Note 5 - Inventories

3 Months Ended

Mar. 31, 2012

NOTE 5: INVENTORIES

Inventories consist of:

	March 31, 2012			December 31, 2011
	(Unaudited)			(Unaudited)
Raw materials	$	1,914,697		$	1,986,880
Work-in-process		527,357			507,943
Finished goods		1,012,250			37,250
Totals		3,454,304			2,532,073
Less: Reserve for obsolescence		(300,000	)		(300,000	)
	$	3,154,304		$	2,232,073

During the three months ended March 31, 2011, the Company recorded certain inventory write-downs of $560,000.

The Company held $975,000 of equipment returned from a terminated contract recorded as Idle Inventories, which it had not been granted permission to use or sell as a result of pending litigation, as a separate line item on the balance sheet as of December 31, 2011. On March 16, 2012, in accordance with a stipulation dated June 17, 2010 the Company may now sell or otherwise dispose of the goods referred to as Idle inventories. As of March 31, 2012, this inventory is included in Finished goods.

- 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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