Quarterly report pursuant to Section 13 or 15(d)

Inventory

Inventory

6 Months Ended

Jun. 30, 2015

All components of inventory are valued at the lower of cost (first-in, first-out) or market. We adjust inventory to market value when the net realizable value is lower than the carrying cost of the inventory. Market value is determined based on estimated sales activity and margins.

The components of inventory as of June 30, 2015 and December 31, 2014, net of reserves of $465,000 and $539,000, respectively, are as follows:



	June 30, 2015			December 31, 2014
	(unaudited)
Materials	$	510,000		$	—
Work-in-process	284,453			1,034,476
Finished goods	865,349			436,936
Reserves	(464,693		)	(539,027		)
Total	$	1,195,109		$	932,385

During the six-month period ended June 30, 2015, we capitalized $791,000 of inventory costs associated with our Lymphoseek product. The Company capitalized no such costs during the same period in 2014. During the six-month period ended June 30, 2015, we wrote off $120,000 of materials related to production issues. During the six-month periods ended June 30, 2015 and 2014, we wrote off $123,000 and $45,000, respectively, of previously capitalized Lymphoseek inventory due to the consumption of the Lymphoseek material for product testing and development purposes.

We estimate a reserve for obsolete inventory based on management’s judgment of probable future commercial use, which is based on an analysis of current inventory levels, estimated future sales and production rates, and estimated shelf lives.