UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-Q
                                   (Mark One)

              ( X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                      For the quarter ended March 31, 2003

                                       OR

              ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
           Or the transition period from ___________ to ______________



                           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, including 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

Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes No X

7,883,188  shares of no par value of the  Registrant's  Common Stock were issued
and outstanding as of May 9, 2003.

<PAGE>


                              DATA I/O CORPORATION

                                    FORM 10-Q
                      For the Quarter Ended March 31, 2003

                                      INDEX

Part I - Financial Information                                          Page

     Item 1.    Financial Statements (unaudited)                          3

     Item 2.    Management's Discussion and Analysis of
                Financial Condition and Results of Operations             8

     Item 3.    Quantitative and Qualitative Disclosures
                About Market Risk                                        12

     Item 4.    Controls and Procedures                                  13

Part II - Other Information

     Item 1.    Legal Proceedings                                        13

     Item 2.    Changes in Securities and Use of Proceeds                13

     Item 3.    Defaults Upon Senior Securities                          13

     Item 4.    Submission of Matters to a Vote of Security Holders      13

     Item 5.    Other Information                                        13

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

     Signatures                                                          17

     Certifications                                                      18




<PAGE>

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                                                         DATA I/O CORPORATION

                                                     CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------------------------------------------------

                                                                                           Mar.31,                    Dec. 31,
                                                                                            2003                        2002
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                          <C>
(in thousands, except share data)                                                       (unaudited)
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                                           $ 5,645                      $ 4,383
     Marketable securities                                                                   339                        1,076
     Trade accounts receivable, less allowance for
        doubtful accounts of $189 and $187                                                 4,675                        4,328
     Inventories                                                                           4,383                        4,476
     Other current assets                                                                    236                          509
                                                                                   ---------------------            ---------------
         TOTAL CURRENT ASSETS                                                             15,278                       14,772

Property and equipment - net                                                               1,196                        1,508
Other assets                                                                                  67                           87
                                                                                   ---------------------           ----------------
         TOTAL ASSETS                                                                    $16,541                      $16,367
                                                                                   =====================           ================

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable                                                                     $1,358                       $1,200
     Accrued compensation                                                                    748                          826
     Deferred revenue                                                                      1,574                        1,613
     Other accrued liabilities                                                             1,453                        1,510
     Accrued costs of business restructuring                                                  22                          204
     Income taxes payable                                                                    314                          294
                                                                                   ---------------------           ----------------
        TOTAL CURRENT LIABILITIES                                                          5,469                        5,647

Deferred gain on sale of property                                                          1,353                        1,435
                                                                                   ---------------------           ----------------
        TOTAL LIABILITIES                                                                 $6,822                       $7,082

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, 7,883,188
           and 7,767,630 shares                                                           18,697                       18,638
     Accumulated deficit                                                                  (8,962)                      (9,279)
     Accumulated other comprehensive loss                                                    (16)                         (74)
                                                                                   ---------------------           ----------------
        TOTAL STOCKHOLDERS' EQUITY                                                         9,719                        9,285
                                                                                   ---------------------           ----------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                       $16,541                      $16,367
                                                                                   =====================           ================


See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

<TABLE>
<CAPTION>


                                                        DATA I/O CORPORATION

                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                                            (UNAUDITED)


                                                                                           Mar. 31,                  Mar 31,
For the three months ended                                                                   2003                     2002
-------------------------------------------------------------------------------------- ------------------     ---------------------
<S>                                                                                     <C>                     <C>
(in thousands, except per share data)

Net sales                                                                                   $6,155                  $5,390
Cost of goods sold                                                                           2,718                   2,887
                                                                                       ------------------     ---------------------
Gross margin                                                                                 3,437                   2,503

Operating expenses:
     Research and development                                                                1,161                   1,308
     Selling, general and administrative                                                     1,928                   2,295
     Net provision (reversal) for business restructuring                                       (27)                      -
                                                                                       ------------------     ---------------------
         Total operating expenses                                                            3,062                   3,603
                                                                                       ------------------     ---------------------

         Operating  income (loss)                                                              375                  (1,100)


Non-operating income (expense):
     Interest income                                                                            32                      26
     Interest expense                                                                           (3)                     (3)
     Foreign currency exchange                                                                 (76)                    (55)
                                                                                       ------------------     ---------------------
         Total non-operating income (expense)                                                  (47)                    (32)

                                                                                       ------------------     ---------------------
        Income (loss) from operations before income taxes                                      328                  (1,132)

Income tax expense (benefit)                                                                    11                      23
                                                                                       ------------------     ---------------------

Net  income (loss)                                                                           $ 317                 ($1,155)
                                                                                       ==================     =====================

Basic and diluted earnings (loss) per share:
     Total basic and diluted earnings (loss) per share                                       $0.04                  ($0.15)
                                                                                       ==================     =====================

Weighted average shares outstanding                                                          7,845                   7,649
                                                                                       ==================     =====================

Weighted average and potential shares outstanding                                            7,847                   7,649
                                                                                       ==================     =====================

See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>



                                                      DATA I/O CORPORATION

                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                          (UNAUDITED)
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------------
                                                                                                   Mar 31,            Mar 31,
For the three months ended                                                                          2003              2002
--------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                                <C>                <C>
(in thousands)
OPERATING ACTIVITIES:
    Income (loss) from operations                                                                   $  317          ($1,155)
    Adjustments to reconcile income (loss) from operations to net cash provided
     by (used in) operating activities:
       Depreciation and amortization                                                                   176              277
       Net loss on dispositions                                                                        298              232
       Amortization of deferred gain on sale                                                           (82)             (83)
       Net change in:
         Deferred revenue                                                                              (38)              59
         Trade accounts receivable                                                                    (351)             395
         Inventories                                                                                    94              312
         Other current assets                                                                          274              (65)
         Accrued costs of business restructuring                                                      (182)             (25)
         Accounts payable and accrued liabilities                                                       45             (427)
                                                                                                 -----------      --------------
    Net cash provided by (used in) operating activities                                                551             (480)

INVESTING ACTIVITIES:
    Purchases of property and equipment                                                               (142)            (295)
    Net from purchase and sale of marketable securities                                                737            1,175
                                                                                                 -----------      --------------
       Net cash provided by (used in) investing activities                                             595              880

FINANCING ACTIVITIES:
    Sale of common stock                                                                                58               69
    Proceeds from exercise of stock options                                                                               7
                                                                                                -----------      --------------
       Net cash provided by (used in) financing activities                                              58               76

                                                                                                 -----------      --------------
Increase/(decrease) in cash and cash equivalents                                                     1,204              476

Effects of exchange rate changes on cash                                                                58              (15)
Cash and cash equivalents at beginning of year                                                       4,383            2,656
                                                                                                 -----------      --------------
Cash and cash equivalents at end of quarter                                                         $5,645           $3,117
                                                                                                 ===========      ==============

See accompanying notes to consolidated financial statements.
</TABLE>

<PAGE>

                              DATA I/O CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1 - FINANCIAL STATEMENT PREPARATION

Data I/O prepared the  financial  statements  as of March 31, 2003 and March 31,
2002,  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,  2002 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 three months ended March 31, 2003 are not necessarily indicative
of the results that may be expected for the year ending December 31, 2003. 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 31, 2002.

Stock-Based Compensation

Data I/O has stock-based  employee  compensation plans. We apply APB Opinion 25,
Accounting  for Stock  Issued  to  Employees,  and  related  Interpretations  in
accounting  for our plans.  Stock expense for the first quarter of 2003 and 2002
would have been the result of options  issued with an  exercise  price below the
underlying  stock's market price. The following table  illustrates the effect on
net loss and loss per share if Data I/O had applied  the fair value  recognition
provisions of FASB Statement 123, Accounting for Stock-Based Compensation.

Data I/O's pro forma information follows (in thousands), except per share data:

<TABLE>
<CAPTION>


                                                                                        Mar. 31,             Mar. 31,
                                                                                          2003                 2002
                                                                                    ----------------     ----------------
<S>                                                                                    <C>                  <C>
Net income (loss) - as reported                                                           $317              ($1,155)

Deduct:  Total stock-based  employee  compensation  expense  determined under fair
value based method for awards granted,  modified,  or settled,  net of related tax
effects                                                                                    (80)                 (86)
                                                                                    ----------------    ----------------

Net income (loss) - pro forma                                                             $237              ($1,241)
                                                                                    ================     ================

Basic and diluted income (loss) per share - as reported                                  $0.04               ($0.15)
Basic and diluted income (loss) per share - pro forma                                    $0.03               ($0.16)
</TABLE>

NOTE 2 - INVENTORIES

Inventories consisted of the following components (in thousands):

                                          Mar. 31,                Dec. 31,
                                           2003                     2002
                                    ----------------          ----------------
                Raw material              $2,273                    $2,308
                Work-in-process              938                       875
                Finished goods             1,172                     1,293
                                    ----------------          ----------------
                                          $4,383                    $4,476
                                    ================          ================

We  continued to reduce the overall  level of inventory  based upon the level of
sales we have been  experiencing and are forecasting.  During the quarter we did
not significantly change the net carrying values of our inventory.

NOTE 3 - PROPERTY AND EQUIPMENT

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

                                          Mar. 31,               Dec. 31,
                                           2003                    2002
                                      ----------------      ----------------
   Leasehold improvement                 $   240                 $  $239
   Equipment                              11,940                  12,132
                                      ----------------      ----------------
                                          12,180                  12,371

   Less accumulated depreciation          10,984                  10,863
                                      ----------------      ----------------
   Property and equipment - net          $ 1,196                 $ 1,508
                                      ================      ================

NOTE 4 - BUSINESS RESTRUCTURING PROGRESS

The economic slowdown of the past few years significantly affected our business.
During 2001 and 2002, we recorded  restructuring charges associated with actions
taken to  reduce  our  breakeven  point  and  realign  Data I/O with our  market
opportunities.  We required this operational repositioning because of the impact
of the  economic  slowdown  and the  decline in capital  spending  across a high
number of customer groups on general demand for programming equipment.

During the first quarter of 2003, we completed  most of the  previously  accrued
restructure actions.  These payments were $27,000 less than anticipated from the
original restructuring related charges that totaled $1.8 million during 2001 and
2002.  Accordingly,  included in the results for the first quarter is a reversal
of these previously  over-accrued  restructure  charges.  At March 31, 2003, all
restructuring  expenses  associated with the activities  detailed above had been
paid  except  approximately   $22,000,   which  was  primarily  associated  with
severance, facility, consulting and legal fees.

An analysis of the restructuring is as follows (in thousands):

<TABLE>
<CAPTION>
                                                          Reserve         March          2003          Reserve
                                                         Balance at        2003       Payments/       Balance at
 Description                                           Dec. 31, 2002       Adj.      Write-offs     Mar. 31, 2003
 --------------                                       ----------------- ----------- ------------- ------------------
<S>                                                     <C>              <C>         <C>            <C>
 Downsizing U.S. Operations:
    Employee severance                                      $169          $(18)       $ (146)             $ 5

    Redmond facility consolidation                            10             -             -               10
    Consulting and legal expenses                             25            (9)           (9)               7
    Downsizing Foreign Operations                              -             -             -                -
                                                      ----------------- ----------- ------------- ------------------
 Total                                                      $204          $(27)        $(155)             $22
                                                      ================= =========== ============= ==================
</TABLE>

NOTE 5 - 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>

                                                                                   For the first quarter
                                                                                ----------------------------
                                                                                   2003            2002
                                                                                -----------    -------------
<S>                                                                             <C>             <C>
Numerator for basic and diluted earnings (loss) per share:
       Net loss                                                                   $  317         ($ 1,155)
                                                                                -----------    -------------

Denominator:
        Denominator for basic earnings per share -
         weighted-average shares                                                   7,845            7,649
        Employee stock options (1)                                                     2              -
                                                                                -----------    -------------
         Denominator for diluted earnings per share -
          adjusted weighted-average shares and
          assumed conversions of stock options                                     7,847            7,649
                                                                                -----------    -------------
Basic and diluted earnings (loss) per share
         Total basic and diluted earnings (loss) per share                         $0.04          ($0.15)
                                                                                ===========    =============
</TABLE>

     (1)  At March 31, 2003 and 2002 there were 1,131,088 and 1,222,438  shares,
          respectively,  of outstanding options potentially  issueable as common
          stock.  Because of the net loss for the three  months  ended March 31,
          2002,  we did not include  potentially  issueable  common stock in the
          calculation   of  diluted  loss  per  share   because  this  would  be
          anti-dilutive.  Because the exercise price exceeds the market value of
          the common stock on March 31, 2003, we did not include the outstanding
          options,  potentially  issueable as common stock on that date,  in the
          calculation of diluted income per share.  The 1,844 shares included in
          the diluted  earning per share relate to the Employee  Stock  Purchase
          Plan.

NOTE 6 - ACCOUNTING FOR INCOME TAXES

     The  Company's  effective  tax  rate for the  first  three  months  of 2003
     differed from the statutory 34% tax rate  primarily due to  utilization  of
     net operating loss carryforwards.  The tax valuation allowance decreased by
     approximately  $56,000 during the quarter ended March 31, 2003. As of March
     31, 2003, the Company has a valuation allowance of $10,084,000.

NOTE 7 - COMPREHENSIVE INCOME

During the first quarter of 2003 and 2002 total comprehensive income (loss) was
comprised of the following (in thousands):

                                                       For the first quarter
                                                  ------------------------------
                                                       2003             2002
                                                  -------------    -------------
    Net income (loss)                                    $317         ($1,155)
    Foreign currency translation gain (loss)               58              11
                                                  -------------    -------------
    Total comprehensive income (loss)                    $375         ($1,144)
                                                  =============    =============

NOTE 8 - FOREIGN CURRENCY TRANSLATION AND DERIVATIVES

Data I/O  translates  assets  and  liabilities  of foreign  subsidiaries  at the
exchange  rate on the  balance  sheet date.  We  translate  revenues,  costs and
expenses of foreign  subsidiaries at average rates of exchange prevailing during
the  year.  We  charge or credit  translation  adjustments  resulting  from this
process to stockholders' equity, net of taxes. Realized and unrealized gains and
losses  resulting  from the effects of changes in  exchange  rates on assets and
liabilities  denominated  in foreign  currencies  are included in  non-operating
expense as foreign currency transaction gains and losses.

Data I/O accounts for its hedging  activities in  accordance  with SFAS No. 133,
Accounting for Derivatives and Hedging  Activities.  This statement  establishes
accounting  and reporting  standards  for  derivative  instruments  and requires
recognition  of  derivatives  as  assets  or  liabilities  in the  statement  of
financial position and measurement of those instruments at fair value.

Data I/O utilizes  forward  foreign  exchange  contracts to reduce the impact of
foreign currency exchange rate risks where natural hedging  strategies cannot be
effectively employed.  All hedging instruments held by us are fair value hedges.
Generally,  these contracts have maturities less than one year and require us to
exchange  foreign  currencies for U.S.  dollars at maturity.  The change in fair
value of the open hedge  contracts as of March 31, 2003 is an unrealized loss of
$22,900 and is included in accounts payable on the balance sheet.

Data I/O does not hold or issue  derivative  financial  instruments  for trading
purposes.  The purpose of our hedging  activities is to reduce the risk that the
valuation of the underlying  assets,  liabilities and firm  commitments  will be
adversely  affected by changes in exchange rates.  Our derivative  activities do
not create foreign currency exchange rate risk because fluctuations in the value
of the instruments  used for hedging  purposes are offset by fluctuations in the
value of the underlying exposures being hedged.

NOTE 9 - NEW ACCOUNTING PRONOUNCEMENTS

In November 2002, the Emerging Issues Task Force reached a consensus  opinion on
EITF 00-21,  "Revenue  Arrangements with Multiple  Deliverables."  The consensus
provides that revenue arrangements with multiple  deliverables should be divided
into separate units of accounting if certain criteria are met. The consideration
for the  arrangement  should be allocated to the  separate  units of  accounting
based on their relative fair values, with different provisions if the fair value
of all deliverables are not known or if the fair value is contingent on delivery
of specified items or performance  conditions.  Applicable  revenue  recognition
criteria  should be considered  separately for each separate unit of accounting.
EITF 00-21 is effective for revenue  arrangements entered into in fiscal periods
beginning  after  June 15,  2003.  Entities  may elect to report the change as a
cumulative  effect  adjustment  in  accordance  with APB Opinion 20,  Accounting
Changes. Data I/O has not determined the effect of adoption of EITF 00-21 on our
financial statements or the method of adoption it will use.

In May of 2003,  FASB  issued  Statement  149,  which  amends  Statement  133 by
clarifying various  derivatives  related issues and provides for more consistent
reporting of derivatives.  Statement 149 is effective for contracts entered into
or  modified  after  June  30,  2003,  with  some  exceptions,  and for  hedging
relationships  designated  after June 30, 2003.  Data I/O has not yet determined
the impact of this statement, but anticipated that it will be complying with the
provisions of the statement, which is to be applied prospectively.


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 or trends;  expected level of
expense;  future results of operations or financial  position;  changes in gross
margin;  integration of acquired  products and operations;  market acceptance of
our  newly  introduced  or  upgraded  products;  development,  introduction  and
shipment  of new  products;  and  any  other  guidance  on  future  periods  are
forward-looking  statements.  Forward-looking  statements  reflect  management's
current  expectations and are inherently  uncertain.  Although Data I/O believes
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.  Data I/O is under no duty to  update  any of these
forward-looking  statements after the date of this report. The Reader should not
place undue reliance on these forward-looking statements. The discussions in the
section entitled  "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 31, 2002,  and in Exhibit 99.1 of this report  describe  some,  but not
all, of the factors that could cause these differences.

CRITICAL ACCOUNTING POLICY JUDGMENTS AND ESTIMATES

The preparation of financial statements in accordance with accounting principles
generally  accepted in the United  States  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 sales
returns, bad debts, inventories,  investments,  intangible assets, income taxes,
warranty obligations,  restructuring charges,  contingencies such as litigation,
and contract terms that have multiple elements and other complexities typical in
the  telecommunications  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 its financial
statements.

Revenue Recognition:  Sales of our semiconductor  programming equipment products
requiring  installation  by us that is other than  perfunctory are recorded when
installation   is  complete,   or  at  the  later  of  customer   acceptance  or
installation,  if an  acceptance  clause is  specified  in the sales  terms.  We
recognize  revenue from other product  sales at the time of shipment.  We record
revenue from the sale of service and update contracts as deferred revenue and we
recognize it on a  straight-line  basis over the  contractual  period,  which is
typically one year. We establish a reserve for sales returns based on historical
trends in product  returns and  estimates  for new items.  If the actual  future
returns differ from historical levels, our revenue could be adversely affected.

Allowance for Doubtful  Accounts:  We base the  allowance for doubtful  accounts
receivable on our assessment of the collectibility of specific customer accounts
and the aging of accounts  receivable.  If there is a  deterioration  of a major
customer's  credit  worthiness  or actual  defaults  are higher than  historical
experience,  our  estimates  of the  recoverability  of amounts  due us could be
adversely affected.

Inventory  Provisions:  We base inventory  purchases and commitments upon future
demand  forecasts  and historic  usage.  If there is a  significant  decrease in
demand for our  products  or there is a higher  risk of  inventory  obsolescence
because of rapidly  changing  technology  and customer  requirements,  we may be
required to increase our inventory  provision  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.

Deferred  Taxes:  We have incurred tax losses in each of the last four years and
have net  operating  loss and tax credit  carryforwards  that begin  expiring in
2020. We have provided a full valuation allowance against our tax assets,  given
the  uncertainty as to their  realization.  In future years,  these benefits are
available to reduce or eliminate taxes on future taxable income.

Results of Operations

Net Sales
<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------------------
(in thousands)

                                                                                  First Quarter
                                                              -------------------------------------------------------

 Net sales by product line                                          2003          % Change             2002
 --------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                 <C>              <C>
 Non-automated programming systems                                 $2,552           (7.4%)            $2,756

 Automated programming systems                                      3,603           36.8%              2,634
                                                              -------------------------------------------------------

 Total programming systems                                         $6,155           14.2%             $5,390
                                                              =======================================================


                                                                                  First Quarter
                                                              -------------------------------------------------------

 Net sales by location                                              2003          % Change             2002
 --------------------------------------------------------------------------------------------------------------------

 United States                                                    $1,815             1.5%             $1,789

    % of total                                                     29.5%                               33.2%

 International                                                    $4,340            20.5%             $3,601

    % of total                                                     70.5%                               66.8%

 --------------------------------------------------------------------------------------------------------------------
</TABLE>

Revenues for the first quarter of 2003 increased by  approximately  14% compared
to  the  first  quarter  of  2002.  Revenue  increased  due  primarily  to  more
ProLINE-RoadRunner  product  line sales,  but PS automated  systems  service and
aftermarket  increased as well.  Sales  declined for  non-automated  programming
systems  with  the  decline  primarily  related  to  fewer  sales  of  low  cost
programmers and  manufacturing  related  non-automated  programmers.  During the
quarter  a vendor  of a low cost  programming  line we  distributed  went out of
business and that distribution  relationship  ceased. These products represented
$251,000 in revenue for the year 2002.  Finally,  the impact of the  weakened US
dollar favorably  impacted us both from making products less expensive when sold
overseas in US Dollars and from Euro based sales which translated into higher US
Dollar reported sales.

Data I/O  continues  to  experience  a trend in its sales mix towards  increased
international sales and believes that, with the economic situation in the United
States and with the  electronics  industry trend toward  offshore and outsourced
manufacturing, this trend is likely to continue.

Gross Margin
<TABLE>
<CAPTION>

                                                                              First Quarter
                                                                ------------------------------------------

(in thousands)                                                        2003                    2002
----------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                     <C>
Gross Margin                                                         $3,437                  $2,503

Percentage of net sales                                               55.8%                   46.4%
----------------------------------------------------------------------------------------------------------
</TABLE>

Gross  margins  increased in dollars and as a percentage  of sales for the first
quarter of 2003  compared  with the same period of 2002.  Overall  gross margins
increased  primarily due to the increase in sales volume, cost reductions due to
the  restructuring;  and first  quarter of 2002 included  unfavorable  inventory
reserves of approximately  $240,000.  The translation net impact from the weaker
US Dollar also benefited the gross margin.

Research and Development
<TABLE>
<CAPTION>
                                                                              First Quarter
                                                                ------------------------------------------

 (in thousands)                                                       2003                    2002
 ---------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                     <C>
 Research and development                                            $1,161                  $1,308

 Percentage of net sales                                              18.9%                    24.3%
 ---------------------------------------------------------------------------------------------------------
</TABLE>

Research and development ("R&D") spending for the first quarter 2003 as compared
to the first  quarter 2002 was slightly  less in dollars and as a percentage  of
sales.  This  decrease in spending was  primarily  related to the  restructuring
actions  taken in the past  year  reducing  personnel  costs.  During  the first
quarter,  Data I/O's R&D  released a  ProLINE-RoadRunner  version for  Panasonic
Panasert  placement  machines and  microcontroller  support on ProLINE FlashCORE
programming systems.

Selling, General and Administrative
<TABLE>
<CAPTION>

                                                                              First Quarter
                                                                ------------------------------------------

                                                                      2003                    2002
 ---------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                     <C>

 Selling, general & administrative                                   $1,928                  $2,295

 Percentage of net sales                                              31.3%                   42.6%
 ---------------------------------------------------------------------------------------------------------
</TABLE>

Selling,  general and administrative  ("SG&A") expenses for the first quarter of
2003 were $367,000 less compared with the same period in 2002,  primarily due to
Data I/O's reduced costs from the prior year's  restructuring  activities offset
by our recording of increased incentive compensation and higher facility-related
costs due to the loss of a sublease  tenant and a rent  increase  in 2002.  Data
I/O's management incentive compensation and employee performance bonus plans are
earned based upon  various  measures of  quarterly  profit and annual  growth in
profit that will be an incremental  expense for any profits in 2003, as compared
to 2002 which was a loss.

Interest
<TABLE>
<CAPTION>

                                                                              First Quarter
                                                                ------------------------------------------

 (in thousands)                                                       2003                    2002
 ---------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                     <C>
 Interest income                                                       $32                    $26

 Interest expense                                                      ($3)                   ($3)
 ---------------------------------------------------------------------------------------------------------
</TABLE>

Interest income increased  slightly in the first quarter of 2003 compared to the
same period in 2002 due to increased funds invested.

Income Taxes
<TABLE>
<CAPTION>

                                                                              First Quarter
                                                                ------------------------------------------

 (in thousands)                                                       2003                    2002
 ---------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                     <C>
 Income tax expense (benefit)                                          $11                    $23
 ---------------------------------------------------------------------------------------------------------
</TABLE>

Tax expense recorded for the first quarter of 2003 was due to foreign taxes. Tax
valuation reserves decreased by approximately  $56,000 during the quarter.  Data
I/O has valuation reserves of $10,084,000 as of March 31, 2003.

Financial Condition

Liquidity and Capital Resources
<TABLE>
<CAPTION>

                                                                    Mar. 31,                                  Dec. 31,
(in thousands)                                                        2003                Change                2002
------------------------------------------------------------- --------------------- -------------------- -------------------
<S>                                                                <C>                      <C>                 <C>
Working capital                                                     $9,810                 $685               $9,125
------------------------------------------------------------- --------------------- -------------------- -------------------
</TABLE>

Working capital increased during the first three months of 2003 primarily due to
cash provided by operations.  Cash, cash  equivalents and marketable  securities
increased  approximately  $0.5 million during this period,  inventory  decreased
$0.1 million,  and accounts receivable increased $0.3 million. We have continued
to focus on reducing  the amount of inventory  relative to our  business  level.
Should our  business  grow  significantly,  we  anticipate  that we will need to
utilize  existing  liquidity to carry the  increased  receivables  and inventory
expected to be associated with sales growth.  As of March 31, 2003, Data I/O had
no debt outstanding.

Data I/O estimates that capital  expenditures for property,  plant and equipment
during the remainder of 2003 will be between $400,000 and $1 million,  excluding
expenditures for strategic purposes. Data I/O's future capital requirements will
depend on a number of factors including;  decisions to invest in new systems and
technology  equipment,  costs  associated  with  R&D,  successful  launch of new
products and the  potential use of funds for  strategic  purposes.  We expect to
fund capital expenditures from existing and internally generated funds or we may
lease capital  equipment.  We believe that we have  sufficient  working  capital
available   under  our  operating  plan  to  fund  our  operations  and  capital
requirements for at least 12 months.

Data I/O renewed a foreign line of credit for 50,000 Euros in the first quarter,
and maintains credit facilities for purchasing card and credit card purchases.

General

Restructuring

The economic slowdown of the past few years significantly affected our business.
During 2001 and 2002, we recorded  restructuring charges associated with actions
taken to  reduce  our  breakeven  point  and  realign  Data I/O with our  market
opportunities.  We required this operational repositioning because of the impact
of the  economic  slowdown  and the  decline in capital  spending  across a high
number of customer groups on general demand for programming equipment.

During the first quarter of 2003, we completed  most of the  previously  accrued
restructure actions.  These payments were $27,000 less than anticipated from the
original restructuring related charges that totaled $1.8 million during 2001 and
2002.  Accordingly,  included in the results for the first quarter is a reversal
of these previously  over-accrued  restructure  charges.  At March 31, 2003, all
restructuring  expenses  associated with the activities  detailed above had been
paid  except  approximately   $22,000,   which  was  primarily  associated  with
severance, facility, consulting and legal fees.

New Accounting Pronouncements

In November 2002, the Emerging Issues Task Force reached a consensus  opinion on
EITF 00-21,  "Revenue  Arrangements with Multiple  Deliverables."  The consensus
provides that revenue arrangements with multiple  deliverables should be divided
into separate units of accounting if certain criteria are met. The consideration
for the  arrangement  should be allocated to the  separate  units of  accounting
based on their relative fair values, with different provisions if the fair value
of all deliverables are not known or if the fair value is contingent on delivery
of specified items or performance  conditions.  Applicable  revenue  recognition
criteria  should be considered  separately for each separate unit of accounting.
EITF 00-21 is effective for revenue  arrangements entered into in fiscal periods
beginning  after  June 15,  2003.  Entities  may elect to report the change as a
cumulative  effect  adjustment  in  accordance  with APB Opinion 20,  Accounting
Changes. Data I/O has not determined the effect of adoption of EITF 00-21 on our
financial statements or the method of adoption it will use.

In May of  2003  FASB  issued  Statement  149,  which  amends  Statement  133 by
clarifying  various  derivative  related issues and provides for more consistent
reporting of derivatives.  Statement 149 is effective for contracts entered into
or  modified  after  June  30,  2003,  with  some  exceptions,  and for  hedging
relationships  designated  after June 30, 2003.  Data I/O has not yet determined
the impact of this statement, but anticipated that it will be complying with the
provisions of the statement, which is to be applied prospectively.


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

We are exposed to financial market risks, including fluctuations in foreign
exchange rates and interest rates.

INTEREST RATE RISK

We invest our cash in a variety of short-term financial  instruments,  including
government  bonds,  commercial  paper and money  market  instruments,  which are
classified as available-for-sale. Our investments are made in accordance with an
investment  policy  approved  by  our  board  of  directors.  Our  portfolio  is
diversified and consists  primarily of investment  grade  securities to minimize
credit risk. Cash balances in foreign  currencies are operating balances and are
invested in demand or short-term deposits of the local operating bank.

Investments  in both fixed rate and floating rate interest  earning  instruments
carry a degree of interest rate risk.  Fixed rate securities may have their fair
market  value  adversely  impacted  because of a rise in interest  rates,  while
floating rate securities may produce less income than expected if interest rates
fall. Due in part to these factors,  our future investment income may fall short
of expectations  because of changes in interest rates or we may suffer losses in
principal if forced to sell  securities that have seen a decline in market value
because of changes in interest  rates.  We do not attempt to reduce or eliminate
our  exposure to interest  rate risk  through  the use of  derivative  financial
instruments due to the short-term nature of the investments.

The table below provides information about our marketable securities,  including
principal  cash  flows  and the  related  weighted  average  interest  rates (in
thousands):
<TABLE>
<CAPTION>

                                 Principal           Estimated Fair         Principal           Estimated Fair
                                 Cash Flows             Value at           Cash Flows              Value at
                                  For 2003           March 31, 2003        For Q1 2003        December 31, 2002
                               ---------------     -------------------    --------------    -----------------------
<S>                             <C>                  <C>                  <C>                 <C>
     Corporate Bonds               $   0                 $  0                $   734                  $  734
                                                                              2.936%
     Euro-dollar bonds                339                  339                   342                     342
                                   2.100%                                     2.100%
                               ---------------     -------------------    --------------    -----------------------
     Total portfolio value        $   339                 $339                $1,076                  $1,076
</TABLE>

FOREIGN CURRENCY RISK

We have operations in Germany,  Canada, and China and, therefore, we are subject
to risks typical of an  international  business  including,  but not limited to,
differing  economic  conditions,  changes in political  climate,  differing  tax
structures,  other  regulations  and  restrictions  and  foreign  exchange  rate
volatility.  Accordingly,  our  future  results  could be  materially  adversely
affected by changes in these or other factors.

Our sales and corresponding  receivables are substantially in U.S. dollars other
than sales made in our subsidiaries in Germany,  Canada, and China.  Through our
operations  in Germany,  Canada,  and China,  we incur  certain  product  costs;
research and development;  customer service and support costs; selling,  general
and administrative  expenses in local currencies.  We are exposed, in the normal
course of  business,  to foreign  currency  risks on these  expenditures  and on
related foreign currency  denominated  monetary assets and liabilities.  We have
evaluated  our  exposure to these risks and  believe  that our only  significant
exposure to foreign  currencies  at the  present  time is  primarily  related to
Euro-based  receivables.  We use forward contracts to hedge and thereby minimize
the currency risks associated with certain transactions denominated in Euros.

If our actual currency  requirement or timing in the period  forecasted  differs
materially from the notional amount of our forward  contracts and/or the natural
balancing of receivables and payables in foreign  currencies  during a period of
currency  volatility  or if we do not continue to manage our exposure to foreign
currency  through  forward   contracts  or  other  means,  we  could  experience
unanticipated  foreign  currency  gains or  losses.  In  addition,  our  foreign
currency  risk   management   policy  subjects  us  to  risks  relating  to  the
creditworthiness  of the  commercial  banks  with  which we enter  into  forward
contracts.  If one of these banks cannot honor its obligations,  we may suffer a
loss. We also invest in our international  operations,  which will likely result
in increased future operating expenses denominated in those local currencies. In
the future,  our  exposure to foreign  currency  risks from these other  foreign
currencies may increase and if not managed  appropriately,  we could  experience
unanticipated foreign currency gains and losses.

The  purpose of our foreign  currency  risk  management  policy is to reduce the
effect of exchange rate  fluctuation  on our results of  operations.  Therefore,
while our foreign  currency  risk  management  policy may reduce our exposure to
losses  resulting from unfavorable  changes in currency  exchange rates, it also
reduces or eliminates our ability to profit from  favorable  changes in currency
exchange rates.

At March 31, 2003,  we had four forward  contracts to sell Euros in exchange for
$860,175 with rates ranging from 1.0279 to 1.0811 all scheduled to be due within
the next quarter and the value at that date of $883,108.


Item 4.  Controls and Procedures

(a) 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,  Data I/O evaluated the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures (as defined in Rule  13a-14(c) and Rule 15d-14(c)  under the Exchange
Act) as of a date (the  "Evaluation  Date")  within 90 days  prior to the filing
date of this report. 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 in timely alerting them to the
material  information  relating to Data I/O (or its  consolidated  subsidiaries)
required to be included in our periodic SEC filings and Form 8-K reports.

(b) Changes in internal controls.

There were no  significant  changes  made in our  internal  controls  or, to our
knowledge,  in other  factors that could  significantly  affect  these  controls
subsequent to the date of their evaluation.

PART II - OTHER INFORMATION

Item 1.           Legal Proceedings

                  None

Item 2.           Changes in Securities and Use of Proceeds

                  None

Item 3.           Defaults Upon Senior Securities

                  None

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

                  None

Item 5.           Other Information

                  None

Item 6.           Exhibits and Reports on Form 8-K

                  (a) Exhibits

The  following  list is a subset  of the list of  exhibits  described  below and
contains all compensatory plans, contracts or arrangements in which any director
or  executive  officer  of the  Company is a  participant,  unless the method of
allocation of benefits  thereunder is the same for management and non-management
participants:

(1) Amended and Restated 1982 Employee Stock Purchase Plan.  See Exhibit 10.7.

(2) Retirement Plan and Trust Agreement. See Exhibit 10.2, 10.3, 10.4, 10.11,
    10.14, 10.15, and 10.16.

(3) Summary of Management Incentive Compensation Plan. See Exhibit 10.12.

(4) Amended and Restated 1983 Stock Appreciation Rights Plan.  See Exhibit 10.1.

(5) Amended and Restated 1986 Stock Option Plan.  See Exhibit 10.19.

(6) Form of Change in Control Agreements. See Exhibit 10.5.

(7) 1996 Director Fee Plan.  See Exhibit 10.6 and 10.17.

(8) Letter Agreement with Frederick R. Hume. See Exhibit 10.21.

          3    Articles of Incorporation:

               3.1    The Company's restated Articles of Incorporation filed
                      November 2, 1987 (Incorporated by reference to Exhibit 3.1
                      of the Company's 1987 Annual Report on Form 10-K (File No.
                      0-10394)).

               3.2    The Company's Bylaws as amended and restated as of March
                      2001. (Incorporated by reference to the Company's 2001
                      Annual Report on Form 10-K (File No. 0-10394)).

               3.3    Certificate of Designation, Preferences and Rights of
                      Series A Junior Participating Preferred Stock
                      (Incorporated by reference to Exhibit 1 of the Company's
                      Registration Statement on Form 8-A filed March 13, 1998
                      (File No. 0-10394)).

          4    Instruments Defining the Rights of Security Holders, Including
               Indentures:

               4.1    Rights Agreement, dated as of April 4, 1998, between Data
                      I/O Corporation and ChaseMellon Shareholder Services,
                      L.L.C. as Rights Agent, which includes: as Exhibit A
                      thereto, the Form of Right Certificate; and, as Exhibit B
                      thereto, the Summary of Rights to Purchase Series A Junior
                      Participating Preferred Stock (Incorporated by reference
                      to the Company's Current Report on Form 8-K filed on March
                      13, 1998).

               4.2    Rights Agreement, dated as of March 31, 1988, between Data
                      I/O Corporation and First Jersey National Bank, as Rights
                      Agent, as amended by Amendment No. 1 thereto, dated as of
                      May 28, 1992 and Amendment No. 2 thereto, dated as of July
                      16, 1997 (Incorporated by reference to the Company's
                      Report on Form 8-K filed on March 13, 1998).

               4.3    Amendment No. 1, dated as of February 10, 1999, to Rights
                      Agreement, dated as of April 4, 1998, between Data I/O
                      Corporation and ChaseMellon Shareholder Services, L.L.C.
                      as Rights Agent (Incorporated by reference to Exhibit 4.1
                      of the Company's Form 8-A/A dated February 10, 1999).

          10   Material Contracts:

               10.1   Amended and Restated 1983 Stock Appreciation Rights Plan
                      dated February 3, 1993 (Incorporated by reference to
                      Exhibit 10.23 of the Company's 1992 Annual Report on
                      Form 10-K  (File No. 0-10394)).

               10.2   Amended and Restated Retirement Plan and Trust Agreement.
                      (Incorporated by reference to Exhibit 10.26 of the
                      Company's 1993 Annual Report on Form 10-K
                      (File No. 0-10394)).

               10.3   First Amendment to the Data I/O Tax Deferred Retirement
                      Plan (Incorporated by reference to Exhibit 10.21 of the
                      Company's 1994 Annual Report on Form 10-K (File No.
                      0-10394)).

               10.4   Second Amendment to the Data I/O Tax Deferred Retirement
                      Plan (Incorporated by reference to Exhibit 10.26 of the
                      Company's 1995 Annual Report on Form 10-K (File No.
                      0-10394)).

               10.5   Form of Change in Control Agreements (Incorporated by
                      reference to Exhibit 10.20 of the Company's 1994 Annual
                      Report on Form 10-K (File No. 0-10394)).

               10.6   Data I/O Corporation 1996 Director Fee Plan (Incorporated
                      by reference to Exhibit 10.27 of the Company's 1995 Annual
                      Report on Form 10K (File No. 0-10394)).

               10.7   Data I/O Corporation 1982 Employee Stock Purchase Plan
                      Amended and Restated December 11, 1996 (Incorporated by
                      reference to Exhibit 10.1 to the Company's Registration
                      Statement of Form S-8 (File No. 333-20657, filed January
                      29, 1997)).

               10.8   Purchase and Sale Agreement dated as of July 9, 1996
                      (Relating to the sale of Data I/O Corporation's
                      headquarters property in Redmond, Washington consisting of
                      approximately 79 acres of land and an approximately 96,000
                      square foot building. (Portions of this exhibit have been
                      omitted pursuant to an application for an order granting
                      confidential treatment. The omitted portions have been
                      separately filed with the Commission) (Incorporated by
                      reference to Exhibit 10.32 of the Company's 1996 Annual
                      Report on Form 10-K (File No. 0-10394)).

               10.9   Letter dated as of December 20, 1996, First Amendment and
                      extension of the Closing Date under that certain Purchase
                      and Sale Agreement dated as of July 9, 1996. (Portions of
                      this exhibit have been omitted pursuant to an application
                      for an order granting confidential treatment. The omitted
                      portions have been separately filed with the Commission)
                      (Incorporated by reference to Exhibit 10.33 of the
                      Company's 1996 Annual Report on Form 10-K (File No.
                      0-10394)).

               10.10  Letter dated as of February 17, 1997, Second Amendment and
                      extension of the Closing Date under that certain Purchase
                      and Sale Agreement dated as of July 9, 1996. (Portions of
                      this exhibit have been omitted pursuant to an application
                      for an order granting confidential treatment. The omitted
                      portions have been separately filed with the Commission)
                      (Incorporated by reference to Exhibit 10.34 of the
                      Company's 1996 Annual Report on Form 10-K (File No.
                      0-10394)).

               10.11  Third Amendment to the Data I/O Tax Deferred Retirement
                      Plan (Incorporated by reference to Exhibit 10.35 of the
                      Company's 1996 Annual Report on Form 10-K (File No.
                      0-10394)).

               10.12  Amended and Restated Management Incentive Compensation
                      Plan dated January 1, 1997 (Incorporated by reference to
                      Exhibit 10.25 of the Company's 1997 Annual Report on Form
                      10-K (File No. 0-10394)).

               10.13  Amended and Restated Performance Bonus Plan dated
                      January 1, 1997 (Incorporated by reference to
                      Exhibit 10.26 of the Company's 1997 Annual Report on
                      Form 10-K (File No. 0-10394)).

               10.14  Fourth Amendment to the Data I/O Tax Deferred Retirement
                      Plan (Incorporated by reference to Exhibit 10.27 of the
                      Company's 1997 Annual Report on Form 10-K (File No.
                      0-10394)).

               10.15  Fifth Amendment to the Data I/O Tax Deferred Retirement
                      Plan (Incorporated by reference to Exhibit 10.28 of the
                      Company's 1997 Annual Report on Form 10-K (File No.
                      0-10394)).

               10.16  Sixth Amendment to the Data I/O Tax Deferred Retirement
                      Plan (Incorporated by reference to Exhibit 10.29 of the
                      Company's 1997 Annual Report on Form 10-K (File No.
                      0-10394)).

               10.17  Amended and Restated Data I/O Corporation 1996 Director
                      Fee Plan (Incorporated by reference to Exhibit 10.32 of
                      the Company's 1997 Annual Report on Form 10-K (File No.
                      0-10394)).

               10.18  Amended and Restated Data I/O Corporation 1996 Director
                      Fee Plan (Incorporated by reference to Exhibit 10.32 of
                      the Company's 1997 Annual Report on 10-K
                      (File No. 0-10394)).

               10.19  Amended and Restated 1986 Stock Option Plan dated May 12,
                      1998 (Incorporated by reference to Exhibit 10.37 of the
                      Company's 1998 Annual Report on Form 10-K (File No.
                      0-10394)).

               10.20  Sublease dated December 22, 1999 between Data I/O
                      Corporation and Imandi.com, Inc. (Incorporated by
                      reference to Exhibit 10.34 of the Company's 1999 Annual
                      Report on Form 10-K (File No. 0-10394)).

               10.21  Letter Agreement with Fred R. Hume dated January 29, 1999.
                      (Incorporated by reference to Exhibit 10.35 of the
                      Company's 1999 Annual Report on Form 10-K (File 0-10394)).

               10.22  Letter Agreement dated May 28, 1999, among Data I/O
                      Corporation, JTAG Technologies B.V., and JTAG Holding B.V.
                      (Incorporated by reference to Exhibit 10.36 of the
                      Company's 1999 Annual Report on Form 10-K
                      (File No. 0-10394)).

              10.23   Amended and Restated 2000 Stock Compensation Incentive
                      Plan dated May 19, 2000. (Incorporated by reference to the
                      Company's 2000 Proxy Statement dated March 27, 2000.)

              10.24   Amended and Restated 1982 Employee Stock Purchase Plan
                      dated May 16, 2001 (Incorporated by reference to the
                      Company's 2001 Proxy Statement dated March 28, 2001.)

        99    Other Exhibits

              99.1  Risk Factors                                             23

        (b)   Reports on Form 8-K

On February 22, 2003,  Data I/O furnished a copy of a press  release  announcing
Data I/O's fourth  quarter  results on a Form 8-K under Item 9. The  information
furnished in the Form 8-K pursuant to Item 9 shall not be deemed filed under the
Securities Exchange Act of 1934, as amended.


<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:   May 14, 2003


                                   By://S//Joel S. Hatlen
                                      Joel S. Hatlen
                                      Vice President - Finance
                                      Chief Financial Officer
                                      Secretary and Treasurer
                   (Principal Financial Officer and Duly Authorized Officer)




                                   By://S//Frederick R. Hume
                                      Frederick R. Hume
                                      President
                                      Chief Executive Officer
                  (Principal Executive Officer and Duly Authorized Officer)


<PAGE>


Certification

I, Frederick R. Hume, certify that:
1)   I have reviewed this quarterly report on Form 10-Q of Data I/O Corporation;
2)   Based on my knowledge, this quarterly 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 officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a)   designed such disclosure controls and procedures 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)   evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and
c)   presented in this quarterly report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;
5)   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):
a)   all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and
b)   any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and
6)   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: May 14, 2003

                  /s/ Frederick R. Hume
                  Frederick R. Hume
                  Chief Executive Officer
                  (Principal Executive Officer)

<PAGE>


Certification

I, Joel S. Hatlen, certify that:
1)   I have reviewed this quarterly report on Form 10-Q of Data I/O Corporation;
2)   Based on my knowledge, this quarterly 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 officers and I are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a)   designed such disclosure controls and procedures 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)   evaluated the effectiveness of the registrant's disclosure controls and
     procedures as of a date within 90 days prior to the filing date of this
     quarterly report (the "Evaluation Date"); and
c)   presented in this quarterly report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation Date;
5)   The registrant's other certifying officers and I have disclosed, based on
     our most recent evaluation, to the registrant's auditors and the audit
     committee of registrant's board of directors (or persons performing the
     equivalent function):
a)   all significant deficiencies in the design or operation of internal
     controls which could adversely affect the registrant's ability to record,
     process, summarize and report financial data and have identified for the
     registrant's auditors any material weaknesses in internal controls; and
b)   any fraud, whether or not material, that involves management or other
     employees who have a significant role in the registrant's internal
     controls; and
6)   The registrant's other certifying officers and I have indicated in this
     quarterly report whether or not there were significant changes in internal
     controls or in other factors that could significantly affect internal
     controls subsequent to the date of our most recent evaluation, including
     any corrective actions with regard to significant deficiencies and material
     weaknesses.

Date: May 14, 2003

                   /s/ Joel S. Hatlen
                  Joel S. Hatlen
                  Chief Financial Officer
                  (Principal Financial Officer)


<PAGE>


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
March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Frederick R.
Hume, Chief Executive Officer of the Company, certify, that
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; 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/ Frederick R. Hume
                Frederick R. Hume
                Chief Executive Officer
                (Principal Executive Officer)
                May 14, 2003

<PAGE>

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
March 31, 2003 as filed with the Securities and Exchange
Commission on the date hereof (the "Report"), I, Joel S.
Hatlen, Chief Financial Officer of the Company, certify, that
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; 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/ Joel S. Hatlen
                Joel S. Hatlen
                Chief Financial Officer
                (Principal Financial Officer)
                May 14, 2003


<PAGE>


Exhibit 99.1

Cautionary Factors That May Affect Future Results

Data I/O's  disclosure  and  analysis in this  Quarterly  Report  contains  some
forward-looking  statements.  Forward-looking  statements  include  our  current
expectations  or  forecasts  of future  events.  The reader can  identify  these
statements by the fact that they do not relate strictly to historical or current
facts.  In  particular,  these  include  statements  relating to future  action,
prospective products, new technologies, future performance or results of current
and anticipated  products,  sales efforts,  expenses,  outsourcing of functions,
outcome of contingencies, and financial results.

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

We undertake no obligation  to publicly  update any  forward-looking  statements
after the date of this Quarterly Report, whether as a result of new information,
future events or otherwise.  The reader should not place undue  reliance on such
forward-looking  statements.  The reader is  advised,  however,  to consult  any
future  disclosures Data I/O makes on related subjects in our 10-Q, 8-K and 10-K
reports to the SEC and press  releases.  Also,  note that Data I/O  provides the
following cautionary discussion of risks,  uncertainties and possible inaccurate
assumptions  relevant to our  business.  These are  factors  that we think could
cause  Data  I/O's  actual  results  to  differ  materially  from  expected  and
historical results. Other factors besides those listed here could also adversely
affect  Data  I/O.  This  discussion  is  permitted  by the  Private  Securities
Litigation Reform Act of 1995.

RISK FACTORS

Development, Introduction and Shipment of New Products

Data I/O  currently is developing  new  engineering  and  automated  programming
systems.  Significant technological,  supplier,  manufacturing or other problems
may delay the development, introduction or production of these products.

For example, we may encounter these problems:

o  technical problems in the development of a new programming system
   platform or the robotics for new automated handing systems

o  inability to hire qualified personnel

o  delays or failures to perform by third parties involved in our development
   projects

Delays in the development,  completion and shipment of new products,  or failure
of customers to accept new products, may result in a decline in sales in 2003.

Variability in Quarterly Operating Results

Data I/O's operating  results tend to vary from quarter to quarter.  Our revenue
in each quarter  substantially depends upon orders received within that quarter.
Conversely,  our  expenditures  are based on  investment  plans and estimates of
future revenues. We may, therefore,  be unable to quickly reduce our spending if
our revenues decline in a given quarter. As a result, operating results for that
quarter  will  suffer.  Our  results of  operations  for any one quarter are not
necessarily indicative of results for any future periods.

Other factors, which may cause our quarterly operating results to fluctuate,
include:

o  increased competition

o  timing of new product announcements

o  product releases and pricing changes by us or our competitors

o  market acceptance or delays in the introduction of new products

o  production constraints

o  labor or material shortages

o  the timing of significant orders

o  war or terrorism

o  health issues (such as SARS)

o  customers' budgets

o  adverse movements in exchange rates, interest rates or tax rates

o  cyclical nature of demand for our customers' products

o  general economic conditions in the countries where we sell products

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

Rapid Technological Change

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

o  new device package types, densities, and technologies requiring
   hardware and software changes in order to be programmed by our products

o  electronics equipment manufacturing practices, such as widespread use of
   in-circuit programming

o  customer software platform preferences different from those on which our
   products operate

o  more rigid industry standards, which would decrease the value-added element
   of our products and support services

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

Economic and Market Conditions

Our business is highly  impacted by capital  spending  plans and other  economic
cycles that affect the users and  manufacturers  of ICs.  These  industries  are
highly  cyclical and are  characterized  by rapid  technological  change,  short
product  life cycles,  fluctuations  in  manufacturing  capacity and pricing and
gross margin  pressures.  As we  experienced  in 2002, our operations may in the
future reflect substantial  fluctuations from  period-to-period as a consequence
of these industry patterns,  general economic conditions affecting the timing of
orders from major customers, and other factors affecting capital spending. These
factors  could have a material  adverse  effect on our  business  and  financial
condition.

History of Losses

We have  incurred  net losses in each of our last three  fiscal  years.  We have
decreased our operating  expenses in recent  periods  through the  restructuring
plans that we initiated  during our two prior fiscal years.  We will continue to
examine our level of operating  expense based upon our projected  revenues.  Any
planned  increases in operating  expenses may result in larger  losses in future
periods if projected  revenues  are not  achieved.  As a result,  we may need to
generate  greater  revenues  than we  have  recently  to  achieve  and  maintain
profitability.  However,  we cannot  provide  assurance  that our revenues  will
increase and our strategy may not be successful, resulting in future losses.

Affects of Restructuring Activities

Beginning in the year 2001 and  continuing  in the past fiscal year,  we reduced
our workforce from 224 to 125 employees.  There have been and may continue to be
substantial costs associated with this workforce  reduction related to severance
and  other   employee-related   costs  and  our  restructuring  plan  may  yield
unanticipated  consequences,  such as  increased  burden on our  administrative,
operational,  and financial resources and has increased the responsibilities for
our  management  personnel.  As a result,  our ability to respond to  unexpected
challenges  may be  impaired  and we may be  unable  to  take  advantage  of new
opportunities.

In addition,  many of the  employees  that were  terminated  possessed  specific
knowledge or expertise,  and that  knowledge or expertise may prove to have been
important to our operations.  In that case, their absence may create significant
difficulties. Further, the reduction in workforce may reduce employee morale and
may create concern among current and potential  employees  about job security at
Data I/O,  which may lead to difficulty in hiring and retaining  employees,  and
divert management's attention. In addition, the headcount reductions may subject
us to the risk of  litigation,  which  could  result in  substantial  cost.  Any
failure by us to properly manage this rapid change in workforce could impair our
ability to efficiently  manage our business,  to maintain and develop  important
relationships with third-parties,  and to attract and retain customers. It could
also cause us to incur higher  operating cost and delays in the execution of our
business plan or in the reporting or tracking of our financial results.

Need for Additional Funding

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

We believe our existing cash and cash equivalents will be sufficient to meet our
working capital  requirements  for at least the next twelve months.  Thereafter,
depending on the  development of our business,  we may need to raise  additional
cash for working capital or other expenses. We may also encounter  opportunities
for  acquisitions or other business  initiatives  that require  significant cash
commitments,  or  unanticipated  problems  or  expenses  that could  result in a
requirement for additional cash before that time.

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

Competition

Technological  advances have reduced the barriers of entry into the  programming
systems  markets.  We expect  competition to increase from both  established and
emerging  companies.  If we fail to compete  successfully  against  current  and
future sources of competition,  our profitability and financial performance will
be adversely impacted.

Dependence on IC Manufacturers

We work  closely  with  most  semiconductor  manufacturers  to  ensure  that our
programming   systems  comply  with  their  requirements.   In  addition,   many
semiconductor  manufacturers  recommend our programming systems for use by users
of their programmable devices. These working relationships enable us to keep our
programming systems product line up to date and provide end-users with broad and
current  programmable device support.  Our business may be adversely affected if
our relationships with semiconductor manufactures deteriorate.

Dependence on Suppliers

Certain parts used in our products are currently  available from either a single
supplier or from a limited number of suppliers. If we cannot develop alternative
sources of these components,  if sales of parts are discontinued by the supplier
or we experience  deterioration in our relationship with these suppliers,  there
may be delays or reductions  in product  introductions  or shipments,  which may
materially adversely affect our operating results.

Because we rely on a small number of suppliers for certain parts, we are subject
to  possible  price  increases  by these  suppliers.  Also,  we may be unable to
accurately forecast our production schedule. If we under estimate our production
schedule,  suppliers may be unable to meet our demand for components. This delay
in the supply of key components may  materially  adversely  affect our business.
Over  estimation  of  demand  will lead to excess  inventories  that may  become
obsolete.

The non-automated  programming  system products we acquired when we acquired SMS
in  November  1998  are  currently  manufactured  to  our  specifications  by  a
third-party  foreign  contract  manufacturer.  We may not be able  to  obtain  a
sufficient  quantity of these  products if and when needed,  which may result in
lost sales.

Reliance on Third-Party Distribution Channels

Data  I/O  has  an   internal   sales  force  and  also   utilizes   third-party
representatives,  and distributors.  Therefore, the financial stability of these
distributors is important. Highly skilled professional engineers use most of our
products.  To be effective,  third-party  distributors must possess  significant
technical,  marketing  and sales  resources  and must devote their  resources to
sales  efforts,  customer  education,   training  and  support.  These  required
qualities limit the number of potential third-party  distributors.  Our business
will suffer if we cannot  attract and retain a  sufficient  number of  qualified
third-party distributors to market our products.

International Operations

International sales represented 64% of our net revenue for the fiscal year ended
December  31, 2002.  We expect that  international  sales will  continue to be a
significant portion of our net revenue. International sales may fluctuate due to
various factors, including:

o migration of manufacturing to low cost geographies

o unexpected changes in regulatory requirements

o tariffs and taxes

o difficulties in staffing and managing foreign operations

o longer average payment cycles and difficulty in collecting accounts receivable

o fluctuations in foreign currency exchange rates

o impact of the Euro

o compliance with applicable export licensing requirements

o product safety and other certification requirements

o political and economic instability

The European  Community and European  Free Trade  Association  have  established
certain electronic emission and product safety requirements ("CE"). Although our
products  currently  meet  these  requirements,  failure  to obtain  either a CE
certification  or a waiver for any product may  prevent us from  marketing  that
product in Europe.

We operate subsidiaries in Germany, China and Canada. Our business and financial
condition  is  sensitive to currency  exchange  rates or any other  restrictions
imposed on their currencies. Currency exchange fluctuations in Canada, China and
Germany may adversely affect our investment in our subsidiaries.

Protection of Intellectual Property

Data I/O also relies on patents,  copyrights,  trade  secrets and  trademarks to
protect our intellectual  property, as well as product development and marketing
skill to establish  and protect our market  position.  We attempt to protect our
rights in proprietary  software products,  including TaskLink and other software
products,  by  retaining  the  title  to  and  copyright  of  the  software  and
documentation,  by including  appropriate  contractual  restrictions  on use and
disclosure  in  our  licenses,   and  by  requiring  our  employees  to  execute
non-disclosure agreements. Our software products are typically shipped in sealed
packages,  or on CDs, on which notices are prominently  displayed  informing the
end-user  that,  by  breaking  the  seal of the  packaging,  or  installing  the
software,  the end-user agrees to be bound by the license agreement contained in
the  package or product.  The  license  agreement  includes  limitations  on the
end-user's  authorized use of the product, as well as restrictions on disclosure
and  transferability.  The  legal and  practical  enforceability  and  extent of
liability for violations of license  agreements that purport to become effective
upon opening of a sealed package or installation of the product are unclear.  We
are  not  aware  of any  situation  where a  license  agreement  restricting  an
end-user's  authorized use of a licensed product resulted in enforcement action.

Because of the rapidly  changing  technology  in the  semiconductor,  electronic
equipment  and  software  industries,  portions of our products  might  possibly
infringe upon existing patents or copyrights, and we may, therefore, be required
to obtain  licenses or  discontinue  the use of the  infringing  technology.  We
believe that any exposure we may have regarding possible  infringement claims is
a reasonable  business  risk  similar to that assumed by other  companies in the
electronic   equipment   and  software   industries.   However,   any  claim  of
infringement,  with or  without  merit,  could  be  costly  and a  diversion  of
management's attention,  and an adverse determination could adversely affect our
reputation,  preclude  us from  offering  certain  products,  and  subject us to
substantial liability.

Acquisitions

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

o  burdening management and our operating teams during the integration of the
   acquired entity

o  diverting management's attention from other business concerns

o  failing to successfully integrate the acquired products

o  lack of acceptance of the acquired products by our sales channels
   or customers

o  entering markets where we have no or limited prior experience

o  potential loss of key employees of the acquired company

o  additional burden of support for an acquired programmer architecture

Future acquisitions may also impact Data I/O's financial position.  For example,
we may use significant  cash or incur  additional  debt,  which would weaken our
balance sheet. We may also capitalize  goodwill and intangible  assets acquired,
the impairment of which would reduce our profitability. We cannot guarantee that
future acquisitions will improve our business or operating results.

Dependence on Key Personnel

We have  employees  located in the U.S.,  Germany,  Canada  and  China.  We also
utilize  independent  contractors for specialty work,  primarily in research and
development,  and utilize  temporary  workers to adjust  capacity to fluctuating
demand.  Many of our employees are highly skilled and our continued success will
depend in part upon our  ability to attract and retain  employees  who can be in
great demand within the industry.  None of our  employees are  represented  by a
collective  bargaining  unit and we believe  relations  with our  employees  are
favorable  though  no  assurance  can be made  that this will be the case in the
future.  Refer to the section  captioned  "Affects of Restructuring  Activities"
above.

Potential Volatility of Stock Price

The stock prices of technology  companies tend to fluctuate  significantly,  and
many experienced  significant  reductions in value during the past few years. We
believe factors such as  announcements  of new products by us or our competitors
and quarterly variations in financial results may cause the market price of Data
I/O's Common Stock to fluctuate substantially.  In addition,  overall volatility
in the stock market,  particularly in the technology  company  sector,  is often
unrelated  to  the  operating   performance   of  companies.   If  these  market
fluctuations continue in the future, they may adversely affect the price of Data
I/O's Common Stock.