Inventory - Note 4

6 Months Ended

Jun. 30, 2012

Inventory Disclosure

Inventory

4. INVENTORY

Inventory consists of the following:

		June 30,		December 31,
		2012		2011
Raw materials	$	16,000	$	2,741,000
Finished goods		850,000		1,513,000
	$	866,000	$	4,254,000

The inventory at June 30, 2012 and December 31, 2011 consisted of raw materials primarily for our accessory pico projectors and PicoP display engine, and finished goods primarily composed of our accessory pico projectors. Inventory is stated at the lower of cost or market, with cost determined on net realizable value basis. Management periodically assesses the need to provide for obsolescence of inventory and adjusts the carrying value of inventory to its net realizable value when required. In addition, we reduce the value of our inventory to our estimated scrap value when management determines that it is not probable that the inventory will be consumed through normal production during the next twelve months.

During the three months ended June 30, 2012, we negotiated a lower price for certain components in inventory that had previously been written down to net realizable value. As a result of the renegotiation, the aggregate purchase price was reduced and we recorded a credit of $1.4 million to cost of product revenue during the three months ended June 30, 2012.