Warranty costs

9 Months Ended

Sep. 30, 2011

Note 5 – Warranty costs

We typically offer a one year warranty on our base systems. Warranty coverage provided is for labor and parts necessary to repair the systems during the warranty period. We account for the estimated warranty cost of the standard warranty coverage as a charge to cost of revenue when revenue is recognized. Factors that affect our warranty reserves include the number of units sold, historical and anticipated product performance, and the cost per repair. While we engage in extensive product quality programs and processes, including actively monitoring and evaluating the quality of our component suppliers, our estimated warranty obligation is affected by ongoing product failure rates, specific product class failures outside of our baseline experience, material usage, and service delivery costs incurred in correcting a product failure. If actual product failure rates, material usage or service delivery costs differ from our estimates, revisions to the estimated warranty liability would be required. Assumptions and historical warranty experience are evaluated to determine the appropriateness of such assumptions. We assess the adequacy of the warranty provision and we may adjust this provision, if necessary.

The following table provides the detail of the change in our product warranty accrual, which is a component of accrued liabilities on the Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010:

	September 30,			December 31,
	2011			2010
Warranty accrual, beginning of period	$	529,374		$	596,210
Charges to cost and expenses relating to new sales		796,300			955,198
Costs of product warranty claims/change of estimate		(702,290	)		(1,022,034	)
Warranty accrual, end of period	$	623,384		$	529,374