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 current and future products in our digital line of periscopes. We are actively marketing the new periscopes internationally and completed our first international shipment utilizing this technology in March 2014. We estimate the commercial life of the patent at 7 years. As of June 29, 2014, the balance of the patent license is $158 thousand net of accumulated amortization. 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 nine months ending June 29, 2014 was $8 thousand and $23 thousand, respectively, and the amortized royalty expense for the three and nine months ending June 30, 2013 was $8 thousand and $23 thousand, respectively.