BASIS OF PRESENTATION AND CERTAIN SIGNIFICANT ACCOUNTING POLICIES	6 Months Ended
Dec. 31, 2012
BASIS OF PRESENTATION AND CERTAIN SIGNIFICANT ACCOUNTING POLICIES	NOTE 1 BASIS OF PRESENTATION AND CERTAIN SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited consolidated financial statements have been prepared in accordance with Form 10-Q instructions and in the opinion of management contain all adjustments (consisting of only normal recurring adjustments and items noted below under “Use of Estimates and Assumptions”) necessary to present fairly the financial position as of December 31, 2012, the results of operations for the three and six months ended December 31, 2012 and December 31, 2011, and the cash flows for the six months ended December 31, 2012 and 2011. These results have been determined on the basis of generally accepted accounting principles in the United States of America and have been applied consistently with those used in the preparation of the Company’s audited consolidated financial statements for its fiscal year ended June 30, 2012. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended June 30, 2012. Use of Estimates and Assumptions Management uses estimates and assumptions in preparing financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could vary from the estimates that were used. An impairment reserve of $1,516,338 was placed against the note receivable as of December 31, 2012, see Note 4. An additional $513,430 tax valuation allowance has been recorded against the current and non-current deferred tax assets, see Note 6. The Company changed its policy in estimating slow moving inventory to more accurately value inventory that may have become impaired or obsolete due to advancing technology or changes in demand of product by some customers. The new policy to estimate the slow moving reserve is based on a sliding scale reserve that increases on a separate and distinct level as raw material and finished goods age. As such, during the first quarter of fiscal year 2013, the Company incurred a charge of approximately $600,000. Revenue Recognition Revenue from short-term contracts calling for delivery of products is recognized as the product is shipped. Revenue and costs under certain long-term fixed price contracts with the United States Government are recognized on the units of delivery method. This method recognizes as revenue the contract price of units of the products delivered during each period and the costs allocable to the delivered units as the cost of earned revenue. Costs allocable to undelivered units are reported in the balance sheet as inventories. Amounts in excess of agreed upon contract price for customer directed changes, constructive changes, customer delays or other causes of additional contract costs are recognized in contract value if it is probable that a claim for such amounts will result in additional revenue and the amounts can be reasonably estimated. Revisions in cost and profit estimates are reflected in the period in which the facts requiring the revision become known and are estimable. Losses on contracts are recorded when identified.

NOTE 1 BASIS OF PRESENTATION AND CERTAIN SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited consolidated financial statements have been prepared in accordance with Form 10-Q instructions and in the opinion of management contain all adjustments (consisting of only normal recurring adjustments and items noted below under “Use of Estimates and Assumptions”) necessary to present fairly the financial position as of December 31, 2012, the results of operations for the three and six months ended December 31, 2012 and December 31, 2011, and the cash flows for the six months ended December 31, 2012 and 2011. These results have been determined on the basis of generally accepted accounting principles in the United States of America and have been applied consistently with those used in the preparation of the Company’s audited consolidated financial statements for its fiscal year ended June 30, 2012. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Annual Report on Form 10-K for the year ended June 30, 2012.

Use of Estimates and Assumptions

Management uses estimates and assumptions in preparing financial statements in accordance with U.S. generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Actual results could vary from the estimates that were used.

An impairment reserve of $1,516,338 was placed against the note receivable as of December 31, 2012, see Note 4.

An additional $513,430 tax valuation allowance has been recorded against the current and non-current deferred tax assets, see Note 6.

The Company changed its policy in estimating slow moving inventory to more accurately value inventory that may have become impaired or obsolete due to advancing technology or changes in demand of product by some customers. The new policy to estimate the slow moving reserve is based on a sliding scale reserve that increases on a separate and distinct level as raw material and finished goods age. As such, during the first quarter of fiscal year 2013, the Company incurred a charge of approximately $600,000.

Revenue Recognition

Revenue from short-term contracts calling for delivery of products is recognized as the product is shipped. Revenue and costs under certain long-term fixed price contracts with the United States Government are recognized on the units of delivery method. This method recognizes as revenue the contract price of units of the products delivered during each period and the costs allocable to the delivered units as the cost of earned revenue. Costs allocable to undelivered units are reported in the balance sheet as inventories. Amounts in excess of agreed upon contract price for customer directed changes, constructive changes, customer delays or other causes of additional contract costs are recognized in contract value if it is probable that a claim for such amounts will result in additional revenue and the amounts can be reasonably estimated. Revisions in cost and profit estimates are reflected in the period in which the facts requiring the revision become known and are estimable. Losses on contracts are recorded when identified.