INTANGIBLE SOFTWARE TECHNOLOGY, NET

9 Months Ended

Sep. 30, 2011

Notes to Financial Statements

INTANGIBLE SOFTWARE TECHNOLOGY, NET

On April 29, 2011, Data I/O purchased software technology for $2 million in cash and 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 as it was determined the assets acquired did not constitute an operational business.

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. The Company will expense the royalty payments when they are incurred as the Company cannot reasonably estimate the future royalty payment amount at the time of acquisition.

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

	September 30, 2011
(in thousands)
Intangible software technology	$	3,089
Less accumulated amortization	$	185
Intangible software technology - net	$	2,904