3. INVENTORIES

Inventories consist principally of packaged meal replacements held in the Company’s warehouses. Inventory is stated at the lower of cost or net realizable value, utilizing the first-in, first-out method. The cost of finished goods includes the cost of raw materials, packaging supplies, direct and indirect labor and other indirect manufacturing costs. On a quarterly basis, management reviews inventory for unsalable or obsolete inventory.

Inventories consisted of the following (in thousands):


	June 30, 2018		December 31, 2017

Raw materials	$	9,043	$	4,348
Packaging		1,495		1,185
Non-food finished goods		1,710		920
Finished goods		14,766		13,407
Reserve for obsolete inventory		(114)		(532)
Total	$	26,900	$	19,328