INVENTORY

Inventories are stated at the lower of cost or market using the first-in, first-out method. Cost includes materials, labor and manufacturing overhead related to the purchase and production of inventories. The Company regularly reviews inventory quantities on hand, future purchase commitments with its suppliers, and the estimated utility of its inventory. If the review indicates a reduction in utility below carrying value, inventory is reduced to a new cost basis through a charge to cost of goods sold. Allowance for slow moving items decreased $15,383 due to the sale of an aerostat launcher. Inventory consists of the following at September 30, 2016 and December 31, 2015:

	September 30, 2016			December 31, 2015
Raw materials inventory	$	41,686		$	26,358
Work in process inventory		67,116			3,817
Finished goods inventory		248,768			107,209
Less valuation allowance		(3,206	)		(18,589	)
Total	$	354,364		$	118,795