INVENTORY - Note 5

6 Months Ended

Jun. 30, 2017

Inventory Disclosure

Inventory - Note 5

5. INVENTORY

Inventory consists of the following:

		June 30,		December 31,
(in thousands)		2017		2016
Raw materials	$	1,142	$	999
Finished goods		1,535		234
	$	2,677	$	1,233

Our inventory consists of raw materials and finished goods assemblies. Inventory is computed using the first-in, first-out (FIFO) method and is stated at the lower of cost and net realizable value. Management periodically assesses the need to account 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 its estimated scrap value when management determines that it is not probable that the inventory will be consumed through the normal course of business during the next twelve months. As of June 30, 2017 and December 31, 2016, we recorded aggregate write-downs of $6.6 million and $6.6 million, respectively, offsetting the value of inventory deemed to be obsolete or scrap inventory. We may enter into arrangements to sell the obsolete or scrap inventory resulting in a gain in the period such transactions are realized.

We have made significant advance payments to our contract manufacturer that will be applied against future inventory purchases. As of June 30, 2017, these advance payments totaled $3.1 million and are classified within other current assets on the balance sheet.