INTANGIBLE SOFTWARE TECHNOLOGY, NET

3 Months Ended

Mar. 31, 2012

Notes to Financial Statements

Note 4. INTANGIBLE SOFTWARE TECHNOLOGY, NET

On April 29, 2011, Data I/O purchased software technology for $2 million in cash and issuance of 163,934 shares of Data I/O common stock, valued at $1 million on the date of purchase.  Acquisition costs of $89,000 were capitalized as part of the transaction.  The transaction was accounted for as an asset purchase.

For a period of five years Data I/O will pay the seller royalties of 4% of directly associated revenues relating to this acquired software technology.  We will expense the royalty payments when they are incurred as we could not reasonably estimate the future royalty payment amount at the time of acquisition.  For the first three years, Data I/O will pay an additional royalty of 2.5% of directly associated revenues relating to this acquired software technology to the original developer of the technology.  No royalty expense was recognized for the first quarter ended March 31, 2012.

The following is a summary of the Company’s intangible software technology:

	March 31, 2012		December 31, 2011
(in thousands)
Intangible software technology	$	3,089	$	3,089
Less accumulated amortization		407		296
Intangible software technology, net	$	2,682	$	2,793