Conference Call with Accompanying Slide
Presentation Scheduled Today at 4:30 PM
ET
RESEARCH
TRIANGLE PARK, N.C., Feb. 13,
2024 /PRNewswire/ -- Charles & Colvard, Ltd.
(Nasdaq: CTHR) (the "Company"), a globally recognized fine jewelry
company that specializes in moissanite and lab grown diamonds,
reported financial results for the second quarter ended
December 31, 2023 ("Second Quarter
Fiscal 2024").
Management Commentary
"We acknowledge the recent industry shift has presented us with
numerous challenges and has significantly impacted our earnings.
However, we do not believe this setback will deter our progress or
hinder our long-term growth and strategic initiatives. We
remain committed to delivering long-term shareholder value and look
forward to the opportunities that lie ahead," said Don O'Connell, President and CEO of the
Company.
Recent Corporate Highlights
- Launched MADE ShoppingTM, the Company's new owned
multimedia network;
- Introduced madeshopping.com, the Company's new owned
transactional website in support of MADE ShoppingTM
programming;
- Launched two strategic drop-ship partnerships—with Fred Meyer
Jewelers and the Army & Air Force Exchange Service, or The
Exchange;
- Introduced Caydia® lab grown diamond finished
jewelry products in select Helzberg Diamonds Stores;
- Expanded charlesandcolvard.com assortment to include 126 new
Forever OneTM moissanite and Caydia® lab
grown diamond fine jewelry styles;
- Debuted lab grown diamond finished jewelry products with
drop-ship and marketplace partners, including Amazon, Belk.com,
eBay, ShopHQ and Walmart.com;
- Partnered with National Breast Cancer Foundation, Inc. during
the month of October to host a social media giveaway campaign;
- Sponsored Raleigh Magazine's Cocktail Classic event in
November; and
- Appeared in numerous brand and product placements, including
TODAY.com, theknot.com, Brides.com, JCKonline.com, Insider.com, and
MarieClaire.com.
Financial Summary for Second Quarter Fiscal 2024
(Quarter Ended December 31, 2023
Compared to Quarter Ended December 31,
2022)
- Net sales of $7.9 million for the
quarter, a decrease of 24% from $10.4
million in the year-ago quarter.
- In the Online Channels segment, which consists of e-commerce
outlets including charlesandcolvard.com, moissaniteoutlet.com,
charlesandcolvarddirect.com, madeshopping.com, third-party online
marketplaces, drop-ship retail and other pure-play e-commerce
outlets, net sales of $6.7 million,
representing 84% of total net sales for the quarter, compared to
$7.8 million, or 76% of total net
sales in the year-ago quarter.
- In the Traditional segment, which consists of wholesale and
brick-and-mortar customers, net sales of $1.3 million, representing 16% of total net sales
for the quarter, compared to $2.5
million, or 24% of total net sales, in the year-ago
quarter.
- Finished jewelry net sales of $7.4
million for the quarter.
- Loose jewel net sales of $0.5
million for the quarter.
- Gross profit was $2.9 million, or
a gross margin of 36% for the quarter, compared to gross profit of
$4.3 million, or gross margin of 41%
in the year-ago quarter.
- Operating expenses increased 5% to $5.8
million for the quarter, compared to $5.5 million in the year-ago quarter.
- Net loss was $2.9 million, or
$0.09 loss per diluted share for the
quarter, compared to net loss of $1.0
million, or $0.03 loss per
diluted share, in the year-ago quarter.
- Weighted average diluted shares outstanding were 30.3 million
for the quarter, consistent with the year-ago quarter.
Financial Position
Cash, cash equivalents and restricted cash totaled $11.1 million as of December 31, 2023, compared to $15.6 million as of June
30, 2023, representing a decrease of $4.5 million. Total inventory decreased to
$25.8 million as of December 31, 2023, down from $26.8 million as of June
30, 2023, and down from $35.0
million as of December 31,
2022. The Company had no debt outstanding as of December 31, 2023.
Investor Conference Call
Charles & Colvard will host an investor conference call and
webcast presentation to discuss its financial results for the
quarter ended December 31, 2023 at
4:30 p.m. ET on Tuesday, February 13,
2024.
Live Call-In Information: Interested parties can
access the conference call by dialing (844) 875-6912 (U.S.
toll-free) or (412) 317-6708 (international) and asking to be
joined into the Charles & Colvard call.
Live Webcast Information: Interested parties can access
the conference call and accompanying presentation slides via a live
webcast, which is available in the Investor Relations section of
the Company's website at https://ir.charlesandcolvard.com/events or
https://www.webcaster4.com/Webcast/Page/346/49753.
A replay of this conference call will be available until
February 20, 2024 at (877) 344-7529
(U.S. toll-free) or (412) 317-0088 (international). The replay
conference code is 7480158. A webcast replay will be available in
the Investor Relations section of the Company's website at
https://ir.charlesandcolvard.com/events.
About Charles & Colvard, Ltd.
Charles & Colvard, Ltd. (Nasdaq: CTHR) believes that fine
jewelry should be as ethical as it is exquisite. Charles &
Colvard is the original creator of lab grown moissanite (a rare
gemstone formed from silicon carbide). The Company brings
revolutionary gems and fine jewelry to market by using exclusively
Made, not MinedTM above ground gemstones and a
dedication to 100% recycled precious metals. The Company's Forever
One™ moissanite and Caydia® lab grown diamond brands
provide exceptional quality, incredible value and a conscious
approach to bridal, high fashion, and everyday jewelry. Charles
& Colvard was founded in 1995 and is based in North Carolina's Research Triangle Park region. For more
information, please visit www.charlesandcolvard.com.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Statements expressing expectations regarding our future
and projections relating to our products, sales, revenues, and
earnings are typical of such statements and are made under the
Private Securities Litigation Reform Act of 1995. These
forward-looking statements include, but are not limited to,
statements about our plans, objectives, representations, and
contentions and are not historical facts and typically are
identified by use of terms such as "may," "will," "should,"
"could," "expect," "intend," "plan," "anticipate," "believe,"
"estimate," "predict," "continue," and similar words, although some
forward-looking statements are expressed differently.
All forward-looking statements are subject to the risks and
uncertainties inherent in predicting the future. You should be
aware that although the forward-looking statements included herein
represent management's current judgment and expectations, our
actual results may differ materially from those projected, stated,
or implied in these forward-looking statements as a result of many
factors including, but not limited to, (1) our business and our
results of operations could be materially adversely affected as a
result of general economic and market conditions; (2) our future
financial performance depends upon increased consumer acceptance,
growth of sales of our products, and operational execution of our
strategic initiatives; (3) we face intense competition in the
worldwide gemstone and jewelry industry; (4) we have historically
been dependent on a single supplier for substantially all of our
silicon carbide, or SiC, crystals, the raw materials we use to
produce moissanite jewels; if our supply of high-quality SiC
crystals is interrupted, our business may be materially harmed; (5)
constantly evolving privacy regulatory regimes are creating new
legal compliance challenges; (6) our information technology, or IT,
infrastructure, and our network has been and may be impacted by a
cyber-attack or other security incident as a result of the rise of
cybersecurity events; (7) we are subject to certain risks due to
our international operations, distribution channels and vendors;
(8) our business and our results of operations could be materially
adversely affected as a result of our inability to fulfill orders
on a timely basis; (9) we are currently dependent on a limited
number of distributor and retail partners in our Traditional
segment for the sale of our products; (10) we may experience
quality control challenges from time to time that can result in
lost revenue and harm to our brands and reputation; (11) the
effects of COVID-19 and other potential future public health
crises, epidemics, pandemics or similar events on our business,
operating results, and cash flows are uncertain; (12) seasonality
of our business may adversely affect our net sales and operating
income; (13) our operations could be disrupted by natural
disasters; (14) sales of moissanite and lab grown diamond jewelry
could be dependent upon the pricing of precious metals, which is
beyond our control; (15) our current customers may potentially
perceive us as a competitor in the finished jewelry business; (16)
if the e-commerce opportunity changes dramatically or if e-commerce
technology or providers change their models, our results of
operations may be adversely affected; (17) governmental regulation
and oversight might adversely impact our operations; (18) the
execution of our business plans could significantly impact our
liquidity; (19) we are subject to arbitration, litigation and
demands, which could result in significant liability and costs, and
impact our resources and reputation; (20) the financial
difficulties or insolvency of one or more of our major customers or
their lack of willingness and ability to market our products could
adversely affect results; (21) negative or inaccurate information
on social media could adversely impact our brand and reputation;
(22) we rely on assumptions, estimates, and data to calculate
certain of our key metrics and real or perceived inaccuracies in
such metrics may harm our reputation and negatively affect our
business; (23) we may not be able to adequately protect our
intellectual property, which could harm the value of our products
and brands and adversely affect our business; (24)
environmental, social, and governance matters may impact our
business, reputation, financial condition, and results of
operations; (25) if we fail to evaluate, implement, and integrate
strategic acquisition or disposition opportunities successfully,
our business may suffer; (26) our failure to maintain compliance
with The Nasdaq Stock Market's continued listing requirements could
result in the delisting of our common stock; (27) some
anti-takeover provisions of our charter documents may delay or
prevent a takeover of our Company; and (28) we cannot guarantee
that our share repurchase program will be utilized to the full
value approved, or that it will enhance long-term stockholder value
and repurchases we consummate could increase the volatility of the
price of our common stock and could have a negative impact on our
available cash balance, in addition to the other risks and
uncertainties described in more detail in our filings with the U.S.
Securities and Exchange Commission (the "SEC"), including our
Annual Report on Form 10-K for the fiscal year ended June 30, 2023 and subsequent reports filed with
the SEC. Forward-looking statements speak only as of the date they
are made. We undertake no obligation to update or revise such
statements to reflect new circumstances or unanticipated events as
they occur except as required by the federal securities laws, and
you are urged to review and consider disclosures that we make in
the reports that we file with the Securities and Exchange
Commission, or SEC, that discuss other factors relevant to our
business.
- Financial Tables Follow –
CHARLES
& COLVARD, LTD.
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(unaudited)
|
|
|
Three Months Ended December 31,
|
|
Six Months Ended December 31,
|
|
2023
|
|
2022
|
|
2023
|
|
2022
|
Net sales
|
$
|
7,905,639
|
|
$
|
10,366,122
|
|
$
|
12,858,662
|
|
$
|
17,740,204
|
|
Cost of
goods sold
|
|
5,049,947
|
|
|
6,071,775
|
|
|
8,058,454
|
|
|
10,157,785
|
|
Gross profit
|
|
2,855,692
|
|
|
4,294,347
|
|
|
4,800,208
|
|
|
7,582,419
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales and
marketing
|
|
4,296,324
|
|
|
4,339,684
|
|
|
7,018,289
|
|
|
7,447,630
|
|
General and
administrative
|
|
1,497,061
|
|
|
1,187,955
|
|
|
3,351,329
|
|
|
2,601,431
|
|
Total operating
expenses
|
|
5,793,385
|
|
|
5,527,639
|
|
|
10,369,618
|
|
|
10,049,061
|
|
Loss from
operations
|
|
(2,937,693)
|
|
|
(1,233,292)
|
|
|
(5,569,410)
|
|
|
(2,466,642)
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
77,359
|
|
|
59,574
|
|
|
169,619
|
|
|
99,776
|
|
Interest
expense
|
|
(5,571)
|
|
|
-
|
|
|
(5,571)
|
|
|
-
|
|
Total other income
(expense), net
|
|
71,788
|
|
|
59,574
|
|
|
164,048
|
|
|
99,776
|
|
Loss before income
taxes
|
|
(2,865,905)
|
|
|
(1,173,718)
|
|
|
(5,405,362)
|
|
|
(2,366,866)
|
|
Income tax
benefit
|
|
-
|
|
|
131,937
|
|
|
-
|
|
|
434,893
|
|
Net loss
|
$
|
(2,865,905)
|
|
$
|
(1,041,781)
|
|
$
|
(5,405,362)
|
|
$
|
(1,931,973)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
(0.09)
|
|
$
|
(0.03)
|
|
$
|
(0.18)
|
|
$
|
(0.06)
|
|
Diluted
|
$
|
(0.09)
|
|
$
|
(0.03)
|
|
$
|
(0.18)
|
|
$
|
(0.06)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of shares used in computing net loss per common share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
30,344,955
|
|
|
30,344,954
|
|
|
30,344,955
|
|
|
30,408,018
|
|
Diluted
|
|
30,344,955
|
|
|
30,344,954
|
|
|
30,344,955
|
|
|
30,408,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CHARLES
& COLVARD, LTD.
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
|
December 31, 2023
(unaudited)
|
|
June 30, 2023
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
$
|
5,772,124
|
|
$
|
10,446,532
|
|
Restricted
cash
|
|
5,315,063
|
|
|
5,122,379
|
|
Accounts receivable,
net
|
|
1,528,476
|
|
|
380,085
|
|
Inventory,
net
|
|
9,879,556
|
|
|
7,476,046
|
|
Note
receivable
|
|
250,000
|
|
|
250,000
|
|
Prepaid expenses and
other assets
|
|
937,767
|
|
|
901,354
|
|
Total current
assets
|
|
23,682,986
|
|
|
24,576,396
|
|
Long-term
assets:
|
|
|
|
|
|
|
Inventory,
net
|
|
15,882,879
|
|
|
19,277,530
|
|
Property and
equipment, net
|
|
2,638,983
|
|
|
2,491,569
|
|
Intangible assets,
net
|
|
338,222
|
|
|
305,703
|
|
Operating lease
right-of-use assets
|
|
1,872,832
|
|
|
2,183,232
|
|
Other
assets
|
|
49,658
|
|
|
49,658
|
|
Total long-term
assets
|
|
20,782,574
|
|
|
24,307,692
|
|
TOTAL
ASSETS
|
$
|
44,465,560
|
|
$
|
48,884,088
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS'
EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$
|
6,049,022
|
|
$
|
4,786,155
|
|
Operating lease
liabilities, current portion
|
|
892,147
|
|
|
880,126
|
|
Accrued expenses and
other liabilities
|
|
1,404,825
|
|
|
1,395,479
|
|
Total current
liabilities
|
|
8,345,994
|
|
|
7,061,760
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
Noncurrent operating
lease liabilities
|
|
1,631,724
|
|
|
2,047,742
|
|
Total long-term
liabilities
|
|
1,631,724
|
|
|
2,047,742
|
|
Total
liabilities
|
|
9,977,718
|
|
|
9,109,502
|
|
Commitments and
contingencies
|
|
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
|
|
Common stock, no par
value; 50,000,000 shares authorized; 30,733,358 shares issued and
30,344,955 shares outstanding at December 31, 2023 and 30,912,108
shares issued and 30,523,705 shares outstanding at June 30,
2023
|
|
57,242,211
|
|
|
57,242,211
|
|
Additional paid-in
capital
|
|
26,324,537
|
|
|
26,205,919
|
|
Treasury stock, at
cost, 388,403 shares at
|
|
|
|
|
|
|
both December 31, 2023
and June 30, 2023
|
|
(489,979)
|
|
|
(489,979)
|
|
Accumulated
deficit
|
|
(48,588,927)
|
|
|
(43,183,565)
|
|
Total shareholders'
equity
|
|
34,487,842
|
|
|
39,774,586
|
|
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
|
$
|
44,465,560
|
|
$
|
48,884,088
|
|
CHARLES
& COLVARD, LTD.
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(unaudited)
|
|
|
Six Months Ended
December 31,
|
|
|
2023
|
|
2022
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
Net loss
|
$
|
(5,405,362)
|
|
$
|
(1,931,973)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
357,019
|
|
|
308,900
|
|
Stock-based
compensation
|
|
118,618
|
|
|
174,725
|
|
Provision for
uncollectible accounts
|
|
117,000
|
|
|
-
|
|
Provision for sales
returns
|
|
154,000
|
|
|
422,000
|
|
Inventory
write-downs
|
|
-
|
|
|
119,000
|
|
Provision for accounts
receivable discounts
|
|
5,793
|
|
|
4,899
|
|
Deferred income
taxes
|
|
-
|
|
|
(434,893)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
Accounts
receivable
|
|
(1,425,184)
|
|
|
(292,951)
|
|
Inventory
|
|
991,141
|
|
|
(1,601,247)
|
|
Prepaid expenses and
other assets, net
|
|
273,987
|
|
|
(247,025)
|
|
Accounts
payable
|
|
1,262,867
|
|
|
459,640
|
|
Accrued expenses and
other liabilities
|
|
(394,651)
|
|
|
(529,418)
|
|
Net cash used in
operating activities
|
|
(3,944,772)
|
|
|
(3,054,293)
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
Purchases of property and
equipment
|
|
(495,302)
|
|
|
(617,283)
|
|
Payments for intangible
assets
|
|
(41,650)
|
|
|
(30,658)
|
|
Net cash used in investing activities
|
|
(536,952)
|
|
|
(647,941)
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
Proceeds from line of
credit
|
|
500,000
|
|
|
-
|
|
Payments on line of
credit
|
|
(500,000)
|
|
|
-
|
|
Repurchases of common
stock
|
|
-
|
|
|
(451,815)
|
|
Net cash used in financing activities
|
|
-
|
|
|
(451,815)
|
|
|
|
|
|
|
|
|
NET DECREASE IN CASH,
CASH EQUIVALENTS AND RESTRICTED CASH
|
|
(4,481,724)
|
|
|
(4,154,049)
|
|
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH, BEGINNING OF PERIOD
|
|
15,568,911
|
|
|
21,179,340
|
|
CASH, CASH EQUIVALENTS
AND RESTRICTED CASH, END OF PERIOD
|
$
|
11,087,187
|
|
$
|
17,025,291
|
|
|
|
|
|
|
|
|
Supplemental disclosure
of cash flow information:
|
|
|
|
|
|
|
Cash paid during the
period for income taxes
|
$
|
-
|
|
$
|
5,900
|
|
Cash paid during the
period for interest expense
|
|
2,875
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Reconciliation to
Condensed Consolidated Balance Sheets:
|
|
December
31,
2023
|
|
June
30,
2023
|
|
Cash and cash
equivalents
|
|
$
|
5,772,124
|
|
$
|
10,446,532
|
|
Restricted
cash
|
|
|
5,315,063
|
|
|
5,122,379
|
|
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
|
|
$
|
11,087,187
|
|
$
|
15,568,911
|
|
View original content to download
multimedia:https://www.prnewswire.com/news-releases/charles--colvard-reports-second-quarter-fiscal-year-2024-financial-results-302060991.html
SOURCE Charles & Colvard, Ltd.