DATA I/O CORP 10-Q

Item 1. Financial Statements DATA I/O CORPORATION CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (UNAUDITED) September 30, 2021 December 31, 2020 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 14,241 $ 14,167 Trade accounts receivable, net of allowance for doubtful accounts of $ 84 and $ 66 , respectively 4,051 2,494 Inventories 6,050 5,270 Other current assets 518 1,319 TOTAL CURRENT ASSETS 24,860 23,250 Property, plant and equipment – net 940 1,216 Other assets 1,454 1,126 TOTAL ASSETS $ 27,254 $ 25,592 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 1,527 $ 1,245 Accrued compensation 2,206 1,509 Deferred revenue 1,223 1,068 Other accrued liabilities 1,281 1,307 Income taxes payable 141 62 TOTAL CURRENT LIABILITIES 6,378 5,191 Operating lease liabilities 942 588 Long-term other payables 221 174 COMMITMENTS - - STOCKHOLDERS’ EQUITY Preferred stock - Authorized, 5,000,000 shares, including 200,000 shares of Series A Junior Participating Issued and outstanding, none - - Common stock, at stated value - Authorized, 30,000,000 shares Issued and outstanding, 8,621,007 shares as of September 30, 2021 and 8,416,335 shares as of December 31, 2020 20,608 20,071 Accumulated earnings (deficit) ( 1,806 ) ( 1,456 ) Accumulated other comprehensive income (loss) 911 1,024 TOTAL STOCKHOLDERS’ EQUITY 19,713 19,639 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 27,254 $ 25,592 See notes to consolidated financial statements 3 Table of Contents DATA I/O CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net sales $ 6,730 $ 5,947 $ 19,478 $ 15,387 Cost of goods sold 2,642 2,670 8,215 6,887 Gross margin 4,088 3,277 11,263 8,500 Operating expenses: Research and development 1,730 1,567 5,009 4,763 Selling, general and administrative 2,216 1,810 6,332 5,324 Total operating expenses 3,946 3,377 11,341 10,087 Operating income (loss) 142 ( 100 ) ( 78 ) ( 1,587 ) Non-operating income: Interest income 8 4 11 13 Foreign currency transaction gain (loss) ( 26 ) ( 271 ) ( 64 ) ( 302 ) Total non-operating income (loss) ( 18 ) ( 267 ) ( 53 ) ( 289 ) Income (loss) before income taxes 124 ( 367 ) ( 131 ) ( 1,876 ) Income tax (expense) benefit ( 112 ) ( 340 ) ( 219 ) ( 442 ) Net income (loss) $ 12 ($ 707 ) ($ 350 ) ($ 2,318 ) Basic earnings (loss) per share $ 0.00 ($ 0.09 ) ($ 0.04 ) ($ 0.28 ) Diluted earnings (loss) per share $ 0.00 ($ 0.09 ) ($ 0.04 ) ($ 0.28 ) Weighted-average basic shares 8,621 8,394 8,519 8,305 Weighted-average diluted shares 8,760 8,394 8,519 8,305 See notes to consolidated financial statements 4 Table of Contents DATA I/O CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, 2021 2020 2021 2020 Net income (loss) $ 12 ($ 707 ) ($ 350 ) ($ 2,318 ) Other comprehensive income (loss): Foreign currency translation gain (loss) ( 85 ) 482 ( 113 ) 302 Comprehensive income (loss) ($ 73 ) ($ 225 ) ($ 463 ) ($ 2,016 ) See notes to consolidated financial statements 5 Table of Contents DATA I/O CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands, except share amounts) (UNAUDITED) Accumulated Retained and Other Total Common Stock Earnings Comprehensive Stockholders' Shares Amount (Deficit) Income (Loss) Equity Balance at December 31, 2019 8,212,748 $ 18,748 $ 2,508 $ 274 $ 21,530 Stock awards issued, net of tax withheld 5,190 ( 10 ) - - ( 10 ) Issuance of stock through: ESPP 3,509 14 - - 14 Share-based compensation - 249 - - 249 Net income (loss) - - ( 554 ) - ( 554 ) Other comprehensive income (loss) - - - ( 265 ) ( 265 ) Balance at March 31, 2020 8,221,447 $ 19,001 $ 1,954 $ 9 $ 20,964 Stock awards issued, net of tax withheld 169,496 ( 163 ) - - ( 163 ) Issuance of stock through: ESPP - - - - - Share-based compensation - 481 - - 481 Net income (loss) - - ( 1,057 ) - ( 1,057 ) Other comprehensive income (loss) - - - 85 85 Balance at June 30, 2020 8,390,943 19,319 897 94 20,310 Stock awards issued, net of tax withheld 4,657 15 - - 15 Issuance of stock through: ESPP - - - - - Share-based compensation - 366 - - 366 Net income (loss) - - ( 707 ) - ( 707 ) Other comprehensive income (loss) - - - 482 482 Balance at September 30, 2020 8,395,600 19,700 190 576 20,466 Balance at December 31, 2020 8,416,335 $ 20,071 ($ 1,456 ) $ 1,024 $ 19,639 Stock awards issued, net of tax withheld 2,089 ( 4 ) - - ( 4 ) Issuance of stock through: ESPP 3,175 16 - - 16 Share-based compensation - 278 - - 278 Net income (loss) - - ( 333 ) - ( 333 ) Other comprehensive income (loss) - - - ( 180 ) ( 180 ) Balance at March 31, 2021 8,421,599 $ 20,361 ($ 1,789 ) $ 844 $ 19,416 Stock awards issued, net of tax withheld 197,923 ( 442 ) - - ( 442 ) Issuance of stock through: ESPP - - - - - Share-based compensation - 401 - - 401 Net income (loss) - - ( 29 ) - ( 29 ) Other comprehensive income (loss) - - - 152 152 Balance at June 30, 2021 8,619,522 $ 20,320 ($ 1,818 ) $ 996 $ 19,498 Stock awards issued, net of tax withheld 176 - - - - Issuance of stock through: ESPP 1,309 8 - - 8 Share-based compensation - 280 - - 280 Net income (loss) - - 12 - 12 Other comprehensive income (loss) - - - ( 85 ) ( 85 ) Balance at September 30, 2021 8,621,007 $ 20,608 ($ 1,806 ) $ 911 $ 19,713 See notes to consolidated financial statements 6 Table of Contents CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (UNAUDITED) For the Nine Months Ended September 30, 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) ($ 350 ) ($ 2,318 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 516 620 Equipment transferred to cost of goods sold 121 186 Share-based compensation 961 1,096 Net change in: Trade accounts receivable ( 1,601 ) 18 Inventories ( 465 ) 11 Other current assets 800 ( 140 ) Accounts payable and accrued liabilities 897 477 Deferred revenue 228 ( 352 ) Other long-term liabilities ( 287 ) ( 1,014 ) Deposits and other long-term assets 443 1,074 Net cash provided by (used in) operating activities 1,263 ( 342 ) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment ( 361 ) ( 654 ) Cash provided by (used in) investing activities ( 361 ) ( 654 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock, less payments for shares withheld to cover tax ( 424 ) ( 144 ) Cash provided by (used in) financing activities ( 424 ) ( 144 ) Increase (decrease) in cash and cash equivalents 478 ( 1,140 ) Effects of exchange rate changes on cash ( 404 ) 186 Cash and cash equivalents at beginning of period 14,167 13,936 Cash and cash equivalents at end of period $ 14,241 $ 12,982 Supplemental disclosure of cash flow information: Cash paid during the period for: Income taxes ($ 463 ) $ 338 See notes to consolidated financial statements 7 Table of Contents DATA I/O CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - FINANCIAL STATEMENT PREPARATION Data I/O Corporation (“Data I/O”, “We”, “Our”, “Us”) prepared the financial statements as of September 30, 2021 and September 30, 2020 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, 2020 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 nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. 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, 2020. 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 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 2021 and 2020, the impact of capitalization of incremental costs for obtaining contracts was immaterial. We 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. 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. 8 Table of Contents 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 Nine Months Ended Net sales by type September 30, 2021 Change September 30, 2020 September 30, 2021 Change September 30, 2020 (in thousands) Equipment $ 4,077 5.6 % $ 3,861 $ 11,554 29.5 % $ 8,924 Adapter 1,901 52.6 % 1,246 5,751 46.9 % 3,915 Software and Maintenance 752 ( 10.5 %) 840 2,173 ( 14.7 %) 2,548 Total $ 6,730 13.2 % $ 5,947 $ 19,478 26.6 % $ 15,387 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 , which was previously carried as a current asset and was received in September, 2021. 9 Table of Contents COVID-19 In 2021, we have continued to react to and manage our business relative to the COVID-19 pandemic. During 2020, COVID-19 had impacted all aspects of our business, from customer demand, to supply chain integrity, employee safety, business processes, and financial management. As a global company, we had to manage each of these while working within the guidelines of local and national policy in the U.S., China and Germany. Our philosophy at the start of the outbreak was simple: 1. Keep our people and their families safe; 2. Keep our facilities safe and operational while we serve our customers as an essential business; and 3. Preserve cash. We have managed the COVID-19 impact successfully to date, with no known employee transmissions in the workplace and significant preservation of our cash and working capital. Our resilient supply chain model kept our facilities in Shanghai, China and Redmond, Washington open, and serving customers globally. We face continued international travel restrictions, shipping delays, and inability to meet with customers in person. As business has recovered we have been able to respond by having the working capital needed and the workforce in place. In the second quarter, we experienced a surge of demand as customers resumed operations and adding capacity. The backlog created by the surge resulted in the revenue growth in the third quarter. In supply chains around the world with the re-openings and now, in a believed ripple effect, factories are experiencing the impact of chip shortages on their production plans. This appears to be a shorter-term issue and the outlook by industry analysts for automotive electronics remains strong for a decade. Waves of COVID-19 infection rates and variants have kept or re-imposed revised travel restrictions. Customers largely have not permitted in-person sales and other visits. Converting these interactions to remote and virtual means has meant implementing new processes and technology. In production, in addition to adding protective health measures for our employees, we have focused on supply chain resilience and duplicating production capability for some products in both our Shanghai, China and Redmond, USA facilities. We implemented additional supplier financial and other monitoring, as well as adding additional local suppliers and increasing inventory stock levels of key parts. Other than production employees who necessarily are onsite, most other Redmond employees are working remotely with hybrid flexibility to be onsite as desired or needed and this is expected to continue through year-end. China employees are generally onsite. We believe our exposure to COVID-19 risks are reduced by vaccination coverage, which is 98% in Redmond with our China and Germany facilities not far behind. New Accounting Pronouncements In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-13, "Measurement of Credit Losses on Financial Instruments," which amends the impairment model by requiring entities to use a forward-looking approach based on expected losses rather than incurred losses to estimate credit losses on certain types of financial instruments. We are planning to adopt the standard effective for years after December 15, 2022 and do not expect this to have a material impact on our financial statements. NOTE 2 – INVENTORIES Inventories consisted of the following components: September 30, 2021 December 31, 2020 (in thousands) Raw material $ 3,743 $ 3,143 Work-in-process 1,412 1,204 Finished goods 895 923 Inventories $ 6,050 $ 5,270 10 Table of Contents NOTE 3 – PROPERTY, PLANT AND EQUIPMENT, NET Property and equipment consisted of the following components: September 30, 2021 December 31, 2020 (in thousands) Leasehold improvements $ 425 $ 421 Equipment 5,637 5,625 Sales demonstration equipment 767 963 6,829 7,009 Less accumulated depreciation 5,889 5,793 Property and equipment, net $ 940 $ 1,216 NOTE 4 – OTHER ACCRUED LIABILITIES Other accrued liabilities consisted of the following components: September 30, 2021 December 31, 2020 (in thousands) Lease liability - short term $ 556 $ 673 Product warranty 416 371 Sales return reserve 71 61 Other taxes 153 109 Other 85 93 Other accrued liabilities $ 1,281 $ 1,307 The changes in our product warranty liability for the nine months ending September 30, 2021 are as follows: September 30, 2021 (in thousands) Liability, beginning balance $ 371 Net expenses 621 Warranty claims ( 621 ) Accrual revisions 45 Liability, ending balance $ 416 11 Table of Contents 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 September 30, 2021: Operating Lease Commitments (in thousands) 2021 (remaining) $ 236 2022 682 2023 433 2024 371 2025 65 Thereafter 80 Total $ 1,867 Less Imputed interest ( 369 ) Total operating lease liabilities $ 1,498 Cash paid for operating lease liabilities for the three and nine months ended September 30, 2021 was $ 203,000 and $ 605,000 , respectively. There were three new operating leases during the nine months ended September 30, 2021. Cash paid for operating lease liabilities for the three and nine months ended September 30, 2020 was $ 194,000 and $ 568,000 , respectively. The following table presents supplemental balance sheet information related to leases: Balance at September 30, 2021 Balance at December 31, 2020 (in thousands) Right-of-use assets (Long-term other assets) $ 1,409 $ 1,081 Lease liability-short term (Other accrued liabilities) 556 673 Lease liability-long term (Operating lease liabilities) 942 588 At September 30, 2021, the weighted average remaining lease term is 2.90 years and the weighted average discount rate used is 5 %. The components of our lease expense for the three and nine months ended September 30, 2021 include operating lease costs of $ 172,000 and $ 515,000 , respectively, and short-term lease costs of $ 7,000 and $ 22,000 , respectively. The components of our lease expense for the three and nine months ended September 30, 2020 include operating lease costs of $ 168,000 and $ 494,000 , respectively, and short-term lease costs of $ 9,000 and $ 26,000 , respectively. Our lease for the Redmond, Washington headquarters facility ran through July 31, 2022. On October 4, 2021, we signed a lease amendment effective August 1, 2022 extending the lease to January 31, 2026 . This lease is for approximately 20,460 square feet. Our lease for a facility located in Shanghai, China ran through October 31, 2021. In April 2021, we signed a lease extension effective November 1, 2021 that extends the lease through October 31, 2024 . This lease is for approximately 19,400 square feet. 12 Table of Contents Our lease near Munich, Germany runs through February 28, 2022 with a five year extension available. This lease is for approximately 4,895 square feet. 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 September 30, 2021, the purchase commitments and other obligations totaled $ 2.1 million of which all but $ 58,000 are expected to be paid over the next twelve months. NOTE 7 – CONTINGENCIES As of September 30, 2021, 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 – INCOME TAXES Income tax benefit (expense) for the third quarter of both 2021 and 2020, primarily related to foreign and state taxes. The effective tax rate differed from the statutory tax rate primarily due to the effect of valuation allowances, as well as foreign taxes. We have a valuation allowance of $ 8.0 million as of September 30, 2021. As of September 30, for both 2021 and 2020, our deferred tax assets and valuation allowance have been reduced by approximately $ 381,000 and $ 370,000 , respectively, associated with the requirements of accounting for uncertain tax positions. Given the uncertainty created by our loss history, as well as the volatile and uncertain economic outlook for our industry and capital spending, we have limited the recognition of net deferred tax assets including our net operating losses and credit carryforwards and continue to maintain a valuation allowance for the full amount of the net deferred tax asset balance. NOTE 9 – 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. 13 Table of Contents The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (in thousands except per share data) Numerator for basic and diluted earnings (loss) per share: Net income (loss) $ 12 ($ 707 ) ($ 350 ) ($ 2,318 ) Denominator for basic earnings (loss) per share: Weighted-average shares 8,621 8,394 8,519 8,305 Employee stock options and awards 139 69 - 57 Denominator for diluted earnings (loss) per share: Adjusted weighted-average shares & assumed conversions of stock options 8,760 8,463 8,519 8,362 Basic and diluted earnings (loss) per share: Basic earnings (loss) per share $ 0.00 ($ 0.09 ) ($ 0.04 ) ($ 0.28 ) Diluted earnings (loss) per share $ 0.00 ($ 0.09 ) ($ 0.04 ) ($ 0.28 ) Weighted average options to purchase 12,500 shares for the three month period ending September 30, 2021 were excluded from the computation of diluted earnings per share as the options were anti-dilutive. Other periods presented are net loss, and thus weighted average options to purchase anti-dilutive shares were excluded from the diluted earnings per share for those periods. For the nine months ending September 30, 2021, there were 20,421 weighted average options to purchase anti-dilutive share. For both the three and nine months ending September 30, 2020, there were 25,000 weighted average options to purchase anti-dilutive shares. NOTE 10 – 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 nine months ended September 30, 2021 and 2020, respectively, were as follows: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 (in thousands) Cost of goods sold $ 16 $ 12 $ 42 $ 33 Research and development 66 87 238 283 Selling, general and administrative 198 267 680 780 Total share-based compensation $ 280 $ 366 $ 960 $ 1,096 14 Table of Contents Equity awards granted during the three and nine months ended September 30, 2021 and 2020 were as follows: Three Months Ended Nine Months Ended September 30, 2021 September 30, 2020 September 30, 2021 September 30, 2020 Restricted Stock Units 1,000 - 257,400 376,200 Stock Options - - - - Non-employee directors Restricted Stock Units (“RSUs”) vest over one year and options vest over three years and have a six-year exercise period. Employee RSUs 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 September 30, 2021 are: September 30, 2021 Unamortized future equity compensation expense (in thousands) $ 2,570 Remaining weighted average amortization period (in years) 2.75 NOTE 11 – SUBSEQUENT EVENTS The Company has evaluated events through November 12, 2021, the date the condensed consolidated financial statements were available to be issued. 15 Table of Contents