NOTE 7.

INVENTORY

As of December 31, 2012, our inventory was comprised of Altrazeal® finished goods, manufacturing costs incurred in the production of Altrazeal®, and raw materials. Inventories are stated at the lower of cost (first in, first out method) or market. We regularly review inventories on hand and write down the carrying value of our inventories for excess and potentially obsolete inventories based on historical usage and estimated future usage. In assessing the ultimate realization of our inventories, we are required to make judgments as to future demand requirements. As actual future demand or market conditions may vary from those projected by us, adjustment to inventories may be required. For the year ended December 31, 2012, we wrote off approximately $88,000 in obsolete finished goods.

The components of inventory, at the different stages of production, consisted of the following at December 31:

Inventory	2012		2011
Finished goods	$	303,779	$	398,634
Work-in-progress		190,794		367,779
Raw materials		33,070		33,070
Total	$	527,643	$	799,483