DATA I/O CORP — Interim / Quarterly Report 1999

Aug 12, 1999

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 JULY 1, 1999 Commission File No. 0-10394 DATA I/O CORPORATION (Exact name of registrant as specified in its charter) Washington 91-0864123 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 10525 Willows Road N.E., Redmond, Washington, 98052 (address of principal executive offices, Zip Code) (425) 881-6444 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No 7,285,790 shares of no par value Common Stock outstanding as of August 6, 1999 Page 1 of 18 Exhibit Index on Page 18 DATA I/O CORPORATION FORM 10-Q For the Quarter Ended July 1, 1999 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 9 Part II - Other Information Item 1. Legal Proceedings 16 Item 2. Changes in Securities 16 Item 3. Defaults Upon Senior Securities 16 Item 4. Submission of Matters to a Vote of Security Holders 16 Item 5. Other Information 16 Item 6. Exhibits and Reports on Form 8-K 16 Signatures 17 Exhibit Index 18 Page 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements DATA I/O CORPORATION CONSOLIDATED BALANCE SHEETS

Page 3 DATA I/O CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

See notes to consolidated financial statements. Page 4 DATA I/O CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

See notes to consolidated financial statements. Page 5 DATA I/O CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 - FINANCIAL STATEMENT PREPARATION The financial statements as of July 1, 1999 and June 25, 1998, 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 31, 1998 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 generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. Operating results for the quarter ended July 1, 1999 are not necessarily indicative of the results that may be expected for the year ending December 30, 1999. 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, 1998. Certain prior period's balances have been reclassified to conform to the presentation used in the current period. NOTE 2 - INVENTORIES Inventories consisted of the following components (in thousands): July 1, Dec. 31, 1999 1998 ---------------- ---------------- Raw material $2,270 $1,357 Work-in-process 1,982 877 Finished goods 2,794 2,208 ---------------- ---------------- $7,046 $4,442 ================ ================ NOTE 3 - PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consisted of the following components (in thousands): July 1, Dec. 31, 1999 1998 ---------------- ---------------- Building and improvements $ 167 $ 181 Equipment 13,680 15,155 ---------------- ---------------- 13,847 15,336 Less accumulated depreciation 11,973 13,162 ---------------- ---------------- $ 1,874 $ 2,174 ================ ================ NOTE 4 - DISCONTINUED OPERATIONS In November 1997, the Company sold the assets of its Semiconductor Equipment Division, Reel-Tech(TM) Inc., to General Scanning Inc. Also in November 1997, the Company entered into a licensing agreement and an agreement to sell certain assets of its Synario Design Automation Division (SDAD) to MINC Washington Incorporated. These transactions discontinued the Semiconductor Equipment Division and SDAD operations of the Company. Although the Company was entitled to receive certain licensing, source code and training and support services revenues related to certain of its former SDAD products through December 31, 1999, during the second quarter 1999 the Company closed final settlements and transfer of its retained licensing rights. The Company has recognized net earnings of $831,000 and $707,000 from SDAD licensing agreements, source code sales and training and support services provided during the first six months 1999 and 1998, respectively. No further income is expected in future periods from SDAD discontinued operations. Operating results of these discontinued divisions are classified as discontinued operations in the financial statements. Page 6 NOTE 5 - BUSINESS RESTRUCTURING PROGRESS During the third and fourth quarters of 1998 the Company recorded a pretax charge of $4.4 million related to the restructure of its Redmond operations and certain of its international subsidiaries. With the implementation of the restructuring initiatives during 1998 and continuing into 1999, the Company has four objectives: (1) to reduce its corporate overhead costs; (2) to reduce research and development expenses and to focus its on-going research and development spending in the segments of the market that show the best potential for growth and return on investment for the Company; (3) to create a more variable cost operating structure including the out-sourcing of certain of its manufacturing operations during 1999; and (4) to eliminate redundant products and operations after the acquisition of SMS GmbH in November 1998. The implementation of the restructuring plan continued during the first six months of 1999. By the end of the second quarter of 1999 the Company completed all of the planned headcount downsizing. Of the total $4.4 million restructuring charge taken in 1998, approximately $2.3 million remained as an accrued liability at December 31, 1998. At July 1, 1999, the remaining accrued liability was approximately $1.0 million. The reduction during the first six months of 1999 related primarily to severances and related payments to terminated employees, plus the reversal of $215,000 of restructure reserve during the second quarter primarily due to the Company's settlement of certain supplier related claims for less than had been anticipated at the time the restructuring charge was taken in 1998. The remaining accrued liability primarily relates to severances and related payments made to employees terminated in June 1999 (paid in July 1999), machinery and equipment to be disposed of and lease abandonment costs. Other than the lease abandonments portion, the remaining restructuring reserve of $1.0 million is expected to be utilized during the second half of 1999. The Company's original restructuring plans included the outsourcing of certain of its manufacturing operations by the second half of 1999. The Company continues to assess the extent of outsourcing and manufacturing restructure changes to implement to best support the long-term direction of the company. NOTE 6 - EARNINGS PER SHARE The following table sets forth the computation of basic and diluted earnings per share (in thousands except per share data):

(1) Excludes 43,452 and 35,361 employee stock options which were antidilutive for the second quarter and the six months ended July 1, 1999, respectively, and 64,062 and 96,927 which were antidilutive for the second quarter and the six months ended June 26, 1998, respectively. Page 7 NOTE 7 - ACCOUNTING FOR INCOME TAXES The Company's effective tax rate for the first six months of 1999 differed from the statutory 34% tax rate primarily due to operating losses for which no tax benefit was recorded. Tax valuation reserves decreased by approximately $324,000 during the first six months of 1999. As of July 1, 1999 the Company has valuation reserves of $5,621,000 that may increase should the Company continue to incur losses or reverse as the Company records income. NOTE 8 - COMPREHENSIVE INCOME During the second quarter and first six months of 1999 and 1998 total comprehensive income (loss) was comprised of the following (in thousands):

Page 8 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 reconstituted products; development, introduction and shipment of new products; completion of outsourcing of manufacturing and certain sustaining engineering functions on favorable terms and without significant disruption and achievement of cost savings from such outsourcing; the assessment of the Company's year 2000 exposure and completion of remediation efforts; and any other guidance on future periods are forward-looking statements. Forward-looking statements reflect management's current expectations and are inherently uncertain. The Company's actual results may differ significantly from management's expectations. The following discussions and discussions under the caption "Business - Additional 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, 1998, describe some, but not all, of the factors that could cause these differences. BUSINESS RESTRUCTURING During the first six months of 1999 the Company continued to implement the restructuring of its Redmond operations and certain of its international subsidiaries. This restructuring plan was initiated in the second half of 1998 and is expected to be completed in the second half of 1999. During the first six months of 1999, approximately $1.1 million in accrued restructuring costs, primarily severance related, were paid out. Also, reserves of $215,000 were reversed during the second quarter of 1999 primarily related to the Company's settlement of certain supplier related claims for less than had been anticipated at the time the restructuring charge was taken in 1998. The remaining restructure reserve of $1.0 million primarily relates to severances and related payments made to employees terminated in June 1999 (paid in July 1999), machinery and equipment to be disposed of and lease abandonment costs. Other than the lease abandonments portion, the remaining restructuring reserve is expected to be utilized during the second half of 1999. This restructuring has lowered the Company's operating costs which is reflected in the results for the first six months of 1999 (see discussions below). The Company's original restructuring plans included the outsourcing of certain of its manufacturing operations by the second half of 1999. The Company continues to assess the extent of outsourcing and manufacturing changes to implement to best support the long-term direction of the company. In February 1999 the Company sold its Japan sales and service subsidiary to a former sub-distributor who continues to distribute the Company's products in Japan (see "Net Gain on Dispositions" below). Additionally, the Company continues to realign its operations in Germany. Page 9 Results of Continuing Operations For all periods presented in this section, results of operations have been reclassified to reflect the classification of the Company's Semiconductor Equipment and Synario Design Automation Divisions as discontinued operations (see "Discontinued Operations").

Sales increased slightly but orders decreased for the Company's programming system products in the second quarter of 1999 compared to the second quarter of 1998. Orders in the second quarter of 1999 decreased approximately 12% to $7.9 million, compared with $9.0 million in 1998. The decrease in orders during the second quarter of 1999 is primarily due to lower orders for the Company's non-automated programming systems, offset partially by increased orders for the Company's PP100 automated programming system, which was part of the SMS and Unmanned Solutions technology license acquisition. The slight increase in sales for the second quarter was due to an increase in sales of the PP100 automated programming system, offset by a decrease in sales of the Company's non-automated programming systems. Sales of the Company's older non-automated products, some of which have been discontinued, decreased during the second quarter, but this was offset partially by the introduction of the SMS Sprint non-automated products which began to be integrated into the Data I/O product line during the first quarter of 1999 following the acquisition of SMS in November 1998. Sales of the Sprint products are expected to increase during the year as those products are fully integrated into the Data I/O product lines and sales channels. However, there can be no assurance that the Sprint products will be accepted in the market or that sales of Sprint products will fully offset the decline in sales related to older Data I/O products or those which have been cancelled. Page 10 GROSS MARGIN Second Quarter First Six Months ---------------------------------------------------- (in thousands) 1999 1998 1999 1998 - ------------------------------------------------------------------------------- Gross Margin $4,463 $3,528 $8,120 $7,184 Percentage of net sales 49.9% 40.2% 48.6% 41.7% - ------------------------------------------------------------------------------- Gross margin for both the second quarter and first six months of 1999 increased compared to the same periods in 1998 due primarily to lower labor costs as a result of the Company's restructuring. Also contributing to the increase was the recognition of contract and upgrade revenue related to the PM970 program during the second quarter of 1999 that had been deferred from 1998. RESEARCH AND DEVELOPMENT Second Quarter First Six Months --------------------------------------------------- (in thousands) 1999 1998 1999 1998 ----------------------------------------------------------------------------- Research and development $1,955 $2,397 $3,963 $4,811 Percentage of net sales 21.9% 27.3% 23.7% 28.0% ----------------------------------------------------------------------------- The decrease in research and development spending in both the second quarter and first six months of 1999 as compared to the same periods in 1998 is primarily due to the Company's restructuring which was initiated in the second half of 1998. This restructuring resulted in significant layoffs in the Redmond headquarters engineering staff in the second half of 1998 and in the first quarter 1999, and has resulted in a more focused research and development effort in strategic growth markets. Partially offsetting the reduced spending in Redmond are incremental expenses of research and development in the Company's Wangen, Germany operations which were acquired in November 1998. SELLING, GENERAL AND ADMINISTRATIVE Second Quarter First Six Months ----------------------------------------- (in thousands) 1999 1998 1999 1998 ------------------------------------------------------------------------------ Selling, general & administrative $3,031 $3,760 $5,998 $7,639 Percentage of net sales 33.9% 42.8% 35.9% 44.4% ------------------------------------------------------------------------------ The decrease in selling, general and administrative expenditures in both the second quarter and first six months of 1999 as compared with the same periods in 1998 is due primarily to a reduction in headcount across most SG&A departments as a result of the Company's restructuring which was initiated in the second half of 1998. Also, the sale of the Company's Japan subsidiary in February 1999 resulted in lower spending in selling, general and administrative expenses as compared to the prior year. Furthermore, first quarter 1998 expenses included a non-cash charge in the amount of $540,000 related to the modification of stock options of a former CEO of the Company and, in addition, expenses related to the search for a new Chief Executive Officer. Partially offsetting the reduced spending are incremental expenses of the Company's Wangen, Germany operations which were acquired in November 1998. Page 11 INTEREST Second Quarter First Six Months ---------------------------------------------------------- (in thousands) 1998 1998 1998 1998 ----------------------------------------------------------------------------- Interest income $135 $382 $403 $851 Interest expense ($10) ($17) ($20) ($49) ----------------------------------------------------------------------------- The decrease in interest income for both the second quarter and first six months of 1999 as compared to the same periods of 1998 is due to the decrease in cash, cash equivalents and marketable securities, due primarily to the funding of operating losses during the past six quarters and the purchase of SMS in the fourth quarter of 1998. NET GAIN ON DISPOSITIONS - SALE OF JAPAN SUBSIDIARY AND JTAG TECHNOLOGIES MINORITY INTEREST In connection with the Company's restructuring, during the first quarter of 1999 the Company sold its Japan sales subsidiary to Synchro-Work Corporation, one of its sub-distributors in Japan, for total consideration of approximately $100,000. The sale resulted in a gain before taxes of approximately $1.1 million primarily due to previously unrecognized accumulated currency translations. In connection with this sale, the Company and Synchro-Work also entered into a new distribution agreement for sales into Japan. See "Business Restructuring" above. During the second quarter of 1999 the Company sold its minority interest in JTAG Technologies back to JTAG Holdings BV, resulting in a net gain of $85,000. Also in connection with this sale the Company terminated its distribution agreement with JTAG. The decision to make this sale and termination was due to the Company's low volume of distribution of the JTAG products. INCOME TAXES Second Quarter First Six Months ------------------------------------------------- (in thousands) 1999 1998 1999 1998 ------------------------------------------------------------------------------ Income tax expense from continuing operations $9 $7 $23 $36 Effective tax rate (9.5%) (0.3%) (55.0%) (0.7%) ------------------------------------------------------------------------------ Tax expense recorded for both the second quarter and first six months of 1999 was due to foreign taxes. Tax valuation reserves decreased by approximately $324,000 during the first six months of 1999. As of July 1, 1999 the Company had valuation reserves of $5,621,000 that may increase should the Company continue to incur losses or reverse as the Company records income. Page 12 NET INCOME AND EARNINGS PER SHARE Second Quarter First Six Months ----------------------------------------- (in thousands, except per share data) 1999 1998 1999 1998 - -------------------------------------------------------------------------------- Loss from continuing operations ($104) ($2,625) ($65) ($4,858) Percentage of net sales (1.2%) (29.9%) (0.4%) (28.2%) Basic and diluted (loss) per share from continuing operations ($0.01) ($0.36) ($0.01) ($0.68) - -------------------------------------------------------------------------------- Losses from continuing operations for both the second quarter and first six months of 1999 decreased as compared to the same periods of 1998 due primarily to higher gross margin, lower operating costs and the reversal of $215,000 of restructure reserve during the second quarter of 1999, as well as, with respect to the first six months of 1999, the gain on the sale of the Company's Japan subsidiary during the first quarter of 1999. The Company expects that during the remainder of 1999, it is likely to incur losses from operations due to many factors, including: (1) continued efforts to integrate and support the Sprint product line, which was acquired in November 1998; (2) costs related to the transition of manufacturing of the automated handling system and accessories acquired from Unmanned Solutions to its Redmond plant; (3) further restructuring of operations; and (4) the transition of sales to the Sprint products. DISCONTINUED OPERATIONS In November 1997, the Company sold the assets of its Semiconductor Equipment Division, Reel-Tech(TM) Inc., to General Scanning Inc. Also in November 1997, the Company entered into a licensing agreement and an agreement to sell certain assets of its Synario Design Automation Division (SDAD) to MINC Washington Incorporated. These transactions discontinued the Semiconductor Equipment Division and SDAD operations of the Company. Although the Company was entitled to receive certain licensing, source code and training and support services revenues related to certain of its former SDAD products through December 31, 1999, during the second quarter 1999 the Company closed final settlements and transfer of its retained licensing rights. The Company has recognized net earnings of $831,000 and $707,000 from SDAD licensing agreements, source code sales and training and support services provided during the first six months 1999 and 1998, respectively. No further income is expected in future periods from SDAD discontinued operations. Operating results of these discontinued divisions are classified as discontinued operations in the financial statements. Financial Condition LIQUIDITY AND CAPITAL RESOURCES July 1, Dec 31, (in thousands) 1999 Change 1998 - ------------------------- ---------------- ----------------- ---------------- Working capital $16,919 $1,835 $15,084 Total debt $0 (564) $564 - ------------------------- ---------------- ----------------- ---------------- Working capital increased during the first six months of 1999 primarily due to net income for the period and proceeds from the sale of the Company's minority interest investment in JTAG Technologies during the second quarter of 1999. Cash, cash equivalents and marketable securities, which decreased $7.7 million during the first six months, were used to: pay accrued liabilities of $3.4 million, primarily related to the Company's restructuring, an earnout payment related to the 1997 Reel-Tech disposition and accrued employee benefits; and increase inventory by approximately $2.6 million related to the PP100 and Sprint programming systems. In addition, the sale of the Company's Japan subsidiary lowered working capital by approximately $400,000. Page 13 As of July 1, 1999, the Company had no debt outstanding. Borrowings as of December 31, 1998 consisted of borrowings under the Japan subsidiary line of credit. This subsidiary was sold during the first quarter of 1999. No borrowings were outstanding under the German subsidiary line of credit and the $4.0 million U.S. line of credit which matures in December 1999. The Company estimates that capital expenditures for property, plant and equipment during the remainder of 1999 will be less than $1.3 million. The Company believes that cash, cash equivalents and marketable securities and cash flows generated from operations are sufficient to meet current and anticipated future capital expenditures. Although the Company expects that such expenditures will be made, it has purchase commitments for only a small portion of this amount. At July 1, 1999, the Company's material short-term unused sources of liquidity consisted of approximately $11.2 million in cash, cash equivalents and marketable securities and available borrowings of $240,000 under its German subsidiary line of credit or $4.0 million under its U.S. line of credit. The Company believes these sources and cash flow from operations will be sufficient during the remainder of 1999 to fund working capital needs, service existing debt and finance planned capital acquisitions. SHARE REPURCHASE PROGRAM Under a previously announced share repurchase program, the Company is authorized to repurchase up to 1,123,800 shares (approximately 15.6%) 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 July 1, 1999, 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. Other IMPACT OF YEAR 2000 Some of the Company's older computer programs were written using two digits rather than four to define the applicable year. As a result, those computer programs have time-sensitive software that recognize a date using "00" as the year 1900 rather than the year 2000. This could cause a system failure or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities or failure of devices with imbedded technology. The Company has completed an assessment of its data processing systems and will have to modify or replace portions of its software so that its computer systems will function properly with respect to dates in the year 2000 and thereafter. The total Year 2000 project budget was initially estimated and authorized for approximately $1 million, which included approximately $200,000 for new hardware to be capitalized and approximately $800,000 of costs to be expensed as incurred. The Company has completed the most significant portion of this phase of the Year 2000 project and currently estimates that the cost of this project will be less than the initial budgeted amount. As of July 1, 1999, the Company has incurred and expensed approximately $300,000 and capitalized approximately $213,000 related to this project. The Company believes, based on its current understanding of its systems, that with modifications to the existing software and conversions to new software, the Year 2000 issue should not pose significant operational problems for its computer systems. However, if such modifications and conversions are not properly made, or are not completed timely, the Year 2000 issue could have a material adverse impact on the operations of the Company. The cost of the project and the date on which the Company believes it will complete the Year 2000 modifications are based on management's best estimates, which were derived utilizing numerous assumptions of future events, including the continued availability of certain resources, cooperation of vendors and other factors. However, there can be no guarantee that these estimates will be achieved and actual results could differ materially from those anticipated. Specific factors that might cause such material differences include, but are not limited to, the availability and cost of personnel trained in the area, the ability to locate and correct all relevant computer codes, and similar uncertainties. Page 14 The Company has also mailed letters to its significant vendors and service providers and has verbally communicated with many strategic customers to determine the extent to which interfaces with such entities are vulnerable to Year 2000 issues and whether the products and services purchased from or by such entities are Year 2000 compliant. As of July 1999 the Company had obtained responses from approximately 80% of such third parties and is currently in the process of analyzing the responses. The Company is also in the process of following up with those vendors and service providers which have not responded that are deemed to be critical suppliers, or whose response was unsatisfactory. This phase of the Year 2000 project is expected to be completed by the third quarter of 1999. The Company is also in the process of evaluating its internal systems with imbedded technology that are subject to the Year 2000 issue. This evaluation and any required remediation are expected to be completed by December 31, 1999. The Company presently believes that the Year 2000 issue will not pose significant operational problems for the Company. However, if all Year 2000 issues are not properly identified, or assessment, remediation and testing are not effected timely with respect to Year 2000 problems that are identified, there can be no assurance that the Year 2000 issue will not materially adversely impact the Company's results of operations or adversely affect the Company's relationships with customers, vendors, or others. Additionally, there can be no assurance that the Year 2000 issues of other entities will not have a material adverse impact on the Company's systems or results of operations. The Company has begun, but not yet completed, a comprehensive analysis of the operational problems and costs (including loss of revenues) that would be reasonably likely to result from the failure by the Company and certain third parties to complete efforts necessary to achieve Year 2000 compliance on a timely basis. A contingency plan has not been developed for dealing with the most reasonably likely worst case scenario, and such scenario has not yet been clearly identified. The Company currently plans to complete such analysis and contingency planning by December 31, 1999. Page 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings None Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders At the Annual Meeting of Shareholders held on May 11, 1999, there were present in person or by proxy the holders of 6,671,242 shares of the 7,238,311 shares of Common Stock of the Corporation. Following are the matters ratified and the voting results: (a) Election of a Board of Directors consisting of the following six (6) directors: Name Votes For Votes Withheld Keith L. Barnes 6,435,777 235,465 David C. Bullis 6,414,819 256,423 Glen F. Ceiley 6,431,693 239,549 Paul A. Gary 6,435,275 235,967 Frederick R. Hume 6,442,125 229,117 Edward D. Lazowska 6,436,740 234,502 Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K Page (a) Exhibits None (b) Reports on Form 8-K None Page 16 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. DATA I/O CORPORATION (REGISTRANT) DATED: August 11, 1999 By://S//Joel S. Hatlen ---------------------- Joel S. Hatlen Vice President - Finance Chief Financial Officer Secretary and Treasurer Page 17 EXHIBIT INDEX Exhibit Number Title Page Number - -------------- ---------------------------------------------- ----------- None Page 18