NOTE 7.

INVENTORY

As of December 31, 2013, 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 years ended December 31, 2013 and 2012, we wrote off approximately $60,000 and $88,000, respectively, in obsolete inventories.

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

Inventory	2013		2012
Finished goods	$	85,993	$	303,779
Work-in-progress		299,464		190,794
Raw materials		10,148		33,070
Total	$	395,605	$	527,643