Note 5 – Inventory

Inventory is comprised of the following for the periods presented:

	June 30,		December 31,
(in thousands)	2014		2013

Inventories, current:
Raw materials	$	147	$	52
Finished goods, net of reserves		296		60
		443		112
Inventories, non-current:
Raw materials		400		–
Total inventories, net	$	843	$	112

Raw materials inventory that is not expected to be used in commercial production until more than 12 months from the balance sheet date is classified as a non-current other asset on the balance sheet. The shelf life of our raw materials is 2‑5 years.

In addition, as of June 30, 2014, we had $0.7 million of raw materials that were purchased prior to October 4, 2013, the date the FDA approved updated SURFAXIN product specifications, which enabled the commercial introduction of SURFAXIN. These raw materials have a carrying value of zero, as the costs to purchase this material were expensed in the period of purchase as research and development expense, and accordingly are not reflected in the inventory balances shown above. These raw materials are anticipated to be used in manufacturing development, research and development activities and in the manufacture of commercial product.

Inventory reserves as of June 30, 2014 and December 31, 2013 were $2.0 million and $0.5 million, respectively. Inventory reserves reflect costs of SURFAXIN finished goods inventories that are not anticipated to be recoverable through the commercial sale of the product during the initial launch period due to product expiration. These reserves ensure that the inventory carrying values do not exceed net realizable value.