UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 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
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(State or other jurisdiction of<br><br>incorporation or organization)	(I.R.S. Employer<br><br>Identification No.)
6645 185th Ave NE, Suite 100, Redmond, Washington, 98052<br><br>425-881-6444<br><br>(Address of principal executive offices, including zip code)
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Securities registered pursuant to Section 12(b) of the Act:
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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
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Common Stock	DAIO	NASDAQ

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.

Large accelerated filer	☐	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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Shares of Common Stock, no par value, outstanding as of July 31, 2025: 9,387,663

DATA I/O CORPORATION
FORM 10-Q
For the Quarter Ended June 30, 2025
INDEX
Part I.		Financial Information	Page
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	Item 1.	Financial Statements (Unaudited)	3
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
	Item 4.	Controls and Procedures	24
Part II		Other Information
	Item 1.	Legal Proceedings	25
	Item 1A.	Risk Factors	25
	Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities	25
	Item 3.	Defaults Upon Senior Securities	25
	Item 4.	Mine Safety Disclosures	25
	Item 5.	Other Information	25
	Item 6.	Exhibits	26
Signatures			27
2
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PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

DATA I/O CORPORATION
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
(UNAUDITED)
		****	December 31,<br><br>2024
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	9,969		$	10,326
Trade accounts receivable, net of allowance for
credit losses of 31 and 22, respectively	3,905			3,960
Inventories	5,972			6,212
Other current assets	781			659
TOTAL CURRENT ASSETS	20,627			21,157
Property, plant and equipment – net	1,050			1,001
Other assets	2,440			2,812
TOTAL ASSETS	24,117		$	24,970
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	1,366		$	820
Accrued compensation	1,056			1,517
Deferred revenue	1,254			1,535
Other accrued liabilities	1,380			1,161
Income taxes payable	20			39
TOTAL CURRENT LIABILITIES	5,076			5,072
Operating lease liabilities	1,750			2,160
Long-term other payables	45			112
COMMITMENTS	-			-
STOCKHOLDERS’ EQUITY
Preferred stock -
Authorized, 5,000,000 shares, including
200,000 shares of Series A Junior Participating
Issued and outstanding, none	-			-
Common stock, at stated value -
Authorized, 30,000,000 shares
Issued and outstanding, 9,374,698 shares as of June 30,
2025 and 9,236,040 shares as of December 31, 2024	23,804			23,475
Accumulated earnings (deficit)	(6,862	)		(5,738	)
Accumulated other comprehensive income	304			(111	)
TOTAL STOCKHOLDERS’ EQUITY	17,246			17,626
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	24,117		$	24,970
See notes to consolidated financial statements

All values are in US Dollars.

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DATA I/O CORPORATION
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CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(UNAUDITED)
	Three Months Ended<br><br>June 30,						Six Months Ended<br><br>June 30,
	2025			2024			2025			2024
Net sales	$	5,948		$	5,062		$	12,124		$	11,161
Cost of goods sold		2,988			2,305			5,976			5,184
Gross margin		2,960			2,757			6,148			5,977
Operating expenses:
Research and development		1,662			1,413			3,177			2,995
Selling, general and administrative		2,142			1,910			4,192			4,408
Total operating expenses		3,804			3,323			7,369			7,403
Operating income (loss)		(844	)		(566	)		(1,221	)		(1,426	)
Non-operating income (loss):
Interest income		35			73			73			153
Foreign currency transaction gain (loss)		47			49			26			62
Total non-operating income (loss)		82			122			99			215
Income (loss) before income taxes		(762	)		(444	)		(1,122	)		(1,211	)
Income tax (expense) benefit		20			(353	)		(2	)		(393	)
Net income (loss)	$	(742)		$	(797)		$	(1,124)		$	(1,604)
Basic earnings (loss) per share	$	(0.08	)	$	(0.09	)	$	(0.12	)	$	(0.18	)
Diluted earnings (loss) per share	$	(0.08	)	$	(0.09	)	$	(0.12	)	$	(0.18	)
Weighted-average basic shares		9,296			9,104			9,267			9,063
Weighted-average diluted shares		9,296			9,104			9,267			9,063
See notes to consolidated financial statements
4
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DATA I/O CORPORATION
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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(in thousands)
(UNAUDITED)
	Three Months Ended<br><br>June 30,						Six Months Ended<br><br>June 30,
	2025			2024			2025			2024
Net income (loss)	$	(742	)	$	(797	)	$	(1,124	)	$	(1,604	)
Other comprehensive income (loss):
Foreign currency translation gain (loss)		289			(70	)		304			(238	)
Comprehensive income (loss)	$	(453	)	$	(867	)	$	(820	)	$	(1,842	)
See notes to consolidated financial statements
5
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CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
---	---	---	---	---	---	---	---	---	---	---	---	---	---	---
(in thousands, except share amounts)
(UNAUDITED)
									Accumulated
						Retained			and Other
	Common Stock					Earnings			Comprehensive
	Shares		Amount			(Deficit)			Income (Loss)			Total
Balance at December 31, 2023		9,020,819	$	22,731		$	(2,645	)	$	233		$	20,319
Stock awards issued, net of tax withholding		1,759		-			-			-			-
Issuance of stock through: ESPP		2,381		7			-			-			7
Share-based compensation		-		281			-			-			281
Net income (loss)		-		-			(807	)		-			(807	)
Other comprehensive income (loss)		-		-			-			(168	)		(168	)
Balance at March 31, 2024		9,024,959	$	23,019		$	(3,452	)	$	65		$	19,632
Stock awards issued, net of tax withholding		194,879		(229	)		-			-			(229	)
Issuance of stock through: ESPP		-		-			-			-			-
Share-based compensation		-		382			-			-			382
Net income (loss)		-		-			(797	)		-			(797	)
Other comprehensive income (loss)		-		-			-			(70	)		(70	)
Balance at June 30, 2024		9,219,838	$	23,172		$	(4,249	)	$	(5)		$	18,918
Balance at December 31, 2024		9,236,040	$	23,475		$	(5,738	)	$	(111	)	$	17,626
Stock awards issued, net of tax withholding		1,759		(3	)		-			-			(3	)
Issuance of stock through: ESPP		1,932		6			-			-			6
Share-based compensation		-		174			-			-			174
Net income (loss)		-		-			(382	)		-			(382	)
Other comprehensive income (loss)		-		-			-			126			126
Balance at March 31, 2025		9,239,731	$	23,652		$	(6,120	)	$	15		$	17,547
Stock awards issued, net of tax withholding		134,967		(98	)		-			-			(98	)
Issuance of stock through: ESPP		-		-			-			-			-
Share-based compensation		-		250			-			-			250
Net income (loss)		-		-			(742	)		-			(742	)
Other comprehensive income (loss)		-		-			-			289			289
Balance at June 30, 2025		9,374,698	$	23,804		$	(6,862	)	$	304		$	17,246
See notes to consolidated financial statements
6
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DATA I/O CORPORATION
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(UNAUDITED)
	For the Six Months Ended<br><br>June 30,
	2025			2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	(1,124	)	$	(1,604	)
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Depreciation and amortization		237			340
Equipment transferred to cost of goods sold		61			250
Share-based compensation		424			663
Net change in:
Trade accounts receivable		191			2,362
Inventories		290			(877	)
Other current assets		(113	)		86
Accounts payable and accrued liabilities		232			(1,601	)
Deferred revenue		(432	)		(17	)
Other long-term liabilities		(409	)		(281	)
Deposits and other long-term assets		410			395
Net cash provided by (used in) operating activities		(233	)		(284	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment		(347	)		(164	)
Cash provided by (used in) investing activities		(347	)		(164	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock, less payments for shares withheld to cover tax		(95	)		(223	)
Cash provided by (used in) financing activities		(95	)		(223	)
Increase (decrease) in cash and cash equivalents		(675	)		(671	)
Effects of exchange rate changes on cash		318			(230	)
Cash and cash equivalents at beginning of period		10,326			12,341
Cash and cash equivalents at end of period	$	9,969		$	11,440
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	14		$	464
See notes to consolidated financial statements
7
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DATA I/O CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

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

Data I/O Corporation (“Data I/O”, “We”, “Our”, “Us”) is a global market leader for advanced programming, security deployment, security provisioning and associated Intellectual Property (“IP”) protection and management solutions used in electronics manufacturing with flash memory, microcontrollers, and flash memory-based intelligent devices as well as secure element devices, authentication devices and secure microcontrollers. Customers for our programming system products are located around the world, primarily in Asia, Europe and the Americas. Our manufacturing operations are currently located in Redmond, Washington, United States and Shanghai, China.

We prepared the financial statements as of June 30, 2025 and June 30, 2024 according to the rules and regulations of the Securities and Exchange Commission ("SEC"). These statements are unaudited but, in the opinion of management, include all adjustments (consisting of normal recurring adjustments and accruals) necessary to present fairly the results for the periods presented. The balance sheet at December 31, 2024 has been derived from the audited financial statements at that date. We have condensed or omitted certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America according to such SEC rules and regulations. Operating results for the six months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending December 31, 2025.

Significant Accounting Policies

These financial statements should be read in conjunction with the annual audited financial statements and the accompanying notes included in our Form 10-K for the year ended December 31, 2024 (filed with the SEC on April 1, 2025). There have been no changes to our significant accounting policies described in the Annual Report that have had a material impact on our unaudited condensed consolidated financial statements and related notes.

Revenue Recognition

Accounting Standards Codification (ASC) Topic 606, 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 the current and prior period quarters, the impact of capitalization of incremental costs for obtaining contracts were immaterial. We exclude sales, use, value added, some excise taxes and other similar taxes from the measurement of the transaction price.

We recognize revenue upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We have determined that our programming equipment has reached a point of maturity and stability such that product acceptance can be assured by testing at the factory prior to shipment and that the installation meets the criteria to be a separate performance obligation. These systems are standard products with published product specifications and are configurable with standard options. The evidence that these systems could be deemed as accepted was based upon having standardized factory production of the units, results from batteries of tests of product performance to our published specifications, quality inspections and installation standardization, as well as past product operation validation with the customer and the history provided by our installed base of products upon which the current versions were based.

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The revenue related to products requiring installation that is perfunctory is recognized upon transfer of control of the product to customers, which generally is at the time of shipment. Installation that is considered perfunctory includes any installation that is expected to be performed by other parties, such as distributors, other vendors, or the customers themselves. This analysis considers the complexity, skill and training needed and customer installation expectations.

We enter into arrangements with multiple performance obligations that arise during the sale of a system that could include hardware, software, installation, services and support and extended maintenance components. We allocate the transaction price of each element based on the relative selling prices. Relative selling price is based on the selling price of the standalone system. For the installation and service and support performance obligations, we use the value of the discount given to distributors who perform these components. For software maintenance performance obligations, we use what we charge for annual software maintenance renewals after the initial year the system is sold. Revenue is recognized on the system based on shipping terms, software based on delivery, installation and services based on completion of work, and software maintenance and extended warranty support ratably over the term of the agreement, typically one year. Total deferred revenue which represents undelivered performance obligations for installation, service, support and extended contracts were $1.3 million and $1.5 million for June 30, 2025 and 2024, respectively. The portion expected to be recognized within one year was $1.3 million and $1.3 million for June 30, 2025 and 2024, respectively.

When we license software separately, we recognize revenue upon the transfer of control of the software, which is generally upon shipment, provided that only inconsequential performance obligations remain on our part and substantive acceptance conditions, if any, have been met.

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

We transfer certain products out of service from their internal use and make them available for sale. The products transferred are typically our standard products in one of the following areas: service loaners, rental or test units; engineering test units; or sales demonstration equipment. Once transferred, the equipment is sold by our regular sales channels as used equipment inventory. These product units often involve refurbishing and are sold in our normal and ordinary course of business with standard warranty coverage. The transfer amount is the product unit’s net book value, and the sale transaction is accounted for as revenue and cost of goods sold.

The following table represents our revenues by major categories:

	Three Months Ended							Six Months Ended
Net sales by type	June 30,<br><br>2025		Change			June 30,<br><br>2024		June 30,<br><br>2025		Change			June 30,<br><br>2024
(in thousands)
Equipment	$	2,997		27.4	%	$	2,353	$	6,315		10.4	%	$	5,719
Adapter		2,331		28.4	%		1,816		4,293		17.2	%		3,662
Software and Maintenance		620		(30.6	)%		893		1,516		(14.8	)%		1,780
Total	$	5,948		17.5	%	$	5,062	$	12,124		8.6	%	$	11,161

Share-Based Compensation

All stock-based compensation awards are measured based on estimated fair values on the date of grant and recognized as compensation expense on the straight-line method. Our share-based compensation is reduced for estimated forfeitures at the time of grant and revised as necessary in subsequent periods if actual forfeitures differ from those estimates.

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Income Tax

Income taxes for U.S. and foreign subsidiary operations are computed at current enacted tax rates, less tax credits using the asset and liability method. Deferred taxes are adjusted both for items that do not have tax consequences and for the cumulative effect of any changes in tax rates from those previously used to determine deferred tax assets or liabilities. Tax provisions include amounts that are currently payable, changes in deferred tax assets and liabilities that arise because of temporary differences between the timing of when items of income and expense are recognized for financial reporting and income tax purposes, and any changes in the valuation allowance caused by a change in judgment about the realization of the related deferred tax assets. A valuation allowance is established when necessary to reduce deferred tax assets to amounts expected to be realized.

On July 4, 2025, the “One Big Beautiful Bill Act” (the “Act”) was enacted into law. The Act includes changes to U.S. tax law, including provisions to accelerate tax deductions for qualified property and research expenditures. The legislation did not affect the Company’s income tax balances as of June 30, 2025. We are in the process of evaluating the impact of the Act on our consolidated financial statements.

New Accounting Pronouncements – Standards Issued and Not Yet Implemented

In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.

In November 2024, FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation (Subtopic 220-40), which requires disclosure of specific information about costs and expenses within relevant expense captions on the face of the income statement, qualitative descriptions for expense captions not specifically disaggregated quantitatively, and the total amount and definition of selling expenses for interim and annual reporting periods. This standard is effective for the annual reporting period beginning January 1, 2027, and interim reporting periods beginning January 1, 2028, and should be applied retrospectively to all comparative periods. Early adoption is permitted. The Company is currently evaluating the effects of adopting this new accounting guidance.

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NOTE 2 – INVENTORIES

Inventories consisted of the following components:
	June 30,<br><br>2025		December 31,<br><br>2024
(in thousands)
Raw material	$	3,137	$	3,273
Work-in-process		1,921		1,845
Finished goods		914		1,094
Inventories	$	5,972	$	6,212

NOTE 3– PROPERTY, PLANT AND EQUIPMENT, NET

Property and equipment consisted of the following components:

	June 30,<br><br>2025		****	December 31,<br><br>2024
(in thousands)
Leasehold improvements	$	353		$	343
Equipment		4,163			3,777
Sales demonstration equipment		1,099			1,031
		5,615			5,151
Less accumulated depreciation		(4,565	)		(4,150	)
Property and equipment, net	$	1,050		$	1,001

NOTE 4 – OTHER ACCRUED LIABILITIES

Other accrued liabilities consisted of the following components:

	June 30,<br><br>2025		December 31,<br><br>2024
(in thousands)
Lease liability - short term	$	673	$	640
Product warranty		468		350
Sales return reserve		32		32
Other taxes		59		69
Other		148		70
Other accrued liabilities	$	1,380	$	1,161

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

	June 30,<br><br>2025		****	December 31,<br><br>2024
(in thousands)
Liability, beginning balance	$	350		$	449
Net expenses		229			901
Warranty claims		(229	)		(901	)
Accrual revisions		118			(99	)
Liability, ending balance	$	468		$	350
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NOTE 5– OPERATING LEASE COMMITMENTS

We have commitments under non-cancelable operating leases and other agreements, primarily for factory and office space, with initial or remaining terms of one year or more as of June 30, 2025, are as follows:

	June 30,<br><br>2025<br><br>Operating<br><br>Lease Commitments
(in thousands)
2025 (remaining)	$	389
2026		774
2027		693
2028		433
2029 & Thereafter		369
Total	$	2,658
Less imputed interest		(235	)
Total operating lease liabilities	$	2,423

For the largest lease component, the Company has three facilities with our headquarters and primary engineering and operational functions located in Redmond, Washington. Our two subsidiary facilities in Munich, Germany and Shanghai, China provide extended worldwide sales, service, engineering and operation services. The components of our lease expense for the three months and six months ended June 30, 2025, include facility related operating lease costs of $184,000 and $366,000, respectively, and short-term lease costs of $10,000 and $19,000, respectively. In the prior year, components of our lease expense for the three months and six months ended June 30, 2024, include facility related operating lease costs of $207,000 and $415,000, respectively, and short-term lease costs of $9,000 and $19,000, respectively. There were no new operating leases during the six months ended June 30, 2025.

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.

The following table presents supplemental balance sheet information related to leases as of June 30, 2025, and December 31, 2024:

	Balance at<br><br>June 30, 2025		Balance at<br><br>December 31, 2024
(in thousands)
Right-of-use assets (Long-term other assets)	$	2,328	$	2,704
Lease liability-short term (Other accrued liabilities)	$	673	$	640
Lease liability-long term (Operating lease liabilities)	$	1,750	$	2,064

At June 30, 2025, the weighted average remaining lease term is 3.7 years and the weighted average discount rate used is 5%.

NOTE 6– OTHER COMMITMENTS

We have purchase obligations for inventory and production costs as well as other obligations such as capital expenditures, service contracts, marketing, and development agreements. Arrangements are considered purchase obligations if a contract specifies all significant terms, including fixed or minimum quantities to be purchased, a pricing structure and approximate timing of the transaction. Most arrangements are cancelable without a significant penalty, and with short notice, typically less than 90 days. As of June 30, 2025, we had confirmed contracts with a commitment of approximately $782,000 to be paid within one year and $480,000 to be paid beyond one year.

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NOTE 7 – CONTINGENCIES

As of June 30, 2025, we were not a party to any legal proceedings or aware of any indemnification agreement claims, the adverse outcome of which in management’s opinion, individually or in aggregate, would have a material adverse effect on our results of operations or financial position.

NOTE 8 – INCOME TAXES

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

The effective tax rate differed from the statutory tax rate primarily due to the effect of valuation allowance, as well as foreign taxes. We have a valuation allowance of $9.1 million as of June 30, 2025. As of June 30, 2025 and 2024, our deferred tax assets and valuation allowance have been reduced by approximately $447,000 and $437,000, respectively. Given the uncertainty created by our loss history, as well as the volatile and uncertain economic outlook for our industry and capital spending, we have limited the recognition of net deferred tax assets including our net operating losses and credit carryforwards and continue to maintain a valuation allowance for the full amount of the net deferred tax asset balance.

NOTE 9 – EARNINGS PER SHARE

Basic earnings per share is calculated based on the weighted average number of common shares outstanding during each period. Diluted earnings per share is calculated based on these same weighted average shares outstanding plus the effect of potential shares issuable upon assumed exercise of stock options based on the treasury stock method.

Potential shares issuable upon the exercise of stock options are excluded from the calculation of diluted earnings per share to the extent their effect would be anti-dilutive.

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The following table sets forth the computation of basic and diluted earnings per share:

	Three Months Ended					****	Six Months Ended					****
****	June 30,<br><br>2025		****	June 30,<br><br>2024		****	June 30,<br><br>2025		****	June 30,<br><br>2024
(in thousands except per share data)
Numerator for basic and diluted
earnings (loss) per share:
Net income (loss)	$	(742	)	$	(797	)	$	(1,124	)	$	(1,604	)
Denominator for basic
earnings (loss) per share:
Weighted-average shares		9,296			9,104			9,267			9,063
Employee stock options and awards		-			-			-			-
Denominator for diluted
earnings (loss) per share:
Adjusted weighted-average shares &
assumed conversions of stock options		9,296			9,104			9,267			9,063
Basic and diluted
earnings (loss) per share:
Basic earnings (loss) per share	$	(0.08	)	$	(0.09	)	$	(0.12	)	$	(0.18	)
Diluted earnings (loss) per share	$	(0.08	)	$	(0.09	)	$	(0.12	)	$	(0.18	)

The weighted average number of shares outstanding used to compute earnings (loss) per share included the following:

	Three Months Ended				Six Months Ended
****	June 30,<br><br>2025		June 30,<br><br>2024		June 30,<br><br>2025		June 30,<br><br>2024
Restricted Stock Units		66,424		91,729		77,906		110,706
Performance Stock Units		19,638		8,098		17,811		5,784
Stock Options		-		161		-		168

Options to purchase 200,000 and 12,500 shares were outstanding as of June 30, 2025 and 2024, respectively, but were excluded from the computation of diluted earnings per share for the periods then ended because the options were anti-dilutive.

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NOTE 10 – SHARE-BASED COMPENSATION

For share-based awards granted, we have recognized compensation expense based on the estimated grant date fair value method. For these awards we have recognized compensation expense using a straight-line amortization method and reduced for estimated forfeitures.

Second quarter 2025 shared-based compensation of $250,000, was $132,000 lower compared to the prior year period due to staff reductions which occurred in the fourth quarter of 2024. The impact on our results of operations of recording share-based compensation, net of forfeitures, for the three and six months ended June 30, 2025 and 2024, were as follows:

	Three Months Ended				Six Months Ended
****	June 30,<br><br>2025		June 30,<br><br>2024		June 30,<br><br>2025		June 30,<br><br>2024
(in thousands)
Cost of goods sold	$	36	$	36	$	61	$	60
Research and development		65		82		113		146
Selling, general and administrative		149		264		250		457
Total share-based compensation	$	250	$	382	$	424	$	663

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

	Three Months Ended				Six Months Ended
****	June 30,<br><br>2025		June 30,<br><br>2024		June 30,<br><br>2025		June 30,<br><br>2024
Restricted Stock Units		81,200		231,650		96,472		231,650
Performance Stock Units		-		119,000		-		119,000

Employee RSUs typically vest annually over three or four years and employee Non-Qualified stock options typically vest quarterly over four years and have a six-year exercise period. Non-employee director Restricted Stock Units (“RSUs”) typically vest over the earlier of one year or the next annual meeting of shareholders and Non-Qualified stock options vest over three years and have a six-year exercise period.

Performance Stock Units (“PSUs”) typically cliff vest at the end of the performance period and the performance metric for 2023 awards is cumulative revenue growth over the three-year period ending December 31, 2025, with a cumulative revenue threshold, target, and maximum performance measure. For 2024 awards, the performance metrics included revenue growth, EBITDA and project objective targets over the three-year period ending December 31, 2026. There have been no Performance Stock awards granted in 2025.

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

	June 30,<br><br>2025		June 30,<br><br>2024
Unamortized future equity compensation expense (in thousands)	$	1,197	$	2,464
Remaining weighted average amortization period (in years)		1.92		2.27
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NOTE 11 –SEGMENT INFORMATION

Data I/O operates as a single segment entity, with the sole objective to design, manufacture, and sell programming systems. We operate in three separate locations — Redmond, Washington; Shanghai, China; and Munich, Germany — these locations function as part of a single, integrated business and all operations are strategically aligned to support this objective.

The accounting policies of the programming system segment are the same as those described in the summary of significant accounting policies. The measure of segment assets is reported on the balance sheet as total consolidated assets.

Our Chief Operating Decision Maker (CODM) is the President/CEO who reviews the company’s financial performance on a consolidated basis without distinguishing between different business lines or geographic areas for the purpose of making operating decisions, allocating resources and evaluating financial performance. Financial performance is assessed using operating results, actual net income vs. plan, balance sheet fluctuations, and other key performance indicators. Significant single segment expense categories that are provided to the chief operating decision maker and included in the reported segment operating profits are outlined in the following table:

	Three Months Ended				Six Months Ended
****	June 30,<br><br>2025		June 30,<br><br>2024		June 30,<br><br>2025		June 30,<br><br>2024
(in thousands)
Net sales	$	5,948	$	5,062	$	12,124	$	11,161
Cost of goods sold		2,988		2,305		5,976		5,184
Gross margin		2,960		2,757		6,148		5,977
Operating Expenses:
Employee expenses		2,392		2,281		4,647		4,747
Customer acquisition costs		240		272		533		706
Professional and outside services		570		340		1,111		982
Occupancy costs (OPEX portion)		243		179		462		378
Depreciation & amortization		139		144		265		287
Other		220		107		351		303
Total operating expense		3,804		3,323		7,369		7,403
Operating income (loss)	$	(844)	$	(566)	$	(1,221)	$	(1,426)
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Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

General

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q 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 Quarterly Report on Form 10-Q are forward-looking. In particular, statements herein regarding economic outlook; industry prospects and trends; expected business recovery; industry partnerships; future results of operations or financial position; future spending; expected expenses, breakeven revenue point; expected market decline, bottom or growth; 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; taxes, trade issues and tariffs; expected inventory levels; expectations for unsupported platform or product versions and related inventory and other charges; 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 2024 Annual Report on Form 10-K section entitled “Risk Factors – Cautionary Factors That May Affect Future Results” describe some, but not all, of the factors that could cause these differences.

OVERVIEW

Data I/O continued to make progress in key operational areas during the second quarter, despite a challenging global economic environment. The second quarter represents a continuation in proving the growth and market expansion strategies being implemented over the past several months. At the same time, efficiency improvements and streamlining operations resulted in a lower cost basis for manufacturing and overhead. We are focused on improvements to our core programming platform and received a significant automated programming system order late in the second quarter from a leading global automotive EV supplier.

We are encouraged to see customers increase the utilization of their existing systems, which results in a greater need for engineering and maintenance services and heightened demand for consumable adapters, and represent a high margin source of revenue. We continue to grow our pipeline of opportunities beyond the automotive sector including a revitalization of our activities with semiconductor companies and forging strategic product development relationships with leading firms serving the memory and microcontroller sectors. Combined with continued efforts to expand our market reach, we expect to deliver revenue growth through end market diversification and an enhanced consultative sales process.

Overall demand for capital equipment continued to be negatively impacted by ongoing global trade and tariff negotiations throughout most of the second quarter. However, ongoing supply chain planning and other actions have helped mitigate the impact of new tariffs, trade and inflationary pressures, including shifting material sourcing and product manufacturing.

Significant progress has been made in a short period of time against a backdrop of significant economic and cross-border trade uncertainty. We remain cautious given the near-term headwinds, as this has created additional strain on the economy and stalled capital investments. We remain focused on setting the business up for sustainable growth by driving innovation, enhancing our products and improving our value proposition.

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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. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, sales returns, credit losses, inventories, income taxes, warranty obligations, restructuring charges, contingencies such as litigation and contract terms that have multiple elements and other complexities typical in the capital equipment industry. We base our estimates on historical experience and other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

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 enter into arrangements with multiple performance obligations that arise during the sale of a system that could include hardware, software, installation, services and support and extended maintenance components. We allocate the transaction price of each element based on the relative selling price. Relative selling price is based on the selling price of the standalone system. Installation, services and support costs are based on the discount given to distributors who perform these services. For software maintenance performance obligations, we use the charge for annual software maintenance renewals after the expiration of the initial warranty coverage. Revenue is recognized on the system based on shipping terms, software based on delivery, installation and services based on completion of work and software maintenance and extended warranty support ratably over the term of the agreement, typically one year.

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

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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, as well as cyclical economic outlook for our industry, 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 in which 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 made 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

	Three Months Ended									Six Months Ended
Net sales by product line	June 30,<br><br>2025			Change			June 30,<br><br>2024			June30,<br><br>2025			Change			June 30,<br><br>2024
(in thousands)
Automated programming systems	$	3,317			(17.3	)%	$	4,009		$	7,663			(13.2	)%	$	8,832
Non-automated programming systems		2,631			149.9	%		1,053			4,461			91.5	%		2,329
Total programming systems	$	5,948			17.5	%	$	5,062		$	12,124			8.6	%	$	11,161
	Three Months Ended										Six Months Ended
Net sales by location	June 30,<br><br>2025			Change			June 30,<br><br>2024			June30,<br><br>2025			Change			June 30,<br><br>2024
(in thousands)
United States	$	284			(51.6	)%	$	587		$	1,040			27.9	%	$	813
% of total		4.8	%					11.6	%	8.6		%					7.3	%
International	$	5,664			26.6	%	$	4,475		$	11,084			7.1	%	$	10,348
% of total		95.2	%					88.4	%	91.4		%					92.7	%
	Three Months Ended										Six Months Ended
Net sales by type	June 30,<br><br>2025			Change			June 30,<br><br>2024			June30,<br><br>2025			Change			June 30,<br><br>2024
(in thousands)
Equipment sales	$	2,997			27.4	%	$	2,353		$	6,315			10.4	%	$	5,719
Adapter sales		2,331			28.4	%		1,816			4,293			17.2	%		3,662
Software and maintenance		620			(30.6	)%		893			1,516			(14.8	)%		1,780
Total	$	5,948			17.5	%	$	5,062		$	12,124			8.6	%	$	11,161

Net sales in the second quarter of 2025 were $5.9 million, compared with $5.1 million in the prior year period and $6.2 million in the first quarter of 2025. First quarter 2025 revenues were elevated due to the completion of a large order received in the first quarter 2024. Overall demand for capital equipment continued to be negatively impacted by ongoing global trade and tariff negotiations through most of the second quarter 2025. Net sales of Consumable adapters and services revenue represented 50% of total revenue and provide a stable base of re-occurring revenue.

Total equipment sales were 50% of revenues, adapters were 39% and software and services revenues were 11% of revenues compared with 46% and 36% and 18% respectively in the second quarter of 2024. For 2025 year to date, equipment sales were 52% of revenues, adapters were 35% and software and services revenues were 13% of revenues compared with 2024 year to date sales of 51% and 33% and 16% respectively. On a geographic basis, international sales represented approximately 95% of total net sales for the second quarter of 2025 compared with 88% in the prior year period.

Bookings increased in the latter half of the second quarter as customers had been delaying purchase decisions amid ongoing global trade and tariff concerns. Second quarter 2025 bookings were $5.8 million, up from $4.6 million in the first quarter 2025 and $5.6 million in the second quarter 2024. Second quarter 2025 bookings and backlog include an order for 10 PSV automated pro-gaming systems with LumenX programming platform from one of the largest EV manufacturing suppliers in China valued at over $1.4 million which is expected to be delivered during the second half of the year. Automotive electronics, a primary business segment in the second quarter of 2025, was 66% of second quarter 2025 bookings.

Backlog at June 30, 2025, was $2.8 million, down from $3.0 million at the end of the prior quarter.

Deferred revenue was $1.3 million on June 30, 2025, down from $1.5 million on March 31, 2025.

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GROSS MARGIN

	Three Months Ended									Six Months Ended
	June 30,<br><br>2025			Change			June 30,<br><br>2024			June 30,<br><br>2025			Change			June 30,<br><br>2024
(in thousands)
Gross margin	$	2,960			7.4	%	$	2,757		$	6,148			2.9	%	$	5,977
Percentage of net sales		49.8	%					54.5	%		50.7	%					53.6	%

Gross margin as a percentage of sales in the second quarter of 2025 was 49.8% as compared to 54.5% in the same period last year and 51.6% in the first quarter of 2025. A lower margin product mix and configuration of automated systems driven by a large customer order led to reduced margins. Direct material costs remained steady and consistent with prior periods. 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.

RESEARCH AND DEVELOPMENT

	Three Months Ended									Six Months Ended
	June 30,<br><br>2025			Change			June 30,<br><br>2024			June 30,<br><br>2025			Change			June 30,<br><br>2024
(in thousands)
Research and development	$	1,662			17.6	%	$	1,413		$	3,177			6.1	%	$	2,995
Percentage of net sales		27.9	%					27.9	%		26.2	%					26.8	%

Research and development (“R&D”) expenses increased in the second quarter of 2025 as compared to the same period in 2024. The increase is due to transition to new R&D programs and the associated changes in project and outside services spending.

SELLING, GENERAL AND ADMINISTRATIVE

	Three Months Ended									Six Months Ended
	June 30,<br><br>2025			Change			June 30,<br><br>2024			June 30,<br><br>2025			Change			June 30,<br><br>2024
(in thousands)
Selling, general &
administrative	$	2,142			12.1	%	$	1,910		$	4,192			(4.9	)%	$	4,408
Percentage of net sales		36.0	%					37.7	%		34.6	%					39.5	%

Selling, General and Administrative (“SG&A”) expenses were higher in the second quarter of 2025 as compared to the same period in 2024. Second quarter spending increase includes higher compensation expenses and leadership and other human resource transition requirements that continued through June 30, 2025. Continued efficiency improvements and cost reduction efforts remain a focus.

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INTEREST

	Three Months Ended							Six Months Ended
	June 30,<br><br>2025		Change			June 30,<br><br>2024		June 30,<br><br>2025		Change			June 30,<br><br>2024
(in thousands)
Interest income	$	35		(52.1	)%	$	73	$	73		(52.3	)%	$	153

Interest income was lower in the second quarter of 2025 compared to the same period in 2024 due to lower interest rates and invested balances.

INCOME TAXES

	Three Months Ended								Six Months Ended
	June 30,<br><br>2025		Change			June 30,<br><br>2024			June 30,<br><br>2025			Change			June 30,<br><br>2024
(in thousands)
Income tax benefit (expense)	$	20		(105.7	)%	$	(353	)	$	(2	)		(99.5	)%	$	(393	)

Income tax benefit (expense) for the second quarter of 2025 and 2024 primarily related to foreign and state taxes.

The effective tax rate differed from the statutory tax rate primarily due to the effect of valuation allowances, as well as foreign taxes. We have a valuation allowance of $9.1 million as of June 30, 2025. As of June 30, 2025 and 2024, our deferred tax assets and valuation allowance have been reduced by approximately $447,000 and $437,000, respectively. Given the uncertainty created by our loss history, as well as the volatile and uncertain economic outlook for our industry and capital spending, we have limited the recognition of net deferred tax assets including our net operating losses and credit carryforwards and continue to maintain a valuation allowance for the full amount of the net deferred tax asset balance.

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Financial Condition

LIQUIDITY AND CAPITAL RESOURCES

	June 30,<br><br>2025		Change			December 31,<br><br>2024
(in thousands)
Working capital	$	15,551	$	(534	)	$	16,085

At June 30, 2025, our principal sources of liquidity consisted of existing cash and cash equivalents. Cash at $10 million decreased $534,000 from December 31, 2024, primarily due to one-time expenses and investments in the second quarter, partially offset by an otherwise improved cost structure and lower inventory levels. Correspondingly, working capital of approximately $15.6 million on June 30, 2025, was down slightly as compared to December 31, 2024. The Company continues to have no debt.

Although we have no significant capital expenditure plans currently, we expect to continue to carefully make and manage expenditures to support the business. Engineering and production tooling, test equipment and sales demonstration products will continue to be purchased as we develop and release new products. Capital expenditures are expected to be funded by existing and internally generated funds.

As a result of our cyclical and seasonal industry, significant product development, customer support and selling and marketing efforts, we have required working capital to fund our operations. We have tried to balance our spending with our anticipated revenue levels and the goal of profitable operations. We have implemented or have on-going initiatives to reduce material and logistic costs, enhance product quality, increase operational and R&D efficiencies and minimize tax expenses.

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. 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. If the Company determines to pursue significant acquisitions or business development initiatives, the Company may need to raise additional capital. If additional capital is required, the Company will review the amounts and options to raise capital at that time, but future financing would most likely be through debt and equity offerings. 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 further reduce expenditure and/or seek possible additional financing.

OFF-BALANCE SHEET ARRANGEMENTS

Except as noted in the accompanying consolidated financial statements in Note 5, “Leases” and Note 6, “Other Commitments”, we have no off-balance sheet arrangements.

NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) FINANCIAL MEASURES

Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) was ($687,000) in the second quarter of 2025 compared to ($379,000) in the second quarter of 2024. Adjusted EBITDA, excluding equity compensation (a non-cash item), was ($437,000) in the second quarter of 2025, compared to $3,000 in the second quarter of 2024.

Non-GAAP financial measures, such as EBITDA and adjusted EBITDA, 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 the Company’s results and facilitate the comparison of results. A reconciliation of net income to EBITDA and adjusted EBITDA follows:

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NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) FINANCIAL MEASURE RECONCILIATION

	Three Months Ended<br><br>June 30,						Six Months Ended<br><br>June 30,
	2025			2024			2025			2024
(in thousands)
Net Income (loss)	$	(742	)	$	(797	)	$	(1,124	)	$	(1,604	)
Interest (income)		(35	)		(73	)		(73	)		(153	)
Taxes		(20	)		353			1			393
Depreciation & amortization		110			138			237			340
EBITDA earnings (loss)	$	(687	)	$	(379	)	$	(959	)	$	(1,024	)
Equity compensation		250			382			424			663
Adjusted EBITDA, excluding equity compensation	$	(437	)	$	3		$	(535	)	$	(361	)

Item 3

. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.

Controls and Procedures

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of the end of the period covered by this report (the “Evaluation Date”). Disclosure Controls are controls and procedures designed to reasonably assure that information required to be disclosed in our reports filed under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure Controls are also designed to reasonably assure that such information is accumulated and communicated to our management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were effective.

As previously reported, we identified material weakness in our internal controls over financial reporting as of December 31, 2024. The material weakness related to user access and segregation of duties for the information technology system that support the Company’s financial reporting process. Notwithstanding this material weakness, we have performed additional procedures to enable management to conclude that our consolidated financial statements included in this Form 10-Q fairly present in all material respects our financial condition and results of operations for the period ended June 30, 2025.

In response to the material weakness, we have made and will continue to expand the remediations needed to address this weakness. Management and the Audit Committee will monitor these remedial measures and the effectiveness of our overall control environment. A material weakness will not be considered remediated, however, until the applicable controls operate for a sufficient period of time and Management concludes, through testing, that these controls are operating effectively.

CHANGES IN INTERNAL CONTROLS

There were no changes made in our internal controls during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting which is still under the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control – Integrated Framework (2013).

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PART II - OTHER INFORMATION

Item 1.

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 June 30, 2025, we were not a party to any material pending legal proceedings.

Item 1A.

Risk Factors

In addition to the other information set forth in this report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. There are no material changes to the Risk Factors described in our Annual Report.

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

None

Item 3.

Defaults Upon Senior Securities

None

Item 4.

Mine Safety Disclosures

Not Applicable

Item 5.

Other Information

(a)	None
(b)	None
(c)	During the quarterly period ended June 30, 2025, no director or officer adopted or terminated any Rule 10b5-1 trading arrangement, and/or any non-Rule 10b5-1 trading arrangement (as such terms are defined pursuant to Item 408(a) of Regulation S-K).
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## Item 6.Exhibits

(a)	Exhibits
10	Material Contracts:
---	---	---
	10.38	Independent Contractor Agreement and Proposal and Statement of Work effective on April 28, 2025 between Data I/O Corporation and Theisen Advisory Group, LLC dba TAG CXO (Portions of this exhibit have been omitted because it is both (i) not material and (ii) is the type that the company treats as private or confidential.)
31	Certification pursuant to Section 302 of the Sarbanes Oxley Act of 2002:
	31.1	Chief Executive Officer Certification
	31.2	Chief Financial Officer Certification
32	Certification pursuant to Section 906 of the Sarbanes Oxley Act of 2002:
	32.1	Chief Executive Officer Certification
	32.2	Chief Financial Officer Certification
101 ****	Interactive Data Files Pursuant to Rule 405 of Regulation S-T
26
---
Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

DATED: August 12, 2025
DATA I/O CORPORATION
(REGISTRANT)
By:	/s/William Wentworth
	William Wentworth
	President and Chief Executive Officer
	(Principal Executive Officer and Duly Authorized Officer)
By:	/s/Todd J. Henne
	Todd J. Henne
	Interim Chief Financial Officer,
	Secretary and Treasurer
	(Principal Financial Officer and Duly Authorized Officer)
27
---

daio_ex1038.htm EXHIBIT 10.38

INDEPENDENT CONTRACTOR AGREEMENT

and

STATEMENT OF WORK

between

Data I/O Corporation

and Theisen Advisory Group LLC d/b/a TAG CXO

[***] Portions of the exhibit have been omitted. Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) it is the type of information that the Company treats as private or confidential.

1

INDEPENDENT CONTRACTOR AGREEMENT

This Independent Contractor Agreement (the “Agreement”) is entered into and effective as of April 28, 2025 between Data I/O Corporation (“Data I/O”) and Theisen Advisory Group LLC d/b/a TAG CXO (“Contractor”). Data I/O requires certain specific, temporary professional services which Contractor is ready, willing and able to perform. The parties, intending to become legally bound, hereby agree as follows:

Services and Deliverables.

Contractor agrees to perform the services described in Exhibit A to this Agreement (the “Services”) in a professional and timely manner and agrees to prepare and deliver to Data I/O the tangible items included in Exhibit A (the “Deliverables”). The scope of the Services and/or Deliverables may be altered from time to time based upon the needs of Data I/O and the performance of Contractor.

Acceptance.

Contractor’s primary contact at Data I/O shall be the person(s) as noted in Exhibit A who shall be responsible for the acceptance of the Services and Deliverables.

Term and Termination.

The Term of this Agreement shall be as noted in Exhibit A, unless terminated earlier by either party upon at least thirty (30) days’ prior written notice. Data I/O may, by notice, require Contractor to stop work hereunder at any time, and Contractor’s sole remedy shall be the compensation for services rendered prior to the termination.

Compensation.

Data I/O agrees to compensate Contractor for the Services and Deliverables in the manner described in Exhibit A. Data I/O shall have up to fifteen (15) business days to accept or reject each of the Deliverables following its delivery, and no compensation shall be due for any Deliverables until accepted by Data I/O. Any modification to bring rejected Deliverables into acceptable form shall be at Contractor’s expense. The compensation stated on Exhibit A shall be Contractor’s entire compensation for the Services and Deliverables and any other tangible or intangible property provided under this Agreement. Contractor shall pay all federal, state, local and other applicable taxes relating to its performance or deliveries under this Agreement.

Proprietary Rights.

All ownership, copyright, patent, trade secrecy, and other rights in all Deliverables, works, inventions, improvements, discoveries, processes or other properties made or conceived by or for Contractor during the term of this Agreement which relate to the Services or Deliverables, or which are directly or indirectly within the scope of the Services or Deliverables as contemplated under this Agreement (whether or not specifically listed in this Agreement), or which are developed in whole or in part through any use of any Data I/O's trade secrets or confidential information, shall be the sole and exclusive property of Data I/O, whether developed independently by Contractor or jointly with others, and whether or not Data I/O uses, registers, or markets the same. Contractor assigns and conveys to Data I/O its entire right, title and interest to all such properties, including but not limited to, copyrights, trademarks and patent rights or applications. To the extent any such works are eligible to be “works made for hire” under the Copyright Act, they are agreed to be “works made for hire”, and to the extent any such works are not so eligible, they are assigned to Data I/O whether or not in existence as of the date of this Agreement. Data I/O retains full creative, artistic and editorial control and all other rights in such works.

INDEPENDENT CONTRACTOR AGREEMENT (with Insurance)

REDACTED ICA TAG-DATA IO April 2025

2

Contractor’s Authority and Warranties.

Contractor represents and warrants that it is also offering and /or providing its services to entities other than Data I/O and that Contractor is responsible for and will pay for any required worker’s compensation or similar insurance for Contractor or its personnel. Contractor represents and warrants that Contractor will perform the Services in a careful, professional and workmanlike manner and that Contractor is fully authorized to enter into and perform this Agreement, without restriction or conflict with any of Contractor’s other commitments, agreements, arrangements, understandings or duties, whether to prior employers or clients or otherwise. Contractor represents and warrants that it will not violate in any way the rights any person or entity has regarding trade secrets or proprietary or confidential information, and that all Services and Deliverables and other tangible and intangible properties developed by or for Contractor under this Agreement are original to Contractor and do not and will not infringe upon any rights of other parties. Contractor shall defend, indemnify and hold Data I/O, its directors, officers and employees harmless from all losses, claims, damages, and expenses (including without limitation, reasonable attorneys’ fees) arising from any breach of Contractor’s warranties or from injury to persons or damage to property caused by the negligent acts or omissions of Contractor.

Binding Effect; Relationship; Insurance.

The relationship of the parties is one of independent contractors, and Contractor will not be eligible for or covered by any of Data I/O's employee benefits, including without limitation, insurance programs, worker’s compensation and unemployment benefits, and 401(k), stock incentive and stock purchase plans. Contractor shall not have authority to bind Data I/O. Contractor agrees to maintain in force during the term of this Agreement a professional liability insurance policy and a policy, or policies, of comprehensive general liability insurance in reasonable amounts and with reasonable carriers. All such policies shall include Data I/O as an additional insured, if permitted by the policies, and shall provide for at least thirty (30) days’ written notice to Data I/O prior to any cancellation or termination. Upon request, Contractor shall deliver to Data I/O copies or other evidence of such policies.

Employees, Agents and Subcontractors.

If Contractor intends to use any employees, agents, or subcontractors in its performance under this Agreement, Contractor shall first request and receive Data I/O's written consent. If requested by Data I/O, Contractor shall require each such person to execute a written agreement binding such person to the terms of this Agreement for the benefit of Data I/O and shall deliver an original of each such agreement to Data I/O.

Confidentiality.

Contractor acknowledges that Data I/O’s business depends on the preservation of Data I/O’s trade secrets and other confidential information (the “Secrets”). Secrets shall mean and include all trade secrets and confidential information of any nature of Data I/O or any of its affiliates, whether presently existing or later developed, and whether communicated orally, in writing, or learned by observation or otherwise, including without limitation, customer and supplier lists; non-public financial information; patent applications, know-how and other intellectual property, programming and/or provisioning code and documentation; buying and marketing plans and methods; pricing policies, sales proposals and contracts, customer information and other non-public business, technical, marketing, or operating information. Secrets shall also include any information obtained by Data I/O from third parties which Data I/O is obligated to protect as trade secrets or confidential information. If there is a good faith dispute regarding whether an item or matter is part of the Secrets, the burden shall be on Contractor to demonstrate that it is not part of the Secrets. Contractor agrees not to use or disclose, in whole or in part, nor to allow others to use or disclose, the Secrets, other than for the sole benefit of Data I/O and to employees or contractors of Contractor who are bound by written contract to protect the Secrets. In accordance with Data I/O’s practices, Contractor shall mark all items containing any Secrets with prominent confidentiality notices acceptable to Data I/O. All tangible items embodying or disclosing any portion of the Secrets shall be and remain the property of Data I/O and shall be returned to Data I/O upon the earlier of Data I/O’s request or the termination of the Services. At such time, Contractor shall also assemble all tangible items of works-in-progress, notes, plans, and other materials related in any way to Contractor’s performance of the Services, and will promptly deliver such items to Data I/O.

INDEPENDENT CONTRACTOR AGREEMENT (with Insurance)

REDACTED ICA TAG-DATA IO April 2025

3

Nothing in this Agreement shall be interpreted to prohibit Contractor from disclosing or discussing conduct that Contractor reasonably believes to be illegal harassment, illegal discrimination, illegal retaliation, wage and hour violations, or sexual assault, that is recognized as illegal under state, federal, or common law, or that is recognized as against a clear mandate of public policy, occurring in the workplace, at work-related events coordinated by or through Data I/O, between employees or contractors, or between Data I/O and an employee or contractor, whether on or off the employment premises. Under the U.S. Defend Trade Secrets Act, Contractor will not be held criminally or civilly liable under any U.S. federal or state trade secret law for the disclosure of a trade secret that is made in confidence to government officials, either directly or indirectly, or to an attorney, in each case solely for the purpose of reporting or investigating a suspected violation of law, or in a complaint or other document filed in a lawsuit or other proceeding, provided such filing is made under seal.

A.	Restriction on Offers of Employment or Hire. During the performance of Services under any Statement of Work and for a period of two (2) years thereafter, each party agrees not to solicit for employment or hire, or employ or hire, any employee or personnel of the other party or of any of its affiliates directly or indirectly involved in the Services provided hereunder, except to the extent that such other party specifically waives such restriction in writing with respect to a specific employee or other personnel. The foregoing shall not prohibit the use of general solicitation by placement of general advertisements for employees in newspapers or other media of general circulation not specifically directed at the employees or personnel of either party or of any of its affiliates.
B.	Procedure for Employment or Hire. While the parties acknowledge that Contractor is in the business of providing Services and is not an executive placement firm, a situation could arise during the performance of Services under any Statement of Work and for a period of two (2) years thereafter, in which Data I/O would like to employ, or hire, directly or indirectly an employee or other personnel of Contractor. If that situation were to arise, such employment or hiring shall only be with the prior written consent of Contractor and shall require payment by Data I/O of a placement fee in the amount of fifty percent (50%) of all compensation payable or paid to or for such employee or other personnel in the first year of their employment, or hire, with Data I/O. Such fifty percent (50%) amount shall be paid by Data I/O as follows: twenty-five percent (25%) of such amount at the time of such employment or hire and the balance ratably on a monthly basis thereafter such that the entire balance is paid by the first anniversary of the date of such employment or hire. For the avoidance of doubt, the term “hire” as used in this Agreement includes consulting or any other engagement, directly or indirectly, between Data I/O and an employee or other personnel of Contractor.

Restriction on Offers of Employment or Hire. During the performance of Services under any Statement of Work and for a period of two (2) years thereafter, each party agrees not to solicit for employment or hire, or employ or hire, any employee or personnel of the other party or of any of its affiliates directly or indirectly involved in the Services provided hereunder, except to the extent that such other party specifically waives such restriction in writing with respect to a specific employee or other personnel. The foregoing shall not prohibit the use of general solicitation by placement of general advertisements for employees in newspapers or other media of general circulation not specifically directed at the employees or personnel of either party or of any of its affiliates.

Procedure for Employment or Hire. While the parties acknowledge that Contractor is in the business of providing Services and is not an executive placement firm, a situation could arise during the performance of Services under any Statement of Work and for a period of two (2) years thereafter, in which Data I/O would like to employ, or hire, directly or indirectly an employee or other personnel of Contractor. If that situation were to arise, such employment or hiring shall only be with the prior written consent of Contractor and shall require payment by Data I/O of a placement fee in the amount of fifty percent (50%) of all compensation payable or paid to or for such employee or other personnel in the first year of their employment, or hire, with Data I/O. Such fifty percent (50%) amount shall be paid by Data I/O as follows: twenty-five percent (25%) of such amount at the time of such employment or hire and the balance ratably on a monthly basis thereafter such that the entire balance is paid by the first anniversary of the date of such employment or hire. For the avoidance of doubt, the term “hire” as used in this Agreement includes consulting or any other engagement, directly or indirectly, between Data I/O and an employee or other personnel of Contractor.

INDEPENDENT CONTRACTOR AGREEMENT (with Insurance)

REDACTED ICA TAG-DATA IO April 2025

4

Entire Agreement; Governing Law; Waiver.

This Agreement contains the entire agreement between the parties with respect to the subject matter of this Agreement and supersedes all prior and contemporaneous oral or written agreements. Use of pronouns of any gender includes all other genders. Contractor’s rights and duties will not be assignable to others, but Contractor’s obligations will bind Contractor’s heirs, successors, and assigns, and will benefit Data I/O and its successors and assigns. This Agreement shall be governed by the laws of the State of Washington and may be modified only in a writing signed by both parties. The most prevailing party in any action to enforce this Agreement shall be reimbursed or paid by the other party for its reasonable attorneys’ fees and all other costs of enforcement. If any provision of this Agreement is held to be invalid or unenforceable to any extent in any context, it shall nevertheless be enforced to the fullest extent allowed by law in that and other contexts, and the validity and force of the remainder of this Agreement shall not be affected. Any failure of Data I/O to require strict performance by Contractor or any waiver by Data I/O of any part of this Agreement shall not be considered consent or waiver of any other breach of the same or of any other provisions, and shall not be effective unless in a writing signed by an officer of Data I/O. The following sections shall survive the termination or expiration of this Agreement: Section, 5, Proprietary Rights; Section 6, Contractor’s Authority and Warranties; Section 9, Confidentiality; and Section 10, Entire Agreement; Governing Law; Waiver. Any provisions required to be included in this Agreement by applicable law or regulation are incorporated as if such provisions were included in their entirety in this Agreement.

In the event of a conflict between this Agreement and the Statement of Work, this Agreement shall control. In the event of a conflict between the terms of the Statement of Work or the Independent Contractor’s Agreement regarding indemnification and the Indemnification Agreement defined in the Statement of Work, the Indemnification Agreement defined in the Statement of Work shall control.

The parties have indicated their acceptance of the terms and conditions of this Agreement by signing below.

TAG CXO		Data I/O Corporation
By	/s/ Paul S. Thiesen	By	/s/ William Wentworth

Address:	6645 185^th^ Ave NE, Suite 100

| 7000 N 16^th^ St, Suite 120-167 | Redmond, Washington 98052 |

| Phoenix, AZ 85020 | Federal Tax I.D.#: 91-0864123 |

| S.S. #: | |

| or | |

| Federal Tax I.D. #: 84-4453966 | |

ADMINISTRATIVE USE ONLY

Approved: Date:

INDEPENDENT CONTRACTOR AGREEMENT (with Insurance)

REDACTED ICA TAG-DATA IO April 2025

5

EXHIBIT A

SERVICES

Contractor shall perform the Services as described below or in the attached Statement of Work.

DELIVERABLES

All Deliverables related to the Services and as described below or in the attached Statement of Work.

COMPENSATION

As described below or in the attached Statement of Work. Invoices shall be payable within 15 days of receipt, but may be submitted 15 days prior to the 1^st^ of the month.

Compensation:____________

PRIMARY CONTACT(S)

Primary Contact responsible for acceptance of Services and Deliverables:

William Wentworth, President & CEO, 603.233.7423, wentworthb@dataio.com

Primary Contact at TAG CXO:

Paul Theisen, Principal/Founder, 602.332.5175, paul@tagcxo.com

TERM

As described below or in the attached Statement of Work.

Term: ___________________________

TIME SCHEDULES

As described below or in the attached Statement of Work.

Time Schedules:______________. Other Schedules as required by Data I/O.

ADDITIONAL TERMS

As described below or in the attached Statement of Work.

INDEPENDENT CONTRACTOR AGREEMENT (with Insurance)

REDACTED ICA TAG-DATA IO April 2025

6

SOW1 - EXHIBIT A to the Independent Contractor Agreement

Table of Contents

1.	Company Overview	3
2.	Background & Situation Summary – What we heard	4
3.	Benefits	5
4.	Approach	6
5.	Effort & Timeline	7
6.	Client Investment & Terms	8
7.	Agreement & Execution	10

© 2025 All Rights Reserved. Confidential.<br> <br>Theisen Advisory Group, LLC. dba TAG CXO	2	Data I/O Corporation<br> <br>Fractional CFO Services (SOW1) v1.2

1. Company Overview

TAG CXO provides seasoned executives with decades of leadership experience within some of the world’s most successful enterprises. We have a unique team of technology industry professionals with decades of experience. Our team is battle-tested, ready to align human capital, business processes, and technology plans to your internal initiatives and programs, aligned with your company vision.

Unlike career consultants, we endeavor to become an extension of your management team, accountable for driving business results on your behalf.

We are passionate about optimizing systems, processes, and people to improve business outcomes. Our clients are typically small to medium-sized companies who have both the opportunities and challenges of their larger competitors. We provide experienced Business, Operations and IT Leadership that helps them attain their vision and outsmart or outmaneuver their competitive giants.

Our approach is simple – to bring the most experienced and proven leaders to our clients on a fractional, interim, or project basis to help them:

·	Gain clarity about their options and opportunities
·	Invest wisely in ways that maximize their competitive advantage
·	Manage their operations with higher confidence, lower risk and better returns

© 2025 All Rights Reserved. Confidential.<br> <br>Theisen Advisory Group, LLC. dba TAG CXO	3	Data I/O Corporation<br> <br>Fractional CFO Services (SOW1) v1.2

2. Background & Situation Summary – What we heard:

Background:

Data I/O Corporation (NASDAQ: DAIO) is the world’s leading global provider of advanced data and security programming solutions for flash, flash-memory based intelligent devices and microcontrollers. Since 1972 Data I/O has developed innovative solutions to enable the design and manufacture of electronic products for automotive, Internet-of-Things, medical, wireless, consumer electronics, industrial controls and other markets. Today, customers use Data I/O’s security provisioning and programming solution to reliably, securely and cost-effectively bring innovative new products to life. Programming systems and value-added software solutions enable customers to:

·	Streamline their security provisioning and programming process with their production process
·	Meet their specific quality and traceability requirements
·	Ensure their devices are programmed at maximum speed with the highest quality

A relentless focus on quality, programming performance and support helps customers achieve excellence in production and product quality. With headquarters in Redmond, Washington and offices located in Shanghai, China and Munich Germany, Data I/O is the only truly global programming solutions provider offering local service and engineering support 24/7.

Situation:

Executive leadership at Data I/O have identified a need to utilize fractional CFO services to help transition from the incumbent CFO, who recently announced his planned retirement and transition out of day-to-day operations. Management needs to install a qualified and tenured fractional CFO, immediately, to work with the incumbent for a smooth transition period and off-boarding process without interruption to monthly and quarterly reporting requirements, while ensuring continuity of business operations across existing accounting staff, company management and key vendor partnerships. In addition to assuming the key operational responsibilities of the outgoing CFO, the fractional CFO will help Data I/O management frame-out the role and job duties necessary to replace the incumbent CFO with another full-time executive and directly assist with recruiting and selection efforts, as requested by the CEO.

© 2025 All Rights Reserved. Confidential.<br> <br>Theisen Advisory Group, LLC. dba TAG CXO	4	Data I/O Corporation<br> <br>Fractional CFO Services (SOW1) v1.2

3. Benefits

Fractional CFO Functions

Responsibilities and Duties:

·	SEC Compliance and filings.

| · | Strategic partner to the CEO to drive growth organically and inorganically. |

| · | Plan and execute the financial strategy of the company. |

| · | Manage financial controls and accounting procedures. |

| · | Ensure full transparency over the financial performance of the company. |

| · | Provide advice and guidance on how to increase revenue and reduce costs. |

| · | Effectively and clearly communicate potential risks in a timely manner. |

| · | Propose action plans to ensure that annual financial objectives are attained. |

| · | Support the CEO with the preparation of monthly and annual budgeting. |

| · | Manage the team to oversee all accounting, financial, tax and audit responsibilities. |

| · | Report results to the CEO and Board of Directors and provide clear guidance. |

| · | Support the CEO with M&A activity, external presentations and fundraising. |

| · | Oversee the annual budget and financial audit process. |

| · | Oversee the financial analysis & modeling for the organization. |

| · | Partner with leadership regarding contract development & management. |

| · | Corporate representative and negotiator with key business partners. |

In addition, the role of the CFO must take into consideration other administrative and organizational duties to ensure smooth and profitable operations including:

·	Financial management, reporting, and budgeting.

| · | General management of department and corporate staff. |

| · | Financial management of assets, resources, and investments. |

| · | Risk management, insurance, and bonding. |

| · | Taxes, compliance, and licensing. |

| · | Payroll, HR management, employee benefits. |

| · | Legal affairs. |

| · | Information systems and technology. |

| · | Interim CFO, Secretary & Treasurer, as approved by the Board of Directors and subject to Todd Henne being covered by Data I/O’s D&O Insurance while providing Services to Data I/O and entering into Data I/O’s standard form of Indemnification Agreement (the “Indemnification Agreement”). In the event of a conflict between the terms of the Statement of Work or the Independent Contractor Agreement regarding indemnification and the Indemnification Agreement, the Indemnification Agreement shall control. |

© 2025 All Rights Reserved. Confidential.<br> <br>Theisen Advisory Group, LLC. dba TAG CXO	5	Data I/O Corporation<br> <br>Fractional CFO Services (SOW1) v1.2

4. Approach

TAG CXO is proposing a fractional CFO to augment existing staff. The fractional CFO executive will focus on the following tasks:

■	Work with existing CFO to become familiar with existing processes and procedures, departmental structure, and roles and responsibilities.
■	Identify and assist in filling staff vacancies including the impending CFO vacancy.
■	Provide leadership and oversight of Client’s accounting and finance department; ensuring the books continue to be closed timely and accurately.
■	Review monthly close process and financial statements; perform analysis of historical results and present to Client in the form of a monthly financial reporting package to enhance the business decision-making process.
■	Monthly review of departmental and overall results with management team and board; helping educate the Client’s leaders on the financial implications of each component of the business and how it impacts the business overall.
■	Identify opportunities to improve working capital and profitability.
■	Enhance the process to track potential bank covenants, identifying sensitivity to potential violations early so corrective action may be taken.
■	Assess departmental staff for capability and competence.
■	Review and identify improvements to existing financial processes.
■	Review and identify improvements to cash management practices.
■	Provide other consultative services, which may be mutually agreed upon under this scope by Client, Consultant and TAG CXO.

© 2025 All Rights Reserved. Confidential.<br> <br>Theisen Advisory Group, LLC. dba TAG CXO	6	Data I/O Corporation<br> <br>Fractional CFO Services (SOW1) v1.2

5. Effort & Timeline

TAG proposes the following executive for this engagement:

✓

Todd Henne, technology industry financial executive, is proposed for this engagement. Highly accomplished, results-driven senior accounting and financial management executive with more than 40 years of progressive experience (25 years as a CFO) in accounting, finance, and operations management within start-ups and global multimillion-dollar organizations. Demonstrated ability to streamline and optimize business operations that drive growth, efficiency and bottom-line results. Proven ability to develop effective financial controls and methodologies for meeting Sarbanes-Oxley and other regulatory requirements. Solid leadership, communication, and interpersonal skills.

Fractional Executive Services

✓	Perform functional executive duties on a regular basis, as required.

| ✓ | Attend Executive staff meetings. |

| ✓ | Oversee initiatives and roadmap projects. |

| ✓ | Provide written and verbal executive briefings as required/requested. |

| ✓ | Initial term at 60% monthly availability (three (3) days per week). |

| ✓ | Hybrid Work Model: three (3) weeks per month on site at Company facilities in Redmond, Washington, one (1) week per month remote. |

| ✓ | Access: Data I/O issued laptop (to be returned upon completion of contract), onsite private office, travel, Zoom, Phone, Email, Other, as needed. |

© 2025 All Rights Reserved. Confidential.<br> <br>Theisen Advisory Group, LLC. dba TAG CXO	7	Data I/O Corporation<br> <br>Fractional CFO Services (SOW1) v1.2

6. Client Investment & Terms

TAG Proposes the following engagement terms:

✓	Monthly retainer-based fee of $25,000 (60% availability, 12 days/Mo.)

| ✓ | Additional Fractional Executive days, as needed and requested in writing by Client, billed at $2,083/Day (“Additional Day(s)”) |

Payment Schedule as follows:

				Optional 1 Mo. Extension Term(s)

| Base | $25,000 | $25,000 | $25,000 | $25,000 | 25,000 | | Contract Deliverable Completion Incentive for Initial SOW Term is 9,000/mo.* | | | | | | | Contract Deliverable Completion Incentive for Optional Extension Term(s) is 9,000/mo.* | | | | | 9,000 | | Annualized IT Savings** adder as approved in writing by Client (@10% Paid at end of contract) | | | | | |

| * Contract Deliverable Completion Incentives increased by 750/day for each Additional Day(s) | | | | | |

All values are in US Dollars.

✓	The Contract Deliverable Completion Incentive* of $9,000/month for the Initial SOW Term is payable based on delivery by the end of each calendar month of the Initial SOW Term, and acceptance by Client on or before the 15^th^ of the following month, of the following Deliverables, workstreams to complete, and identified actions and executable plans to:

·	[]*
·	[]*
·	[]*
·	[]*
·	[]*

The order of monthly priority for the above Contract Deliverables will be as mutually agreed.

© 2025 All Rights Reserved. Confidential.<br> <br>Theisen Advisory Group, LLC. dba TAG CXO	8	Data I/O Corporation<br> <br>Fractional CFO Services (SOW1) v1.2

If applicable, the Contract Deliverable Completion Incentive* for the Optional Extension Term(s) is $9,000 per month based on delivery and acceptance of deliverables, to be mutually agreed upon.

✓	IT spend reductions and efficiencies, to be measured on annual based savings (Annualized IT Savings**) and approved in writing by Client of the following deliverables:

·	Review current IT spend and make recommended changes
·	Implement changes to target savings

✓	Contract Deliverable Completion Incentive* will be pro-rated based on number of days worked and percentage of completion of Deliverables, as determined by Client.

| ✓ | Start date as mutually agreed between Client and TAG executive. |

| ✓ | Retainer billed monthly on the 1st of each month. |

| ✓ | Invoices due within fifteen (15) days of receipt. TAG CXO may submit invoices up to 15 days prior to the 1st of each month. |

| ✓ | This SOW and Fractional Executive Services may be canceled by Client on 30-days written notice (email from Client is acceptable), and may be expanded, reduced or extended, upon mutual agreement of Client and engagement executive and 30-days written notice (email is acceptable). |

| ✓ | Travel reimbursed at actual cost with copy of receipts. In the event of travel, every effort will be made to minimize any/all travel related expenses, including airfare, accommodations, transportation and meals. Travel-related expenses only with prior Client approval. |

Work Area: TAG CXO resources will utilize a combination of onsite and remote work configuration for duration of engagement. Client to provide suitable onsite workspaces and meeting environments for in-person sessions, as may be needed.

Start Date: As mutually agreed between TAG CXO and Client management.

Timely Access: Client management will ensure timely access to all key stakeholders, materials, and resources reasonably necessary to complete the scope of the engagement.

Good Faith: All estimates are in good faith based on our practical experience and current understanding of scope and requirements.

© 2025 All Rights Reserved. Confidential.<br> <br>Theisen Advisory Group, LLC. dba TAG CXO	9	Data I/O Corporation<br> <br>Fractional CFO Services (SOW1) v1.2

7. Agreement & Execution

This Statement of Work is subject to the terms and conditions of the Independent Contractor Agreement between the parties .

In the event of a conflict between the terms of the Independent Contractor Agreement and the Statement of Work, the Independent Contractor Agreement shall control. In the event of a conflict between the terms of the Statement of Work or the Independent Contractor Agreement regarding indemnification and the Indemnification Agreement, the Indemnification Agreement shall control.

IN WITNESS WHEREOF, the parties hereto each acting with proper authority have executed this Statement of Work.

DATAI/OCORPORATION	Theisen Advisory Group, LLC<br> <br>dba TAG CXO
William Wentworth	Paul R. Theisen

| Signature: | Signature: | | 05/06/2025 | 05/06/25 |

| Date: | Date: |

© 2025 All Rights Reserved. Confidential.<br> <br>Theisen Advisory Group, LLC. dba TAG CXO	10	Data I/O Corporation<br> <br>Fractional CFO Services (SOW1) v1.2

daio_ex311.htm EXHIBIT 31.1

CERTIFICATION

I, William Wentworth, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Data I/O Corporation;
2)	Based on my knowledge, this report does not contain any untrue statement of material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3)	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
d)	Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

DATED: August 12, 2025
/s/ William Wentworth

| William Wentworth |

| Chief Executive Officer |

| (Principal Executive Officer) |

daio_ex312.htm EXHIBIT 31.2

CERTIFICATION

I, Todd J. Henne, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of Data I/O Corporation;
2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;
3)	Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;
4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)), for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and
d)	Disclosed in this quarterly report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

DATED: August 12, 2025
/s/ Todd J. Henne

| Todd J. Henne |

| Interim Chief Financial Officer |

| (Principal Financial Officer) |

daio_ex321.htm EXHIBIT 32.1

Certification by Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Data I/O Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William Wentworth, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William Wentworth

| William Wentworth |

| Chief Executive Officer |

| (Principal Executive Officer) |

| August 12, 2025 |

daio_ex322.htm EXHIBIT 32.2

Certification by Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Data I/O Corporation (the “Company”) on Form 10-Q for the period ended June 30, 2025 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Todd J. Henne, Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as amended; and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Todd J. Henne

| Todd J. Henne |

| Interim Chief Financial Officer |

| (Principal Financial Officer) |

| August 12, 2025 |