Note 3. Inventory

For the three months ended March 31, 2016 and 2015, the Company recorded increases in the inventory reserve of $18,237 and $21,926, respectively, to adjust for estimated shrinkage and obsolescence. For the three months ended March 31, 2016 and 2015, $30,542 and $21,926 have been included in cost of revenue, respectively.

HTG Edge or HTG EdgeSeq instruments at customer locations under evaluation agreements are included in finished goods inventory. Equipment that is under evaluation for purchase remains in inventory as the Company maintains title to the equipment throughout the evaluation period. The period of time customers use to evaluate the Company’s equipment generally ranges from 90 to 180 days, and in certain circumstances the evaluation period may be extended beyond 180 days. HTG Edge or HTG EdgeSeq instruments at customer locations under evaluation agreements are included in finished goods inventory. Equipment that is under evaluation for purchase remains in inventory as the Company maintains title to the equipment throughout the evaluation period. If the customer has not completed the purchase of the instrument by the end of the initial evaluation period, the Company will determine whether to extend the evaluation period or have the equipment returned to the Company. However, in no case will the evaluation period exceed one year. If the customer has not purchased the equipment or entered into a reagent agreement with the Company after evaluating for one year and the customer is allowed to continue use of the equipment, the cost of the equipment is written off to cost of revenue.

Inventory, net of allowance, consisted of the following as of the date indicated:

	March 31,		December 31,
	2016		2015
Raw materials	$	1,451,079	$	1,198,605
Work in process		2,160		—
Finished goods		912,723		1,002,696
	$	2,365,962	$	2,201,301