DATA I/O CORP 10-Q

Item 1. Financial Statements CONSOLIDATED BALANCE SHEETS (in thousands, except share data) (UNAUDITED) September 30, 2024 December 31, 2023 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 12,372 $ 12,341 Trade accounts receivable, net of allowance for credit losses of $ 20 and $ 72 , respectively 2,607 5,707 Inventories 6,627 5,875 Other current assets 554 690 TOTAL CURRENT ASSETS 22,160 24,613 Property, plant and equipment – net 928 1,359 Other assets 1,755 1,429 TOTAL ASSETS $ 24,843 $ 27,401 LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable $ 895 $ 1,272 Accrued compensation 1,021 2,003 Deferred revenue 1,280 1,362 Other accrued liabilities 1,302 1,438 Income taxes payable 48 113 TOTAL CURRENT LIABILITIES 4,546 6,188 Operating lease liabilities 886 702 Long-term other payables 222 192 COMMITMENTS - - STOCKHOLDERS’ EQUITY Preferred stock - Authorized, 5,000,000 shares, including 200,000 shares of Series A Junior Participating Issued and outstanding, none - - Common stock, at stated value - Authorized, 30,000,000 shares Issued and outstanding, 9,236,019 shares as of September 30, 2024 and 9,020,819 shares as of December 31, 2023 23,482 22,731 Accumulated earnings (deficit) ( 4,556 ) ( 2,645 ) Accumulated other comprehensive income 263 233 TOTAL STOCKHOLDERS’ EQUITY 19,189 20,319 TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 24,843 $ 27,401 See notes to consolidated financial statements 3 Table of Contents DATA I/O CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share amounts) (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net sales $ 5,423 $ 6,561 $ 16,584 $ 21,190 Cost of goods sold 2,499 3,041 7,684 8,995 Gross margin 2,924 3,520 8,900 12,195 Operating expenses: Research and development 1,544 1,577 4,539 4,922 Selling, general and administrative 1,705 2,006 6,112 7,003 Total operating expenses 3,249 3,583 10,651 11,925 Operating income (loss) ( 325 ) ( 63 ) ( 1,751 ) 270 Non-operating income (loss): Interest income 71 41 224 125 Foreign currency transaction gain (loss) ( 53 ) ( 15 ) 9 107 Total non-operating income (loss) 18 26 233 232 Income (loss) before income taxes ( 307 ) ( 37 ) ( 1,518 ) 502 Income tax (expense) benefit - ( 16 ) ( 393 ) ( 160 ) Net income (loss) $ ( 307 ) $ ( 53 ) $ ( 1,911 ) $ 342 Basic earnings (loss) per share $ ( 0.03 ) $ ( 0.01 ) $ ( 0.21 ) $ 0.04 Diluted earnings (loss) per share $ ( 0.03 ) $ ( 0.01 ) $ ( 0.21 ) $ 0.04 Weighted-average basic shares 9,235 9,020 9,121 8,914 Weighted-average diluted shares 9,235 9,020 9,121 9,065 See notes to consolidated financial statements 4 Table of Contents DATA I/O CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (in thousands) (UNAUDITED) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023 Net income (loss) $ ( 307 ) $ ( 53 ) $ ( 1,911 ) $ 342 Other comprehensive income (loss): Foreign currency translation gain (loss) 268 ( 130 ) 30 ( 415 ) Comprehensive income (loss) $ ( 39 ) $ ( 183 ) $ ( 1,881 ) $ ( 73 ) See notes to consolidated financial statements 5 Table of Contents DATA I/O CORPORATION CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (in thousands, except share amounts) (UNAUDITED) Common Stock Retained Earnings Accumulated and Other Comprehensive Total Stockholders' Shares Amount (Deficit) Income (Loss) Equity Balance at December 31, 2022 8,816,381 $ 21,897 $ ( 3,131 ) $ 343 $ 19,109 Stock awards issued, net of tax withholding - - - - - Issuance of stock through: ESPP 1,695 7 - - 7 Share-based compensation - 249 - - 249 Net income (loss) - - 95 - 95 Other comprehensive income (loss) - - - 65 65 Balance at March 31, 2023 8,818,076 22,153 ( 3,036 ) 408 19,525 Stock awards issued, net of tax withholding 200,799 ( 368 ) - - ( 368 ) Issuance of stock through: ESPP - - - - - Share-based compensation - 380 - - 380 Net income (loss) - - 300 - 300 Other comprehensive income (loss) - - ( 350 ) ( 350 ) Balance at June 30, 2023 9,018,875 22,165 ( 2,736 ) 58 19,487 Stock awards issued, net of tax withholding 352 ( 1 ) - - ( 1 ) Issuance of stock through: ESPP 1,571 7 - - 7 Share-based compensation - 300 - - 300 Net income (loss) - - ( 53 ) - ( 53 ) Other comprehensive income (loss) - - ( 130 ) ( 130 ) Balance at September 30, 2023 9,020,798 $ 22,471 $ ( 2,789 ) $ ( 72 ) $ 19,610 Balance at December 31, 2023 9,020,819 $ 22,731 $ ( 2,645 ) $ 233 $ 20,319 Stock awards issued, net of tax withholding 1,759 - - - - Issuance of stock through: ESPP 2,381 7 - - 7 Share-based compensation - 281 - - 281 Net income (loss) - - ( 807 ) - ( 807 ) Other comprehensive income (loss) - - - ( 168 ) ( 168 ) Balance at March 31, 2024 9,024,959 23,019 ( 3,452 ) 65 19,632 Stock awards issued, net of tax withholding 194,879 ( 229 ) - - ( 229 ) Issuance of stock through: ESPP - - - - - Share-based compensation - 382 - - 382 Net income (loss) - - ( 797 ) - ( 797 ) Other comprehensive income (loss) - - - ( 70 ) ( 70 ) Balance at June 30, 2024 9,219,838 23,172 ( 4,249 ) ( 5 ) 18,918 Stock awards issued, net of tax withholding 13,543 - - - - Issuance of stock through: ESPP 2,638 6 - - 6 Share-based compensation - 304 - - 304 Net income (loss) - - ( 307 ) - ( 307 ) Other comprehensive income (loss) - - - 268 268 Balance at September 30, 2024 9,236,019 $ 23,482 $ ( 4,556 ) $ 263 $ 19,189 See notes to consolidated financial statements 6 Table of Contents DATA I/O CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) (UNAUDITED) For the Nine Months Ended September 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ ( 1,911 ) $ 342 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 451 468 Equipment transferred to cost of goods sold 259 139 Share-based compensation 967 929 Net change in: Trade accounts receivable 3,119 25 Inventories ( 704 ) 241 Other current assets 140 35 Accounts payable and accrued liabilities ( 1,582 ) ( 329 ) Deferred revenue ( 68 ) ( 318 ) Other long-term liabilities 184 ( 515 ) Deposits and other long-term assets ( 300 ) 444 Net cash provided by (used in) operating activities 555 1,461 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment ( 279 ) ( 490 ) Cash provided by (used in) investing activities ( 279 ) ( 490 ) CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from issuance of common stock, less payments for shares withheld to cover tax ( 216 ) ( 354 ) Cash provided by (used in) financing activities ( 216 ) ( 354 ) Increase (decrease) in cash and cash equivalents 60 617 Effects of exchange rate changes on cash ( 29 ) ( 260 ) Cash and cash equivalents at beginning of period 12,341 11,510 Cash and cash equivalents at end of period $ 12,372 $ 11,867 Supplemental disclosure of cash flow information: Cash paid during the period for: Income taxes $ 458 $ 189 See notes to consolidated financial statements 7 Table of Contents DATA I/O CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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. 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. We prepared the financial statements as of September 30, 2024 and September 30, 2023 according to the rules and regulations of the Securities and Exchange Commission ("SEC"). These statements are unaudited but, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the results for the periods presented. The balance sheet as of December 31, 2023 has been derived from the audited financial statements at that date. We have condensed or omitted certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America according to such SEC rules and regulations. Operating results for the nine months ended September 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. Significant Accounting Policies These financial statements should be read in conjunction with the annual audited financial statements and the accompanying notes included in our Form 10-K for the year ended December 31, 2023 (filed with the SEC on March 27, 2024). There have been no changes to our significant accounting policies described in the Annual Report that have had a material impact on our unaudited condensed consolidated financial statements and related notes. Revenue Recognition Accounting Standards Codification (ASC) Topic 606, R evenue from Contracts with Customers (ASC 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 the third quarter of 2024 and 2023, 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 analysis considers the complexity, skill and training needed and customer installation expectations. 8 Table of Contents We enter into arrangements with multiple performance obligations that arise during the sale of a system that could include hardware, software, installation, services and support and extended maintenance components. We allocate the transaction price of each element based on relative selling price. Relative selling price is based on the selling price of the standalone system. Installation, services and support costs are based on the discount given to distributors who perform these services. For software maintenance performance obligations, we use the charge for annual software maintenance renewals after the expiration of the initial warranty coverage. Revenue is recognized on the system based on shipping terms, software based on delivery, installation and services based on completion of work, and software maintenance and extended warranty support ratably over the term of the agreement, typically one year. Total deferred revenue which represents undelivered performance obligations for installation, service, support and extended contracts was $ 1.5 million and $ 1.5 million for September 30, 2024 and 2023, respectively, and the portion expected to be recognized within one year was $ 1.3 million and $ 1.3 million for September 30, 2024 and 2023, respectively. When we license 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 to 60 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 are sold in our normal and ordinary course of business with standard warranty coverage. 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: Three Months Ended Nine Months Ended Net sales by type September 30, 2024 Change September 30, 2023 September 30, 2024 Change September 30, 2023 (in thousands) Equipment $ 2,509 ( 34.3 %) $ 3,820 $ 8,228 ( 33.8 %) $ 12,428 Adapter 2,005 10.6 % 1,813 5,667 ( 6.5 %) 6,059 Software and Maintenance 909 ( 2.0 %) 928 2,689 ( 0.5 %) 2,703 Total $ 5,423 ( 17.3 %) $ 6,561 $ 16,584 ( 21.7 %) $ 21,190 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 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. 9 Table of Contents Income Tax Income taxes for U.S. and foreign subsidiary operations 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. New Accounting Pronouncements – Standards Issued and Not Yet Implemented For the nine months ended September 30, 2024, there were no recently issued accounting pronouncements that had a material impact to Data I/O Corporation’s consolidated financial statements. In November 2023, the FASB issued ASU 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures. In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures. NOTE 2 – INVENTORIES Inventories consisted of the following components: September 30, 2024 December 31, 2023 (in thousands) Raw material $ 3,490 $ 3,328 Work-in-process 2,083 1,596 Finished goods 1,054 951 Inventories $ 6,627 $ 5,875 NOTE 3 – PROPERTY, PLANT AND EQUIPMENT, NET Property and equipment consisted of the following components: September 30, 2024 December 31, 2023 (in thousands) Leasehold improvements $ 398 $ 394 Equipment 4,843 4,977 Sales demonstration equipment 923 1,396 6,164 6,767 Less accumulated depreciation 5,236 5,408 Property and equipment, net $ 928 $ 1,359 10 Table of Contents NOTE 4 – OTHER ACCRUED LIABILITIES Other accrued liabilities consisted of the following components: September 30, 2024 December 31, 2023 (in thousands) Lease liability - short term $ 779 $ 798 Product warranty 356 449 Sales return reserve 32 32 Other taxes 31 69 Other 104 90 Other accrued liabilities $ 1,302 $ 1,438 The changes in our product warranty liability for the nine months ending September 30, 2024, and year ending December 31, 2023, are as follows: September 30, 2024 December 31, 2023 (in thousands) Liability, beginning balance $ 449 $ 425 Net expenses 604 902 Warranty claims ( 604 ) ( 902 ) Accrual revisions ( 93 ) 24 Liability, ending balance $ 356 $ 449 NOTE 5 – OPERATING LEASE COMMITMENTS 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 of September 30, 2024 are as follows: September 30, 2024 Operating Lease Commitments (in thousands) 2024 (remaining) $ 193 2025 869 2026 407 2027 275 2028 & Thereafter - Total $ 1,744 Less imputed interest ( 101 ) Total operating lease liabilities $ 1,643 Facilities account for the largest portion of our lease commitments. The Company has three facilities with our headquarters and primary engineering and operational functions located in Redmond, Washington. Our two subsidiary facilities in Munich, Germany and Shanghai, China provide extended worldwide sales, service, engineering and operation services. The Shanghai facility lease was renewed for an additional three years with a new expiration date of October 31, 2027. There were no other new operating leases during the three and nine months ended September 30, 2024. The components of our lease payments for the three and nine months ended September 30, 2024, include facility related operating lease costs of $ 214,000 and $ 629,000 , respectively, and short-term lease costs of $ 9,000 and $ 28,000 , respectively. 11 Table of Contents The Redmond, Washington headquarters facility lease runs to January 31, 2026 at approximately 20,460 square feet. The lease for the facility located in Shanghai, China was renewed for an additional three years to October 31, 2027 at approximately 19,400 square feet. The lease for the facility located near Munich, Germany runs to August 2027 at approximately 4,895 square feet. The following table presents supplemental balance sheet information related to leases as of September 30, 2024 and December 31, 2023: September 30, 2024 December 31, 2023 (in thousands) Right-of-use assets (Long-term other assets) $ 1,643 $ 1,363 Lease liability-short term (Other accrued liabilities) 779 798 Lease liability-long term (Operating lease liabilities) 864 703 As of September 30, 2024, the weighted average remaining lease term is 2.3 years and the weighted average discount rate used is 5 %. The third quarter increases in the valuation of right-of-use assets, lease liabilities and weighted average lease term are due to the Shanghai lease renewal. NOTE 6 – 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. As of September 30, 2024, we had one contract with a commitment of approximately $ 232,000 to be paid within one year and $ 77,000 beyond one year. NOTE 7 – CONTINGENCIES As of September 30, 2024, 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 8 – INCOME TAXES Income tax benefit (expense) primarily relates to foreign and state taxes. The third quarter 2024 activity did not have a dividend payment from Shanghai. However, the second quarter of 2024 included dividend withholding taxes of approximately $ 337,000 due to a $ 3.4 million dividend repatriation from our China subsidiary operation. The effective tax rate differed from the statutory tax rate primarily due to valuation allowances, as well as foreign taxes. We have a valuation allowance of $ 9.3 million as of September 30, 2024. As of September 30, for both 2024 and 2023, our deferred tax assets and valuation allowance have been reduced by approximately $ 441,000 and $ 435,000 , respectively. 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. 12 Table of Contents NOTE 9 – EARNINGS PER SHARE Basic earnings per share are calculated based on the weighted average number of common shares outstanding during each period. Diluted earnings per share is calculated based on these same weighted average shares outstanding plus the effect of potential shares issuable upon assumed exercise of stock options based on the treasury stock method. Potential shares issuable upon the exercise of stock options are excluded from the calculation of diluted earnings per share to the extent their effect would be anti-dilutive. The following table sets forth the computation of basic and diluted earnings per share: Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 (in thousands except per share data) Numerator for basic and diluted earnings (loss) per share: Net income (loss) $ ( 307 ) $ ( 53 ) $ ( 1,911 ) $ 342 Denominator for basic earnings (loss) per share: Weighted-average shares 9,235 9,020 9,121 8,914 Employee stock options and awards - - - 151 Denominator for diluted earnings (loss) per share: Adj weighted-average shares & assumed stock option conversions 9,235 9,020 9,121 9,065 Basic and diluted earnings (loss) per share: Basic earnings (loss) per share $ ( 0.03 ) $ ( 0.01 ) $ ( 0.21 ) $ 0.04 Diluted earnings (loss) per share $ ( 0.03 ) $ ( 0.01 ) $ ( 0.21 ) $ 0.04 The weighted average number of shares outstanding used to compute earnings (loss) per share included the following: Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Restricted Stock Units 10,214 71,903 71,265 148,529 Performance Stock Units 7,312 679 9,222 599 Stock Option Unit - 220 151 231 Options to purchase 34,398 and 12,500 shares, respectively, were outstanding as of September 30, 2024 and 2023, but were excluded from the computation of diluted earnings per share for the periods then ended because the options were anti-dilutive. 13 Table of Contents NOTE 10 – SHARE-BASED COMPENSATION For share-based awards granted, we have recognized compensation expense based on the estimated grant date fair value method. For these awards we have recognized compensation expense using a straight-line amortization method and reduced for estimated forfeitures. The impact on our results of operations of recording share-based compensation, net of forfeitures, for the three and nine months ended September 30, 2024 and 2023, respectively, were as follows: Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 (in thousands) Cost of goods sold $ 26 $ 24 $ 86 $ 72 Research and development 69 64 215 193 Selling, general & administrative 209 212 666 664 Total share-based compensation $ 304 $ 300 $ 967 $ 929 Equity awards granted during the three and nine months ended September 30, 2024 and 2023 were as follows: Three Months Ended Nine Months Ended September 30, 2024 September 30, 2023 September 30, 2024 September 30, 2023 Restricted Stock Units 2,500 75,000 234,150 357,100 Performance Stock Units - 5,000 119,000 30,000 Stock Option Units 200,000 - 200,000 - Non-employee directors Restricted Stock Units (“RSUs”) typically vest over the earlier of one year or the next annual meeting of shareholders and Non-Qualified stock options vest over three years and have a six-year exercise period. Employee RSUs typically vest annually over three or four years and employee Non-Qualified stock options typically vest quarterly over four years and have a six-year exercise period. Performance Stock Units (“PSUs”) granted in 2024, cliff vest at the end of the performance period based on performance metrics which includes cumulative revenue growth, EBITDA attainment and other project-based milestone targets over the three-year period ending December 31, 2026 with a performance threshold, target, and maximum. Stock option inducement grant of 200,000 shares was awarded to William Wentworth, new President and CEO, effective on the first day of employment. These options have a four-year quarterly vesting period and a six-year term and will be paid at the Fair Market Value (average of the high and low for the day) on the date of the grant. All other terms of the equity award are stated in the applicable award agreement. The remaining unamortized expected future equity compensation expense and remaining amortization period associated with award grants of unvested options, PSUs and RSUs at September 30, 2024 and 2023 are: September 30, 2024 September 30, 2023 Unamortized future equity compensation expense (in thousands) $ 2,401 $ 2,731 Remaining weighted average amortization period (in years) 2.24 2.60 14 Table of Contents