8.Inventory

Inventory is stated at the lower of cost or market. The cost of inventory is determined by the first-in, first-out (“FIFO”) method. We provide a reserve for obsolescence to recognize inventory impairment for the effects of engineering change orders, age and use of inventory that affect the value of the inventory. The reserve for obsolescence creates a new cost basis for the impaired inventory. When inventory that has previously been impaired is sold or disposed of, the related obsolescence reserve is reduced resulting in the reduced cost basis being reflected in cost of goods sold. A detailed review of the inventory is performed annually with quarterly updates for known changes that have occurred since the annual review. Inventory, net of reserves of $1,998,000 and $1,608,000 at September 30, 2016 and June 30, 2016, respectively, is comprised of the following (in thousands):



	At September 30,		At June 30,
	2016		2016
Component Parts	$	4,399	$	5,054
Work in Process		2,464		3,461
Finished Goods		3,777		3,657
Total	$	10,640	$	12,172