Note 5. Detail of Certain Asset Accounts

Cash and Cash Equivalents - The Company considers all highly liquid investments, with an original maturity of three months or less when purchased, to be cash equivalents.

Compensating Cash Balance - The Company’s credit facility with The PrivateBank and Trust Company had a minimum compensating balance requirement of $500,000. As described below in Note 6, on September 23, 2011 the Company entered into a fifth amendment to its credit facility with The PrivateBank and Trust Company which, among other things, eliminated the minimum compensating balance requirement, and as such no restricted cash was shown on the balance sheet as of December 30, 2011.

Inventories - Inventories, which include material, labor and manufacturing overhead, are stated at the lower of cost (on a first in, first out method) or market. Inventories consist of the following at December 30, 2011 and March 31, 2011:

	December 30, 2011		March 31, 2011
Raw material	$	3,038,000	$	3,204,000
Work-in-process		737,000		1,214,000
Finished products		549,000		357,000
Inventories, net	$	4,324,000	$	4,775,000

Slow moving and obsolete inventories are reviewed throughout the year to assess whether a cost adjustment is required. Our review of slow moving and obsolete inventory begins with a listing of all inventory items which have not moved regularly within the past 12 months. In addition, any residual inventory, which is customer specific and remaining on hand at the time of contract completion, is included in the list. The complete list of slow moving and obsolete inventory is then reviewed by the production, engineering and/or purchasing departments to identify items that can be utilized in the near future. These items are then excluded from the analysis and the remaining amount of slow-moving and obsolete inventory is then further assessed and a write down is recorded when warranted. Additionally, non-cancelable open purchase orders for parts we are obligated to purchase where demand has been reduced may also be reserved. Impairments for open purchase orders where the market price is lower than the purchase order price are also recorded. The impairments established for excess, slow moving, and obsolete inventory create a new cost basis for those items. The cost basis of these parts is not subsequently increased if the circumstances which led to the impairment change in the future. If a product that had previously been impaired is subsequently sold, the amount of reduced cost basis is reflected as cost of goods sold.

Intangible Assets - Intangible assets that have definite lives consist of the following (dollars in thousands):

	Weighted Average	December 30, 2011
	Lives in Years	Amortization Method		Carrying Value		Accumulated Amortization		Intangibles Net
Customer list	15	Straight Line	$	475	$	369	$	106
Trademarks	15	Cash Flow		2,270		912		1,358
Technology	10	Cash Flow		10,950		8,742		2,208
Patents pending				682		--		682
Patents	10	Straight Line		716		226		490
Total Intangibles			$	15,093	$	10,249	$	4,844

	Weighted Average	March 31, 2011
	Lives in Years	Amortization Method		Carrying Value		Accumulated Amortization		Intangibles Net
Customer list	15	Straight Line	$	475	$	360	$	115
Trademarks	15	Cash Flow		2,270		798		1,472
Technology	10	Cash Flow		10,950		7,886		3,064
Patents pending				619		--		619
Patents	10	Straight Line		620		177		443
Total Intangibles			$	14,934	$	9,221	$	5,713

Amortization expense for the nine-month periods ended December 30, 2011 and December 31, 2010 was approximately $1.0 million and $1.2 million, respectively. The current patents held by the Company have remaining useful lives ranging from 1 year to 17 years.

The cash flow method of amortization is based upon management’s estimate of how the intangible asset contributes to our cash flows and best represents the pattern of how the economic benefits of the intangible asset will be consumed or used up. Such amortization is initially derived from the estimated undiscounted cash flows that were used in determining the original fair value of the intangible asset at the acquisition date and is monitored for significant changes in subsequent periods.

Assuming no impairment to the intangible value, future amortization expense for intangible assets and patents, excluding patents pending, are as follows by fiscal year (in thousands):

Intangible Assets and Patents
Remainder of 2012	$	342
2013		1,154
2014		967
2015		623
2016		401
2017 & after		675
Total	$	4,162

Patent pending costs of $682,000 are not included in the future amortization chart above. These costs will be amortized beginning the month the patents are granted.