4. INVENTORY

Inventories currently consist of MelaFind^® systems and other finished products and accessories that are stated at the lower of cost or market value. Inventory accessories are purchased items to be sold for use in the operation of the MelaFind^® systems. The Company maintains a reserve for specific inventory items that are no longer being used in the devices.

In December 2013, the Company changed its business model for the MelaFind^® system from a rental-based model to a sales-based model. In accordance with this new sales model, the Company reclassified approximately $5.4 million of MelaFind^® systems from property and equipment into inventory at December 31, 2013. The systems reclassified into inventory represent systems available for sale.

During the second quarter of 2014, the Company ceased repairs of certain of its MelaFind system units that it determined were unlikely to be sold during the next several periods. The Company estimated the cost to restore its system units to sellable condition and created a repair reserve amounting to $0.5 million at June 30, 2014.

Inventory consists of the following:


	June 30,			December 31,
	2014			2013
MelaFind^® Systems	$	4,277,581		$	5,401,866
Mela record cards		327,748			327,900
Accessories		205,082			226,439

		4,810,411			5,956,205
Reserve for obsolete inventory		(325,000	)		(325,000	)
Reserve for inventory repairs		(538,559	)		—

		3,946,852		$	5,631,205