NOTE 3 – INVENTORIES

At December 31, 2015 and 2014, inventories consisted of the following:

	December 31, 2015			December 31, 2014
Raw materials	$	690,824		$	835,589
Work-in-process		1,593,815			1,454,999
Finished goods		635,771			2,132,080
		2,920,410			4,422,668
Less: reserve for obsolete inventories		(1,093,326	)		(181,646	)
	$	1,827,084		$	4,241,022

The Company establishes a reserve to mark down its inventories for estimated unmarketable inventories equal to the difference between the cost of inventories and the estimated net realizable value based on assumptions about the usability of the inventories, future demand and market conditions. For the years ended December 31, 2015 and 2014, the Company increased the reserve for obsolete inventories in the amount of approximately $962,000 and $0, respectively, which has been included in cost of revenues. In December 2015, based on a notice of contract termination received by the Company from its largest petroleum and chemical equipment segment customer, the Company increased its reserve for obsolete inventories by approximately $836,000 for all remaining inventories manufactured to the specifications of such customer and not readily saleable to other customers.