daio_10k.htm

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During the year ended December 31, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement, as each term is defined in Item 408(a) of Regulation S-K.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission file number: 0-10394

DATA I/O CORPORATION

(Exact name of registrant as specified in its charter)

Washington		91-0864123
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

6645 185^th Ave NE, Suite 100, Redmond, Washington, 98052

(425) 881-6444

(Address, including zip code, of registrant’s principle executive offices and telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	DAIO	NASDAQ

Securities registered pursuant to Section 12(g) of the Act

None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark whether the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. ☐

Accelerated filer	☐	Large accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☒

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b) ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Aggregate market value of voting and non-voting common equity held by non-affiliates on the registrant as of June 30, 2025: $26,901,555

Shares of Common Stock, no par value, outstanding as of April 14, 2026: 9,394,422

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s Proxy Statement relating to the annual meeting of shareholders to be held on June 11, 2026 are incorporated by reference into Part III hereof.

DATA I/O CORPORATION

FORM 10-K

For the Fiscal Year Ended December 31, 2025

INDEX

PART I		3
Item 1. Business		3
Item 1A. Risk Factors		13
Item 1B. Unresolved Staff Comments		22
Item 1C. Cybersecurity		22
Item 2. Properties		23
Item 3. Legal Proceedings		23
Item 4. Mine Safety Disclosures		23
PART II		24
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		24
Item 6. Selected Financial Data		24
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		32
Item 8. Financial Statements and Supplementary Data		32
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.		58
Item 9A. Controls and Procedures		58
Item 9B. Other Information		59
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections		59
PART III		60
Item 10. Directors, Executive Officers and Corporate Governance		60
Item 11. Executive Compensation		60
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		60
Item 13. Certain Relationships and Related Transactions, and Director Independence		60
Item 14. Principal Accounting Fees and Services		60
PART IV		61
Item 16. Form 10-K Summary		66
SIGNATURES		67

Table of Contents

PART I

Item 1. Business

This Annual Report on Form 10-K and the documents incorporated herein by reference contain forward-looking statements based on current expectations, estimates and projections about Data I/O Corporation’s industry, management’s beliefs and certain assumptions made by management. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Forward Looking Statements.”

General

Data I/O Corporation (“Data I/O”, “We”, “Our”, “Us”) is a global market leader for advanced programming, security deployment, security provisioning and associated Intellectual Property (“IP”) protection and management solutions used in electronics manufacturing with flash memory, microcontrollers, and flash memory-based intelligent devices as well as secure element devices, authentication devices and secure microcontrollers. We collectively refer to IP protection, security provisioning of devices, provisioning of security into devices, and related services such as cloud onboarding and device and provisioning documentation management as “security deployment”. Data I/O designs, manufactures and sells programming and security deployment systems and services for electronic device manufacturers, specifically targeting high-growth areas such as high-volume users of flash memory and flash memory-based microcontrollers.

Our mission is to bring the world’s electronic devices to life. Programmable devices are used in products such as automobile electronics, smartphones, HDTVs, smart meters, gaming systems and a broad category called Internet of Things (“IoT”). Our solutions, some of which include security deployment and process control capabilities, enable us to address the demanding requirements of the electronic device market, where applications security and IP protection are essential to our customer’s success.

Data I/O was incorporated in the State of Washington in 1969 and its business was founded in 1972. Our website address is www.dataio.com.

Major Impacts on 2025

The year ended December 31, 2025 was defined by the Company’s strategic transformation, directed by President and CEO William Wentworth, who assumed the role in the fourth quarter of 2024. The Company’s strategic plan was designed around six priorities: modernizing our go-to-market strategy, investing in our core technology platform, strengthening customer relationships, optimizing business operations and IT infrastructure, improving operational processes, and deploying artificial intelligence across the organization. As we enter 2026, management believes the transformation is approximately one year ahead of the original execution timeline projected by management and that the Company believes it is well positioned to return to revenue growth and a path to positive operating cash flow.

A central element of the strategy was the rapid refresh of the Company’s core technology platform, initiated and completed through the course of 2025. The Company launched the next-generation LumenX2 programming platform and LumenX2-M4 manual programmer at the productronica 2025 tradeshow in Munich, Germany in November 2025. The LumenX2 platform, with higher pin counts and increased power, significantly expands the breadth of device technologies supported on the LumenX architecture, including microcontrollers, eMMC, UFS, SPI NOR flash, Secure Elements, and other device types. The LumenX2-M4 features VerifyBoost technology delivering verify speeds of up to 750 megabytes per second. The LumenX2 platform received the 2025 Global Technology Award in the Programming category, and the refreshed LumenX-M8 manual programmer received both the 2025 Mexico Technology Award and the 2025 Step-by-Step Excellence Award. These products support the Company’s Unified Programming Platform strategy, which provides a single, scalable programming architecture from design and new product introduction through high-volume production, creating a seamless transition across the preprogrammed parts supply chain.

With the updated programming platform, the Company has turned its attention to broadening and stabilizing its business model. Historically, Data I/O’s revenues have been overwhelmingly tied to capital expenditure cycles in programming equipment, making the business highly cyclical and dependent on customers’ capacity expansion decisions. The Company is now focusing its efforts on progressing toward a more balanced revenue model that incorporates recurring services and consumables revenues, including adapter sales, software services, and programming-at-test service offerings. For the full year, consumable adapters and services revenue represented approximately 58% of total revenue, helping to moderate the impact of continued softness in capital equipment demand. This diversification is expected to continue as the Company expands its addressable market from traditional programming capex into the broader data provisioning ecosystem.

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During 2025, the Company underwent a significant transition in its financial leadership. Gerald Ng, who had served as Vice President, Chief Financial Officer, Secretary and Treasurer since August 2023, departed the Company in July 2025. Todd Henne served as interim CFO during the transition period. Effective August 11, 2025, the Company appointed Charles DiBona as Vice President of Finance, and as an Executive Officer of the Company and the Company’s Vice President, Chief Financial Officer, Secretary and Treasurer, effective August 15, 2025. Mr. DiBona brings extensive experience in financial leadership across public and private companies, including prior roles at Microsoft Corporation, Unify Square, Inc., and LabVantage Solutions, Inc. The leadership transition was part of a broader deliberate strengthening of the executive suite to ensure the Company has the right team in place to execute its growth strategy.

On August 16, 2025, the Company experienced a ransomware incident affecting certain internal IT systems. Upon discovery, the Company promptly activated its response protocols, secured its global IT systems and implemented containment measures, including proactively taking certain platforms offline. The Company engaged leading cybersecurity experts to support system recovery and conduct a comprehensive investigation. It was determined that the attack was not specifically targeted at Data I/O but originated through a vulnerability in a commercially available third-party firewall service provider. By September 2025, the incident had been completely contained and remediated, all global systems were restored, and the Company does not believe it has any remaining risk exposure from the incident. The remediation and associated professional fees resulted in approximately $388,000 of one-time costs, primarily recorded in the third quarter of 2025. As an outcome of the incident, the Company’s IT systems and cybersecurity posture were strengthened, with improved corporate processes and enhanced security infrastructure.

In the latter part of 2025, the Company began the implementation process of a new enterprise resource planning (“ERP”) system, Acumatica, to replace the legacy IFS system. This initiative is part of the broader effort to optimize business operations and IT infrastructure. The Company is leveraging AI-driven tools to accelerate traditionally time-consuming aspects of the ERP implementation, including chart of accounts mapping, data migration planning, and intercompany policy documentation. The ERP transition is expected to improve operational efficiency, enhance financial reporting capabilities, and support the Company’s growth objectives. The Acumatica implementation project remains on schedule with a target switchover date of July 1, 2026.

Geopolitical, economic and trade uncertainties continued to impact the Company’s markets in 2025. Tariff policies affecting goods manufactured in the United States and China created additional cost pressures and business uncertainty for the Company and its customers. As a company that produces products in both the United States and China and sells into global markets, the evolving tariff environment required ongoing evaluation of manufacturing strategies, supply chain resilience, and pricing. Some customers continued to shift production locations in response to trade tensions, affecting demand patterns. The Company’s dual-sourced manufacturing strategy in Redmond, Washington and Shanghai, China provides flexibility to navigate these challenges and optimize tariff exposure and to support customers to the extent they shift manufacturing to the Americas. While oil price increases and conflicts in the Middle East have limited direct effect on our input factors, their broader impacts on general price levels and economic activity could affect our customers and end markets as well as our material, labor, and shipping costs.

The broader semiconductor market has experienced a multi-year cyclical downturn continuing into 2025, with notable softness in automotive electronics, historically the Company’s largest end market, as a reassessment of electric vehicle capacity and manufacturing plans affecting customer ordering patterns. Automotive electronics represented approximately 64% of 2025 bookings, compared to 59% in 2024. Demand for capital equipment was further impacted by a reallocation of technology spending, with AI and AI datacenter-related investments taking priority. In response, the Company has shifted its strategic focus to diversify its market reach, expanding into the broader data provisioning market and positioning to capitalize on the emerging buildout of Edge AI. The shift toward servicing the overall data provisioning market represents a significantly larger opportunity than the traditional programming equipment market. Early evidence of customer alignment and interest in this expanded value proposition was encouraging in the fourth quarter 2025 and into early 2026.

During 2025, the Company deployed artificial intelligence internally across all functional departments to accelerate operations and reduce costs. AI-enabled efficiencies contributed to a 7% reduction in normalized operating expense run-rate, from an annualized $26.7 million at the time of the CEO transition in November 2024 to $24.8 million by year end 2025, with plans for at least an additional $1 million of annual run rate savings within the first half of 2026. AI tools were applied to software engineering to accelerate programming algorithm development and device support, ERP implementation planning and data migration, customer support processes, legal documentation, and internal business operations. These capabilities enabled the Company to accomplish its transformation objectives faster than originally planned.

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Additionally, in January 2026, the Company filed a shelf registration statement on Form S-3 providing the ability to issue up to $20 million dollars of equity securities, providing financial flexibility for potential strategic initiatives, including acquisitions aligned with the Company’s growth strategy. The Company also engaged a leading boutique middle-market investment bank during 2025 to support inorganic growth initiatives.

Subsequent to year end, in February 2026, the Company announced a collaboration with IAR, a leader in embedded development tools and security solutions, to combine IAR’s security expertise with Data I/O’s provisioning expertise to create a frictionless solution that reduces the complexity that exists with current device provisioning approaches. This collaboration is intended to simplify the process of securely programming and provisioning devices across global manufacturing supply chains.

Industry Background

Data I/O enables companies to improve productivity, increase supply-chain security and reduce costs by providing device data programming and security deployment solutions that allow our customers to take IP (large design and data files) and protect and program it into memory, microcontroller, security and logic devices quickly and cost-effectively. We also provide services related to hardware support, system and repair, and device programming. Companies that design and manufacture products utilizing programmable electronic devices, ranging from automobiles to industrial controls to edge AI, purchase programming solutions from us. Trends of increasing device densities, shrinking device packages, increased demands for security, and customers increasing their software content file sizes, combined with the increasing numbers of intelligent devices such as automotive electronics and IoT applications, are driving demand for our solutions.

Geopolitical, economic and trade uncertainties continued to impact the Company’s markets in 2025. Tariff policies created additional cost pressures and business uncertainty in the market with some players shifting production locations in response to trade tensions and thereby affecting demand patterns.

In line with the multi-year cyclical downturn in the broader semiconductor market, automotive electronics, historically the Company’s largest end market, has exhibited notable weakness continuing into 2025 as a reassessment of electric vehicle capacity and manufacturing plans affected customer ordering patterns. Automotive electronics represented approximately 64% of 2025 bookings, compared to 59% in 2024. More generally, overall capital equipment spending has seen a reallocation of technology spending towards AI and AI datacenter-related investments. Responding to and taking advantage of these long-term trends, the Company has shifted its strategic focus towards expanding into the greater data provisioning market and positioning to capitalize on the nascent buildout of Edge AI. Semiconductors in general, but especially within the emerging Edge AI sector, have exhibited an increasing need for security provisioning.

The data provisioning market has also continued to diversify such that adjacent segments such as programming services and programming at test now exceed the company’s traditional market segment of capital equipment.

Products

To accommodate the expanding variety and quantities of programmable devices being manufactured today, we offer multiple solutions for the numerous types of device mix and volume usage by our customers in the various market segments and applications. We work closely with leading manufacturers of programmable devices to develop our products to meet the requirements of a particular device and invested in 2025 in updating our programming platform to meet customers’ evolving needs.

The Company launched the next-generation LumenX2 programming platform and LumenX2-M4 manual programmer at the productronica 2025 tradeshow in Munich, Germany in November 2025. The LumenX2 platform, with higher pin counts and increased power, significantly expands the breadth of device technologies supported on the LumenX architecture, including microcontrollers, eMMC, UFS, SPI NOR flash, Secure Elements, and other device types. The LumenX2-M4 features VerifyBoost technology delivering verify speeds of up to 750 megabytes per second. The platform received the 2025 Global Technology Award in the Programming category, and the refreshed LumenX-M8 manual programmer received both the 2025 Mexico Technology Award and the 2025 Step-by-Step Excellence Award. These products support the Company’s Unified Programming Platform strategy, which provides a single, scalable programming architecture from design and new product introduction through high-volume production, creating a seamless transition across the preprogrammed parts supply chain.

Our automated systems have list selling prices ranging from approximately $150,000 to $210,000 and our manual systems have list selling prices ranging from approximately $8,000 to $11,000.

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Sales Percentage of Total Sales Breakdown by Type

Sales Type	2025	2024	Drivers
Platform Sales	42%	51%	Capacity, Process improvement, Technology
Adapter Sales	37%	33%	Capacity utilization, New customer products
Software and Maintenance Sales	21%	16%	Installed base, Added capabilities
Total	100%	100%

The table below presents our main products and the key features that benefit our customers:

Products

Key Features

Customer Benefits

PSV Systems:

Off-line

(Automated)

• Fast program and verify speeds

• Up to 112 programming sites

• Up to 2000 devices per hour throughput

• UFS Support

• Supports LumenX and FlashCORE III programmers

• Supports multiple media types

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

• ConneX Service Software enables connected factory integration and automation and system monitoring dashboards

• Managed and secure programming

• High throughput for high-density flash memory programming

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

• Scalable solutions for low to high-volume manufacturing

• Access to system data for connected factory and traceability

Lumen®X

Programmer

(Non-automated)

• Extensible architecture for fast programming, verify and download speeds

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

• Large file size support

• Secure job creation

• Four or eight sockets configuration with tool-less changeover with single-socket adapters

• Managed and secure programming

• Fast setup and job changeover

• Highest yield and low total cost of programming

• High performance

• Create and validate designs before moving down the firmware supply chain

FlashPAK III

programmer:

(Non-automated)

• Scalability

• Network control via Ethernet

• Stand-alone operation or PC compatible

• Parallel programming

• Four sockets

• Universal device support

• Create and validate designs before moving down the firmware supply chain

• Unmatched ease of use in manual production systems

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Customers/Markets

We sell our solutions to customers worldwide, many of whom are world-class manufacturers of electronic devices used in a broad range of industries.

	OEMs		EMS	Programming Centers
	Automotive Electronics	IoT, Industrial, Consumer Electronics	Contract Manufacturers
Notable end customers	Borg Warner, Bosch, Alps Alpine, Visteon, Kostal, JVCKenwood, Harman, Hitachi, Denso Ten, Continental, Aptiv Panasonic, Magna, Marelli, Tesla, Desay, BYD	LG, TCL, Siemens, Danfoss, Philips, Schneider, Endress+Hauser, Insta, Sony, UTEC	Pegatron, Flex, Jabil, Wistron, Sanmina SCI, Foxconn, Salcomp, Calcomp, Plexus	Arrow, Avnet, BTV, CPS, Semitron, NOA Leading
Business drivers	Infotainment, Advanced Driver Assist (ADAS), electrification, connectivity, and security	Higher functionality driven by increasing electronic content. Shift from analog to connected intelligent devices, security. Initial buildout of Edge AI impacting investment decisions.	Production contract wins	Value-added services, logistics, security
Programming equipment drivers	Growing electronic content, global support, resilient supply chains, new product rollouts, growing file sizes, quality control, traceability, and security	Growing electronic content and need for IP protection. Process improvement and simplification as well as new product rollouts, memory and new technology security	New contracts from OEMs, programming solutions specified by OEMs	Large algorithm device support library, contract wins, capacity utilization of their installed base of equipment, small parts handling, security
Buying criteria	Quality, throughput, reliability, configuration control, traceability, global support, IP protection, security	Quality, reliability, configuration control, traceability, global support, IP protection, security	Lowest equipment procurement cost, throughput, global support	Flexibility, lowest lifecycle cost per programmed part, low changeover time; use of multiple vendors provides negotiating leverage, device support availability
Security Deployment	End-customer focus	End-customer focus	End-customer and partner focus	Partner focus of our SentriX deployments

Our solutions address the data programming and security deployment needs of programmable semiconductors (flash memory, microcontrollers and secure elements) at high volumes, with security, quality and traceability requirements. We provide our programming solutions in the factory and through service, programming centers and programming at test to support our customers’ manufacturing requirements.

Our device programming solutions currently target two high volume growing markets: automotive electronics and IoT, including industrial, consumer electronics and wireless.

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Growth drivers for automotive electronics

	·	Consumers desire advanced car features requiring higher levels of sophistication, including autonomous vehicle capabilities and safety assistance.
	·	Proliferation of programmable microcontrollers to support the next-generation electronic car systems.
	·	Increasing use of high-density flash to provide memory for advanced applications.
	·	Increasing complexity to support autonomous vehicles.
	·	Increasing need for security solutions for a secure supply chain and lifecycle firmware integrity.
	·	Growing software size.

Growth drivers for IoT, including industrial, consumer electronics and wireless

	·	Securely controlling groups of connected devices through a secure supply chain and lifecycle firmware integrity.
	·	Adding intelligence and processing into devices.
	·	Connecting previously unconnected devices to networks and the internet (such as smart home, including security, appliances, wearables and other devices).
	·	Emergence of new devices and applications (such as health and wellness wearable devices and applications).

Diversification of net sales and accounts receivable

During 2025, we sold products to approximately 170 customers throughout the world.

The following represented greater than 10% of net sales for the applicable year:

Percentage of Net Sales	2025			2024			2023
Number of customers		3			2			2
Approximate percentage of net sales		41	%		34	%		24	%
Percentage of Customer 1		18	%		19	%		13	%
Percentage of Customer 2		12	%		15	%		11	%
Percentage of Customer 3		11	%		-			-

The following represented greater than 10% of our accounts receivable:

Percentage of Accounts Receivable	2025			2024			2023
Number of customers		3			2			3
Approximate percentage of AR balance		49	%		43	%		47	%
Percentage of Customer 1		19	%		30	%		18	%
Percentage of Customer 2		16	%		13	%		16	%
Percentage of Customer 3		14	%		-			13	%

Geographic Markets and Distribution

We market and sell our products through a combination of direct sales, indirect sales representatives and distributors, as well as services through programming centers. We continually evaluate our sales channels against our evolving markets and customers and realign them as necessary to ensure that we reach our existing and potential customers in the most effective and efficient manner possible.

U.S. Sales

We market our products throughout the U.S. using a variety of sales channels, including our own field sales management personnel, independent sales representatives and direct sales. Our U.S. independent sales representatives obtain orders on an agency basis, with shipments made directly to the customer by us. Net sales in the U.S. for 2025, 2024 and 2023 were (in millions) $1.3, $1.4, and $2.8, respectively. Some of our customers’ orders delivered internationally are heavily influenced by U.S. sales-based efforts.

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International Sales

International sales represented approximately 94%, 94%, and 90% of net sales in 2025, 2024 and 2023, respectively. We make foreign sales through our wholly-owned subsidiaries in Germany and China, as well as through independent distributors and sales representatives operating in 39 countries. Our independent foreign distributors purchase our products for resale and we generally recognize the sale at the time of shipment to the distributor. As with U.S. sales representatives, sales made by international sales representatives are on an agency basis, with sales made directly to the customer by us.

Net international sales for 2025, 2024 and 2023 were (in millions) $20.2, $20.4, and $25.3, respectively. We determine international sales by the international geographic destination into which the products are sold and delivered and include not only sales by foreign subsidiaries but also export sales from the U.S. to our foreign distributors and to our representatives’ customers. International sales do not include transfers between Data I/O and our foreign subsidiaries. Export sales are subject to U.S. Department of Commerce regulations. We have not, however, experienced difficulties to date as a result of these requirements. Our products typically do not require export licenses. We have not made sales to Iran or any Iranian governmental entities or any other blacklisted companies or countries.

Fluctuating exchange rates and other factors beyond our control, such as the coronavirus, international monetary stability, tariff and trade policies and U.S. and foreign tax and economic policies, may affect the level and profitability of international sales. We cannot predict the effect of such factors on our business, but we try to consider and respond to changes in these factors, particularly as the majority of our costs are U.S. based while the vast majority of our sales are international.

Competition

The competition in the programming systems market is fragmented with several companies selling directly competitive solutions. Our direct competition competes primarily based on price. Many of these competitors compete on a regional basis. Although competition in the security deployment market is developing, we expect competition in the market to increase as security deployment becomes more important. There are alternative security deployment solutions such as software-based security, rather than the hardware-based security of our SentriX equipment.

In addition, we compete with multiple substitute forms of device programming including “home grown” solutions. Programming after device placement may be done with In Circuit Test (“ICT”), In System Programming (“ISP”), and End of Line Downloading (“EOL”). Some automotive products may also be programmed over the air (“OTA”). IoT devices may also be programmed with ICT, ISP, EOL or OTA. In addition, new security devices may be required to be programmed using device-specific programmers developed by the semiconductor manufacturer.

While we are not aware of any published industry market reports covering the programming systems or security deployment market, according to our internal analysis of competitors’ revenues, we believe we continue to be one of the largest suppliers in the programming systems market.

Manufacturing, Raw Materials and Backlog

We strive to manufacture and provide the best solutions for advanced programming. We primarily assemble and test our products at our principal facilities in Redmond, Washington and Shanghai, China. Both of these locations are ISO 9001:2015 certified. We outsource our circuit board manufacturing and fabrication. As a resilient supply chain strategy, we manufacture various products in both of our production facilities. This strategy allows opportunity to mitigate some of the risks of having only one location, as well as enabling tariff and tax optimization strategies. We use a combination of standard components and fabricated parts manufactured to our specifications. Most components used are available from a number of different suppliers and subcontractors but certain items, such as some handler and programmer and security deployment subassemblies, custom integrated circuits, hybrid circuits and connectors, are purchased from single sources. We believe that additional sources can be developed for most present single-source components without significant difficulties. Single-source components may not always continue to be readily available or may be subject to part shortage delays. If we cannot develop alternative sources for these components, or if we experience deterioration in relationships with these suppliers, there may be price increases, minimum order quantities, end of life purchase requirements, costs associated with integrating alternatively sourced parts, and delays or reductions in product introductions or shipments, which may materially adversely affect our operating results.

In accordance with industry practices, generally all orders are subject to cancellation prior to shipment without penalty, except for contracts calling for custom configuration. To date, such cancellations have not had a material effect on our sales volume. To meet customers’ delivery requirements, we manufacture certain products based upon a combination of backlog and anticipated orders. Most orders are scheduled for delivery within 1 to 90 days after receipt of the order.

Our backlog of pending orders was approximately (in millions) $1.6, $3.5, and $2.8 as of December 31, 2025, 2024 and 2023, respectively. The size of backlog at any date is not necessarily a meaningful indicator of the trend of our business.

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Research and Development

We believe that continued investment in research and development is critical to our future success. We continue to develop new technologies and products and enhance existing products. Future growth is 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 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. We also continue to focus on increasing our capacity and responsiveness for new device support requests from customers and programmable integrated circuit manufacturers by revising and enhancing our internal processes and tools. Our research and development efforts have resulted in the release of significant new products and product enhancements over the past several years.

During 2025, the Company’s R&D efforts focused on the development and launch of the next-generation LumenX2 programming platform and LumenX2-M4 manual programmer, which were introduced at the productronica 2025 tradeshow in November 2025. The LumenX2 programming platform, with higher pin counts and increased power, significantly expands the breadth of device technologies supported, including microcontrollers, eMMC, UFS, SPI NOR flash, Secure Elements, and other device types. The R&D team has begun the systematic integration of artificial intelligence tools to accelerate programming algorithm development and device support.

During 2025, 2024 and 2023, we made expenditures for research and development of (in millions) $6.5, $6.2 and $6.5, respectively, representing 30%, 29% and 23% of net sales, respectively. Research and development costs are generally expensed as incurred.

Finance and Administration

The Company began the implementation process of a new enterprise resource planning system, Acumatica, to replace the legacy IFS system. This initiative is part of the broader effort to optimize business operations and IT infrastructure. The Company is leveraging AI-driven tools to accelerate traditionally time-consuming aspects of the ERP implementation, including chart of accounts mapping, data migration planning, and intercompany policy documentation. The ERP transition is expected to improve operational efficiency, enhance financial reporting capabilities, and support the Company’s growth objectives. The Acumatica implementation project remains on schedule with a target switchover date of July 1, 2026.

During 2025, the Company deployed artificial intelligence internally across all functional departments to accelerate operations and reduce costs. AI tools were applied to software engineering to accelerate programming algorithm development and device support, ERP implementation planning and data migration, customer support processes, legal documentation, and internal business operations. These capabilities enabled the Company to accomplish its transformation objectives faster than originally planned.

On August 16, 2025, the Company experienced a ransomware incident affecting certain internal IT systems. Upon discovery, the Company promptly activated its response protocols, secured its global IT systems and implemented containment measures, including proactively taking certain platforms offline. The Company engaged leading cybersecurity experts to support system recovery and conduct a comprehensive investigation. It was determined that the attack was not specifically targeted at Data I/O but originated through a vulnerability in a commercially available third-party firewall service provider. By September 2025, the incident had been completely contained and remediated, all global systems were restored, and the Company does not believe it has any remaining risk exposure from the incident. The remediation and associated professional fees resulted in approximately $388,000 of one-time costs, primarily recorded in the third quarter. As an outcome of the incident, the Company’s IT systems and cybersecurity posture were strengthened, with improved corporate processes and enhanced security infrastructure.

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 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.

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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 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 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, 2025, we were not subject to any pending actions regarding infringement claims.

Employees - Human Capital

As of December 31, 2025, we had a total of 97 employees, of which 44 were located outside the U.S. and 7 of which were part time. We also utilize independent contractors for specialty work, primarily in research and development, and utilize temporary workers to adjust capacity to fluctuating demand and for special projects. Many of our employees are highly skilled, trained and experienced in specialized areas and our continued success will depend in part upon our ability to attract and retain employees who can be in great demand within the industry. None of our employees are represented by a collective bargaining unit and we believe relations with our employees are favorable. In foreign countries we have employment agreements or, in China, the Shanghai Foreign Services Co., Ltd. (“FSCO”) labor agreement. Because of the creation of specialized knowledge and skills in our business, there are extra short-term challenges to hiring and training replacements. Our hiring and retention strategies and efforts include emphasis on the advantages of working in a technology oriented, smaller, international, public company, and the culture of our organization. We utilize competitive pay practices, incentive compensation, equity awards, and benefits such as health care, life and disability insurance, paid time off, education and volunteer time.

Through the course of 2025 and early 2026, the Company has undertaken organizational changes to centralize the direction and management of business functions in its Redmond, Washington headquarters. The Company believes that this structure will enable a more consistent strategic focus, especially as the Company seeks to expand into adjacent segments of the data provisioning market and generally extend market reach.

Environmental, Social and Governance (“ESG”)

Data I/O is committed to the responsibilities associated with modern age ESG. The Company’s key pillars for ESG support a framework for sustainable growth and include Leadership & Governance, Environment, Innovation, Human Capital, Social Capital, and Financial Excellence. Initiatives within these areas apply to the Company’s daily global operations as well as within its supply chains. Our facilities are subject to numerous laws and regulations concerning the discharge of materials or otherwise relating to the environment. In addition to this commitment, the Company has a track record of meeting its ESG regulatory obligations, being a solid corporate citizen, delivering superior value to its customers and partners, and demonstrating corporate stewardship including returning capital to shareholders through past share buybacks.

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Executive Officers of the Registrant

During 2025, the Company underwent a significant transition in its financial leadership. Gerry Ng, who had served as Vice President and Chief Financial Officer since August 2023, departed the Company. Todd Henne served as interim CFO during the transition period. Effective August 11, 2025 as Vice President of Finance, and effective August 15, 2025 as an Executive Officer of the Company and the Company’s Vice President, Chief Financial Officer, Secretary and Treasurer. The leadership transition was part of a broader deliberate strengthening of the Board and executive suite to ensure the Company has the right team in place to execute its growth strategy.

Set forth below is certain information concerning the executive officers of Data I/O as of April 16, 2026:

Name	Age	Position
William Wentworth	60	President and Chief Executive Officer
Charles DiBona	61	Vice President, Chief Financial Officer, Secretary and Treasurer

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. In 1988 he cofounded Source Electronics, the global market share leader in programming and test services, and a Data I/O customer. He 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.

Charles DiBona joined Data I/O on August 11, 2025 as Vice President of Finance, and effective August 15, 2025 as an Executive Officer of the Company and the Company’s Vice President, Chief Financial Officer (“CFO”), Secretary and Treasurer . Mr. DiBona brings extensive experience in financial leadership across public and private companies and equity research. He previously served as the Senior Equity Analyst covering Enterprise Software at Sanford C. Bernstein & Co., LLC. He then served as GM of Strategy and M&A in Microsoft’s Server and Tools Business (which subsequently became Microsoft’s Cloud + Enterprise division). Subsequently, he was CFO of Unify Square, Inc., a purveyor of unified communications monitoring and management solutions which was successfully sold to Unisys Corporation in 2021, and of LabVantage Solutions, Inc., a closely-held leader in the Laboratory Information Management space.

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Item 1A. Risk Factors

Cautionary Factors That May Affect Future Results

Our disclosure and analysis in this Annual Report contains some forward-looking statements. Forward-looking statements include our current expectations or forecasts of future events. The reader can identify these statements by the fact that they do not relate strictly to historical or current facts. In particular, these include statements relating to future action, supply chain expectations, semiconductor chip availability, Russia-Ukraine war impacts, prospective products, expected market growth, new technologies and trends, industry partnerships, foreign operations, economic expectations, future performance or results of current and anticipated products, sales efforts, expenses, outcome of contingencies, impact of regulatory requirements, tariffs and financial results.

Any or all of the forward-looking statements in this Annual Report or in any other public statement made may turn out to be wrong. They can be affected by inaccurate assumptions we might make or known or unknown risks and uncertainties can affect these forward-looking statements. Many factors – for example, product competition and product development – will be important in determining future results. Moreover, neither Data I/O nor anyone else assumes responsibility for the accuracy and completeness of these forward-looking statements. Actual future results may materially vary.

We undertake no obligation to publicly update any forward-looking statements after the date of this Annual Report, whether as a result of new information, future events or otherwise. The reader should not unduly rely on our forward-looking statements. The reader is advised, however, to consult any future disclosures we make on related subjects in our 10-Q, 8-K and 10-K reports to the Securities and Exchange Commission (“SEC”) and press releases. Also, note that we provide the following cautionary discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business. These are factors that we think could cause our actual results to differ materially from expected and historical results. Other factors besides those listed here could also adversely affect us. This discussion is permitted by the Private Securities Litigation Reform Act of 1995.

RISK FACTORS:

TARIFFS AND TRADE ISSUES

Changes in tariffs and issues of trade and global conflict may adversely affect our business, including revenues and/or gross margins.

The tariff environment continued to evolve in 2025, with new tariff actions and ongoing trade tensions between the United States and China among others affecting the Company’s costs and competitive position. The Company produces products in both the United States and China and sells into global markets. Ongoing supply chain planning and other actions have been mitigating the impact of new tariffs, trade and inflationary pressures, including shifting material sourcing and product manufacturing. The Company’s dual-sourced manufacturing strategy in Redmond, Washington and Shanghai, China provided flexibility to navigate tariff challenges, optimize tariff exposure and support customers to the extent they shift manufacturing to the Americas. However, further increases in tariff rates, additional items subject to tariffs, or retaliatory trade actions could increase costs and adversely affect revenues and gross margins and on-going uncertainty surrounding tariffs may continue to affect customer investment decisions and timelines, adversely affect demand for the Company’s offerings.

We produce products in the United States and China. Currently, certain of our products are subject to tariffs imposed by one country on goods manufactured in the other country. There is uncertainty regarding the tariffs expected to be imposed, and any increase in tariff rates and subjecting additional items to tariffs could increase our costs, revenues and the competitiveness of our products due to our manufacturing locations. Trade and tariff issues are creating business uncertainty and may spread to and impact other jurisdictions.

Additionally, ongoing trade tensions between the United States and China are impacting our ability to seamlessly design, build, market and sell our products. These tensions may increase suddenly at any time due to government policies or actions. Some customers have moved production away from China, further from our facilities and engineers. We endeavor to have multi-sourced manufacturing, but this is not currently practical for all products in all locations.

War based restrictions, embargos, and supply chain disruptions have and are occurring because of the Russian invasion of Ukraine, which could have economic and other indirect impacts to our business. We do not have any operations in Russia or Ukraine, nor do we rely on any software or hardware components sourced from these two countries. The escalation of military conflict involving Iran and other actors in the Middle East, including risks of broader regional war, cyberattacks, and disruption to critical shipping routes and energy infrastructure, could materially impact global economic conditions and adversely affect our business, including through increased costs, supply chain disruptions, and demand volatility.

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NEW PRODUCTS OR SERVICES

We are pursuing new product or service initiatives, and business models that may develop more slowly and/or to a lesser extent than expected.

In order to lead in new and potentially lucrative market opportunities, we are making significant investments in people, technology and business development while the market is developing and uncertain. Due to the length of time to market from design to production in security provisioning, if these markets develop more slowly than planned, or if our solutions are not widely accepted, then we may not achieve our expected return on investment in new technologies, which may significantly affect the results of our existing business.

Failure to adapt to new technological trends in our industry may impact our competitiveness and financial results.

Product and service technology in our industry evolves rapidly, making timely product innovation essential to success in the marketplace. Introducing products and services with improved technologies or features may render our existing products obsolete and unmarketable. Technological advances and trends that may negatively impact our business include:

	·	new device package types, densities, chip interfaces and technologies requiring hardware and software changes in order to be programmed by our products, particularly certain segments of the high-density flash memory markets where after placement programming is recommended by certain semiconductor manufacturers.
	·	reduction in semiconductor process geometries for certain 3 Dimensional (3D), Multi Level Cell (MLC) and Triple Level Cell (TLC) NAND and eMMC FLASH memories impact the product data retention through Surface Mount Technology (SMT) reflow or X-ray inspection. Improper SMT process control can negatively impact the end customer’s ability to successfully program devices. This can cause them to change their programming methods away from pre-programming to post placement programming techniques, including ISP, ICT. Data I/O has, and continues to work with several semiconductor manufacturers to develop best practices to minimize the impact of reflow and potential concerns about X-ray induced data loss so that preprogramming remains a supported alternative;
	·	changes in Flash technology speeds will eventually require us to change the architecture of our programming engines;
	·	electronics equipment manufacturing practices, such as widespread use of in-circuit programming or downloading;
	·	adoption of proprietary security and programming protocols and additional security capabilities and requirements;
	·	customer software platform preferences different from those on which our products operate;
	·	customer adoption of newer unsupported semiconductor device technologies such as NVMe memory or device interface methods, particularly if these technologies are adopted by automotive electronics, IoT or wireless customers; and/or
	·	more rigid industry standards, which would decrease the value-added element of our products and support services.

If we cannot develop products or services in a timely manner in response to industry changes, or if our products or services do not perform well, our business and financial condition may be adversely affected. Also, our new products or services may contain defects or errors that give rise to product liability claims against us or cause our products to fail to gain market acceptance. Our future success depends on our ability to successfully compete with other technology firms in attracting and retaining key technical personnel.

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Failure to adapt to increasing automotive electronics customer requirements and a rapidly changing global automotive electronics ecosystem may impact our competitiveness and result in a decline in sales or increased costs.

Concentration in automotive electronics represented approximately 64% of 2025 bookings, compared to 59% in 2024 and 63% in 2023, as the broader slowdown in the semiconductor industry caught up with the automotive sector. Demand was further impacted by a broad-based reallocation of technology spending toward AI-related investments and a reassessment of electric vehicle manufacturing capacity and plans by major automotive OEMs and their supply chains. The emerging buildout of Edge AI represents a potential growth driver as autonomous systems and connected vehicles require increasing volumes of data to be securely provisioned into semiconductor devices at the point of manufacture.

As we have been concentrated on automotive electronics customers, any decrease in demand from these customers may materially impact our results, as it will take some time to transition our product line to other markets. Quality standards and business requirements by our automotive electronics customers, driven in turn by their automotive manufacturer customers, may demand processes and certifications at a higher level than we currently are structured to provide. For example, although we currently meet the ISO 9001:2015 standard, new quality standards, and environmental standards may be demanded by our customers with even more rigorous requirements. In addition, contractual provisions may expose us to greater potential liability and costs and we may be required to provide higher service levels than we currently provide. If we cannot adapt to these industry requirements or manage these contractual provisions, our business may be adversely affected.

We are also seeing a shift in the global automotive industry towards new entrants touting new methods, especially for all electric vehicles. These new entrants may not develop solutions through the traditional value chain. If Data I/O is not able to market and sell effectively to these new entrants, we risk losing market share in our largest market.

Delays in development, introduction and shipment of new products or services may result in a decline in sales or increased costs.

We develop new engineering and automated programming systems and services. Significant technological, supplier, manufacturing or other problems may delay the development, introduction or production of these products or services.

For example, we may encounter these problems:

	·	technical problems in the development of a new programming or provisioning systems;
	·	inability to hire qualified personnel or turnover in existing personnel or inability to engage or retain key technology partners;
	·	delays or failures to perform by us or third parties, including some smaller early stage or recently acquired companies, involved in our development projects;
	·	dependence on large semiconductor companies for cooperation and support to securely provision their devices. These companies must enable us with specific technical information and support Data I/O as a qualified solution to their customers and channel partners;
	·	delays or failure to develop and utilize Artificial Intelligence (“AI”) for our offerings or services, potentially falling behind competitors exploiting the use of AI;
	·	development of new products or services that are not accepted by the market; and/or
	·	delays in supply chain for parts needed for new products.

These problems may result in a delay or decline in sales or increased costs.

We may pursue business acquisitions that could impair our financial position and profitability.

During 2025, the Company engaged a leading boutique middle-market investment bank to evaluate inorganic growth opportunities. Management has expressed a preference for non-equity funding sources when pursuing acquisitions. The active pursuit of acquisitions increases the risks described below.

We may pursue acquisitions of complementary technologies, product lines or businesses. Acquisitions may include risks, such as:

	·	burdening management and our operating teams during the integration of the acquisition;
	·	diverting management’s attention from other business concerns;
	·	failing to successfully integrate, scale or monetize the acquired products or technologies;
	·	lack of acceptance of the acquired products by our sales channels or customers;
	·	entering markets where we have no or limited prior experience;
	·	potential loss of key employees of the acquired company; and/or
	·	additional burden of support for an acquired programmer architecture.

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Future acquisitions may also affect our financial position. For example, we may use significant cash or incur debt, which would weaken our balance sheet, or issue additional shares, potentially diluting existing shareholders. We may also capitalize goodwill and intangible assets acquired, the amortization or impairment of which would reduce our profitability. We cannot guarantee that future acquisitions will improve our business or operating results.

If we are unable to protect our IP, we may not be able to compete effectively or operate profitably.

We rely on 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. In particular, patents are a key part of our security deployment strategy, and if we are not able to successfully enforce these patents, we might lose our competitive advantage in the security deployment market. We attempt to protect our rights in proprietary software products, including our user interface, product firmware, software module options 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.

Because of the rapidly changing technology in the semiconductor, electronic equipment and software industries, portions of our products might possibly infringe upon existing patents or copyrights, and we might be required to obtain licenses or discontinue the use of 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, preclude us from offering certain products, and subject us to substantial liability.

We might face increased competition and might not be able to compete successfully with current and future competitors.

Technological advances have reduced the barriers of entry into the capital equipment segment of the data provisioning market in which we compete. We expect competition to increase from both established and emerging companies. If we fail to compete successfully against current and future sources of competition, our profitability and financial performance will be adversely impacted.

The Company is expanding into adjacent segments of the data provisioning market, which has developing competition and may bring exposure to new competitors and competitive forces.

THIRD PARTY RELATIONSHIPS

If we do not develop and enhance our relationships with semiconductor manufacturers, our business may be adversely affected.

We work closely with most semiconductor manufacturers to ensure that our data programming and security deployment systems comply with their requirements. In addition, many semiconductor manufacturers recommend our managed and secure programming systems for use by users of their programmable devices. These working relationships enable us to keep our programming systems product lines up to date and provide end-users with broad and current programmable device support. As technology changes occur, that could limit the effectiveness of pre-placement programming, particularly for very small high-density NAND, eMMC and UFS devices, certain semiconductor manufacturers may not recommend or may not continue recommending our programming systems for these devices. Our business may be adversely affected if our relationships with semiconductor manufacturers deteriorate or if semiconductor manufacturers are not willing to closely work with us on security deployment. Consolidation within the semiconductor industry may also impact us. As we develop more security deployment solutions, we will need to partner more closely with semiconductor manufacturers.

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Our reliance on a small number of suppliers may result in a shortage of key components, which may adversely affect our business, and our suppliers may experience financial difficulties which could impact their ability to service our needs.

Certain parts or software used in our products are currently available from either a single supplier or from a limited number of suppliers. Our small relative level of business means we frequently lack influence and significant purchasing power. If we cannot develop alternative sources of these components, if sales of parts or software are discontinued by the supplier, if we experience deterioration in our relationship with these suppliers, or if these suppliers require financing which is not available, there may be delays or reductions in product introductions or shipments, which may materially and adversely affect our operating results.

Because we rely on a small number of suppliers for certain parts, we are subject to possible price increases by these suppliers. Also, we may be unable to accurately forecast our production schedule. If we underestimate our production schedule, suppliers may be unable to meet our demand for components. This delay in the supply of key components may have a materially adverse effect on our business. For suppliers who discontinue parts, we may be required to make lifetime purchases covering future requirements. Over estimation of demand or excessive minimum order quantities may lead to excess inventories that may become obsolete. Part shortages impact availability, lead times and pricing that may be disruptive to our production plans, lead times, margins and may result in lost sales.

Some of our sockets, parts, subassemblies and boards are currently manufactured to our specifications by third-party foreign contract manufacturers and we are sourcing certain parts or options from foreign manufacturers, particularly in China. For example, due to geopolitical considerations, we may not be able to obtain sufficient quantity of these products if and when needed or the quality of these parts or options may not meet our standards, which may result in lost sales.

If we are unable to attract and retain qualified third-party distributors and representatives, our business may be adversely affected.

We utilize an internal sales force and third-party distributors and representatives. Therefore, the financial stability of these distributors and representatives is important. Their ability to operate, timely pay us, and to acquire any necessary financing may be affected by the current economic climate. Highly skilled professional engineers use most of our products. To be effective, third-party distributors and representatives must possess significant technical, security, marketing, customer relationships and sales resources and must devote their resources to sales efforts, customer education, training and support. These required qualities limit the number of potential third-party distributors and representatives. Our business will suffer if we cannot attract and retain a sufficient number of qualified third-party distributors and representatives to market our products.

MARKET CONDITIONS

A decline in economic and market conditions may result in delayed or decreased capital spending and delayed or defaulted payments from our customers.

The broader semiconductor market has experienced a multi-year cyclical downturn which continued into 2025, with notable softness in automotive electronics as a reassessment of electric vehicle capacity and manufacturing plans affected ordering patterns. Demand for capital equipment was further impacted by a reallocation of technology spending, with AI and AI datacenter-related investments taking priority.

The overall data provisioning market represents a significantly larger opportunity than the traditional programming equipment market. While it has been impacted by many of the same macroeconomic forces as the capital equipment segment, the impact has been somewhat more muted, and the cyclical effects are much less pronounced. Furthermore, the entire market is showing early signs of a recovery led by use cases such as the emerging buildout of Edge AI.

Current and future public health crises, geo-political conflicts, and economic barriers, tariffs and constraints can adversely impact the Company’s financial performance. Our business is highly impacted by capital spending plans and other economic cycles that affect the users and manufacturers of integrated circuits. The industries are highly cyclical and are characterized by rapid technological change, short product life cycles and fluctuations in manufacturing capacity and pricing and gross margin pressures. In a difficult economic climate, it may take us longer to receive payments from our customers and some of our customers’ business may fail, resulting in non-payment. Our market growth outlook and related business decisions may be wrong. These factors could have a material adverse effect on our business and financial condition.

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Our international operations may expose us to additional risks that may adversely affect our business.

International sales represented approximately 94%, 94%, and 90% of net sales in 2025, 2024 and 2023, respectively. We expect that international sales will continue to be a significant portion of our net revenue. International sales may fluctuate due to various factors, including:

	·	current and future global health crisis, similar to COVID-19;
	·	economic trade barriers and constraints such as tariffs and taxes;
	·	economic challenges in China, Europe and Latin America, as these are major markets for our products, with China being a significant production location;
	·	foreign currency exchange rate fluctuations in our major international markets as volatile exchange rates may impact our competitiveness and margins, especially where we have subsidiary operations;
	·	unexpected changes in regulatory requirements;
	·	difficulties in staffing and managing foreign operations;
	·	longer average payment cycles and difficulty in collecting accounts receivable;
	·	compliance with applicable export licensing requirements and the Foreign Corrupt Practices Act;
	·	product safety and other certification requirements;
	·	ability to protect our intellectual property in multiple patent jurisdictions; and/or
	·	ability to move cash freely from subsidiaries.

Because we have customers located throughout the world, we have significant foreign receivables, although none are based in Russia or Ukraine. We may experience difficulties in collecting these amounts as a result of payment practices of certain foreign customers, economic uncertainty and regulations in foreign countries, the availability and reliability of foreign credit information, and potential difficulties in enforcing collection terms.

The European Union and European Free Trade Association (“EU”) has established certain electronic emission and product safety requirements (“CE”). As applicable, our products currently meet these requirements; however, failure to obtain either CE certification or a waiver for any product may prevent us from marketing that product in Europe. The EU also has directives concerning the Reduction of Hazardous Substances (“RoHS”) and we believe we are classified within the EU RoHS Directive category list as Industrial Monitoring and Control Equipment (category 9). We believe all current products meet the RoHS directives. Failure to meet applicable directives or qualifying exemptions may prevent us from marketing certain products in Europe or other territories with similar requirements.

We have subsidiaries in Germany and China and large balances of cash are in our foreign subsidiaries. Our business and financial condition is sensitive to currency exchange rates and any restrictions imposed on their currencies including restrictions on repatriation of cash. A repatriation of cash has, and could in the future, result in tax costs and corresponding deferred tax assets with related tax valuation allowances.

OPERATIONS

Fluctuations in our quarterly operating results may adversely affect our stock price.

Our operating results tend to vary from quarter to quarter. Our revenue in each quarter substantially depends upon orders received within that quarter. Conversely, our expenditures are based on investment plans and estimates of future revenues. We may, therefore, be unable to quickly reduce our spending if our revenues decline in a given quarter. As a result, operating results for that quarter will suffer. Our operating results for any one quarter are not necessarily indicative of results for any future periods. Other factors, which may cause our quarterly operating results to fluctuate, include:

	·	increased competition;
	·	timing of new product announcements and timing of development expenditures;
	·	product or service releases and pricing changes by us or our competitors;
	·	market acceptance or delays in the introduction of new products or services;
	·	production constraints, including part shortages impact on us and our supply chains;
	·	quality issues;
	·	labor or material constraints;
	·	timing of significant orders;
	·	sales channel mix of direct vs. indirect distribution;
	·	civil unrest, war or terrorism;
	·	health issues such as the outbreak of the coronavirus or other viruses impacting workers, suppliers, customers, travel, or our facilities;
	·	customers’ budgets;
	·	changes in accounting rules, tax or other legislation;
	·	adverse movements in exchange rates, interest rates, inflation or tax rates;
	·	cyclical and seasonal nature of demand for our customers’ products;
	·	general economic conditions in the countries where we sell products;
	·	expenses and delays obtaining authorizations in setting up new operations or locations; and/or
	·	facilities relocations.

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Due to any of the foregoing factors, it is possible that in some future quarters, our operating results will be below the expectations of analysts and investors.

We have a history of operating losses and may be unable to generate enough revenue to achieve and maintain profitability.

We have incurred operating losses in 8 of the last ten years. We operate in a cyclical industry. We will continue to examine our level of operating expense based upon our projected revenues. Any planned increases in operating expenses may result in losses in future periods if projected revenues are not achieved or the investment level required is too large. As a result, we may need to generate greater revenues than we have recently in order to maintain profitability. However, we cannot provide assurance that our revenues will increase and our business strategies will be successful, resulting in future losses.

The loss of key employees may adversely affect our operations.

During 2025, the Company underwent significant leadership transitions, including the appointment of Charles DiBona as Chief Financial Officer in August 2025, replacing Gerald Ng. Additional changes were made in sales, marketing, and engineering leadership as part of the Company’s strategic transformation. While management believes these changes strengthen the Company’s capabilities, leadership transitions carry inherent risks including potential disruption to ongoing operations and loss of institutional knowledge.

We have employees located in the U.S., Germany and China. We also utilize independent contractors for specialty work, primarily in research and development, and utilize temporary workers to adjust capacity to fluctuating demand. Many of our employees are highly skilled, and our continued success will depend in part upon our ability to attract and retain employees who can be in great demand within the industry. None of our employees are represented by a collective bargaining unit, and we believe relations with our employees are favorable, though no assurance can be made that this will be the case in the future. In China, our workers have benefits and similar arrangements provided under a “FSCO” labor agreement, and we could be adversely affected if we were unable to continue that arrangement.

We may need to raise additional capital and our future access to capital is uncertain.

Cash at December 31, 2025 was $7.9 million.

Our past revenues have sometimes been, and our future revenues may again be, insufficient to support the expense of our operations and any expansion of our business. We may therefore need additional equity or debt capital to finance our operations. If we are unable to generate sufficient cash flows from operations or to obtain funds through additional debt, lease or equity financing, we may have to reduce some or all of our development and sales and marketing efforts and limit the expansion of our business.

We believe that we have sufficient cash or working capital available under our operating plan to fund our operations and capital requirements through at least the next one-year period. In the event we require additional cash for U.S. operations or other needs, we may choose to repatriate some, or all, of the cash held in our foreign subsidiaries. There may be tax, legal and other impediments to any repatriation actions. Our working capital may be used to fund possible losses, business growth, project initiatives, share repurchases, and business development initiatives including acquisitions, which could reduce our liquidity and result in a requirement for additional cash before that time. Any substantial inability to achieve our current business plan could have an adverse impact on our financial position, liquidity, or results of operations and may require us to reduce expenditures and/or seek additional financing.

Therefore, we may seek additional funding through public or private debt or equity financing or from other sources. We have no commitments for additional financing and given a potential future unfavorable economic climate and our financial results, we may experience difficulties in obtaining funding on favorable terms, if at all. Any financing we obtain may contain covenants that restrict our freedom to operate our business or may require us to issue securities that have rights, preferences or privileges senior to our Common Stock and may dilute your ownership interest.

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Our stock price may be volatile and, as a result, our shareholders may lose some or all their investment.

The stock prices of technology companies tend to fluctuate significantly. We believe factors such as announcements of new products or services by us or our competitors and quarterly variations in financial results and outlook may cause the market price of our Common Stock to fluctuate substantially. In addition, overall volatility in the stock market, particularly in the technology sector, is often unrelated to the operating performance of companies. If these market fluctuations continue in the future, they may adversely affect the price of our Common Stock.

CYBERSECURITY RISKS

Cybersecurity incidents could result in loss of revenue, business disruptions, remediation costs, legal claims and proceedings, regulatory actions, reporting delays, increased insurance costs, or damage to the Company’s reputation which could adversely impact or operations and financial results.

In August 2025, the Company experienced a ransomware incident that resulted in the shutdown of most global operating systems, business disruptions including the inability to timely process certain shipments, and significant remediation costs of approximately $388,000 in the third quarter of 2025. While the incident was contained and remediated by September 2025 and the Company does not believe any customer data was compromised, the incident demonstrated the Company’s vulnerability to cyber attacks and the potential for material operational and financial impacts. The Company has implemented significant enhancements to its cybersecurity infrastructure and processes; however, no assurance can be given that these measures will prevent future incidents. A future cybersecurity incident could result in loss of revenue, business disruptions, remediation costs, legal claims and proceedings, regulatory actions, reporting delays, increased insurance costs, or damage to the Company’s reputation. The costs of preventing, responding to and recovering from cybersecurity incidents may be material.

Cybersecurity breaches or terrorism could result in liabilities or costs as well as damage to or loss of our data or customer access to our website and information systems. The collection, storage, transmission, use and disclosure of user data and personal information, if accessed improperly, could give rise to liabilities or additional costs as a result of laws, government regulations and evolving views of personal privacy rights.

Cybersecurity attacks may increase due to geo-political disagreements with countries and regions such as Russia, China, Korea and the Middle East. Cybersecurity breaches or terrorism could result in the exposure or theft of private or confidential information as well as interrupt our business, including denying customer access to our website and information systems. We transmit, and in some cases store, end-user data, including personal information. In jurisdictions around the world, personal information is becoming increasingly subject to legislation and regulations intended to protect consumers’ privacy and security. The interpretation of privacy and data protection laws and regulations regarding collection, storage, transmission, use and disclosure of such information in some jurisdictions are unclear and evolving. These laws may be interpreted and applied in conflicting ways from country to country and in a manner that is not consistent with our current data protection practices. Complying with these varying international requirements could cause us to incur additional costs and change our business practices. Because our services are accessible in many foreign jurisdictions, some of these jurisdictions may claim that we are required to comply with their laws, even if we have no local entity, employees or infrastructure. We could be forced to incur significant expenses if we were required to modify our products, our services or our existing security and privacy procedures to comply with new or expanded regulations.

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REGULATORY REQUIREMENTS

Failure to comply with increasing regulatory requirements may adversely affect our stock price and business.

As a public company, we are subject to numerous governmental and stock exchange requirements with which we believe we are in compliance. Our failure to meet regulatory requirements and exchange listing standards may result in actions such as: the delisting of our stock, impacting our stock’s liquidity; SEC enforcement actions; and securities claims and litigation. Increased regulations pushed onto public companies may have a disproportionate impact to smaller public companies.

The Sarbanes-Oxley Act of 2002 and the Securities and Exchange Commission (SEC)SEC have requirements that we may fail to meet or we may fall out of compliance with, such as the internal controls auditor attestation required under Section 404 of the Sarbanes-Oxley Act of 2002, with which we are not currently required to comply as we are a smaller reporting company. We assume that we will continue to have the status of a smaller reporting company based on the aggregate market value of the voting and non-voting shares held as of June 30, 2025. If we fail to achieve and maintain the adequacy of our internal controls, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002. Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent financial fraud. If we cannot provide reliable financial reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial information, and the trading price of our stock could drop significantly.

As previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024, the Company identified a material weakness in internal control over financial reporting related to user access and segregation of duties within certain IT systems. During 2025, the Company implemented remediation actions including enhancements to system access controls, improved segregation of duties, and expanded monitoring and review procedures. Meanwhile, the Company has identified an additional instance of material weakness, and while management has taken steps to remediate these internal control issues related to reviews and reporting, these weaknesses did persist during the reporting period of this Form 10-K for the year ended December 31, 2025. See item 9A.

While we have policies and procedures in place designed to prevent corruption and bribery, because our business is significantly international, violations of the Foreign Corrupt Practices Act (FCPA) could have a significant adverse effect on our business due to the disruption and distraction of an investigation, financial penalties and criminal penalties.

Government regulations regarding the use of “conflict” minerals and potential climate and ESG requirements could adversely affect our prospects and results of operations.

Regulatory requirements regarding disclosure of our use of “conflict” minerals mined from the Democratic Republic of Congo and adjoining countries could affect the sourcing and availability of minerals used in the manufacture of certain products. Although we do not buy raw materials, manufacture, or produce any electronic equipment using conflict minerals directly, some components provided by our suppliers and contained in our products contain conflict minerals. Our goal is for our products to be conflict free. As a result, there may only be a limited pool of suppliers who provide conflict-free metals, and we cannot assure you that we will be able to obtain products in sufficient quantities or at competitive prices. Single source suppliers may not respond or respond negatively regarding conflict mineral sourcing, and we may be unable to find alternative sources to replace them. Also, because our supply chain is complex, we may face reputational challenges with our customers and other stakeholders if we are unable to sufficiently verify the origins for all metals used in the products that we sell. Further, if we are unable to comply with the new laws or regulations or if our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us. We may need to incur additional costs and invest additional resources, including management’s time, to comply with the new regulations and additional reporting and disclosure obligations.

Climate focused regulations and related disclosures are a similar evolving regulatory area, and we may be required to invest in systems, processes and personnel to address new requirements in the ESG area. These will require significant costs, work and reputational risk for failing to meet requirements, with miniscule impact to the global environment.

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Item 1B. Unresolved Staff Comments

None.

Item 1C. Cybersecurity

The following discussion of our cybersecurity program reflects conditions as of December 31, 2025, including significant enhancements implemented in response to the August 2025 cybersecurity incident described below.

On August 16, 2025, the Company was the subject of a targeted ransomware incident affecting certain internal IT systems. Upon discovering the incident, the Company promptly activated its response protocols and implemented containment measures, including proactively shutting down most operating systems globally to manage the safety of the overall global systems environment. The Company engaged leading cybersecurity experts to support system recovery and conduct a comprehensive forensic investigation. The investigation determined that the attack originated through a vulnerability in a commercially available third-party firewall service provider and was not specifically targeted at Data I/O. By September 2025, the incident had been completely contained and remediated, all global systems were restored, and the Company does not believe it has any remaining risk exposure from the incident. The remediation and associated professional fees resulted in approximately $388,000 of one-time costs, primarily recorded in the third quarter of 2025. The incident was reported on Form 8-K filed with the SEC on August 21, 2025.

As an outcome of the incident, the Company’s IT systems and cybersecurity posture were strengthened, with improved corporate processes and enhanced security infrastructure. Remediation actions included enhancements to system access controls, improved network segmentation, migration of critical systems to cloud-based solutions, and expanded monitoring and review procedures. See “Risk Factors - Cybersecurity incidents could result in loss of revenue, business disruptions, remediation costs, legal claims and proceedings, regulatory actions, reporting delays, increased insurance costs, or damage to the Company’s reputation which could adversely impact or operations and financial results.”

CYBERSECURITY GOVERNANCE

The Company’s Board of Directors has oversight responsibility for our strategic and operational risks. The Audit Committee of the Board of Directors is responsible for board-level oversight of cybersecurity risk. The cybersecurity program is managed by our outsourced IT infrastructure team with oversight and coordination by our CFO, Charles DiBona, who reports directly to our CEO.

During the third quarter of 2025, in connection with the appointment of Charles DiBona as Chief Financial Officer, the Company formalized CFO oversight of the cybersecurity program. Following the August 2025 ransomware incident, the Audit Committee increased the frequency of cybersecurity reporting and the Company enhanced its incident response protocols. The cybersecurity program is managed by the Company’s new outsourced IT infrastructure team, which provides 24/7 monitoring and response capabilities, with oversight and coordination by the CFO, who reports directly to the CEO. The Audit Committee receives regular updates on cybersecurity matters, including threat assessments, incident response activities, and the status of remediation efforts.

CYBERSECURITY RISK MANAGEMENT AND STRATEGY

The Company’s cybersecurity risk management program is integrated into its overall enterprise risk management framework. Following the August 2025 ransomware incident, the Company significantly enhanced its cybersecurity risk management processes. These enhancements included: patching the third-party firewall service provider through which the attack originated and evaluating replacement providers; implementing improved network segmentation and access controls; expanding endpoint detection and response capabilities; enhancing backup and disaster recovery procedures; conducting comprehensive vulnerability assessments across all IT systems; and providing additional cybersecurity awareness training to all employees. The Company also engaged independent cybersecurity consultants to review and validate the effectiveness of its enhanced security posture. As of September 30, 2025, all remediation activities had been completed and all global systems had been restored to full operational status. The Company continues to assess and adapt its cybersecurity risk management practices to address evolving threats.

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Item 2. Properties

The Company has three facilities with our headquarters and primary engineering and operational functions located in Redmond, Washington. Our two subsidiary facilities in Munich, Germany and Shanghai, China provide extended worldwide sales, service, engineering and operations services. The total annual gross or base lease payments during 2025 and 2024 were approximately $735,000 and $795,000, 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 Redmond, Washington headquarters facility lease runs to October 31, 2029, at approximately 20,460 square feet. The lease for the facility located in Shanghai, China runs to October 31, 2027, at approximately 19,400 square feet. The lease for the facility located near Munich, Germany runs to August 2027, at approximately 4,895 square feet.

Item 3. Legal Proceedings

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of December 31, 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.

Item 4. Mine Safety Disclosures

Not Applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Our Common Stock is listed on the NASDAQ Capital Market (NASDAQ symbol is DAIO).

The closing price was $3.17 on December 31, 2025.

The approximate number of shareholders of record as of April 14, 2026 was 337.

Except for special cash dividend of $4.15 per share paid on March 8, 1989, we have not paid cash dividends on our Common Stock and do not anticipate paying regular cash dividends in the foreseeable future.

No sales of unregistered securities were made by us during the periods ended December 31, 2025, 2024 or 2023.

See Item 12 for the Equity Compensation Plan Information.

Item 6. Selected Financial Data

Not applicable.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. This Act provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information about themselves as long as they identify these statements as forward-looking and provide meaningful cautionary statements identifying important factors that could cause actual results to differ from the projected results. All statements other than statements of historical fact made in this Annual Report on Form 10-K are forward-looking. In particular, statements herein regarding industry prospects and trends; expected business recovery; industry partnerships; future results of operations or financial position; future spending; expected expenses, breakeven revenue point; cybersecurity risk management and costs; expected market decline, bottom or growth; the development of the Edge AI market; market acceptance of our newly introduced or upgraded products or services; the sufficiency of our cash to fund future operations and capital requirements; development, introduction and shipment of new products or services; changing foreign operations; strategic transformation progress and timeline; ERP implementation timeline; potential acquisitions; and the 2026 organic growth framework; taxes, trade issues and tariffs; expected inventory levels; expectations for unsupported platform or product versions and related inventory and other charges; Russian invasion of Ukraine impacts; Israel – Hamas war impacts; supply chain expectations; semiconductor chip shortages and recovery; and any other guidance on future periods are forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, achievements, or other future events. Moreover, neither Data I/O nor anyone else assumes responsibility for the accuracy and completeness of these forward-looking statements. We are under no duty to update any of these forward-looking statements after the date of this Annual Report. The Reader should not place undue reliance on these forward-looking statements. The following discussions and the section entitled “Risk Factors - Cautionary Factors That May Affect Future Results” describes some, but not all, of the factors that could cause these differences.

OVERVIEW

Data I/O Corporation is a global leader in data programming and provisioning solutions for flash memory, microcontrollers and security integrated circuits. The Company designs, manufactures and sells programming and security deployment systems used by electronics manufacturers in automotive, Internet-of-Things, industrial, medical, wireless and consumer electronics applications. Since 1972, the Company has enabled the design and manufacture of electronic products through innovative programming solutions, and today its customers use Data I/O’s security deployment and programming systems to reliably, securely and cost-effectively bring innovative new products to life. The Company’s global operations include manufacturing and engineering facilities in Redmond, Washington and Shanghai, China, with additional sales and support operations in Munich, Germany.

The year ended December 31, 2025 was a pivotal period for the Company, defined by a comprehensive strategic transformation executed under the leadership of President and CEO William Wentworth, who assumed the role in the fourth quarter of 2024. The transformation was designed around six strategic priorities: modernizing the Company’s go-to-market strategy, investing in the core technology platform, strengthening customer relationships, optimizing business operations and IT infrastructure, improving operational processes, and deploying artificial intelligence across the organization. As the Company enters 2026, management believes the transformation is approximately one year ahead of schedule relative to its original multi-year plan.

A central element of the transformation has been expanding the Company’s addressable market. Historically, Data I/O served the relatively narrow market for offline semiconductor programming equipment, where demand is predominantly tied to customers’ capital expenditure budgets and capacity expansion decisions. The Company is now repositioning itself to serve the significantly larger data provisioning market, which encompasses the programming, configuration, and testing of connected devices across the full manufacturing lifecycle. This expanded market opportunity includes services and solutions for programming at test and support for the growing Edge AI ecosystem. Management believes the broader data provisioning market represents a meaningfully larger opportunity than the traditional programming equipment market segment the Company has historically served.

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Subsequent to year end, 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. This collaboration is an early example of the Company’s strategy to build partnerships that extend its platform into adjacent areas of the data provisioning value chain.

The buildout of Edge AI represents a significant emerging growth driver for the Company. Autonomous systems, connected vehicles, industrial IoT devices and smart infrastructure all require increasing volumes of data to be economically and securely provisioned into semiconductor devices at the various points in the manufacturing process. As the proliferation of AI-enabled devices at the network edge accelerates, the demand for high-throughput, secure programming and provisioning solutions is expected to grow substantially. The Company observed encouraging early indicators of this trend during the fourth quarter of 2025 and into early 2026, with new customer logos engaging on definitive production timelines for Edge AI applications. Management believes the convergence of Edge AI buildout and increasing device complexity positions the Company favorably for sustainable long-term growth.

During 2025, the Company deployed artificial intelligence across all functional departments to accelerate operations and reduce costs. AI-enabled efficiencies were a key contributor to a 7% reduction in recurring operating expenses, from an annualized run rate of approximately $26.7 million at the time of the CEO transition in November 2024 to approximately $24.8 million by year end 2025. The Company has identified plans for an additional $1.0 million of annual run rate savings to be realized within the first half of 2026. AI tools were applied to software engineering to accelerate programming algorithm development and device support, ERP implementation planning and data migration, customer support and service processes, and internal business operations including financial reporting and analysis. Management believes these AI capabilities enabled the Company to accomplish its transformation objectives significantly faster than would have been achievable through traditional approaches, and that ongoing AI deployment will continue to yield productivity gains and competitive advantages.

The Company has turned its strategic attention to broadening and stabilizing its business model. Historically, Data I/O’s revenues have been overwhelmingly tied to capital expenditure cycles in programming equipment, making the business highly cyclical and dependent on customers’ capacity expansion decisions. The Company is making concerted efforts to reduce its dependence on the automotive electronics sector, historically the Company’s largest end market. Automotive electronics represented approximately 64% of 2025 bookings, compared to 59% in 2024. More broadly, the Company is focused on developing a more balanced revenue model that incorporates recurring services and consumables revenues, including adapter sales, software services, and programming-at-test service offerings. For the full year 2025, consumable adapters and services represented 58% of total revenue, providing a more stable and recurring base, while platform sales represented 42% of total revenue. Deferred revenue decreased to approximately $1.5 million at December 31, 2025 from $1.6 million at December 31, 2024.

For the full year ended December 31, 2025, the Company reported net sales of $21.5 million, compared to $21.8 million in 2024.

Bookings for the full year 2025 were $18.6 million, a decrease of 17% from $22.5 million in 2024, with backlog at December 31, 2025 of $1.6 million. Regionally, 2025 bookings were strongest from customers throughout Asia, while North America demand for bookings was consistent with the prior year though tailing off in the fourth quarter and Europe declined more generally, reflecting both the ongoing automotive downturn and the Company’s deliberate efforts to diversify its customer base into adjacent markets. Despite the near-term booking softness, the Company observed very encouraging customer activity in the fourth quarter 2025 and into early 2026, with new customer engagements and definitive production timelines providing increased confidence in the demand environment heading into the new year.

Looking ahead, the Company has established a 2026 business framework that encompasses organic revenue growth only, from which management sees a path to positive operating cash flows. Inorganic growth opportunities, while actively being evaluated, are not incorporated into this framework and would be incremental to the organic plan. The framework is supported by the convergence of the Company’s platform investments, expanding market opportunities in data provisioning and Edge AI, the strategic transformation progress realized in 2025, improved operational capabilities and a strengthened leadership team. The Company’s balance sheet provides a solid foundation, with $7.9 million in cash and no debt as of December 31, 2025. Management made deliberate changes to the Board of Directors and executive suite over the past 18 months to ensure the right team is in place to execute this growth plan, and the Company engaged a leading boutique middle-market investment bank to evaluate inorganic growth opportunities aligned with its strategic direction. Based on the progress achieved in 2025 and the early indicators observed in the demand environment, management is confident that 2026 will be a year of growth for Data I/O.

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CRITICAL ACCOUNTING POLICY JUDGMENTS AND ESTIMATES

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires that we make estimates and judgments, which affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities.

We believe the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our financial statements:

Revenue Recognition: Accounting Standards Codification (ASC) Topic 606, Revenue from Contracts with Customers (ASC 606) provides a single, principles-based five-step model to be applied to all contracts with customers. It generally provides for the recognition of revenue in an amount that reflects the consideration to which the Company expects to be entitled, net of allowances for estimated returns, discounts or sales incentives, as well as taxes collected from customers when control over the promised goods or services are transferred to the customer.

We expense contract acquisition costs, primarily sales commissions, for contracts with terms of one year or less and will capitalize and amortize incremental costs with terms that exceed one year. During 2025 and 2024, the impact of capitalization of incremental costs for obtaining contracts was immaterial. We exclude sales, use, value added, some excise taxes and other similar taxes from the measurement of the transaction price.

We recognize revenue upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We have determined that our programming equipment has reached a point of maturity and stability such that product acceptance can be assured by testing at the factory prior to shipment. 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.

We enter into arrangements with multiple performance obligations that arise during the sale of a system that could include hardware, software, service 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 use the price charged by 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, and services based on completion of work and software maintenance and extended warranty support ratably over the term of the agreement, typically one year.

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.

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We recognize revenue when there is an approved contract that both parties are committed to perform, both parties rights have been identified, the contract has substance, collection of substantially all the consideration is probable, the transaction price has been determined and allocated over the performance obligations, the performance obligations, including substantive acceptance conditions, if any, in the contract have been met, the obligation is not contingent on resale of the product, the buyer’s obligation would not be changed in the event of theft, physical destruction or damage to the product, the buyer acquiring the product for resale has economic substance apart from us, and we do not have significant obligations for future performance to directly bring about the resale of the product by the buyer. We establish a reserve for sales returns based on historical trends in product returns and estimates for new items. Payment terms are generally 30 to 60 days from shipment.

We transfer certain products out of service from their internal use and make them available for sale. The products transferred are typically our standard products in one of the following areas: service loaners, rental or test units; engineering test units; or sales demonstration equipment. Once transferred, the equipment is sold by our regular sales channels as used equipment inventory. These product units often involve refurbishing with standard equipment warranty provided 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.

Allowance for Credit Losses: Allowance for credit losses is based on our assessment of the losses collectively expected for the future, as well as collectability of specific customer accounts and the aging of accounts receivable. If there is deterioration of a major customer’s credit worthiness or actual defaults are higher than historical experience, or events forecast that collectively indicate some impairment is expected, our estimates of the recoverability of amounts due to us could be adversely affected.

Inventory: Inventories are stated at the lower of cost or net realizable value. Adjustments are made to standard cost, which approximates actual cost on a first-in, first-out basis. We estimate reductions to inventory for obsolete, slow-moving, excess and non-salable inventory by reviewing current transactions and forecasted product demand. 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.

Warranty Accruals: We accrue for warranty costs based on the expected material and labor costs to fulfill our warranty obligations. If we experience an increase in warranty claims, which are higher than our historical experience, our gross margin could be adversely affected.

Tax Valuation Allowances: Given the uncertainty created by our loss history, capital and geographic spending, as well as income and current net deferred tax assets by entity and country, we expect to continue to limit the recognition of net deferred tax assets and accounting for uncertain tax positions and maintain the tax valuation allowances. At the current time, we expect, therefore, that reversals of the tax valuation allowance will take place as we are able to take advantage of the underlying tax loss or other attributes in carry forward or their use by future income or circumstances allow us to realize these attributes. The transfer pricing and expense or cost sharing arrangements are complex areas where judgments, such as the determination of arms-length arrangements, can be subject to challenges by different tax jurisdictions.

Share-based Compensation: We account for share-based awards provided to our employees and directors, including employee stock option awards, performance stock unit awards and restricted stock unit awards, using the estimated grant date fair value method of accounting. For options, we estimate the fair value using the Black-Scholes valuation model and an estimated forfeiture rate. Restricted stock unit awards and performance stock unit awards are valued based on the average of the high and low price on the date of the grant and an estimated forfeiture rate. For options, performance and restricted stock unit awards, expense is recognized as compensation expense on the straight-line basis. Employee Stock Purchase Plan (“ESPP”) shares were issued under provisions that do not require us to record any equity compensation expense.

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RESULTS OF OPERATIONS:

NET SALES

Net sales by location	2025		Change		2024
(in thousands)
United States	$	1,289	(6.4%	)	$	1,377
% of total		6.0%				6.3	%
International	$	20,211	(0.9%	)	$	20,392
% of total		94.0%				93.7	%

Net sales by type	2025		Change			2024 (as Revised)
(in thousands)
Platform Sales	$	8,997	(14.0%)		$	10,466
Adapter Sales		7,903		9.9%		7,190
Software and Services Sales*		4,600		11.9%		4,113
Total	$	21,500	(1.2%)		$	21,769

* includes service and parts sales associated with equipment service contracts

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

Net sales for the year ended December 31, 2025 decreased approximately 1.2%, to $21.5 million, compared to $21.8 million in 2024. In 2025, automotive electronics uncertainty persisted and customer capacity expansion slowed, resulting in lower system shipments, notably in Europe, which were partially offset by growth in Asia. Automotive electronics represented 64% of 2025 bookings compared to 59% for 2024. For the full year, consumable adapters and services revenue increased, representing 58% of total revenue and helping mitigate the decline in system sales.

Order bookings in 2025 were $18.6 million, down approximately 17% compared to $22.5 million in 2024, due to similar market challenges noted for revenue. The order backlog on December 31, 2025 was $1.6 million. Additionally, deferred revenue was approximately $1.5 million on December 31, 2025.

GROSS MARGIN

	2025			Change	2024
(in thousands)
Gross margin	$	10,596		(8.7%)	$	11,606
Percentage of net sales		49.3	%			53.3	%

Gross margin as a percentage of sales for the year ended December 31, 2025, was 49.3%, compared to 53.3% in 2024. The decrease in gross margin as a percentage of sales primarily reflects lower sales volume and lower related absorption of labor and overhead costs.

RESEARCH AND DEVELOPMENT

	2025			Change			2024
(in thousands)
Research and development	$	6,531			4.7	%	$	6,240
Percentage of net sales		30.4	%					28.7	%

Research and development (“R&D”) expense increased $291,000 for the year ended December 31, 2025, compared to 2024. The increase was primarily related to increased staff, notably in China.

We invest in R&D to significantly enhance our existing solutions and create new products as markets develop and technologies change. During 2025, we continued to invest in the creation of new and enhancement of existing capabilities for our PSV family of automated systems, LumenX and FlashPAK family of non-automated programmers and related software. In addition to product development, a significant part of R&D spending is on creating algorithm software and support for new devices introduced by the semiconductor companies. Our R&D spending fluctuates based on the number, type, and the development stage of our product initiatives and projects.

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SELLING, GENERAL AND ADMINISTRATIVE

	2025			Change			2024
(in thousands)
Selling, general & administrative	$	9,181			9.2	%	$	8,404
Percentage of net sales		42.7	%					38.6	%

Selling, General and Administrative (“SG&A”) expenses increased approximately $777,000 for the year ended December 31, 2025, compared to 2024. The increase was primarily related to increased legal and accounting fees tied to SEC filings, one-time charges associated with the ransomware incident report on August 16, 2025, and increased spending on infrastructure and security, partially offset by reduced IT spending in other areas. Cost control measures remain in effect.

INTEREST

	2025		Change		2024
(in thousands)
Interest income	$	130	(52.4	%)	$	273

Interest income was lower for the year ended December 31, 2025 compared to 2024 primarily due to lower invested balances.

INCOME TAXES

	2025			Change		2024
(in thousands)
Income tax (expense) benefit	$	(240	)	(37.8	%)	$	(386	)

Income tax (expense) decreased by $146,000 for the year ended December 31, 2025 compared to 2024.

In 2025, income tax expense includes $250,000 of deferred income taxes from recording deferred tax liabilities primarily related to outside basis differences in foreign subsidiaries. In 2024, the Company repatriated cash from our China subsidiary resulting in a withholding tax of $337,000.

The effective tax rates in 2025 and 2024, respectively were (4.8%) and (14.3%), and differed from the statutory tax rates in our tax reporting jurisdictions primarily due to subsidiaries income and losses and consolidated losses and the effect of valuation allowances. We have a valuation allowance of $10.5 million and $9.2 million as of December 31, 2025 and 2024, respectively. Given the uncertainty created by our loss history, particularly the U.S., which is where most of our net deferred tax assets are located, and the ongoing uncertain economic outlook for our industry, as well as capital and geographic spending, we currently expect to continue to limit the recognition of net deferred tax assets and maintain the tax valuation allowances.

INFLATION AND CHANGES IN FOREIGN CURRENCY EXCHANGE RATES

We recognized foreign currency transaction losses of ($10,000) in 2025 and $58,000 transactions gains in 2024.

Sales and expenses incurred by foreign subsidiaries are denominated in the subsidiary’s local currency and translated into U.S. Dollar amounts at average rates of exchange during the year. The transaction gains resulted primarily from translation adjustments to foreign inter-company accounts and U.S. Dollar accounts held by foreign subsidiaries and sales by our German subsidiary to certain customers, which were invoiced in U.S. Dollars. Because approximately 94% of sales are to international markets, volatile exchange rates may also impact our competitiveness and margins. Product and service price increases have been increased in response to cost increases caused by inflation, tariffs and part shortages.

FINANCIAL CONDITION:

LIQUIDITY AND CAPITAL RESOURCES

	2025		Change			2024
(in thousands)
Working capital	$	12,270	$	(4,065	)	$	16,085

Working capital decreased by $4.1 million during 2025, primarily due to the revenue decline and resulting operating loss. Our current ratio was 3.3 and 4.2 for December 31, 2025 and 2024, respectively.

At December 31, 2025, our principal sources of liquidity consisted of existing cash and cash equivalents. Cash at December 31, 2025 and 2024 was $7.9 million and $10.3 million, respectively. The company continues to have no debt.

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We expect to continue to carefully make and manage capital expenditures to support our business. We plan to increase our internally developed rental, sales demonstration and test equipment as we develop and release new products. Capital expenditures are currently expected to be funded by existing and internally generated funds.

As a result of the cyclical and seasonal nature of capital expenditure businesses, we require significant working capital to fund our operations. We have continued to manage the geographic posture of our operations to align to our customers’ needs and to minimize impacts of exogenous factors such as tariffs. All that said, we believe that we have sufficient cash or working capital available under our operating plan to fund our operations and capital requirements through the next one-year period, and beyond.

We may require additional cash at the U.S. headquarters to support future strategic and operational initiatives., which could cause potential repatriation of cash that is held in our foreign subsidiaries. For any repatriation, there may be tax and other impediments to any repatriation actions. As many repatriations typically have associated withholding taxes, those withheld will be a current tax without generating a current or deferred tax benefit recognition. We are actively tuning our operations and intercompany structures to minimize the need for and impact of any repatriation of monies.

Our working capital may be used to fund possible losses, business growth, project initiatives, share repurchases and business development initiatives including acquisitions, which could reduce our liquidity and result in a requirement for additional cash before that time. Any substantial inability to achieve our current business plan could have a material adverse impact on our financial position, liquidity, or results of operations and may require us to reduce expenditure and/or seek possible additional financing.

OFF-BALANCE SHEET ARRANGEMENTS

Except as noted in the accompanying consolidated financial statements in Note 7, “Other Commitments” we had no material off-balance sheet arrangements.

SHARE REPURCHASE PROGRAMS

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

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NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) FINANCIAL MEASURES

Earnings Before Interest, Taxes, Depreciation, and Amortization (“EBITDA”) and Adjusted EBITDA excluding equity compensation and impairment & related charges (non-cash, one-time items) are set forth below. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. We believe that these non-GAAP financial measures provide meaningful supplemental information regarding our results and facilitate the comparison of results. A reconciliation of net income to EBITDA and Adjusted EBITDA follows:

	For Year Ended December 31,
	2025			2024
(in thousands)
Net Income (loss)	$	(5,236	)	$	(3,093	)
Interest (income)		(130	)		(273	)
Taxes		240

SEC Form 10-K filed by Data I/O Corporation