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.

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 June 29, 2012 and March 31, 2012:

	June 29, 2012		March 31, 2012
Raw material		2,059,000	$	2,342,000
Work-in-process		860,000		949,000
Finished products		408,000		303,000
Inventories, net	$	3,327,000	$	3,594,000

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		June 29, 2012
	Lives in Years		Amortization Method	Carrying Value		Accumulated Amortization		Intangibles Net
Customer list		15	Straight Line	$	190	$	90	$	100
Trademarks		15	Cash Flow		2,270		988		1,282
Technology		10	Cash Flow		10,950		9,257		1,693
Patents pending					616		--		616
Patents		10	Straight Line		831		266		565
Total Intangibles				$	14,857	$	10,601	$	4,256

	Weighted Average		March 31, 2012
	Lives in Years		Amortization Method	Carrying Value		Accumulated Amortization		Intangibles Net
Customer list		15	Straight Line	$	475	$	372	$	103
Trademarks		15	Cash Flow		2,270		949		1,321
Technology		10	Cash Flow		10,950		9,027		1,923
Patents pending					673		--		673
Patents		10	Straight Line		764		246		518
Total Intangibles				$	15,132	$	10,594	$	4,538

Amortization expense for the three-month periods ended June 29, 2012 and July 1, 2011 was approximately $292,000 and $342,000, respectively. The current patents held by the Company have remaining useful lives ranging from 2 years to 20 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 2013	$	874
2014		978
2015		537
2016		264
2017		267
2018 & after		720
Total	$	3,640

Patent pending costs of $616,000 are not included in the future amortization chart above. These costs will be amortized beginning the month the patents are granted.