5.	INVENTORIES

The Company’s total inventories, net of reserves, consisted of the following as of December 31, 2014 and 2013:

	December 31,
	2014			2013
Raw materials	$	4,917,399		$	3,581,418
Work-in-process		6,292,679			10,291,124
Finished goods		27,985,067			28,771,098
Finished goods on consignment		677,484			407,462
Less inventory reserves		(934,000	)		(639,000	)
Total	$	38,938,629		$	42,412,102

Short-term portion	$	13,320,639		$	13,074,428
Long-term portion		25,617,990			29,337,674
Total	$	38,938,629		$	42,412,102

Periodically, the Company ships finished goods inventory to wholesale customers on consignment terms. Under these terms, the customer assumes the risk of loss and has an absolute right of return for a specified period. Finished goods on consignment at December 31, 2014 and 2013 are net of shrinkage reserves of $53,000 and $75,000, respectively, to allow for certain loose jewels and finished jewelry on consignment with wholesale customers that may not be returned or may be returned in a condition that does not meet the Company’s current grading or quality standards.

Total net loose jewel inventories at December 31, 2014 and 2013, including inventory on consignment net of reserves, were $31.95 million and $32.87 million, respectively. The loose jewel inventories at December 31, 2014 and 2013 include shrinkage reserves of $17,000 and $2,000, respectively, which includes $17,000 and $0 of shrinkage reserves on inventory on consignment at December 31, 2014 and 2013, respectively. Loose jewel inventories at December 31, 2014 and 2013 also include recuts reserves of $216,000 and $172,000, respectively.

Total net jewelry inventories at December 31, 2014 and December 31, 2013, including inventory on consignment net of reserves, finished jewelry featuring moissanite manufactured by the Company since entering the finished jewelry business in 2010, and fashion finished jewelry purchased by the Company for sale through Lulu Avenue^®, were $6.93 million and $9.45 million, respectively. Jewelry inventories consist primarily of finished goods, a portion of which the Company acquired as part of a January 2009 settlement agreement with a former manufacturer customer to reduce the outstanding receivable to the Company. Due to the lack of a plan to market this inventory at that time, a jewelry inventory reserve was established to reduce the majority of the acquired jewelry inventory value to scrap value, or the amount the Company would expect to obtain by melting the gold in the jewelry and returning to loose-jewel finished goods inventory those jewels that meet grading standards. The scrap reserve established for this acquired inventory at the time of the agreement is adjusted at each reporting period for the market price of gold and has generally declined as the associated jewelry is sold down. At December 31, 2014, the balance decreased to $101,000 from $106,000 at December 31, 2013 as a result of sell down of the inventory during the year and scraping the finished jewelry. Because the finished jewelry the Company began manufacturing in 2010 after it entered that business was made pursuant to an operational plan to market and sell the inventory, it is not subject to this reserve. The finished jewelry inventories at December 31, 2014 and December 31, 2013 also include shrinkage reserves of $192,000 and $180,000, respectively, which includes shrinkage reserves of $36,000 and $75,000 on inventory on consignment, respectively; and a repairs reserve of $127,000 and $51,000, respectively. During the years ended December 31, 2014 and 2013, the Company identified certain fashion finished jewelry inventory that could not be sold due to damage or branding issues, and established an obsolescence reserve of $250,000 and $128,000, respectively, for the carrying costs in excess of any estimated scrap values. As of December 31, 2014, we identified certain finished jewelry featuring moissanite that was obsolete and established an obsolescence reserve of $31,000 for the carrying costs in excess of any estimated scrap values. No obsolescence reserve requirement relating to our finished jewelry featuring moissanite existed as of December 31, 2013.