common stock equivalents are not included in the diluted earnings per share calculation when their effect is antidilutive . revenue recognition and accounts receivable reserves on january 1 , 2017 , we adopted asc 606 “ revenue from contracts with customers ” and implemented a new revenue recognition policy . previously we deferred 100 % of revenue and cost of revenue until products are sold by distributors . under the new policy , we recognize revenue on sales to distributors when shipping of product is completed and title transfers to the distributor , less a reserve for estimated product returns ( sales and cost of sales ) . the reserves are based on estimates of future returns calculated from actual return history , primarily from stock rotations , plus knowledge of pending returns outside of the norm . at december 31 , 2020 , the deferred revenue and deferred cost on shipments to distributors were approximately $ 451,000 and $ 170,000 , respectively , compared to approximately $ 611,000 and $ 234,000 , respectively , at december 31 , 2019. we generally recognize revenues on sales to customers other than distributors upon shipment provided that contract with the customer is identified , performance obligations in the contract are satisfied , and the price is determined . most of our customers other than distributors do not have rights of return except under warranty . we earn revenue from an extended warranty service program offered on select products . revenues from the extended warranty service program are recognized ratably over the life of the extended warranty contract . the amount of unrecognized warranty service revenue is classified as deferred service revenue and presented on our balance sheet in its short and long-term components . we also earn revenue from services performed in connection with consulting and engineering development arrangements . for those contracts that include contract milestones or acceptance criteria we recognize revenue as such milestones are achieved or as such acceptance occurs . in some instances , the acceptance criteria in the contract requires acceptance after all services are complete and all other elements have been delivered , in which case revenue recognition is deferred until those requirements are met . we estimate the amount of uncollectible receivables at the end of each reporting period based on the aging of the receivable balance , historical trends , and communications with our customers . if actual bad debts are significantly different from our estimates our operating results will be affected . inventory valuation our inventories primarily consist of component parts used to assemble our products after we receive orders from our customers . we purchase or have manufactured the component parts required by our engineering bill of materials . the timing and quantity of our purchases are based on order forecasts , the lead time requirements of our vendors , and on economic order quantities . at the end of each reporting period , we compare our inventory on hand to our forecasted requirements for the next nine-month period and reserve the cost of any inventory that is a surplus , less any amounts that we believe we can recover from disposal of goods or that we specifically believe will be saleable past a nine-month horizon . our sales forecasts are based upon historical trends , communications from customers , and marketing data regarding market trends and dynamics . surplus or obsolete inventory can also be created by changes to our engineering bill of materials . charges for the amounts we record as surplus or obsolete inventory are included in cost of revenue . 23 stock-based compensation we account for share-based awards to employees , including grants of employee stock options and restricted stocks , in our financial statements based on the grant date fair values of the share-based awards . we use a binomial lattice valuation model to estimate the fair value of stock option grants . the binomial lattice model incorporates calculations for expected volatility , risk-free interest rates , employee exercise patterns and post-vesting employment termination behavior , and these factors affect the estimate of the fair value of the stock option grants . valuation of goodwill in january 2017 , the financial accounting standards board ( “ fasb ” ) issued accounting standards update ( “ asu ) 2017-04 , intangibles – goodwill and other ( topic 350 ) : simplifying the test for goodwill impairment . the amendments in this update eliminate step 2 from the goodwill impairment test . the annual , or interim , goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount . an impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit 's fair value ; however , the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit . in addition , income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss , if applicable . the company tests its goodwill for impairment annually as of september 30th or more frequently when events or circumstances indicate that the carrying value of the company 's single reporting unit more likely than not exceeds its fair value . as of september 30 , 2020 , the company experienced a triggering event due to a drop in its stock price , which had been negatively impacted by the economic downturn caused by covid-19 pandemic and performed a quantitative analysis for potential impairment of its goodwill . the company 's fair value measurement approach combines the income approach , which estimates fair value based upon projections of future revenues , expenses , and cash flows discounted to its present value , and market valuation technique . story_separator_special_tag the income valuation technique uses estimates and assumptions including the projected future cash flows , discount rate reflecting the risk attributable to the company , perpetual growth rate , and projected future economic and market conditions . under the market approach , the principal assumption included an estimate for a control premium . as a result of the analysis , the company determined the carrying value exceeded its fair value and recorded a non-cash goodwill impairment charge of $ 4,427,000 at september 30 , 2020. no income tax benefit related to this goodwill impairment charge is recorded at september 30 , 2020 . 24 results of operations for years ended december 31 , 2020 and 2019 revenues revenue for 2020 was $ 15.7 million , a decrease of 19 % compared to revenue of $ 19.3 million for 2019. although we saw positive momentum , which included sales growth during the second half of the year , the negative effects from the covid-19 global pandemic in the first half of 2020 were material to the company 's operating results . revenue of companion socketscan products represented 65 % of our revenue and decreased 9 % compared to 2019. our companion durascan products , which are weatherproof and ruggedized and primarily targeted at commercial , industrial , warehousing and outdoor application and their associated customers , represented about 17 % of revenue and decreased 28 % compared to 2019. we upgraded all our durascan products to support themed field-replaceable battery , increased the durability and added healthcare specific options . our attachable scanners , durasled and 800 series , made up of approximately 11 % of our 2020 revenue and decreased approximately 29 % compared to 2019. in 2020 , we expanded our support for apple devices , and now durasled supports iphone 6 , 7 , 8 , iphone x series , se 2020 , and the entire iphone 11 and 12 series . gross margins annual gross margins on revenue increased slightly to 53.1 % in 2020 from 52.5 % in 2019. the improvement in margins was primarily attributed to the reduction in manufacturing overhead , a cost-saving initiative implemented during the year . research and development expense research and development expenses in 2020 were approximately $ 3.1 million , a decrease of 19 % compared to expenses of approximately $ 3.9 million one year ago . decreases in the level of research and development expense was primarily due to a reduction in employee compensation , a short-term cost saving initiative implemented by the company to cope with covid-19 impacts . research and development expenses as a percentage of revenue were 20 % in 2020 and in 2019. we believe that a continued commitment to research and development activities is essential to maintain or achieve a leadership position for our existing products , to provide innovative new product offerings , and to provide engineering support for key customers . in addition , we consider our ability to accelerate time to market for new products to be critical to our revenue growth . therefore , we expect to continue to make significant research and development investments in the future . the investment percentage is impacted by revenue levels and investing cycles . sales and marketing expense sales and marketing expenses in 2020 were approximately $ 2.8 million , a decrease of approximately 6 % compared to $ 3.0 million in 2019. the decrease was primarily due to a reduction in employee compensation , a short-term cost saving initiative implemented by the company to cope with covid-19 impacts . general and administrative expense general and administrative expense in 2020 was $ 2.3 million , a decrease of 12 % compared to $ 2.6 million in 2019. the decrease was primarily due to a reduction in employee compensation , a short-term cost saving initiative implemented by the company to cope with covid-19 impacts . 25 interest expense , net of interest income interest expense and other , net of interest income and other , was approximately $ 97,000 in 2020 compared to approximately $ 101,000 in 2019. interest expense in 2020 were primarily related to the subordinated convertible notes to related parties and interest on bank term loan and credit line facilities . interest expense in 2019 was primarily related to interest on bank term loan and credit line facilities ( see “ note 2 — bank financing arrangements ” for more information ) . average total outstanding balance of bank term loan and credit lines during 2020 was $ 0.48 million , compared to $ 1.49 million during 2019. additionally , interest expense in each of the comparable periods includes interest on equipment lease financing obligations . interest income reflects interest earned on cash balances . interest income was nominal in each of the comparable periods , reflecting low average rates of return . income taxes in 2020 , the differences between the financial loss and taxable income included the goodwill impairment charge of $ 4.47 million and stock-based compensation of $ 0.51 million , partially offset by $ 1.06 million for ppp loan forgiveness , which arrived a federal taxable income of $ 0.29 million . the state taxable income , however , was $ 1.3 million due to the expenses on which the ppp loan proceeds were spent on are non-deductible in california . no deferred tax expense or benefit was recorded in 2020. in 2019 , our stock-based compensation of $ 519,891 is the primary permanent difference between financial and tax income , which increased our taxable income and the effective tax rate . we recorded a deferred tax expense of $ 274,000 in 2019 with the expectation of a return to profitable operating results and full utilization of our net operating loss carryforwards . our net operating loss carryforwards do not begin expiring until the end of 2023 if not used . our deferred tax asset , primarily representing future income tax savings from the application of

cash flows and contractual obligations as reflected in our statements of cash flows , net cash provided by operating activities in 2020 was $ 0.80 million , compared to $ 0.87 million in 2019. we calculate net cash provided by operating activities by reducing our net loss ( $ 3.3 million in 2020 ) or increasing our net income ( $ 0.3 million in 2019 ) by the expenses , such as our goodwill impairment charges in 2020 , stock-based compensation expense , depreciation , amortization of intangible assets , deferred tax expense , that did not require the use of cash , and by increasing our net loss by the ppp loan forgiveness in 2020. the net amounts were $ 4.48 million and $ 1.26 million in 2020 and 2019 , respectively . in addition , we report increases in assets and reductions in liabilities as uses of cash and decreases in assets and increases in liabilities as sources of cash , together referred to as changes in operating assets and liabilities . in 2020 , changes in operating assets and liabilities resulted in a net use of cash of $ 0.4 million which was primarily due to a decrease of accounts payable and accrued expenses as well as accrued payroll and related expenses , partially offset by decrease in accounts receivable due to reduced levels of shipments in the second half of q4 2020 compared to q4 2019. in 2019 , changes in operating assets and liabilities resulted in a


 Write a concise suspicious activity report of the following text delimited by triple backquotes. Return your response as a formal report which covers the key points highlighting the location,dates,entity names and account holder information in chronological order of the text.
     ```cash flows and contractual obligations as reflected in our statements of cash flows , net cash provided by operating activities in 2020 was $ 0.80 million , compared to $ 0.87 million in 2019. we calculate net cash provided by operating activities by reducing our net loss ( $ 3.3 million in 2020 ) or increasing our net income ( $ 0.3 million in 2019 ) by the expenses , such as our goodwill impairment charges in 2020 , stock-based compensation expense , depreciation , amortization of intangible assets , deferred tax expense , that did not require the use of cash , and by increasing our net loss by the ppp loan forgiveness in 2020. the net amounts were $ 4.48 million and $ 1.26 million in 2020 and 2019 , respectively . in addition , we report increases in assets and reductions in liabilities as uses of cash and decreases in assets and increases in liabilities as sources of cash , together referred to as changes in operating assets and liabilities . in 2020 , changes in operating assets and liabilities resulted in a net use of cash of $ 0.4 million which was primarily due to a decrease of accounts payable and accrued expenses as well as accrued payroll and related expenses , partially offset by decrease in accounts receivable due to reduced levels of shipments in the second half of q4 2020 compared to q4 2019. in 2019 , changes in operating assets and liabilities resulted in a
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 Suspicious Activity Report : common stock equivalents are not included in the diluted earnings per share calculation when their effect is antidilutive . revenue recognition and accounts receivable reserves on january 1 , 2017 , we adopted asc 606 “ revenue from contracts with customers ” and implemented a new revenue recognition policy . previously we deferred 100 % of revenue and cost of revenue until products are sold by distributors . under the new policy , we recognize revenue on sales to distributors when shipping of product is completed and title transfers to the distributor , less a reserve for estimated product returns ( sales and cost of sales ) . the reserves are based on estimates of future returns calculated from actual return history , primarily from stock rotations , plus knowledge of pending returns outside of the norm . at december 31 , 2020 , the deferred revenue and deferred cost on shipments to distributors were approximately $ 451,000 and $ 170,000 , respectively , compared to approximately $ 611,000 and $ 234,000 , respectively , at december 31 , 2019. we generally recognize revenues on sales to customers other than distributors upon shipment provided that contract with the customer is identified , performance obligations in the contract are satisfied , and the price is determined . most of our customers other than distributors do not have rights of return except under warranty . we earn revenue from an extended warranty service program offered on select products . revenues from the extended warranty service program are recognized ratably over the life of the extended warranty contract . the amount of unrecognized warranty service revenue is classified as deferred service revenue and presented on our balance sheet in its short and long-term components . we also earn revenue from services performed in connection with consulting and engineering development arrangements . for those contracts that include contract milestones or acceptance criteria we recognize revenue as such milestones are achieved or as such acceptance occurs . in some instances , the acceptance criteria in the contract requires acceptance after all services are complete and all other elements have been delivered , in which case revenue recognition is deferred until those requirements are met . we estimate the amount of uncollectible receivables at the end of each reporting period based on the aging of the receivable balance , historical trends , and communications with our customers . if actual bad debts are significantly different from our estimates our operating results will be affected . inventory valuation our inventories primarily consist of component parts used to assemble our products after we receive orders from our customers . we purchase or have manufactured the component parts required by our engineering bill of materials . the timing and quantity of our purchases are based on order forecasts , the lead time requirements of our vendors , and on economic order quantities . at the end of each reporting period , we compare our inventory on hand to our forecasted requirements for the next nine-month period and reserve the cost of any inventory that is a surplus , less any amounts that we believe we can recover from disposal of goods or that we specifically believe will be saleable past a nine-month horizon . our sales forecasts are based upon historical trends , communications from customers , and marketing data regarding market trends and dynamics . surplus or obsolete inventory can also be created by changes to our engineering bill of materials . charges for the amounts we record as surplus or obsolete inventory are included in cost of revenue . 23 stock-based compensation we account for share-based awards to employees , including grants of employee stock options and restricted stocks , in our financial statements based on the grant date fair values of the share-based awards . we use a binomial lattice valuation model to estimate the fair value of stock option grants . the binomial lattice model incorporates calculations for expected volatility , risk-free interest rates , employee exercise patterns and post-vesting employment termination behavior , and these factors affect the estimate of the fair value of the stock option grants . valuation of goodwill in january 2017 , the financial accounting standards board ( “ fasb ” ) issued accounting standards update ( “ asu ) 2017-04 , intangibles – goodwill and other ( topic 350 ) : simplifying the test for goodwill impairment . the amendments in this update eliminate step 2 from the goodwill impairment test . the annual , or interim , goodwill impairment test is performed by comparing the fair value of a reporting unit with its carrying amount . an impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit 's fair value ; however , the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit . in addition , income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit should be considered when measuring the goodwill impairment loss , if applicable . the company tests its goodwill for impairment annually as of september 30th or more frequently when events or circumstances indicate that the carrying value of the company 's single reporting unit more likely than not exceeds its fair value . as of september 30 , 2020 , the company experienced a triggering event due to a drop in its stock price , which had been negatively impacted by the economic downturn caused by covid-19 pandemic and performed a quantitative analysis for potential impairment of its goodwill . the company 's fair value measurement approach combines the income approach , which estimates fair value based upon projections of future revenues , expenses , and cash flows discounted to its present value , and market valuation technique . story_separator_special_tag the income valuation technique uses estimates and assumptions including the projected future cash flows , discount rate reflecting the risk attributable to the company , perpetual growth rate , and projected future economic and market conditions . under the market approach , the principal assumption included an estimate for a control premium . as a result of the analysis , the company determined the carrying value exceeded its fair value and recorded a non-cash goodwill impairment charge of $ 4,427,000 at september 30 , 2020. no income tax benefit related to this goodwill impairment charge is recorded at september 30 , 2020 . 24 results of operations for years ended december 31 , 2020 and 2019 revenues revenue for 2020 was $ 15.7 million , a decrease of 19 % compared to revenue of $ 19.3 million for 2019. although we saw positive momentum , which included sales growth during the second half of the year , the negative effects from the covid-19 global pandemic in the first half of 2020 were material to the company 's operating results . revenue of companion socketscan products represented 65 % of our revenue and decreased 9 % compared to 2019. our companion durascan products , which are weatherproof and ruggedized and primarily targeted at commercial , industrial , warehousing and outdoor application and their associated customers , represented about 17 % of revenue and decreased 28 % compared to 2019. we upgraded all our durascan products to support themed field-replaceable battery , increased the durability and added healthcare specific options . our attachable scanners , durasled and 800 series , made up of approximately 11 % of our 2020 revenue and decreased approximately 29 % compared to 2019. in 2020 , we expanded our support for apple devices , and now durasled supports iphone 6 , 7 , 8 , iphone x series , se 2020 , and the entire iphone 11 and 12 series . gross margins annual gross margins on revenue increased slightly to 53.1 % in 2020 from 52.5 % in 2019. the improvement in margins was primarily attributed to the reduction in manufacturing overhead , a cost-saving initiative implemented during the year . research and development expense research and development expenses in 2020 were approximately $ 3.1 million , a decrease of 19 % compared to expenses of approximately $ 3.9 million one year ago . decreases in the level of research and development expense was primarily due to a reduction in employee compensation , a short-term cost saving initiative implemented by the company to cope with covid-19 impacts . research and development expenses as a percentage of revenue were 20 % in 2020 and in 2019. we believe that a continued commitment to research and development activities is essential to maintain or achieve a leadership position for our existing products , to provide innovative new product offerings , and to provide engineering support for key customers . in addition , we consider our ability to accelerate time to market for new products to be critical to our revenue growth . therefore , we expect to continue to make significant research and development investments in the future . the investment percentage is impacted by revenue levels and investing cycles . sales and marketing expense sales and marketing expenses in 2020 were approximately $ 2.8 million , a decrease of approximately 6 % compared to $ 3.0 million in 2019. the decrease was primarily due to a reduction in employee compensation , a short-term cost saving initiative implemented by the company to cope with covid-19 impacts . general and administrative expense general and administrative expense in 2020 was $ 2.3 million , a decrease of 12 % compared to $ 2.6 million in 2019. the decrease was primarily due to a reduction in employee compensation , a short-term cost saving initiative implemented by the company to cope with covid-19 impacts . 25 interest expense , net of interest income interest expense and other , net of interest income and other , was approximately $ 97,000 in 2020 compared to approximately $ 101,000 in 2019. interest expense in 2020 were primarily related to the subordinated convertible notes to related parties and interest on bank term loan and credit line facilities . interest expense in 2019 was primarily related to interest on bank term loan and credit line facilities ( see “ note 2 — bank financing arrangements ” for more information ) . average total outstanding balance of bank term loan and credit lines during 2020 was $ 0.48 million , compared to $ 1.49 million during 2019. additionally , interest expense in each of the comparable periods includes interest on equipment lease financing obligations . interest income reflects interest earned on cash balances . interest income was nominal in each of the comparable periods , reflecting low average rates of return . income taxes in 2020 , the differences between the financial loss and taxable income included the goodwill impairment charge of $ 4.47 million and stock-based compensation of $ 0.51 million , partially offset by $ 1.06 million for ppp loan forgiveness , which arrived a federal taxable income of $ 0.29 million . the state taxable income , however , was $ 1.3 million due to the expenses on which the ppp loan proceeds were spent on are non-deductible in california . no deferred tax expense or benefit was recorded in 2020. in 2019 , our stock-based compensation of $ 519,891 is the primary permanent difference between financial and tax income , which increased our taxable income and the effective tax rate . we recorded a deferred tax expense of $ 274,000 in 2019 with the expectation of a return to profitable operating results and full utilization of our net operating loss carryforwards . our net operating loss carryforwards do not begin expiring until the end of 2023 if not used . our deferred tax asset , primarily representing future income tax savings from the application of

