Note 4 - Inventories

Inventories are measured at the lower of cost or net realizable value. The cost of inventories is based on the weighted-average principle, and includes expenditures incurred in acquiring the inventories, production or conversion costs and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, costs include an appropriate share of production overhead based on normal operating capacity.

Inventories consist of the following:

Obsolete inventory charged to cost of goods during the three months ended September 30, 2018 and 2017 totaled $219,701 and $2,664, respectively, and $251,984 and $3,158 during the nine months ended September 30, 2018 and 2017, respectively. In the three and nine months ended September 30, 2018, the Company reserved $218,799 of inventory for the removal of OxiChek from the market which is included in cost of goods sold and wrote-off, against the reserve, $187,399 of expired BreathScan Alcohol products, resulting in a net increase of $31,400 in the reserve for obsolescence as of September 30, 2018 compared to that as of December 31, 2017.