NOTE 4 - INTANGIBLE SOFTWARE TECHNOLOGY, NET

6 Months Ended

Jun. 30, 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 has been recognized since the acquisition date.

The following is a summary of the Company’s intangible software technology:
	June 30, 2012	December 31, 2011
(in thousands)
Intangible software technology	$3,089	$3,089
Less accumulated amortization	517	296
Intangible software technology, net	$2,572	$2,793

Future amortization expense related to this intangible asset is as follows:
	Amortization
(in thousands)
2012 (remaining)	$219
2013	438
2014	438
2015	438
2016	438
Thereafter	601
Total	$2,572