PR Newswire | Sep 2, 2021 04:07PM EDT

Results

09/02 15:07 CDT

Charles & Colvard Reports Fourth Quarter and Full Fiscal Year 2021 Financial Results- $9.7 Million in Net Sales, $1.1 Million in Income from Operations for Q4 2021- $8.4 Million in Net Income or $0.27 Earnings Per Diluted Share in Q4 2021- $39.2 Million in Net Sales, $5.5 Million in Income from Operations for Fiscal 2021- $12.8 Million in Net Income or $0.42 Earnings Per Diluted Share in Fiscal 2021- $1.8 Million in Cash Flow from Operations in Q4 2021- Total Cash of $21.4 Million as of June 30, 2021, a 47% Increase Year-Over-Year- Conference Call with Accompanying Slide Presentation Scheduled Today at 4:30 PM ET RESEARCH TRIANGLE PARK, N.C., Sept. 2, 2021

RESEARCH TRIANGLE PARK, N.C., Sept. 2, 2021 /PRNewswire/ -- Charles & Colvard, Ltd. (Nasdaq: CTHR) (the "Company"), a globally recognized fine jewelry company specializing in lab created gemstones, reported financial results for the fourth quarter and full fiscal year ended June 30, 2021 ("Fiscal 2021").

For the fourth quarter of Fiscal 2021, the Company reported net sales of $9.7 million, a 120% increase over the year-ago quarter. Income from operations was $1.1 million. Net income was $8.4 million, or $0.27 earnings per diluted share. Online Channels net sales were $5.6 million, which was an 86% increase over the year-ago quarter. Traditional net sales were $4.2 million, which was a 189% increase over the year-ago quarter. Finished jewelry net sales for the quarter were $5.6 million, which was an increase of 86% to the year-ago quarter, and loose jewels net sales were $4.1 million, for a 190% increase over the year-ago quarter.

For the fiscal year ended June 30, 2021, the Company reported net sales of $39.2 million, for a 34% increase over the prior fiscal year. Income from operations was $5.5 million for Fiscal 2021. Net income was $12.8 million, or $0.42 earnings per diluted share. Online Channels net sales were $23.2 million, representing a 40% increase over the year-ago period. Traditional net sales were $16.0 million, representing an increase of 28% over the prior fiscal year. Finished jewelry net sales totaled $24.4 million for Fiscal 2021, or a 45% increase over fiscal 2020, and loose jewels net sales were $14.8 million for Fiscal 2021, an increase of 20% over the year-ago period.

"I'm pleased to report this quarter that we continued to execute successfully on our core strategies and to make further strides towards building our global brand," said Don O'Connell, President and CEO of Charles & Colvard. "We've experienced sequential growth quarter-over-quarter, and a 120% increase in revenue compared to the year-ago quarter. We're excited about the growth that our Caydia(r) lab grown diamond brand is bringing to Charles & Colvard's overall market opportunity."

"We were able to increase both our Online Channels and Traditional segments by 86% and 189% respectively compared to the year-ago quarter, which included expanding our finished jewelry net sales 86% and our loose jewels net sales by 190% compared to the year-ago quarter. We continued to strive to elevate shareholder value as evidenced by the more than 300% increase in our stock price year-over-year. Looking ahead, we intend to continue to execute on our strategic initiatives: expanding our brand presence, enhancing customer engagement, and focusing on design and product development, all the while utilizing innovative, technology to drive disciplined, top-line growth," concluded Mr. O'Connell.

Recent Corporate Highlights

* Executed a successful Mother's Day campaign, increasing sales by 123% over the prior-year campaign period; * Effective June 23, 2021, forgiveness in full of the Company's Paycheck Protection Program Loan, or PPP Loan, including accrued and unpaid interest, in the amount of approximately $974,000 was approved and processed; * Revamped the Company's Amazon online store presence to further enhance the customer experience; * Expanded in-store Macy's assortment to nearly 50 styles; * Introduced new Caydia(r) lab grown diamond cuts; * Expanded patented Signature Collection styles with Forever OneTM moissanite gemstone cuts; * Presented at Planet MicroCap Showcase: VIRTUAL 2021 and the Q2 Investor Summit; * Implemented technology in support of digital streaming and shoppable commerce; * Featured in Forbes, Now Weddings, MSN, Harper's Bazaar, New York Magazine and Brides; and * Added back to the Russell Microcap(r) Index.

Financial Summary for Fourth Quarter Fiscal 2021 (Quarter Ended June 30, 2021 Compared to Quarter Ended June 30, 2020)

* Net sales increased 120%, to $9.7 million for the quarter, compared with $4.4 million in the year-ago quarter. * In the Online Channels segment, which consists of e-commerce outlets including charlesandcolvard.com, moissaniteoutlet.com, third-party online marketplaces, drop-ship retail and other pure-play e-commerce outlets, net sales increased 86% year over year, to $5.6 million, representing 57% of total net sales for the quarter, compared to $3.0 million, or 68% of total net sales in the year-ago quarter. * In the Traditional segment, which consists of wholesale and brick-and-mortar customers, net sales increased 189% year over year, to $4.1 million, representing 43% of total net sales for the quarter, compared to $1.4 million, or 32% of total net sales, in the year-ago quarter. * Finished jewelry net sales increased 86% to $5.6 million for the quarter, compared to $3.0 million in the year-ago quarter. * Loose jewel net sales increased 190% to $4.1 million for the quarter, compared to $1.4 million in the year-ago quarter. * Operating expenses increased 16% to $3.3 million for the quarter, compared to $2.8 million in the year-ago quarter. * Net income was $8.4 million, or $0.27 earnings per diluted share for the quarter, compared to a net loss of $1.0 million, or $0.04 loss per diluted share, in the year-ago quarter. * Weighted average shares outstanding on a diluted basis were 31.1 million for the quarter, compared to 28.7 million in the year-ago quarter. * During the fourth quarter of Fiscal 2021, effective June 23, 2021, the Company's PPP Loan forgiveness was approved and processed by the U.S. Small Business Administration, or the SBA, for the full principal of the Company's PPP Loan in the amount of $965,000. In connection with the Company's PPP Loan forgiveness, the SBA also approved forgiveness of the full amount of accrued and unpaid interest expense in the amount of approximately $9,000 that the Company recognized during the period the principal of the PPP Loan was outstanding. Accordingly, the full amount of principal of the loan, including the inception to-date interest expense, in the amount of approximately $974,000 was recognized and included in the gain on extinguishment of debt in the fiscal quarter ended June 30, 2021. * As of June 30, 2021, cumulative positive taxable income over the last three tax years had been generated in the U.S. by the Company, as compared to the negative evidence of cumulative losses in previous years. The Company's management also determined that its expectations of future taxable income in upcoming tax years would be sufficient to result in full utilization of the Company's federal net operating loss carryforwards and certain of the deferred tax assets prior to any statutory expiration. As a result, the Company's management determined that sufficient positive evidence exists as of June 30, 2021, to conclude that it is more likely than not deferred tax assets of approximately $6.4 million are realizable, and it reduced the Company's valuation allowance accordingly. The reduction of the valuation allowance against these deferred tax assets was the main driver of the income tax benefit recognized during the fiscal quarter ended June 30, 2021, of approximately $6.3 million.

Financial Summary for Fiscal Year 2021

* Net sales increased 34% to $39.2 million for the fiscal year ended June 30, 2021, compared to $29.2 million in the year-ago period. * Online Channels segment net sales increased 40% year over year to $23.2 million, representing 59% of total net sales, for the fiscal year ended June 30, 2021, compared to $16.6 million, or 57% of total net sales in the year-ago period. * Traditional segment net sales increased 28% year over year to $16.0 million, representing 41% of total net sales, for the fiscal year ended June 30, 2021, compared to $12.6 million, or 43% of total net sales, in the year-ago period. * Finished jewelry net sales increased 45% to $24.4 million for the fiscal year ended June 30, 2021, compared to $16.8 million in the year-ago period. * Loose jewel net sales were $14.8 million for the fiscal year ended June 30, 2021, an increase of 20%, compared to $12.4 million in the year-ago period. * Operating expenses decreased 10% to $12.9 million for the fiscal year ended June 30, 2021, compared to $14.3 million in the year-ago period. * Net income was $12.8 million, or $0.42 earnings per diluted share, for the fiscal year ended June 30, 2021, compared to a net loss of $6.2 million, or $0.22 loss per diluted share, in the year-ago period. * Weighted average shares outstanding on a diluted basis were 30.2 million for the fiscal year ended June 30, 2021, compared to 28.6 million in the year-ago period. * As disclosed above, during the fourth quarter of Fiscal 2021, the Company's PPP Loan forgiveness was approved and processed by the SBA, which resulted in approximately $974,000 that was recognized and included in the gain on extinguishment of debt in the fiscal year ended June 30, 2021. * In addition, as disclosed above, at June 30, 2021, the Company's management determined that sufficient positive evidence existed to conclude that it is more likely than not deferred tax assets of approximately $6.4 million are realizable, and the Company reduced its valuation allowance accordingly. The reduction of the valuation allowance against these deferred tax assets was the main driver of the income tax benefit recognized during the fiscal year ended June 30, 2021, of approximately $6.3 million.

Financial Position

* Cash, cash equivalents and restricted cash totaled $21.4 million as of June 30, 2021, representing an increase of $6.8 million from $14.6 million as of June 30, 2020. * Total inventory decreased to $29.2 million as of June 30, 2021, compared to $30.6 million as of June 30, 2020. * During the fiscal year ended June 30, 2021, our working capital increased $12.7 million, or 73%, to $30.1 million from $17.4 million at June 30, 2020. * The Company had no debt outstanding as of June 30, 2021, compared to $1.0 million at June 30, 2020.

Investor Conference Call

Charles & Colvard will host an investor conference call and webcast presentation to discuss its financial results for the fourth quarter and fiscal year ended June 30, 2021 at 4:30 p.m. ET on Thursday, September 2, 2021. The investor conference call and accompanying presentation slides will be webcast live and can be accessed in the Investor Relations section of the Company's website at https://ir.charlesandcolvard.com/events.

To participate via telephone, callers should dial 844-875-6912 (U.S. toll-free) or 412-317-6708 (international) and ask to be connected to the "Charles & Colvard, Ltd. Conference Call" a few minutes before 4:30 p.m. ET on Thursday, September 2, 2021.

A replay of this conference call will be available until September 9, 2021 at 877-344-7529 (U.S. toll-free) or 412-317-0088 (international). The replay conference ID is 10159158. The call will also be available for replay 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 fine jewelry can be accessible, beautiful and conscientious. Charles & Colvard is the original pioneer of lab-created moissanite, a rare gemstone formed from silicon carbide. The Company brings revolutionary gemstones and jewelry to market through its pinnacle Forever OneTM moissanite brand and its premium Caydia(r) lab grown diamond brand. Consumers seek Charles & Colvard fashion, bridal and fine jewelry because of its exceptional quality, incredible value and shared beliefs in environmental and social responsibility. Charles & Colvard was founded in 1995 and is based in North Carolina'sResearch Triangle Park. 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, financial condition and results of operations could continue to be adversely affected by an ongoing COVID-19 pandemic and related global economic 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) our business and our results of operations could be materially adversely affected as a result of general and economic conditions; (4) we face intense competition in the worldwide gemstone and jewelry industry; (5) a failure of our information technology infrastructure or a failure to protect confidential information of our customers and our network against security breaches could adversely impact our business and operations; (6) we are subject to certain risks due to our international operations, distribution channels and vendors; (7) 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; (8) we are currently dependent on a limited number of distributor and retail partners in our Traditional segment for the sale of our products; (9) we may experience quality control challenges from time to time that can result in lost revenue and harm to our brands and reputation; (10) seasonality of our business may adversely affect our net sales and operating income; (11) our operations could be disrupted by natural disasters; (12) sales of moissanite and lab grown diamond jewelry could be dependent upon the pricing of precious metals, which is beyond our control; (13) our current customers may potentially perceive us as a competitor in the finished jewelry business; (14) we depend on an exclusive supply agreement, or the Supply Agreement, with Cree, Inc., or Cree, 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; (15) 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; (16) governmental regulation and oversight might adversely impact our operations; (17) the execution of our business plans could significantly impact our liquidity; (18) 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; (19) negative or inaccurate information on social media could adversely impact our brand and reputation; (20) 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; (21) 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; (22) if we fail to evaluate,implement, and integrate strategic acquisition or disposition opportunities successfully, our business may suffer; (23) our loan, pursuant to the Paycheck Protection Program, or the PPP Loan, under the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, as administered by the U.S. Small Business Administration, or the SBA, was forgiven in full and may be subject to review for compliance with applicable SBA requirements for six years from the date the loan was forgiven; (24) some anti-takeover provisions of our charter documents may delay or prevent a takeover of our company; and (25) our failure to maintain compliance with The Nasdaq Stock Market's continued listing requirements could result in the delisting of our common stock, 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, 2021 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 -

Appendix A

CHARLES & COLVARD, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended June 30, Year Ended June 30,

2021 2020 2021 2020

(unaudited) (unaudited) (unaudited)

Net sales $ 9,726,699 $ 4,430,460 $ 39,235,839 $ 29,189,020

Costs and expenses:

Cost of goods sold 5,352,475 2,621,138 20,809,690 21,200,207

Sales and marketing 2,136,862 1,533,956 8,476,716 9,443,244

General and 1,163,195 1,313,855 4,441,441 4,861,297administrative

Total costs and 8,652,532 5,468,949 33,727,847 35,504,748expenses

Income (Loss) from 1,074,167 (1,038,489) 5,507,992 (6,315,728)operations

Other income(expense):

Gain onextinguishment of 974,328 - 974,328 -debt

Interest 455 11,908 5,581 158,091income

Interest expense (1,635) (348) (8,953) (884)

Loss on foreign - (770) (603) (1,829)currency exchange

Total other income 973,148 10,790 970,353 155,378(expense), net

Income (Loss) before 2,047,315 (1,027,700) 6,478,345 (6,160,350)income taxes

Income tax benefit 6,333,881 (493) 6,332,421 (1,733)(expense)

Net income (loss) $ 8,381,196 $ (1,028,193) $ 12,810,766 $ (6,162,083)

Net income (loss) percommon share:

Basic $ 0.28 $ (0.04) $ 0.44 $ (0.22)

Diluted $ 0.27 $ (0.04) $ 0.42 $ (0.22)

Weighted averagenumber of shares usedin computing netincome (loss) percommon share:

Basic 29,680,806 28,699,767 29,144,820 28,644,133

Diluted 31,058,495 28,699,767 30,232,567 28,644,133

CHARLES & COLVARD, LTD.

CONDENSED CONSOLIDATED BALANCE SHEETS

June 30, 2021 June 30, 2020

(unaudited)

ASSETS

Current assets:

Cash and cash equivalents $ 21,302,317 $ 13,993,032

Restricted cash 144,634 624,202

Accounts receivable, net 1,662,074 670,718

Inventory, net 11,450,141 7,443,257

Note receivable 250,000 -

Prepaid expenses and other assets 952,065 1,177,860

Total current assets 35,761,231 23,909,069

Long-term assets:

Inventory, net 17,722,579 23,190,702

Property and equipment, net 875,897 999,061

Intangible assets, net 209,658 170,151

Operating lease right-of-use asset 3,952,146 584,143

Deferred income taxes, net 6,350,830 -

Other assets 49,658 51,461

Total long-term assets 29,160,768 24,995,518

TOTAL ASSETS $ 64,921,999 $ 48,904,587

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable $ 2,774,373 $ 3,748,235

Operating lease liabilities, current portion 566,083 622,493

Current maturity of long-term debt - 193,000

Accrued expenses and other liabilities 2,281,807 1,922,332

Total current liabilities 5,622,263 6,486,060

Long-term liabilities:

Long-term debt, net - 772,000

Noncurrent operating lease liabilities 3,600,842 203,003

Accrued income taxes 9,878 7,947

Total long-term liabilities 3,610,720 982,950

Total liabilities 9,232,983 7,469,010

Commitments and contingencies

Shareholders' equity:

Common stock, no par value; 50,000,000 sharesauthorized; 29,913,095 and 28,949,410 shares 56,057,109 54,342,864issued and outstanding at June 30, 2021 and2020, respectively

Additional paid-in capital 25,608,593 25,880,165

Accumulated deficit (25,976,686) (38,787,452)

Total shareholders' equity 55,689,016 41,435,577

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 64,921,999 $ 48,904,587

CHARLES & COLVARD, LTD.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Year Ended June 30,

2021 2020

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss) $ 12,810,766 $ (6,162,083)

Adjustments to reconcile net income (loss) to netcash provided by operating activities:

Depreciation and amortization 567,122 490,235

Stock-based compensation 352,583 459,538

Provision for uncollectible accounts 2,030 8,788

Recovery of sales returns (29,000) (42,000)

Inventory write-downs 150,000 5,863,991

(Recovery of) Provision for accounts receivable (9,153) 3,751discounts

Gain on extinguishment of debt (974,328) -

Benefit for deferred income taxes, net (6,350,830) -

Changes in operating assets and liabilities:

Accounts receivable (955,233) 1,321,214

Inventory 1,311,239 (2,764,230)

Prepaid expenses and other assets, net (3,140,405) 490,438

Accounts payable (973,862) 468,687

Accrued income taxes 1,931 1,733

Accrued expenses and other liabilities 3,710,232 109,123

Net cash provided by operating activities 6,473,092 249,185

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment (437,069) (458,854)

Payment to fund note receivable (250,000) -

Payments for intangible assets (46,396) (77,122)

Net cash used in investing (733,465) (535,976)activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Stock option exercises 1,090,090 -

Proceeds from long-term debt - 965,000

Issuance of common stock, net of offering costs - 932,480

Net cash provided by financing 1,090,090 1,897,480activities

NET INCREASE IN CASH, CASH EQUIVALENTS AND 6,829,717 1,610,689RESTRICTED CASH

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, 14,617,234 13,006,545BEGINNING OF YEAR

CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END $ 21,446,951 $ 14,617,234OF YEAR

Reconciliation to Condensed Consolidated Balance June 30, June 30,Sheets: 2021 2020

Cash and cash equivalents $ 21,302,317 $ 13,993,032

Restricted cash 144,634 624,202

$ 21,446,951 $ 14,617,234

Supplemental disclosure of non-cash investing andfinancing activities:

Additions to right-of-use assets obtained $ 3,908,249 $ -from new operating lease liabilities

Forgiveness of PPP Loan principal $ 965,000 -

Supplemental disclosure of cash flow information:

Cash paid during the year for interest $ - $ 884

Cash paid during the year for taxes $ 14,704 $ 2,050

Appendix B

CHARLES & COLVARD, LTD.SUMMARY FINANCIAL INFORMATION BY REPORTABLE SEGMENT(unaudited)

The Company evaluates the financial performance of its segments based on netsales; product line gross profit, or the excess of product line sales overproduct line cost of goods sold; and operating income (loss). The Company'sproduct line cost of goods sold is defined as product cost of goods sold,excluding non-capitalized expenses from the Company's manufacturing andproduction control departments, comprising personnel costs, depreciation,leases, utilities, and corporate overhead allocations; freight out; inventorywrite-downs; and other inventory adjustments, comprising costs of qualityissues, and damaged goods.

The Company allocates certain general and administrative expenses between itsOnline Channels segment and its Traditional segment primarily based on netsales and number of employees to arrive at segment operating income (loss).Unallocated expenses remain in its Traditional segment.

Summary unaudited financial information by reportable segment for the threemonths ended June 30, 2021 is as follows:

Three Months Ended June 30, 2021

Online Channels Traditional Total

Net sales

Finished Jewelry $ 4,790,434 $ 790,684 $ 5,581,118

Loose jewels 783,863 3,361,718 4,145,581

Total $ 5,574,297 $ 4,152,402 $ 9,726,699

Product line cost of goods sold

Finished jewelry $ 1,993,161 $ 470,478 $ 2,463,639

Loose jewels 269,525 1,570,367 1,839,892

Total $ 2,262,686 $ 2,040,845 $ 4,303,531

Product line gross profit

Finished jewelry $ 2,797,273 $ 320,206 $ 3,117,479

Loose jewels 514,338 1,791,351 2,305,689

Total $ 3,311,611 $ 2,111,557 $ 5,423,168

Operating income $ 718,486 $ 355,681 $ 1,074,167

Depreciation and amortization $ 68,048 $ 79,563 $ 147,611

Capital expenditures $ 58,240 $ 32,717 $ 90,957

CHARLES & COLVARD, LTD.SUMMARY FINANCIAL INFORMATION BY REPORTABLE SEGMENT(unaudited)

Summary unaudited financial information by reportable segment for the threemonths ended June 30, 2020 is as follows:

Three Months Ended June 30, 2020

Online Traditional Total Channels

Net sales

Finished jewelry $ 2,636,333 $ 364,784 $ 3,001,117

Loose jewels 359,565 1,069,778 1,429,343

Total $ 2,995,898 $ 1,434,562 $ 4,430,460

Product line cost of goodssold

Finished jewelry $ 1,020,925 $ 192,340 $ 1,213,265

Loose jewels 131,213 537,818 669,031

Total $ 1,152,138 $ 730,158 $ 1,882,296

Product line gross profit

Finished jewelry $ 1,615,408 $ 172,444 $ 1,787,852

Loose jewels 228,352 531,960 760,312

Total $ 1,843,760 $ 704,404 $ 2,548,164

Operating loss $ (311,606) $ (726,883) $ (1,038,489)

Depreciation and amortization $ 46,347 $ 77,566 $ 123,913

Capital expenditures $ 60,395 $ 3,634 $ 64,029

CHARLES & COLVARD, LTD.

SUMMARY FINANCIAL INFORMATION BY REPORTABLE SEGMENT

(unaudited)

Summary unaudited financial information by reportable segment for the yearended June 30, 2021 is as follows:

Year Ended June 30, 2021

Online Traditional Total Channels

Net sales

Finished jewelry $ $ 4,496,347 $ 24,401,546 19,905,199

Loose jewels 3,304,439 11,529,854 14,834,293

Total $ 23,209,638 $ 16,026,201 $ 39,235,839

Product line cost of goodssold

Finished jewelry $ 8,235,797 $ 3,036,215 $ 11,272,012

Loose jewels 1,216,942 5,640,813 6,857,755

Total $ 9,452,739 $ 8,677,028 $ 18,129,767

Product line gross profit

Finished jewelry $ 11,669,402 $ 1,460,132 $ 13,129,534

Loose jewels 2,087,497 5,889,041 7,976,538

Total $ 13,756,899 $ 7,349,173 $ 21,106,072

Operating income $ 3,739,553 $ 1,768,439 $ 5,507,992

Depreciation and amortization $ 248,995 $ 318,127 $ 567,122

Capital expenditures $ 253,935 $ 183,134 $ 437,069

CHARLES & COLVARD, LTD.

SUMMARY FINANCIAL INFORMATION BY REPORTABLE SEGMENT

Summary financial information by reportable segment for the year ended June 30,2020 is as follows:

Year Ended June 30, 2020

Online Traditional Total Channels

Net sales

Finished jewelry $ $ 3,097,188 $ 16,777,628 13,680,440

Loose jewels 2,944,100 9,467,292 12,411,392

Total $ 16,624,540 $ 12,564,480 $ 29,189,020

Product line cost of goodssold

Finished jewelry $ 5,760,413 $ 1,709,377 $ 7,469,790

Loose jewels 1,198,275 4,863,911 6,062,186

Total $ 6,958,688 $ 6,573,288 $ 13,531,976

Product line gross profit

Finished jewelry $ 7,920,027 $ 1,387,811 $ 9,307,838

Loose jewels 1,745,825 4,603,381 6,349,206

Total $ 9,665,852 $ 5,991,192 $ 15,657,044

Operating loss $ (249,016) $ (6,066,712) $ (6,315,728)

Depreciation and amortization $ 177,703 $ 312,532 $ 490,235

Capital expenditures $ 305,570 $ 153,284 $ 458,854

CHARLES & COLVARD, LTD.

SUMMARY FINANCIAL INFORMATION BY REPORTABLE SEGMENT

(unaudited)

An unaudited reconciliation of the Company's total product line cost of goodssold by reportable segment to its cost of goods sold as reported in theunaudited condensed consolidated financial statements for each applicableperiod presented herein is as follows:

Three Months Year Ended Ended June 30, June 30, 2021 2021

Product line cost of goods sold by reportable $ 4,303,531 $ 18,129,767segment

Non-capitalized manufacturing and production 468,400 1,591,114control expenses

Freight out 329,695 1,013,275

Inventory write-downs 22,000 150,000

Other inventory adjustments 228,849 (74,466)

Consolidated cost of goods sold $ 5,352,475 $ 20,809,690

Three Months Year Ended Ended June 30, June 30, 2020 2020

Product line cost of goods sold by reportable $ 1,882,296 $ 13,531,976segment

Non-capitalized manufacturing and production 339,457 1,443,698control expenses

Freight out 85,179 510,612

Inventory write-downs 243,000 5,863,991

Other inventory adjustments 71,206 (150,070)

Consolidated cost of goods sold $ 2,621,138 $ 21,200,207

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SOURCE Charles & Colvard, Ltd.