What changed in this filing

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Item 1. Financial Statements

2024-11-12 compared with 2024-08-13 · 112 added, 47 removed, 258 unchanged (38% of the section changed)

2 unchanged sentences

(in thousands, except share data)

September 30,

CURRENT ASSETS:

Cash and cash equivalents

Trade accounts receivable, net of allowance for credit losses of $ 21 and $ 72 , respectively

Trade accounts receivable, net of allowance for

credit losses of $ 20 and $ 72 , respectively

Other current assets

13 unchanged sentences

Preferred stock -

Authorized, 5,000,000 shares, including 200,000 shares of Series A Junior Participating Issued and outstanding, none

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

Authorized, 30,000,000 shares

Issued and outstanding, 9,236,019 shares as of September 30,

2024 and 9,020,819 shares as of December 31, 2023

Accumulated earnings (deficit)

7 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Cost of goods sold

20 unchanged sentences

Three Months Ended

Six Months Ended

September 30,

Nine Months Ended

September 30,

Net income (loss)

22 unchanged sentences

Balance at June 30, 2023

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, 2023

Balance at December 31, 2023

11 unchanged sentences

Balance at June 30, 2024

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, 2024

See notes to consolidated financial statements

2 unchanged sentences

(in thousands)

For the Six Months Ended

For the Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

17 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

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

Net proceeds from issuance of common stock, less payments

for shares withheld to cover tax

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 June 30, 2024 and June 30, 2023 according to the rules and regulations of the Securities and Exchange Commission (“SEC”).

We prepared the financial statements as of September 30, 2024 and September 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.

The balance sheet at December 31, 2023 has been derived from the audited financial statements at that date.

The balance sheet as of December 31, 2023 has been derived from the audited financial statements at that date.

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

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

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

During the third 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.

9 unchanged sentences

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

For the installation and service and support performance obligations, we use the value of the discount given to distributors who perform these components.

For software maintenance performance obligations, we use what we charge for annual software maintenance renewals after the initial year the system is sold.

Installation, services and support costs are based on the discount given to distributors who perform these services.

For software maintenance performance obligations, we use the charge for annual software maintenance renewals after the expiration of the initial warranty coverage.

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 $ 1.5 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.

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

8 unchanged sentences

Once transferred, the equipment is sold by our regular sales channels as used equipment inventory.

These product units often involve refurbishing and an equipment warranty and are conducted as sales in our normal and ordinary course of business.

These product units often involve refurbishing and are sold in our normal and ordinary course of business with standard warranty coverage.

The transfer amount is the product unit’s net book value, and the sale transaction is accounted for as revenue and cost of goods sold.

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

Net sales by type

September 30,

(in thousands)

9 unchanged sentences

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.

For the nine months ended September 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):

8 unchanged sentences

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 six months ending June 30, 2024, and year ending December 31, 2023, are as follows:

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

September 30,

(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 June 30, 2024 are as follows:

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 September 30, 2024 are as follows:

September 30,

2024 Operating

5 unchanged sentences

Total operating lease liabilities

For the largest lease component, the Company has three facilities with our headquarters and primary engineering and operational functions located in Redmond, Washington.

Facilities account for the largest portion of our lease commitments.

The Company has three facilities with our headquarters and primary engineering and operational functions located in Redmond, Washington.

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 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 Shanghai facility lease was renewed for an additional three years with a new expiration date of October 31, 2027.

There were no other new operating leases during the three and nine months ended September 30, 2024.

The components of our lease payments for the three and nine months ended September 30, 2024, include facility related operating lease costs of $ 214,000 and $ 629,000 , respectively, and short-term lease costs of $ 9,000 and $ 28,000 , respectively.

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

The lease for the facility located in Shanghai, China runs to October 31, 2024 at approximately 19,400 square feet.

The lease for the facility located in Shanghai, China was renewed for an additional three years to October 31, 2027 at approximately 19,400 square feet.

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 June 30, 2024 and December 31, 2023:

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

September 30,

(in thousands)

2 unchanged sentences

Lease liability-long term (Operating lease liabilities)

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

As of September 30, 2024, the weighted average remaining lease term is 2.3 years and the weighted average discount rate used is 5 %.

The third quarter increases in the valuation of right-of-use assets, lease liabilities and weighted average lease term are due to the Shanghai lease renewal.

NOTE 6 – OTHER COMMITMENTS

2 unchanged sentences

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

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.

As of September 30, 2024, we had one contract with a commitment of approximately $ 232,000 to be paid within one year and $ 77,000 beyond one year.

NOTE 7 – CONTINGENCIES

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.

As of September 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 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.

The third quarter 2024 activity did not have a dividend payment from Shanghai.

However, 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, as well as foreign taxes.

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

As of September 30, for both 2024 and 2023, our deferred tax assets and valuation allowance have been reduced by approximately $ 441,000 and $ 435,000 , 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.

NOTE 9 – EARNINGS PER SHARE

Basic earnings per share is calculated based on the weighted average number of common shares outstanding during each period.

Basic earnings per share are calculated based on the weighted average number of common shares outstanding during each period.

Diluted earnings per share is calculated based on these same weighted average shares outstanding plus the effect of potential shares issuable upon assumed exercise of stock options based on the treasury stock method.

2 unchanged sentences

Three Months Ended

Six 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:

Adj weighted-average shares &

assumed stock option conversions

Basic and diluted

earnings (loss) per share:

Basic earnings (loss) per share

2 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

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.

Stock Option Unit

Options to purchase 34,398 and 12,500 shares, respectively, were outstanding as of September 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 and six months ended June 30, 2024 and 2023, respectively, were as follows:

The impact on our results of operations of recording share-based compensation, net of forfeitures, for the three and nine months ended September 30, 2024 and 2023, respectively, were as follows:

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Research and development

Selling, general and administrative

Selling, general & administrative

Total share-based compensation

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

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

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Restricted Stock Units

Performance Stock Units

Stock Option 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.

1 unchanged sentence

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:

Stock option inducement grant of 200,000 shares was awarded to William Wentworth, new President and CEO, effective on the first day of employment.

These options have a four-year quarterly vesting period and a six-year term and will be paid at the Fair Market Value (average of the high and low for the day) on the date of the grant.

All other terms of the equity award are stated in the applicable award agreement.

The remaining unamortized expected future equity compensation expense and remaining amortization period associated with award grants of unvested options, PSUs and RSUs at September 30, 2024 and 2023 are:

September 30,

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