Note 3. Inventory

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 retains 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. 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. If the customer has not purchased the equipment or entered into a reagent agreement with the Company within one year, the equipment is returned to the Company or the customer is allowed to continue use of the equipment in which case the cost of the equipment is written off to selling, general and administrative expense.

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

	September 30,			December 31,
	2016			2015
Raw materials	$	1,584,273		$	1,274,840
Work in process		1,991			—
Finished goods		948,974			1,210,780
Total gross inventory		2,535,238			2,485,620
Less inventory allowance		(667,553	)		(284,319	)
	$	1,867,685		$	2,201,301

For the three and nine months ended September 30, 2016, the Company recorded adjustments to provision for excess inventory $288,130 and $437,893, respectively, resulting in a net adjustment to inventory allowance of $291,692 and $383,234, respectively. For the three and nine months ended September 30, 2015, the Company recorded adjustments to provision for excess inventory of $76,799 and $330,088, respectively, resulting in a net adjustment to the inventory allowance of $62,872 and $273,752, respectively. Adjustments in these periods to the allowance for estimated shrinkage and obsolescence and excess inventory were recognized within cost of revenue in the condensed statements of operations. During the nine months ended September 30, 2016 and 2015, the Company wrote off $54,659 and $56,336, respectively, of obsolete inventory against the inventory allowance.