DATA I/O CORP 10-K

Item 1. Business This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements based on current expectations, estimates and projections about Data I/O Corporation’s industry, management’s beliefs and certain assumptions made by management. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward Looking Statements.” General 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. We collectively refer to IP protection, security provisioning of devices, provisioning of security into devices, and related services such as cloud onboarding and device and provisioning documentation management as “security deployment”. Data I/O ® designs, manufactures and sells programming and security deployment systems and services for electronic device manufacturers, specifically targeting high-growth areas such as high-volume users of flash memory and flash memory-based microcontrollers. Most electronic products today incorporate a number of programmable semiconductor devices that contain data, operating instructions and security credentials essential for the proper operation of the product and more and more products require security deployment. Our mission is to bring the world’s electronic devices to life. Programmable devices are used in products such as automobile electronics, smartphones, HDTV, smart meters, gaming systems and a broad category called Internet of Things (“IoT”). IoT is a broad term that addresses the interconnectivity of devices and other electronic or smart products. Our solutions, some of which include security deployment and process control capabilities, enable us to address the demanding requirements of the electronic device market, where applications security and IP protection are essential to our customer’s success. Our largest customers are heavy users of programmable semiconductor devices and include original equipment manufacturers (“OEMs”) in automotive electronics, industrial electronics, consumer electronics and IoT markets as well as their programming center partners and electronic manufacturing service (“EMS”) contract manufacturers. Data I/O was incorporated in the State of Washington in 1969 and its business was founded in 1972. Our website address is www.dataio.com. COVID-19 During 2022, we continued to react to and manage our business relative to the COVID-19 pandemic. During 2020 and throughout 2021, COVID-19 impacted all aspects of our business, from customer demand, to supply chain integrity, employee safety, business processes, and financial management. During 2022, as a result of vaccinations and the reduced impact of COVID-19, our business started to return to more normal in parts of the world. As a global company, we had to manage these aspects of our business while working within the guidelines of local and national policy in the U.S., China and Germany. During parts of the first and second quarters, our Shanghai facility and operations were shut down for two and a half months as required by China’s requirements pursuant to their COVID Zero policy. This shutdown impacted our supply chains, shipping times, travel, trade shows, and forced remote work. We were largely able to resume operations and begin recovery late in the second quarter and throughout the third quarter. For most of 2022, waves of COVID-19 infection and variants have kept or re-imposed revised travel restrictions. Customers continued to restrict in-person sales and other visits. We have continued to do business by converting these interactions to remote and virtual means as we have implemented new processes and technology. Our resilient supply chain model was able to support our customers by having alternate facilities that were open and responded to the critical impacts of the shutdown. Later in the year China’s COVID Zero policy was effectively cancelled. In December most of our employees in Shanghai China were out briefly with COVID and then we resumed normal operations. 3 Table of Contents Other Major Impacts on 2022 The war in Ukraine had many impacts on our business. While we had little direct impact from Russia or Ukraine, the war’s effect on supply chains, shipping, European economic uncertainty and energy concerns disrupted our business. Later in the year, the impacts seemed to diminish. Inflation impacted everyone. We believe we were able to adequately address inflation with pricing adjustments such that our margins were mostly maintained. Certain labor markets were tight during the year, with assembly technicians and software development engineers being challenging to recruit. Interest rate hikes by central banks is a concern especially for cyclical industries with resulting worries about capital spending and planning for recessionary impacts. Currency changes caused significant headwinds to our translated consolidated revenues. This resulted from the strengthening of the US Dollar versus most foreign currencies, especially the Euro and Yuan in which our subsidiaries do business. Later in the fourth quarter and continuing into early 2023, the US Dollar weakened somewhat, providing some tailwinds to revenue growth. The impact of semiconductor chip shortages that began mid 2021 continued well into 2022 and are not completely resolved going into 2023. Many of the issues described here in the overview have caused supply chain disruptions and lead time unreliability, which we have managed though carefully maintaining and increasing key inventory levels. Finally, the continued outlook by industry analysts for automotive electronics remains strong based on the long-term forecast for a decade, which remains our primary market focus. Industry Background We enable companies to improve productivity, increase supply-chain security and reduce costs by providing device data programming and security deployment solutions that allow our customers to take IP (large design and data files) and protect and program it into memory, microcontroller, security and logic devices quickly and cost-effectively. We also provide services related to hardware support, system installation and repair, and device programming. Companies that design and manufacture products utilizing programmable electronic devices, ranging from automobiles to cell phones, purchase programming solutions from us. Trends of increasing device densities, shrinking device packages, increased demands for security, and customers increasing their software content file sizes, combined with the increasing numbers of intelligent devices such as automotive electronics and IoT applications, are driving demand for our solutions. Traditionally, our programming market opportunity focused on the number of semiconductor devices to be programmed, but because of the rapid increase in the density of devices, and increasing demands for supply-chain security, the focus has shifted in many cases from the number and type of devices to the number and type of bits per device to be programmed or securely provisioned. With expected growth in IoT applications, the business opportunity for this market differentiates on quality, security and automation. Some of our automated programming systems integrate data programming, automated handling functions and/or security deployment into a single product solution. During 2022, we continued to simplify and integrate security deployment into some of our solutions adding the capability to our PSV5000 and as a field upgrade to installed systems. Quality and security-conscious customers, particularly those in high-volume manufacturing and programming, drive this portion of our business. Products To accommodate the expanding variety and quantities of programmable devices being manufactured today, we offer multiple solutions for the numerous types of device mix and volume usage by our customers in the various market segments and applications. We work closely with leading manufacturers of programmable devices to develop our products to meet the requirements of a particular device. Our newer products are positioned and recognized as some of the most advanced programming and security deployment solutions. Our programming solutions include a broad range of products, systems, modules and accessories, grouped into two general categories: automated programming systems and manual programming systems. Our PSV family of automated programming systems delivers a broad range of programming capacity and capability to the marketplace. Our PSV2800 Automated Programming System focuses on dedicated high-volume manufacturing in a lower cost platform. Our PSV7000 Automated Programming System continues to be well adopted in the marketplace, in particular for automotive electronics customers and as a base for security deployment upgrades. Our PSV5000 Automated Programming System combines mid-range capacity and flexibility with competitive pricing and also supports security deployment. Our PSV3000 Automated Programming System is a lower cost platform for basic programming needs. Our PSV family of handlers has won multiple industry awards for technical excellence and innovation and has a large global installed base. Our automated systems have list selling prices ranging from $95,000 to $635,000 and our manual systems have list selling prices ranging from $10,000 to $36,000. Our security deployment system, SentriX®, is offered for security provisioning on a pay per part use basis along with related fees. Data I/O programming technology is integrated with the PSV family to create highly-flexible systems that deliver outstanding performance with low total cost of ownership. The Lumen®X programming engine is our highest performance programming engine, designed to support eMMC and UFS programming of large NAND FLASH, as well as microcontrollers, serial FLASH and other devices. Increasing memory densities and the need for faster data interfaces are resulting in an expected transition to the use of UFS devices. LumenX is available on our PSV7000 and PSV5000 and as a standalone manual programmer. FlashCORE™, and our universal job setup tool, Tasklink™ for Windows®, are available in each family of our automated programming systems and in FlashPAK™, our manual programming system. The SentriX security system adds security deployment capability to our data programming system. SentriX allows customers of any size and demand-profile to securely add keys, certificates, and other security information to specialized regions of authentication integrated circuits ("ICs”), secure elements and secure microcontrollers. We provide device support and service on all of our products. Device support is a critical aspect of our business and consists of writing software algorithms for devices and developing socket adapters to hold and connect to the device for programming. 4 Table of Contents Our products have both an upfront solution sale and recurring revenue element. Adapters are a consumable item and software and maintenance are typically recurring under subscription contracts. Our SentriX system revenue typically comes from per part use fees, set-up or minimum quarterly fees, consumables, non-recurring engineering fees, service fees and the sale of equipment related to SentriX. Sales Percentage of Total Sales Breakdown by Type Sales Type 2022 2021 Drivers Equipment Sales 57% 58% Capacity, Process improvement, Technology Adapter Sales 30% 30% Capacity utilization, New customer products Software and Maintenance Sales 13% 12% Installed base, Added capabilities Total 100% 100% The table below presents our main products and the key features that benefit our customers: Products Key Features Customer Benefits PSV Handlers: Off-line (Automated) · Fast program and verify speeds · Up to 112 programming sites · Up to 3000 devices per hour throughput · UFS Support · Supports LumenX and FlashCORE III programmers · Supports multiple media types · Supports quality options – fiber laser marking, 3D coplanarity · ConneX Factory Integration, Job Composer & other Software · Managed and secure programming · High throughput for high density Flash programming · High flexibility with respect to I/O options (tray, tape, tube), marking/labeling and vision for coplanarity inspection SentriX Security Deployment System · Unique ability to securely provision keys and certificates one device at a time · Pay per use model reduces capital spending requirements as the market develops. · Create Secure IoT devices across a global network · Maintain IP control over the lifecycle of their products LumenX Programmer · Extensible architecture for fast program, verify and download speeds · Supports UFS, microcontrollers, Serial FLASH, secure elements and other device types · Large file size support · Secure Job creation · 8 sockets with tool-less changeover with single socket adapters · Managed and secure programming · Fast setup and job changeover · Highest yield and low total cost of programming · High performance FlashPAK III programmer: (Non-Automated) · Scalability · Network control via Ethernet · Stand-alone operation or PC compatible · Parallel programming · Validate designs before moving down the firmware supply chain · Unmatched ease of use in manual production systems 5 Table of Contents Customers/Markets We sell our solutions to customers worldwide, many of whom are world-class manufacturers of electronic devices used in a broad range of industries, as described in the following table: OEMs EMS Programming Centers Automotive Electronics IoT, Industrial, Consumer Electronics, including Wireless Contract Manufacturers Notable end customers Borg Warner, Bosch, Alps Alpine, Visteon, Kostal, JVCKenwood, Harman, Denso Ten, Continental, Aptiv Panasonic, Magna, Marelli, Tesla LG, TCL, Siemens, Danfoss, Philips, Schneider, Endress+Hauser, Insta, Microsoft, Sony, Amazon, UTEC Pegatron, Flex, Jabil, Wistron, Sanmina SCI, Foxconn, Leesys, Calcomp Arrow, Avnet, BTV, CPS, Elsil, Elmitech, NOA Leading Business drivers Infotainment, Advanced Driver Assist (ADAS), Electrification, Connectivity and Security Higher functionality driven by increasing electronic content. Shift from analog to connected intelligent devices, security Production contract wins Value-added services, logistics, security Programming equipment drivers Growing Electronic Content, Global Support, Resilient Supply Chains, new product rollouts, growing file sizes, quality control and traceability, security Growing Electronic Content, need for IP protection. Process improvement and simplification as well as new product rollouts, memory and new technology, security New contracts from OEMs, programming solutions specified by OEMs Capacity utilization of their installed base of equipment, small parts handling, security Buying criteria Quality, reliability, configuration control, traceability, global support, IP protection, security Quality, reliability, configuration control, traceability, global support, IP protection, Security. Lowest equipment procurement cost, global support Flexibility, lowest life-cycle cost-per programmed-part, low changeover time; use of multiple vendors provides negotiating leverage, device support availability Security Deployment End customer focus End customer focus End customer and partner Focus Partner focus of our SentriX deployments Our solutions address the data programming of devices and security deployment needs of programmable semiconductor devices. Semiconductor devices are a large, growing market, in terms of devices, bits programmed and need for security. We believe that our sales are driven by many of the same forces that propel the semiconductor industry. We sell to the same firms that buy the semiconductors. When their business grows, they buy more semiconductors which, in turn, require additional programming equipment to maintain production speeds or program new device technologies. Our device programming solutions currently target two high volume, growing markets: automotive electronics and IoT systems including industrial and consumer devices. 6 Table of Contents Growth drivers for automotive electronics · Consumers desire advanced car features requiring higher levels of sophistication, including autonomous cars, infotainment options (audio, radio, dashboard displays, navigation), ADAS, wireless connectivity and electrification · Proliferation of programmable microcontrollers to support the next-generation electronic car systems · Increasing use of high-density flash to provide memory for advanced applications that require programming · Increasing complexity to support autonomous vehicles · Increasing need for security solutions for a secure supply chain and lifecycle firmware integrity · Growing software size is a programming capacity driver Growth drivers for IoT, including industrial, consumer electronics and wireless · Securely controlling groups of connected devices through a secure supply chain and lifecycle firmware integrity management · Adding intelligence and processing into devices · Connecting previously unconnected devices to networks and the internet (such as smart home, including intelligent thermostats and lighting) · Emergence of new devices and applications (such as health and wellness wearable devices and applications) All of the above growth drivers are long term and are likely to be adversely impacted, at least temporarily, due to the global pandemic of COVID-19 and other global political and economic factors in our markets. Annual projections on spending, growth, mix, and profitability are likely to be revised substantially as new information is obtained. Diversification of accounts receivable and net sales During 2022, we sold products to approximately 200 customers throughout the world. The following represented greater than 10% of net sales for the applicable year: Percentage of Net Sales 2022 2021 2020 Number of customers (a distributor) 1 1 1 Approximate percentage of net sales 23 % 14 % 12 % The following represented greater than 10% of our consolidated accounts receivable for the applicable year: Percentage of Consolidated Accounts Receivable 2022 2021 2020 Number of customers 3 3 3 Approximate percentage of consolidated accounts receivable balance 39 % 36 % 41 % Percentage of each 15 % 13 % 17 % Percentage of each 13 % 12 % 12 % Percentage of each 11 % 11 % 12 % Geographic Markets and Distribution We market and sell our products through a combination of direct sales, indirect sales representatives and distributors, as well as services through programming centers. We continually evaluate our sales channels against our evolving markets and customers and realign them as necessary to ensure that we reach our existing and potential customers in the most effective and efficient manner possible. U.S. Sales We market our products throughout the U.S. using a variety of sales channels, including our own field sales management personnel, independent sales representatives and direct sales. Our U.S. independent sales representatives obtain orders on an agency basis, with shipments made directly to the customer by us. Net sales in the U.S. for 2022, 2021 and 2020 were (in millions) $1.8, $2.6 and $1.5, respectively. Some of our customers’ orders delivered internationally are heavily influenced by U.S. sales-based efforts. 7 Table of Contents International Sales International sales represented approximately 93%, 90% and 93% of net sales in 2022, 2021 and 2020, respectively. We make foreign sales through our wholly-owned subsidiaries in Germany and China, as well as through independent distributors and sales representatives operating in 45 countries. Our independent foreign distributors purchase our products for resale and we generally recognize the sale at the time of shipment to the distributor. As with U.S. sales representatives, sales made by international sales representatives are on an agency basis, with sales made directly to the customer by us. Net international sales for 2022, 2021 and 2020 were (in millions) $22.4, $23.2 and $18.8, respectively. We determine international sales by the international geographic destination into which the products are sold and delivered, and include not only sales by foreign subsidiaries but also export sales from the U.S. to our foreign distributors and to our representatives’ customers. International sales do not include transfers between Data I/O and our foreign subsidiaries. Export sales are subject to U.S. Department of Commerce regulations. We have not, however, experienced difficulties to date as a result of these requirements. Our products typically do not require export licenses. We have not made sales to Iran or any Iranian governmental entities or any other blacklisted companies or countries. Fluctuating exchange rates and other factors beyond our control, such as the coronavirus, international monetary stability, tariff and trade policies and U.S. and foreign tax and economic policies, may affect the level and profitability of international sales. We cannot predict the effect of such factors on our business, but we try to consider and respond to changes in these factors, particularly as the majority of our costs are U.S. based while the vast majority of our sales are international. Competition The competition in the programming systems market is highly fragmented with a small number of organizations selling directly competitive solutions and a large number of smaller organizations offering less expensive solutions. In particular, low cost automated solutions have gained market share in recent years, where the competition is primarily based on price. Typically, their equipment meets a “good enough” standard, but with reduced quality, traceability, upgradability, security and other software features such as factory integration software. Many of these competitors compete on a regional basis, with local language and support. Although competition in the security deployment market is developing, we expect competition in the market to increase as security deployment becomes more important. There are alternative security deployment solutions such as software-based security, rather than the hardware-based security of our SentriX equipment. In addition, we compete with multiple substitute forms of device programming including “home grown” solutions. Programming after device placement may be done with In Circuit Test (“ICT”), In System Programming (“ISP”), and End of Line Downloading (“EOL”). Some automotive products may also be programmed over the air (“OTA”). IoT devices may also be programmed with ICT, ISP, EOL or OTA. In addition, new security devices may be required to be programmed using device-specific programmers developed by the semiconductor manufacturer. While we are not aware of any published industry market information covering the programming systems or security deployment market, according to our internal analysis of competitors’ revenues, we believe we continue to be the largest competitor in the programming systems equipment market and have been gaining market share in recent years, especially with our new products. Manufacturing, Raw Materials and Backlog We strive to manufacture and provide the best solutions for advanced programming. We primarily assemble and test our products at our principal facilities in Redmond, Washington and Shanghai, China. Both of these locations are ISO 9001:2015 certified. We outsource our circuit board manufacturing and fabrication. As a resilient supply chain strategy, we manufacture various products in both of our production facilities. This strategy allows opportunity to mitigate some of the risks of having only one location, as well as enabling tariff and tax optimization strategies. We use a combination of standard components and fabricated parts manufactured to our specifications. Most components used are available from a number of different suppliers and subcontractors but certain items, such as some handler and programmer and security deployment subassemblies, custom integrated circuits, hybrid circuits and connectors, are purchased from single sources. We believe that additional sources can be developed for most present single-source components without significant difficulties. Single-source components may not always continue to be readily available or may be subject to part shortage delays. If we cannot develop alternative sources for these components, or if we experience deterioration in relationships with these suppliers, there may be price increases, minimum order quantities, end of life purchase requirements, costs associated with integrating alternatively sourced parts, and delays or reductions in product introductions or shipments, which may materially adversely affect our operating results. 8 Table of Contents In accordance with industry practices, generally all orders are subject to cancellation prior to shipment without penalty, except for contracts calling for custom configuration. To date, such cancellations have not had a material effect on our sales volume. To meet customers’ delivery requirements, we manufacture certain products based upon a combination of backlog and anticipated orders. Most orders are scheduled for delivery within 1 to 90 days after receipt of the order. Our backlog of pending orders was approximately (in millions) $4.8, $2.9 and $3.9 as of December 31, 2022, 2021 and 2020, respectively. The size of backlog at any particular date is not necessarily a meaningful indicator of the trend of our business. Research and Development We believe that continued investment in research and development is critical to our future success. We continue to develop new technologies and products and enhance existing products. Future growth is, to a large extent, dependent upon the timely development and introduction of new products, as well as the development of technology and algorithms to support the latest programmable devices. Where possible, we may pursue partnerships and other strategic relationships to add new products, capabilities and services, particularly in security deployment. We are currently focusing our research and development efforts on strategic growth markets, including automotive electronics, IoT and security deployment. We are continuing to develop technology for security deployment to program new categories of semiconductors, including Secure Elements, TPMs, Authentication Chips, and Secure Microcontrollers. We plan to deliver new programming technology, automated handling systems and enhancements for security deployment in the manufacturing environment. We also continue to focus on increasing our capacity and responsiveness for new device support requests from customers and programmable integrated circuit manufacturers by revising and enhancing our internal processes and tools. Our research and development efforts have resulted in the release of significant new products and product enhancements over the past several years. During 2022, 2021 and 2020, we made expenditures for research and development of (in millions) $6.1, $6.6 and $6.4, respectively, representing 25%, 26% and 31% of net sales, respectively. Research and development costs are generally expensed as incurred. Patents, Copyrights, Trademarks and Licenses We rely on a combination of patents, copyrights, trade secrets and trademarks to protect our IP, as well as product development and marketing skill to establish and protect our market position. We continue to apply for and add new patents to our patent portfolio as we develop strategic new technologies. We believe patent protection enforcement may be increasingly important in our security provisioning business and we have approximately 20 U.S. and international awarded patents related to the SentriX platform and security provisioning architecture, processes, and methods. We attempt to protect our rights in proprietary systems (architecture, implementations, software), including the SentriX Security Deployment System. We attempt to protect our software, including Lumen ® X software, FlashCORE software, TaskLink software, ConneX smart programming software and other software products, by retaining the title to and copyright of the software and documentation, by including appropriate contractual restrictions on use and disclosure in our licenses, and by requiring our employees to execute non-disclosure agreements. Our software products are not typically sold separately from sales of programming systems. However, 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. Because of the rapidly changing technology in the semiconductor, electronic equipment and software industries, portions of our products might infringe upon existing patents or copyrights, and we may be required to obtain licenses or discontinue the use of the infringing technology. We believe that any exposure we may have regarding possible infringement claims is a reasonable business risk similar to that assumed by other companies in the electronic equipment and software industries. However, any claim of infringement, with or without merit, could be costly and a diversion of management’s attention, and an adverse determination could adversely affect our reputation, potentially preclude us from offering certain products, and subject us to substantial liability. As of December 31, 2022, we were not subject to any pending actions regarding infringement claims. 9 Table of Contents Employees As of December 31, 2022, we had a total of 95 employees, of which 45 were located outside the U.S. and 10 of which were part time. We also utilize independent contractors for specialty work, primarily in research and development, and utilize temporary workers to adjust capacity to fluctuating demand and for special projects. Many of our employees are highly skilled, trained and experienced in specialized areas and our continued success will depend in part upon our ability to attract and retain employees who can be in great demand within the industry. None of our employees are represented by a collective bargaining unit and we believe relations with our employees are favorable. In foreign countries we have employment agreements or, in China, the Shanghai Foreign Services Co., Ltd. (“FSCO”) labor agreement. When hiring and retaining talent, we create specialized knowledge that is difficult to replace short term. We experienced tight labor markets during 2022 which resulted in challenges in recruiting assembly technicians and software development engineers. Environmental, Social and Governance (“ESG”) Data I/O is committed to the responsibilities associated with modern age ESG. The Company’s key pillars for ESG support a framework for sustainable growth and include Leadership & Governance, Environment, Innovation, Human Capital, Social Capital, and Financial Excellence. Initiatives within these areas apply to the company’s daily global operations as well as within its supply chains. We believe we are the only supplier in our industry with a published conflict mineral policy and public company governance. We believe we are the only programming industry supplier with a diverse Board of Directors. Our facilities are subject to numerous laws and regulations concerning the discharge of materials or otherwise relating to the environment. In addition to this commitment, the company has a track record of meeting its ESG regulatory obligations, being a solid corporate citizen, delivering superior value to its customers and partners, and demonstrating corporate stewardship including returning capital to shareholders through past share buybacks. As the largest and only publicly traded company in its sector, according to our internal analysis, Data I/O has led its industry in disclosing significant operational and financial information. The Company's Board currently includes Data I/O's CEO and four Independent Directors. It is diverse in gender, education, professional experience and differences in viewpoints and skills. Through its continuous improvement practices and our operations’ focus on assembly and test with no fabrication, the company consumes relatively little energy, has minimal or no emissions or pollutants to air and wastewater, and complies with workplace labor, safety and business practices on three continents. Data I/O is also committed to giving back to our local communities through volunteer and internship programs. The Company provides employees time-off to volunteer and also coordinates group projects. In addition, the Company provides internships to local high school and college students through STEM and technical colleges. Compliance with environmental laws has not had, nor is it currently expected to have, a material effect on our capital expenditures, financial position, results of operations or competitive position. Potential regulations regarding climate change measurements and disclosures could require significant effort and costs. Executive Officers of the Registrant Set forth below is certain information concerning the executive officers of Data I/O as of March 20, 2023: Name Age Position Anthony Ambrose 61 President and Chief Executive Officer Joel S. Hatlen 64 Vice President, Chief Operating and Financial Officer, Secretary and Treasurer Rajeev Gulati 59 Chief Technology Officer, Vice President of Engineering Michael Tidwell 54 Vice President of Marketing and Business Development Anthony Ambrose joined Data I/O on October 25, 2012, and is our President and Chief Executive Officer (“CEO”), and a member of the Board of Directors. Prior to Data I/O, Mr. Ambrose was Owner and Principal of Cedar Mill Partners, LLC, a strategy consulting firm since 2011. From 2007 to 2011, he was Vice President and General Manager at RadiSys Corporation, a leading provider of embedded wireless infrastructure solutions, where he led all product divisions and worldwide engineering. Until 2007, he was general manager and held several other progressively responsible positions at Intel Corporation, where he led development and marketing of standards-based telecommunications platforms, and grew the industry standard server business to over $1B in revenues. He is Chair of the EvergreenHealth Foundation Board of Trustees. He is also a board member of SideChannel, Inc. ((OTCQB: SDCH) retained after their 2022 merger with Cipherloc Corporation (OTCQB: CLOK) where he joined the board in 2019 and has also been lead independent director since 2019). Mr. Ambrose has a Bachelor’s of Science in Engineering from Princeton University. He has completed the Stanford Graduate School of Business Director Symposium and earned the Carnegie Mellon University Certificate in Cybersecurity Oversight. 10 Table of Contents Joel S. Hatlen joined Data I/O in September 1991 and in July 2017 became our Chief Operating Officer in addition to serving as our Vice President, Chief Financial Officer, Secretary and Treasurer since January 1998. He was Chief Accounting Officer since February 1997 and served as Corporate Controller from December 1993 to December 1997. Previously, he was Tax Manager and Senior Tax Accountant. From September 1981 until joining Data I/O, Joel was employed by Ernst & Young LLP as a Certified Public Accountant, where his most recent position was Senior Manager. Joel is a Certified Public Accountant and holds a Masters in Taxation from Golden Gate University and a Bachelor’s in Business Administration in Accounting from Pacific Lutheran University. Joel plans to retire during the second half of 2023 and a search for his replacement is underway. Rajeev Gulati joined Data I/O in July 2013 and is our Chief Technology Officer and Vice President of Engineering. Prior to Data I/O, Rajeev served as Director of Software Engineering for AMD responsible for tools, compiler strategy and execution from 2006 to 2013. He has an extensive background in software, systems and applying technology to develop new markets. Previously, he served as Director of Strategy and Planning at Freescale from 2004 to 2006; as Director of Embedded Products at Metrowerks (acquired by Motorola) from 2000 to 2004 and Director of Compilers, Libraries & Performance Tools from 1997 to 2000; and engineering and programmer positions at Apple Computer, IBM and Pacific-Sierra Research. Rajeev holds a Master of Science in Electrical & Computer Engineering from the University of Texas, Austin and a BE in Electrical Engineering from Delhi College of Engineering, New Delhi. Michael Tidwell joined Data I/O in May 2019 and is our Vice President of Marketing and Business Development. Prior to Data I/O, he was Vice President of Marketing & Business Development at Tignis, an AI and machine learning startup. From 2012 to 2018 Michael was head of Marketing and Business Development at Sansa Security, a leading software security IP provider that was sold to ARM Holdings. Prior to Sansa, Michael was Vice President of Business and Market Development at BSQUARE Corporation. Michael has a Master of Science in Electrical Engineering from the University of Washington and a Bachelor of Electrical Engineering (Summa Cum Laude) from Georgia Institute of Technology.