INVENTORIES

6 Months Ended

Dec. 31, 2021

5.	INVENTORIES

The Company’s total inventories, net of reserves, consisted of the following as of the dates presented:

	December 31, 2021		June 30, 2021
Finished jewelry:
Raw materials	$	1,728,266	$	1,476,514
Work-in-process		1,826,826		779,593
Finished goods		10,089,451		8,025,816
Finished goods on consignment		2,316,408		2,050,372
Total finished jewelry	$	15,960,951	$	12,332,295
Loose jewels:
Raw materials	$	1,673,194	$	1,775,505
Work-in-process		8,604,863		9,893,443
Finished goods		5,153,778		4,942,192
Finished goods on consignment		344,337		154,968
Total loose jewels		15,776,172		16,766,108
Total supplies inventory		103,188		74,317
Total inventory	$	31,840,311	$	29,172,720

As of the dates presented, the Company’s total inventories, net of reserves, are classified as follows:

	December 31, 2021		June 30, 2021
Short-term portion	$	12,492,151	$	11,450,141
Long-term portion		19,348,160		17,722,579
Total	$	31,840,311	$	29,172,720

The Company’s work-in-process inventories include raw SiC crystals on which processing costs, such as labor and sawing, have been incurred; and components, such as metal castings and finished good moissanite jewels, that have been issued to jobs in the manufacture of finished jewelry. The Company’s moissanite jewel manufacturing process involves the production of intermediary shapes, called “preforms,” that vary depending upon the expected size and shape of the finished jewel. To maximize manufacturing efficiencies, preforms may be made in advance of current finished inventory needs but remain in work-in-process inventories. As of December 31, 2021 and June 30, 2021, work-in-process inventories issued to active production jobs approximated $3.07 million and $2.23 million, respectively.

The Company’s moissanite and lab grown diamond jewels do not degrade in quality over time and inventory generally consists of the shapes and sizes most commonly used in the jewelry industry. In addition, the majority of jewel inventory is not mounted in finished jewelry settings and is therefore not subject to fashion trends, and product obsolescence is closely monitored and reviewed by management as of and for each financial reporting period.

The Company manufactures finished jewelry featuring moissanite and lab grown diamonds. Relative to loose moissanite jewels and lab grown diamonds, finished jewelry is more fashion-oriented and subject to styling trends that could render certain designs obsolete over time. The majority of the Company’s finished jewelry featuring moissanite and lab grown diamonds is held in inventory for resale and largely consists of such core designs as stud earrings, solitaire and three-stone rings, pendants, and bracelets that tend not to be subject to significant obsolescence risk due to their classic styling. In addition, the Company generally holds smaller quantities of designer-inspired and trend moissanite fashion jewelry that is available for resale through retail companies and through its Online Channels segment. The Company also carries a limited amount of inventory as part of its sample line that the Company uses in the selling process to its customers.

The Company’s continuing operating subsidiaries carry no net inventories, and inventory is transferred without intercompany markup from the parent entity as product line cost of goods sold when sold to the end consumer.

The Company’s inventories are stated at the lower of cost or net realizable value on an average cost basis. Each accounting period the Company evaluates the valuation and classification of inventories including the need for potential adjustments to inventory-related reserves, which also include significant estimates by management, including the effect of market factors and sales trends. Changes to the Company’s inventory reserves and allowances are accounted for in the accounting period in which a change in such reserves and allowances is observed and deemed appropriate, including changes in management’s estimates used in the process to determine such reserves and valuation allowances.