Inventories and Deferred Cost of Sales

Inventories consisted of the following (in thousands):



	September 30, 2016			December 31, 2015
Raw materials	$	20,171		$	14,546
Work-in-process	—			98
Finished goods	7,074			7,485
	27,245			22,129
Less: inventory valuation allowance	(8,165		)	(5,317		)
Inventories, net	$	19,080		$	16,812

Consigned inventory is held at third-party locations, which include the Company's contract manufacturing partner and customers. The Company retains title to the inventory until purchased by the third-party. Consigned inventory, consisting of raw materials and finished goods was $12.0 million and $11.5 million at September 30, 2016 and December 31, 2015.

The Company’s consignment inventory with its contract manufacturer consists of inventory transferred from the Company’s prior contract manufacturer as well as inventory that has been purchased by the contract manufacturer as a result of the Company's forecasted demand. The Company is contractually obligated to purchase inventory transferred from the Company's prior contract manufacturer after the inventory ages for 365 days. The Company is also contractually obligated to purchase inventory that has been purchased by its contract manufacturer as a result of the Company's forecasted demand when the inventory ages beyond 180 days and has no forecasted demand. The Company’s consigned inventory at its contract manufacturing partner was $10.8 million and $8.7 million as of September 30, 2016 and December 31, 2015. The Company records a liability for adverse purchase commitments of inventory owned by its contract manufacturing partner. See Note 8 - Commitments and Contingencies for additional information regarding the Company's adverse purchase commitment liability.

The Company recorded the following charges associated with the valuation of inventory and the adverse purchase commitment liabilities (in thousands):



	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2016		2015		2016		2015
Inventory, net	$	1,570	$	806	$	4,073	$	1,078
Adverse purchase commitments^(A)	(289)		527		(1,403)		1,534
Net charges	$	1,281	$	1,333	$	2,670	$	2,612