5.	INVENTORIES

The Company’s total inventories, net of reserves, consisted of the following as of December 31, 2015 and 2014:

	December 31,
	2015			2014
Raw materials	$	6,932,139		$	4,917,399
Work-in-process		6,031,745			6,292,679
Finished goods		20,441,535			27,985,067
Finished goods on consignment		293,001			677,484
Less inventory reserves		(1,370,000	)		(934,000	)
Total	$	32,328,420		$	38,938,629

Short-term portion	$	10,739,798		$	13,320,639
Long-term portion		21,588,622			25,617,990
Total	$	32,328,420		$	38,938,629

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, 2015 and 2014 are net of shrinkage reserves of $37,000 and $53,000, 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, 2015 and 2014, including inventory on consignment net of reserves, were $28.19 million and $31.95 million, respectively. The loose jewel inventories at December 31, 2015 and 2014 include shrinkage reserves of $50,000 and $17,000, respectively, which includes $10,000 and $17,000 of shrinkage reserves on inventory on consignment at December 31, 2015 and 2014, respectively. Loose jewel inventories at December 31, 2015 and 2014 also include recut reserves of $449,000 and $216,000, respectively. During the year ended December 31, 2015, management identified an opportunity to sell approximately $2.28 million of slow-moving loose jewel inventory of less desirable quality. As a result of this sale and feedback from customers on the value of some of these goods, the Company determined a lower of cost or market reserve of $352,000 was required on some of the remaining inventory of these lower quality goods. In view of the foregoing factors, management has concluded that no excess or obsolete loose jewel inventory reserve requirements existed as of December 31, 2015 and 2014 on goods other than the lower quality goods noted previously.

Total net jewelry inventories at December 31, 2015 and 2014, 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 $4.10 million and $6.93 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, 2015, the balance decreased to $4,000 from $101,000 at December 31, 2014 as a result of melting a majority of the jewelry, some sell down of the inventory during the year, and change in gold prices. 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, 2015 and 2014 also include shrinkage reserves of $95,000 and $192,000, respectively, including shrinkage reserves of $27,000 and $36,000 on inventory on consignment, respectively; and a repairs reserve of $31,000 and $127,000, respectively.

The need for adjustments to inventory reserves is evaluated on a period-by-period basis.