INVENTORIES

The Company works closely with third parties to manufacture and package finished goods for sale and it takes title to the finished goods at the time of shipment from the manufacturer and maintains such goods until distribution and sale. Inventories are stated at the lower of cost or market with cost determined using the first-in, first-out method.

The Company continually evaluates inventory for potential losses due to excess, obsolete or slow-moving inventory by comparing sales history and sales projections to the inventory on hand. When evidence indicates the carrying value may not be recoverable, a charge is taken to reduce the inventory to the net realizable value.

Caldolor inventory represented the majority of net inventory on hand at March 31, 2013 and December 31, 2012, and has varying expiration dates that begin in the second quarter of 2014 and extend through January 2015. Through March 31, 2013 and December 31, 2012, the Company has recognized charges for potential obsolescence and discontinuance losses, primarily for Caldolor, of approximately $2.6 million. If actual sales in future periods are less than projected sales, the Company could incur additional obsolescence losses.

In connection with the purchase of certain Kristalose assets in 2011, the Company is responsible for the purchase of the active pharmaceutical ingredient for Kristalose and maintains the inventory at the third-party manufacturer. As the ingredients are consumed in production, the value of the ingredients is transferred from raw materials to finished goods inventory.

As of March 31, 2013 and December 31, 2012, inventory was comprised of the following:



	March 31, 2013		December 31, 2012
Raw materials	$	1,424,496	$	1,310,670
Finished goods	4,567,535		4,907,685
Total	$	5,992,031	$	6,218,355