Item 9A. Controls and Procedures
Item 9A. Controls and Procedures
(a) Evaluation of disclosure controls and procedures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective at the reasonable assurance level. Disclosure controls are controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls are also designed to ensure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
(b) Management’s Report on Internal Control Over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control systems are designed to provide reasonable assurance to the Company’s management and board of directors regarding reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting is defined in Rule 13a-15(f) promulgated under the Exchange Act and includes those policies and procedures that:
(i)
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;
(ii)
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
(iii)
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
All internal controls, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statements preparation and presentation.
Our management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013). Based on this assessment our Chief Executive Officer and Chief Financial Officer have concluded that, as of December 31, 2021, our internal control over financial reporting was effective.
This annual report does not include an attestation report of the company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the company’s registered public accounting firm pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permanently exempts smaller reporting companies from complying with Section 404(b) of the Sarbanes-Oxley Act of 2002.
(c) Changes in internal controls.
There were no changes made in our internal controls during the period covered by this report that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information regarding the Registrant’s directors is set forth under “Election of Directors” in our Proxy Statement relating to our annual meeting of shareholders to be held on May 19, 2022 and is incorporated herein by reference. Such Proxy Statement will be filed within 120 days of our year-end. Information regarding the Registrant’s executive officers is set forth in Item 1 of Part I herein under the caption “Executive Officers of the Registrant.”
Code of Ethics
We have adopted a Code of Ethics that applies to all directors, officers and employees of Data I/O, including the Chief Executive Officer and Chief Financial Officer. The key principles of the Code of Ethics are to act legally and with integrity in all work for Data I/O. The Code of Ethics is posted on the corporate governance page of our website:
http://www.dataio.com/Company/InvestorRelations/CorporateGovernance.aspx
We will post any amendments to our Code of Ethics on our website. In the unlikely event that the Board of Directors approves any sort of waiver to the Code of Ethics for our executive officers or directors, information concerning such waiver will also be posted on our website. In addition to posting information regarding amendments and waivers on our website, the same information will be included in a Current Report on Form 8-K within four business days following the date of the amendment or waiver, unless website posting of such amendments or waivers is permitted by NASDAQ’s rules.
Item 11. Executive Compensation
Information called for by Part III, Item 11, is included in our Proxy Statement relating to our annual meeting of shareholders to be held on May 19, 2022 and is incorporated herein by reference. The information appears in the Proxy Statement under the caption “Executive Compensation.” Such Proxy Statement will be filed within 120 days of our year-end.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information called for by Part III, Item 12, is included in our Proxy Statement relating to our annual meeting of shareholders to be held on May 19, 2022 and is incorporated herein by reference. The information appears in the Proxy Statement under the caption “Voting Securities and Principal Holders.” Such Proxy Statement will be filed within 120 days of our year end.
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Equity Compensation Plan Information
The following table gives information about our Common Stock that may be issued upon the exercise of options and rights under all of our existing equity compensation plans as of December 31, 2021. See Notes 9 and 10 of “Notes to Consolidated Financial Statements.”
(a) Number of securities to be issued upon the exercise of outstanding options, warrants and rights
(b) Weighted–average exercise price of outstanding options, warrants and rights
(c) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by the security holders (1) (2)
1,362
$ 4.75
730,753
Equity compensation plans not approved by the security holders (3)
12,500
$ 4.98
-
Total
13,862
$ 4.96
730,753
(1)
Represents shares of our Common Stock issuable pursuant to the Data I/O Corporation 2000 Stock Compensation Incentive Plan, 1982 Employee Stock Purchase Plan and 1996 Director Fee Plan. Table excludes unvested restricted stock awards of 598,777 from the 2000 Plan.
(2)
Stock Appreciation Rights Plan (“SAR”) provides that directors, executive officers or holders of 10% or more of our Common Stock have an accompanying SAR with respect to each exercisable option. While the plan has been approved by the security holders, no amounts are included in columns (a), (b), or (c) relating to the SAR.
(3)
Inducement grant to Michael Tidwell of 25,000 non-qualified stock options with 12,500 remaining unexercised. Table excludes 25,000 unvested 2019 restricted stock inducement grant to Michael Tidwell.
Item 13. Certain Relationships and Related Transactions , and Director Independence
The information required by this item is contained in, and incorporated by reference from, the Proxy Statement for our 2022 Annual Meeting of Shareholders under the caption “Certain Relationships and Related Transactions.”
Item 14. Principal Accounting Fees and Services
The information required by this Item with respect to principal accountant fees and services is incorporated by reference to the section captioned “Principal Accountant’s Fees and Services” in the Proxy Statement relating to our annual meeting of shareholders to be held on May 19, 2022. Such Proxy Statement will be filed within 120 days of our year-end.
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PART IV
Item 15. Exhibits, Financial Statement Schedules
Executive Compensation Plans and Arrangements
The following list is a subset of the list of exhibits described below and contains all compensatory plans, contracts or arrangements in which any director or executive officer of Data I/O is a participant, unless the method of allocation of benefits thereunder is the same for management and non-management participants:
(1)
Amended and Restated 1982 Employee Stock Purchase Plan. See Exhibit 10.5.
(2)
Data I/O Corporation Tax Deferral Retirement Plan and Trust with Great West Financial (formerly Orchard Trust Company). See Exhibits 10.15, 10.16, 10.17, 10.29, 10.30 and 10.37.
(3)
Summary of Amended and Restated Management Incentive Compensation Plan. See Exhibit 10.2.
(4)
Amended and Restated 1983 Stock Appreciation Rights Plan. See Exhibit 10.1.
(5)
Amended and Restated Executive Agreements. See Exhibit 10.8, 10.20, 10.23 and 10.27.
(6)
1996 Director Fee Plan. See Exhibit 10.4.
(7)
Data I/O Corporation 2000 Stock Compensation Incentive Plan. See Exhibit 10.6, 10.11, 10.21, 10.25 and 10.35.
(8)
Form of Option Agreement. See Exhibit 10.7.
(9)
Form of Indemnification Agreement. See Exhibit 10.18.
(10)
Letter Agreement with Anthony Ambrose. See Exhibit 10.20.
(11)
Letter Agreement with Rajeev Gulati. See Exhibit 10.23.
(12)
Form of Restricted Stock Agreement. See Exhibit 10.12.
(13)
Letter Agreement with Joel S. Hatlen. See Exhibit 10.27.
(14)
Form of Executive Agreement. See Exhibit 10.26.
(15)
Form of Restricted Stock Unit Award Agreement. See Exhibit 10.24.
(16)
Letter Agreement with Michael Tidwell. See Exhibit 10.34.
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(a)
List of Documents Filed as a Part of This Report:
Page
(1)
Index to Financial Statements:
Report of Independent Registered Public Accounting Firm (PCAOB ID 248 )
28
Consolidated Balance Sheets as of December 31, 2021 and December 31, 2020
30
Consolidated Statements of Operations for each of the two years ended December 31, 2021 and December 31, 2020
31
Consolidated Statements of Comprehensive Income (Loss) for each of the two years ended December 31, 2021 and December 31, 2020
32
Consolidated Statements of Stockholders’ Equity for each of the two years ended December 31, 2021 and December 31, 2020
33
Consolidated Statements of Cash Flows for each of the two years ended December 31, 2021 and December 31, 2020
34
Notes to Consolidated Financial Statements
35
(2)
Index to Financial Statement Schedules:
Schedule II – Consolidated Valuation and Qualifying Accounts
58
All other schedules not listed above have been omitted because the required information is included in the consolidated financial statements or the notes thereto, or is not applicable or required.
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(3)
Index to Exhibits:
3
Articles of Incorporation:
3.1
Data I/O’s restated Articles of Incorporation filed November 2, 1987 (Incorporated by reference to Exhibit 3.1 of Data I/O’s 1987 Annual Report on Form 10-K (File No. 0-10394) and attached as a PDF to Exhibit 3.1 in our 2017 Annual Report on Form 10-K).
3.2
Data I/O’s Bylaws as amended and restated as of July 20, 2011 (Incorporated by reference to Data I/O’s Current Report on Form 8-K filed July 26, 2011).
3.3
Certification of Designation, Preferences and Rights of Series A Junior Participating Preferred Stock (Incorporated by reference to Exhibit 1 of Data I/O’s Registration Statement on Form 8-A filed March 13, 1998 (File No. 0-10394)).
4
Instruments Defining the Rights of Security Holders, Including Indentures:
4.1
Rights Agreement dated as of April 4, 1998, between Data I/O Corporation and ChaseMellon Shareholder Services, L.L.C. as Rights Agent, which includes: as Exhibit A thereto, the Form of Right Certificate; and, as Exhibit B thereto, the Summary of Rights to Purchase Series A Junior Participating Preferred Stock (Incorporated by reference to Data I/O’s Current Report on Form 8-K filed on March 13, 1998).
4.2
Description of Data I/O Corporation’s Common Stock.
10
Material Contracts:
10.1
Amended and Restated 1983 Stock Appreciation Rights Plan dated February 3, 1993 (Incorporated by reference to Exhibit 10.23 of Data I/O’s 1992 Annual Report on Form 10-K (File No. 0-10394) and attached as a PDF to Exhibit 10.1 in our 2017 Annual Report on Form 10-K).
10.2
Amended and Restated Management Incentive Compensation Plan dated January 1, 1997 (Incorporated by reference to Exhibit 10.25 of Data I/O’s 1997 Annual Report on Form 10-K (File No. 0-10394)).
10.3
Amended and Restated Performance Bonus Plan dated January 1, 1997 (Incorporated by reference to Exhibit 10.26 of Data I/O’s 1997 Annual Report on Form 10-K (File No. 0-10394)).
10.4
Amended and Restated Data I/O Corporation 1996 Director Fee Plan (Incorporated by reference to Exhibit 10.32 of Data I/O’s 1997 Annual Report on Form 10-K (File No. 0-10394)).
10.5
Amended and Restated 1982 Employee Stock Purchase Plan dated May 16, 2003 (Incorporated by reference to Data I/O’s 2003 Proxy Statement dated March 31, 2003).
10.6
Amended and Restated Data I/O Corporation 2000 Stock Compensation Incentive Plan dated May 24, 2006 (Incorporated by reference to Data I/O’s 2006 Proxy Statement dated April 6, 2006).
10.7
Form of Option Agreement (Incorporated by reference to Data I/O’s 2004 Annual Report on Form 10-K (File No. 0-10394)).
10.8
Amended and Restated Executive Agreement with Joel S. Hatlen dated December 31, 2011 (Incorporated by reference to Data I/O’s 2011 Annual Report on Form 10K (File No. 0-10394)).
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10.9
Lease, Redmond East Business Campus between Data I/O Corporation and Carr Redmond PLLC dated February 28, 2006 (Incorporated by reference to Data I/O’s 2005 Annual Report on Form 10K (File No. 0-10394)).
10.10
Second Amendment to Lease, (Redmond East) between Data I/O Corporation and Arden Realty Limited Partnership, made as of January 31, 2011. (Incorporated by reference to Data I/O’s 2010 Annual Report on Form 10-K (File No. 0-10394)).
10.11
Amended and Restated Data I/O Corporation 2000 Stock Compensation Incentive Plan approved May 17, 2011 (Incorporated by reference to Data I/O’s 2011 Proxy Statement filed April 5, 2011).
10.12
Form of Restricted Stock Award Agreement (Incorporated by reference to Exhibit 10.29 of Data I/O’s June 30, 2006 Quarterly Report on Form 10-Q (File No. 0-10394)).
10.13
Patent Purchase Agreement (Incorporated by reference to Data I/O’s Current Report on Form 8-K filed on March 25, 2008)).
10.14
First Amendment to the Patent Purchase Agreement (Incorporated by reference to Data I/O’s Current Report on Form 8-K filed on March 25, 2008).
10.15
Great West Financial (formerly Orchard Trust Company) Defined Contribution Prototype Plan and Trust (Incorporated by reference to Data I/O’s 2007 Annual Report on Form 10-K (File No. 0-10394)).
10.16
Great West Financial (formerly Orchard Trust Company) Non-standardized 401(k) Plan (Incorporated by reference to Data I/O’s 2007 Annual Report on Form 10-K (File No. 0-10394)).
10.17
Great West Financial (formerly Orchard Trust Company) Defined Contribution Prototype Plan and Trust Amendment for Pension Protection Act and Heart Act. (Incorporated by reference to Data I/O’s 2009 Annual Report on Form 10-K (File No. 0-10394)).
10.18
Form of Indemnification Agreement. (Incorporated by reference to Data I/O’s 2010 Annual Report on Form 10-K (File No. 0-10394)).
10.19
Executive Agreement with Anthony Ambrose dated October 25, 2012. (Incorporated by reference to Data I/O’s 2012 Annual Report on Form 10-K (File No. 0-10394)).
10.20
Letter Agreement with Anthony Ambrose (Incorporated by reference to Data I/O’s Current Report on Form 8-K filed on October 29, 2012).
10.21
Amended and Restated Data I/O Corporation 2000 Stock Compensation Incentive Plan approved May 10, 2012 (Incorporated by reference to Data I/O’s 2012 Proxy Statement filed April 3, 2012).
10.22
Executive Agreement with Rajeev Gulati dated July 25, 2013. (Incorporated by reference to Data I/O’s 2013 Annual Report on Form 10-K (File No. 0-10394)).
10.23
Letter Agreement with Rajeev Gulati (Incorporated by reference to Data I/O’s Current Report on Form 8-K filed on July 31, 2013).
10.24
Form of Restricted Stock Unit Award Agreement (Incorporated by reference to Exhibit 10.29 of Data I/O’s March 31, 2014 Quarterly Report on Form 10-Q (File No. 0-10394)).
10.25
Amended and Restated Data I/O Corporation 2000 Stock Compensation Incentive Plan approved April 30, 2014 (Incorporated by reference to Exhibit 10.30 of Data I/O’s March 31, 2014 Quarterly Report on Form 10-Q (File No. 0-10394)).
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10.26
Form of Executive Agreement (Incorporated by reference to Exhibit 10.31 of Data I/O’s June 30, 2014 Quarterly Report on Form 10-Q (File No. 0-10394)).
10.27
Letter Agreement with Joel S. Hatlen (Incorporated by reference to Exhibit 10.32 of Data I/O’s June 30, 2014 Quarterly Report on Form 10-Q (File No. 0-10394)).
10.28
Third Amendment to Lease, (Redmond East) between Data I/O Corporation and Arden Realty Limited Partnership, made as of June 1, 2015 (Incorporated by reference to Exhibit 10.29 of Data I/O’s June 30, 2015 Quarterly Report on Form 10-Q (File No. 0-10394)).
10.29
Great West Financial Adoption Agreement #005 Non-standardized 401(k) Plan (Incorporated by reference to Data I/O’s 2015 Annual Report on Form 10-K (File No. 0-10394)).
10.30
Great West Financial Adoption Agreement #005 Non-standardized 401(k) Plan (Incorporated by reference to Data I/O’s 2016 Annual Report on Form 10-K (File No. 0-10394)).
10.31
Negotiation Protocol for the Purchase of Data I/O’s PSV7000, a supply agreement executed July 20, 2016, between Data I/O Corporation and Bosch Car Multimedia Group (Incorporated by reference to Exhibit 10.31 of Data I/O’s September 30, 2016 Quarterly Report on Form 10-Q (File No. 0-10394)). (Portions of this exhibit have been omitted based on confidential treatment granted by the SEC. The omitted portions of these exhibits have been filed separately with the SEC. The registrant undertakes to furnish on a supplemental basis a copy of any omitted schedules to the Securities and Exchange Commission upon request.).
10.32
Fifth Amendment to Lease, between Data I/O Corporation and BRE WA OFFICE OWNER LLC, made as of September 12, 2017 (Incorporated by reference to Data I/O’s September 30, 2017 Quarterly Report on Form 10-Q (File No. 0-10394)).
10.33
1st Amendment to Negotiation Protocol executed on September 24, 2018 between Data I/O Corporation and Robert Bosch GmbH (Incorporated by reference to Exhibit 10.35 of Data I/O’s September 30, 2018 Quarterly Report on Form 10-Q (File No. 0-10394)). (Portions of this exhibit have been omitted based on a request for confidential treatment made to the SEC. The omitted portions of these exhibits have been filed separately with the SEC. The registrant undertakes to furnish on a supplemental basis a copy of any omitted schedules to the Securities Exchange Commission upon request.).
10.34
Letter Agreement with Michael Tidwell (Incorporated by reference to Form 8-K filed on May 1, 2019).
10.35
Amended and Restated Data I/O Corporation 2000 Stock Compensation Incentive Plan approved May 20, 2021 (Incorporated by reference to Data I/O’s 2021 Proxy Statement dated April 5, 2021).
10.36
Sixth Amendment to Lease, between Data I/O Corporation and Alco Redmond East, LLC, made as of October 4, 2021.
10.37
Great West Financial Adoption Agreement #001 Non-standardized 401(k) Plan.
21.1
Subsidiaries of the Registrant
23.1
Consent of Independent Registered Public Accounting Firm
31
Certification – Section 302:
31.1
Chief Executive Officer Certification
31.2
Chief Financial Officer Certification
32
Certification – Section 906:
32.1
Chief Executive Officer Certification
32.2
Chief Financial Officer Certification
101
Interactive Date Files Pursuant to Rule 405 of Regulation S-T
Item 16. Form 10-K Summary
None.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATA I/O CORPORATION
(REGISTRANT)
DATED: March 29, 2022 By: /s/Anthony Ambrose
Anthony Ambrose
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
NAME & DATE
TITLE
By:
/s/Anthony Ambrose
March 29, 2022
President and Chief Executive Officer
Anthony Ambrose
(Principal Executive Officer), Director
By:
/s/Joel S. Hatlen
March 29, 2022
Chief Operating and Financial Officer
Joel S. Hatlen
Vice President Secretary, Treasurer
(Principal Financial and Accounting Officer)
By:
/s/Douglas W. Brown
March 29, 2022
Director
Douglas W. Brown
By:
/s/Mark J. Gallenberger
March 29, 2022
Director
Mark J. Gallenberger
By:
/s/Sally A. Washlow
March 29, 2022
Director
Sally A. Washlow
By:
/s/Cheemin Bo-Linn
March 29, 2022
Director
Cheemin Bo-Linn
By:
s/Edward J. Smith
March 29, 2022
Director
Edward J. Smith
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DATA I/O CORPORATION
SCHEDULE II – CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
Balance at
Beginning
of Period
Charged/
(Credited) to
Costs and
Expenses
Deductions-
Describe
Balance
at End of
Period
(in thousands)
Year Ended December 31, 2020:
Allowance for bad debts
$ 80
$ (14
)
$ - (1)
$ 66
Year Ended December 31, 2021:
Allowance for bad debts
$ 66
$ 23
$ - (1)
$ 89
(1) Uncollectable accounts written off, net of recoveries
58