(6) INVENTORIES

Inventories consisted of the following (in thousands):

	June 30,				December 31,
	2013		2012		2012
	(unaudited)
Purchased macadamia kernels	$	376	$	239	$	721
Finished Goods	339		13		285
Internally produced kernel	522		—		—
Work-in-process (nut-in-shell)	78		—		—
Packaging supplies and ingredients	168		40		98
Farming supplies	260		243		247
	$	1,743	$	535	$	1,351

All inventories are stated at the lower of cost or market. Work in process inventory is wet-in-shell nuts recorded at production cost. The cost to produce the related nut and the kernel processing costs are reclassified on a first in first out basis to kernel inventory. Management regularly evaluates its inventory for any impairment and has determined that an inventory valuation allowance is not required at this time. Macadamia kernel, packaging, ingredients and nut-in-shell inventories will be used to generate branded sales. Farming supplies will be used in the owned orchard and contract farming segments to generate nut sales and contract farming revenue.