NOTE 6. INVENTORIES

Inventories consist of finished goods, raw materials and work in process and are stated at the lower of cost or market and consist of the following (in thousands):

	June 30,			December 31,
	2014			2013

Raw materials	$	1,736		$	1,951
Work-in-process	953			181
Finished goods	6,136			9,056
Less: allowance for obsolescence	(1,043		)	(1,043		)
Total	$	7,782		$	10,145

Inventories relate to the manufacturing costs of the Company’s Gralise, CAMBIA, Zipsor and Lazanda products at June 30, 2014.

The fair value of inventories acquired included a step-up in the value of CAMBIA, Zipsor and Lazanda inventories of $3.7 million, $1.9 million and $0.6 million, respectively, which is being amortized to cost of sales as the acquired inventories are sold. The cost of sales related to the step-up value of CAMBIA, Lazanda and Zipsor inventories was $1.7 million, $0.1 million and zero for the three months ended June 30, 2014, respectively. The cost of sales related to the step-up value of CAMBIA, Lazanda and Zipsor inventories was $3.0 million, $0.1 million, and zero for the six months ended June 30, 2014, respectively. The cost of sales related to the step-up value of Zipsor for the three and six months ended June 30, 2013 was $0.2 million and $0.7 million, respectively. The Company acquired Lazanda in July 2013 and CAMBIA in December 2013.