What changed in this filing

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Item 1. Business

2025-04-01 compared with 2024-03-27 · 50 added, 93 removed, 246 unchanged (37% of the section changed)

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Our website address is www.dataio.com .

In 2023, most of the direct implications of COVID-19 had passed, and we were dealing with the follow-on impacts or indirect impacts from COVID-19 and the policies put in place to mitigate the disease.

We continued to manage inflation, supply chain impacts and shortages, and the post lock down economic transitions in China and elsewhere.

Other Major Impacts on 2023

In 2022, the war in Ukraine started, while having little direct impact on us from Russia or Ukraine, did affect our supply chains, European economic uncertainty and energy concerns.

Inflation impacted everyone.

We believe we were able to adequately address inflation with pricing adjustments such that our margins were mostly maintained.

The strengthening of the dollar in 2022 created headwinds for revenues, as typically over 90% of our business is international.

Interest rate hikes by central banks were a concern, especially for cyclical industries with resulting worries about capital spending and planning for recessionary impacts.

Certain labor markets were tight during the year causing recruiting challenges.

The impact of semiconductor chip shortages, that began mid-2021 and continued well into 2022, are not completely resolved yet in 2023.

For 2023, many of the issues described have caused supply chain disruptions and lead-time unreliability, which we have managed carefully by maintaining and increasing key inventory levels.

We believe there is less risk exposure on these issues and we are now reducing inventory levels.

The economic challenges resulting from the war in Ukraine and inflation have likely caused Germany to enter into a recession in 2023.

We believe that this, and challenges related to the expected shift from Internal Combustion Engines (ICE) to Electric Vehicles (EV), have impacted short-term demand in Germany.

In the United States, we believe uncertainty related to automotive labor strikes softened demand and pushed out expected end-of-the-quarter orders.

We experienced stronger orders the second half of 2023 from our automotive electronics customers and the labor strikes have been resolved.

Major Impacts on 2024

Due to economic and automotive electronics uncertainties and slower customer capacity expansion, shipments of the Company’s automated systems in the Americas and Europe were lower which was partially offset by revenue growth in Asia.

COVID-19 impacts in past years were no longer an operational challenge with personnel staffing, inventory levels, supply chain and operational activities returning to normal levels.

However, late in 2024 with the new incoming United States Administration, geo-political, economic and trade uncertainties have increased.

The resulting future impact on the Company’s markets, customers, supply chain and operations are uncertain.

We will leverage the experience gained from the impacts of COVID-19, along with the expertise of our leadership and operational teams, to effectively navigate and mitigate these potential challenges.

After a period of stability which lasted over a decade, a key organizational leadership transition occurred in the fourth quarter of 2024 with the planned retirement of Anthony Ambrose and the appointment of a new CEO and President, William Wentworth.

Subsequent changes have also occurred in the leadership of the Sales, Marketing and Engineering functions.

Industry Background

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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 $62,000 to $690,000 and our manual systems have list selling prices ranging from $12,000 to $48,000.

Our automated systems have list selling prices ranging from approximately $62,000 to $690,000 and our manual systems have list selling prices ranging from approximately $10,000 to $20,000.

Our security deployment system, SentriX®, is offered as a software license added to existing programming systems or on a pay per part use basis along with related fees.

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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.

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

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Customer Benefits

Off-line (Automated)

Fast program and verify speeds ·

Managed and secure programming

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, 2D inspection, 3D coplanarity

· ConneX Service Software enables connected factory integration and automation

· Managed and secure programming

High throughput for high-density flash memory programming

Supports LumenX and FlashCORE III programmers

Flexible I/O options (tray, tape, tube), marking/labeling and vision for coplanarity inspection

Supports multiple media types

Supports quality options – fiber laser marking, ink dot marking, 2D inspection, 3D coplanarity

· Scalable solutions for low to high-volume manufacturing

· Access to system data for connected factory machine learning and AI applications

SentriX Security Deployment System

· Unique ability to securely provision keys and certificates one device at a time

· Broad set of secure devices supported with wide range of silicon partners

· Software license model allows easy upgrades from deployed data programming systems

· Pay per use model

· Create secure IoT devices across a global network

· Maintain IP control over their product’s lifecycle

· Secure supply chain and flexible key management architecture

Access to system data for connected factory and traceability

ConneX Service Software enables connected factory integration and automation

LumenX Programmer

(Non-automated)

· Extensible architecture for fast program, verify and download speeds

· Supports UFS memory, microcontrollers, serial flash, secure elements and other device types

· Large file size support

· Secure job creation

· Eight sockets with tool-less changeover with single-socket adapters

Extensible architecture for fast programming, verify and download speeds ·

Managed and secure programming

Fast setup and job changeover

Supports UFS memory, microcontrollers, serial flash, secure elements and other device types ·

Highest yield and low total cost of programming

High performance

Large file size support

Secure job creation

Create and validate designs before moving down the firmware supply chain

Eight sockets with tool-less changeover with single-socket adapters

FlashPAK III programmer:

(Non-automated)

· Scalability

Network control via Ethernet

Create and validate designs before moving down the firmware supply chain

Stand-alone operation or PC compatible ·

Unmatched ease of use in manual production systems

Parallel programming

· Four sockets

Universal device support

· Validate designs before moving down the firmware supply chain

· Unmatched ease of use in manual production systems

SentriX Security Deployment

Unique ability to securely provision keys and certificates one device at a time ·

Create secure IoT devices across a global network

Maintain IP control over their product’s lifecycle

Broad set of secure devices supported with wide range of silicon partners ·

Secure supply chain and flexible key management architecture

Software license model allows easy upgrades from deployed PSV data programming systems

Pay per use model

Customers/Markets

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New contracts from OEMs, programming solutions specified by OEMs

Capacity utilization of their installed base of equipment, small parts handling, security

Large algorithm device support library, contract wins, capacity utilization of their installed base of equipment, small parts handling, security

Buying criteria

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End-customer and partner focus

Partner focus of our SentriX

Partner focus of our SentriX deployments

Our solutions address the data programming and security deployment needs of programmable semiconductor devices.

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We sell to the manufacturers who are consumers of certain semiconductors.

When their business grows, they buy more semiconductors which, in turn, requires additional programming equipment to maintain production speeds or program new device technologies.

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:

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Percentage of each

The following represented greater than 10% of our consolidated accounts receivable for the applicable year:

The following represented greater than 10% of our consolidated accounts receivable for the applicable years:

Percentage of Consolidated Accounts Receivable

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Our direct competition competes primarily based on price.

Typically, their equipment meets a “good enough” standard, but with reduced quality, traceability, upgradability, security and other software features.

Many of these competitors compete on a regional basis.

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Our backlog of pending orders was approximately (in millions) $3.5, $2.8 and $4.8 as of December 31, 2024, 2023 and 2022, respectively.

The size of backlog at any particular date is not necessarily a meaningful indicator of the trend of our business.

The size of backlog at any date is not necessarily a meaningful indicator of the trend of our business.

Research and Development

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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.

Future growth is largely 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 are continuing to develop technology for manual and automated systems 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, factory automation communications software, and enhancements for security deployment in the manufacturing environment.

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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 25 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.

We rely on a combination of patents, copyrights, trade secrets and trademarks to protect our IP, as well as product development and marketing skills to establish and protect our market position and will continue to apply for and add new patents to our patent portfolio as we develop strategic new technologies.

We attempt to protect our rights in proprietary systems (architecture, implementations, software) including Lumen®X, FlashCORE, TaskLink, ConneX, SentriX 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 or licensed separately from sales of programming systems.

However, 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.

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.

However, any claim of infringement, with or without merit, could be costly and a diversion of management’s attention, and be 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, 2024, we were not subject to any pending actions regarding infringement claims.

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education and volunteer time.

The tight labor markets that we experienced in 2022 returned to more normal in 2023.

Environmental, Social and Governance (“ESG”)

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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.

Our facilities are subject to numerous laws and regulations concerning the discharge of materials or otherwise relating to the environment.

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German facility in prior years) and started to purchase offsets for its carbon emissions from natural gas use in the U.S.

For our vehicles, we have been replacing turned in cars with hybrid or electric vehicles.

For our vehicles, we have been replacing company-owned cars with hybrid or electric vehicles where feasible.

None of these actions have had a material financial impact.

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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.

The Company provide employees time-off to volunteer.

In addition, the Company provides internships to local high school and college students through STEM and technical colleges.

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Set forth below is certain information concerning the executive officers of Data I/O as of March 18, 2025:

Anthony Ambrose

William Wentworth

President and Chief Executive Officer

Vice President, Chief Financial Officer, Secretary and Treasurer

Rajeev Gulati

Chief Technology Officer, Vice President of Engineering

Michael Tidwell

Vice President of Marketing and Corporate 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 previously served as a board member of SideChannel, Inc.

SDCH) until February 2024 having been retained after their 2022 merger with Cipherloc Corporation (OTCQB:

CLOK) where he joined the board in 2019 and had also been lead independent director since 2019.

Ambrose has a Bachelor 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.

William Wentworth joined Data I/O as a member of the Board of Directors on May 2023 and assumed the President position on September 1,2024 and Chief Executive Officer (“CEO”) position on October 1, 2024.

Bill Wentworth brings a wealth of industry experience spanning over 35 years, including private equity and M&A exposure.

As the CEO of Source Electronics, the global market share leader in programming and test services, he was a Data I/O customer and led the sale of controlling interest of Source Electronics to HIG Capital in 2001 and the company’s subsequent sale to Avnet in 2008 with significant investor return.

Under Bill's leadership, Source developed compelling programming solutions for the automotive and consumer industries, expanding the business and limiting its industry and customer concentration.

For the years prior to joining Data I/O, as President and owner of Wentworth Advisors, he has consulted in the programming, IT, and private equity markets, focusing on expanding deal flow, performing due diligence and Board service.

Ng joined Data I/O in July 2023 as Data I/O's Vice President of Finance and, effective August 16, 2023, became Data I/O's Vice President and Chief Financial Officer.

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Gerry holds a Masters of Business Administration from Northwestern University – Kellogg School of Management and a Bachelor of Arts Finance and Accounting from the University of Washington.

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 Corporate 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.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business