Inventories

9 Months Ended

Sep. 30, 2012

3.	INVENTORIES

The composition of inventories at September 30, 2012 and December 31, 2011 are as follows:

	September 30, 2012			December 31, 2011
Raw materials	$	4,448,470		$	4,431,651
Finished goods		5,372,553			5,472,850
Inventories, gross		9,821,023			9,904,501

Inventory reserves		(285,738	)		(276,703	)

Inventories, net	$	9,535,285		$	9,627,798

The inventory reserves shown in the table above reflect slow moving and obsolete inventory.

The Company operates a vendor managed inventory program with one of its customers to improve the promotion of the Company's products. The Company manages the inventory levels at this customer’s warehouses and recognizes revenue as the products are sold by the customer. The inventories managed at the customer’s warehouses amounted to approximately $548,000 and $570,000 at September 30, 2012 and December 31, 2011, respectively.

- 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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