What changed in this filing

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Item 1. Financial Statements

2024-08-13 compared with 2024-05-13 · 63 added, 43 removed, 242 unchanged (30% of the section changed)

Financial Statements

DATA I/O CORPORATION

CONSOLIDATED BALANCE SHEETS

20 unchanged sentences

Common stock, at stated value -

Authorized, 30,000,000 shares Issued and outstanding, 9,024,959 shares as of March 31, 2024 and 9,020,819 shares as of December 31, 2023

Authorized, 30,000,000 shares Issued and outstanding, 9,219,838 shares as of June 30, 2024 and 9,020,819 shares as of December 31, 2023

Accumulated earnings (deficit)

7 unchanged sentences

Three Months Ended

Six Months Ended

Cost of goods sold

20 unchanged sentences

Three Months Ended

Six Months Ended

Net income (loss)

16 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

Balance at December 31, 2023

5 unchanged sentences

Balance at March 31, 2024

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, 2024

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:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Adjustments to reconcile net income (loss)

to net cash provided by (used in) operating activities:

Depreciation and amortization

14 unchanged sentences

Net proceeds from issuance of common stock, less payments for shares withheld to cover tax

Repurchase of common stock

Payment of capital lease obligation

Cash provided by (used in) financing activities

12 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, 2024 and March 31, 2023 according to the rules and regulations of the Securities and Exchange Commission ("SEC").

We prepared the financial statements as of June 30, 2024 and June 30, 2023 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, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Operating results for the six months ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024.

Significant Accounting Policies

2 unchanged sentences

Revenue Recognition

Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606) provides a single, principles-based five-step model to be applied to all contracts with customers.

Accounting Standards Codification (ASC) Topic 606, R evenue from Contracts with Customers (ASC 606) provides a single, principles-based, five-step model to be applied to all contracts with customers.

It generally provides for the recognition of revenue in an amount that reflects the consideration to which the Company expects to be entitled, net of allowances for estimated returns, discounts or sales incentives, as well as taxes collected from customers when control over the promised goods or services are transferred to the customer.

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 2024 and 2023, the impact of capitalization of incremental costs for obtaining contracts was immaterial.

During the second quarter of 2024 and 2023, 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.

5 unchanged sentences

Installation that is considered perfunctory includes any installation that is expected to be performed by other parties, such as distributors, other vendors, or the customers themselves.

This analysis considers the complexity, skill and training needed as well as customer expectations regarding installation.

This analysis considers the complexity, skill and training needed and customer installation expectations.

We enter into arrangements with multiple performance obligations that arise during the sale of a system that could include hardware, software, installation, services and support and extended maintenance components.

We allocate the transaction price of each element based on the relative selling prices.

We allocate the transaction price of each element based on relative selling price.

Relative selling price is based on the selling price of the standalone system.

2 unchanged sentences

Revenue is recognized on the system based on shipping terms, software based on delivery, installation and services based on completion of work, and software maintenance and extended warranty support ratably over the term of the agreement, typically one year.

Total deferred revenue which represents undelivered performance obligations for installation, service, support and extended contracts were $ 1.8 million and $ 2.0 million for March 31, 2024 and 2023, respectively, and the portion expected to be recognized within one year was $ 1.6 million and $ 1.7 million for March 31, 2024 and 2023, respectively.

When we sell software separately, we recognize revenue upon the transfer of control of the software, which is generally upon delivery, provided that only immaterial items in the context of the contract with the customer remain on our part and substantive acceptance conditions, if any, have been met.

Total deferred revenue which represents undelivered performance obligations for installation, service, support and extended contracts were $ 1.5 million and $ 1.6 million for June 30, 2024 and 2023, respectively, and the portion expected to be recognized within one year was $ 1.3 million and $ 1.4 million for June 30, 2024 and 2023, respectively.

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

4 unchanged sentences

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.

Income taxes are computed at current enacted tax rates, less tax credits using the asset and liability method.

Income taxes for U.S.

and foreign subsidiary operations are computed at current enacted tax rates, less tax credits using the asset and liability method.

Deferred taxes are adjusted both for items that do not have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities.

1 unchanged sentence

A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

Recently Adopted Accounting Pronouncements

For the three months ended March 31, 2024, there were no recently issued accounting pronouncements that had or are expected to have, a material impact on Data I/O Corporation’s consolidated financial statements.

New Accounting Pronouncements – Standards Issued and Not Yet Implemented

For the six months ended June 30, 2024, there were no recently issued accounting pronouncements that had a material impact to Data I/O Corporation’s consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07 “Segment Reporting (Topic 280):

25 unchanged sentences

Other accrued liabilities

The changes in our product warranty liability for the three months ending March 31, 2024 and year ended December 31, 2023 are as follows:

The changes in our product warranty liability for the six months ending June 30, 2024, and year ending December 31, 2023, are as follows:

(in thousands)

4 unchanged sentences

NOTE 5 – OPERATING LEASE COMMITMENTS

We have commitments under non-cancelable operating leases and other agreements, primarily for factory and office space, with initial or remaining terms of one year or more as of March 31, 2024 are as follows:

2024 Operating

Lease Commitments

(in thousands)

5 unchanged sentences

Our two subsidiary facilities in Munich, Germany and Shanghai, China provide extended worldwide sales, service, engineering and operation services.

The components of our lease expense for the three months ended March 31, 2024 and 2023 include facility related operating lease costs of $ 213,000 and $ 215,000 , respectively, and short-term lease costs of $ 8,000 and $ 7,000 , respectively.

There were no new operating leases during the three months ended March 31, 2024.

The components of our lease expense for the three and six months ended June 30, 2024, include facility related operating lease costs of $ 207,000 and $ 415,000 , respectively, and short-term lease costs of $ 8,000 and $ 17,000 , respectively.

There were no new operating leases during the three and six months ended June 30, 2024.

The Redmond, Washington headquarters facility lease runs to January 31, 2026 at approximately 20,460 square feet.

1 unchanged sentence

The lease for the facility located near Munich, Germany runs to August 2027 at approximately 4,895 square feet.

The following table presents supplemental balance sheet information related to leases as of March 31, 2024 and December 31, 2023:

The following table presents supplemental balance sheet information related to leases as of June 30, 2024 and December 31, 2023:

(in thousands)

2 unchanged sentences

Lease liability-long term (Operating lease liabilities)

At March 31, 2024, the weighted average remaining lease term is 1.98 and the weighted average discount rate used is 5 %.

At June 30, 2024, the weighted average remaining lease term is 1.73 years and the weighted average discount rate used is 5 %.

NOTE 6 – OTHER COMMITMENTS

2 unchanged sentences

Most arrangements are cancelable without a significant penalty, and with short notice, typically less than 90 days.

At March 31, 2024, we had one contract with a commitment of approximately $ 174,000 to be paid in 2024 and $ 251,000 to be paid beyond one year.

As of June 30, 2024, we had one contract with a commitment of approximately $ 232,000 to be paid within one year and $ 135,000 beyond one year.

NOTE 7 – CONTINGENCIES

As of March 31, 2024, 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, 2024, 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 2024 and 2023, primarily related to foreign and minor 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 $ 8.9 million as of March 31, 2024.

As of March 31, for both 2024 and 2023, our deferred tax assets and valuation allowance have been reduced by approximately $ 434,000 and $ 429,000 , respectively.

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

For the comparison period of 2024, the second quarter of 2024 included dividend withholding taxes of approximately $ 337,000 due to a $ 3.4 million dividend repatriation from our China subsidiary operation.

The effective tax rate differed from the statutory tax rate primarily due to valuation allowances effect, as well as foreign taxes.

We have a valuation allowance of $ 9.3 million as of June 30, 2024.

As of June 30, for both 2024 and 2023, our deferred tax assets and valuation allowance have been reduced by approximately $ 437,000 and $ 437,000 , respectively.

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)

6 unchanged sentences

Adjusted weighted-average shares & assumed conversions of stock options

Basic and diluted

earnings (loss) per share:

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, 2024 and 2023, but were excluded from the computation of diluted earnings per share for the periods then ended because the options were anti-dilutive.

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

Options to purchase 12,500 and 12,500 shares, respectively, were outstanding as of June 30, 2024 and 2023, 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 and 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, 2024 and 2023 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, 2024 and 2023, 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, 2024 and 2023 were as follows:

Equity awards granted during the three and six months ended June 30, 2024 and 2023 were as follows:

Three Months Ended

Six Months Ended

Restricted Stock Units

Non-employee director 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.

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 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”), granted in 2023, 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 performance measure.

The remaining unamortized expected future equity compensation expense and remaining amortization period associated with award grants of unvested options, PSUs and RSUs at March 31, 2024 and 2023 are:

Three Months Ended

Performance Stock Units (“PSUs”) granted in 2024, cliff vest at the end of the performance period based on performance metrics which includes cumulative revenue growth, EBITDA attainment and other project-based milestone targets over the three-year period ending December 31, 2026 with a performance 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, 2024 and 2023 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

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