(6) INVENTORIES

Inventories consisted of the following (in thousands):

	September 30,				December 31,
	2013		2012		2012
	(unaudited)
Kernel	$	1,012	$	601	$	721
Work-in-process (nut-in-shell)	993		—		—
Finished goods	290		14		285
Packaging supplies and ingredients	210		64		98
Farming supplies	299		235		247
	$	2,804	$	914	$	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 manufacture branded products. Farming supplies will be used in the owned orchard and contract farming segments to generate nut sales and contract farming revenue.