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 March 31, 2013, the unamortized balance of the patent license is $196 thousand. The royalty expenses for the associated patent license are amortized on a straight line basis starting in fiscal year 2013. The amortized royalty expense for the three and six months ending March 31, 2013 was $8 thousand and $15 thousand, respectively, and the amortized royalty expense for the three and six months ending April 1, 2012 was zero.