2.	Inventories

The Company’s inventories are primarily stated at standard cost, which approximates actual cost determined on a first-in, first-out basis. The Company adjusts the value of its inventory to the extent management determines that the cost cannot be recovered due to obsolescence or other factors. In order to make these determinations, management uses estimates of future demand and sales prices for each product to determine the appropriate inventory reserves and to make corresponding adjustments to the carrying value of these inventories to reflect the lower of cost or market value. In the event of a sudden significant decrease in demand for the Company’s products, or a higher incidence of inventory obsolescence, the Company could be required to increase its inventory reserves, which would increase cost of sales and decrease gross profit.

Work-in-process, finished products, field inventory and consignment inventory include material, labor and production overhead costs. Field inventory represents finished products inventory that is in the possession of the Company’s direct sales representatives and is available for immediate sale. Consignment inventory represents finished products that are located at third party customers, such as distributors and hospitals and is also available for immediate sale.

Deferred cost of sales result from transactions where the Company has shipped product or performed services for which all revenue recognition criteria have not been met. Once the revenue recognition criteria have been met, both the deferred revenues and associated cost of sales are recognized.

Inventories, net of reserves, were as follows:


(U.S. Dollars, in thousands)	March 31, 2014		December 31, 2013
Raw materials	$	4,872	$	6,515
Work-in-process		7,412		6,606
Finished products		40,758		36,898
Field inventory		28,787		29,360
Consignment inventory		4,354		3,916
Deferred cost of sales		6,570		7,282

Total Inventory	$	92,753	$	90,577