expense using a straight-line amortization method reduced for estimated forfeitures. The impact on our results of operations of recording share-based compensation, net of forfeitures, for the three and six months ended June 30, 2020 and 2019, respectively, were as follows: Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, (in thousands) Cost of goods sold $ 15 $ 10 $ 21 $ 16 Research and development 132 103 196 166 Selling, general and administrative 334 251 513 469 Total share-based compensation $ 481 $ 364 $ 730 $ 651 Equity awards granted during the three and six months ended June 30, 2020 and 2019 were as follows: Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, Restricted Stock Units 376,200 276,700 376,200 276,700 Stock Options — 25,000 — 25,000 Non-employee directors Restricted Stock Units (“RSU’s”) vest over one year and options vest over three years and have a six-year exercise period. Employee RSU’s typically vest over four years and employee Non-Qualified stock options typically vest quarterly over 4 years and have a six-year exercise period. The remaining unamortized expected future equity compensation expense and remaining amortization period associated with unvested option grants, restricted stock awards and restricted stock unit awards at June 30, 2020 are: June 30, Unamortized future equity compensation expense (in thousands) $ 2,731 Remaining weighted average amortization period (in years) 2.63

NOTE 1 - FINANCIAL STATEMENT _2

NOTE 1 - FINANCIAL STATEMENT PREPARATION (Policies)	6 Months Ended
	Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Revenue Recognition	Topic 606 provides a single, principles-based five-step model to be applied to all contracts with customers. It generally provides for the recognition of revenue in an amount that reflects the consideration to which the Company expects to be entitled, net of allowances for estimated returns, discounts or sales incentives, as well as taxes collected from customers when control over the promised goods or services are transferred to the customer. We have elected the practical expedient to expense contract acquisition costs, primarily sales commissions, for contracts with terms of one year or less and will capitalize and amortize incremental costs with terms that exceed one year. During 2020 and 2019, the impact of capitalization of incremental costs for obtaining contracts was immaterial. We have made a sales tax policy election to exclude sales, use, value added, some excise taxes and other similar taxes from the measurement of the transaction price. We recognize revenue upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We have determined that our programming equipment has reached a point of maturity and stability such that product acceptance can be assured by testing at the factory prior to shipment and that the installation meets the criteria to be a separate performance obligation. These systems are standard products with published product specifications and are configurable with standard options. The evidence that these systems could be deemed as accepted was based upon having standardized factory production of the units, results from batteries of tests of product performance to our published specifications, quality inspections and installation standardization, as well as past product operation validation with the customer and the history provided by our installed base of products upon which the current versions were based. The revenue related to products requiring installation that is perfunctory is recognized upon transfer of control of the product to customers, which generally is at the time of shipment. Installation that is considered perfunctory includes any installation that is expected to be performed by other parties, such as distributors, other vendors, or the customers themselves. This considers the complexity, skill and training needed as well as customer expectations regarding installation. We enter into arrangements with multiple performance obligations that arise during the sale of a system that includes an installation component, a service and support component and a software maintenance component. The transaction price is allocated to the separate performance obligations on relative standalone sales price. We allocate the transaction price of each element based on relative selling prices. Relative selling price is based on the selling price of the standalone system. For the installation and service and support performance obligations, we use the value of the discount given to distributors who perform these components. For software maintenance performance obligations, we use what we charge for annual software maintenance renewals after the initial year the system is sold. Revenue is recognized on the system sale based on shipping terms, installation revenue is recognized after the installation is performed, and hardware service and support and software maintenance revenue is recognized ratably over the term of the agreement, typically one year. Deferred revenue includes service, support and maintenance contracts and represents the undelivered performance obligation of agreements that are typically for one year. When we sell software separately, we recognize revenue upon the transfer of control of the software, which is generally upon shipment, provided that only inconsequential performance obligations remain on our part and substantive acceptance conditions, if any, have been met. We recognize revenue when there is an approved contract that both parties are committed to perform, both parties’ rights have been identified, the contract has substance, collection of substantially all the consideration is probable, the transaction price has been determined and allocated over the performance obligations, the performance obligations including substantive acceptance conditions, if any, in the contract have been met, the obligation is not contingent on resale of the product, the buyer’s obligation would not be changed in the event of theft, physical destruction or damage to the product, the buyer acquiring the product for resale has economic substance apart from us and we do not have significant obligations for future performance to directly bring about the resale of the product by the buyer. We establish a reserve for sales returns based on historical trends in product returns and estimates for new items. Payment terms are generally 30 days from shipment. We transfer certain products out of service from their internal use and make them available for sale. The products transferred are typically our standard products in one of the following areas: service loaners, rental or test units; engineering test units; or sales demonstration equipment. Once transferred, the equipment is sold by our regular sales channels as used equipment inventory. These product units often involve refurbishing and an equipment warranty, and are conducted as sales in our normal and ordinary course of business. The transfer amount is the product unit’s net book value and the sale transaction is accounted for as revenue and cost of goods sold. The following table represents our revenues by major categories: Three Months Ended Six Months Ended Net sales by type June 30, Change June 30, June 30, Change June 30, (in thousands) Equipment Sales $ 2,476 (30.0%) $ 3,537 $ 5,063 (30.1%) $ 7,247 Adapter Sales 1,324 (6.8%) 1,421 2,669 (7.4%) 2,882 Software and Maintenance Sales 855 (2.4%) 876 1,708 (3.1%) 1,763 Total $ 4,655 (20.2%) $ 5,834 $ 9,440 (20.6%) $ 11,892
Share-Based Compensation	All stock-based compensation awards are measured based on estimated fair values on the date of grant and recognized as compensation expense on the straight-line single-option method. Our share-based compensation is reduced for estimated forfeitures at the time of grant and revised as necessary in subsequent periods if actual forfeitures differ from those estimates.
Income Tax	Income taxes are computed at current enacted tax rates, less tax credits using the asset and liability method. Deferred taxes are adjusted both for items that do not have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, and any changes in the valuation allowance caused by a change in judgment about the realization of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized. The CARES Act, enacted in Q1 2020, accelerated the AMT credit refund of $640,000 to be a current asset instead of non-current.
Recently Adopted Accounting Pronouncements	None.

NOTE 1 - FINANCIAL STATEMENT _3

NOTE 1 - FINANCIAL STATEMENT PREPARATION (Tables)	6 Months Ended
	Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Disaggregation of revenue	Three Months Ended Six Months Ended Net sales by type June 30, Change June 30, June 30, Change June 30, (in thousands) Equipment Sales $ 2,476 (30.0%) $ 3,537 $ 5,063 (30.1%) $ 7,247 Adapter Sales 1,324 (6.8%) 1,421 2,669 (7.4%) 2,882 Software and Maintenance Sales 855 (2.4%) 876 1,708 (3.1%) 1,763 Total $ 4,655 (20.2%) $ 5,834 $ 9,440 (20.6%) $ 11,892

NOTE 2 - INVENTORIES (Tables)

NOTE 2 - INVENTORIES (Tables)	6 Months Ended
	Jun. 30, 2020
Inventory Disclosure [Abstract]
Inventories	June 30, December 31, (in thousands) Raw material $ 2,122 $ 2,416 Work-in-process 1,667 1,832 Finished goods 942 772 Inventories $ 4,731 $ 5,020

NOTE 3 - PROPERTY, PLANT AND _2

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET (Tables)	6 Months Ended
	Jun. 30, 2020
Property, Plant and Equipment [Abstract]
Property, plant, and equipment, net	June 30, December 31, (in thousands) Leasehold improvements $ 390 $ 395 Equipment 5,666 5,606 Sales demonstration equipment 905 778 6,961 6,779 Less accumulated depreciation 5,359 5,111 Property and equipment, net $ 1,602 $ 1,668

NOTE 4 - OTHER ACCRUED LIABIL_2

NOTE 4 - OTHER ACCRUED LIABILITIES (Tables)	6 Months Ended
	Jun. 30, 2020
Accrued Liabilities [Abstract]
Other accrued liabilities	June 30, December 31, (in thousands) Lease liability - short term $ 692 $ 678 Product warranty 341 367 Sales return reserve 67 77 Other taxes 98 126 Other 61 124 Other accrued liabilities $ 1,259 $ 1,372
Product warranty liability	June 30, (in thousands) Liability, beginning balance $ 367 Net expenses 341 Warranty claims (341 ) Accrual revisions (26 ) Liability, ending balance $ 341

NOTE 5 - LEASES (Tables)

NOTE 5 - LEASES (Tables)	6 Months Ended
	Jun. 30, 2020
Leases [Abstract]
Operating lease commitments	Operating (in thousands) 2020 (remaining) $ 381 2021 711 2022 317 2023 91 2024 83 Thereafter 141 Total $ 1,724 Less Imputed interest (198 ) Total operating lease liabilities $ 1,526
Supplemental balance sheet information related to leases	Balance at June 30, 2020 Balance at December 31, 2019 (in thousands) Right-of-use assets (Long-term other assets) $ 1,297 $ 1,574 Lease liability-short term (Other accrued liabilities) 692 678 Lease liability-long term (Long-term other payables) 834 1,178

NOTE 8 - EARNINGS PER SHARE (Ta

NOTE 8 - EARNINGS PER SHARE (Tables)	6 Months Ended
	Jun. 30, 2020
Earnings Per Share [Abstract]
Earnings per share	Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, (in thousands except per share data) Numerator for basic and diluted earnings (loss) per share: Net income (loss) $ (1,057 ) $ 127 $ (1,611 ) $ 153 Denominator for basic earnings (loss) per share: Weighted-average shares 8,302 8,257 8,261 8,280 Employee stock options and awards 46 75 51 95 Denominator for diluted earnings (loss) per share: Adjusted weighted-average shares & assumed conversions of stock options 8,348 8,332 8,312 8,375 Basic and diluted earnings (loss) per share: Total basic earnings (loss) per share $ (0.13 ) $ 0.02 $ (0.19 ) $ 0.02 Total diluted earnings (loss) per share $ (0.13 ) $ 0.02 $ (0.19 ) $ 0.02

NOTE 9 - SHARE-BASED COMPENSA_2

NOTE 9 - SHARE-BASED COMPENSATION (Tables)	6 Months Ended
	Jun. 30, 2020
Share-based Payment Arrangement, Noncash Expense [Abstract]
Impact on operations of recording share-based compensation	Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, (in thousands) Cost of goods sold $ 15 $ 10 $ 21 $ 16 Research and development 132 103 196 166 Selling, general and administrative 334 251 513 469 Total share-based compensation $ 481 $ 364 $ 730 $ 651
Equity award activity	Three Months Ended Six Months Ended June 30, June 30, June 30, June 30, Restricted Stock Units 376,200 276,700 376,200 276,700 Stock Options — 25,000 — 25,000
Future equity compensation expense	June 30, Unamortized future equity compensation expense (in thousands) $ 2,731 Remaining weighted average amortization period (in years) 2.63

NOTE 1 - FINANCIAL STATEMENT _4

NOTE 1 - FINANCIAL STATEMENT PREPARATION (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Revenues	$ 4,655	$ 5,834	$ 9,440	$ 11,892
Change in revenue	(20.20%)		(20.60%)
Equipment Sales
Revenues	$ 2,476	3,537	$ 5,063	7,247
Change in revenue	(30.00%)		(30.10%)
Adapter Sales
Revenues	$ 1,324	1,421	$ 2,669	2,882
Change in revenue	(6.80%)		(7.40%)
Software and Maintenance
Revenues	$ 855	$ 876	$ 1,708	$ 1,763
Change in revenue	(2.40%)		(3.10%)

NOTE 2 - INVENTORIES (Details)

NOTE 2 - INVENTORIES (Details) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Raw material	$ 2,122	$ 2,416
Work-in-process	1,667	1,832
Finished goods	942	772
Inventories	$ 4,731	$ 5,020

NOTE 3 - PROPERTY, PLANT AND _3

NOTE 3 - PROPERTY, PLANT AND EQUIPMENT, NET (Details) (in thousands) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Property, Plant and Equipment [Abstract]
Leasehold improvements	$ 390	$ 395
Equipment	5,666	5,606
Sale demonstration equipment	905	778
Property and equipment gross	6,961	6,779
Less accumulated depreciation	5,359	5,111
Property and equipment, net	$ 1,602	$ 1,668

NOTE 4 - OTHER ACCRUED LIABIL_3

NOTE 4 - OTHER ACCRUED LIABILITIES (Details) (in thousands) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Accrued Liabilities [Abstract]
Lease liability - short term	$ 692	$ 678
Product warranty	341	367
Sales return reserve	67	77
Other taxes	98	126
Other	61	124
Other accrued liabilities	$ 1,259	$ 1,372

NOTE 4 - OTHER ACCRUED LIABIL_4

NOTE 4 - OTHER ACCRUED LIABILITIES (Details 1) (in thousands) $ in Thousands	6 Months Ended
	Jun. 30, 2020USD ($)
Accrued Liabilities [Abstract]
Liability, beginning balance	$ 367
Net expenses	341
Warranty claims	(341)
Accrual revisions	(26)
Liability, ending balance	$ 341

NOTE 5 - LEASES (Details) (in t

NOTE 5 - LEASES (Details) (in thousands) $ in Thousands	Jun. 30, 2020USD ($)
Leases [Abstract]
2020 (remaining)	$ 381
2021	711
2022	317
2023	91
2024	83
Thereafter	141
Total	1,724
Less: imputed interest	(198)
Total operating lease liability	$ 1,526

NOTE 5 - LEASES (Details 1) (in

NOTE 5 - LEASES (Details 1) (in thousands) - USD ($) $ in Thousands	Jun. 30, 2020	Dec. 31, 2019
Leases [Abstract]
Right-of-use assets (Long-term other assets)	$ 1,297	$ 1,574
Lease liability-short term (Other accrued liabilities)	692	678
Lease liability-long term (Long-term other payables)	$ 834	$ 1,178

NOTE 5 - LEASES (Details Narrat

NOTE 5 - LEASES (Details Narrative) (in thousands) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2020USD ($)	Jun. 30, 2020USD ($)
Leases [Abstract]
Cash paid for operating lease liabilities	$ 189	$ 374
Weighted average remaining lease term	3 years 29 days	3 years 29 days
Weighted average discount rate	5.00%	5.00%
Operating lease costs	$ 164	$ 326
Short-term lease costs	$ 8	$ 16

NOTE 6 - OTHER COMMITMENTS (Det

NOTE 6 - OTHER COMMITMENTS (Details Narrative) $ in Thousands	Jun. 30, 2020USD ($)
Commitments and Contingencies Disclosure [Abstract]
Purchase and other obligations	$ 1,200
After 2019	$ 228

NOTE 8 - EARNINGS PER SHARE (In

NOTE 8 - EARNINGS PER SHARE (In thousands, except per share data) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2020	Mar. 31, 2020	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Abstract]
Numerator for basic and diluted earnings per share: Net income (loss)	$ (1,057)	$ (554)	$ 127	$ 26	$ (1,611)	$ 153
Denominator for basic earnings per share: weighted average shares (in thousands)	8,302		8,257		8,261	8,280
Employee stock options and awards (in thousands)	46		75		51	95
Denominator for diluted earnings per share: adjusted weighted-average shares and assumed conversions of stock options (in thousands)	8,348		8,332		8,312	8,375
Total basic earnings (loss) per share	$ (0.13)		$ 0.02		$ (0.19)	$ 0.02
Total diluted earnings (loss) per share	$ (0.13)		$ 0.02		$ (0.19)	$ 0.02

NOTE 8 - EARNINGS PER SHARE (De

NOTE 8 - EARNINGS PER SHARE (Details Narrative) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Earnings Per Share [Abstract]
Anti dilutive options to purchase shares	25,000	35,422	25,000	30,240

NOTE 9 - SHARE-BASED COMPENSA_3

NOTE 9 - SHARE-BASED COMPENSATION (Details) (in thousands, except per share data) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Total share-based compensation	$ 481	$ 364	$ 730	$ 651
Cost of Goods Sold
Total share-based compensation	15	10	21	16
Research and Development
Total share-based compensation	132	103	196	166
Selling, General and Administrative
Total share-based compensation	$ 334	$ 251	$ 513	$ 469

NOTE 9 - SHARE-BASED COMPENSA_4

NOTE 9 - SHARE-BASED COMPENSATION (Details 1) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2020	Jun. 30, 2019	Jun. 30, 2020	Jun. 30, 2019
Share-based Payment Arrangement, Noncash Expense [Abstract]
Restricted stock units	376,200	276,700	376,200	276,700
Stock options	0	25,000	0	25,000

NOTE 9 - SHARE-BASED COMPENSA_5

NOTE 9 - SHARE-BASED COMPENSATION (Details 2) $ in Thousands	6 Months Ended
	Jun. 30, 2020USD ($)
Share-based Payment Arrangement, Noncash Expense [Abstract]
Unamortized future equity compensation expense	$ 2,731
Remaining weighted average amortization period	2 years 7 months 17 days