What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2022-05-12 compared with 2021-11-12 · 33 added, 127 removed, 243 unchanged (40% of the section changed)

3 unchanged sentences

(in thousands, except share data)

September 30,

CURRENT ASSETS:

22 unchanged sentences

Authorized, 30,000,000 shares

Issued and outstanding, 8,621,007 shares as of September 30,

Issued and outstanding, 8,622,369 shares as of March 31,

2022 and 8,621,007 shares as of December 31, 2021

Accumulated earnings (deficit)

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income

TOTAL STOCKHOLDERS’ EQUITY

5 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of goods sold

6 unchanged sentences

Interest income

Gain on sale of assets

Foreign currency transaction gain (loss)

12 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net income (loss)

10 unchanged sentences

Balance at December 31, 2020

Stock awards issued, net of tax withheld

Stock awards issued, net of tax withholding

Issuance of stock through:

3 unchanged sentences

Balance at March 31, 2021

Stock awards issued, net of tax withheld

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at June 30, 2020

Stock awards issued, net of tax withheld

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at September 30, 2020

Balance at December 31, 2021

Stock awards issued, net of tax withheld

Stock awards issued, net of tax withholding

Issuance of stock through:

3 unchanged sentences

Balance at March 31, 2022

Stock awards issued, net of tax withheld

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at June 30, 2021

Stock awards issued, net of tax withheld

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at September 30, 2021

See notes to consolidated financial statements

DATA I/O CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Nine Months Ended

September 30,

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

30 unchanged sentences

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").

Data I/O Corporation (“Data I/O”, “We”, “Our”, “Us”) prepared the financial statements as of March 31, 2022 and March 31, 2021 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.

1 unchanged sentence

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.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

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, 2021.

33 unchanged sentences

Three Months Ended

Nine Months Ended

Net sales by type

September 30,

(in thousands)

1 unchanged sentence

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.

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 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.

3 unchanged sentences

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.

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:

Keep our people and their families safe;

Keep our facilities safe and operational while we serve our customers as an essential business;

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.

During the quarter ended March 31, 2022, as a result of a dividend paid from our China subsidiary to the USA parent company, $ 442,000 of income tax was withheld and paid.

Recently Adopted Accounting Pronouncements

On January 1, 2021 the Company adopted ASU 2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes.

This ASU clarifies and simplifies accounting for income taxes by eliminating certain exceptions for intraperiod tax allocation principles and the methodology for calculating income tax rates in an interim period, among other updates.

The adoption of this ASU did not have a material impact on our financial statements.

NOTE 2 – INVENTORIES

Inventories consisted of the following components:

September 30,

(in thousands)

3 unchanged sentences

Property and equipment consisted of the following components:

September 30,

(in thousands)

5 unchanged sentences

Other accrued liabilities consisted of the following components:

September 30,

(in thousands)

3 unchanged sentences

Other accrued liabilities

The changes in our product warranty liability for the nine months ending September 30, 2021 are as follows:

September 30,

The changes in our product warranty liability for the three months ending March 31, 2022 are as follows:

(in thousands)

5 unchanged sentences

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:

The following table presents our future lease payments for long-term operating leases as of March 31, 2022:

Lease Commitments

3 unchanged sentences

Total operating lease liabilities

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.

Cash paid for operating lease liabilities for the three months ended March 31, 2022 and 2021 were $ 212,000 and $ 201,000 , respectively.

The following table presents supplemental balance sheet information related to leases:

September 30,

(in thousands)

2 unchanged sentences

Lease liability-long term (Operating lease liabilities)

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 .

At March 31, 2022, the weighted average remaining lease term is 3.67 and the weighted average discount rate used is 5 %.

The components of our lease expense for the three months ended March 31, 2022 and 2021 include operating lease costs of $ 220,000 and $ 171,000 , respectively, and short-term lease costs of $ 20,000 and $ 7,000 , respectively.

Our real estate facility leases are described below:

During the fourth quarter of 2021, we amended our lease agreement for the Redmond, Washington headquarters facility, extending the lease to January 31, 2026 .

The lease is for approximately 20,460 square feet.

In April 2021, we signed a lease extension effective November 1, 2021 that extends the lease for a facility located in Shanghai, China through October 31, 2024 .

This lease is for approximately 19,400 square feet.

Our lease near Munich, Germany runs through February 28, 2022 with a five year extension available.

Our lease for our facility located near Munich, Germany ran through February 28, 2022 and in March 2022 we entered into a lease extension to August 2027.

This lease is for approximately 4,895 square feet.

3 unchanged sentences

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.

At March 31, 2022, the purchase commitments and other obligations totaled $ 2.0 million of which all but $ 590,000 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.

As of March 31, 2022, 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

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands except per share data)

14 unchanged sentences

Diluted earnings (loss) per share

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.

Options to purchase 12,500 and 25,000 shares respectively were outstanding as of March 31, 2022 and 2021, but 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 COMPENSATION

1 unchanged sentence

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:

The impact on our results of operations of recording share-based compensation, net of forfeitures, for the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

3 unchanged sentences

Total share-based compensation

Equity awards granted during the three and nine months ended September 30, 2021 and 2020 were as follows:

Equity awards granted during the three months ended March 31, 2022 and 2021 were as follows:

Three Months Ended

Nine Months Ended

September 30,

Restricted Stock Units

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.

Non-employee directors Restricted Stock Units (“RSUs”) typically vest over the earlier of one year or the next annual meeting of shareholders and Non-Qualified stock 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,

Unamortized future equity compensation expense (in thousands)

Remaining weighted average amortization period (in years)

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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements