What changed in this filing

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Item 1. Financial Statements

2025-05-13 compared with 2024-11-12 · 74 added, 138 removed, 232 unchanged (48% of the section changed)

Financial Statements

DATA I/O CORPORATION

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

September 30,

CURRENT ASSETS:

Cash and cash equivalents

Trade accounts receivable, net of allowance for

credit losses of $ 20 and $ 72 , respectively

Trade accounts receivable, net of allowance for credit losses of $ 22 and $ 22 , 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, 9,236,019 shares as of September 30,

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

Authorized, 30,000,000 shares Issued and outstanding, 9,239,731 shares as of March 31, 2025 and 9,236,040 shares as of December 31, 2024

Accumulated earnings (deficit)

7 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of goods sold

20 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net income (loss)

16 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, 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, 2024

5 unchanged sentences

Balance at March 31, 2025

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

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 Nine Months Ended

September 30,

For the Three 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

13 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 September 30, 2024 and September 30, 2023 according to the rules and regulations of the Securities and Exchange Commission ("SEC").

We prepared the financial statements as of March 31, 2025 and March 31, 2024 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 as of December 31, 2023 has been derived from the audited financial statements at that date.

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

Operating results for the three months ended March 31, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

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, 2023 (filed with the SEC on March 27, 2024).

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.

Revenue Recognition

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.

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.

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

During the current and prior period quarters, the impact of capitalization of incremental costs for obtaining contracts were immaterial.

We exclude sales, use, value added, some excise taxes and other similar taxes from the measurement of the transaction price.

7 unchanged sentences

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 relative selling price.

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

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

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.

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.

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 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.

Total deferred revenue which represents undelivered performance obligations for installation, service, support and extended contracts were $ 1.5 million and $ 1.8 million for March 31, 2025 and 2024, respectively, and the portion expected to be recognized within one year was $ 1.5 million and $ 1.6 million for March 31, 2025 and 2024, 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.

12 unchanged sentences

Three 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 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):

Improvements to Reportable Segment Disclosures" which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740):

2 unchanged sentences

We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

In November 2024, FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation (Subtopic 220-40), which requires disclosure of specific information about costs and expenses within relevant expense captions on the face of the income statement, qualitative descriptions for expense captions not specifically disaggregated quantitatively, and the total amount and definition of selling expenses for interim and annual reporting periods.

This standard is effective for the annual reporting period beginning January 1, 2027 and interim reporting periods beginning January 1, 2028 and should be applied retrospectively to all comparative periods.

Early adoption is permitted.

The Company is currently evaluating the effects of adopting this new accounting guidance.

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, 2024, and year ending December 31, 2023, are as follows:

September 30,

The changes in our product warranty liability for the three months ending March 31, 2025 and year ended December 31, 2024 are as follows:

(in thousands)

4 unchanged sentences

NOTE 5– OPERATING LEASE COMMITMENTS

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

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, 2025 are as follows:

Lease Commitments

4 unchanged sentences

Total operating lease liabilities

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.

For the largest lease component, 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 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 was renewed for an additional three years to October 31, 2027 at approximately 19,400 square feet.

The components of our lease expense for the three months ended March 31, 2025 and 2024 include facility related operating lease costs of $ 182,000 and $ 208,000 , respectively, and short-term lease costs of $ 9,500 and $ 9,400 , respectively.

There were no new operating leases during the three months ended March 31, 2025.

The Redmond, Washington headquarters facility lease runs to October 31, 2029, at approximately 20,460 square feet.

The lease for the facility located in Shanghai, China runs 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 September 30, 2024 and December 31, 2023:

September 30,

The following table presents supplemental balance sheet information related to leases as of March 31, 2025 and December 31, 2024:

(in thousands)

2 unchanged sentences

Lease liability-long term (Operating lease liabilities)

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.

At March 31, 2025, the weighted average remaining lease term is 3.9 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.

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.

As of March 31, 2025, we had four contracts with a commitment of approximately $ 469,000 to be paid within one year and $ 1,473,000 to be paid beyond one year.

NOTE 7 – CONTINGENCIES

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.

As of March 31, 2025, 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 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.

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.

Income tax expense for the first quarter of both 2025 and 2024, 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 allowance, as well as foreign taxes.

We have a valuation allowance of $ 8.9 million as of both March 31, 2025 and 2024.

As of March 31, for both 2025 and 2024, our deferred tax assets and valuation allowance have been reduced by approximately $ 444,000 and $ 434,000 , 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 are calculated based on the weighted average number of common shares outstanding during each period.

Basic earnings per share is 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

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:

Adj weighted-average shares &

assumed stock option conversions

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

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Restricted Stock Units

Performance Stock Units

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.

Stock Options

Options to purchase 200,000 and 12,500 shares were outstanding as of March 31, 2025 and 2024, respectively, 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 nine months ended September 30, 2024 and 2023, respectively, were as follows:

First quarter 2025 shared-based compensation of $ 174,000 , was $ 107,000 lower compared to the prior year period due to staff reductions which occurred in the fourth quarter of 2024.

The impact on our results of operations of recording share-based compensation, net of forfeitures, for the three months ended March 31, 2025 and 2024 were as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

1 unchanged sentence

Research and development

Selling, general & administrative

Selling, general and administrative

Total share-based compensation

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

Equity awards granted during the three months ended March 31, 2025 and 2024 were as follows:

Three 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.

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 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.

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,

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 (“PSUs”) typically cliff vest at the end of the performance period and the performance metric for 2023 awards is cumulative revenue growth over the three-year period ending December 31, 2025 with a cumulative revenue threshold, target, and maximum performance measure.

For 2024 awards, the performance metrics included revenue growth, EBITDA and project objective targets over the three-year period ending December 31, 2026.

The remaining unamortized expected future equity compensation expense and remaining amortization period associated with award grants of RSUs, PSUs and unvested options at March 31, 2025 and 2024 are:

Unamortized future equity compensation expense (in thousands)

Remaining weighted average amortization period (in years)

NOTE 11 –SEGMENT INFORMATION

Data I/O operates as a single segment entity, with the sole objective to design, manufacture, and sell programming systems.

We operate in three separate locations — Redmond, Washington;

Shanghai, China;

and Munich, Germany — these locations function as part of a single, integrated business and all operations are strategically aligned to support this objective.

The accounting policies of the programming system segment are the same as those described in the summary of significant accounting policies.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

Our chief operating decision maker (CODM) is the President/CEO who reviews the company’s financial performance on a consolidated basis without distinguishing between different business lines or geographic areas for the purpose of making operating decisions, allocating resources and evaluating financial performance.

Financial performance is assessed using operating results, actual net income vs.

plan, balance sheet fluctuations, and other key performance indicators.

Significant single segment expense categories that are provided to the chief operating decision maker and included in the reported segment operating profits are outlined in the following table:

Three Months Ended

(in thousands)

Cost of goods sold

Operating Expenses:

Employee expenses

Customer acquisition costs

Professional and outside services

Occupancy costs (OPEX portion)

Depreciation & amortization

Total operating expense

Operating income (loss)

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