NOTE 3. INVENTORY, NET

Inventory reserves are mandated per ASC 330 to ensure inventory is reported at the lower of cost or net realizable value (NRV), preventing overstatement of assets. Reserves account for estimated losses from obsolescence, damage, or market declines. This is contra-asset accounts, reducing gross inventory on the balance sheet and increasing expenses on the statement of operations as part of cost of revenue in the period the loss is deemed probable.