North Carolina | 56-1928817 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
170 Southport Drive Morrisville, North Carolina | 27560 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common Stock, no par value per share | CTHR | The Nasdaq Stock Market LLC |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ | |
Emerging growth company | ☐ |
Page Number | ||
PART I – FINANCIAL INFORMATION | ||
Item 1. | ||
1 | ||
2 | ||
3 | ||
4 | ||
5 | ||
Item 2. | 20 | |
Item 3. | 32 | |
Item 4. | ||
PART II – OTHER INFORMATION | ||
Item 1. | 33 | |
Item 1A. | 33 | |
Item 2. | 33 | |
Item 6. | 34 | |
35 |
Item 1. | Financial Statements |
September 30, 2021 (unaudited) | June 30, 2021 | September 30, 2022 (unaudited) | June 30, 2022 | |||||||||||||
ASSETS | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 14,116,632 | $ | 21,302,317 | $ | 11,568,995 | $ | 15,668,361 | ||||||||
Restricted cash | 5,050,000 | 144,634 | 5,054,778 | 5,510,979 | ||||||||||||
Accounts receivable, net | 2,671,701 | 1,662,074 | 1,558,401 | 2,220,816 | ||||||||||||
Inventory, net | 12,043,187 | 11,450,141 | 12,092,385 | 11,024,276 | ||||||||||||
Note receivable | 250,000 | 250,000 | - | 250,000 | ||||||||||||
Prepaid expenses and other assets | 1,427,801 | 952,065 | 1,375,093 | 1,190,012 | ||||||||||||
Total current assets | 35,559,321 | 35,761,231 | 31,649,652 | 35,864,444 | ||||||||||||
Long-term assets: | ||||||||||||||||
Inventory, net | 19,571,239 | 17,722,579 | 24,476,083 | 22,488,524 | ||||||||||||
Property and equipment, net | 1,151,725 | 875,897 | 2,196,099 | 1,901,176 | ||||||||||||
Intangible assets, net | 207,739 | 209,658 | 265,710 | 265,730 | ||||||||||||
Operating lease right-of-use assets | 3,779,395 | 3,952,146 | 2,638,400 | 2,787,419 | ||||||||||||
Deferred income taxes, net | 6,228,672 | 6,350,830 | 6,154,860 | 5,851,904 | ||||||||||||
Note receivable | 250,000 | - | ||||||||||||||
Other assets | 49,658 | 49,658 | 50,212 | 49,658 | ||||||||||||
Total long-term assets | 30,988,428 | 29,160,768 | 36,031,364 | 33,344,411 | ||||||||||||
TOTAL ASSETS | $ | 66,547,749 | $ | 64,921,999 | $ | 67,681,016 | $ | 69,208,855 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 3,752,907 | $ | 2,774,373 | $ | 4,718,048 | $ | 4,401,229 | ||||||||
Operating lease liabilities | 612,988 | 566,083 | ||||||||||||||
Operating lease liabilities, current portion | 862,401 | 856,571 | ||||||||||||||
Accrued expenses and other liabilities | 1,700,577 | 2,281,807 | 1,135,536 | 1,546,483 | ||||||||||||
Total current liabilities | 6,066,472 | 5,622,263 | 6,715,985 | 6,804,283 | ||||||||||||
Long-term liabilities: | ||||||||||||||||
Noncurrent operating lease liabilities | 3,418,110 | 3,600,842 | 2,653,039 | 2,846,805 | ||||||||||||
Accrued income taxes | 10,349 | 9,878 | ||||||||||||||
Total long-term liabilities | 3,428,459 | 3,610,720 | 2,653,039 | 2,846,805 | ||||||||||||
Total liabilities | 9,494,931 | 9,232,983 | 9,369,024 | 9,651,088 | ||||||||||||
Commitments and contingencies (Note 9) | 0 | 0 | ||||||||||||||
Shareholders’ equity: | ||||||||||||||||
Common stock, 0 par value; 50,000,000 shares authorized; 30,339,457 and 29,913,095 shares issued and outstanding at September 30, 2021 and June 30, 2021, respectively | 56,454,221 | 56,057,109 | ||||||||||||||
Common stock, no par value; 50,000,000 shares authorized; 30,733,358 shares issued and 30,344,955 shares outstanding at September 30, 2022 and 30,778,046 shares issued and 30,747,759 shares outstanding at June 30, 2022 | 57,242,211 | 57,242,211 | ||||||||||||||
Additional paid-in capital | 25,748,258 | 25,608,593 | 26,052,723 | 25,956,491 | ||||||||||||
Treasury stock, at cost, 388,403 shares and 30,287 shares at September 30, 2022 and June 30, 2022, respectively | (489,979 | ) | (38,164 | ) | ||||||||||||
Accumulated deficit | (25,149,661 | ) | (25,976,686 | ) | (24,492,963 | ) | (23,602,771 | ) | ||||||||
Total shareholders’ equity | 57,052,818 | 55,689,016 | 58,311,992 | 59,557,767 | ||||||||||||
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | $ | 66,547,749 | $ | 64,921,999 | $ | 67,681,016 | $ | 69,208,855 |
Three Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Net sales | $ | 10,280,311 | $ | 7,926,293 | $ | 7,374,083 | $ | 10,280,311 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of goods sold | 5,016,550 | 4,196,055 | 4,086,010 | 5,016,550 | ||||||||||||
Sales and marketing | 2,730,153 | 1,647,933 | 3,107,946 | 2,730,153 | ||||||||||||
General and administrative | 1,584,275 | 1,208,035 | 1,413,476 | 1,584,275 | ||||||||||||
Total costs and expenses | 9,330,978 | 7,052,023 | 8,607,432 | 9,330,978 | ||||||||||||
Income from operations | 949,333 | 874,270 | ||||||||||||||
(Loss) Income from operations | (1,233,349 | ) | 949,333 | |||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 355 | 3,459 | 40,201 | 355 | ||||||||||||
Interest expense | 0 | (2,439 | ) | |||||||||||||
Loss on foreign currency exchange | (34 | ) | (530 | ) | - | (34 | ) | |||||||||
Total other income (expense), net | 321 | 490 | 40,201 | 321 | ||||||||||||
Income before income taxes | 949,654 | 874,760 | ||||||||||||||
Income tax expense | (122,629 | ) | (494 | ) | ||||||||||||
Net Income | $ | 827,025 | $ | 874,266 | ||||||||||||
(Loss) Income before income taxes | (1,193,148 | ) | 949,654 | |||||||||||||
Income tax benefit (expense) | 302,956 | (122,629 | ) | |||||||||||||
Net (loss) income | $ | (890,192 | ) | $ | 827,025 | |||||||||||
Net income per common share: | ||||||||||||||||
Net (loss) income per common share: | ||||||||||||||||
Basic | $ | 0.03 | $ | 0.03 | $ | (0.03 | ) | $ | 0.03 | |||||||
Diluted | $ | 0.03 | $ | 0.03 | $ | (0.03 | ) | $ | 0.03 | |||||||
Weighted average number of shares used in computing net income per common share: | ||||||||||||||||
Weighted average number of shares used in computing net (loss) income per common share: | ||||||||||||||||
Basic | 29,971,178 | 28,786,910 | 30,433,195 | 29,971,178 | ||||||||||||
Diluted | 31,097,540 | 28,839,897 | 30,433,195 | 31,097,540 |
Three Months Ended September 30, 2021 | ||||||||||||||||||||
Common Stock | Additional | Total | ||||||||||||||||||
Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Equity | ||||||||||||||||
Balance at June 30, 2021 | 29,913,095 | $ | 56,057,109 | $ | 25,608,593 | $ | (25,976,686 | ) | $ | 55,689,016 | ||||||||||
Stock-based compensation | - | 0 | 279,407 | 0 | 279,407 | |||||||||||||||
Issuance of restricted stock | 242,725 | 0 | 0 | 0 | 0 | |||||||||||||||
Stock option exercises | 183,637 | 397,112 | (139,742 | ) | 0 | 257,370 | ||||||||||||||
Net income | - | 0 | 0 | 827,025 | 827,025 | |||||||||||||||
Balance at September 30, 2021 | 30,339,457 | $ | 56,454,221 | $ | 25,748,258 | $ | (25,149,661 | ) | $ | 57,052,818 |
Three Months Ended September 30, 2022 | ||||||||||||||||||||||||
Common Stock | ||||||||||||||||||||||||
Number of Outstanding Shares | Amount | Additional Paid-in Capital | Treasury Stock | Accumulated Deficit | Total Shareholders’ Equity | |||||||||||||||||||
Balance at June 30, 2022 | 30,747,759 | $ | 57,242,211 | $ | 25,956,491 | $ | (38,164 | ) | $ | (23,602,771 | ) | $ | 59,557,767 | |||||||||||
Stock-based compensation | - | - | 96,232 | - | - | 96,232 | ||||||||||||||||||
Cancellation of restricted stock | (44,688 | ) | - | - | - | - | - | |||||||||||||||||
Repurchases of common stock | (358,116 | ) | - | - | (451,815 | ) | - | (451,815 | ) | |||||||||||||||
Net loss | - | - | - | - | (890,192 | ) | (890,192 | ) | ||||||||||||||||
Balance at September 30, 2022 | 30,344,955 | $ | 57,242,211 | $ | 26,052,723 | $ | (489,979 | ) | $ | (24,492,963 | ) | $ | 58,311,992 |
Three Months Ended September 30, 2020 | Three Months Ended September 30, 2021 | |||||||||||||||||||||||||||||||||||||||||||
Common Stock | Additional | Total | Common Stock | | ||||||||||||||||||||||||||||||||||||||||
Number of Shares | Amount | Paid-in Capital | Accumulated Deficit | Shareholders’ Equity | Number of Outstanding Shares | Amount | Additional Paid-in Capital | Treasury Stock | Accumulated Deficit | Total Shareholders’ Equity | ||||||||||||||||||||||||||||||||||
Balance at June 30, 2020 | 28,949,410 | $ | 54,342,864 | $ | 25,880,165 | $ | (38,787,452 | ) | $ | 41,435,577 | ||||||||||||||||||||||||||||||||||
Balance at June 30, 2021 | 29,913,095 | $ | 56,057,109 | $ | 25,608,593 | $ | - | $ | (25,976,686 | ) | $ | 55,689,016 | ||||||||||||||||||||||||||||||||
Stock-based compensation | - | 0 | 107,355 | 0 | 107,355 | - | - | 279,407 | - | - | 279,407 | |||||||||||||||||||||||||||||||||
Issuance of restricted stock | 178,750 | 0 | 0 | 0 | 0 | 242,725 | - | - | - | - | - | |||||||||||||||||||||||||||||||||
Retirement of restricted stock | (162,500 | ) | 0 | 0 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||
Stock option exercises | 183,637 | 397,112 | (139,742 | ) | - | - | 257,370 | |||||||||||||||||||||||||||||||||||||
Net income | - | 0 | 0 | 874,266 | 874,266 | - | - | - | - | 827,025 | 827,025 | |||||||||||||||||||||||||||||||||
Balance at September 30, 2020 | 28,965,660 | $ | 54,342,864 | $ | 25,987,520 | $ | (37,913,186 | ) | $ | 42,417,198 | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | 30,339,457 | $ | 56,454,221 | $ | 25,748,258 | $ | - | $ | (25,149,661 | ) | $ | 57,052,818 |
Three Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||||||||
Net income | $ | 827,025 | $ | 874,266 | ||||||||||||
Adjustments to reconcile net income to net cash used in operating activities: | ||||||||||||||||
Net (loss) income | $ | (890,192 | ) | $ | 827,025 | |||||||||||
Adjustments to reconcile net (loss) income to net cash used in operating activities: | ||||||||||||||||
Depreciation and amortization | 124,212 | 132,456 | 137,711 | 124,212 | ||||||||||||
Stock-based compensation | 279,407 | 107,355 | 96,232 | 279,407 | ||||||||||||
Provision for uncollectible accounts | 32,000 | 32,514 | - | 32,000 | ||||||||||||
Provision for sales returns | 27,000 | 96,000 | ||||||||||||||
Inventory write-off | 232,000 | 80,000 | ||||||||||||||
(Recovery of) Provision for sales returns | (36,000 | ) | 27,000 | |||||||||||||
Inventory write-downs | 119,000 | 232,000 | ||||||||||||||
Provision for accounts receivable discounts | 16,419 | 1,688 | 3,250 | 16,419 | ||||||||||||
Deferred income taxes | 122,158 | 0 | (302,956 | ) | 122,158 | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Accounts receivable | (1,085,046 | ) | (1,084,999 | ) | 695,165 | (1,085,046 | ) | |||||||||
Inventory | (2,673,706 | ) | 829,199 | (3,174,668 | ) | (2,673,706 | ) | |||||||||
Prepaid expenses and other assets, net | (302,985 | ) | 27,920 | (36,616 | ) | (302,985 | ) | |||||||||
Accounts payable | 978,534 | (1,165,697 | ) | 316,819 | 978,534 | |||||||||||
Accrued income taxes | 471 | 494 | - | 471 | ||||||||||||
Accrued expenses and other liabilities | (717,057 | ) | (573,120 | ) | (598,883 | ) | (717,057 | ) | ||||||||
Net cash used in operating activities | (2,139,568 | ) | (641,924 | ) | (3,671,138 | ) | (2,139,568 | ) | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||||||||
Purchases of property and equipment | (398,121 | ) | (101,459 | ) | (430,400 | ) | (398,121 | ) | ||||||||
Payments for intangible assets | 0 | (12,142 | ) | (2,214 | ) | - | ||||||||||
Net cash used in investing activities | (398,121 | ) | (113,601 | ) | (432,614 | ) | (398,121 | ) | ||||||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||||||||
Stock option exercises | 257,370 | 0 | - | 257,370 | ||||||||||||
Net cash provided by financing activities | 257,370 | 0 | ||||||||||||||
Repurchases of common stock | (451,815 | ) | - | |||||||||||||
Net cash (used in) provided by financing activities | (451,815 | ) | 257,370 | |||||||||||||
NET DECREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (2,280,319 | ) | (755,525 | ) | (4,555,567 | ) | (2,280,319 | ) | ||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF PERIOD | 21,446,951 | 14,617,234 | 21,179,340 | 21,446,951 | ||||||||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD | $ | 19,166,632 | $ | 13,861,709 | $ | 16,623,773 | $ | 19,166,632 | ||||||||
Supplemental disclosure of cash flow information: | ||||||||||||||||
Cash paid during the period for interest | $ | 0 | $ | 2,439 | ||||||||||||
Cash paid during the period for income taxes | $ | 0 | $ | 3,350 | $ | 5,900 | $ | - |
1. | DESCRIPTION OF BUSINESS |
2. | BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
September 30, 2021 | June 30, 2021 | September 30, 2022 | June 30, 2022 | |||||||||||||
Cash and cash equivalents | $ | 14,116,632 | $ | 21,302,317 | $ | 11,568,995 | $ | 15,668,361 | ||||||||
Restricted cash | 5,050,000 | 144,634 | 5,054,778 | 5,510,979 | ||||||||||||
Total cash, cash equivalents, and restricted cash | $ | 19,166,632 | $ | 21,446,951 | $ | 16,623,773 | $ | 21,179,340 |
3. | SEGMENT INFORMATION AND GEOGRAPHIC DATA |
Three Months Ended September 30, 2021 | Three Months Ended September 30, 2022 | |||||||||||||||||||||||
Online Channels | Traditional | Total | Online Channels | Traditional | Total | |||||||||||||||||||
Net sales | ||||||||||||||||||||||||
Finished jewelry | $ | 4,486,958 | $ | 1,199,329 | $ | 5,686,287 | $ | 4,403,589 | $ | 1,136,817 | $ | 5,540,406 | ||||||||||||
Loose jewels | 882,847 | 3,711,177 | 4,594,024 | 448,897 | 1,384,780 | 1,833,677 | ||||||||||||||||||
Total | $ | 5,369,805 | $ | 4,910,506 | $ | 10,280,311 | $ | 4,852,486 | $ | 2,521,597 | $ | 7,374,083 | ||||||||||||
Product line cost of goods sold | ||||||||||||||||||||||||
Finished jewelry | $ | 1,711,224 | $ | 623,258 | $ | 2,334,482 | $ | 1,970,111 | $ | 636,588 | $ | 2,606,699 | ||||||||||||
Loose jewels | 314,105 | 1,745,341 | 2,059,446 | 162,699 | 662,924 | 825,623 | ||||||||||||||||||
Total | $ | 2,025,329 | $ | 2,368,599 | $ | 4,393,928 | $ | 2,132,810 | $ | 1,299,512 | $ | 3,432,322 | ||||||||||||
Product line gross profit | ||||||||||||||||||||||||
Finished jewelry | $ | 2,775,734 | $ | 576,071 | $ | 3,351,805 | $ | 2,433,478 | $ | 500,229 | $ | 2,933,707 | ||||||||||||
Loose jewels | 568,742 | 1,965,836 | 2,534,578 | 286,198 | 721,856 | 1,008,054 | ||||||||||||||||||
Total | $ | 3,344,476 | $ | 2,541,907 | $ | 5,886,383 | $ | 2,719,676 | $ | 1,222,085 | $ | 3,941,761 | ||||||||||||
Operating income | $ | 321,671 | $ | 627,662 | $ | 949,333 | ||||||||||||||||||
Operating loss | $ | (609,545 | ) | $ | (623,804 | ) | $ | (1,233,349 | ) | |||||||||||||||
Depreciation and amortization | $ | 67,702 | $ | 56,510 | $ | 124,212 | $ | 63,387 | $ | 74,324 | $ | 137,711 | ||||||||||||
Capital expenditures | $ | 59,260 | $ | 338,861 | $ | 398,121 | $ | 136,988 | $ | 293,412 | $ | 430,400 |
Three Months Ended September 30, 2020 | Three Months Ended September 30, 2021 | |||||||||||||||||||||||
Online Channels | Traditional | Total | Online Channels | Traditional | Total | |||||||||||||||||||
Net sales | ||||||||||||||||||||||||
Finished jewelry | $ | 3,623,462 | $ | 711,876 | $ | 4,335,338 | $ | 4,486,958 | $ | 1,199,329 | $ | 5,686,287 | ||||||||||||
Loose jewels | 841,833 | 2,749,122 | 3,590,955 | 882,847 | 3,711,177 | 4,594,024 | ||||||||||||||||||
Total | $ | 4,465,295 | $ | 3,460,998 | $ | 7,926,293 | $ | 5,369,805 | $ | 4,910,506 | $ | 10,280,311 | ||||||||||||
Product line cost of goods sold | ||||||||||||||||||||||||
Finished jewelry | $ | 1,333,383 | $ | 420,906 | $ | 1,754,289 | $ | 1,711,224 | $ | 623,258 | $ | 2,334,482 | ||||||||||||
Loose jewels | 312,689 | 1,431,233 | 1,743,922 | 314,105 | 1,745,341 | 2,059,446 | ||||||||||||||||||
Total | $ | 1,646,072 | $ | 1,852,139 | $ | 3,498,211 | $ | 2,025,329 | $ | 2,368,599 | $ | 4,393,928 | ||||||||||||
Product line gross profit | ||||||||||||||||||||||||
Finished jewelry | $ | 2,290,079 | $ | 290,970 | $ | 2,581,049 | $ | 2,775,734 | $ | 576,071 | $ | 3,351,805 | ||||||||||||
Loose jewels | 529,144 | 1,317,889 | 1,847,033 | 568,742 | 1,965,836 | 2,534,578 | ||||||||||||||||||
Total | $ | 2,819,223 | $ | 1,608,859 | $ | 4,428,082 | $ | 3,344,476 | $ | 2,541,907 | $ | 5,886,383 | ||||||||||||
Operating income | $ | 774,665 | $ | 99,605 | $ | 874,270 | $ | 321,671 | $ | 627,662 | $ | 949,333 | ||||||||||||
Depreciation and amortization | $ | 54,352 | $ | 78,103 | $ | 132,456 | $ | 67,702 | $ | 56,510 | $ | 124,212 | ||||||||||||
Capital expenditures | $ | 59,250 | $ | 42,209 | $ | 101,459 | $ | 59,260 | $ | 338,861 | $ | 398,121 |
Three Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Product line cost of goods sold | $ | 4,393,928 | $ | 3,498,211 | $ | 3,432,322 | $ | 4,393,928 | ||||||||
Non-capitalized manufacturing and production control expenses | 342,401 | 329,406 | 377,053 | 342,401 | ||||||||||||
Freight out | 217,506 | 175,338 | 275,737 | 217,506 | ||||||||||||
Inventory write-off | 232,000 | 80,000 | ||||||||||||||
Inventory write-downs | 119,000 | 232,000 | ||||||||||||||
Other inventory adjustments | (169,285 | ) | 113,100 | (118,102 | ) | (169,285 | ) | |||||||||
Cost of goods sold | $ | 5,016,550 | $ | 4,196,055 | $ | 4,086,010 | $ | 5,016,550 |
Three Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Net sales: | ||||||||||||||||
United States | $ | 9,824,730 | $ | 7,499,720 | $ | 7,095,373 | $ | 9,824,730 | ||||||||
International | 455,581 | 426,573 | 278,710 | 455,581 | ||||||||||||
Total | $ | 10,280,311 | $ | 7,926,293 | $ | 7,374,083 | $ | 10,280,311 |
4. | FAIR VALUE MEASUREMENTS |
5. | INVENTORIES |
September 30, 2021 | June 30, 2021 | September 30, 2022 | June 30, 2022 | |||||||||||||
Finished jewelry: | ||||||||||||||||
Raw materials | $ | 1,681,561 | $ | 1,476,514 | $ | 1,380,713 | $ | 1,697,361 | ||||||||
Work-in-process | 2,034,428 | 779,593 | 1,622,170 | 1,260,728 | ||||||||||||
Finished goods | 9,993,963 | 8,025,816 | 14,421,069 | 12,100,910 | ||||||||||||
Finished goods on consignment | 2,131,244 | 2,050,372 | 2,440,245 | 2,135,856 | ||||||||||||
Total finished jewelry | $ | 15,841,196 | $ | 12,332,295 | $ | 19,864,197 | $ | 17,194,855 | ||||||||
Loose jewels: | ||||||||||||||||
Raw materials | $ | 1,683,330 | $ | 1,775,505 | $ | 1,987,296 | $ | 1,985,355 | ||||||||
Work-in-process | 9,058,183 | 9,893,443 | 9,070,743 | 8,485,713 | ||||||||||||
Finished goods | 4,783,702 | 4,942,192 | 5,297,794 | 5,454,266 | ||||||||||||
Finished goods on consignment | 169,879 | 154,968 | 265,338 | 303,491 | ||||||||||||
Total loose jewels | 15,695,094 | 16,766,108 | 16,621,171 | 16,228,825 | ||||||||||||
Total supplies inventory | 78,136 | 74,317 | 83,100 | 89,120 | ||||||||||||
Total inventory | $ | 31,614,426 | $ | 29,172,720 | $ | 36,568,468 | $ | 33,512,800 |
September 30, 2021 | June 30, 2021 | September 30, 2022 | June 30, 2022 | |||||||||||||
Short-term portion | $ | 12,043,187 | $ | 11,450,141 | $ | 12,092,385 | $ | 11,024,276 | ||||||||
Long-term portion | 19,571,239 | 17,722,579 | 24,476,083 | 22,488,524 | ||||||||||||
Total | $ | 31,614,426 | $ | 29,172,720 | $ | 36,568,468 | $ | 33,512,800 |
6. | NOTE RECEIVABLE |
7. | ACCRUED EXPENSES AND OTHER LIABILITIES |
September 30, 2021 | June 30, 2021 | September 30, 2022 | June 30, 2022 | |||||||||||||
Accrued sales tax | $ | 658,863 | $ | 555,547 | ||||||||||||
Deferred revenue | 559,150 | 774,891 | $ | 504,919 | $ | 452,866 | ||||||||||
Accrued compensation and related benefits | 303,675 | 866,705 | 325,121 | 614,443 | ||||||||||||
Accrued sales taxes | 142,216 | 295,743 | ||||||||||||||
Accrued cooperative advertising | 80,681 | 68,185 | 139,694 | 137,467 | ||||||||||||
Accrued income taxes | 16,478 | 16,478 | ||||||||||||||
Other | 81,730 | 1 | ||||||||||||||
Accrued franchise taxes | 23,585 | 45,963 | ||||||||||||||
Other accrued expenses | 1 | 1 | ||||||||||||||
Total accrued expenses and other liabilities | $ | 1,700,577 | $ | 2,281,807 | $ | 1,135,536 | $ | 1,546,483 |
8. | INCOME TAXES |
9. | COMMITMENTS AND CONTINGENCIES |
Operating Leases: | ||||||||
Noncurrent operating lease ROU assets | $ | 3,779,395 | $ | 2,638,400 | ||||
Current operating lease liabilities | $ | 612,988 | $ | 862,401 | ||||
Noncurrent operating lease liabilities | 3,418,110 | 2,653,039 | ||||||
Total operating lease liabilities | $ | 4,031,098 | $ | 3,515,440 |
2022 | $ | 410,799 | ||||||
2023 | 869,742 | $ | 656,221 | |||||
2024 | 893,660 | 893,660 | ||||||
2025 | 918,236 | 918,236 | ||||||
2026 | 943,487 | 943,487 | ||||||
2027 | 317,327 | 317,327 | ||||||
Total lease payments | 4,353,251 | 3,728,931 | ||||||
Less: imputed interest | 322,153 | 213,491 | ||||||
Present value of lease payments | 4,031,098 | 3,515,440 | ||||||
Less: current lease obligations | 612,988 | 862,401 | ||||||
Total long-term lease obligations | $ | 3,418,110 | $ | 2,653,039 |
10. | DEBT |
11. | SHAREHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION |
Three Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Employee stock options | $ | 69,565 | $ | 91,040 | $ | 72,498 | $ | 69,565 | ||||||||
Restricted stock awards | 209,842 | 16,315 | 23,734 | 209,842 | ||||||||||||
Totals | $ | 279,407 | $ | 107,355 | $ | 96,232 | $ | 279,407 |
Shares | Weighted Average Exercise Price | Shares | Weighted Average Exercise Price | |||||||||||||
Outstanding, June 30, 2021 | 2,235,286 | $ | 1.24 | |||||||||||||
Outstanding, June 30, 2022 | 1,658,803 | $ | 1.32 | |||||||||||||
Granted | 72,500 | $ | 2.67 | 55,000 | $ | 1.30 | ||||||||||
Exercised | (183,637 | ) | $ | 1.40 | ||||||||||||
Forfeited | (14,584 | ) | $ | 0.89 | (3,001 | ) | $ | 1.96 | ||||||||
Expired | (49,079 | ) | $ | 1.27 | (999 | ) | $ | 0.88 | ||||||||
Outstanding, September 30, 2021 | 2,060,486 | $ | 1.28 | |||||||||||||
Outstanding, September 30, 2022 | 1,709,803 | $ | 1.32 |
Options Outstanding | Options Outstanding | Options Exercisable | Options Vested or Expected to Vest | Options Outstanding | Options Exercisable | Options Vested or Expected to Vest | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of 9/30/2021 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Balance as of 9/30/2021 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Balance as of 9/30/2021 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of 9/30/2022 | Balance as of 9/30/2022 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Balance as of 9/30/2022 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | Balance as of 9/30/2022 | Weighted Average Remaining Contractual Life (Years) | Weighted Average Exercise Price | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2,060,486 | 6.35 | $ | 1.28 | 1,525,774 | 5.42 | $ | 1.30 | 1,988,851 | 6.26 | $ | 1.28 | 1,709,803 | 6.75 | $ | 1.32 | 1,315,087 | 6.07 | $ | 1.11 | 1,645,429 | 6.65 | $ | 1.30 |
Shares | Weighted Average Grant Date Fair Value | |||||||
Unvested, June 30, 2021 | 178,750 | $ | 0.72 | |||||
Granted | 242,725 | $ | 2.75 | |||||
Vested | (242,725 | ) | $ | 1.25 | ||||
Unvested, September 30, 2021 | 178,750 | $ | 2.75 |
Shares | Weighted Average Grant Date Fair Value | |||||||
Unvested, June 30, 2022 | 178,750 | $ | 2.75 | |||||
Cancelled | (44,688 | ) | $ | 2.75 | ||||
Vested | (134,062 | ) | $ | 2.75 | ||||
Unvested, September 30, 2022 | - | $ | - |
12. | NET (LOSS) INCOME PER COMMON SHARE |
Three Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Numerator: | ||||||||||||||||
Net income | $ | 827,025 | $ | 874,266 | ||||||||||||
Net (loss) income | $ | (890,192 | ) | $ | 827,025 | |||||||||||
Denominator: | ||||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||
Basic | 29,971,178 | 28,786,910 | 30,433,195 | 29,971,178 | ||||||||||||
Effect of dilutive securities | 1,126,362 | 52,987 | - | 1,126,362 | ||||||||||||
Diluted | 31,097,540 | 28,839,897 | 30,433,195 | 31,097,540 | ||||||||||||
Net income per common share: | ||||||||||||||||
Net (loss) income per common share: | ||||||||||||||||
Basic | $ | 0.03 | $ | 0.03 | $ | (0.03 | ) | $ | 0.03 | |||||||
Diluted | $ | 0.03 | $ | 0.03 | $ | (0.03 | ) | $ | 0.03 |
13. | MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK |
September 30, 2021 | June 30, 2021 | |||||||
Customer A | 31 | % | 30 | % | ||||
Customer B | 24 | % | 22 | % | ||||
Customer C | 12 | % | *0 | % | ||||
Customer D | 0 ** | % | 14 | % |
September 30, 2022 | June 30, 2022 | |||||||
Customer A | 11 | % | 29 | % | ||||
Customer B | 31 | % | 20 | % | ||||
Customer C | 16 | % | 13 | % |
Three Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Customer A | 14 | % | *0 | % | * | % | 19 | % | ||||||||
Customer B | 19 | % | 14 | % | 17 | % | 14 | % |
* | Customer A did not have net sales that represented 10% or more of total net sales for the three months ended September 30, |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
1. | Our business |
2. | Our future financial performance depends upon increased consumer acceptance, growth of sales of our products, and operational execution of our strategic initiatives; |
3. |
4. | We face intense competition in the worldwide gemstone and jewelry industry; |
5. |
6. | Constantly evolving privacy regulatory regimes are creating new legal compliance challenges; |
7. | We are subject to certain risks due to our international operations, distribution channels and vendors; |
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; |
We are currently dependent on a limited number of distributor and retail partners in our Traditional segment for the sale of our products; |
We may experience quality control challenges from time to time that can result in lost revenue and harm to our brands and reputation; |
Seasonality of our business may adversely affect our net sales and operating income; |
Our operations could be disrupted by natural disasters; |
Sales of moissanite and lab grown diamond jewelry could be dependent upon the pricing of precious metals, which is beyond our control; |
Our current customers may potentially perceive us as a competitor in the finished jewelry business; |
We depend 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; |
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; |
Governmental regulation and oversight might adversely impact our operations; |
The execution of our business plans could significantly impact our liquidity; |
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; |
Negative or inaccurate information on social media could adversely impact our brand and reputation; |
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; |
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 |
Environmental, social, and governance matters may impact our business, reputation, financial condition, and results of operations; |
24. | If we fail to |
Some anti-takeover provisions of our charter documents may delay or prevent a takeover of our |
26. | 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; and |
Our failure to maintain compliance with The Nasdaq Stock Market’s continued listing requirements could result in the delisting of our common stock. |
Three Months Ended September 30, | Three Months Ended September 30, | |||||||||||||||
2021 | 2020 | 2022 | 2021 | |||||||||||||
Net sales | $ | 10,280,311 | $ | 7,926,293 | $ | 7,374,083 | $ | 10,280,311 | ||||||||
Costs and expenses: | ||||||||||||||||
Cost of goods sold | 5,016,550 | 4,196,055 | 4,086,010 | 5,016,550 | ||||||||||||
Sales and marketing | 2,730,153 | 1,647,933 | 3,107,946 | 2,730,153 | ||||||||||||
General and administrative | 1,584,275 | 1,208,035 | 1,413,476 | 1,584,275 | ||||||||||||
Total costs and expenses | 9,330,978 | 7,052,023 | 8,607,432 | 9,330,978 | ||||||||||||
Income from operations | 949,333 | 874,270 | ||||||||||||||
(Loss) Income from operations | (1,233,349 | ) | 949,333 | |||||||||||||
Other income (expense): | ||||||||||||||||
Interest income | 355 | 3,459 | 40,201 | 355 | ||||||||||||
Interest expense | - | (2,439 | ) | |||||||||||||
Loss on foreign currency exchange | (34 | ) | (530 | ) | - | (34 | ) | |||||||||
Total other income (expense), net | 321 | 490 | 40,201 | 321 | ||||||||||||
Income before income taxes | 949,654 | 874,760 | ||||||||||||||
Income tax expense | (122,629 | ) | (494 | ) | ||||||||||||
Net income | $ | 827,025 | $ | 874,266 | ||||||||||||
(Loss) Income before income taxes | (1,193,148 | ) | 949,654 | |||||||||||||
Income tax benefit (expense) | 302,956 | (122,629 | ) | |||||||||||||
Net (loss) income | $ | (890,192 | ) | $ | 827,025 |
Three Months Ended September 30, | Change | Three Months Ended September 30, | Change | |||||||||||||||||||||||||||||
2021 | 2020 | Dollars | Percent | 2022 | 2021 | Dollars | Percent | |||||||||||||||||||||||||
Finished jewelry | $ | 5,686,287 | $ | 4,335,338 | $ | 1,350,949 | 31 | % | $ | 5,540,406 | $ | 5,686,287 | $ | (145,881 | ) | (3 | )% | |||||||||||||||
Loose jewels | 4,594,024 | 3,590,955 | 1,003,069 | 28 | % | 1,833,677 | 4,594,024 | (2,760,347 | ) | (60 | )% | |||||||||||||||||||||
Total consolidated net sales | $ | 10,280,311 | $ | 7,926,293 | $ | 2,354,018 | 30 | % | $ | 7,374,083 | $ | 10,280,311 | $ | (2,906,228 | ) | (28 | )% |
Three Months Ended September 30, | Change | Three Months Ended September 30, | Change | |||||||||||||||||||||||||||||
2021 | 2020 | Dollars | Percent | 2022 | 2021 | Dollars | Percent | |||||||||||||||||||||||||
Product line cost of goods sold: | ||||||||||||||||||||||||||||||||
Finished jewelry | $ | 2,334,482 | $ | 1,754,289 | $ | 580,193 | 33 | % | $ | 2,606,699 | $ | 2,334,482 | $ | 272,217 | 12 | % | ||||||||||||||||
Loose jewels | 2,059,446 | 1,743,922 | 315,524 | 18 | % | 825,623 | 2,059,446 | (1,233,823 | ) | (60 | )% | |||||||||||||||||||||
Total product line cost of goods sold | 4,393,928 | 3,498,211 | 895,717 | 26 | % | 3,432,322 | 4,393,928 | (961,606 | ) | (22 | )% | |||||||||||||||||||||
Non-product line cost of goods sold | 622,622 | 697,844 | (75,222 | ) | (11 | )% | 653,688 | 622,622 | 31,066 | 5 | % | |||||||||||||||||||||
Total cost of goods sold | $ | 5,016,550 | $ | 4,196,055 | $ | 820,495 | 20 | % | $ | 4,086,010 | $ | 5,016,550 | $ | (930,540 | ) | (19 | )% |
Three Months Ended September 30, | Change | |||||||||||||||
2021 | 2020 | Dollars | Percent | |||||||||||||
Sales and marketing | $ | 2,730,153 | $ | 1,647,933 | $ | 1,082,220 | 66 | % |
Three Months Ended September 30, | Change | |||||||||||||||
2022 | 2021 | Dollars | Percent | |||||||||||||
Sales and marketing | $ | 3,107,946 | $ | 2,730,153 | $ | 377,793 | 14 | % |
Three Months Ended September 30, | Change | |||||||||||||||
2021 | 2020 | Dollars | Percent | |||||||||||||
General and administrative | $ | 1,584,275 | $ | 1,208,035 | $ | 376,240 | 31 | % |
Three Months Ended September 30, | Change | |||||||||||||||
2022 | 2021 | Dollars | Percent | |||||||||||||
General and administrative | $ | 1,413,476 | $ | 1,584,275 | $ | (170,799 | ) | (11 | )% |
Three Months Ended September 30, | Change | |||||||||||||||
2021 | 2020 | Dollars | Percent | |||||||||||||
Interest income | $ | 355 | $ | 3,459 | $ | (3,104 | ) | (90 | )% |
Three Months Ended September 30, | Change | |||||||||||||||
2022 | 2021 | Dollars | Percent | |||||||||||||
Interest income | $ | 40,201 | $ | 355 | $ | 39,846 | * | % |
Three Months Ended September 30, | Change | |||||||||||||||
2021 | 2020 | Dollars | Percent | |||||||||||||
Interest expense | $ | - | $ | 2,439 | $ | (2,439 | ) | (100 | )% |
Three Months Ended September 30, | Change | |||||||||||||||
2021 | 2020 | Dollars | Percent | |||||||||||||
Loss on foreign currency exchange | $ | 34 | $ | 530 | $ | (496 | ) | (94 | )% |
Three Months Ended September 30, | Change | |||||||||||||||
2022 | 2021 | Dollars | Percent | |||||||||||||
Loss on foreign currency exchange | $ | - | $ | 34 | $ | (34 | ) | (100 | )% |
Period | Total Number of Shares Purchased | Average Price Paid per share | Total Number of shares Purchased as Part of Publicly Announced Plans or Programs(1) | Approximate Dollar Value of Shares that May Yet be Purchased Under the Plans or Programs | ||||||||||||
July 1, 2022 – July 31, 2022 | 124,053 | $ | 1.30 | 154,340 | $ | 4,800,995 | ||||||||||
August 1, 2022 – August 31, 2022 | 127,080 | $ | 1.32 | 281,420 | $ | 4,633,303 | ||||||||||
September 1, 2022 – September 30, 2022 | 106,983 | $ | 1.15 | 388,403 | $ | 4,510,021 | ||||||||||
Total | 358,116 | $ | 1.26 | 388,403 | $ | 4,510,021 |
(1) | On May 5, 2022, we announced that our Board of Directors had approved a share repurchase program to permit us to repurchase up to $5.00 million worth of our issued and outstanding common stock over the three-year period ending April 29, 2025. |
Exhibit No. | Description | |
Line of Credit Note, dated as of July 28, 2022, by Charles & Colvard, Ltd. | ||
Certification by Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
Certification by Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | ||
Certification by Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
Certification by Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | ||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document. | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase document | |
104 | Cover Page Interactive Data File – the cover page XBRL tags are embedded within the Inline XBRL document contained in Exhibit 101 | |
CHARLES & COLVARD, LTD. | ||
By: | ||
November | Don O’Connell | |
President and Chief Executive Officer | ||
By: | ||
November | Clint J. Pete | |
Chief Financial Officer | ||
(Principal Financial Officer and Chief Accounting Officer) |