What changed in this filing

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Item 1. Financial Statements

2023-08-14 compared with 2023-05-15 · 69 added, 34 removed, 238 unchanged (30% of the section changed)

21 unchanged sentences

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

Common stock, at stated value - Authorized, 30,000,000 shares Issued and outstanding, 9,018,875 shares as of June 30, 2023 and 8,816,381 shares as of December 31, 2022

Accumulated earnings (deficit)

7 unchanged sentences

Three Months Ended

Six Months Ended

Cost of goods sold

21 unchanged sentences

Three Months Ended

Six Months Ended

Net income (loss)

16 unchanged sentences

Balance at March 31, 2022

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

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, 2023

See notes to consolidated financial statements

2 unchanged sentences

(in thousands)

For the Three Months Ended

For the Six 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 March 31, 2023 and March 31, 2022 according to the rules and regulations of the Securities and Exchange Commission ("SEC").

We prepared the financial statements as of June 30, 2023 and June 30, 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 three months ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Operating results for the six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

Significant Accounting Policies

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, 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, 2022 (filed with the SEC on March 30, 2023).

There have been no changes to our significant accounting policies described in the Annual Report that have had a material impact on our unaudited condensed consolidated financial statements and related notes.

3 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 the first quarter of 2023 and 2022, the impact of capitalization of incremental costs for obtaining contracts was immaterial.

During the second 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.

13 unchanged sentences

Deferred revenue includes service, support and maintenance contracts and represents the undelivered performance obligation of agreements that are typically for one year.

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.

When we license 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.

11 unchanged sentences

Three Months Ended

Six Months Ended

Net sales by type

9 unchanged sentences

Recently Adopted Accounting Pronouncements

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

For the six months ended June 30, 2023, 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.

In the first quarter of 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.

18 unchanged sentences

Other accrued liabilities

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

The changes in our product warranty liability for the six months ending June 30, 2023 and year ending December 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 March 31, 2023:

The following table presents our future lease payments for long-term operating leases as of June 30, 2023:

Lease Commitments

3 unchanged sentences

Total operating lease liabilities

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:

Cash paid for operating lease liabilities for the three and six months ended June 30, 2023 were $ 219,254 and $ 442,909 , respectively.

There were no new operating leases during the six months ended June 30, 2023.

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

Balance at June 30,

Balance at December 31,

(in thousands)

2 unchanged sentences

Lease liability-long term (Operating lease liabilities)

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.

At June 30, 2023, the weighted average remaining lease term is 2.5 years and the weighted average discount rate used is 5 %.

The components of our lease expense for the three and six months ended June 30, 2023 include operating lease costs of $ 213,000 and $ 430,000 , respectively, and short-term lease costs of $ 7,000 and $ 13,000 , respectively.

This compares to the three and six months ended June 30, 2022 with operating lease costs of $ 213,000 and $ 434,000 respectively, and short-term lease costs of $ 6,000 and $ 27,000 , respectively.

The Redmond, Washington headquarters facility lease runs to January 31, 2026 .

The lease is for approximately 20,460 square feet.

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

The lease for a facility located in Shanghai, China runs to October 31, 2024 .

This lease is for approximately 19,400 square feet.

Our lease agreement for our facility located near Munich, Germany, extends to August 2027 .

The lease for our facility located near Munich, Germany runs 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 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.

At June 30, 2023, the purchase commitments and other obligations totaled $ 2.0 million of which all but $ 0.3 million are expected to be paid over the next twelve months.

NOTE 7 – CONTINGENCIES

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.

As of June 30, 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 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.

Income tax benefit (expense) primarily relates to foreign and state taxes.

The first quarter of 2022 included dividend withholding taxes of $ 445,000 on a dividend repatriation.

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.

We have a valuation allowance of $ 9.6 million as of June 30, 2023.

As of June 30, for both 2023 and 2022, our deferred tax assets and valuation allowance have been reduced by approximately $ 437,000 and $ 405,000 , 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.

5 unchanged sentences

Three Months Ended

Six Months Ended

(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 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.

Options to purchase 12,500 and 12,500 shares, respectively, were outstanding as of June 30, 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 months ended March 31, 2023 and 2022 were as follows:

The impact on our results of operations of recording share-based compensation, net of forfeitures, for the three and six months ended June 30, 2023 and 2022, respectively, were as follows:

Three Months Ended

Six Months Ended

(in thousands)

3 unchanged sentences

Total share-based compensation

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

Equity awards granted during the three and six months ended June 30, 2023 and 2022 were as follows:

Three Months Ended

Six Months Ended

Restricted Stock Units

Performance 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 annually over four years and employee Non-Qualified stock options typically vest quarterly over four 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 March 31, 2023 are:

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

Performance Stock Units (“PSUs”) typically cliff vest at the end of the performance period and the performance metric is cumulative revenue growth over the three-year period ending December 31, 2025 with a cumulative revenue threshold, target, and maximum.

The remaining unamortized expected future equity compensation expense and remaining amortization period associated with award grants of unvested options, PSUs and RSUs at June 30, 2023 and 2022 are:

Unamortized future equity compensation expense (in thousands)

Remaining weighted average amortization period (in years)

The weighted average number of shares outstanding used to compute earnings (loss) per share included the following:

Three Months Ended

Six Months Ended

Restricted Stock Units

Performance Stock Units

Stock Options

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