UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

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



         For the quarter ended JUNE 29, 2000 Commission File No. 0-10394

                              DATA I/O CORPORATION

             (Exact name of registrant as specified in its charter

             Washington                                    91-0864123

                (State or other jurisdiction of (I.R.S.  Employer  incorporation
               or organization) Identification No.)

               10525 Willows Road N.E., Redmond, Washington, 98052
               (address of principal executive offices, Zip Code)


                                 (425) 881-6444
              (Registrant's telephone number, including area code)



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 X No

  7,382,440 shares of no par value Common Stock outstanding as of June 29, 2000


                                  Page 1 of 17

                            Exhibit Index on Page 16

<PAGE>

                              DATA I/O CORPORATION

                                    FORM 10-Q

                       For the Quarter Ended June 29, 2000

                                      INDEX

Part I - Financial Information                                            Page

     Item 1.    Financial Statements (unaudited)                           3

     Item 2.    Management's Discussion and Analysis of Financial          9
                Condition and Results of Operations

Part II - Other Information

     Item 1.    Legal Proceedings                                         14

     Item 2.    Changes in Securities                                     14

     Item 3.    Defaults Upon Senior Securities                           14

     Item 4.    Submission of Matters to a Vote of Security Holders       14

     Item 5.    Other Information                                         14

     Item 6.    Exhibits and Reports on Form 8-K                          14


Signatures                                                                15

Exhibit Index                                                             16



                                     Page 2

<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.           Financial Statements

                                                   DATA I/O CORPORATION

                                                CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------
                                                                                    Jun. 29,                Dec. 30,
                                                                                      2000                    1999
-----------------------------------------------------------------------------------------------------------------------
(in thousands, except share data)                                                  (unaudited)              (note 1)
<S>                                                                                <C>                      <C>
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                                         $2,048                 $3,597
     Marketable securities                                                              6,029                  9,614
     Trade accounts receivable, less allowance for
        doubtful accounts of $446 and $464                                              6,995                  5,548
     Inventories                                                                        9,070                  6,237
     Recoverable income taxes                                                             151                    205
     Other current assets                                                                 369                    545
                                                                                   -----------            -------------
        TOTAL CURRENT ASSETS                                                           24,662                 25,746

Property, plant and equipment - net                                                     1,933                  2,180
Other assets                                                                            1,607                  2,124
                                                                                   -----------            -------------
        TOTAL ASSETS                                                                  $28,202                $30,050
                                                                                   ===========            =============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable                                                                  $2,085                 $1,592
     Accrued compensation                                                               2,403                  2,080
     Deferred revenue                                                                   2,681                  2,626
     Other accrued liabilities                                                          2,247                  2,204
     Accrued costs of business restructuring                                              159                    493
     Income taxes payable                                                                 538                    572
                                                                                   -----------            -------------
        TOTAL CURRENT LIABILITIES                                                      10,113                  9,567

Deferred gain on sale of property                                                       2,259                  2,425
                                                                                   -----------            -------------
        TOTAL LIABILITIES                                                              12,372                 11,992

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, 7,375,314
           and 7,290,165 shares                                                        17,967                 17,813
     Retained earnings                                                                 (2,004)                   366
     Accumulated other comprehensive income (loss)                                       (133)                  (121)
                                                                                   -----------            -------------
        TOTAL STOCKHOLDERS' EQUITY                                                     15,830                 18,058
                                                                                   -----------            -------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $28,202                $30,050
                                                                                   ===========            =============
</TABLE>

See notes to consolidated financial statements.

                                     Page 3

<PAGE>

                                                   DATA I/O CORPORATION

                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                                        (UNAUDITED)
<TABLE>
<CAPTION>

                                                                             Quarters Ended              Six Months Ended
------------------------------------------------------------------------ ------------------------ -- -------------------------
                                                                         June 29,       July 1,       June 29,       July 1,
                                                                           2000          1999           2000          1999
------------------------------------------------------------------------ ---------- -- ---------- -- ----------- -- ----------
(in thousands, except per share data)
<S>                                                                      <C>            <C>           <C>            <C>

Net sales                                                                 $10,128        $8,939       $16,730        $16,698
Cost of goods sold                                                          5,535         4,476         9,479          8,578
                                                                         ----------    ----------    -----------    ----------
Gross margin                                                                4,593         4,463         7,251          8,120

Operating expenses:
     Research and development                                               2,111         1,955         4,532          3,963
     Selling, general and administrative                                    3,057         3,031         5,585          5,998
     Provision for business restructuring                                    (255)         (215)         (255)          (215)
                                                                         ----------    ----------    -----------    ----------
         Total operating expenses                                           4,913         4,771         9,862          9,746

                                                                         ----------    ----------    -----------    ----------
         Operating loss                                                      (320)         (308)       (2,611)        (1,626)

Non-operating income (expense):
     Interest income                                                          128           135           304            403
     Interest expense                                                         (11)          (10)          (20)           (20)
     Foreign currency exchange                                                (11)            3           (14)             2
     Net gain (loss) on dispositions                                            -            85             -          1,199
                                                                         ----------    ----------    -----------    ----------
         Total non-operating income                                           106           213           270          1,584

                                                                         ----------    ----------    -----------    ----------
Loss from continuing operations, before income taxes                         (214)          (95)       (2,341)           (42)
                                                                         ----------    ----------    -----------    ---------
Income tax expense                                                             17             9            30             23

Loss from continuing operations                                              (231)         (104)       (2,371)           (65)

Income from discontinued operations, net of taxes                               -           505             -            831
                                                                         ----------    ----------    -----------    ----------

Net income (loss)                                                           ($231)         $401       ($2,371)          $766
                                                                         ==========    ==========    ===========    ==========

Basic and diluted earnings (loss) per share:

     From continuing operations                                            ($0.03)       ($0.01)       ($0.32)        ($0.01)
     From discontinued operations                                            0.00          0.07          0.00           0.11
                                                                         ----------    ----------    -----------    ----------
     Total basic and diluted earnings (loss) per share                     ($0.03)        $0.06        ($0.32)         $0.10
                                                                         ==========    ==========    ===========    ==========

Weighted average shares outstanding                                         7,374         7,238         7,361          7,230
                                                                         ==========    ==========    ===========    ==========
Weighted average and potential shares outstanding                           7,374         7,238         7,361          7,230
                                                                         ==========    ==========    ===========    ==========
</TABLE>

See notes to consolidated financial statements.

                                     Page 4

<PAGE>

                                                   DATA I/O CORPORATION

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                        (UNAUDITED)
<TABLE>
<CAPTION>

------------------------------------------------------------------------------------------------------------------------------
                                                                                                Jun. 29,          July. 01,
For the six months ended                                                                          2000              1999
------------------------------------------------------------------------------------------------------------------------------
(in thousands)
<S>                                                                                             <C>               <C>

OPERATING ACTIVITIES:
     Loss from continuing operations                                                             ($2,371)            ($65)
     Adjustments to reconcile loss from continuing
       operations to net cash provided by (used in) operating activities:
       Depreciation and amortization                                                               1,060            1,089
       Net loss on dispositions                                                                        -           (1,198)
       Equity earnings from investee                                                                   -              (17)
       Deferred income taxes                                                                           -              (12)
       Deferred revenue                                                                               55             (403)
       Amortization of deferred gain on sale                                                        (166)            (166)
       Net change in:
          Trade accounts receivable                                                               (1,453)            (521)
          Inventories                                                                             (2,833)          (2,778)
          Recoverable income taxes                                                                    54              (17)
          Other current assets                                                                       176              632
          Business restructure                                                                      (334)          (1,336)
          Accounts payable and accrued liabilities                                                   822           (4,448)
                                                                                               -----------      --------------
     Cash used in operating activities of continuing operations                                   (4,990)          (9,240)
     Cash provided by operating activities of discontinued operations                                  -              831
                                                                                               -----------      --------------
     Net cash used in operating activities                                                        (4,990)          (8,409)

INVESTING ACTIVITIES:
     Additions to property, plant and equipment                                                     (298)            (403)
     Proceeds on sale of subsidiary                                                                    -               72
     Proceeds from sale of minority interest                                                           -            1,067
     Purchases of marketable securities                                                           (2,339)            (568)
     Proceeds from sales of marketable securities                                                  5,924            8,500
                                                                                               -----------      --------------
       Cash provided by investing activities                                                       3,287            8,668

FINANCING ACTIVITIES:
     Additions to notes payable                                                                        -                7
     Sale of common stock                                                                             82              103
     Proceeds from exercise of stock options                                                          72                1
                                                                                               -----------      --------------
       Cash provided by in financing activities                                                      154              111

Increase (decrease) in cash and cash equivalents                                                  (1,549)             370

Effects of exchange rate changes on cash                                                               -             (101)
Cash and cash equivalents at beginning of year                                                     3,597            4,008
                                                                                               -----------      --------------
Cash and cash equivalents at end of year                                                          $2,048           $4,277
                                                                                               ===========      ==============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
     Interest                                                                                        $22             $104
     Income taxes                                                                                    $17              $75
</TABLE>

See notes to consolidated financial statements.

                                     Page 5

<PAGE>

                              DATA I/O CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

NOTE 1 / FINANCIAL STATEMENT PREPARATION

The  financial  statements  as of June  29,  2000 and July 1,  1999,  have  been
prepared by the Company  pursuant 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 30, 1999 has been derived from
the audited financial  statements at that date. Certain information and footnote
disclosures  normally  included in financial  statements  prepared in accordance
with  accounting  principles  generally  accepted in the United States have been
condensed  or  omitted  pursuant  to such SEC rules and  regulations.  Operating
results for the six months ended June 29, 2000 are not necessarily indicative of
the results  that may be expected for the year ending  December 28, 2000.  These
financial  statements  should be read in  conjunction  with the  annual  audited
financial  statements and the accompanying  notes included in the Company's Form
10-K for the year ended December 30, 1999.

In December 1999, the staff of the  Securities  and Exchange  Commission  issued
Staff Accounting Bulletin No. 101 ("SAB 101"),  Revenue Recognition in Financial
Statements.  SAB 101 was  amended  by SAB 101A and SAB 101B  which  delayed  the
implementation  date of SAB 101  for  calendar  year  end  reporting  companies,
including Data I/O  Corporation,  to the quarter  ending  December 28, 2000. The
Company is currently  evaluating  SAB 101 and is uncertain as to what impact SAB
101 will have on its  revenues  and  results of  operations  for the year ending
December  28,  2000,  and  subsequent  periods.  The  impact  of SAB 101 will be
reported as a change in accounting  principle in accordance  with FASB Statement
No. 3, and will be reflected in the Company's results of operations for the year
ended December 28, 2000.

NOTE 2 / INVENTORIES

Inventories consisted of the following components (in thousands):

                                               Jun. 29,          Dec. 30,
                                                2000               1999
                                           ----------------   ----------------
                  Raw material                 $4,301             $2,567
                  Work-in-process               2,910              1,665
                  Finished goods                1,859              2,005
                                           ---------------    ----------------
                                               $9,070             $6,237
                                           ===============    ================


NOTE 3 / PROPERTY, PLANT AND EQUIPMENT

Property,  plant  and  equipment  consisted  of  the  following  components  (in
thousands):

                                               Jun. 29,          Dec. 30,
                                                2000               1999
                                           ---------------  ----------------

Building and improvements                    $    196          $    179
Equipment                                      12,189            12,030
                                           ---------------  ----------------
                                               12,385            12,209

Less accumulated depreciation                  10,452            10,029
                                           ---------------  ----------------
                                              $ 1,933           $ 2,180
                                           ===============  ================

                                     Page 6

<PAGE>

NOTE 4 / DISCONTINUED OPERATIONS

In November 1997 the Company entered into a licensing agreement and an agreement
to sell  certain  assets  of its  Synario  Design  Automation  Division  to MINC
Washington  Incorporated.  This  transaction  discontinued  the  Synario  Design
Automation  Division  operations of the Company.  However,  the Company received
certain licensing revenues related to its Synario, ABEL and ECS products through
the second  quarter 1999,  and  recognized  net earnings of $831,000 from source
code sales and  training  and  support  services  provided  during the first six
months of 1999.  Operating results of this discontinued  division are classified
as discontinued operations in the financial statements.

NOTE 5 / BUSINESS RESTRUCTURING PROGRESS

During the third quarter of 1998, the Company recorded a restructuring charge of
$2.0 million as the Company began the  implementation  of a plan to  restructure
its Redmond and foreign  subsidiary  operations to a level more in line with the
lower sales it was experiencing.  During the fourth quarter of 1998, the Company
recorded further restructuring charges of $2.4 million related to the continuing
restructure of the Company's  Redmond  operations and foreign  subsidiaries  and
related  to  activities   directly  associated  with  the  fourth  quarter  1998
acquisition of SMS Holding GmbH ("SMS").  The acquisition of SMS created certain
redundancies in product offerings and in the operations of the combined company.
A  restructuring  plan was  implemented  after the  acquisition was completed to
eliminate such redundant operations and to phase out overlapping products.

The  total  number  of  employees  terminated  due to the  restructure  was  133
(approximately  39% of the total  workforce).  Employees  were  terminated  from
almost all areas of the Company. Total involuntary termination benefits paid and
charged against the restructure  reserve were approximately $2.0 million.  Total
facility  consolidation  and abandonment  costs incurred and charged against the
restructure  reserve  were  approximately  $293,000.  Other  exit costs paid and
charged against the restructure  reserve,  including legal and consulting  fees,
settlements with suppliers and fixed asset disposals,  were  approximately  $1.7
million.  The  Company's  activities  under  its  restructuring  plans  are  now
substantially complete.

The Company reversed  portions of the restructure  reserve at two separate times
as it became  apparent  that  certain  provisions  made at the time the original
restructure   reserve  was  established  in  1998  required   adjusting  as  the
restructuring  plan was  implemented.  During  the  second  quarter  of 1999 the
Company reversed $215,000 of restructure reserve due to the Company's settlement
of  certain  supplier  related  claims for less than had been  anticipated,  and
during the second quarter of 2000 the Company  reversed  $255,000 of restructure
reserve primarily due to charges related to facility  consolidations  being less
than had been  anticipated.  The remaining  reserve at June 29, 2000 of $159,000
relates  primarily to facility  abandonment which will be paid out over the next
six quarters.

                                     Page 7

<PAGE>

NOTE 6 / EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per
share (in thousands except per share data):

<TABLE>
<CAPTION>
                                                                      Second Quarter               First Six Months
                                                                ---------------------------    --------------------------
                                                                   2000            1999           2000           1999
                                                                -----------     -----------    -----------    -----------
<S>                                                                <C>             <C>            <C>            <C>

Numerator for basic and diluted earnings per share:

         Loss from continuing operations                          ($231)          ($104)       ($2,371)          ($65)
         Income from discontinued operations                          -             505              -            831
                                                                -----------     -----------    -----------    -----------
         Net income (loss)                                        ($231)           $401        ($2,371)          $766
                                                                ===========     ===========    ===========    ===========
Denominator:
         Denominator for basic earnings per share -
                  weighted-average shares                         7,374           7,238          7,361          7,230
         Employee stock options (1)                                   -               -              -              -
                                                                -----------     -----------    -----------    -----------
         Denominator for diluted earnings per share -
                  adjusted weighted-average shares and
                  assumed conversions                             7,374           7,238          7,361          7,230
                                                                ===========     ===========    ===========    ===========
Basic earnings (loss) per share
         From continuing operations                              ($0.03)         ($0.01)        ($0.32)        ($0.01)
         From discontinued operations                              0.00           $0.07           0.00           0.11
                                                                -----------     -----------    -----------    -----------
         Total basic earnings (loss) per share                   ($0.03)          $0.06         ($0.32)         $0.10
                                                                ===========     ===========    ===========    ===========
Diluted earnings (loss) per share
         From continuing operations                              ($0.03)         ($0.01)        ($0.32)        ($0.01)
         From discontinued operations                              0.00           $0.07           0.00           0.11
                                                                -----------     -----------    -----------    -----------
         Total diluted earnings (loss) per share                 ($0.03)          $0.06         ($0.32)         $0.10
                                                                ===========     ===========    ===========    ===========

(1)      Excludes   253,601  and  251,498  employee  stock  options  which  were
         antidilutive  for the second  quarter and the six months ended June 29,
         2000,  respectively,  and 43,452 and 35,361 which were antidilutive for
         the second quarter and the six months ended July 1, 1999, respectively.

</TABLE>

NOTE 7 / ACCOUNTING FOR INCOME TAXES

The Company's  effective tax rate for the first six months of 2000 differed from
the  statutory 34% tax rate  primarily due to operating  losses for which no tax
benefit was recorded. Tax valuation reserves increased by approximately $112,000
during the quarter.  As of June 29, 2000 the Company has  valuation  reserves of
$7,714,000.

NOTE 8 / COMPREHENSIVE INCOME

During  the second  quarter  and the first  sixth  months of 2000 and 1999 total
comprehensive income (loss) was comprised of the following (in thousands):

<TABLE>
<CAPTION>

                                                       For the Second Quarter                For the Six Months
                                                   -------------------------------    ----------------------------------
                                                       2000             1999              2000               1999
                                                   -------------    --------------    ------------     -----------------
<S>                                                    <C>              <C>               <C>                <C>
    Net income (loss)                                    ($231)            $401           ($2,371)            $766
    Foreign currency translation gain (loss)               (13)              (1)               12               21
                                                   -------------    --------------    -------------    -----------------
    Total comprehensive income (loss)                    ($244)            $400           ($2,359)           $787
                                                   =============    ==============    =============    =================

</TABLE>

                                     Page 8
<PAGE>

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 industry prospects;  future results of operations or
financial  position;  integration of acquired  products and  operations;  market
acceptance of the Company's newly introduced or upgraded products;  development,
introduction and shipment of new products;  expected  spending  levels;  and any
other guidance on future periods are forward-looking statements. Forward-looking
statements  reflect   management's   current  expectations  and  are  inherently
uncertain.   The  Company's  actual  results  may  differ   significantly   from
management's  expectations.  The following discussions and discussions under the
caption "Business - Cautionary Factors That May Affect Future Results" in Item 1
in the  Company's  Annual  report on Form 10-K for the year ended  December  30,
1999,  describe  some,  but not all,  of the  factors  that  could  cause  these
differences.

Results of Continuing Operations

For all periods  presented,  results of operations reflect the classification of
the Company's Synario Design Automation Division as discontinued operations (see
"Discontinued Operations").

Net Sales

<TABLE>
<CAPTION>
 -------------------------------------------------------------------------------------------------------------------------------
 (in thousands)
                                                        Second Quarter                            First Six Months
                                           -----------------------------------------  ------------------------------------------

 Net sales by product line                      2000         % Change       1999           1999        % Change        1999
 -----------------------------------------------------------------------------------  ------------------------------------------
<S>                                             <C>          <C>            <C>            <C>         <C>             <C>
 Non-automated programming systems              $4,579       (10.9%)        $5,142         $8,910       (16.4%)        $10,659

 Automated programming systems                   5,549        46.1%          3,797          7,820        29.5%           6,039
                                           ----------------------------------------  -------------  -----------------------------

 Total programming systems                     $10,128        13.3%         $8,939        $16,730         0.2%         $16,698
                                           =========================================  ==========================================

                                                        Second Quarter                            First Six Months
                                           -----------------------------------------  ------------------------------------------

 Net sales by location                         2000         % Change      1999            2000         % Change        1999
 -----------------------------------------------------------------------------------  ------------------------------------------
 United States                                $4,211           9.6%       $3,843         $6,804          (6.9%)        $7,305

    % of total                                41.6%                       43.0%          40.7%                          43.7%

 International                                $5,917          16.1%       $5,096         $9,926           5.7%         $9,393

    % of total                                58.4%                       57.0%          59.3%                          56.3%
 -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Bookings and sales  increased in the second quarter of 2000 compared to the same
period of 1999. Orders in the secondquarter of 2000 increased  approximately 39%
to $10.9  million,  compared with $7.9 million in 1999.  This increase in orders
over the prior year is primarily due to higher  orders for the  Company's  PP100
automated  programming  systems and the first  bookings  for the  Company's  new
ProLINE-RoadRunner   automated  programming  system,  which  was  introduced  in
February 2000. The higher orders for the PP100 products are due primarily to the
Company's  new  FlashTOP  product  that was  introduced  in February  2000.  The
bookings  increase in automated systems was partially offset by decreased orders
for the Company's non-automated programming systems.

                                     Page 9

<PAGE>
The  increase  in sales for the second  quarter  2000 was  primarily  due to the
increased shipments of the PP100. The first shipments of the  ProLINE-RoadRunner
will  be in  the  third  quarter  of  2000.  Sales  of the  older  non-automated
programming  systems  decreased  significantly  from the second quarter of 1999,
offset partially by an increase in sales of the Company's  Sprint  non-automated
programming   system  products,   resulting  in  a  net  decrease  in  sales  of
non-automated systems for the quarter.

The Company has  realized a negative  impact from foreign  currency  translation
during 2000 due primarily to the German Mark to U.S.  Dollar  exchange rate. The
net impact of exchange rate changes on sales revenue during the first six months
of 2000 was approximately $300,000.  When the U.S. Dollar is stronger,  sales of
the Company's  products  denominated in local currency  translate into less U.S.
Dollars.  However,  partially offsetting the negative revenue translation impact
is the positive translation impact of local currency costs and expenses.

Gross Margin

<TABLE>
<CAPTION>

                                                   Second Quarter                         First Six Months
                                           ---------------------------------------------------------------------------
 (in thousands)                                  2000                1999               2000               1999
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
<S>                                             <C>                  <C>                <C>                <C>
Gross Margin                                    $4,593               $4,463             $7,251             $8,120

Percentage of net sales                          45.4%                49.9%              43.3%              48.6%
----------------------------------------------------------------------------------------------------------------------
</TABLE>

Despite  higher sales,  gross margin  percentage  for the second quarter of 2000
decreased compared to the second quarter of 1999 due primarily to a shift in mix
to higher sales of lower margin products. Also,  inefficiencies were realized by
the manufacturing  organization during the quarter as it prepared for production
of the  ProLINE-RoadRunner  which was introduced in February 2000 and will begin
shipping in the third quarter.

Research and Development

<TABLE>
<CAPTION>

                                                     Second Quarter                         First Six Months
                                           ---------------------------------------------------------------------------
 (in thousands)                                  2000                1999                2000              1999
 ---------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                  <C>                 <C>               <C>
 Research and development                       $2,111               $1,955              $4,532            $3,963

 Percentage of net sales                         20.8%                21.9%               27.1%             23.7%
 ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The increase in research and development spending for the second quarter of 2000
as compared to the second quarter of 1999 is primarily due to headcount  related
to the  Company's  continued  focus on  enhanced  device  support.  Spending  in
research  and  development  is expected  to  continue  at this level  during the
remainder of 2000 as the Company continues to invest in new product development,
new technologies and enhanced device support.

Selling, General and Administrative

<TABLE>
<CAPTION>
                                                     Second Quarter                         First Six Months
                                           ---------------------------------------------------------------------------
                                                 2000                1999                2000              1999
 ---------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                 <C>                 <C>               <C>

 Selling, general & administrative              $3,057               $3,031              $5,585            $5,998

 Percentage of net sales                         30.2%                33.9%               33.4%             35.9%
 ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The slight increase in selling,  general and administrative  expenditures in the
second  quarter  of 2000 as  compared  with the  second  quarter  of 1999 is due
primarily to higher selling  expenses  related to the higher revenue,  partially
offset by lower spending levels in other areas of administration.

                                     Page 10

<PAGE>
Interest

<TABLE>
<CAPTION>

                                                     Second Quarter                         First Six Months
                                           ---------------------------------------------------------------------------
<S>                                              <C>                 <C>                 <C>               <C>

 (in thousands)                                  2000                1999                2000              1999
 ---------------------------------------------------------------------------------------------------------------------

 Interest income                                 $128                $135                $304              $403

 Interest expense                                ($11)               ($10)               ($20)             ($20)
 ---------------------------------------------------------------------------------------------------------------------
</TABLE>

The decrease in interest income for both the second quarter and first six months
of 2000 as compared to the same  periods of 1999 is due to the decrease in cash,
cash  equivalents  and  marketable  securities,  due primarily to the funding of
operating losses during the past five quarters.

Net Gain on Dispositions - Sale of Japan Subsidiary

In connection with the Company's restructuring, during the first quarter of 1999
the Company sold its Japan sales subsidiary to Synchro-Work Corporation,  one of
its   sub-distributors  in  Japan,  for  total  consideration  of  approximately
$100,000.  The sale resulted in a gain before taxes of approximately  $1,113,000
primarily due to previously  unrecognized  accumulated currency translation.  In
connection with this sale, the Company and Synchro-Work  also entered into a new
distribution agreement for sales into Japan.

Income Taxes

<TABLE>
<CAPTION>

                                                     Second Quarter                         First Six Months
                                           ---------------------------------------------------------------------------

 (in thousands)                                  2000                1999                2000              1999
 ---------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                 <C>                 <C>               <C>
 Income tax expense from continuing

     operations                                   $17                 $9                 $30                $23

 Effective tax rate                              7.9%                9.5%                1.3%              54.8%
 ---------------------------------------------------------------------------------------------------------------------
</TABLE>

Tax expense  recorded  for both the second  quarter and first six months of 2000
was due to foreign taxes. The Company's effective tax rate for the first quarter
of 2000  differed  from the  statutory  34% tax rate  primarily due to operating
losses for which no tax benefit was recorded.  Tax valuation  reserves increased
by  approximately  $112,000 during the quarter.  As of June 29, 2000 the Company
has valuation reserves of $7,714,000.

Net Income and Earnings Per Share

<TABLE>
<CAPTION>
                                                        Second Quarter                      First Six Months
                                               -----------------------------------------------------------------------
(in thousands, except per share data)
                                                    2000              1999               2000               1999
----------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>               <C>                <C>                <C>

Loss from continuing operations                     ($231)            ($104)             ($2,371)           ($65)
Percentage of net sales                             (2.3%)            (1.2%)             (14.2%)            (0.4%)
Basic and diluted loss per share
     from continuing operations                     ($0.03)           ($0.01)            ($0.32)            ($0.01)
----------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company  recognized a larger loss from continuing  operations for the second
quarter of 2000 as compared to the loss from  continuing  operations  recognized
for the second  quarter of 1999 due  primarily to higher  operating  expenses as
discussed above.

                                     Page 11

<PAGE>

Business Restructuring Progress

During the third quarter of 1998, the Company recorded a restructuring charge of
$2.0 million as the Company began the  implementation  of a plan to  restructure
its Redmond and foreign  subsidiary  operations to a level more in line with the
lower sales it was experiencing.  During the fourth quarter of 1998, the Company
recorded further restructuring charges of $2.4 million related to the continuing
restructure of the Company's  Redmond  operations and foreign  subsidiaries  and
related  to  activities   directly  associated  with  the  fourth  quarter  1998
acquisition of SMS Holding GmbH ("SMS").  The acquisition of SMS created certain
redundancies in product offerings and in the operations of the combined company.
A  restructuring  plan was  implemented  after the  acquisition was completed to
eliminate such redundant operations and to phase out overlapping products.

The  total  number  of  employees  terminated  due to the  restructure  was  133
(approximately  39% of the total  workforce).  Employees  were  terminated  from
almost all areas of the Company. Total involuntary termination benefits paid and
charged against the restructure  reserve were approximately $2.0 million.  Total
facility  consolidation  and abandonment  costs incurred and charged against the
restructure  reserve  were  approximately  $293,000.  Other  exit costs paid and
charged against the restructure  reserve,  including legal and consulting  fees,
settlements with suppliers and fixed asset disposals,  were  approximately  $1.7
million.  The  Company's  activities  under  its  restructuring  plans  are  now
substantially complete.

The Company reversed  portions of the restructure  reserve at two separate times
as it became  apparent  that  certain  provisions  made at the time the original
restructure   reserve  was  established  in  1998  required   adjusting  as  the
restructuring  plan was  implemented.  During  the  second  quarter  of 1999 the
Company reversed $215,000 of restructure reserve due to the Company's settlement
of  certain  supplier  related  claims for less than had been  anticipated,  and
during the second quarter of 2000 the Company  reversed  $255,000 of restructure
reserve primarily due to charges related to facility  consolidations  being less
than had been  anticipated.  The remaining  reserve at June 29, 2000 of $159,000
relates  primarily to facility  abandonment which will be paid out over the next
six quarters.

Discontinued Operations

In November 1997 the Company entered into a licensing agreement and an agreement
to  sell  certain  assets  of its  Synario  Design  Automation  Division  to MIN
Washington  Incorporated.  This  transaction  discontinued  the  Synario  Design
Automation  Division  operations of the Company.  However,  the Company received
certain licensing revenues related to its Synario, ABEL and ECS products through
the second  quarter 1999,  and  recognized  net earnings of $831,000 from source
code sales and  training  and  support  services  provided  during the first six
months of 1999.  Operating results of this discontinued  division are classified
as discontinued operations in the financial statements.

Financial Condition

Liquidity and Capital Resources

<TABLE>
<CAPTION>

                                                                  Jun. 29,                                  Dec. 30,
(in thousands)                                                     2000                  Change                1999
------------------------------------------------------------- --------------------- -------------------- -------------------
<S>                                                                <C>                   <C>                <C>

Working capital                                                    $14,549              ($1,630)            $16,179
Total debt                                                           $0                    $0                  $0
------------------------------------------------------------- --------------------- -------------------- -------------------
</TABLE>
Working capital  decreased  during the first six months of 2000 primarily due to
funding of the losses for the period.  Cash,  cash  equivalents  and  marketable
securities,  which decreased  approximately $5.1 million during the period, were
used to fund losses and to increase  inventory by approximately  $2.8 million as
the Company has ramped up production  of its newly  introduced  products.  Also,
accounts  receivable  increased by approximately  $1.4 million due to the higher
sales.

As of June 29, 2000,  the Company had no debt  outstanding.  No borrowings  were
outstanding under the $400,000 German subsidiary line of credit. The Company did
not renew its $4.0  million  US line of credit  line when it expired in May 2000
but intends to put into place a working  capital credit line of a similar nature
during the third or fourth quarter of 2000.

                                     Page 12

<PAGE>

The  Company  estimates  that  capital  expenditures  for  property,  plant  and
equipment  during  the  remainder  of 2000  will be  between  $600,000  and $1.0
million.  The  Company  believes  that cash,  cash  equivalents  and  marketable
securities  will  besufficient  to meet current and  anticipated  future capital
expenditures.  Although the Company expects that such expenditures will be made,
it has purchase commitments for only a small portion of this amount.

At June 29, 2000, the Company's material  short-term unused sources of liquidity
consisted of approximately $8.1 million in cash, cash equivalents and marketable
securities and available  borrowings of approximately  $400,000 under its German
subsidiary line of credit. The Company believes these sources and cash flow from
operations will be sufficient to fund its working capital needs.

Share repurchase program

Under a previously announced share repurchase program, the Company is authorized
to repurchase up to 1,123,800  shares  (approximately  15.2%) of its outstanding
common stock.  These purchases may be executed  through open market purchases at
prevailing  market prices,  through block  purchases or in privately  negotiated
transactions,  and may commence or be  discontinued  at any time. As of June 29,
2000, the Company has repurchased 1,016,200 shares under this repurchase program
at a total cost of approximately  $7.1 million.  The Company has not repurchased
shares  under this plan since the second  quarter of 1997  although it still has
the authority to do so.

General

Impact of Year 2000

In prior years,  the Company  discussed  the nature and progress of its plans to
become Year 2000 ready.  In 1999,  the Company  completed  its  remediation  and
testing of systems.  As a result of those planning and  implementation  efforts,
the  Company   experienced  no  significant   disruptions  in  mission  critical
information technology and non-information technology systems and believes those
systems  successfully  responded  to the Year  2000  date  change.  The  Company
expensed  approximately  $300,000  through  December 30, 1999 in connection with
remediating  its  systems.  The  Company is not aware of any  material  problems
resulting from Year 2000 issues, either with its products, its internal systems,
or the  products  and services of third  parties.  The Company will  continue to
monitor its mission  critical  computer  applications and those of its suppliers
and vendors throughout the year 2000 to ensure that any latent Year 2000 matters
that may arise are addressed promptly.

European monetary conversion

On  January  1,  1999,  the  European  Economic  and  Monetary  Union (the "EMU"
introduced  the  Euro,  which  became a  functional  legal  currency  of the EMU
countries. From 1999 to 2001 business in the EMU member states has been and will
be  conducted  in both the  existing  national  currency,  such as the  Franc or
Deutsche Mark, and the Euro.

The  Company has taken  certain  steps to ensure  that its  financial  and other
software systems are capable of processing  transactions  and properly  handling
EMU  currencies,  including  the Euro.  The Company will continue to assess what
further impact the EMU formation will have on both its internal  systems and its
products  sold.  The  costs  related  to  addressing  this  issue  have not been
determined,  however,  management believes that this issue and its related costs
will not have a material  adverse  effect on the Company's  business,  financial
condition and operating results.

                                     Page 13

<PAGE>

PART II - OTHER INFORMATION



Item 1.           Legal Proceedings

                  None

Item 2.           Changes in Securities

                  None

Item 3.           Defaults Upon Senior Securities

                  None

Item 4.           Submission of Matters to a Vote of Security Holders

         At the Annual Meeting of Shareholders  held on May 19, 2000, there were
         present in person or by proxy the  holders of  7,027,259  shares of the
         7,365,063 shares of Common Stock of the Corporation.  Following are the
         matters ratified and the voting results:

(a)      Election of a Board of Directors consisting of the following six (6)
         directors:

                  Name                         Votes For        Votes Withheld

                  Keith L. Barnes              6,999,519              27,740
                  Glen F. Ceiley               6,977,196              50,063
                  Daniel A. DiLeo              5,552,044           1,475,215
                  Paul A. Gary                 6,999,520              27,739
                  Frederick R. Hume            6,984,364              42,895
                  Edward D. Lazowska           6,998,119              29,140

(b)      Approval  of the  Company's  2000 Stock  Incentive  Compensation  Plan.
         Votes cast were  6,706,219  For,  286,985  Against, 34,055 Abstain and
         no Broker Non-votes.


Item 5.           Other Information

                  In May  2000 the  Company's  Board of  Directors  approved  an
                  amendment to the  Company's  By-Laws to increase the number of
                  directors of the Company from five (5) to six (6).

Item 6.           Exhibits and Reports on Form 8-K

(a)      Exhibits

                  None

(b)      Reports on Form 8-K

                  None

                                     Page 14

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) 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.

                              DATA I/O CORPORATION

                                  (REGISTRANT)

DATED: August 3, 2000



                             By://S//Joel S. Hatlen

                                 Joel S. Hatlen

                            Vice President - Finance

                             Chief Financial Officer

                             Secretary and Treasurer

                                     Page 15

<PAGE>

                                  EXHIBIT INDEX

Exhibit Number                      Title                          Page Number


         27           Financial Data Schedule which is submitted        17
                      electronically to the Securities and
                      Exchange Commission for information purposes
                      only and not filed.


                                     Page 16

<PAGE>