What changed in this filing

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Item 1. Financial Statements

2026-05-15 compared with 2025-11-12 · 94 added, 136 removed, 257 unchanged (47% of the section changed)

3 unchanged sentences

(in thousands, except share data)

September 30,

CURRENT ASSETS:

12 unchanged sentences

TOTAL CURRENT LIABILITIES

Deferred foreign income tax

Operating lease liabilities

2 unchanged sentences

Preferred stock -

Authorized, 5,000,000 shares, including 200,000 shares of Series A Junior Participating

Authorized, 5,000,000 shares, including

200,000 shares of Series A Junior Participating

Issued and outstanding, none

1 unchanged sentence

Authorized, 30,000,000 shares

Issued and outstanding, 9,390,730 shares as of September 30, 2025 and 9,236,040 shares as of December 31, 2024

Issued and outstanding, 9,394,422 shares as of March 31,

2026 and 9,391,922 shares as of December 31, 2025

Accumulated deficit

7 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Cost of goods sold

20 unchanged sentences

Three Months Ended

September 30,

Nine Months Ended

September 30,

Net income (loss)

4 unchanged sentences

DATA I/O CORPORATION

CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share amounts)

9 unchanged sentences

Balance at March 31, 2025

Stock awards issued, net of tax withholding

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at June 30, 2024

Stock awards issued, net of tax withholding

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at September 30, 2024

Balance at December 31, 2025

Stock awards issued, net of tax withholding

Stock options exercised

Stock awards issued, net of tax withheld

Issuance of stock through:

3 unchanged sentences

Balance at March 31, 2026

Stock awards issued, net of tax withholding

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at June 30, 2025

Stock awards issued, net of tax withholding

Issuance of stock through:

Share-based compensation

Net income (loss)

Other comprehensive income (loss)

Balance at September 30, 2025

See notes to consolidated financial statements

DATA I/O CORPORATION

1 unchanged sentence

(in thousands)

For the Nine Months Ended

September 30,

For the Three Months Ended

CASH FLOWS FROM OPERATING ACTIVITIES:

29 unchanged sentences

NOTE 1 - DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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.

Data I/O Corporation (“Data I/O”, “We”, “Our”, “Us”, the “Company”) 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, 2025, and September 30, 2024, according to the rules and regulations of the Securities and Exchange Commission (“SEC”).

We prepared the financial statements as of March 31, 2026 and March 31, 2025, 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.

1 unchanged sentence

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, 2025, are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

Operating results for the three months ended March 31, 2026, are not necessarily indicative of the results that may be expected for the year ending December 31, 2026.

Significant Accounting Policies

8 unchanged sentences

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 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.

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.

Total deferred revenue, which represents undelivered performance obligations for installation, service, support and extended contracts, was $ 1.4 million and $ 1.5 million for September 30, 2025 and 2024, respectively.

The portion expected to be recognized within one year was $ 1.4 million and $ 1.3 million for September 30, 2025 and 2024, respectively.

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.

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.

We record deferred revenue as any non-refundable amounts that are primarily related to prepayments from customers, which is recognized as revenue as or when the performance obligations are satisfied.

We have elected the practical expedient to omit disclosure of the amount of the transaction price allocated to remaining performance obligations for contracts with an expected contract length of one year or less.

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.

8 unchanged sentences

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.

These product units often involve refurbishing and an equipment warranty and are conducted as sales in our normal and ordinary course of business.

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.

1 unchanged sentence

Three Months Ended

Nine Months Ended

Net sales by type

September 30,

March 31, 2026

March 31, 2025

(in thousands)

Software and Maintenance

Platform Sales

Adapter 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 2025 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.

Note 12 for additional information regarding the revision of prior‑period disaggregated revenue amounts.

Share-Based Compensation

6 unchanged sentences

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, no discrete tax adjustment was recorded in Q3 2025, and the Company continues to amortize R&E expenditures over the five-year period as previously required under Section 174.

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

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 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.

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

ASU 2023-09 is effective for the Company’s annual periods beginning January 1, 2025, and will apply on a prospective basis starting with the Company’s consolidated financial statements included in the annual report on Form 10-K for the fiscal year ending December 31, 2025.

Retrospective application in all prior periods presented is permitted.

The Company is currently evaluating the impact that the adoption of ASU 2023-09 will have on its annual income tax disclosures in its consolidated financial statements, however it is not expected to have any impact on the Company’s results of operations, cash flows, or financial condition.

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.

Early adoption is permitted.

5 unchanged sentences

We evaluate our inventories on an item-by-item basis and record inventory adjustments accordingly.

If there is a significant decrease in demand for our products, uncertainty during product line transitions, or a higher risk of inventory obsolescence because of rapidly changing technology and customer requirements, we may be required to increase our inventory adjustments and our gross margin could be adversely affected.

Inventories consisted of the following components:

September 30,

(in thousands)

2 unchanged sentences

NOTE 3– PROPERTY, PLANT AND EQUIPMENT, NET

Property and equipment consisted of the following components:

September 30,

Property, plant and equipment consisted of the following components:

(in thousands)

2 unchanged sentences

Less accumulated depreciation

Property and equipment, net

Property, plant and equipment, net

NOTE 4 – OTHER ACCRUED LIABILITIES

Other accrued liabilities consisted of the following components:

September 30,

March 31, 2026

(in thousands)

2 unchanged sentences

Sales return reserve

Severance accrual

Other accrued liabilities

The changes in our product warranty liability at September 30, 2025 and year ended December 31, 2024 are as follows:

September 30,

During the three months ended March 31, 2026, the Company recorded approximately $ 1.0 million of employee-related costs associated with a workforce reduction in its Germany operations.

These costs consisted primarily of severance and related employee termination benefits, as well as legal and other costs incurred in connection with the workforce reduction.

As of March 31, 2026, accrued liabilities related to these termination benefits were approximately $ 973,000 , which are expected to be paid within the next twelve months.

The changes in our product warranty liability at for the three months ending March 31, 2026 and year ended December 31, 2025 are as follows:

March 31, 2026

(in thousands)

Liability, beginning balance

Product warranty liability, beginning balance

Warranty claims

Accrual revisions

Liability, ending balance

Product warranty liability, ending balance

NOTE 5 – 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 as of September 30, 2025, are as follows:

September 30,

March 31, 2026

(in thousands)

2026 (remaining)

And Thereafter

Less imputed interest

2 unchanged sentences

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

The components of our lease expense for the three months and nine months ended September 30, 2025, include facility related operating lease costs of $ 185,000 and $ 550,000 , respectively, and short-term lease costs of $ 9,800 and $ 29,000 , respectively.

In the prior year, components of our lease expense for the three months 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 $ 10,000 and $ 9,000 , respectively.

There were no new operating leases during the nine months ended September 30, 2025.

The components of our lease expense for the three months ended March 31, 2026, include facility related operating lease costs of $ 189,000 , and short-term lease costs of $ 7,800 .

In the prior year, components of our lease expense for the three months ended March 31, 2025, include facility related operating lease costs of $ 182,000 , and short-term lease costs of $ 9,500 .

There were no new operating leases during the three months ended March 31, 2026.

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

1 unchanged sentence

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, 2025, and December 31, 2024:

September 30,

The following table presents supplemental balance sheet information related to leases as of March 31, 2026, and December 31, 2025:

(in thousands)

2 unchanged sentences

Lease liability-long term (Operating lease liabilities)

At September 30, 2025, the weighted average remaining lease term is 3.4 years and the weighted average discount rate used is 5 %.

NOTE 6 – OTHER COMMITMENTS

2 unchanged sentences

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

As of September 30, 2025, we had confirmed contracts with a commitment of approximately $ 554,000 to be paid within one year and $ 480,000 to be paid beyond one year.

As of March 31, 2026, we had confirmed contracts with a commitment of approximately $ 596,000 to be paid within one year and $ 480,000 to be paid beyond one year.

NOTE 7 – CONTINGENCIES

As of September 30, 2025, 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 aggregate, would have a material adverse effect on our results of operations or financial position.

As of March 31, 2026, 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 aggregate, would have a material adverse effect on our results of operations or financial position.

NOTE 8 – INCOME TAXES

Income tax expense for the third quarter of 2025 and 2024 primarily related to foreign and minor state taxes.

The effective tax rate differed from the statutory tax rate primarily due to the effect of valuation allowance, as well as foreign taxes.

We have a valuation allowance of $ 9.3 million as of September 30, 2025.

As of September 30, 2025 and 2024, our deferred tax assets and valuation allowance have been reduced by approximately $ 449,000 and $ 441,000 , 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.

Income tax expense for the first quarter of 2026 and 2025 primarily related to foreign and minor state taxes.

Benefit or provision for income taxes for the three months ended March 31, 2026, and 2025, was a provision of $ 0 and $ 21,000 , respectively, and the effective tax rates for these periods were 0 % and 5.82 %, respectively.

The difference between our effective tax rates for the three months ended March 31, 2026 and 2025, and the U.S.

statutory rate of 21 % was primarily attributable to the impact of a full valuation allowance on our net deferred tax assets, as well as foreign taxes.

Our consolidated effective tax rate decreased for the three months ended March 31, 2026, compared to the same period in the prior year primarily due to operational results in the first quarter of 2026.

NOTE 9 – EARNINGS PER SHARE

4 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

(in thousands except per share data)

1 unchanged sentence

Net income (loss)

Denominator for basic earnings (loss) per share:

Denominator for basic

earnings (loss) per share:

Weighted-average shares

7 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Restricted Stock Units

1 unchanged sentence

Stock Options

Options to purchase 200,000 and 34,398 shares were outstanding as of September 30, 2025 and 2024, respectively, but were excluded from the computation of diluted earnings per share for the periods then ended because the options were anti-dilutive.

Options to purchase 200,000 and 200,000 shares were outstanding as of March 31, 2026 and 2025, respectively, but were excluded from the computation of diluted earnings per share for the periods then ended because the options were anti-dilutive.

NOTE 10 – SHARE-BASED COMPENSATION

1 unchanged sentence

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, 2025 and 2024, were as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

3 unchanged sentences

Total share-based compensation

Equity awards granted during the three and nine months ended September 30, 2025 and 2024 were as follows:

Three Months Ended

Nine Months Ended

September 30,

Equity awards granted during the three months ended March 31, 2026 and 2025 were as follows:

Restricted Stock Units

Performance Stock Units

Stock Option Units

Employee Restricted Stock Units (“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.

2 unchanged sentences

For 2024 awards, the performance metrics included revenue growth, EBITDA and project objective targets over the three-year period ending December 31, 2026.

There have been no Performance Stock awards granted in 2025.

The remaining unamortized expected future share-based compensation expense and remaining amortization period associated with award grants of RSUs, PSUs and unvested options at September 30, 2025 and 2024 are:

September 30,

Unamortized future share-based compensation expense

(in thousands)

There were no Performance Stock awards granted in 2025 or 2026.

Unamortized future equity compensation expense (in thousands)

Remaining weighted average amortization period (in years)

NOTE 11 – SEGMENT INFORMATION

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

Data I/O operates as a single segment entity, to design, manufacture, and sell programming systems and services.

We operate in three separate locations — Redmond, Washington;

8 unchanged sentences

Three Months Ended

Nine Months Ended

(in thousands)

September 30,

Cost of goods sold

3 unchanged sentences

Professional and outside services

Occupancy costs

Occupancy costs (OPEX portion)

Depreciation & amortization

2 unchanged sentences

Operating income (loss)

NOTE 12 – 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 quarter ended March 31, 2025.

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 quarter ended March 31, 2025 to enhance comparability.

Effect of Revision

Net sales by type

March 31, 2025

As Previously Reported

Effect of Revision

March 31, 2025

(in thousands)

Platform Sales

Adapter Sales

Software and Services Sales*

* includes service and parts sales associated with equipment service contracts

NOTE 13 – SUBSEQUENT EVENTS

Subsequent to quarter end, the Company entered into a definitive securities purchase agreement with institutional investors for aggregate gross proceeds of approximately $ 9.0 million, consisting of a combination of common stock, convertible debentures, and warrants.

The transaction is subject to customary closing conditions, including regulatory approvals, and is expected to close in the second quarter of 2026.

Nasdaq rules will limit the number of shares that may be issued upon conversion or exercise of the convertible debentures and warrants absent shareholder approval.

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-Q

Item 1. Financial Statements