Note 4 – Prepaid Royalties-

Prepaid royalties represent payments made for the purchase of non transferable, non exclusive patent rights associated with a patent license. We expect the patent license to allow for development of future products in our digital line of periscopes. We anticipate orders and deliveries on the new periscope product line to begin in 2013 for an estimated commercial life of 7 years. As of July 1, 2012 the unamortized balance of the patent license is $208 thousand. Amortized royalty expenses for the three and nine months ending July 1, 2012 and July 3, 2011 were zero. We expect to begin amortizing the associated royalty expenses on a straight line basis starting in FY2013.