(Mark
One)
|
|
☒
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|
For the
quarterly period ended
September
30, 2017
|
|
or
|
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
|
For the transition period from
________________ to
________________
|
Commission
file number:
0-10394
|
|
DATA I/O CORPORATION
|
|
(Exact
name of registrant as specified in its charter)
|
|
|
|
Washington
|
91-0864123
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
|
|
6645 185
th
Ave NE, Suite 100, Redmond, Washington, 98052
(Address
of principal executive offices, including zip code)
|
|
(425) 881-6444
(Registrant’s
telephone number, including area code)
|
|
|
Large accelerated filer
|
☐
|
Accelerated filer
|
☐
|
Non-accelerated
filer
|
☐
(Do not check if a smaller reporting
company)
|
Smaller reporting company
|
☒
|
|
|
Emerging
growth company
|
☐
|
D
ATA I/O CORPORATION
|
|||||
|
|||||
FORM 10-Q
|
|||||
For the Quarter Ended
September 30,
2017
|
|||||
|
|||||
INDEX
|
|||||
|
Page
|
||||
|
|
|
|
||
|
3
|
||||
|
|
|
|
||
|
14
|
||||
|
|
|
|
||
|
22
|
||||
|
|
|
|
||
|
22
|
||||
|
|
|
|
||
|
|
||||
|
|
|
|
||
|
22
|
||||
|
|
|
|
||
|
22
|
||||
|
|
|
|
||
|
22
|
||||
|
|
|
|
||
|
23
|
||||
|
|
|
|
||
|
23
|
||||
|
|
|
|
||
|
23
|
||||
|
|
|
|
||
|
23
|
||||
|
|
|
|
||
|
24
|
|
September 30,
2017
|
December 31,
2016
|
|
|
|
ASSETS
|
|
|
CURRENT
ASSETS:
|
|
|
Cash
and cash equivalents
|
$
15,164
|
$
11,571
|
Trade
accounts receivable, net of allowance for
|
|
|
doubtful
accounts of $104 and $96, respectively
|
5,233
|
4,725
|
Inventories
|
4,950
|
4,059
|
Other
current assets
|
537
|
483
|
TOTAL
CURRENT ASSETS
|
25,884
|
20,838
|
|
|
|
Property,
plant and equipment – net
|
2,158
|
1,875
|
Other
assets
|
45
|
63
|
TOTAL
ASSETS
|
$
28,087
|
$
22,776
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
CURRENT
LIABILITIES:
|
|
|
Accounts
payable
|
$
1,598
|
$
1,428
|
Accrued
compensation
|
3,273
|
2,208
|
Deferred
revenue
|
1,570
|
1,926
|
Other
accrued liabilities
|
1,029
|
703
|
TOTAL
CURRENT LIABILITIES
|
7,470
|
6,265
|
|
|
|
Long-term
other payables
|
438
|
479
|
|
|
|
COMMITMENTS
|
-
|
-
|
|
|
|
STOCKHOLDERS’
EQUITY
|
|
|
Preferred
stock -
|
|
|
Authorized,
5,000,000 shares, including
|
|
|
200,000
shares of Series A Junior Participating
|
|
|
Issued
and outstanding, none
|
-
|
-
|
Common
stock, at stated value -
|
|
|
Authorized,
30,000,000 shares
|
|
|
Issued
and outstanding, 8,240,711 shares as of September 30,
|
|
|
2017
and 8,015,746 shares as of December 31, 2016
|
18,836
|
19,204
|
Accumulated
earnings (deficit)
|
553
|
(3,360
)
|
Accumulated
other comprehensive income
|
790
|
188
|
TOTAL
STOCKHOLDERS’ EQUITY
|
20,179
|
16,032
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
28,087
|
$
22,776
|
|
|
|
See notes to consolidated financial statements
|
DATA I/O CORPORATION
|
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(in thousands, except per share amounts)
|
(UNAUDITED)
|
|
Three Months
Ended
September
30,
|
Nine Months
Ended
September
30,
|
||
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Net
sales
|
$
9,596
|
$
6,588
|
$
25,955
|
$
17,002
|
Cost
of goods sold
|
3,639
|
2,945
|
10,629
|
7,743
|
Gross
margin
|
5,957
|
3,643
|
15,326
|
9,259
|
Operating
expenses:
|
|
|
|
|
Research
and development
|
1,814
|
1,358
|
5,130
|
3,655
|
Selling,
general and administrative
|
2,319
|
1,664
|
6,300
|
4,766
|
Total
operating expenses
|
4,133
|
3,022
|
11,430
|
8,421
|
Operating
income
|
1,824
|
621
|
3,896
|
838
|
Non-operating
income (expense):
|
|
|
|
|
Interest
income
|
6
|
11
|
19
|
34
|
Gain
on sale of assets
|
72
|
-
|
363
|
-
|
Foreign
currency transaction gain (loss)
|
(66
)
|
(3
)
|
(158
)
|
41
|
Total
non-operating income
|
12
|
8
|
224
|
75
|
Income
before income taxes
|
1,836
|
629
|
4,120
|
913
|
Income
tax (expense)
|
(108
)
|
(4
)
|
(207
)
|
(12
)
|
Net
income
|
$
1,728
|
$
625
|
$
3,913
|
$
901
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings per share
|
$
0.21
|
$
0.08
|
$
0.48
|
$
0.11
|
Diluted
earnings per share
|
$
0.20
|
$
0.08
|
$
0.47
|
$
0.11
|
Weighted-average
basic shares
|
8,201
|
7,977
|
8,112
|
7,955
|
Weighted-average
diluted shares
|
8,467
|
8,183
|
8,400
|
8,083
|
|
|
|
|
|
See notes to consolidated financial statements
|
DATA I/O CORPORATION
|
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
|
(in thousands)
|
(UNAUDITED)
|
|
Three Months
Ended
September
30,
|
Nine Months
Ended
September
30,
|
||
|
2017
|
2016
|
2017
|
2016
|
|
|
|
|
|
Net
income
|
$
1,728
|
$
625
|
$
3,913
|
$
901
|
Other
comprehensive income:
|
|
|
|
|
Foreign
currency translation gain (loss)
|
248
|
(17
)
|
602
|
(77
)
|
Comprehensive
income
|
$
1,976
|
$
608
|
$
4,515
|
$
824
|
|
|
|
|
|
See notes to consolidated financial statements
|
Inventories
consisted of the following components:
|
|
|
|
September 30,
2017
|
December
31,
2016
|
(in
thousands)
|
|
|
Raw
material
|
$
2,806
|
$
2,402
|
Work-in-process
|
1,465
|
1,226
|
Finished
goods
|
679
|
431
|
Inventories
|
$
4,950
|
$
4,059
|
|
September 30,
2017
|
December
31,
2016
|
(in
thousands)
|
|
|
Leasehold
improvements
|
$
409
|
$
376
|
Equipment
|
5,293
|
4,449
|
Sales
demonstration equipment
|
1,102
|
1,158
|
|
6,804
|
5,983
|
Less
accumulated depreciation
|
4,646
|
4,108
|
Property and
equipment, net
|
$
2,158
|
$
1,875
|
|
September 30,
2017
|
December
31,
2016
|
(in
thousands)
|
|
|
Product
warranty
|
$
501
|
$
371
|
Sales
return reserve
|
80
|
50
|
Other
taxes
|
262
|
149
|
Other
|
186
|
133
|
Other
accrued liabilities
|
$
1,029
|
$
703
|
|
September
30,
2017
|
(in
thousands)
|
|
Liability,
beginning balance
|
$
371
|
Net
expenses
|
609
|
Warranty
claims
|
(609
)
|
Accrual
revisions
|
130
|
Liability,
ending balance
|
$
501
|
|
Operating Leases
|
(in
thousands)
|
|
2017
(remaining)
|
$
197
|
2018
|
909
|
2019
|
937
|
2020
|
919
|
2021
|
753
|
Thereafter
|
231
|
Total
|
$
3,946
|
|
Three
Months Ended
|
Nine
Months Ended
|
||
|
September 30,
2017
|
September 30,
2016
|
September 30,
2017
|
September 30,
2016
|
(in thousands
except per share data)
|
|
|
|
|
Numerator for basic
and diluted
|
|
|
|
|
earnings per
share:
|
|
|
|
|
Net
income
|
$
1,728
|
$
625
|
$
3,913
|
$
901
|
|
|
|
|
|
Denominator for
basic
|
|
|
|
|
earnings per
share:
|
|
|
|
|
weighted-average
shares
|
8,201
|
7,977
|
8,112
|
7,955
|
|
|
|
|
|
Employee stock
options and awards
|
266
|
206
|
288
|
128
|
|
|
|
|
|
Denominator for
diluted
|
|
|
|
|
earnings per
share:
|
|
|
|
|
adjusted
weighted-average shares &
|
|
|
|
|
assumed
conversions of stock options
|
8,467
|
8,183
|
8,400
|
8,083
|
|
|
|
|
|
Basic and
diluted
|
|
|
|
|
earnings per
share:
|
|
|
|
|
Total
basic earnings per share
|
$
0.21
|
$
0.08
|
$
0.48
|
$
0.11
|
Total
diluted earnings per share
|
$
0.20
|
$
0.08
|
$
0.47
|
$
0.11
|
|
Three
Months Ended
|
Nine
Months Ended
|
||
|
September 30,
2017
|
September 30,
2016
|
September 30,
2017
|
September 30,
2016
|
(in
thousands)
|
|
|
|
|
Cost of goods
sold
|
$
4
|
$
3
|
$
14
|
$
11
|
Research and
development
|
39
|
23
|
127
|
82
|
Selling, general
and administrative
|
130
|
84
|
399
|
316
|
Total share-based
compensation
|
$
173
|
$
110
|
$
540
|
$
409
|
|
|
|
|
|
Impact on net
earnings (loss) per share:
|
|
|
|
|
Basic and
diluted
|
$
(0.02
)
|
$
(0.01
)
|
$
(0.07
)
|
$
(0.05
)
|
|
Three Months
Ended
|
Nine Months
Ended
|
||
|
September
30,
2017
|
September
30,
2016
|
September
30,
2017
|
September
30,
2016
|
|
|
|
|
|
Risk-free interest
rates
|
1.72
%
|
N/A
|
1
.72
%
|
N/A
|
Volatility
factors
|
0.62
|
N/A
|
0.62
|
N/A
|
Expected life of
the option in years
|
4.00
|
N/A
|
4.00
|
N/A
|
Expected dividend
yield
|
None
|
N/A
|
None
|
N/A
|
|
Three
Months Ended
|
Nine
Months Ended
|
||
|
September 30,
2017
|
September 30,
2016
|
September 30,
2017
|
September 30,
2016
|
|
|
|
|
|
Restricted
Stock
|
51,000
|
3,000
|
286,600
|
225,100
|
Stock
Options
|
25,000
|
-
|
25,000
|
-
|
|
September 30,
2017
|
|
|
Unamortized future
equity compensation expense (in thousands)
|
$
2,722
|
Remaining weighted
average amortization period (in years)
|
3.19
|
|
Three
Months Ended
|
Nine
Months Ended
|
||||
Net
sales by product line
|
September 30,
2017
|
Change
|
September 30,
2016
|
September 30,
2017
|
Change
|
September 30,
2016
|
(in
thousands)
|
|
|
|
|
|
|
Automated
programming systems
|
$
7,766
|
49.5
%
|
$
5,196
|
$
21,193
|
58.0
%
|
$
13,417
|
Non-automated
programming systems
|
1,830
|
31.5
%
|
1,392
|
4,762
|
32.8
%
|
3,585
|
Total programming
systems
|
$
9,596
|
45.7
%
|
$
6,588
|
$
25,955
|
52.7
%
|
$
17,002
|
|
Three
Months Ended
|
Nine
Months Ended
|
||||
Net
sales by location
|
September 30,
2017
|
Change
|
September 30,
2016
|
September 30,
2017
|
Change
|
September 30,
2016
|
(in
thousands)
|
|
|
|
|
|
|
United
States
|
$
610
|
31.5
%
|
$
464
|
$
2,256
|
8.1
%
|
$
2,086
|
% of
total
|
6.4
%
|
|
7.0
%
|
8.7
%
|
|
12.3
%
|
|
|
|
|
|
|
|
International
|
$
8,986
|
46.7
%
|
$
6,124
|
$
23,699
|
58.9
%
|
$
14,916
|
% of
total
|
93.6
%
|
|
93.0
%
|
91.3
%
|
|
87.7
%
|
|
Three
Months Ended
|
Nine
Months Ended
|
||||
|
September 30,
2017
|
Change
|
September 30,
2016
|
September 30,
2017
|
Change
|
September 30,
2016
|
(in
thousands)
|
|
|
|
|
|
|
Gross
margin
|
$
5,957
|
63.5
%
|
$
3,643
|
$
15,326
|
65.5
%
|
$
9,259
|
Percentage of net
sales
|
62.1
%
|
|
55.3
%
|
59.0
%
|
|
54.5
%
|
|
Three
Months Ended
|
Nine
Months Ended
|
||||
|
September 30,
2017
|
Change
|
September 30,
2016
|
September 30,
2017
|
Change
|
September 30,
2016
|
(in
thousands)
|
|
|
|
|
|
|
Research and
development
|
$
1,814
|
33.6
%
|
$
1,358
|
$
5,130
|
40.4
%
|
$
3,655
|
Percentage of net
sales
|
18.9
%
|
|
20.6
%
|
19.8
%
|
|
21.5
%
|
|
Three
Months Ended
|
Nine
Months Ended
|
||||
|
September 30,
2017
|
Change
|
September 30,
2016
|
September 30,
2017
|
Change
|
September 30,
2016
|
(in
thousands)
|
|
|
|
|
|
|
Selling, general
&
|
|
|
|
|
|
|
administrative
|
$
2,319
|
39.4
%
|
$
1,664
|
$
6,300
|
32.2
%
|
$
4,766
|
Percentage of net
sales
|
24.2
%
|
|
25.3
%
|
24.3
%
|
|
28.0
%
|
|
Three
Months Ended
|
Nine
Months Ended
|
||||
|
September 30,
2017
|
Change
|
September 30,
2016
|
September 30,
2017
|
Change
|
September 30,
2016
|
(in
thousands)
|
|
|
|
|
|
|
Interest
income
|
$
6
|
(45.5
%)
|
$
11
|
$
19
|
(44.1
%)
|
$
34
|
|
Three
Months Ended
|
Nine
Months Ended
|
||
|
September 30,
2017
|
September 30,
2016
|
September 30,
2017
|
September 30,
2016
|
(in
thousands)
|
|
|
|
|
Income tax
(expense)
|
$
(108
)
|
$
(4
)
|
$
(207
)
|
$
(12
)
|
|
September 30,
2017
|
Change
|
December 31,
2016
|
(in
thousands)
|
|
|
|
Working
capital
|
$
18,414
|
$
3,841
|
$
14,573
|
|
Three
Months Ended
|
Nine
Months Ended
|
||
|
September 30,
2017
|
September 30,
2016
|
September 30,
2017
|
September 30,
2016
|
(in
thousands)
|
|
|
|
|
Net
Income
|
$
1,728
|
$
625
|
$
3,913
|
$
901
|
Interest
(income) expense
|
(6
)
|
(11
)
|
(19
)
|
(34
)
|
Taxes
|
108
|
4
|
207
|
12
|
Depreciation
& amortization
|
306
|
137
|
634
|
409
|
EBITDA
earnings
|
$
2,136
|
$
755
|
$
4,735
|
$
1,288
|
|
|
|
|
|
Equity
compensation
|
173
|
110
|
540
|
409
|
Adjusted EBITDA
earnings,
|
|
|
|
|
excluding
equity compensation
|
$
2,309
|
$
865
|
$
5,275
|
$
1,697
|
Period of Second Extended Term
|
Annual Rate Per Square Foot (rounded to the nearest 100
th
of a
dollar)
|
Monthly Base Rent
|
5/1/21
– 8/31/21
|
$17.97
|
$30,638.85
|
9/1/21
– 7/31/22
|
$18.50
|
$31,542.50
|
|
LANDLORD:
|
|
|
|
BRE WA OFFICE OWNER LLC, a Delaware limited liability
company
By:
/s/Alan
Walker
Name:
Alan
Walker
Title:
SVP
|
|
|
|
|
|
|
|
TENANT:
|
|
DATA I/O CORPORATION, a Washington corporation
By:
/s/ Joel S
Hatlen
Name:
Joel S
Hatlen
Title:
VP / COO /
CFO
|