Inventories

Inventories consisted of the following (in thousands):



	September 30, 2013			December 31, 2012
Raw materials	$	20,252		$	10,420
Work-in-process	908			605
Finished goods	8,976			11,245
	30,136			22,270
Less: inventory valuation allowance	(4,378		)	(2,199		)
Inventories, net	$	25,758		$	20,071



	September 30, 2013			December 31, 2012
Inventory deposit ^(A)	$	1,226		$	11,637
Less: inventory deposit valuation allowance	(763		)	(2,801		)
Inventory deposit, net	$	463		$	8,836

(A)

Beginning in the third quarter of 2013 the Company modified the inventory deposit arrangement with its contract manufacturing partner. Prior to the modification, the Company was obligated to reimburse its contract manufacturer for the cost of excess inventory that has been purchased as a result of the Company's forecasted demand when there is no alternative use. Under the new arrangement, rather than reimburse the contract manufacturer, the Company is now obligated to purchase inventory on consignment. The calculation of excess inventory and its impact on the Company’s cash and reported aggregate inventory levels is the same under the consignment arrangement as it was under the prior deposit arrangement. As of September 30, 2013, the balance of consigned inventory at the Company’s contract manufacturing partner was $10.3 million with the remaining inventory deposit associated with inventory held at the Company’s outsourced hardware repair service provider. The remaining deposit is recorded net of adverse purchase commitment liabilities, and therefore the net balance of the deposit represents inventory the Company believes will be utilized. The deposit will be applied against future adverse purchase commitments owed to the Company's contract manufacturer or reduced based on the usage of inventory. See Note 8 - Commitments and Contingencies for additional information regarding the Company's adverse purchase commitment liability.

Consigned inventory is held at third-party locations, including the Company's contract manufacturing partner and customers. The Company retains title to the inventory until purchased by the third-party. Consigned inventory, consisting of raw materials and finished goods was $11.9 million and $0.7 million at September 30, 2013 and December 31, 2012.

The Company recorded the following charges associated with the valuation of inventory, inventory deposit and the adverse purchase commitment liability (in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
Inventory, net	$	214	$	336	$	578	$	772
Inventory deposit, net	66		158		876		521
Adverse purchase commitments	271		40		403		12