Note 4 - Inventories

6 Months Ended

Jun. 30, 2015

NOTE 4. - INVENTORIES

Inventories are valued at the lower of cost or market and include material, labor and manufacturing overhead. Cost, determined on a first-in, first-out basis, is as follows (in thousands):

	June 30, 2015		December 31, 2014
Raw Materials	$	1,306	$	1,510
Work-in-Process		324		467
Finished Goods		300		159
Total	$	1,930	$	2,136

Valuing inventory at the lower of cost or market involves an inherent level of risk and uncertainty due to technology trends in the industry and customer demand for the Company’s products. Future events may cause significant fluctuations in the Company’s operating results. Inventories are written down when needed to ensure the Company carries inventory at the lower of cost or market. The Company increased reserve requirements by $18,000 during the three months ended June 30, 2015. The Company recorded no increase or decrease to the reserve requirement during the three months ended June 30, 2014. The Company increased reserve requirements by $25,000 and $14,000 during the six months ended June 30, 2015 and 2014, respectively.