===============================================================

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


                                    FORM 10-Q




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



        For the quarter ended MARCH 31, 2001 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 Idenitfication No.)
      incorporation or organization)





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


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



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



  7,560,167 shares of no par value Common Stock outstanding as of May 10, 2001

                                  Page 1 of 13




<PAGE>


                              DATA I/O CORPORATION

                                    FORM 10-Q
                      For the Quarter Ended March 31, 2001

                                      INDEX


Part I - Financial Information                                         Page

     Item 1.    Financial Statements (unaudited)                         3

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

     Item 3     Qantitative And Qualitative Disclosures About
                Market Risk                                             12

Part II - Other Information

     Item 1.    Legal Proceedings                                       13

     Item 2.    Changes in Securities                                   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                        13


Signatures                                                              13






<PAGE>


                         PART I - FINANCIAL INFORMATION

                          Item 1. Financial Statements

                              DATA I/O CORPORATION

                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------
                                                                                    Mar. 31,                Dec. 28,
                                                                                      2001                    2000
-----------------------------------------------------------------------------------------------------------------------
(in thousands, except share data)                                                  (unaudited)
<S>                                                                               <C>                      <C>
ASSETS
CURRENT ASSETS:
     Cash and cash equivalents                                                         $2,238                 $3,133
     Marketable securities                                                              2,251                  1,944
     Trade accounts receivable, less allowance for
        doubtful accounts of $351 and $350                                              9,320                 10,627
     Inventories                                                                        7,893                  9,166
     Recoverable income taxes                                                              73                     91
     Other current assets                                                                 352                    444
                                                                                   -----------            -------------
        TOTAL CURRENT ASSETS                                                           22,127                 25,405

Property, plant and equipment - net                                                     2,469                  2,190
Other assets                                                                              889                  1,151
                                                                                   -----------            -------------
        TOTAL ASSETS                                                                  $25,485                $28,746
                                                                                   ===========            =============

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
     Accounts payable                                                                $    922                 $1,674
     Accrued compensation                                                               1,388                  2,073
     Deferred revenue                                                                   2,799                  2,637
     Other accrued liabilities                                                          1,986                  1,623
     Accrued costs of business restructuring                                              102                    117
     Income taxes payable                                                                 350                    489
                                                                                   -----------            -------------
        TOTAL CURRENT LIABILITIES                                                       7,547                  8,613

Deferred gain on sale of property                                                       2,012                  2,094
                                                                                   -----------            -------------
        TOTAL LIABILITIES                                                               9,559                 10,707

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, 7,560,000
           and 7,495,000 shares                                                        18,407                 18,292
     Accumulated losses                                                                (2,482)              (    163)
     Accumulated other comprehensive income (loss)                                          1               (     90)
                                                                                   -----------            -------------
        TOTAL STOCKHOLDERS' EQUITY                                                     15,926                 18,039
                                                                                   -----------            -------------
        TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $25,485                $28,746
                                                                                   ===========            =============
See notes to consolidated financial statements.


</TABLE>


<PAGE>


                              DATA I/O CORPORATION

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------
                                                                                               Mar. 31,           Mar. 30,
For the quarters ended                                                                           2001               2000
-----------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share data)                                                                                   As
                                                                                                                 Restated 1
<S>                                                                                           <C>               <C>
Net sales                                                                                        $7,883             $5,630
Cost of goods sold                                                                                5,147              3,384
                                                                                              ------------       ------------
Gross margin                                                                                      2,736              2,246

Operating expenses:
     Research and development                                                                     1,939              2,421
     Selling, general and administrative                                                          2,996              2,525
                                                                                              ------------       ------------
          Total operating expenses                                                                4,935              4,946

                                                                                              ------------       ------------
          Operating loss                                                                         (2,199)            (2,700)

Non-operating income (expense):
     Interest income                                                                                 65                176
     Interest expense                                                                                (7)                (9)
     Foreign currency exchange                                                                       (6)                (3)
                                                                                              ------------       ------------
          Total non-operating income (expense)                                                       52                164

                                                                                              ------------       ------------
     Loss from operations before income taxes                                                    (2,147)            (2,536)


Income tax expense                                                                                     2                 13
                                                                                              ------------       ------------
     Loss from operations                                                                         (2,149)            (2,549)



Cumulative effect of change in accounting principle                                                    -             (2,531)
                                                                                              ------------       ------------

Net loss                                                                                        ($2,149)           ($5,080)
                                                                                              ============       ============

Basic and diluted loss per share:
     From continuing operations                                                                  ($0.28)            ($0.35)
     Cumulative effect of change in accounting principle                                           0.00              (0.34)
                                                                                              ------------       ------------
     Total basic and diluted loss per share                                                      ($0.28)            ($0.69)
                                                                                              ============       ============

Weighted average shares outstanding                                                               7,560              7,347
                                                                                              ============       ============
Weighted average and potential shares outstanding                                                 7,560              7,347
                                                                                              ============       ============

See notes to consolidated financial statements.
</TABLE>
1 The restatement is due to the Company's adoption of SAB 101.

<PAGE>


                              DATA I/O CORPORATION

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------
                                                                                                Mar. 31,           Mar, 30
For the quarters ended                                                                            2001              2000
------------------------------------------------------------------------------------------------------------------------------
(in thousands)                                                                                                       As
                                                                                                                Restated 1
<S>                                                                                            <C>             <C>
OPERATING ACTIVITIES:
     Loss from operations                                                                        ($2,149)         ($2,549 )
     Adjustments to reconcile income (loss) from operations
       to net cash provided by (used in) operating activities:
       Depreciation and amortization                                                                 597              527
       Net loss on dispositions                                                                       74                -
       Deferred revenue                                                                              162            5,638
       Amortization of deferred gain on sale                                                         (82)             (83)
       Net change in:
          Trade accounts receivable                                                                1,307              (37)
          Inventories                                                                              1,005           (3,809)
          Recoverable income taxes                                                                    18                2
          Other current assets                                                                        85              151
          Business restructure                                                                      (15)             (60)
          Accounts payable and accrued liabilities                                                (1,212)             178
                                                                                               -----------      --------------
     Cash used in operating activities                                                              (210)             (42)
     Cash used in cumulative effect of change in accounting principle                                  -           (2,531)
                                                                                               -------------------------------
     Net cash used in operating activities                                                          (210)          (2,573)

INVESTING ACTIVITIES:
     Additions to property, plant and equipment                                                     (413)             (83)
     Purchases of marketable securities                                                           (2,679)          (2,340)
     Proceeds from sales of marketable securities                                                  2,369            2,999
                                                                                               -----------      --------------
       Cash provided by investing activities                                                        (723)             576

FINANCING ACTIVITIES:
     Sale of common stock                                                                            115               82
     Proceeds from exercise of stock options                                                           -               56
                                                                                               -----------      --------------
       Cash provided by financing activities                                                         115              138

Decrease in cash and cash equivalents                                                               (818)          (1,859)

Effects of exchange rate changes on cash                                                             (77)               -
Cash and cash equivalents at beginning of quarter                                                  3,133            3,597
                                                                                               -----------      --------------
Cash and cash equivalents at end of quarter                                                       $2,238           $1,738
                                                                                               ===========      ==============

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
     Interest                                                                                         $8              $10
     Income taxes                                                                                     $2              $38

See notes to consolidated financial statements.

1 The restatement is due to the Company's adoption of SAB 101.
</TABLE>

<PAGE>


                              DATA I/O CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1 - FINANCIAL STATEMENT PREPARATION

The  financial  statements  as of March 31, 2001 and March 30,  2000,  have been
prepared by the Company  pursuant to the rules and regulations of the Securities
and Exchange  Commission  (SEC).  These  statements  are  unaudited  but, in the
opinion of management,  include all adjustments  (consisting of normal recurring
adjustments  and  accruals)  necessary  to present  fairly the  results  for the
periods presented.  The balance sheet at December 28, 2000 has been derived from
the audited financial  statements at that date. Certain information and footnote
disclosures  normally  included in financial  statements  prepared in accordance
with  accounting  principles  generally  accepted in the United States have been
condensed  or  omitted  pursuant  to such SEC rules and  regulations.  Operating
results for the quarter ended March 31, 2001 are not  necessarily  indicative of
the results  that may be expected for the year ending  December 31, 2001.  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 28, 2000.


NOTE 2 - INVENTORIES

Inventories consisted of the following components (in thousands):

                                           Mar. 31,                 Dec. 28,
                                            2001                     2000
                                      ----------------         ----------------
Raw material                              $4,416                    $4,526
Work-in-process                            2,206                     2,756
Finished goods                             1,271                     1,884
                                      ----------------         ----------------
                                          $7,893                    $9,166
                                      ================         ================


NOTE 3 - PROPERTY, PLANT AND EQUIPMENT

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

                                          Mar. 31,                 Dec. 28,
                                           2001                     2000
                                      ----------------         ----------------

Building improvements                  $    221                  $    205
Equipment                                13,101                    12,703
                                      ----------------         ----------------
                                         13,322                    12,908
Less accumulated depreciation            10,853                    10,718
                                      ----------------         ----------------
                                        $ 2,469                   $ 2,190
                                      ================         ================


<PAGE>


NOTE 4 - BUSINESS RESTRUCTURING PROGRESS

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

The  total  number  of  employees  terminated  due to the  restructure  was  133
(approximately  39% of the total  workforce).  Employees  were  terminated  from
almost all areas of the Company. Total involuntary termination benefits paid and
charged against the restructure  reserve were approximately $2.1 million.  Total
facility  consolidation  and abandonment  costs incurred and charged against the
restructure  reserve  were  approximately  $480,000.  Other  exit costs paid and
charged against the restructure  reserve,  including legal and consulting  fees,
settlements with suppliers and fixed asset disposals,  were  approximately  $1.7
million. The remaining reserve at March 31, 2001 of $102,000 relates to facility
abandonment and foreign subsidiary operations realignment.


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
                                                                                   2001             2000
                                                                               -------------    -------------
<S>                                                                              <C>               <C>
      Numerator for basic and diluted earnings per share:
           Income from operations before cum-
           ulative effect of change in accounting principle                        (2,149)          (2,549)
           Cumulative effect of change in accounting principle                          -           (2,531)
                                                                               -------------    -------------
           Net income (loss)                                                      ($2,149)         ($5,080)
                                                                               =============    =============
      Denominator:
           Denominator for basic earnings per share -
               weighted-average shares                                              7,560            7,347
           Employee stock options (1)                                                   -                -
                                                                               -------------    -------------
           Denominator for diluted earnings per share -
               adjusted weighted-average shares and
               assumed conversion of stock options                                  7,560            7,347
                                                                               =============    =============
      Basic and diluted earnings (loss) per share
           From continuing operations, after taxes before
           cumulative effect of change in accounting principle                     ($0.28)          ($0.35)
           From change in accounting principle                                     ($0.00)          ($0.34)
                                                                               -------------    -------------
           Total basic and diluted earnings per share                              ($0.28)          ($0.69)
                                                                               =============    =============


(1)      Excludes 73,258 and 249,395 employee stock options which were antidilutive in the first quarter of 2001 and 2000.
</TABLE>


<PAGE>


NOTE 6 - ACCOUNTING FOR INCOME TAXES

The Company's effective tax rate for the first quarter of 2001 differed from the
statutory  34% tax rate  primarily  due to  operating  losses  for  which no tax
benefit was recorded. Tax valuation reserves increased by approximately $525,000
during the quarter.  As of March 31, 2001 the Company has valuation  reserves of
$7,907,000.


NOTE 7 - COMPREHENSIVE INCOME (LOSS)

During the first quarter of 2001 and 2000 total comprehensive income (loss) was
comprised of the following (in thousands):
<TABLE>
<CAPTION>

                                                                                  For the first quarter
                                                                                    2001             2000
                                                                              ------------     -------------
<S>                                                                             <C>            <C>
                                                                                               As Restated
                  Net loss                                                        ($2,149)         ($5,080)
                  Foreign currency translation gain (loss)                             (2)               1
                                                                              ------------     -------------
                  Total comprehensive loss                                        ($2,151)         ($5,079)
                                                                              ============     =============
</TABLE>

NOTE 8 - CHANGE IN FISCAL YEAR

The  Company has  reported  on a  fifty-two,  fifty-three  week basis.  The last
reporting  period using this fiscal period was the year ended December 28, 2000.
The  Company's  board of directors  approved a  resolution  on March 12, 2001 to
change the Company's  reporting  period to a calendar year and calendar  quarter
basis  effective for the current  fiscal year.  The first quarter of 2001 covers
the period December 29, 2000 to March 31, 2001.


NOTE 9 - FOREIGN CURRENCY TRANSLATION AND DERIVATIVES

Assets and  liabilities of foreign  subsidiaries  are translated at the exchange
rate on the  balance  sheet  date.  Revenues,  costs  and  expenses  of  foreign
subsidiaries are translated at average rates of exchange  prevailing  during the
year.  Translation  adjustments  resulting  from this  process  are  charged  or
credited 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.

The Company 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 the Company are fair value
hedges.  Generally,  these  contracts  have  maturities  less  than one year and
require the Company to exchange foreign currencies for U.S. dollars at maturity.
The fair  value  of open  hedge  contracts  as of  March  31,  2001 is a loss of
$106,000 and is included in accounts payable on the balance sheet.

NOTE 10 - REVENUE RECOGNITION

Sales of the Company's  semiconductor  programming  equipment products requiring
installation  by the Company 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.  Revenue
from other product sales is recognized at the time of shipment. Revenue from the
sale of service  and update  contracts  is  recorded  as  deferred  revenue  and
recognized on a straight-line basis over the contractual period.

The Company  previously  recognized  revenue from  product  sales at the time of
shipment,  or at customer  acceptance,  if an acceptance clause was specified in
the sales terms.  Effective December 31, 1999, the Company changed its method of
accounting for product sales requiring Company  installation,  when installation
is other than  perfunctory,  to recognize  such  revenues when  installation  is
complete,  or at  the  later  of  customer  acceptance  or  installation,  if an
acceptance  clause is  specified in the sales  terms.  The Company  believes the
change in accounting  principle is preferable based on guidance  provided in SEC
Staff Accounting  Bulletin No. 101 (SAB 101),  Revenue  Recognition in Financial
Statements.  The  cumulative  effect on prior years resulted in a charge to year
2000's income of  $2,531,000  (or $0.34 per share,  basic and diluted).  The net
quarterly  effect on previously  reported  revenues for year 2000 was: Quarter 1
($972,000), Quarter 2 $3,966,000, and Quarter 3 $1,643,000.



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

General


Forward-Looking Statements

This Quarterly Report on Form 10-Q includes  forward-looking  statements  within
the meaning of the Private  Securities  Litigation  Reform Act of 1995. This Act
provides a "safe harbor" for  forward-looking  statements to encourage companies
to provide  prospective  information  about  themselves as long as they identify
these statements as forward looking and provide meaningful cautionary statements
identifying important factors that could cause actual results to differ from the
projected results.  All statements other than statements of historical fact made
in this  Quarterly  Report  on Form 10-Q are  forward  looking.  In  particular,
statements herein regarding industry prospects;  future results of operations or
financial  position;  integration of acquired  products and  operations;  market
acceptance of the Company's newly introduced or upgraded products;  development,
introduction  and  shipment of new  products;  and any other  guidance on future
periods  are  forward-looking  statements.  Forward-looking  statements  reflect
management's  current expectations and are inherently  uncertain.  The Company's
actual results may differ  significantly  from  management's  expectations.  The
following  discussion  and discussion  under the caption  "Business - Cautionary
Factors That May Affect Future Results" in Item 1 in the Company's Annual report
on Form 10-K for the year ended  December 28, 2000,  describe some, but not all,
of the factors that could cause these differences.

<TABLE>
<CAPTION>

Results of Operations

Net Sales

 (in thousands)                                               First Quarter                                First Quarter

 Net Sales by Product Line:                                       2001                   Change                 2000
 ----------------------------------------------------------------------------------------------------   -------------------
<S>                                                          <C>                        <C>               <C>

 Non-automated programming systems                               $4,690                   8.3%                 $4,331

 Automated programming systems                                    3,193                 145.8%                  1,299
                                                            ------------------    -------------------    -------------------

 Total Programming Systems Division                              $7,883                  40.0%                 $5,630
                                                            ==================    ===================    ===================


 Net Sales by location:

    United States                                                $2,920                 15.2%                  $2,535

       % of total                                                 37.0%                                         45.0%

    International                                                $4,963                 60.4%                  $3,095

       % of total                                                 63.0%                                         55.0%
 ---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Revenues for the first quarter of 2001 increased $2.3 million or 40% compared to
the first quarter of 2000.  The company  adopted SAB 101 in the first quarter of
2000,  resulting  in the  deferral of  recognizing  $972,000 in revenues for the
quarter.  The balance of the increased sales relates to higher shipment  volumes
of PP100's and the introduction of the ProLINE-RoadRunner  automated programming
system.

Most of the revenue  deferred in 2000 related to  international  shipments,  but
international  revenue in 2001 still increased  $900,000 over the prior year and
accounted for 63% of the quarter's shipments.

The Company has  experienced  a decline in sales for the first quarter 2001 from
the third and fourth  quarters of 2000. The decline is attributed to the Company
experiencing a reduction in the orders for automated programming equipment.  The
Company  believes this to be primarily due to a general  economic slowing in the
wireless  communications  industry,  among contract  manufacturers  and in other
sectors of the electronics industry.



<TABLE>
<CAPTION>

Gross Margin

 (in thousands)                                                 First Quarter                              First Quarter
                                                                     2001                Change                 2000
----------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                       <C>              <C>
Gross Margin                                                        $2,736                21.7%                $2,248

Percentage of net sales                                              34.7%                                      39.9%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

Gross margin dollars  increased 21.7% on a 40% revenue increase during the first
quarter  2001  versus the same  quarter  in 2000.  The gross  margin  percentage
decreased  from  39.9% to 34.7%.  The  adoption  of SAB 101  reduced  the margin
dollars in the first quarter of 2000 by $409,000 but did not  materially  impact
the margin  percentage.

A  $630,000  charge was  recorded  in the first  quarter of 2001 to reserve  for
excess or obsolete  inventory  due primarily to the slower sales volume than the
preceding  quarters.  This charge  reduced the gross margin  percentage by 8.0%.
Without  this  charge  for  excess  or  obsolete  inventory,  the  gross  margin
percentage would have increased from year to year.

Research and Development
<TABLE>
<CAPTION>

  (in thousands)                                                First Quarter                              First Quarter
                                                                     2001                Change                2000
 --------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                      <C>               <C>
 Research and development                                           $1,939               (19.9%)              $2,421

 Percentage of net sales                                             24.6%                                     43.0%
 --------------------------------------------------------------------------------------------------------------------------
</TABLE>

The decrease in research and development (R&D) spending for the first quarter of
2001 as compared to the first quarter of 2000 reflects lower headcount and lower
development  spending.  R&D spending was very high in the first  quarter of 2000
due to PP100 and  ProLINE  RoadRunner  development  activities.  During 2001 the
Company  plans to continue  spending at its current rate to develop new products
and technology.

Selling, General and Administrative
<TABLE>
<CAPTION>
 (in thousands)                                                 First Quarter                              First Quarter
                                                                     2001                Change                2000
 --------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                      <C>               <C>
 Selling, general & administrative                                  $2,996                18.5%               $2,528

 Percentage of net sales                                             38.0%                                     44.9%
 --------------------------------------------------------------------------------------------------------------------------
</TABLE>

The  increase in Selling,  General and  Administrative  (SG&A)  expense  relates
primarily to increases in selling expenses.  Internal sales personnel were hired
to generate  sales and the Company  staffed a direct  sales force in China.  The
discount  in 2000 for sales  distributors  was  recorded as a net  reduction  to
revenue,  while the internal  sales costs are recorded as selling  expense.  G&A
costs are slightly  higher than the prior year.  Under the  reorganization  into
business units done last fall,  certain management costs became part of G&A that
had previously been charged to COGS and R&D in 2000.

Interest

<TABLE>
<CAPTION>

 (in thousands)                                                 First Quarter                              First Quarter
                                                                     2001                 Change                2000
 --------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                       <C>              <C>
 Interest income                                                     $65                 (63.1%)                $176

 Interest expense                                                     $7                 (22.2%)                  $9
 --------------------------------------------------------------------------------------------------------------------------
</TABLE>

The decrease in interest income for the first quarter of 2001 as compared to the
first  quarter of 2000 is due to the  decrease  in cash,  cash  equivalents  and
marketable  securities,  due primarily to the funding of operating losses during
the past year.

Income Taxes
<TABLE>
<CAPTION>

 (in thousands)                                                 First Quarter                              First Quarter
                                                                     2001                                      2000
 --------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                                        <C>

 Income tax expense                                                   $2                                        $13

 Effective tax rate                                                 0.1%                                       0.2%
 --------------------------------------------------------------------------------------------------------------------------
</TABLE>

Tax expense recorded for the first quarter of 2001 was due to foreign taxes. Tax
valuation reserves increased by approximately $525,000 during the quarter. As of
March 31, 2001 the Company has valuation reserves of $7,907,000.


Financial Condition

Liquidity and Capital Resources
<TABLE>
<CAPTION>
                                                                 Mar. 31                                     Dec. 28,
(in thousands)                                                    2001                   Change                2000
------------------------------------------------------------- --------------------- -------------------- -------------------
<S>                                                             <C>                      <C>                 <C>
Working capital                                                  $14,580                 ($2,212)             $16,792
Total debt                                                            $0                      $0                   $0
------------------------------------------------------------- --------------------- -------------------- -------------------
</TABLE>

Working capital decreased during the first quarter of 2001 due to funding of the
loss for the quarter.  Cash, cash equivalents and marketable  securities,  which
decreased  approximately  $600,000  during the quarter,  were used to reduce the
accounts  payable  balance.  Accounts  receivable  and inventory  each decreased
approximately  $1.3  million.  As of March 31,  2001,  the  Company  had no debt
outstanding.

The  Company  estimates  that  capital  expenditures  for  property,  plant  and
equipment  during  the  remainder  of 2001 will be  between  $750,000  and $1.75
million.  The Company's future capital  requirements  will depend on a number of
factors costs  associated  with R&D,  successful  launch of new products and the
potential use of funds for  strategic  purposes.  The Company  believes that its
existing working capital, together with amounts anticipated from operations will
provide the Company with sufficient funds to finance its operations for at least
the next 12 months.

Share  repurchase  program

Under a previously announced share repurchase program, the Company is authorized
to repurchase up to 1,123,800  shares  (approximately  15.2%) of its outstanding
common stock.  These purchases may be executed  through open market purchases at
prevailing  market prices,  through block  purchases or in privately  negotiated
transactions,  and may commence or be  discontinued at any time. As of March 31,
2001, the Company has repurchased 1,016,200 shares under this repurchase program
at a total cost of approximately  $7.1 million.  The Company has not repurchased
shares  under this plan since the second  quarter of 1997  although it still has
the authority to do so.

RESTRUCTURING

The  Company  announced  on April 17, 2001 a  restructuring  plan to realign the
company with growth  opportunities.  The plan refocuses the company's investment
in  long-term  growth  markets  by  streamlining   worldwide   operations.   The
restructuring  program is meant to reduce the Company's breakeven  operations at
least 20% by reducing the global  workforce by 20%;  discontinue  or  reallocate
numerous projects and activities not essential to the company's long-term goals;
decrease  discretionary  marketing,  distribution and promotional expenses;  and
consolidate  numerous  functions across the organization.  The Company estimates
that the restructuring charges will be approximately $500,000.


General


European Monetary Conversion

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

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


Item 3.  Quantitative and Qualitative Disclosures About Market Risk

The Company has  experienced  no material  changes in market  risk.  The Company
currently uses only foreign currency hedge derivative  instruments,  which, at a
given date, are not material.  However,  the Company is exposed to interest rate
risks.  The  Company  generally  invests  in  high-grade  commercial  paper with
original  maturity dates of twelve months or less and conservative  money market
funds  to  minimize  its  exposure  to  interest  rate  risk  on its  marketable
securities,  which are classified as available-for-sale as of March 31, 2001 and
December 28, 2000.


<PAGE>



PART II - OTHER INFORMATION



Item 1.           Legal Proceedings

                  None


Item 2.           Changes in Securities

                  None


Item 3.           Defaults Upon Senior Securities

                  None


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

                  None

Item 5.           Other Information

                  None


Item 6.           Exhibits and Reports on Form 8-K

                  (a)  Exhibits

                  None

                  (b)  Reports on Form 8-K

                  A report  on Form 8-K  dated  March  19,  2001 was  filed
                  related to a change in the company's fiscal period. The
                  Company previously reported on a fifty-two, fifty-three
                  week basis.  The board of  directors  approved on March
                  12, 2001 a resolution to change the Company's reporting
                  to a calendar year and calendar quarter basis.

                  A report on Form 8-K dated March 19, 2001 was filed related
                  to the election of Steven M. Quist to the company's board of
                  directors on March 12, 2001 and the appointment of Irene
                  Bjorklund as the vice president of sales and marketing.



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 10, 2001



                                                   By://S//Joel S. Hatlen
                                                        Joel S. Hatlen
                                                   Vice President - Finance
                                                   Chief Financial Officer
                                                   Secretary and Treasurer