DATA I/O CORP Leases Disclosure

NOTE 6 –LEASES

Operating Lease Commitments

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

Cash paid for amounts included in the measurement of lease liabilities was $735,000 and $795,000 for the years ended December 31, 2025 and 2024, respectively. The Company has no finance leases. The total annual lease expense in 2025 and 2024, including operating lease expenses and short-term lease expenses of $30,000 and $38,000, was approximately $807,000 and $845,000, respectively.  Variable payments were not material and were treated as non-lease components and were recognized in the period for which the costs occur.

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 operations services.   The lease payment decrease in 2025 versus 2024 was due primarily to the realization of a full year of the reduction in lease rates for our Redmond, Washington and Shanghai, China facilities effected in 2024 when, the Redmond lease was renewed and extended by 3.75 years and the Shanghai, China lease was renewed and extended by 3 years. Right-of-use assets obtained in exchange for lease liabilities was approximately $2.5 million the year ended December 31, 2024

The Redmond, Washington headquarters facility lease runs to October 31, 2029, at approximately 20,460 square feet.  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 December 31, 2025 and 2024:

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

Lessor Arrangements

During the year ended December 31, 2025, the Company recognized approximately $0.6 million of revenue from one sales‑type lease related to the lease of programming equipment, which is included in Platform Sales in the consolidated statements of operations. The Company did not recognize sales‑type lease revenue during the year ended December 31, 2024. The Company does not typically enter into sales‑type lease arrangements and does not expect such arrangements to be recurring.

We determined the residual value of this leased equipment based on its estimated end-of-term market value.  We estimate the residual value of leased equipment at the inception of the lease based on a number of factors, including historical wholesale market sales prices, past remarketing experience and any known significant market/product trends.  We also consider the following critical factors in our residual value estimates: lease term, market size and demand, total expected hours of usage, machine configuration, application, location, model changes, quantities, third-party residual guarantees and contractual customer purchase options. Although the lease permits month‑to‑month continuation, the Company has concluded that the lessee is reasonably certain to exercise the purchase option. Accordingly, as of December 31, 2025, substantially all remaining undiscounted lease payments related to the Company’s sales‑type lease are expected to be received in 2026. The timing of such payments is consistent with the Company’s estimate of the exercise of the purchase option and supports the carrying amount of the net investment in the lease recognized as of December 31, 2025.

At December 31, 2025, the Company’s net investment in sales‑type leases was $0.4 million, which is included in Trade accounts receivable, net on the consolidated balance sheets. The net investment represents the present value of future lease payments and the expected purchase option proceeds, discounted at the rate implicit in the lease.