Note 7.

Inventories

Inventories are stated at the lower of cost (first-in, first-out method) or market (net realizable value). We value at lower of cost or market the slow moving and obsolete inventories based upon current and expected future product sales and the expected impact of product transitions or modifications. Historically, the inventory write-offs have generally been within our expectations. Inventories consist of the following:

	September 30, 2015		March 31, 2015

Raw materials	$	3,502,000	$	3,156,000
Work-in-process		38,000		527,000
Finished goods		1,424,000		1,143,000

	$	4,964,000	$	4,826,000

Inventories acquired in a business combination are recorded at their estimated fair value less profit for sales efforts and expensed in cost of sales as that inventory is sold. On March 31, 2015, inventories included an adjustment amount of $240,000 related to VSCI inventory recorded at estimated fair value. During the six months ended September 30, 2015, the full amount has been recorded as an addition to cost of goods sold.