NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nature of Operations
Data I/O
Corporation (“Data I/O”, “We”,
“Our”, “Us”) designs, manufactures and
sells programming systems used by designers and manufacturers of
electronic products. Our programming system products are used to
program integrated circuits (“ICs” or
“devices” or “semiconductors”) with the
specific unique data necessary for the ICs contained in various
products, and are an important tool for the electronics industry
experiencing growing use of programmable ICs. 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.
Principles of Consolidation
The
consolidated financial statements include the accounts of
Data I/O Corporation and our wholly-owned subsidiaries.
Intercompany accounts and transactions have been eliminated in
consolidation.
Use of Estimates
The
preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America
(“U.S. GAAP”) requires management to make estimates and
assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Significant
estimates include:
●
Allowance for
Doubtful Accounts
●
Tax Valuation
Allowances
●
Share-based
Compensation
Foreign Currency Translation
Assets
and liabilities of foreign subsidiaries are translated at the
exchange rate on the balance sheet date. Revenues, costs and
expenses of foreign subsidiaries are translated at average rates of
exchange prevailing during the year. Translation adjustments
resulting from this process are charged or credited to
stockholders’ equity. Realized and unrealized gains and
losses resulting from the effects of changes in exchange rates on
assets and liabilities denominated in foreign currencies are
included in non-operating expense as foreign currency transaction
gains and losses.
Cash and Cash Equivalents
All
highly liquid investments purchased with an original maturity of 90
days or less are considered cash equivalents. We maintain our
cash and cash equivalents with major financial institutions in the
United States of America, which are insured by the Federal Deposit
Insurance Corporation (FDIC), and in foreign jurisdictions.
Deposits in U.S. banks exceed the FDIC insurance limit. We
have not experienced any losses on our cash and cash
equivalents. Cash and cash equivalents held in foreign bank
accounts, primarily China, Germany and Canada, totaled (in
millions) $8.7 at December 31, 2019 and $6.4 at December 31,
2018.
Fair Value of Financial Instruments
Certain
financial instruments are carried at cost on the consolidated
balance sheets, which approximates fair value due to their
short-term, highly liquid nature. These instruments include cash
and cash equivalents, accounts receivable, accounts payable and
accrued expenses, and other short-term liabilities.
Accounts Receivable
The
majority of our accounts receivable are due from companies in the
electronics manufacturing industries. Credit is extended based on
an evaluation of a customer’s financial condition and,
generally, collateral is not required. Accounts receivable are
typically due within 30 to 60 days and are stated at amounts due
from customers net of an allowance for doubtful accounts. Accounts
receivable outstanding longer than the contractual payment terms
are considered past due. We determine the allowance by considering
a number of factors, including the length of time trade accounts
receivable are past due, the industry and geographic payment
practices involved, our previous bad debt experience, the
customer’s current ability to pay their obligation to us, and
the condition of the general economy and the industry as a whole.
We write off accounts receivable when they become uncollectible,
and payments subsequently received on such receivables are credited
to the allowance for doubtful accounts. Interest may be charged, at
the discretion of management and according to our standard sales
terms, beginning on the day after the due date of the receivable.
However, interest income is subsequently recognized on these
accounts either to the extent cash is received, or when the future
collection of interest and the receivable balance is considered
probable by management.
Inventories
Inventories
are stated at the lower of cost or net realizable value with cost
being the currently adjusted standard cost, which approximates cost
on a first-in, first-out basis. We estimate changes 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 an
adjustment (lower of cost or net realizable value)
accordingly.
Property, Plant and Equipment
Property,
plant and equipment, including leasehold improvements, are stated
at cost and depreciation is calculated over the estimated useful
lives of the related assets or lease terms on the straight-line
basis. We depreciate substantially all manufacturing and office
equipment over periods of three to seven years. We depreciate
leasehold improvements over the remaining portion of the lease or
over the expected life of the asset if less than the remaining term
of the lease.
We
regularly review all of our property, plant and equipment for
impairment whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. If the total of
future undiscounted cash flows is less than the carrying amount of
these assets, an impairment loss, if any, based on the excess of
the carrying amount over the fair value of the assets, is recorded.
Based on this evaluation, no impairment was noted for property,
plant and equipment for the years ended December 31, 2019 and
2018.
Patent Costs
We
expense external costs, such as filing fees and associated attorney
fees, incurred to obtain initial patents, but capitalize patents
obtained through acquisition as intangible assets. We also expense
costs associated with maintaining and defending patents subsequent
to their issuance.
Income Taxes
Income
taxes 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.
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 single-option 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.
Revenue Recognition
Effective
January 1, 2018, the Company adopted ASU 2014-09, Revenue
(“Topic 606”): Revenue from Contracts with Customers,
using the modified retrospective method. 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.
Our
basic revenue recognition remains essentially the same as it was in
2017. The adoption of Topic 606 did not have a material impact on
our 2018 financial statement line items, either individually or in
the aggregate, and would not have been material to 2017 financial
results. We have elected the practical expedient to 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
2019, the impact of capitalization of incremental costs for
obtaining contracts was immaterial. We have made a sales tax policy
election to 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 takes into account 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.
The
following table represents our revenues by major
categories:
Net
sales by type
|
|
|
(in
thousands)
|
|
|
Equipment
Sales
|
$12,553
|
$19,002
|
Adapter
Sales
|
5,535
|
6,954
|
Software and
Maintenance Sales
|
3,480
|
3,268
|
Total
|
$21,568
|
$29,224
|
Leases - Accounting Standards Codification 842
Leases
arise from contracts which convey the right to control the use of
identified property or equipment for a period of time in exchange
for consideration. Our leasing arrangements are primarily for
office space we use to conduct our operations. In addition, there
are automobiles and a small amount of office equipment leased. We
determine whether contracts include a lease at the inception date,
which is generally upon contract signing, considering factors such
as whether the contract includes an asset which is physically
distinct, which party obtains substantially all of the capacity and
economic benefit of the asset, and which party directs how, and for
what purpose, the asset is used during the contractual period of
use. Our leases commence when the lessor makes the asset available
for our use. At commencement we record a lease liability at the
present value of future lease payments, net of any future lease
incentives to be received. Some of our lease agreements include
cancellable future periods subject to termination or extension
options. We include cancellable lease periods in our future lease
payments when we are reasonably certain to continue to utilize the
asset for those periods. We calculate the present value of future
lease payments at commencement using a discount rate which we
estimate as the collateralized borrowing rate we believe that would
be incurred on our future lease payments over a similar term. At
commencement we also record a corresponding right-of-use asset,
which is calculated based on the amount of the lease liability,
adjusted for any advance lease payments paid, initial direct costs
incurred or lease incentives received prior to commencement.
Right-of-use assets are subject to evaluation for impairment or
disposal on a basis consistent with other long-lived
assets.
Leases
are classified at commencement as either operating or finance
leases. As of December 31, 2019, all of our leases are classified
as operating leases. Rent expense for operating leases is
recognized on the straight-line method over the term of the
agreement beginning on the lease commencement date.
In
accounting for leases, we utilize certain practical expedients and
policy elections available under the lease accounting standard. For
example, we do not record right-of-use assets or lease liabilities
for leases with terms of 12 months or less. For contracts
containing real estate leases, we do not combine lease and
non-lease components. The primary impact of this policy election is
that we do not include in our calculation of lease liabilities any
fixed and noncancelable future payments due under the contract for
items such as common area maintenance, utilities and other costs.
Lease-related costs which are variable rather than fixed are
expensed in the period incurred.
Assumptions,
judgments and estimates impacting the carrying value of our
right-of-use assets and liabilities include evaluating whether an
arrangement contains a lease, determining whether the lease term
should include any cancellable future periods, estimating the
discount rate used to calculate our lease liabilities, estimating
the fair value and useful life of the leased asset for the purpose
of classifying the lease as an operating or finance lease,
evaluating whether a lease contract amendment represents a new
lease agreement or a modification to the existing lease and
evaluating our right-of-use assets for impairment.
Research and Development
Research
and development costs are generally expensed as
incurred.
Advertising Expense
Advertising
costs are expensed as incurred. Total advertising expenses were
approximately $173,000 and $174,000 in 2019 and 2018,
respectively.
Warranty Expense
We
record a liability for an estimate of costs that we expect to incur
under our basic limited warranty when product revenue is
recognized. Factors affecting our warranty liability include the
number of units sold and historical and anticipated rates of claims
and costs per claim. We normally provide a warranty for our
products against defects for periods ranging from ninety days to
one year. We provide for the estimated cost that may be incurred
under our product warranties and periodically assess the adequacy
of our warranty liability based on changes in the above factors. We
record revenues on extended warranties on a straight-line basis
over the term of the related warranty contracts. Service costs are
expensed as incurred.
Earnings (Loss) Per Share
Basic
earnings (loss) per share exclude any dilutive effects of stock
options. Basic earnings (loss) per share are computed using the
weighted-average number of common shares outstanding during the
period. Diluted earnings per share are computed using the
weighted-average number of common shares and common stock
equivalent shares outstanding during the period. The common stock
equivalent shares from equity awards used in calculating diluted
earnings per share were 65,000 and 136,000 for the years ended
December 31, 2019 and 2018, respectively. Options to purchase
29,752 and 25,000 shares of common stock were outstanding as of
December 31, 2019 and 2018, respectively, but were excluded from
the computation of diluted EPS for the period then ended because
the options were anti-dilutive.
Diversification of Credit Risk
Financial
instruments, which potentially subject us to concentrations of
credit risk, consist primarily of trade receivables. Our trade
receivables are geographically dispersed and include customers in
many different industries. Two customers accounted for greater than
10% of our consolidated accounts receivable balance at December 31,
2019: Flextronics and Panasonic represented 17% and 15% of that
balance, respectively. As of December 31, 2018, three customers
each accounted for greater than 10% of our consolidated accounts
receivable balance at December 31, 2018: Systemation, Continental
and Semitron. Our consolidated accounts receivable balance as of
December 31, 2019 and 2018 includes foreign accounts receivable in
the functional currency of our foreign subsidiaries amounting to
$1,255,000 and $1,931,000, respectively. We generally do business
with our foreign distributors in U.S. Dollars. We believe that risk
of loss is significantly reduced due to the diversity of our
end-customers and geographic sales areas. We perform on-going
credit evaluations of our customers’ financial condition and
require collateral, such as letters of credit and bank guarantees,
or prepayment whenever deemed necessary.
New Accounting Pronouncements
We adopted the new lease accounting standard, ASC 842, on January
1, 2019 using the modified retrospective transition method, and
recorded a balance sheet adjustment on the date of adoption. In
2018, we accounted for leases under ASC 840. In adopting ASC 842,
we utilized certain practical expedients available under the
standard. These practical expedients include waiving reassessment
of conclusions reached under the previous lease standard as to
whether contracts contain leases, not recording right-of-use assets
or lease liabilities for leases with terms of 12 months or less,
how to classify leases identified and how to account for initial
direct costs incurred. We also utilized the practical expedient to
use hindsight as of the date of adoption to determine the terms of
our leases and to evaluate our right-of-use assets for
impairment.
In June 2016, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standards Update
(“ASU”) 2016-13, Financial Instruments - Credit Losses
(Topic 326), which updates the guidance related to the measurement
of credit losses on financial instruments, including trade
receivables. This ASU requires the recognition of credit losses on
financial instruments based on an estimate of expected losses,
replacing the incurred loss model in the prior guidance. The new
guidance is effective for annual periods beginning after December
15, 2019, including interim periods within those fiscal years. The
Company does not expect the adoption of ASU 2016-13 will have a
material impact on the consolidated financial
statements.
NOTE 2 – ACCOUNTS RECEIVABLE, NET
|
|
|
(in
thousands)
|
|
|
Trade accounts
receivable
|
$4,179
|
$3,846
|
Less allowance for
doubtful receivables
|
80
|
75
|
Trade accounts
receivable, net
|
$4,099
|
$3,771
|
Changes
in Data I/O’s allowance for doubtful accounts are as
follow:
|
|
|
(in
thousands)
|
|
|
Beginning
balance
|
$75
|
$73
|
Bad debt expense
(reversal)
|
5
|
2
|
Accounts
written-off
|
-
|
-
|
Recoveries
|
-
|
-
|
Ending
balance
|
$80
|
$75
|
NOTE 3– INVENTORIES
|
|
|
(in
thousands)
|
|
|
Raw
material
|
$2,416
|
$2,925
|
Work-in-process
|
1,832
|
1,584
|
Finished
goods
|
772
|
676
|
Inventories
|
$5,020
|
$5,185
|
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT, NET
|
|
|
(in
thousands)
|
|
|
Leasehold
improvements
|
$395
|
$399
|
Equipment
|
5,606
|
5,378
|
Sales
demonstration equipment
|
778
|
942
|
|
6,779
|
6,719
|
Less
accumulated depreciation
|
5,111
|
4,734
|
Property and
equipment, net
|
$1,668
|
$1,985
|
Total
depreciation expense recorded for 2019 and 2018 was $867,000 and
$955,000, respectively.
NOTE 5 – INCOME TAX RECEIVABLE
On December 22,
2017, the Tax Cuts and Jobs Act of 2017 (the “Act”) was
signed into law, making significant changes to the Internal Revenue
Code. Changes include the repeal of corporate Alternative Minimum
Tax (AMT) for tax years after December 31, 2017. As a result, in
2017, we have recorded a long-term income tax receivable which as
of December 31, 2019 has a balance of $640,000 for the refundable
AMT credits.
NOTE 6 – OTHER ACCRUED LIABILITIES
Other
accrued liabilities consisted of the following
components:
|
|
|
(in
thousands)
|
|
|
Lease
liability - short term
|
$678
|
$0
|
Product
warranty
|
367
|
471
|
Sales
return reserve
|
77
|
87
|
Other
taxes
|
126
|
102
|
Other
|
124
|
129
|
Other
accrued liabilities
|
$1,372
|
$789
|
The
changes in our product warranty liability for the year ending
December 31, 2019 are follows:
|
|
(in
thousands)
|
|
Liability,
beginning balance
|
$471
|
Net
expenses
|
736
|
Warranty
claims
|
(736)
|
Accrual
revisions
|
(104)
|
Liability,
ending balance
|
$367
|
NOTE 7 – OPERATING LEASE COMMITMENTS
We have
commitments under non-cancelable operating leases and other
agreements, primarily for factory and office space, with initial or
remaining terms of one year or more as follows:
For the
years ending December 31:
|
Operating Lease Commitments
|
(in
thousands)
|
|
2020
|
$755
|
2021
|
681
|
2022
|
308
|
2023
|
89
|
2024
|
82
|
Thereafter
|
141
|
Total
|
$2,056
|
Less
Imputed interest
|
(200)
|
Total operating
lease liabilities
|
$1,856
|
Cash
paid for operating lease liabilities for the twelve months ended
December 31, 2019 was $757,000. There were no new or modified
leases during the twelve months ended December 31,
2019.
The
following table presents supplemental balance sheet information
related to leases as of December 31, 2019:
|
Balance at
December 31,
2019
|
(in
thousands)
|
|
Right-of-use assets
(Long-term other assets)
|
$1,574
|
Lease
liability-short term (Other accrued liabilities)
|
678
|
Lease
liability-long term (Long-term other payables)
|
1,178
|
At
December 31, 2019, the weighted average remaining lease term is
3.39 years and the weighted average discount rate used is
5%.
The
components of our lease expense for the twelve months ended
December 31, 2019 include operating lease costs of $685,000, which
includes short-term lease costs of $32,000.
Our
real estate facility leases are described below:
During
the third quarter of 2017, we amended our lease agreement for the
Redmond, Washington headquarters facility, extending the lease to
July 31, 2022, waiving a potential space give back provision and
receiving lease inducement incentives. Previously on June 8, 2015
the lease had been amended to relocate our headquarters to a nearby
building and lower the square footage to approximately 20,460. The
lease base annual rental payments during 2019 and 2018 were
approximately $351,000 and $341,000, respectively.
In
addition to the Redmond facility, approximately 24,000 square feet
is leased at two foreign locations, including our sales, service,
operations and engineering office located in Shanghai, China, and
our German sales, service and engineering office located near
Munich, Germany.
We
signed a lease agreement effective November 1, 2015 that extends
through October 31, 2021 for a facility located in Shanghai, China.
This lease is for approximately 19,400 square feet. The lease base
annual rental payments during 2019 and 2018 were approximately
$305,000 and $288,000, respectively.
During
the fourth quarter of 2016, we signed a lease agreement for a new
facility located near Munich, Germany which was effective March 1,
2017 and extends through February 28, 2022. This lease is for
approximately 4,895 square feet. The lease base annual rental
payments during 2019 and 2018 were approximately $57,000 and
$67,000, respectively.
NOTE 8 –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. At December 31, 2019,
the purchase commitments and other obligations totaled $1,334,000
of which all but $323,000 are expected to be paid over the next
twelve months.
NOTE 9 – CONTINGENCIES
As of
December 31, 2019, 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 10 – STOCK AND RETIREMENT PLANS
Stock Option Plans
At
December 31, 2019, there were 687,119 shares available for future
grant under Data I/O Corporation 2000 Stock Compensation Incentive
Plan (“2000 Plan”). At December 31, 2019 there were
shares of Common Stock reserved for issuance consisting of 561,403
under the 2000 plan. Pursuant to this 2000 Plan, options are
granted to our officers and key employees with exercise prices
equal to the fair market value of the Common Stock at the date of
grant and generally vest over four years. Options granted under the
plans have a maximum term of six years from the date of grant.
Stock awards are also granted under the 2000 Plan which generally
vest over four years.
Employee Stock Purchase Plan
Under
the Employee Stock Purchase Plan (“ESPP”), eligible
employees may purchase shares of our Common Stock at six-month
intervals at 95% of the fair market value on the last day of each
six-month period. Employees may purchase shares having a value not
exceeding ten percent of their gross compensation during an
offering period. During 2019 and 2018, a total of 6,177 and 3,012
shares, respectively, were purchased under the plan at average
prices of $4.88 and 7.81 per share, respectively. At December 31,
2019, a total 39,249 shares were reserved for future
issuance.
Stock Appreciation Rights Plan
We have
a Stock Appreciation Rights (“SAR”) Plan under which
each director, executive officer or holder of 10% or more of our
Common Stock has a SAR with respect to each exercisable stock
option. The SAR entitles the SAR holder to receive cash from us for
the difference between the market value of the stock and the
exercise price of the option in lieu of exercising the related
option. SARs are only exercisable following a tender offer or
exchange offer for our stock, or following approval by shareholders
of Data I/O of any merger, consolidation, reorganization or other
transaction providing for the conversion or exchange of more than
50% of the common shares outstanding. As no event has occurred,
which would make the SARs exercisable, and no such event is deemed
probable, no compensation expense has been recorded under this
plan. At December 31, 2019 there were 25,000 SARs
outstanding.
Director Fee Plan
We have
a Director Fee Plan available to compensate directors who are not
employees of Data I/O Corporation with equity. No shares were
issued from the plan for 2019 or 2018 board service and 151,322 shares remain available in
the plan as of December 31, 2019.
Retirement Savings Plan
We have
a savings plan that qualifies as a cash or deferred salary
arrangement under Section 401(k) of the Internal Revenue Code.
Under the plan, participating U.S. employees may defer their
pre-tax salary or post-tax salary if Roth is elected, subject to
IRS limitations. In fiscal years 2019 and 2018, we contributed one
dollar for each dollar contributed by a participant, with a maximum
contribution of four percent of a participant’s eligible
earnings. Our matching contribution expense for the savings plan,
net of forfeitures, was approximately $239,000 and $237,000 in 2019
and 2018, respectively. Employer matching contributions owed to the
plan were $211,000 and $271,000 at December 31, 2019 and 2018,
respectively.