Inventory

The Company began capitalizing inventory in the first quarter of 2016, when it was determined that the inventory had a probable future economic benefit. Inventory has been recorded at cost as of December 31, 2016. Costs capitalized at December 31, 2016 relate to finished goods from the initial and second production runs of HOTSHOT, as well as raw materials available to be used for future production runs. The Company held no inventory at December 31, 2015.

The following table presents inventory:



	December 31, 2016		December 31, 2015
Raw materials	$	19,888	$	—
Finished goods	434,244		—
Total inventory	$	454,132	$	—

In the first quarter of 2016, the Company wrote off approximately $185,000 of materials purchased for the initial production run of HOTSHOT finished goods that, upon completion, were not expected to be sold based upon projected sales, estimated product shelf life, the number of units produced and production level requirements. The initial production run of HOTSHOT finished goods was completed in the second quarter of 2016, at which time the Company wrote off approximately $41,000 of production costs incurred for those finished goods that were not expected to be sold. During the third quarter of 2016, the Company wrote off approximately $33,000 of additional finished goods that were not expected to be sold based on shelf life requirements and the timing of Company's next production run, which took place during the fourth quarter of 2016. In the fourth quarter of 2016, upon completion of the second production run of HOTSHOT, the Company wrote off approximately $23,000 for certain raw materials that are not expected to be used in future production runs. Based on the Company's projected sales, estimated product shelf life and the number of units produced, the Company did not write off any finished goods produced during the second production run of HOTSHOT as they are expected to be sold during 2017. Write-offs totaled approximately $282,000 for the year ended December 31, 2016 and are included in cost of product revenue in the accompanying consolidated statement of operations.

The cost of product revenue related to deferred revenue is capitalized and recorded as cost of product revenue at the time the revenue is recognized.