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, impact of
novel coronavirus or COVID-19; industry prospects and trends;
expected business recovery; industry partnerships; future results
of operations or financial position; future spending; 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; trade issues and
tariffs; expected inventory levels; expectations for unsupported
platform or product versions and related inventory and other
charges; 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 Quarterly Report. The Reader should
not place undue reliance on these forward-looking statements.
The discussions above and in the section in Item 1A., Risk Factors
“Cautionary Factors That May Affect Future Results” in
our Annual report on Form 10-K for the year ended December 31,
2019, describe some, but not all, of the factors that could cause
these differences.
OVERVIEW
After a
weak first half of 2020, business started to recover from COVID-19
related country and customer business shutdowns. In response
to suddenly changing business conditions, we had scaled back
planned investments and reduced our current spending. Despite
the spending reductions, we continue to invest with a long-term
focus towards expanding our markets and creating unique value for
our customers. This is true for both our traditional core business
as well as the emerging security deployment business. During Q3, we
continued this course of response and actions. Our facilities and
operations in the different countries adapted to the local
conditions and restrictions. We have and are taking advantage of
government programs to assist during the pandemic to the extent we
are qualified to participate. We have adapted to embrace virtual
and remote operations for our employees, sales, and service and
avoid travel and non-social distanced interactions.
Our
short-term challenge continues to be operating in a cyclical,
COVID-19 impacted, and rapidly evolving industry environment.
During the first three quarters of 2020, Q2 was the business level
bottom for our automotive electronics business, which improved in
Q3. We must balance industry changes, industry partnerships, new
technologies, business geography shifts, travel and customer
restrictions, customer shut downs, exchange rate volatility, trade
issues and tariffs, coronavirus impacts, increasing costs and
strategic investments in our business with the level of demand and
mix of business we expect. We continue to manage our costs
carefully and execute strategies for cash preservation, protecting
our employee base and cost reductions. Many of our employees worked
remotely from home, with the essential production and process
workers onsite as part of our essential operations.
We are
focusing our research and development efforts in our strategic
growth markets, namely automotive electronics and IoT new
programming technologies, secure supply chain solutions, automated
programming systems and their enhancements for the manufacturing
environment and software. We are continuing to develop technology
to securely provision new categories of semiconductors, including
Secure Elements, Authentication Chips, and Secure Microcontrollers.
In Q3, we released updated SentriX hardware and tools which
simplify the customer acquisition process, and reduce dependency on
third party suppliers. We also upgraded SentriX systems in the
field to this new architecture. We plan to deliver new programming
technology and automated handling systems for managed and secure
programming in the manufacturing environment. We continue to
focus on extending the capabilities and support for our product
lines and supporting the latest semiconductor devices, including
various configurations of NAND Flash, e-MMC, UFS and
microcontrollers on our newer products.
Our
customer focus has been on global and strategic high-volume
manufacturers in key market segments like automotive electronics,
IoT, industrial controls and consumer electronics, as well as
programming centers.
Although
the long-term prospects for our strategic growth markets should be
good, these markets and our business have been, and are likely to
continue to be, adversely impacted by the global pandemic of novel
coronavirus or COVID-19.
As a
global company with 92% of our 2019 sales in international markets,
we have been and expect to continue to be significantly impacted by
the COVID-19 pandemic, which started to impact us first in China
and has since spread to Asia, USA, Europe and all other markets we
serve. During Q3 we have seen that our China operations have
resumed onsite quasi-normal activities. Automotive facilities that
had largely shut down in Q2 were operating and ramping to more
normal production. Our European operations opened up for travel and
limited customer site visits for technical support. Our Americas
operations continue to be relatively restricted as local areas
begin opening but international travel is very restricted or
generally banned. Although our facilities in Shanghai, Redmond and
Germany are currently operating in pandemic related restricted
ways, we believe that our classification as essential by certain
U.S. customer groups has and will continue to keep operations
open. We source other components from China and other
countries that are used to manufacture our equipment in China and
in our Redmond, Washington facility and these components may not be
readily available or subject to unpredictable delays. Many of
our employees and executives are working from home and we are
limiting visitors to our facilities as the pandemic
continues. All of our facilities are subject to restrictions
and closure by governmental entities. The pandemic has and may
continue to impact our revenues, our ability to obtain key
components and to manufacture our products, as well as sell,
install and support our products around the world. We expect to
continue to be impacted and respond to customer site restrictions
on sales and service visits, travel restrictions, closed borders,
cancelled trade shows and industry gatherings, and modifications in
our operations to allow social distancing. See also the detailed
discussion of the impacts of the coronavirus COVID-19 on our
business and markets in Item 1A, Risk Factors in our annual report
on Form 10-K. The pandemic could have the effect of heightening
many of the other risks described in it. Annual projections on
spending, growth, mix, and profitability have been and are likely
to be further revised substantially as new information is
obtained.
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,
intangible assets, 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: Topic 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 2020 and 2019, 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 considers the complexity, skill and training needed as well as
customer expectations regarding installation.
We
enter into arrangements with multiple performance obligations that
arise during the sale of a system that includes an installation
component, a service and support component and a software
maintenance component. The transaction price is allocated to the
separate performance obligations on relative standalone sales
price. We allocate the transaction price of each element based on
relative selling prices. Relative selling price is based on the
selling price of the standalone system. For the installation and
service and support performance obligations, we use the value of
the discount given to distributors who perform these components.
For software maintenance performance obligations, we use what we
charge for annual software maintenance renewals after the initial
year the system is sold. Revenue is recognized on the system sale
based on shipping terms, installation revenue is recognized after
the installation is performed, and hardware service and support and
software maintenance revenue is recognized ratably over the term of
the agreement, typically one year. Deferred revenue includes
service, support and maintenance contracts and represents the
undelivered performance obligation of agreements that are typically
for one year.
When we
sell 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 30 days from shipment.
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 an equipment
warranty, and are conducted as sales in our normal and ordinary
course of business. 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 Doubtful Accounts: We base the allowance for
doubtful accounts receivable on our assessment of the
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, 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 the current and ongoing cyclical and
COVID-19 related uncertain economic outlook for our industry and
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 where 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 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, which requires the input of highly
subjective assumptions, including the option’s expected life
and the price volatility of the underlying stock. The expected
stock price volatility assumption was determined using the
historical volatility of our common stock. Changes in the
subjective assumptions required in the valuation model may
significantly affect the estimated value of the awards, the related
stock-based compensation expense and, consequently, our results of
operations. Restricted 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 both options and restricted 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.
RESULTS OF OPERATIONS:
NET SALES
|
|
|
Net
sales by product line
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
Automated
programming systems
|
$4,736
|
83.1%
|
$2,587
|
$11,685
|
(3.0%)
|
$12,041
|
Non-automated
programming systems
|
1,211
|
(0.8%)
|
1,221
|
3,702
|
1.2%
|
3,659
|
Total programming
systems
|
$5,947
|
56.2%
|
$3,808
|
$15,387
|
(2.0%)
|
$15,700
|
|
|
|
Net
sales by location
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
United
States
|
$445
|
14.4%
|
$389
|
$1,007
|
(25.7%)
|
$1,355
|
% of
total
|
7.5%
|
|
10.2%
|
6.5%
|
|
8.6%
|
|
|
|
|
|
|
|
International
|
$5,502
|
60.9%
|
$3,419
|
$14,380
|
0.2%
|
$14,345
|
% of
total
|
92.5%
|
|
89.8%
|
93.5%
|
|
91.4%
|
|
|
|
Net
sales by type
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
Equipment
sales
|
$3,861
|
146.4%
|
$1,567
|
$8,924
|
1.2%
|
$8,815
|
Adapter
sales
|
1,246
|
(7.2%)
|
1,342
|
3,915
|
(7.3%)
|
4,223
|
Software and
maintenance
|
840
|
(6.6%)
|
899
|
2,548
|
(4.3%)
|
2,662
|
Total programming
systems
|
$5,947
|
56.2%
|
$3,808
|
$15,387
|
(2.0%)
|
$15,700
|
Net
sales in the third quarter of 2020 were $5.9 million, as compared
with $3.8 million in the prior year period and $4.7 million in the
second quarter of 2020. Third quarter 2020 booking were $5.6
million, as compared with $4.3 million in the prior year period and
$5.0 million in second quarter of 2020.
On a
geographic basis, international sales represented approximately
92.5% of total net sales for the third quarter of 2020 compared
with 89.8% in the prior year period. Total capital equipment sales
were 65% of revenues, adapters were 21% and software and
maintenance revenues were 14% of revenues respectively in the third
quarter of 2020 compared with 41% and 35% and 24% respectively for
the third quarter of 2019.
Our
turnaround in financial performance in the third quarter of 2020 is
bolstered by what appears to be a bottoming out of our primary
addressable market for automotive electronics in the second
quarter. We are keeping a close watch on the so called COVID
‘second wave’. Europe’s ‘second wave”
policy response currently is primarily various forms of
‘lockdowns’.
Net
sales for the first nine months of 2020 were $15.4 million, as
compared with $15.7 million in the same period in 2019 and declined
primarily due to COVID related impacts, especially on the
automotive electronics market.
GROSS MARGIN
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
Gross
margin
|
$3,277
|
63.7%
|
$2,002
|
$8,500
|
(8.3%)
|
$9,270
|
Percentage of net
sales
|
55.1%
|
|
52.6%
|
55.2%
|
|
59.0%
|
Gross
margin as a percentage of sales in the third quarter of 2020 was
55.1% as compared to 52.6% in the same period last year. The 2020
third quarter gross margin was primarily impacted by fixed costs
being spread over higher revenue as compared to prior periods, and
a favorable channel and revenue mix as compared to the second
quarter of 2020.
Gross
margin as a percentage of sales for the first nine months of 2020
was 55.2% as compared to 59.0% in the same period last year. Gross
margin for the first nine months of 2020 was primarily impacted
by lower revenues and unfavorable currency
fluctuations.
RESEARCH AND DEVELOPMENT
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
Research and
development
|
$1,567
|
4.0%
|
$1,507
|
$4,763
|
(2.2%)
|
$4,868
|
Percentage of net
sales
|
26.3%
|
|
39.6%
|
31.0%
|
|
31.0%
|
Research
and development (“R&D”) expenses were slightly
higher in the third quarter of 2020 and slightly lower for the nine
months ending September 30, 2020 due to expense management and
planned increases in engineering spending and relates to continued
advancements in our technology solutions.
SELLING, GENERAL AND ADMINISTRATIVE
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
Selling, general
& administrative
|
$1,810
|
17.9%
|
$1,535
|
$5,324
|
(0.3%)
|
$5,338
|
Percentage of net
sales
|
30.4%
|
|
40.3%
|
34.6%
|
|
34.0%
|
Selling,
General and Administrative (“SG&A”) expenses were
higher in the third quarter of 2020 compared to the same period in
2019 primarily due to increases relating to higher stock-based
compensation, contractor costs and business-level
variable expenses such as higher sales
commissions related to channel mix and volume. Partially
offsetting these were certain reductions in work hours, pay cuts
and various government assistance programs taken in
response to COVID-19 which impacted a portion of our third
quarter 2020 results as this flowed into the period from actions
taken in the second quarter. Also, due to COVID-19
limitations, we continued
to reduce travel, trade show and other promotional
activities.
INTEREST
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
Interest
income
|
$4
|
(84.0%)
|
$25
|
$13
|
(72.3%)
|
$47
|
Interest
income was lower in the third quarter and year to date 2020
compared to the same periods in 2019 primarily due to lower
invested funds and lower interest rates.
INCOME TAXES
|
|
|
|
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
|
|
Income tax benefit
(expense)
|
$(340)
|
518.2%
|
$(55)
|
$(442)
|
750.0%
|
$(52)
|
Income
tax for both the third quarter of 2020 and the same period in 2019,
primarily related to foreign and state taxes. In addition to the US
domestic benefit realized from converting remaining sequestered AMT
credits, that had a full valuation allowance on such credits, into
a receivable of approximately $42,000, resulting from IRS rule
changes allowing the release of previously sequestered AMT
credits.
The
effective tax rate differed from the statutory tax rate primarily
due to the effect of valuation allowances, as well as foreign
taxes. We have a valuation allowance of $8.3 million as of
September 30, 2020. As of September 30 for both 2020 and 2019, our
deferred tax assets and valuation allowance have been reduced by
approximately $370,000 and $335,000, respectively, associated with
the requirements of accounting for uncertain tax positions. 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. The CARES
Act, initiated in Q1 2020, accelerated the AMT credit refund of
$640,000 to be a current asset instead of non-current.
Due to
repatriations of cash from China and Canada, we were required to
pay $260,000 in withholding tax during 2020, as compared with no
withholding tax during 2019. Movements of cash that generate local
country withholding taxes will be expected to be a current tax
expense that will create additional deferred tax assets that will
create additional tax valuation allowances.
Financial Condition
LIQUIDITY AND CAPITAL RESOURCES
|
|
|
|
(in
thousands)
|
|
|
|
Working
capital
|
$18,273
|
$(224)
|
$18,497
|
At
September 30, 2020, our principal sources of liquidity consisted of
existing cash and cash equivalents. Cash decreased $954,000 from
December 31, 2019 primarily funding current year net loss and
prepaid items, offset, in part, by collections on accounts
receivables.
Net
working capital at the end of the third quarter was $18.3 million,
down slightly from $18.5 million at December 31, 2019. The CARES
Act acceleration of the AMT credit refund to current assets, offset
some of the other declines in current assets. The company continues
to have no debt.
Although
we have no significant external capital expenditure plans
currently, we expect that we will continue to make and manage
carefully capital expenditures to support our business. We plan to
increase our internally developed rental, security provisioning,
sales demonstration and test equipment as we develop and release
new products. Capital expenditures are currently 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 substantial working capital to fund our operations.
We have tried to balance our level of development spending with the
goal of profitable operations or managing down business levels
related to COVID-19. We have implemented or have initiatives to
implement geographic shifts in our operations, optimize real estate
usage, reduce exposure to the impact of currency volatility and
tariffs, increase product development differentiation, and reduce
costs.
We
believe that we have sufficient cash or working capital available
under our operating plan to fund our operations and capital
requirements through at least the next one-year period. We may
require additional cash at the U.S. headquarters, which could cause
potential repatriation of cash that is held in our foreign
subsidiaries. We have liquidated our subsidiary in Canada and
repatriated its cash. For any repatriation, there may be tax and
other impediments to any repatriation actions. As many
repatriations typically have associated withholding taxes, those
withheld will be a current tax without generating a current or
deferred tax benefit. 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 reduce expenditures
and/or seek possible additional financing.
OFF-BALANCE SHEET ARRANGEMENTS
Except
as noted in the accompanying consolidated financial statements in
Note 5, “Operating Lease Commitments” 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 ($197,000) in the third quarter of
2020, compared to EBITDA of ($566,000) in
the third quarter of 2019. Adjusted EBITDA,
excluding equity compensation (a non-cash item), was $169,000 in
the third quarter of 2020, compared to adjusted EBITDA
of ($306,000) in the third quarter of
2019.
Earnings
before interest, taxes, depreciation and amortization
(“EBITDA”) was ($1,269,000) in the nine months ended
September 30, 2020 compared to EBITDA of ($14,000) in the
same period of 2019. Adjusted EBITDA, excluding equity
compensation (a non-cash item), was ($173,000) in the nine months
ended September 30, 2020, compared to $897,000 in the same period
of 2019.
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,
|
|
|
|
|
|
(in
thousands)
|
|
|
|
|
Net Income
(loss)
|
$(707)
|
$(844)
|
$(2,318)
|
$(691)
|
Interest
(income)
|
(4)
|
(25)
|
(13)
|
(47)
|
Taxes
|
340
|
55
|
442
|
52
|
Depreciation
& amortization
|
174
|
248
|
620
|
672
|
EBITDA earnings
(loss)
|
$(197)
|
$(566)
|
$(1,269)
|
$(14)
|
|
|
|
|
|
Equity
compensation
|
366
|
260
|
1,096
|
911
|
Adjusted EBITDA
earnings (loss),
|
|
|
|
|
excluding
equity compensation
|
$169
|
$(306)
|
$(173)
|
$897
|
Recently Adopted Accounting Pronouncements
None.
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 the 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).