SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8 - K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 8, 2005
Data I/O Corporation
(Exact name of registrant as specified in its charter)
Washington
(State of other jurisdiction of incorporation)
0-10394 91-0864123
(Commission File Number) (IRS Employer Identification No.)
10525 Willows Road N.E., Redmond, WA 98052
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (425) 881-6444
Not Applicable
(Former name or former address, if changed since last report)
Page 1 of 5 Pages
Item 4.02 Non-Reliance on Previously Issued Financial Statements or a Related
Audit Report or Completed Interim Review
(a)
During the preparation of our 2004 year-end financial statements and more
specifically the inter-company profit eliminations associated with demonstration
inventory equipment amounts, Data I/O Corporation ("Data I/O") identified
elimination calculation omission errors that had resulted in the understatement
of inter-company expense eliminations on foreign subsidiary demonstration
inventory equipment depreciation, with a corresponding overstatement of
demonstration inventory equipment accumulated depreciation. The errors, which
had occurred over a period of more than five years, overstated depreciation
(international selling) expense associated with demonstration inventory
equipment in service in the Company's foreign subsidiaries. Therefore, our
annual report filed on Form 10K for the period ended December 31, 2003 should no
longer be relied upon.
The errors resulted in a cumulative overstatement of demonstration inventory
equipment accumulated depreciation and a corresponding overstatement of
depreciation (international selling) expense of approximately $112,000 through
December 31, 2004. The cumulative impact of this error as of December 31, 2003,
including the related income tax effect, resulted in a $112,000 overstatement of
demonstration inventory equipment accumulated depreciation reserve and a
$112,000 understatement of depreciation (international selling) expense. The
income tax effects from the cumulative effect of this error had no impact on
income tax expense and just impacted the related disclosure of net operating
losses in carry forward and the related valuation allowances.
The impact of the errors on 2003 and prior periods are as follows:
2003 $ 65,000 Reduction in expense
2002 No impact to record due to immateriality
2001 No impact to record due to immateriality
2000 $ 47,000 Increase to ending retained earnings related to
_______ the cumulative effect from periods prior to 2001
Total $112,000
For 2003, the quarterly breakdown of the reduction of expense should have been
as follows: 4th Quarter $39,000; 3rd Quarter $12,000; 2nd Quarter $13,000; and
1st Quarter $1,000. Data I/O has determined that the adjustments to the
quarters other than the fourth quarter are immaterial and that the entire 2003
adjustment will be reflected as a correction to the 4th quarter of 2003 of
$65,000 in the restated Form 10-K and that accordingly no restatement is
necessary for the interim quarterly Form 10-Q filings.
While Data I/O believes the impacts of these elimination errors are not material
to any previously issued financial statement, Data I\O determined, on February
8, 2005, that the cumulative adjustment required to correct these errors was
material to record in 2004, and that the calculation errors were most
appropriately corrected through restatement of previously issued financial
statements for the fiscal years ended December 31, 2003. Data I/O advised its
independent registered public accounting firm, Grant Thornton LLP ("Grant
Thornton"), of Data I/O's determination.
On February 8, 2005 Data I/O Corporation's Audit Committee discussed the matters
disclosed in this Item 4.02(a) with management and Grant Thornton. Grant
Thornton informed the Audit Committee that it concurs with Data I/O's conclusion
described above.
Data I/O's decision to restate previously issued financial statements was based
on the impact of a cumulative correction on the 2004 financial statements,
rather than the impact on any previously issued financial statement. Data I/O
expects to file the restated audited financial statements and related auditors'
report by amending its Form 10-K for the fiscal year ended December 31, 2003.
Data I/O expects to make these filings before filing its Form 10-K for the
fiscal year ended December 31, 2004 in March 2005.
A summary of the impacts of the matters described above on the indicated
financial statements is attached hereto as Exhibit 99.1 and incorporated herein
by reference.
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 hereunto duly authorized.
Data I/O Corporation
February 14, 2005 By /s/Joel S. Hatlen
Joel S. Hatlen
Vice President
Chief Financial Officer
Secretary and Treasurer
Exhibit 99.1
Data I/O Corporation ("Data I/O") identified elimination calculation omission
errors that had resulted in the understatement of inter-company expense
eliminations on foreign subsidiary demonstration inventory equipment
depreciation, with a corresponding overstatement of demonstration inventory
equipment accumulated depreciation reserve. A summary of the impacts related to
the restatement of the indicated financial statements is provided below.
Consolidated Balance Sheet (in thousands)
------------------------------------------------------------ ---------------- -------------- ----------------
As Previously As
At December 31, 2003 Reported Adjustment Restated
------------------------------------------------------------ ---------------- -------------- ----------------
Property, plant and equipment-net 1,151 112 1,263
Total Assets 17,988 112 18,110
Retained deficit (8,038) 112 (7,926)
Total Stockholders' Equity 11,088 112 11,200
Total Liabilities and Stockholders' Equity $17,988 $112 $18,100
Consolidated Statement of Operations (in thousands, except per share data)
------------------------------------------------------------ ---------------- -------------- ----------------
As Previously As
For the Year Ended December 31, 2003 Reported Adjustment Restated
------------------------------------------------------------ ---------------- --------------- ---------------
Operating expenses:
Selling, general and administrative 7,780 (65) 7,715
Total operating expenses 12,380 (65) 12,315
Total operating income 1,299 65 1,364
Income (loss) before income taxes 1,274 65 1,339
Net income (loss) $1,241 $65 $1,306
Basic earnings (loss) per share $0.16 $0.01 $0.17
Diluted earnings (loss) per share $0.15 $0.01 $0.16
Consolidated Statement of Cash Flows (in thousands)
------------------------------------------------------------ ---------------- -------------- ----------------
As Previously As
For the Year Ended December 31, 2003 Reported Adjustment Restated
------------------------------------------------------------ ---------------- -------------- ----------------
Income (loss) from continuing operations $1,241 $65 $1,306
Depreciation and amortization 749 (65) 684
Consolidated Statement of Stockholders' Equity (in thousands)
------------------------------------------------------------ ---------------- -------------- ----------------
As Previously As
Reported Adjustment Restated
------------------------------------------------------------ ---------------- -------------- ----------------
Balance at December 28, 2000
Retained Earnings (Deficit) ($163) $47 ($116)
Balance at December 31, 2001
Retained Earnings (Deficit) (6,173) 47 (6,126)
Balance at December 31, 2002
Retained Earnings (Deficit) (9,279) 47 9,232
Net Income (for 2003) 1,241 65 1,306
Balance at December 31, 2003
Retained Earnings (Deficit) ($8,038) 112 ($7,926)