Basis of Presentation Interim financial statements and information are unaudited; however, in the opinion of management, all adjustments necessary for a fair and accurate presentation of the interim results in conformity with U.S. generally accepted accounting principles ( GAAP ) have been made. All such adjustments were of a normal recurring nature. The results for the three month period ended October 2, 2011 are not necessarily an indication of results to be expected for the entire fiscal year. All information reported in this Form 10-Q should be read in conjunction with the Company s annual consolidated financial statements for the fiscal year ended July 3, 2011 included in the Company s Annual Report on Form 10-K. The accompanying balance sheet at July 3, 2011 has been derived from audited financial statements. Because the Company is viewed as a single operating segment for management purposes, no segment information has been disclosed. Revenue Recognition The Company recognizes revenues when the earnings process is complete, when persuasive evidence of an arrangement exists, the product has been delivered, the price is fixed and determinable and collection is reasonably assured. During the first quarter of fiscal year 2012 , the Company recognized approximately 15% of net revenues from domestic distributors that are recognized under agreements which provide for certain sales price rebates and limited product return privileges. Given the uncertainties associated with the levels of pricing rebates, the ultimate sales price on domestic distributor sales transactions is not fixed or determinable until domestic distributors sell the merchandise to the end-customer. At the time of shipment to domestic distributors, the Company records a trade receivable and deferred revenue at the distributor purchasing price since there is a legally enforceable obligation from the distributor to pay for the products delivered. The Company relieves inventory as title has passed to the distributor and recognizes deferred cost of sa