4. Inventories

Inventories are valued at the lower of cost or market using the first in, first out (FIFO) method and consist of the following:

	August 24, 2012 (unaudited)		February 24, 2012

Raw materials	$	39	$	42
Work in process		4,188		4,103
	$	4,227	$	4,145

Inventory is presented net of an allowance for obsolescence of $1,159 (raw material $80 and work in process $1,079), and $1,157 (raw material $50 and work in process $1,107) at August 24, 2012 and February 24, 2012, respectively.

In accordance with United States generally accepted accounting principles, the Company may capitalize into property, plant, and equipment certain costs of simulation equipment. This equipment may be used to provide training or as a demonstration device to market the technology, and may be sold as a product if appropriate. Upon receipt of a contract or contracts for products which are based on this technology, such costs will be transferred initially into inventory and subsequently charged to the cost of sales for that particular contract as manufacturing costs.