UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One) | |
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the quarterly period ended | |
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Or | |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
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For the transition period from ________________ to ________________ | |
Commission file number: |
(Exact name of registrant as specified in its charter) |
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(State or other jurisdiction of incorporation or organization) |
| (I.R.S. Employer Identification No.) |
(Address of principal executive offices, including zip code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, ”accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
☐ | Smaller reporting company | ||
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| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
Shares of Common Stock, no par value, outstanding as of October 31, 2024:
DATA I/O CORPORATION | |||||
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FORM 10-Q | |||||
For the Quarter Ended September 30, 2024 | |||||
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INDEX | |||||
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| Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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| Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities |
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| 2 |
| Table of Contents |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS | ||||||||
(in thousands, except share data) | ||||||||
(UNAUDITED) | ||||||||
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| September 30, 2024 |
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| December 31, 2023 |
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ASSETS |
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CURRENT ASSETS: |
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Cash and cash equivalents |
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Trade accounts receivable, net of allowance for |
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credit losses of $ |
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Inventories |
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Other current assets |
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TOTAL CURRENT ASSETS |
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Property, plant and equipment – net |
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Other assets |
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TOTAL ASSETS |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Accounts payable |
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Accrued compensation |
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Deferred revenue |
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Other accrued liabilities |
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Income taxes payable |
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TOTAL CURRENT LIABILITIES |
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Operating lease liabilities |
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Long-term other payables |
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COMMITMENTS |
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STOCKHOLDERS’ EQUITY |
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Preferred stock - |
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Authorized, |
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Issued and outstanding, none |
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Common stock, at stated value - |
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Authorized, |
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Issued and outstanding, |
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2024 and |
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Accumulated earnings (deficit) |
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Accumulated other comprehensive income |
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TOTAL STOCKHOLDERS’ EQUITY |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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See notes to consolidated financial statements
| 3 |
| Table of Contents |
DATA I/O CORPORATION | ||||||||||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||
(in thousands, except per share amounts) | ||||||||||||||||
(UNAUDITED) | ||||||||||||||||
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| Three Months Ended September 30, |
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| Nine Months Ended September 30, |
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Net sales |
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Cost of goods sold |
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Gross margin |
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Operating expenses: |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Operating income (loss) |
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Non-operating income (loss): |
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Interest income |
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Foreign currency transaction gain (loss) |
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Total non-operating income (loss) |
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Income (loss) before income taxes |
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Income tax (expense) benefit |
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Net income (loss) |
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Basic earnings (loss) per share |
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Diluted earnings (loss) per share |
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Weighted-average basic shares |
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Weighted-average diluted shares |
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See notes to consolidated financial statements
| 4 |
| Table of Contents |
DATA I/O CORPORATION | ||||||||||||||||
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) | ||||||||||||||||
(in thousands) | ||||||||||||||||
(UNAUDITED) | ||||||||||||||||
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| Three Months Ended September 30, |
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Net income (loss) |
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Other comprehensive income (loss): |
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Foreign currency translation gain (loss) |
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Comprehensive income (loss) |
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See notes to consolidated financial statements
| 5 |
| Table of Contents |
DATA I/O CORPORATION | ||||||||||||||||||||
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY | ||||||||||||||||||||
(in thousands, except share amounts) | ||||||||||||||||||||
(UNAUDITED) | ||||||||||||||||||||
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| Common Stock |
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| Retained Earnings |
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| Accumulated and Other Comprehensive |
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Balance at December 31, 2022 |
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Stock awards issued, net of tax withholding |
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Issuance of stock through: ESPP |
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Share-based compensation |
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Net income (loss) |
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Other comprehensive income (loss) |
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Balance at March 31, 2023 |
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Stock awards issued, net of tax withholding |
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Issuance of stock through: ESPP |
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Share-based compensation |
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Net income (loss) |
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Other comprehensive income (loss) |
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Balance at June 30, 2023 |
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Stock awards issued, net of tax withholding |
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Issuance of stock through: ESPP |
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Share-based compensation |
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Net income (loss) |
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Balance at September 30, 2023 |
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Balance at December 31, 2023 |
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Stock awards issued, net of tax withholding |
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Issuance of stock through: ESPP |
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Share-based compensation |
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Net income (loss) |
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Other comprehensive income (loss) |
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Balance at March 31, 2024 |
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Stock awards issued, net of tax withholding |
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Issuance of stock through: ESPP |
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Share-based compensation |
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Net income (loss) |
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Balance at June 30, 2024 |
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Stock awards issued, net of tax withholding |
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Issuance of stock through: ESPP |
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Share-based compensation |
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Net income (loss) |
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Other comprehensive income (loss) |
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Balance at September 30, 2024 |
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See notes to consolidated financial statements
| 6 |
| Table of Contents |
DATA I/O CORPORATION | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(in thousands) | ||||||||
(UNAUDITED) | ||||||||
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net income (loss) |
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Adjustments to reconcile net income (loss) |
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to net cash provided by (used in) operating activities: |
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Depreciation and amortization |
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Equipment transferred to cost of goods sold |
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Share-based compensation |
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Net change in: |
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Trade accounts receivable |
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Inventories |
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Other current assets |
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Accounts payable and accrued liabilities |
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Deferred revenue |
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Other long-term liabilities |
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Deposits and other long-term assets |
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Net cash provided by (used in) operating activities |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Purchases of property, plant and equipment |
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Cash provided by (used in) investing activities |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Net proceeds from issuance of common stock, less payments |
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for shares withheld to cover tax |
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Cash provided by (used in) financing activities |
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Increase (decrease) in cash and cash equivalents |
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Effects of exchange rate changes on cash |
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Cash and cash equivalents at beginning of period |
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Cash and cash equivalents at end of period |
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Supplemental disclosure of cash flow information: |
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Cash paid during the period for: |
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Income taxes |
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See notes to consolidated financial statements
| 7 |
| Table of Contents |
DATA I/O CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Data I/O Corporation (“Data I/O”, “We”, “Our”, “Us”) is a global market leader for advanced programming, security deployment, security provisioning and associated Intellectual Property (“IP”) protection and management solutions used in electronics manufacturing with flash memory, microcontrollers, and flash memory-based intelligent devices as well as secure element devices, authentication devices and secure microcontrollers. Customers for our programming system products are located around the world, primarily in Asia, Europe and the Americas. 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"). 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. 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.
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, 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. We exclude sales, use, value added, some excise taxes and other similar taxes from the measurement of the transaction price.
We recognize revenue upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We have determined that our programming equipment has reached a point of maturity and stability such that product acceptance can be assured by testing at the factory prior to shipment and that the installation meets the criteria to be a separate performance obligation. These systems are standard products with published product specifications and are configurable with standard options. The evidence that these systems could be deemed as accepted was based upon having standardized factory production of the units, results from batteries of tests of product performance to our published specifications, quality inspections and installation standardization, as well as past product operation validation with the customer and the history provided by our installed base of products upon which the current versions were based.
The revenue related to products requiring installation that is perfunctory is recognized upon transfer of control of the product to customers, which generally is at the time of shipment. 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 and customer installation expectations.
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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. 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. 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 $
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. We establish a reserve for sales returns based on historical trends in product returns and estimates for new items. Payment terms are generally
We transfer certain products out of service from their internal use and make them available for sale. The products transferred are typically our standard products in one of the following areas: service loaners, rental or test units; engineering test units; or sales demonstration equipment. Once transferred, the equipment is sold by our regular sales channels as used equipment inventory. 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.
The following table represents our revenues by major categories:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
Net sales by type |
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
| ||||||
(in thousands) |
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| ||||||
Equipment |
| $ |
|
|
| ( | %) |
| $ |
|
| $ |
|
|
| ( | %) |
| $ |
| ||||
Adapter |
|
|
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|
| % |
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| ( | %) |
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| ||||||
Software and Maintenance |
|
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|
| ( | %) |
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|
|
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|
| ( | %) |
|
|
| ||||||
Total |
| $ |
|
| ( | %) |
| $ |
|
| $ |
|
| ( | %) |
| $ |
| ||||||
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 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.
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Income Tax
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. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, and any changes in the valuation allowance caused by a change in judgment about the realization of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.
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): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual 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.
NOTE 2 – INVENTORIES
Inventories consisted of the following components:
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| September 30, 2024 |
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| December 31, 2023 |
| ||
(in thousands) |
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Raw material |
| $ |
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| $ |
| ||
Work-in-process |
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Finished goods |
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Inventories |
| $ |
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| $ |
| ||
NOTE 3 – PROPERTY, PLANT AND EQUIPMENT, NET
Property and equipment consisted of the following components:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
(in thousands) |
|
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| ||
Leasehold improvements |
| $ |
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| $ |
| ||
Equipment |
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| ||
Sales demonstration equipment |
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| ||
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| ||
Less accumulated depreciation |
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Property and equipment, net |
| $ |
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| $ |
| ||
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NOTE 4 – OTHER ACCRUED LIABILITIES
Other accrued liabilities consisted of the following components:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
(in thousands) |
|
|
|
|
|
| ||
Lease liability - short term |
| $ |
|
| $ |
| ||
Product warranty |
|
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|
| ||
Sales return reserve |
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Other taxes |
|
|
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| ||
Other |
|
|
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| ||
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, 2024 |
|
| December 31, 2023 |
| ||
(in thousands) |
|
|
|
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|
| ||
Liability, beginning balance |
| $ |
|
| $ |
| ||
Net expenses |
|
|
|
|
|
| ||
Warranty claims |
|
| ( | ) |
|
| ( | ) |
Accrual revisions |
|
| ( | ) |
|
|
| |
Liability, ending balance |
| $ |
|
| $ |
| ||
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 Lease Commitments |
| |
(in thousands) |
|
|
| |
2024 (remaining) |
| $ |
| |
2025 |
|
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| |
2026 |
|
|
| |
2027 |
|
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| |
2028 & Thereafter |
|
|
| |
Total |
| $ |
| |
Less imputed interest |
|
| ( | ) |
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. 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 $
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The Redmond, Washington headquarters facility lease runs to
The following table presents supplemental balance sheet information related to leases as of September 30, 2024 and December 31, 2023:
|
| September 30, 2024 |
|
| December 31, 2023 |
| ||
(in thousands) |
|
|
|
|
|
| ||
Right-of-use assets (Long-term other assets) |
| $ |
|
| $ |
| ||
Lease liability-short term (Other accrued liabilities) |
|
|
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|
| ||
Lease liability-long term (Operating lease liabilities) |
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|
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| ||
As of September 30, 2024, the weighted average remaining lease term is
NOTE 6 – OTHER COMMITMENTS
We have purchase obligations for inventory and production costs as well as other obligations such as capital expenditures, service contracts, marketing, and development agreements. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transaction. 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 $
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.
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 $
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 $
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| Table of Contents |
NOTE 9 – EARNINGS PER SHARE
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.
Potential shares issuable upon the exercise of stock options are excluded from the calculation of diluted earnings per share to the extent their effect would be anti-dilutive.
The following table sets forth the computation of basic and diluted earnings per share:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, 2024 |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| September 30, 2023 |
| ||||
(in thousands except per share data) |
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| ||||
Numerator for basic and diluted |
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| ||||
earnings (loss) per share: |
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| ||||
Net income (loss) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |
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Denominator for basic |
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earnings (loss) per share: |
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Weighted-average shares |
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| ||||
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Employee stock options and awards |
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| ||||
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Denominator for diluted |
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earnings (loss) per share: |
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Adj weighted-average shares & |
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assumed stock option conversions |
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| ||||
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Basic and diluted |
|
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earnings (loss) per share: |
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |
Diluted earnings (loss) per share |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ |
| |
The weighted average number of shares outstanding used to compute earnings (loss) per share included the following:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, 2024 |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| September 30, 2023 |
| ||||
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| ||||
Restricted Stock Units |
|
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| ||||
Performance Stock Units |
|
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|
| ||||
Stock Option Unit |
|
| - |
|
|
|
|
|
|
|
|
|
| |||
Options to purchase
| 13 |
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NOTE 10 – SHARE-BASED COMPENSATION
For share-based awards granted, we have recognized compensation expense based on the estimated grant date fair value method. 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:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, 2024 |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| September 30, 2023 |
| ||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cost of goods sold |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Research and development |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling, general & administrative |
|
|
|
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|
|
|
|
|
|
|
| ||||
Total share-based compensation |
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||
Equity awards granted during the three and nine months ended September 30, 2024 and 2023 were as follows:
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| September 30, 2024 |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| September 30, 2023 |
| ||||
|
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|
|
|
|
|
|
|
|
|
|
| ||||
Restricted Stock Units |
|
|
|
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|
|
|
|
|
|
| ||||
Performance Stock Units |
|
| - |
|
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|
| |||
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
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, 2024 |
|
| September 30, 2023 |
| ||
|
|
|
|
|
|
| ||
Unamortized future equity compensation expense (in thousands) |
| $ |
|
| $ |
| ||
Remaining weighted average amortization period (in years) |
|
|
|
|
|
| ||
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| Table of Contents |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
General
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This Act provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about themselves as long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than statements of historical fact made in this Quarterly Report on Form 10-Q are forward-looking. In particular, statements herein regarding economic outlook; industry prospects and trends; expected business recovery; industry partnerships; future results of operations or financial position; future spending; expected expenses, breakeven revenue point; expected market decline, bottom or growth; market acceptance of our newly introduced or upgraded products or services; the sufficiency of our cash to fund future operations and capital requirements; development, introduction and shipment of new products or services; changing foreign operations; taxes, trade issues and tariffs; expected inventory levels; expectations for unsupported platform or product versions and related inventory and other charges; supply chain expectations; semiconductor chip shortages and recovery; and any other guidance on future periods are forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or other future events. Moreover, neither Data I/O nor anyone else assumes responsibility for the accuracy and completeness of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this Annual Report. The Reader should not place undue reliance on these forward-looking statements. The following discussions and the 2023 Annual Report on Form 10-K section entitled “Risk Factors – Cautionary Factors That May Affect Future Results” describe some, but not all, of the factors that could cause these differences.
OVERVIEW
Third quarter revenue at $5.4 million was down 17% compared with $6.6 million from the prior year period. Since the beginning of the year, automotive electronics uncertainty has increased and customer capacity expansion has slowed, resulting in lower system shipments in the Americas and Europe. Offsetting this headwind was the Asia channel which grew 29% in the third quarter and 26% year-to-date.
While sales of systems to the automotive market were below expectations, we continue to achieve steady performance from our programming centers, industrial markets and recurring revenue offerings. Specifically, our consumables, software and services grew 6% in the third quarter and currently represent 50% of our total year-to-date revenue, which provides a steady base of revenue to help offset the present Capex softness. Order backlog remains strong at $4.7 million as of September 30th, 2024 and down only $700,000 from the start of the quarter, with further reductions expected as planned customer deliveries occur in the next two quarters.
Third quarter operating expense was $3.2 million, down $334,000 or 9% from the prior year and down $1.3 million or 11% on a year-to-date basis. Core personnel, facilities, IT and other outside services costs declined through prioritization of critical initiatives and overall efficiency improvements. This lower and more efficient cost structure has partially mitigated the year-to-date revenue shortfall while positioning the Company to fund critical future growth initiatives.
Looking ahead, we expect continued near-term market headwinds, which will be partially mitigated by continued backlog reductions in the upcoming quarters, as well as leveraging the progress made on managing costs. Overall, we remain very solid financially with a strong cash position, no debt and improved cost and operating structures which enable us to begin implementing future market, product and operational initiatives to drive growth under new company leadership.
Finally, a Chief Executive Officer (“CEO”) transition was initiated with industry veteran and current Data I/O Board member, William “Bill” Wentworth, becoming President effective September 1, 2024, and CEO effective October 1, 2024. Bill replaced retiring Anthony Ambrose in his CEO role for Data I/O for the past twelve years.
| 15 |
| Table of Contents |
CRITICAL ACCOUNTING POLICY JUDGMENTS AND ESTIMATES
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires that we make estimates and judgments, which affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, sales returns, bad debts, inventories, income taxes, warranty obligations, restructuring charges, contingencies such as litigation and contract terms that have multiple elements and other complexities typical in the capital equipment industry. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements:
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. 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 three quarters 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.
We recognize revenue upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We have determined that our programming equipment has reached a point of maturity and stability such that product acceptance can be assured by testing at the factory prior to shipment and that the installation meets the criteria to be a separate performance obligation. These systems are standard products with published product specifications and are configurable with standard options. The evidence that these systems could be deemed as accepted was based upon having standardized factory production of the units, results from batteries of tests of product performance to our published specifications, quality inspections and installation standardization, as well as past product operation validation with the customer and the history provided by our installed base of products upon which the current versions were based.
The revenue related to products requiring installation that is perfunctory is recognized upon transfer of control of the product to customers, which generally is at the time of shipment. 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 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 price. 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. 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.
When we license 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.
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. We establish a reserve for sales returns based on historical trends in product returns and estimates for new items. Payment terms are generally 30 to 60 days from shipment.
| 16 |
| Table of Contents |
We transfer certain products out of service from their internal use and make them available for sale. The products transferred are typically our standard products in one of the following areas: service loaners, rental or test units; engineering test units; or sales demonstration equipment. Once transferred, the equipment is sold by our regular sales channels as used equipment inventory. 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.
Allowance for Credit Losses: We base the allowance for credit losses on our assessment of the losses collectively expected for the future, as well as collectability of specific customer accounts and the aging of accounts receivable. If there is deterioration of a major customer’s credit worthiness or actual defaults are higher than historical experience, or events forecast that collectively indicate some impairment is expected, our estimates of the recoverability of amounts due to us could be adversely affected.
Inventory: Inventories are stated at the lower of cost or net realizable value. Adjustments are made to standard cost, which approximates actual cost on a first-in, first-out basis. We estimate reductions to inventory for obsolete, slow-moving, excess and non-salable inventory by reviewing current transactions and forecasted product demand. We evaluate our inventories on an item-by-item basis and record inventory adjustments accordingly. If there is a significant decrease in demand for our products, uncertainty during product line transitions, or a higher risk of inventory obsolescence because of rapidly changing technology and customer requirements, we may be required to increase our inventory adjustments, and our gross margin could be adversely affected.
Warranty Accruals: We accrue for warranty costs based on the expected material and labor costs to fulfill our warranty obligations. If we experience an increase in warranty claims, which are higher than our historical experience, our gross margin could be adversely affected.
Tax Valuation Allowances: Given the uncertainty created by our loss history, as well as cyclical economic outlook for our industry, capital and geographic spending, as well as income and current net deferred tax assets by entity and country, we expect to continue to limit the recognition of net deferred tax assets and accounting for uncertain tax positions and maintain the tax valuation allowances. At the current time, we expect, therefore, that reversals of the tax valuation allowance will take place as we are able to take advantage of the underlying tax loss or other attributes in carry forward or their use by future income or circumstances allow us to realize these attributes. The transfer pricing and expense or cost sharing arrangements are complex areas in which judgments, such as the determination of arms-length arrangements, can be subject to challenges by different tax jurisdictions.
Share-based Compensation: We account for share-based awards made to our employees and directors, including employee stock option awards, performance stock unit awards and restricted stock unit awards, using the estimated grant date fair value method of accounting. For options, we estimate the fair value using the Black-Scholes valuation model and an estimated forfeiture rate. Restricted stock unit awards and performance stock unit awards are valued based on the average of the high and low price on the date of the grant and an estimated forfeiture rate. For options, performance and restricted stock unit awards, expense is recognized as compensation expense on the straight-line basis. Employee Stock Purchase Plan (“ESPP”) shares were issued under provisions that do not require us to record any equity compensation expense.
| 17 |
| Table of Contents |
RESULTS OF OPERATIONS:
NET SALES
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
Net sales by product line |
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Automated programming systems |
| $ | 4,012 |
|
|
| (23.8 | %) |
| $ | 5,267 |
|
| $ | 12,844 |
|
|
| (25.0 | %) |
| $ | 17,129 |
|
Non-automated programming systems |
|
| 1,411 |
|
|
| 9.0 | % |
|
| 1,294 |
|
|
| 3,740 |
|
| (7.9 | %) |
|
| 4,061 |
| |
Total programming systems |
| $ | 5,423 |
|
|
| (17.3 | %) |
| $ | 6,561 |
|
| $ | 16,584 |
|
|
| (21.7 | %) |
| $ | 21,190 |
|
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
Net sales by location |
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
United States |
| $ | 388 |
|
|
| 39.6 | % |
| $ | 278 |
|
| $ | 1,201 |
|
|
| (46.0 | %) |
| $ | 2,225 |
|
% of total |
|
| 7.2 | % |
|
|
|
|
|
| 4.2 | % |
|
| 7.2 | % |
|
|
|
|
|
| 10.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
| $ | 5,035 |
|
|
| (19.9 | %) |
| $ | 6,283 |
|
| $ | 15,383 |
|
|
| (18.9 | %) |
| $ | 18,965 |
|
% of total |
|
| 92.8 | % |
|
|
|
|
|
| 95.8 | % |
|
| 92.8 | % |
|
|
|
|
|
| 89.5 | % |
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
Net sales by type |
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Equipment sales |
| $ | 2,509 |
|
|
| (34.3 | %) |
| $ | 3,820 |
|
| $ | 8,228 |
|
|
| (33.8 | %) |
| $ | 12,428 |
|
Adapter sales |
|
| 2,005 |
|
|
| 10.6 | % |
|
| 1,813 |
|
|
| 5,667 |
|
| (6.5 | %) |
|
| 6,059 |
| |
Software and maintenance |
|
| 909 |
|
| (2.0 | %) |
|
| 928 |
|
|
| 2,689 |
|
| (0.5 | %) |
|
| 2,703 |
| ||
Total |
| $ | 5,423 |
|
| (17.3 | %) |
| $ | 6,561 |
|
| $ | 16,584 |
|
| (21.7 | %) |
| $ | 21,190 |
| ||
Net sales in the third quarter 2024 were $5.4 million, down 17% compared with $6.6 million in the third quarter 2023. Since the beginning of the year, automotive electronics uncertainty has increased and customer capacity expansion has slowed, resulting in lower system shipments in the Americas and Europe which are offsetting growth in Asia.
While the automotive system results are below expectations, the Company continues to achieve steady performance from programming centers, industrial markets, and its recurring revenue offerings. Third quarter 2024 recurring services and consumable adapter sales increased by 6% from the prior year, while system sales declined by 34% during the same periods.
Third-quarter bookings mirrored sales at $4.7 million, down from $5.3 million in the prior year. Backlog remains strong at $4.7 million as of September 30, 2024, down $0.7 million from the start of the quarter, with further reductions expected as planned customer deliveries occur in future quarters.
| 18 |
| Table of Contents |
GROSS MARGIN
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Gross margin |
| $ | 2,924 |
|
|
| (16.9 | %) |
| $ | 3,520 |
|
| $ | 8,900 |
|
|
| (27.0 | %) |
| $ | 12,195 |
|
Percentage of net sales |
|
| 53.9 | % |
|
|
|
|
|
| 53.7 | % |
|
| 53.7 | % |
|
|
|
|
|
| 57.6 | % |
Gross margin as a percentage of sales was 53.9% in the third quarter as compared to 53.7% in the prior year period. Despite lower sales volume, gross margin as a percentage of sales remained comparable to prior quarters in 2024 due to product mix favoring software and services over reduced system sales, and successful efforts to improve material, production and service costs through ongoing cost reduction initiatives. Year-to-date gross margin decline from prior year reflects lower sales volume on relatively fixed manufacturing and service costs.
RESEARCH AND DEVELOPMENT
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Research and development |
| $ | 1,544 |
|
|
| (2.1 | %) |
| $ | 1,577 |
|
| $ | 4,539 |
|
|
| (7.8 | %) |
| $ | 4,922 |
|
Percentage of net sales |
|
| 28.5 | % |
|
|
|
|
|
| 24.0 | % |
|
| 27.4 | % |
|
|
|
|
|
| 23.2 | % |
Research and development (“R&D”) expenses in the third quarter and year-to-date 2024 decreased compared to the same periods in 2023, primarily due to lower consulting and outside services in support of our product lines. Through prioritization and focus on key engineering programs, the company continues to efficiently invest in the research and development of new technology, products and services.
SELLING, GENERAL AND ADMINISTRATIVE
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Selling, general & |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
administrative |
| $ | 1,705 |
|
|
| (15.0 | %) |
| $ | 2,006 |
|
| $ | 6,112 |
|
|
| (12.7 | %) |
| $ | 7,003 |
|
Percentage of net sales |
|
| 31.4 | % |
|
|
|
|
|
| 30.6 | % |
|
| 36.9 | % |
|
|
|
|
|
| 33.0 | % |
Selling, General and Administrative (“SG&A”) expenses in the third quarter of 2024 decreased by approximately $300,000 or 15% from the prior year period primarily due to lower channel and sales commissions associated with lower sales volume, continued efficiency improvements and receipt of a $228,000 China subsidy grant to recognize past and promote continued local business development. All operational areas including sales, marketing, facilities, IT, finance and human resources contributed to these reductions through efficiency improvements and cost reductions throughout the year.
INTEREST
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Interest income |
| $ | 71 |
|
|
| 73.2 | % |
| $ | 41 |
|
| $ | 224 |
|
|
| 79.2 | % |
| $ | 125 |
|
Interest income was higher in the third quarter and year-to-date 2024 compared to the same periods in 2023 due to higher average interest rates and higher invested balances.
| 19 |
| Table of Contents |
INCOME TAXES
|
| Three Months Ended |
|
| Nine Months Ended |
| ||||||||||||||||||
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
|
| September 30, 2024 |
|
| Change |
|
| September 30, 2023 |
| ||||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Income tax benefit (expense) |
| $ | 0 |
|
|
| (100.0 | %) |
| $ | (16 | ) |
| $ | (393 | ) |
|
| 145.6 | % |
| $ | (160 | ) |
Income tax benefit (expense) for the third quarter of both 2024 and 2023, primarily related to foreign and some state taxes. Foreign income tax in the second quarter of 2024 was primarily a result of a China subsidiary dividend withholding tax of $337,000 paid in connection with a dividend repatriation to the U.S. parent company. Year-to-date income tax benefit (expense) was primarily due to the same factors as in the second quarter of 2024.
The effective tax rate differed from the statutory tax rate due primarily to the valuation allowance’s effect, 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.
Financial Condition
LIQUIDITY AND CAPITAL RESOURCES
|
| September 30, 2024 |
|
| Change |
|
| December 31, 2023 |
| |||
(in thousands) |
|
|
|
|
|
|
|
|
| |||
Working capital |
| $ | 17,614 |
|
| $ | (811 | ) |
| $ | 18,425 |
|
At September 30, 2024, our principal sources of liquidity consisted of existing cash and cash equivalents. The balance sheet remains strong with cash of $12.4 million at the end of the third quarter compared to $12.3 million on December 31, 2023. Cash increased slightly from the beginning of the year due to reduced operating expenses and improved collections of receivables, offset by lower revenue, higher inventories, cash expenses paid annually in the first quarter, and the second quarter tax repatriation expense of approximately $337,000. Correspondingly, working capital decreased by $811,000 during the year to $17.6 million as of September 30, 2024. The Company continues to have no debt.
Although we currently have no significant capital expenditure plans, we expect to continue to carefully make and manage expenditures to support the business. Engineering and production tooling, test equipment and sales demonstration products will continue to be purchased as we develop and release new products. Capital expenditures are expected to be funded by existing and internally generated funds.
As a result of our cyclical and seasonal industry, significant product development, customer support and selling and marketing efforts, we have required working capital to fund our operations. We have tried to balance our spending with our anticipated revenue levels and the goal of profitable operations. We have implemented or have on-going initiatives to reduce material and logistic costs, enhance product quality, increase operational and R&D efficiencies and minimize tax expenses.
We believe that we have sufficient cash or working capital available under our operating plan to fund our operations and capital requirements through the next one-year period, and beyond. Our working capital may be used to fund possible losses, business growth, project initiatives, share repurchases and business development initiatives, including acquisitions, which could reduce our liquidity and result in a requirement for additional cash before that time. Any substantial inability to achieve our current business plan could have a material adverse impact on our financial position, liquidity, or results of operations and may require us to further reduce expenditure and/or seek possible additional financing.
| 20 |
| Table of Contents |
OFF-BALANCE SHEET ARRANGEMENTS
Except as noted in the accompanying consolidated financial statements in Note 5, “Leases” and Note 6, “Other Commitments”, we have no off-balance sheet arrangements.
NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) FINANCIAL MEASURES
Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) was approximately ($267,000) in the third quarter of 2024 compared to $102,000 in the third quarter of 2023. Adjusted EBITDA, excluding equity compensation (a non-cash item), was approximately $37,000 in the third quarter of 2024, compared to $402,000 in the third quarter of 2023. Year-to-date Adjusted EBITDA was ($324,000) and $1.8 million for the periods ending September 30, 2024 and 2023, respectively.
Non-GAAP financial measures, such as EBITDA and adjusted EBITDA, should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding the Company’s results and facilitate the comparison of results. A reconciliation of net income to EBITDA and adjusted EBITDA follows:
NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) FINANCIAL MEASURE RECONCILIATION
|
| Three Months Ended September 30, |
|
| Nine Months Ended September 30, |
| ||||||||||
|
| 2024 |
|
| 2023 |
|
| 2024 |
|
| 2023 |
| ||||
(in thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net Income (loss) |
| $ | (307 | ) |
| $ | (53 | ) |
| $ | (1,911 | ) |
| $ | 342 |
|
Interest (income) |
|
| (71 | ) |
|
| (41 | ) |
|
| (224 | ) |
|
| (125 | ) |
Taxes |
|
| - |
|
|
| 16 |
|
|
| 393 |
|
|
| 160 |
|
Depreciation & amortization |
|
| 111 |
|
|
| 180 |
|
|
| 451 |
|
|
| 468 |
|
EBITDA earnings (loss) |
| $ | (267 | ) |
| $ | 102 |
|
| $ | (1,291 | ) |
| $ | 845 |
|
Equity compensation |
|
| 304 |
|
|
| 300 |
|
|
| 967 |
|
|
| 929 |
|
Adjusted EBITDA, excluding equity compensation |
| $ | 37 |
|
| $ | 402 |
|
| $ | (324 | ) |
| $ | 1,774 |
|
Recently Adopted Accounting Pronouncements
See Note 1 of Notes to Condensed Consolidated Financial Statements included in Part 1, Item 1 for a discussion of recently adopted accounting pronouncements.
| 21 |
| Table of Contents |
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of disclosure controls and procedures
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report (the “Evaluation Date”). Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective at a reasonable level of assurance. Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Changes in internal controls
There were no changes made in our internal controls during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting which is still under the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013).
| 22 |
| Table of Contents |
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of September 30, 2024, we were not a party to any material pending legal proceedings.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There are no material changes to the Risk Factors described in our Annual Report.
Item 2. Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information
None
| 23 |
| Table of Contents |
Item 6. Exhibits
10 | Material Contracts: | |
Executive Employment Agreement with William Wentworth dated August 19, 2024 | ||
| Transition Agreement with Anthony Ambrose dated August 19, 2024 | |
|
|
|
31 | Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002: | |
| ||
| ||
|
|
|
32 | Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002: | |
| ||
| ||
|
|
|
101 | Interactive Data Files Pursuant to Rule 405 of Regulation S-T | |
| 24 |
| Table of Contents |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
DATED: November 12, 2024
DATA I/O CORPORATION (REGISTRANT) | ||
| By: | /s/William Wentworth | |
William Wentworth President and Chief Executive Officer (Principal Executive Officer and Duly Authorized Officer) | ||
| By: | /s/Gerald Y. Ng | |
Gerald Y. Ng Vice President and Chief Financial Officer Secretary and Treasurer (Principal Financial Officer and Duly Authorized Officer) |
| |
| 25 |