Inventories

3 Months Ended

Mar. 31, 2012

Note 4 – Inventories

Inventories are valued at the lower of cost (first-in, first-out method) or market, and include material, labor and manufacturing overhead. At March 31, 2012 and December 31, 2011, inventories consisted of the following:

	March 31,		December 31,
	2012		2011
Raw materials	$	9,364,005	$	10,068,589
Work in process		2,483,567		1,217,968
Finished goods		10,974,815		9,889,197
Total	$	22,822,387	$	21,175,754

Our policy is to establish inventory reserves to write down inventory to its net realizable value when conditions exist that suggest that inventory may be in excess of anticipated demand or is obsolete based upon assumptions about future demand for products and market conditions. Included in our finished goods inventory at March 31, 2012 and December 31, 2011, are $2.8 million and $2.7 million, respectively, of demonstration products that are used by our sales organization. We regularly evaluate the ability to realize the value of inventory based on a combination of factors including the following: historical usage rates, forecasted sales or usage, product end of life dates, estimated current and future market values, and new product introductions. Assumptions used in determining our estimates of future product demand may prove to be incorrect, in which case the provision required for excess and obsolete inventory would have to be adjusted in the future. If inventory is determined to be overvalued, we would be required to recognize such costs as cost of goods sold at the time of such determination. Although we perform a detailed review of our forecasts of future product demand, any significant unanticipated changes in this demand could have a significant impact on the value of our inventory and our reported operating results.

At March 31, 2012 and December 31, 2011, we had $0.4 million and $0.8 million, respectively of consumer product inventory held on consignment in finished goods. Please see Note 2 for further information about our consumer product inventory.

- Definition

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

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