Inventories

The Company uses the lower of first-in, first-out (“FIFO”) cost or market method of accounting for inventory.



Inventories consist of the following:	(in thousands)
	2013			2012
Inventory work-in-process, January 1	$	453		$	897
Production	—			579
Spoilage	(453		)	(1,023		)
Inventory work-in-process, December 31	$	—		$	453

As of December 31, 2012, all of the Company's lots of Alferon® Work-In-Process Inventory had completed the fill, finish and packaging process. The inventory was not classified as finished goods until stability and release testing were concluded and it is confirmed by the U.S. Food and Drug Administration ("FDA") that the product could be commercially sold as is.

In April 2012, FDA reviewers raised certain questions about the status of the Company's existing lots of older Work-In-Process Alferon® materials and Alferon® Active Pharmaceutical Ingredient (“API”), which would need to be released by the FDA before those materials could be used in commercial product. After conducting all of the appropriate tests on samples of the inventory during 2013, the Company concluded that it could not alleviate certain questions the FDA had about the older Work-In-Process Alferon N Injection®. Accordingly, these lots were not submitted to the FDA to request release for commercial sale and their remaining dollar value was written-off in 2013.