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Note 4 - Inventories

9 Months Ended

Sep. 30, 2013

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):

	September 30, 2013		December 31, 2012
Raw Materials	$	1,854	$	1,616
Work-in-Process		945		462
Finished Goods		368		141
Total	$	3,167	$	2,219

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 $21,000 and $45,000 during the three months ended September 30, 2013 and 2012, respectively. The Company increased reserve requirements by $101,000 and $65,000 during the nine months ended September 30, 2013 and 2012, respectively.

- Definition

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

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