What changed in this filing

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Item 1. Financial Statements

2023-05-15 compared with 2022-11-14 · 37 added, 102 removed, 235 unchanged (37% of the section changed)

3 unchanged sentences

(in thousands, except share data)

September 30,

CURRENT ASSETS:

15 unchanged sentences

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, 8,816,381 shares as of September 30,

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

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, 8,818,076 shares as of March 31, 2023 and 8,816,381 shares as of December 31, 2022

Accumulated earnings (deficit)

7 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of goods sold

21 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net income (loss)

16 unchanged sentences

Balance at March 31, 2022

Repurchased shares

Stock awards issued, net of tax withholding

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at June 30, 2021

Repurchased shares

Stock awards issued, net of tax withholding

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at September 30, 2021

Balance at December 31, 2022

5 unchanged sentences

Balance at March 31, 2023

Stock awards issued, net of tax withholding

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at June 30, 2022

Stock awards issued, net of tax withholding

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at September 30, 2022

See notes to consolidated financial statements

2 unchanged sentences

(in thousands)

For the Nine Months Ended

September 30,

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

32 unchanged sentences

Our manufacturing operations are currently located in Redmond, Washington, United States and Shanghai, China.

We prepared the financial statements as of September 30, 2022 and September 30, 2021 according to the rules and regulations of the Securities and Exchange Commission ("SEC").

We prepared the financial statements as of March 31, 2023 and March 31, 2022 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, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022.

Operating results for the three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Significant Accounting Policies

5 unchanged sentences

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 2022 and 2021, the impact of capitalization of incremental costs for obtaining contracts was immaterial.

During the first quarter of 2023 and 2022, 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.

16 unchanged sentences

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.

Payment terms are generally 30 to 60 days from shipment.

We transfer certain products out of service from their internal use and make them available for sale.

8 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.

4 unchanged sentences

Recently Adopted Accounting Pronouncements

For the nine months ended September 30, 2022, there were no recently issued accounting pronouncements that had, or are expected to have, a material impact to Data I/O Corporation’s consolidated financial statements.

For the three months ended March 31, 2023, ASU 326 became effective for the Company.

The adoption of the ASU 326 CECL (Current Estimate of Credit Losses) did not have a material impact to Data I/O Corporation’s consolidated 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, 2022 are as follows:

September 30,

The changes in our product warranty liability for the three months ending March 31, 2023 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, 2022:

The following table presents our future lease payments for long-term operating leases as of March 31, 2023:

Lease Commitments

3 unchanged sentences

Total operating lease liabilities

Cash paid for operating lease liabilities for the three and nine months ended September 30, 2022 was $ 138,000 and $ 555,000 , respectively.

There were three new operating leases during the nine months ended September 30, 2022.

Cash paid for operating lease liabilities for the three months ended March 31, 2023 and 2022 were $ 220,000 and $ 212,000 , respectively.

There were no new operating leases during the three months ended March 31, 2023.

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, 2022, the weighted average remaining lease term is 3.21 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, 2022 include operating lease costs of $ 209,000 and $ 642,000 , respectively, and short-term lease costs of $ 8,000 and $ 35,000 , respectively.

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

At March 31, 2023, the weighted average remaining lease term is 2.77 and the weighted average discount rate used is 5 %.

The components of our lease expense for the three months ended March 31, 2023 and 2022 include operating lease costs of $ 217,000 and $ 220,000 , respectively, and short-term lease costs of $ 6,000 and $ 20,000 , respectively.

Our lease agreement for the Redmond, Washington headquarters facility, extends 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 .

Our lease agreement for our facility located in Shanghai, China, extends to October 31, 2024 .

This lease is for approximately 19,400 square feet.

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.

Our lease agreement for our facility located near Munich, Germany, extends 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, 2022, the purchase commitments and other obligations totaled $ 2.6 million of which all but $ 540,000 are expected to be paid over the next twelve months.

At March 31, 2023, the purchase commitments and other obligations totaled $ 2.4 million of which all but $ 553,000 are expected to be paid over the next twelve months.

NOTE 7 – CONTINGENCIES

As of September 30, 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.

As of March 31, 2023, 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 2022 and 2021, primarily related to foreign and state taxes.

Income tax expense for the first quarter of both 2023 and 2022, primarily related to foreign and minor state taxes.

The first quarter of 2022, as a result of a dividend paid from our China subsidiary to the USA parent company, included $ 442,000 of income tax withheld and paid.

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 $ 9.3 million as of March 31, 2023.

As of March 31, for both 2023 and 2022, our deferred tax assets and valuation allowance have been reduced by approximately $ 429,000 and $ 399,000 , 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

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands except per share data)

Numerator for basic and diluted

earnings (loss) per share:

Numerator for basic and diluted earnings (loss) per share:

Net income (loss)

Denominator for basic

earnings (loss) per share:

Denominator for basic earnings (loss) per share:

Weighted-average shares

Employee stock options and awards

Denominator for diluted

earnings (loss) per share:

Adjusted weighted-average shares &

assumed conversions of stock options

Basic and diluted

earnings (loss) per share:

Denominator for diluted earnings (loss) per share:

Adjusted weighted-average shares & assumed conversions of stock options

Basic and diluted earnings (loss) per share:

Basic earnings (loss) per share

Diluted earnings (loss) per share

Options to purchase 12,500 shares were outstanding as of both September 30, 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.

Options to purchase 12,500 were outstanding as of March 31, 2023 and 2022, but were excluded from the computation of diluted earnings per share for the periods then ended because the options were anti-dilutive.

NOTE 10 – 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, 2022 and 2021, 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, 2023 and 2022 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, 2022 and 2021 were as follows:

Equity awards granted during the three months ended March 31, 2023 and 2022 were as follows:

Three Months Ended

Nine Months Ended

September 30,

Restricted Stock Units

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, 2022 are:

September 30,

Employee RSUs typically vest annually over four years and employee Non-Qualified stock options typically vest quarterly over four years and have a six-year exercise period.

Unamortized future equity compensation expense (in thousands)

1 unchanged sentence

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