STOCK AND RETIREMENT PLANS

12 Months Ended

Dec. 31, 2011

Notes to Financial Statements

Note 11 - STOCK AND RETIREMENT PLANS

Stock Option Plans

At December 31, 2011, there were 1,316,433 shares of Common Stock reserved for issuance of which 248,044 shares are available for future grant under Data I/O’s 2000 Stock Compensation Incentive Plan (“2000 Plan”). Pursuant to this 2000 Plan, options are granted to our officers and key employees with exercise prices equal to the fair market value of the Common Stock at the date of grant and generally vest over four years. Options granted under the plans have a maximum term of six years from the date of grant. Stock awards may also be granted under the 2000 Plan.

Employee Stock Purchase Plan

Under the Employee Stock Purchase Plan, eligible employees may purchase shares of Data I/O’s Common Stock at six-month intervals at 95% of the fair market value on the last day of each six-month period. Employees may purchase shares having a value not exceeding 10% of their gross compensation during an offering period. During 2011 and 2010, a total of 4,018 and 4,742 shares, respectively, were purchased under the plan at average prices of $5.78 and $4.42 per share, respectively. At December 31, 2011, a total of 79,452 shares were reserved for future issuance. The 5% discount allowed under the ESPP is not considered compensatory under authoritative guidance from the FASB.

Stock Appreciation Rights Plan

Data I/O has a Stock Appreciation Rights Plan (“SAR”) under which each director, executive officer or holder of 10% or more of Data I/O’s Common Stock has a SAR with respect to each exercisable stock option. The SAR entitles the SAR holder to receive cash from Data I/O for the difference between the market value of the stock and the exercise price of the option in lieu of exercising the related option. SARs are only exercisable following a tender offer or exchange offer for Data I/O’s stock, or following approval by shareholders of Data I/O of any merger, consolidation, reorganization or other transaction providing for the conversion or exchange of more than 50% of the common shares outstanding. As no event has occurred, which would make the SARs exercisable, and no such event is deemed probable, no compensation expense has been recorded under this plan.

Director Fee Plan

Data I/O has a Director Fee Plan, not currently in use, which had provided for payment to directors who are not employees of Data I/O Corporation by delivery of shares of Data I/O’s Common Stock. No shares were issued from the plan for 2011 or 2010 board service and 151,332 shares remain available in the plan as of December 31, 2011.

Retirement Savings Plan

Data I/O has a savings plan that qualifies as a cash or deferred salary arrangement under Section 401(k) of the Internal Revenue Code. Under the plan, participating U.S. employees may defer their pre-tax salary or post-tax salary if Roth is elected, subject to IRS limitations. In fiscal years 2011 and 2010, Data I/O contributed one dollar for each dollar contributed by a participant, with a maximum contribution of 4% of a participant’s earnings. Data I/O’s matching contribution expense for the savings plan was approximately $191,000 and $185,000 in 2011 and 2010.

Share Repurchase Program

On October 20, 2011, we announced a stock repurchase program to buy back up to $1 million dollars of stock over four quarters. Through December 31, 2011, Data I/O repurchased 62,916 shares of stock at an average price of $3.97 for a total repurchase amount of $249,986 plus $2,517 in commissions. See Note 15 “Subsequent Events” for termination of this program and establishment of a new expanded program. The following table presents repurchases of Data I/O’s common stock for the year ended December 31, 2011:

	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Repurchase Program		Approximate Dollar Value of Shares that May Yet Be Purchased under the Program
November 1, 2011-November 30, 2011		32,068	$	3.88		32,068	$	874,328
December 1, 2011-December 31, 2011		30,848	$	4.07		30,848	$	747,463
Total		62,916	$	3.97		62,916