What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2026-04-16 compared with 2025-04-01 · 212 added, 147 removed, 437 unchanged (45% of the section changed)

Financial Statements and Supplementary Data

See pages 28 through 47.

See pages 32-57.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Data I/O Corporation (a Washington corporation) and subsidiaries (the “Company”) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2024, and the related notes and financial statement schedules included under Item 15(a)(2) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

We have audited the accompanying consolidated balance sheets of Data I/O Corporation (a Washington corporation) and subsidiaries (the “Company”) as of December 31, 2025 and 2024, the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2025, and the related notes and financial statement schedules included under Item 15(a)(2) (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2025 and 2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with accounting principles generally accepted in the United States of America.

Basis for opinion

These financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

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We have served as the Company’s auditor since 2001.

Bellevue, Washington

March 31, 2025

DATA I/O CORPORATION

San Jose, California

April 16, 2026

CONSOLIDATED BALANCE SHEETS

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Other accrued liabilities

Income taxes payable

Other income taxes payable

TOTAL CURRENT LIABILITIES

Deferred foreign income tax

Operating lease liabilities

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Preferred stock -

Authorized, 5,000,000 shares, including 200,000 shares of Series A Junior Participating Issued and outstanding, none

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, 9,236,040 shares as of December 31, 2024 and 9,020,819 shares as of December 31, 2023

Authorized, 30,000,000 shares

Issued and outstanding, 9,391,922 shares as of December 31,

2025 and 9,236,040 shares as of December 31, 2024

Accumulated earnings (deficit)

3 unchanged sentences

See notes to consolidated financial statements

DATA I/O CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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Weighted-average diluted shares

See notes to consolidated financial statements

DATA I/O CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

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See notes to consolidated financial statements

DATA I/O CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share amounts)

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Balance at December 31, 2023

Stock awards issued, net of tax withholding

Stock options exercised

Stock awards issued, net of tax withheld

Issuance of stock through:

Employee Stock Purchase Plan

Share-based compensation

Net income (loss)

Other comprehensive income gain (loss)

Other comprehensive income (loss)

Balance at December 31, 2024

Stock awards issued, net of tax withholding

Stock options exercised

Stock awards issued, net of tax withheld

Issuance of stock through:

Employee Stock Purchase Plan

Share-based compensation

Net income (loss)

Other comprehensive income gain (loss)

Other comprehensive income (loss)

Balance at December 31, 2025

See notes to consolidated financial statements

DATA I/O CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

For the Twelve Months Ended December 31,

For the Twelve Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

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Accounts payable and accrued liabilities

Deferred foreign income tax

Deferred revenue

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Net proceeds from issuance of common stock, less payments for shares withheld to cover tax

Repurchase of common stock

Payment of capital lease obligation

Cash provided by (used in) financing activities

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See notes to consolidated financial statements

DATA I/O CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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Nature of Operations

Data I/O Corporation (“Data I/O”, “We”, “Our”, “Us”) designs, manufactures and sells programming systems used by designers and manufacturers of electronic products.

Our programming system products are used to program integrated circuits (“ICs” or “devices” or “semiconductors”) with the specific unique data necessary for the ICs contained in various products and are an important tool for the electronics industry experiencing growing use of programmable ICs.

Data I/O Corporation (“Data I/O”, “We”, “Our”, “Us”) is the leading global provider of advanced security and data deployment solutions for microcontrollers, security ICs and memory devices.

Customers for our programming system products are located around the world, primarily in Asia, Europe and the Americas.

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We have not experienced any losses on our cash and cash equivalents.

Cash and cash equivalents held in foreign bank accounts, typically in local currency, in China and Germany, totaled $ 4.3 and $ 6.6 million at December 31, 2024 and 2023, respectively.

Cash and cash equivalents held in foreign bank accounts, typically in local currency, in China and Germany, totaled $ 5.2 million and $ 4.3 million at December 31, 2025 and 2024, respectively.

This cash held in subsidiaries have restrictions and costs associated with repatriations, currency conversions, and complying with government policies, regulations and controls, especially in China.

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These instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses, and other short-term liabilities.

Accounts Receivable

Trade Accounts Receivable

Majority of our accounts receivable are due from companies in the electronics manufacturing industries.

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Property, plant and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

If the total of future undiscounted cash flows is less than the carrying amount of these assets, an impairment loss, if any, based on the excess of the carrying amount over the fair value of the assets, is recorded.

Based on these evaluations, for the years ended December 31, 2025 and 2024, no impairment was noted or recorded for property, plant and equipment.

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A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

On July 4, 2025, the One Big Beautiful Bill Act (“OB3”) was enacted, which includes provisions allowing for the immediate expensing of domestic research and experimental (“R&E”) expenditures under Section 174A, effective for tax years beginning after December 31, 2021.

The Company has elected not to accelerate the amortization of unamortized R&E costs incurred in prior years.

As a result, the Company continues to amortize R&E expenditures over the five-year period as previously required under Section 174.

The Company will continue to evaluate the impact of OB3 on future periods.

Share-Based Compensation

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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.

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.

These systems are standard products with published product specifications and are configurable with standard options.

The evidence that these systems could be deemed 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 as well as customer expectations regarding installation.

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 the relative selling prices.

Relative selling price is based on the selling price of the standalone system.

For the installation and service and support performance obligations, we use the value of the discount given to distributors who perform these components.

For software maintenance performance obligations, we use what we charge for annual software maintenance renewals after the initial year the system is sold.

Revenue is recognized on the system 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.

We enter into arrangements with multiple performance obligations that arise during the sale of a system that could include hardware, software, services and support and extended maintenance components.

We allocate the transaction price of each element based on the relative selling price of each performance obligation.

For hardware, we determine our best estimate of selling price based on an expected cost-plus-a-margin approach.

For the service and support performance obligations, we estimate the standalone selling price using the adjusted market assessment approach, which considers observable market pricing, discounting practices, and prices charged for comparable standalone arrangements.

For software maintenance performance obligations, we determine our best estimate of selling price based on observable standalone sales of annual software maintenance renewals.

Revenue is recognized on the system based on shipping terms, software based on delivery, 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 maintenance contracts was $ 1.5 million and $ 1.7 million and the portion expected to be recognized within one year was $ 1.5 million and $ 1.5 million for December 31, 2025 and 2024, respectively.

When we sell software separately, we recognize revenue upon the transfer of control of the software, which is generally upon delivery, provided that only immaterial items in the context of the contract with the customer remain on our part and substantive acceptance conditions, if any, have been met.

Deferred revenue as of December 31, 2023 was $ 1.4 million.

When we license software separately, we recognize revenue upon the transfer of control of the software, which is generally upon delivery, provided that only immaterial items in the context of the contract with the customer 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.

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(in thousands)

Equipment Sales

Platform Sales

Adapter Sales

Software and Maintenance Sales *

* includes an insignificant amount of service and parts sales

Software and Services Sales *

* includes service and parts sales associated with equipment service contracts

The Company identified an error in the prior‑year disaggregated revenue amounts.

As a result, the 2024 revenue by major category amounts have been revised.

The correction did not impact the Company’s previously reported consolidated balance sheets, statements of operations, comprehensive income (loss), or statements of cash flows.

See Note 15 for additional information regarding the revision of prior‑period disaggregated revenue amounts.

Leases – Accounting Standards Codification 842

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In accounting for leases, we utilize certain practical expedients and policy selections available under the lease accounting standard.

For example, we do not record right-of-use assets or lease liabilities for leases with terms of 12 months or less.

We do not record right-of-use assets or lease liabilities for leases with terms of 12 months or less.

For contracts containing real estate leases, we do not combine lease and non-lease components.

The primary impact of this policy election is that we do not include in our calculation of lease liabilities any fixed and non-cancelable future payments due under the contract for items such as common area maintenance, utilities and other costs.

The primary impact of this policy election is that we do not include in our calculation of lease liabilities any fixed and non-cancellable future payments due under the contract for items such as common area maintenance, utilities and other costs.

Lease-related costs which are variable rather than fixed are expensed in the period incurred.

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Advertising costs are expensed as incurred.

Total advertising expenses were approximately $ 92,000 and $ 196,000 in 2024 and 2023, respectively.

Total advertising expenses were approximately $ 139,000 and $ 92,000 for the years ending December 31, 2025 and 2024, respectively.

Warranty Expense

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The common stock equivalent shares from equity awards used in calculating diluted earnings per share were 86,000 and 74,000 for the years ended December 31, 2025 and 2024, respectively.

Excluded from the computation of diluted earnings per share were options to purchase 200,000 and 12,500 shares of common stock because of the loss in 2024 and options’ purchase price exceeding market price (underwater) in 2023, thus the options were anti-dilutive for the years ended December 31, 2024 and 2023, respectively.

Excluded from the computation of diluted earnings per share were options to purchase 200,000 and 200,000 shares of common stock because of the net loss in 2025 and 2024, thus the options were anti-dilutive for the years ended December 31, 2025 and 2024, respectively.

Diversification of Credit Risk

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We perform on-going credit evaluations of our customers’ financial conditions and require collateral, such as letters of credit and bank guarantees, or prepayment whenever deemed necessary.

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

Percentage of Consolidated Accounts Receivable

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

Percentage of Accounts Receivable

Number of customers

Approximate percentage of consolidated accounts receivable balance

Percentage of each

Approximate percentage of accounts receivable balance

Percentage of Customer 1

Percentage of Customer 2

Percentage of Customer 3

Diversification of Net Sales

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Approximate percentage of net sales

Percentage of each

Percentage of Customer 1

Percentage of Customer 2

Percentage of Customer 3

Reclassifications

Certain prior‑year amounts have been reclassified within the notes to the consolidated financial statements to conform to the current‑year presentation.

These reclassifications had no impact on the consolidated balance sheets, statements of operations, statements of comprehensive income (loss), statements of stockholders’ equity or cash flows as previously reported.

New Accounting Pronouncements – Standards Issued and Implemented

Effective January 1, 2024, the Company adopted ASU 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures.

This update requires entities, including those with a single reportable segment, to disclose significant segment expenses regularly provided to the Chief Operating Decision Maker (CODM) and included in the reported measure of segment profit or loss.

The Company operates as a single reportable segment.

The CODM evaluates the Company's performance based on operating income, as presented in the consolidated statements of operations.

Significant segment expenses are those that are already disclosed in operating income and regularly reviewed by the CODM for purposes of assessing performance and allocating resources.

Additional significant single segment expense categories are provided in Note 13 – Segment Information.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which expands disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

ASU 2023-09 became effective for the Company’s annual period beginning January 1, 2025, and has been applied on a prospective basis in these consolidated financial statements.

New Accounting Pronouncements – Standards Issued and Not Yet Implemented

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.

In November 2024, FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation (Subtopic 220-40), which requires disclosure of specific information about costs and expenses within relevant expense captions on the face of the income statement, qualitative descriptions for expense captions not specifically disaggregated quantitatively, and the total amount and definition of selling expenses for interim and annual reporting periods.

This standard is effective for the annual reporting period beginning January 1, 2027 and interim reporting periods beginning January 1, 2028 and should be applied retrospectively to all comparative periods.

In November 2024, the FASB issued ASU 2024-03, “Income Statement – Reporting Comprehensive Income – Expense Disaggregation (Subtopic 220-40),” which requires disclosure of specific information about costs and expenses within relevant expense captions on the face of the income statement.

This standard is effective for the Company’s annual reporting period beginning January 1, 2027, and interim reporting periods beginning January 1, 2028, and should be applied retrospectively to all comparative periods.

Early adoption is permitted.

The Company is currently evaluating the effects of adopting this new accounting guidance.

NOTE 2 – ACCOUNTS RECEIVABLE, NET

NOTE 2 – TRADE ACCOUNTS RECEIVABLE, NET

(in thousands)

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Trade accounts receivable, net*

________________

Trade accounts receivable, net was $5.7 million as of December 31, 2023.

Changes in Data I/O’s allowance for credit losses are as follows:

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Other accrued liabilities

The changes in our product warranty liability for the year ending:

The changes in our product warranty liability for the year ended:

(in thousands)

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Liability, ending balance

NOTE 6 – OPERATING LEASE COMMITMENTS

We have commitments under non-cancellable operating leases and other agreements, primarily for factory and office space, with initial or remaining terms of one year or more for the year ending December 31 are as follows:

2024 Operating

Lease Commitments

NOTE 6 – LEASES

Operating Lease Commitments

We have commitments under non-cancellable operating leases and other agreements, primarily for factory and office space, with initial or remaining terms of one year or more.

Future minimum lease payments as of December 31 are as follows:

(in thousands)

2029 & thereafter

Less imputed interest

Total operating lease liabilities

Payments for operating lease liabilities for the twelve months ending December 31, 2024 and 2023, respectively, were $ 833,000 and $ 894,000 which included short-term lease costs of $ 38,000 and $ 25,000 .

The total annual lease expense in 2024 and 2023, including operating lease expenses and short-term lease expenses, was approximately $ 845,000 and $ 745,000 , respectively.

Cash paid for amounts included in the measurement of lease liabilities was $ 735,000 and $ 795,000 for the years ended December 31, 2025 and 2024, respectively.

The Company has no finance leases.

The total annual lease expense in 2025 and 2024, including operating lease expenses and short-term lease expenses of $ 30,000 and $ 38,000 , was approximately $ 807,000 and $ 845,000 , respectively.

Variable payments were not material and were treated as non-lease components and were recognized in the period for which the costs occur.

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Our two subsidiary facilities in Munich, Germany and Shanghai, China provide extended worldwide sales, service, engineering and operations services.

The total annual gross or base lease payments during 2024 and 2023 were approximately $ 795,000 and $ 823,000 , respectively.

The lease payment decrease in 2024 was due primarily to a reduction in lease rates for our Redmond, Washington and Shanghai, China facilities.

The lower rates reflect the real estate market conditions as part of the lease extensions which occurred in the fourth quarter of 2024.

The Redmond lease was renewed and extended by 3.75 years and the Shanghai, China lease was renewed and extended by 3 years.

The lease payment decrease in 2025 versus 2024 was due primarily to the realization of a full year of the reduction in lease rates for our Redmond, Washington and Shanghai, China facilities effected in 2024 when, the Redmond lease was renewed and extended by 3.75 years and the Shanghai, China lease was renewed and extended by 3 years.

Right-of-use assets obtained in exchange for lease liabilities was approximately $2.5 million the year ended December 31, 2024

The Redmond, Washington headquarters facility lease runs to October 31, 2029, at approximately 20,460 square feet.

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Lease liability-long term (Operating lease liabilities)

At December 31, 2024, the weighted average remaining lease term is 4.1 years and the weighted average discount rate used is 5 %.

At December 31, 2025, the weighted average remaining lease term is 3.2 years and the weighted average discount rate is 5 %.

Lessor Arrangements

During the year ended December 31, 2025, the Company recognized approximately $0.6 million of revenue from one sales‑type lease related to the lease of programming equipment, which is included in Platform Sales in the consolidated statements of operations.

The Company did not recognize sales‑type lease revenue during the year ended December 31, 2024.

The Company does not typically enter into sales‑type lease arrangements and does not expect such arrangements to be recurring.

We determined the residual value of this leased equipment based on its estimated end-of-term market value.

We estimate the residual value of leased equipment at the inception of the lease based on a number of factors, including historical wholesale market sales prices, past remarketing experience and any known significant market/product trends.

We also consider the following critical factors in our residual value estimates:

lease term, market size and demand, total expected hours of usage, machine configuration, application, location, model changes, quantities, third-party residual guarantees and contractual customer purchase options.

Although the lease permits month‑to‑month continuation, the Company has concluded that the lessee is reasonably certain to exercise the purchase option.

Accordingly, as of December 31, 2025, substantially all remaining undiscounted lease payments related to the Company’s sales‑type lease are expected to be received in 2026.

The timing of such payments is consistent with the Company’s estimate of the exercise of the purchase option and supports the carrying amount of the net investment in the lease recognized as of December 31, 2025.

At December 31, 2025, the Company’s net investment in sales‑type leases was $0.4 million, which is included in Trade accounts receivable, net on the consolidated balance sheets.

The net investment represents the present value of future lease payments and the expected purchase option proceeds, discounted at the rate implicit in the lease.

NOTE 7 – OTHER COMMITMENTS

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Most arrangements are cancelable without a significant penalty, and with short notice, typically less than 90 days.

On December 31, 2024, we had four contracts with a commitment of approximately $ 389,000 to be paid in 2025 and $ 1,630,000 to be paid beyond one year.

On December 31, 2025, we had contracts with a commitment of approximately $ 905,000 , of which approximately $ 585,000 is expected to be paid during 2026, $160,000 during 2027, $160,000 during 2028, $0 during 2029, 2030 and thereafter.

NOTE 8 – CONTINGENCIES

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Stock Option Plans

At December 31, 2024, there were 492,843 shares available for future grant under the Data I/O Corporation 2023 Omnibus Incentive Compensation Incentive Plan (the “2023 Plan”).

At December 31, 2024, there were shares of Common Stock reserved for issuance for outstanding awards, consisting of 61,250 inducement reserve shares, 79,875 shares under the 2000 Plan, and 530,775 shares under the 2023 Plan.

The inducement reserve shares remaining that were granted in 2023 consisted of 56,250 RSU and 5,000 PSU, (which were not from the 2023 Plan, but were made under the terms of the 2023 Plan).

Pursuant to the 2000 and 2023 Plans, options are granted to our officers and key employees with exercise prices equal to the fair market value of the Common Stock at the date of grant and generally vest over four years.

At December 31, 2025, there were 400,838 shares available for future grant under the Data I/O Corporation 2023 Omnibus Incentive Compensation Plan (the “2023 Plan”).

At December 31, 2025, there were shares of Common Stock reserved for issuance for outstanding awards.

Pursuant to the 2023 Plan, options are granted to our officers and key employees with exercise prices equal to the fair market value of the Common Stock at the date of grant and generally vest over four years.

Options granted under the plan have a maximum term of six years from the date of grant.

Stock awards are now granted under the 2023 Plan (previously the 2000 Plan) which for RSU awards generally vest over three or four years and one year for non-employee Directors.

Performance Share Unit (PSU) awards vesting based upon the three-year performance achievement on December 31, 2025 and 2026.

The performance measures for the PSUs awarded are revenue growth targets for the three-year period ending December 31, 2025.

Stock awards are granted under the 2023 Plan which for RSU awards generally vest over three or four years and one year for non-employee Directors.

Performance Share Unit (PSU) awards vest based upon three-year performance achievement.

The performance measures for the PSUs awarded in 2023 are cumulative revenue growth over the three-year period ending December 31, 2025.

The performance measures for the PSUs awarded in 2024 are revenue growth targets, EBITDA targets and for Engineers, project objectives for the three-year period ending December 31, 2026.

Achieving a threshold measure earns 50% of the PSU target award;

achieving the target measure earns 100% of the PSU target award;

and achieving the maximum target measure earns 150% of the PSU target award.

There were no PSU awards granted in 2025.

Employee Stock Purchase Plan

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The SAR entitles the SAR holder to receive cash from us for the difference between the market value of the stock and the exercise price of the option in lieu of exercising the related option.

SARs are only exercisable following a tender offer or exchange offer for our stock or following approval by shareholders of Data I/O of any merger, consolidation, reorganization or other transaction providing for the conversion or exchange of more than 50% of the common shares outstanding.

SARs are only exercisable following a tender offer or exchange offer for our stock or following approval by shareholders of any merger, consolidation, reorganization or other transaction providing for the conversion or exchange of more than 50% of the common shares outstanding.

As no event has occurred which would make the SARs exercisable, and no such event is deemed probable, no compensation expense has been recorded under this plan.

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employees may defer their pre-tax salary or post-tax salary if Roth is elected, subject to IRS limitations.

In fiscal year 2024, we contributed one dollar for each dollar contributed by a participant on the first two percent and $.50 for each dollar contributed by participant on the next four percent of a participant’s eligible earnings, and as a result this requires a minimum six percent contribution to receive a four percent matching contribution.

In fiscal year 2025, we contributed one dollar for each dollar contributed by a participant on the first two percent and $.50 for each dollar contributed by participant on the next four percent of a participant’s eligible earnings.

Our matching contribution expense for the savings plan, net of forfeitures, was approximately $ 197,000 and $ 217,000 in 2025 and 2024, respectively.

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Total share-based compensation

An immaterial amount of share-based compensation was capitalized into inventory as overhead for the years ended December 31, 2024 and 2023, respectively.

The following table summarizes stock option activity under our stock option plans for the twelve months ended December 31, 2025 and 2024:

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Outstanding at beginning of year

Cancelled, Expired or Forfeited

Cancelled, Expired or

Outstanding at end of year

Vested or expected to vest at the end of the period

Vested or expected to vest at end of the period

Exercisable at end of year

The aggregate intrinsic value of outstanding options is $ 81,540 .

There were no stock option awards exercised in 2024.

There were no stock option awards exercised in 2025 or 2024.

Restricted stock award activity including performance-based stock award activity under our share-based compensation plan was as follows:

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NOTE 11 – SHARE REPURCHASE PROGRAMS

Data I/O did not have a share repurchase program in 2024.

Data I/O did not have a share repurchase program in 2025 or 2024.

NOTE 12 – INCOME TAXES

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Current tax expense (benefit)

Deferred tax expense (benefit) – U.S.

Deferred tax expense (benefit) – foreign

Total income tax expense (benefit)

Income tax (expense) increased by $ 192,000 for the year ended December 31, 2024, compared to 2023.

The increase was primarily a result of the withholding tax of $ 337,000 on the repatriation of cash from China subsidiary in 2024.

Income tax (expense) in 2024 and 2023 is primarily the result of foreign subsidiary income tax and minimal U.S.

state income tax.

A reconciliation of our effective income tax and the U.S.

federal tax rate is as follows:

Year Ended December 31,

For the year ended December 31, 2025, income tax expense includes $ 250,000 of deferred tax expense resulting from the recognition of deferred tax liabilities associated with outside basis differences in foreign subsidiaries.

Effective Rate Reconciliation:

(In thousands)

federal statutory tax

State and local income tax, net of federal income tax effect

Foreign tax effects:

Withholding tax

Statutory rate differential

Research and development credit

Changes in valuation allowances

Nontaxable or nondeductible items:

Permanent differences - stock compensation

Permanent differences - other

Changes in unrecognized tax benefits

Other adjustments

Global effective tax

The following table presents the required disclosures prior to our adoption of ASU 2023-09 and reconciles the U.S.

federal statutory income tax rate to the actual global effective income tax rate for the year ended December 31, 2024:

(In thousands)

Statutory tax

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Stock based compensation

Total income tax expense (benefit)

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets are presented below:

Year Ended December 31,

Total income tax expense (benefit) (effective tax rate of ( 14.3 %))

On July 4, 2025, the One Big Beautiful Bill Act (Act) was signed into law.

The Act makes permanent key elements of the Tax Cuts and Jobs Act, including 100 percent bonus depreciation, domestic research cost expensing, increases the AMIC to 35 percent from 25 percent and makes modifications to the international tax framework.

The Act includes multiple effective dates, with certain provisions effective in 2025 and others phased in through 2027.

We continue to evaluate the impact of the Act's provisions that will take effect in future years.

As a result of this legislation, the Company is deducting its domestic Section 174A expenditures beginning in the 2025 taxable year.

As noted in the 2025 rate reconciliation above, we derive the effective tax rate benefit, or detriment, attributed to non-U.S.

income taxed at different rates primarily from our operations in China, among others.

Deferred Taxes

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts for income tax purposes.

Significant components of our deferred tax assets and liabilities at the end of each period were as follows:

(In thousands)

Deferred income tax assets:

Allowance for credit losses

1 unchanged sentence

Compensation accruals

Accrued liabilities

Book-over-tax depreciation and amortization

2 unchanged sentences

credit carryforwards

Gross deferred tax assets

Valuation allowance

Total Deferred Income Tax Assets

The valuation allowance for deferred tax assets increased $ 584,000 and decreased $ 639,000 during the years ended December 31, 2024 and 2023, respectively.

The net deferred tax assets have a full valuation allowance provided due to uncertainty regarding our ability to utilize such assets in future years.

This full valuation allowance evaluation is based upon our volatile history of losses and the cyclical nature of our industry and capital spending.

Credit carryforwards consist primarily of research and experimental and foreign tax credits.

We intend to continue to reinvest foreign earnings of our operating subsidiaries.

net operating loss carryforwards are $ 14.2 million on December 31, 2024 with expiration years from 2024 to 2035 .

Utilization of net operating loss and credit carryforwards is subject to certain limitations under Section 382 of the Internal Revenue Code of 1986, as amended.

We have not had a Section 382 ownership change, but if we did the usage of these tax assets would have an income usage limitation based on the value of the Company at the time of the change times the federal long-term tax-exempt rate.

The gross changes in uncertain tax positions resulting in unrecognized tax benefits are presented below:

Year Ended December 31,

Total net deferred tax assets

Deferred tax liabilities:

(In thousands)

Unrecognized tax benefits, opening balance

Prior period tax position increases

Additions based on tax positions related to current year

Unrecognized tax benefits, ending balance

Accrued liabilities

Deferred tax liabilities - foreign

Total gross deferred tax liabilities

Changes in the valuation allowance for deferred tax assets were as follows:

Balance at Beginning of Year

Additions charged to expenses/other accounts

(Deductions) recoveries, net

Balance at End of Year

The change in valuation allowance is substantially attributable to the uncertainty regarding the realizability of our U.S.

deferred tax assets.

As of December 31, 2025, our federal and non-U.S.

net operating loss carryforwards for income tax purposes were $ 19,345,000 and $ 1,690,000 respectively.

The majority of the federal and non-U.S.

net operating loss carryforwards have multiple expiration dates.

The remaining federal U.S.

net operating loss carryforwards expire at various dates through 2034.The Company has determined that certain undistributed earnings of its foreign subsidiaries are indefinitely reinvested.

Accordingly, no deferred income taxes have been recorded on those earnings.

The deferred tax liability related to these indefinitely reinvested earnings that has not been recognized was approximately $ 294,000 as of December 31, 2025.

Deferred income taxes have been recorded for undistributed foreign earnings that are expected to be repatriated.

Uncertain Tax Positions

(In thousands)

Beginning gross unrecognized tax benefits

Settlements and effective settlements with tax authorities

Changes in balances related to tax position taken during prior periods

Changes in balances related to tax position taken during current period

Ending gross unrecognized tax benefits

Historically, we have incurred minimal interest expense, and no penalties associated with tax matters.

2 unchanged sentences

In addition, various tax years from 2004 to 2014 may be subject to examination if we utilize the net operating losses and credit carryforwards from those years in our current or future year tax returns.

Income Tax Paid

We adopted ASU 2023-09 on a prospective basis for the year ended December 31, 2025 and have included the following table as a result of our adoption, which presents income taxes paid (net of refunds received) for the year ended December 31, 2025:

(In thousands)

Federal taxes

Foreign taxes (China, others minimal)

Total income tax paid

NOTE 13 – SEGMENT INFORMATION

Data I/O operates as a single segment entity, with the sole objective to design, manufacture, and sell programming systems.

We operate in three separate locations — Redmond, WA;

We operate in three separate locations – Redmond, Washington;

Shanghai, China;

and Munich, Germany – these locations function as part of a single, integrated business and all operations are strategically aligned to support this objective.

The accounting policies of the programing system segment are the same as those described in the summary of significant accounting policies.

The accounting policies of the programming system segment are the same as those described in the summary of significant accounting policies.

The measure of segment assets is reported on the balance sheet as total consolidated assets.

Our chief operating decision maker (CODM) is the President/CEO who reviews the company’s financial performance on a consolidated basis without distinguishing between different business lines or geographic areas for the purpose of making operating decisions, allocating resources and evaluating financial performance.

Our Chief Operating Decision Maker (“CODM”) is the President/Chief Executive Officer who reviews the company’s financial performance on a consolidated basis without distinguishing between different business lines or geographic areas for the purpose of making operating decisions, allocating resources and evaluating financial performance.

Financial performance is assessed using operating results, actual net income vs.

plan, balance sheet fluctuations, and other key performance indicators.

Significant single segment expense categories that are provided to the chief operating decision maker and included in the reported segment operating profits are outlined in the following table:

Year Ended December 31,

Significant single segment expense categories that are provided to the CODM and included in the reported segment operating profits are outlined in the following table:

(in thousands)

4 unchanged sentences

Professional and outside services

Occupancy costs (OPEX portion)

Depreciation & amortization

Occupancy costs

Depreciation and amortization

Other expense (income)

Total operating expense

6 unchanged sentences

to our foreign distributors and to our representatives’ customers.

Certain revenues recognized over time (for instance, multi-period service contracts under ASC 606) are allocated to geographic regions based on estimates, because our systems do not track the country of these revenues as they are deferred and recognized.

In such cases, we allocate revenue to countries proportionally based on the initial contract value by country, which we believe is a reasonable approximation.

International sales do not include transfers between Data I/O and our foreign subsidiaries.

Operating income by region is based on sales noted above less direct costs and allocated costs including U.S.

headquarter operations, engineering and SG&A.

Long-lived assets are reported in the region where the asset is physically located, and consist of property, plant and equipment and other long-term assets.

The following tables provide summary operating information by geographic area:

1 unchanged sentence

(in thousands)

Net sales by region

Asia and others

Operating income:

Asia and others

Identifiable assets:

Americas (primarily U.S.)

Europe (primarily Germany)

Asia & others (primarily China)

Net sales by location:

United States

International

International sales:

Long-lived assets by location:

United States

NOTE 15 – PRIOR PERIOD REVISION

The Company identified an error in the prior‑year disaggregated revenue amounts of net sales by type.

As such, the Company has revised the net sales by type for the year ended December 31, 2024.

This correction affected only the disaggregation of net sales among Platform, Adapter, and Software and Services sales and did not impact the Company’s previously reported consolidated balance sheets, statements of operations, comprehensive income (loss), or statements of cash flows.

While the total revenue was not affected, the Company has revised the presentation of net sales by type for the year ended December 31, 2024 to enhance comparability.

Effect of Revision

Net sales by type

As Previously Reported

Effect of Revision

(in thousands)

Platform Sales

Adapter Sales

Software and Services Sales*

* includes service and parts sales associated with equipment service contracts

NOTE 16 – SUBSEQUENT EVENTS

In preparing the financial statements, the Company has reviewed all known events which occurred after December 31, 2025 through the date on which the financial statements are available for issuance, for potential recognition or disclosure in the consolidated financial statements and footnotes.

There were no other subsequent events which would require additional disclosures to the financial statements other than those already disclosed throughout the Notes to Consolidated Financial Statements.

In January 2026, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission, providing the ability to issue up to $ 20 million of equity securities.

The shelf registration provides financial flexibility for potential strategic initiatives, including acquisitions aligned with the Company’s growth strategy.

Also in January, the Company took steps to realign its German subsidiary, scaling back on some functions and bringing a number of roles back to headquarters which resulted in the elimination of several positions in the German subsidiary.

In February 2026, the Company announced a collaboration with IAR, a global leader in embedded development tools and security solutions, to combine IAR’s security expertise with Data I/O’s provisioning expertise.

The collaboration is intended to create a frictionless solution that reduces the complexity inherent in current device provisioning approaches, simplifying the process of securely programming and provisioning devices across global manufacturing supply chains.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .

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 8. Financial Statements and Supplementary Data