Charles & Colvard (CTHR) 10-Q 31 Oct 13 2013 Q3 Quarterly report Financial data

Document_and_Entity_Informatio

Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Oct. 28, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	CHARLES & COLVARD LTD
Entity Central Index Key	1015155
Current Fiscal Year End Date	-19
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		20,116,189
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	FALSE
Document Period End Date	30-Sep-13

CONDENSED_CONSOLIDATED_BALANCE

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$6,199,803	$11,860,842
Accounts receivable, net	9,038,174	8,138,358
Interest receivable	4,601	694
Held-to-maturity investments	500,999	505,068
Inventory, net	11,469,778	8,442,430
Prepaid expenses and other assets	1,018,921	737,406
Deferred income taxes	1,211,772	1,211,772
Total current assets	29,444,048	30,896,570
Long-term assets:
Inventory, net	28,946,967	24,353,580
Property and equipment, net	1,835,446	1,746,792
Intangible assets, net	361,538	346,732
Deferred income taxes	2,586,910	2,520,818
Other assets	13,266	12,199
Total long-term assets	33,744,127	28,980,121
TOTAL ASSETS	63,188,175	59,876,691
Current liabilities:
Accounts payable	5,078,859	2,112,585
Accrued cooperative advertising	493,000	200,000
Accrued expenses and other liabilities	579,887	574,522
Total current liabilities	6,151,746	2,887,107
Long-term liabilities:
Accrued income taxes	392,501	383,730
Total liabilities	6,544,247	3,270,837
Commitments and contingencies
Shareholders' equity:
Common stock, no par value	53,644,382	53,318,044
Additional paid-in capital - stock-based compensation	9,566,770	8,459,020
Accumulated deficit	-6,567,224	-5,171,210
Total shareholders' equity	56,643,928	56,605,854
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$63,188,175	$59,876,691

CONDENSED_CONSOLIDATED_BALANCE1

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) (USD $)	Sep. 30, 2013	Dec. 31, 2012
Shareholders' equity
Common stock, par value (in dollars per share)	$0	$0

CONDENSED_CONSOLIDATED_STATEME

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) [Abstract]
Net sales	$6,858,252	$5,076,364	$19,875,826	$14,312,976
Costs and expenses:
Cost of goods sold	3,805,227	2,092,734	10,076,520	5,763,179
Sales and marketing	2,449,679	1,678,779	7,228,883	4,764,595
General and administrative	1,723,676	1,192,278	3,917,461	3,834,744
Research and development	6,755	1,490	21,779	18,279
Loss on abandonment of assets	0	0	95,052	0
Total costs and expenses	7,985,337	4,965,281	21,339,695	14,380,797
(Loss) income from operations	-1,127,085	111,083	-1,463,869	-67,821
Other income (expense):
Interest income	5,135	16,002	19,609	57,690
Interest expense	-202	-335	-1,176	-939
Total other income, net	4,933	15,667	18,433	56,751
(Loss) income before income taxes	-1,122,152	126,750	-1,445,436	-11,070
Income tax net	-88,550	-3,125	49,422	307,421
Net (loss) income	($1,210,702)	$123,625	($1,396,014)	$296,351
Net (loss) income per common share:
Basic (in dollars per share)	($0.06)	$0.01	($0.07)	$0.02
Fully diluted (in dollars per share)	($0.06)	$0.01	($0.07)	$0.01
Weighted average number of shares used in computing net (loss) income per common share:
Basic (in shares)	20,001,543	19,638,610	19,825,532	19,558,152
Fully diluted (in shares)	20,001,543	20,017,147	19,825,532	19,942,891

CONDENSED_CONSOLIDATED_STATEME1

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	($1,396,014)	$296,351
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	584,734	423,419
Amortization of bond premium	4,069	3,988
Stock-based compensation	1,192,823	801,119
Provision for uncollectible accounts	17,195	373,396
Provision for sales returns	-101,000	237,000
Provision for inventory reserves	197,000	5,000
Benefit for deferred income taxes	-66,092	0
Loss on abandonment of assets	95,052	0
Changes in assets and liabilities:
Accounts receivable	-816,011	-502,437
Interest receivable	-3,907	3,352
Inventory	-7,817,735	1,314,577
Prepaid expenses and other assets, net	-282,582	-282,285
Accounts payable	2,966,274	-127,850
Accrued cooperative advertising	293,000	225,000
Accrued income taxes	8,771	-355,768
Other accrued liabilities	5,365	-309,646
Net cash (used in) provided by operating activities	-5,119,058	2,105,216
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	-673,588	-738,341
Proceeds from call of long-term investments	0	2,500,000
Patent, license rights, and trademark costs	-109,658	-41,344
Net cash (used in) provided by investing activities	-783,246	1,720,315
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock option exercises	241,265	156,093
Net cash provided by financing activities	241,265	156,093
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	-5,661,039	3,981,624
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	11,860,842	6,701,701
CASH AND CASH EQUIVALENTS, END OF PERIOD	6,199,803	10,683,325
Supplemental disclosures of cash flow information:
Cash paid during the period for interest	1,176	939
Cash paid during the period for income taxes	$7,899	$12,221

DESCRIPTION_OF_BUSINESS

DESCRIPTION OF BUSINESS	9 Months Ended
	Sep. 30, 2013
DESCRIPTION OF BUSINESS [Abstract]
DESCRIPTION OF BUSINESS	1	DESCRIPTION OF BUSINESS
	Charles & Colvard, Ltd. (the “Company”), a North Carolina corporation founded in 1995, manufactures, markets, and distributes Charles & Colvard Created Moissanite® jewels (hereinafter referred to as moissanite or moissanite jewels), finished jewelry featuring moissanite, and fashion jewelry for sale in the worldwide jewelry market. Moissanite, also known by its chemical name of silicon carbide (“SiC”), is a rare mineral first discovered in a meteor crater. Because naturally occurring SiC crystals are too small for commercial use, larger crystals must be grown in a laboratory. Leveraging its advantage of being the sole source worldwide of created moissanite jewels, the Company’s strategy is to establish itself with reputable, high-quality, and sophisticated brands and to position moissanite as an affordable, luxurious alternative to other gemstones, such as diamond. The Company believes this is possible due to moissanite’s exceptional brilliance, fire, luster, durability, and rarity like no other jewel available on the market. The Company sells loose moissanite jewels and finished jewelry at wholesale to distributors, manufacturers, and retailers and at retail to end consumers through its wholly owned operating subsidiaries Moissanite.com, LLC and Charles & Colvard Direct, LLC.

BASIS_OF_PRESENTATION_AND_SIGN

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES	9 Months Ended
	Sep. 30, 2013
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract]
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES	2	BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
	Basis of Presentation and Principles of Consolidation - The accompanying unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. However, certain information or footnote disclosures normally included in complete financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, the unaudited statements in this Quarterly Report on Form 10-Q include all normal and recurring adjustments necessary for the fair statement of the results for the interim periods presented. The results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2013.
	The consolidated financial statements as of and for the three and nine months ended September 30, 2013 and 2012 included in this Quarterly Report on Form 10-Q are unaudited. The balance sheet as of December 31, 2012 is derived from the audited financial statements as of that date. The accompanying statements should be read in conjunction with the audited financial statements and related notes, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on March 29, 2013 (the “2012 Annual Report”).
	The accompanying consolidated financial statements as of and for the three and nine months ended September 30, 2013 and 2012 include the accounts of the Company and its wholly owned subsidiaries Moissanite.com, LLC, formed in 2011; Charles & Colvard Direct, LLC, formed in 2011; and Charles & Colvard (HK) Ltd., the Company’s Hong Kong subsidiary that became a dormant entity in the second quarter of 2009 and the operations of which ceased in 2008. All intercompany accounts have been eliminated.
	Significant Accounting Policies - In the opinion of the Company’s management, the significant accounting policies used for the three and nine months ended September 30, 2013 are consistent with those used for the year ended December 31, 2012. Accordingly, please refer to the 2012 Annual Report for the Company’s significant accounting policies.
	Use of Estimates -The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates impacting the Company’s consolidated financial statements relate to valuation and classification of inventories, accounts receivable reserves, deferred tax assets, uncertain tax positions, stock compensation expense, and cooperative advertising. Actual results could differ materially from those estimates.
	Reclassifications - Certain amounts in the prior year’s condensed consolidated financial statements have been reclassified to conform to the current year presentation.
	Recently Adopted/Issued Accounting Pronouncements - All new and recently issued, but not yet effective, accounting pronouncements have been deemed to be not relevant to the Company and therefore are not expected to have any impact once adopted.

SEGMENT_INFORMATION_AND_GEOGRA

SEGMENT INFORMATION AND GEOGRAPHIC DATA	9 Months Ended
	Sep. 30, 2013
SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract]
SEGMENT INFORMATION AND GEOGRAPHIC DATA	3	SEGMENT INFORMATION AND GEOGRAPHIC DATA
	The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making operating decisions and assessing performance as the source of the Company’s operating and reportable segments.
	The Company manages its business primarily by its two distribution channels that it uses to sell its loose jewel and finished jewelry product lines. Accordingly, the Company determined its two operating and reporting segments to be wholesale distribution transacted through the parent entity and direct-to-consumer distribution transacted through the Company’s wholly owned operating subsidiaries, Moissanite.com, LLC and Charles & Colvard Direct, LLC. The accounting policies of these segments are the same as those described in Note 2, “Basis of Presentation and Significant Accounting Policies,” of this Quarterly Report on Form 10-Q and in the Notes to Consolidated Financial Statements in the 2012 Annual Report.
	The Company evaluates the financial performance of its segments based on net sales; product line gross profit, or the excess of product line sales over product line cost of goods sold; and operating income (loss). The Company’s inventories are maintained in the parent entity’s wholesale distribution segment and are transferred without intercompany markup to the operating subsidiaries as product line cost of goods sold when sold to the end consumer. Product line cost of goods sold is defined as product cost of goods sold in each of the Company’s wholesale distribution and direct-to-consumer distribution operating segments excluding non-capitalized expenses from the Company’s manufacturing and production control departments, comprising personnel costs, depreciation, rent, utilities, and corporate overhead allocations; freight out; inventory valuation allowance adjustments; and other inventory adjustments, comprising costs of quality issues, damaged goods, and inventory write-offs.
	The Company allocates certain general and administrative and information technology-related expenses from its parent entity to its two direct-to-consumer operating subsidiaries primarily based on net sales and headcount, respectively. Unallocated expenses, which also include interest and taxes, remain in the parent entity’s wholesale distribution segment.
	Summary financial information by reporting segment is as follows:
			Three Months Ended September 30,
			2013											2012
			Wholesale			Direct-to-				Total				Wholesale				Direct-to-				Total
						Consumer												Consumer
	Net sales
	Loose jewels		$	4,744,308		$	77,011			$	4,821,319			$	3,718,706			$	55,035			$	3,773,741
	Finished jewelry			1,610,485			426,448				2,036,933				978,606				324,017				1,302,623
	Total		$	6,354,793		$	503,459			$	6,858,252			$	4,697,312			$	379,052			$	5,076,364
	Product line cost of goods sold
	Loose jewels		$	2,214,152		$	16,878			$	2,231,030			$	1,337,451			$	-			$	1,337,451
	Finished jewelry			795,711			213,566				1,009,277				538,196				10,094				548,290
	Total		$	3,009,863		$	230,444			$	3,240,307			$	1,875,647			$	10,094			$	1,885,741
	Product line gross profit
	Loose jewels		$	2,530,156		$	60,133			$	2,590,289			$	2,381,255			$	55,035			$	2,436,290
	Finished jewelry			814,774			212,882				1,027,656				440,410				313,923				754,333
	Total		$	3,344,930		$	273,015			$	3,617,945			$	2,821,665			$	368,958			$	3,190,623
	Operating income (loss)		$	175,342		$	(1,302,427	)		$	(1,127,085	)		$	762,973			$	(651,890	)		$	111,083
	Depreciation and amortization		$	108,763		$	91,222			$	199,985			$	69,117			$	36,244			$	105,361
	Capital expenditures		$	452,288		$	18,600			$	470,888			$	22,520			$	229,943			$	252,463
			Nine Months Ended September 30,
			2013											2012
			Wholesale			Direct-to-				Total				Wholesale				Direct-to-				Total
						Consumer												Consumer
	Net sales
	Loose jewels		$	13,022,685		$	221,957			$	13,244,642			$	10,164,361			$	148,618			$	10,312,979
	Finished jewelry			5,244,474			1,386,710				6,631,184				3,285,547				714,450				3,999,997
	Total		$	18,267,159		$	1,608,667			$	19,875,826			$	13,449,908			$	863,068			$	14,312,976
	Product line cost of goods sold
	Loose jewels		$	5,264,563		$	35,420			$	5,299,983			$	3,253,724			$	12,014			$	3,265,738
	Finished jewelry			2,726,789			687,034				3,413,823				1,274,617				147,775				1,422,392
	Total		$	7,991,352		$	722,454			$	8,713,806			$	4,528,341			$	159,789			$	4,688,130
	Product line gross profit
	Loose jewels		$	7,758,122		$	186,537			$	7,944,659			$	6,910,637			$	136,604			$	7,047,241
	Finished jewelry			2,517,685			699,676				3,217,361				2,010,930				566,675				2,577,605
	Total		$	10,275,807		$	886,213			$	11,162,020			$	8,921,567			$	703,279			$	9,624,846
	Operating income (loss)		$	2,443,939		$	(3,907,808	)		$	(1,463,869	)		$	1,912,231			$	(1,980,052	)		$	(67,821	)
	Depreciation and amortization		$	301,618		$	283,116			$	584,734			$	281,645			$	141,774			$	423,419
	Capital expenditures		$	641,694		$	31,894			$	673,588			$	391,637			$	346,704			$	738,341
		30-Sep-13											31-Dec-12
		Wholesale			Direct-to-				Total				Wholesale				Direct-to-				Total
					Consumer												Consumer
	Total assets		$	54,493,320		$	8,694,855			$	63,188,175			$	58,823,642			$	1,053,049			$	59,876,691
	A reconciliation of the Company’s product line cost of goods sold to cost of goods sold as reported in the consolidated financial statements is as follows:
			Three Months Ended							Nine Months Ended
			September 30,							September 30,
			2013			2012				2013				2012
	Product line cost of goods sold		$	3,240,307		$	1,885,741			$	8,713,806			$	4,688,130
	Non-capitalized manufacturing and production control expenses			380,369			300,025				989,009				1,038,413
	Freight out			39,850			25,450				127,812				66,946
	Inventory valuation allowances			122,000			(21,000	)			197,000				5,000
	Other inventory adjustments			22,701			(97,482	)			48,893				(35,310	)
	Cost of goods sold		$	3,805,227		$	2,092,734			$	10,076,520			$	5,763,179
	The Company’s net inventories by product line maintained in the parent entity’s wholesale distribution segment are as follows:
			September 30,			December 31,
			2013			2012
	Loose jewels
	Raw materials		$	4,006,655		$	3,189,320
	Work-in-process			9,048,269			3,650,322
Finished goods			18,224,036			19,074,526
Finished goods on consignment			77,725			75,131
Total		$	31,356,685		$	25,989,299
Finished jewelry
Raw materials		$	283,167		$	259,366
Work-in-process			730,298			250,628
Finished goods			7,378,672			5,451,178
Finished goods on consignment			575,919			748,022
Total		$	8,968,056		$	6,709,194
Supplies inventories of approximately $92,000 and $98,000 at September 30, 2013 and December 31, 2012, respectively, included in finished goods inventories in the consolidated financial statements are omitted from inventories by product line because they are used in both product lines and are not maintained separately.
The Company recognizes sales by geographic area based on the country in which the customer is based. A portion of the Company’s international wholesale distribution segment sales represents products sold internationally that may be re-imported to United States (“U.S.”) retailers. Sales to international end consumers made by the Company’s direct-to-consumer distribution segment are included in U.S. sales because products are shipped and invoiced to a U.S.-based intermediary party that assumes all international shipping and credit risks. The following presents certain data by geographic area:
		Three Months Ended							Nine Months Ended
		September 30,							September 30,
		2013			2012				2013				2012
Net sales
United States		$	3,852,627		$	4,057,050			$	14,338,094			$	11,476,209
International			3,005,625			1,019,314				5,537,732				2,836,767
Total		$	6,858,252		$	5,076,364			$	19,875,826			$	14,312,976
		September 30,			December 31,
		2013			2012
Property and equipment, net
United States		$	1,835,446		$	1,746,792
International			-			-
Total		$	1,835,446		$	1,746,792
		September 30,			December 31,
		2013			2012
Intangible assets, net
United States		$	197,747		$	152,038
International			163,791			194,694
Total		$	361,538		$	346,732

INVESTMENTS

INVESTMENTS	9 Months Ended
	Sep. 30, 2013
INVESTMENTS [Abstract]
INVESTMENTS	4	INVESTMENTS
	Investments consist of long-term U.S. government agency securities carried at amortized cost using the effective interest method. The Company classifies its marketable securities as held-to-maturity based upon management’s positive intention and ability to hold these securities until their maturity dates.
	The following table summarizes information about held-to-maturity investments at September 30, 2013:
		Amortized			Gross			Estimated
		Cost			Unrealized			Fair Value
					Gains
	U.S. government agency securities		$	500,999		$	2,046		$	503,045
	As of September 30, 2013, the estimated fair value of the investments was greater than the amortized cost. Because management intends to hold the investments until their maturity dates, this unrealized gain was not recorded in the consolidated financial statements.
	The maturities of held-to-maturity investments at September 30, 2013 were as follows:
		Less than 1			Total
		Year
	U.S. government agency securities		$	500,999		$	500,999

FAIR_VALUE_MEASUREMENTS

FAIR VALUE MEASUREMENTS	9 Months Ended
	Sep. 30, 2013
FAIR VALUE MEASUREMENTS [Abstract]
FAIR VALUE MEASUREMENTS	5	FAIR VALUE MEASUREMENTS
	Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. The fair value hierarchy consists of three levels based on the reliability of inputs, as follows:
		·	Level 1- quoted prices in active markets for identical assets and liabilities
		·	Level 2- inputs other than Level 1 quoted prices that are directly or indirectly observable
		·	Level 3- unobservable inputs that are not corroborated by market data
	The Company evaluates assets and liabilities subject to fair value measurements on a recurring and non-recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments to be made by management of the Company. The instruments identified as subject to fair value measurements on a recurring basis are cash and cash equivalents, trade accounts receivable, held-to-maturity investments, trade accounts payable, and accrued expenses. All instruments other than held-to-maturity investments are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. The estimated fair value of the Company’s held-to-maturity investments as of September 30, 2013 utilized Level 2 inputs of similar investments traded on active securities exchanges.
	Assets that are measured at fair value on a non-recurring basis include property and equipment and intangible assets, comprising patents, license rights, and trademarks. These items are recognized at fair value when they are considered to be impaired. Level 3 inputs are primarily based on the estimated future cash flows of the asset determined by market inquiries to establish fair market value of used machinery or future revenue expected to be generated with the assistance of patents, license rights, and trademarks.

INVENTORIES

INVENTORIES	9 Months Ended
	Sep. 30, 2013
INVENTORIES [Abstract]
INVENTORIES	6	INVENTORIES
	The Company’s total inventories, net of reserves, consisted of the following as of September 30, 2013 and December 31, 2012:
			September 30,			December 31,
			2013			2012
	Raw materials		$	4,289,822		$	3,448,686
	Work-in-process			9,778,567			3,900,950
	Finished goods			26,211,712			24,978,221
	Finished goods on consignment			708,644			843,153
	Less inventory reserves			(572,000	)		(375,000	)
	Total		$	40,416,745		$	32,796,010
	Current portion		$	11,469,778		$	8,442,430
	Long-term portion			28,946,967			24,353,580
	Total		$	40,416,745		$	32,796,010
	Inventories are stated at the lower of cost or market on an average cost basis. Inventory costs include direct material and labor, inbound freight, purchasing and receiving costs, inspection costs, and warehousing costs. Any inventory on hand at the measurement date in excess of the Company’s current requirements based on historical and anticipated levels of sales is classified as long-term on the Company’s consolidated balance sheets. The Company’s classification of long-term inventory requires it to estimate the portion of on-hand inventory that can be realized over the next 12 months and does not include precious metal, labor, and other inventory purchases expected to be both purchased and realized over the next 12 months.
	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 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 September 30, 2013 and December 31, 2012, work-in-process inventories issued to active production jobs approximated $4.64 million and $1.12 million, respectively.
	The Company’s 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 nor is obsolescence a significant factor. The Company has very small market penetration in the worldwide jewelry market, and the Company has the exclusive right in the U.S. through mid-2015 and in many other countries through mid-2016 to produce and sell created SiC for use in jewelry applications. In view of the foregoing factors, management has concluded that no excess or obsolete loose jewel inventory reserve requirements existed as of September 30, 2013.
	In 2010, the Company began manufacturing finished jewelry featuring moissanite. Relative to loose moissanite jewels, finished jewelry is more fashion oriented and subject to styling trends that could render certain designs obsolete. The majority of the Company’s finished jewelry featuring moissanite is held in inventory for resale and consists of such basic 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 manufactures small individual quantities of designer-inspired moissanite fashion jewelry as part of its sample line that are used in the selling process to its wholesale customers.
	In 2011, the Company began purchasing fashion finished jewelry comprised of base metals and non-precious gemstones for sale through Lulu AvenueTM, the direct-to-consumer home party division of its wholly owned operating subsidiary, Charles & Colvard Direct, LLC. This finished jewelry is fashion oriented and subject to styling trends that may change with each catalog season, of which there are several each year. Typically in the jewelry industry, slow-moving or discontinued lines are sold as closeouts or liquidated in alternative sales channels. The Company reviews the finished jewelry inventory on an ongoing basis for any lower of cost or market and obsolescence issues and has established an obsolescence reserve on its fashion finished jewelry at September 30, 2013 of $108,000. The Company concluded that no such finished jewelry inventory reserve requirements relating to the Company’s fashion finished jewelry existed as of December 31, 2012 or relating to its new line of finished jewelry featuring moissanite existed as of September 30, 2013 or December 31, 2012.
	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 September 30, 2013 and December 31, 2012 are net of shrinkage reserves of $55,000 and $20,000, 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 September 30, 2013 and December 31, 2012, including inventory on consignment net of reserves, were $31.36 million and $25.99 million, respectively. The loose jewel inventories at September 30, 2013 and December 31, 2012 include shrinkage reserves of $50,000 and $36,000, respectively, including shrinkage reserves of $0 and $17,000 on inventory on consignment at September 30, 2013 and December 31, 2012, respectively. Loose jewel inventories at September 30, 2013 and December 31, 2012 also include recuts reserves of $167,000 and $109,000, respectively.
	Total net jewelry inventories at September 30, 2013 and December 31, 2012, 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 AvenueTM, were $8.97 million and $6.71 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 September 30, 2013, the balance increased to $152,000 from $132,000 at December 31, 2012 as a result of a decrease in the market price of gold, offset in part by sell down of the inventory during the quarter. The reserve will increase when the market price of gold decreases so as to lower the net realizable value of the inventory due to the lower gold price.  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. In addition, the finished jewelry inventories at September 30, 2013 and December 31, 2012 include shrinkage reserves of $95,000 and $98,000, respectively, including shrinkage reserves of $55,000 and $3,000 on inventory on consignment, respectively. The finished jewelry inventories at September 30, 2013 also include an inventory reserve for obsolescence of $108,000.
	The need for adjustments to inventory reserves is evaluated on a period-by-period basis.

INCOME_TAXES

INCOME TAXES	9 Months Ended
	Sep. 30, 2013
INCOME TAXES [Abstract]
INCOME TAXES	7	INCOME TAXES
	The Company recognized an income tax expense of approximately $89,000 and an income tax net benefit of approximately $49,000 for the three and nine months ended September 30, 2013, respectively, compared to an income tax expense of approximately $3,000 and an income tax net benefit of approximately $307,000 for the three and nine months ended September 30, 2012, respectively.
	During 2008, the Company recorded a full valuation allowance against certain deferred tax assets consisting primarily of net operating loss carryforwards. Due to continued uncertainty over sufficient future taxable income to fully utilize these deferred tax assets, the Company did not record an income tax expense for the pretax income earned during the three months ended September 30, 2012 or an income tax benefit for the pretax loss incurred during the nine months ended September 30, 2012.
	As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact its view with regard to future realization of deferred tax assets. For the year ended December 31, 2012, cumulative positive taxable income over the last three tax years had been generated, offsetting the negative evidence of cumulative losses in previous years. The Company also determined that its expectations of future taxable income in upcoming tax years would be sufficient to result in full utilization of these net operating loss carryforwards and deferred tax assets prior to any statutory expiration. As a result, the Company’s management determined that sufficient positive evidence existed as of December 31, 2012 to conclude that it is more likely than not that the majority of its deferred tax assets are realizable, and it reduced its valuation allowance accordingly. A valuation allowance remains against certain deferred tax assets relating to state net operating loss carryforwards from the Company’s e-commerce and home party operating subsidiaries due to the timing uncertainty of when the subsidiaries will generate cumulative positive taxable income to utilize the associated deferred tax assets. A valuation allowance also remains against certain deferred tax assets relating to investment loss carryforwards because the Company’s current investments are classified as held-to-maturity, indicating they will be redeemed at par value and will not generate gains sufficient or of the appropriate character to utilize the associated deferred tax assets.
	For the three months ended September 30, 2013, the Company recognized $89,000 of current period income tax expense, offsetting an income tax benefit recorded in the first half of 2013 of approximately $138,000. The resulting income tax net benefit of $49,000 for the nine months ended September 30, 2013 represents an effective tax rate of 1.6% on the year-to-date pre-tax book loss. The effective tax rate for the nine months ended September 30, 2013 differs from the federal statutory rate of 34.0% primarily due to the impact of state income taxes, stock-based compensation expense that is not deductible for tax purposes, and other book-to-tax reconciling items. This effective tax rate has decreased from December 31, 2012 due to anticipation of lower taxable income in the current fiscal year, despite an additional $7,000 of income tax expense that was accrued and paid in the first quarter of 2013 related to the prior tax year, primarily for adjustment of the federal alternative minimum tax. Additionally, during the three months ended September 30, 2013 the Company paid $1,000 with a state tax filing for 2012 that was in excess of estimated payments.  The Company recorded approximately $129,000 of income tax expense during the three months ended September 30, 2013 to reflect lower anticipated taxable income for the full year than had been previously estimated, which reduced the tax benefit for the nine months ended September 30, 2013 to $18,000.  In addition, the Company recorded $44,000 and $48,000 of income tax benefit for discrete permanent tax deduction differences during the three and nine months ended September 30, 2013 and approximately $3,000 and $9,000 of income tax expense for estimated tax, penalties, and interest associated with uncertain tax positions during the three and nine months ended September 30, 2013, respectively.
	During the three months ended September 30, 2012, the Company recognized approximately $4,000 of income tax expense for estimated tax, penalties, and interest associated with uncertain tax positions. During the nine months ended September 30, 2012, the Company entered into a voluntary disclosure agreement with a taxing authority for which the Company had previously recorded a liability for an uncertain tax position. As a result of the agreement, the Company reduced its total recorded liabilities relating to uncertain tax positions by approximately $320,000 and recognized a corresponding income tax benefit. This benefit was offset by approximately $9,000 of income tax expense for estimated tax, penalties, and interest for other uncertain tax positions.

COMMITMENTS_AND_CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	9 Months Ended
	Sep. 30, 2013
COMMITMENTS AND CONTINGENCIES [Abstract]
COMMITMENTS AND CONTINGENCIES	8	COMMITMENTS AND CONTINGENCIES
	Lease Commitments
	In March 2004, the Company entered into a seven-year lease, beginning in August 2004, for approximately 16,500 square feet of mixed-use space from an unaffiliated third party at a base cost with escalations throughout the lease term plus additional common-area expenses based on the Company’s proportionate share of the lessor’s operating costs. The lease provided for two rent holidays, during which no rent was payable, and a moving allowance. In January 2011, the Company amended the lease effective January 1, 2011 to extend the term through January 2017 in exchange for a reduced rental rate and 50% rent abatement in the first 12 months of the extended term.  The amended lease includes 3% annual rent escalations and a one-time option to terminate the lease effective as of July 31, 2014. The Company exercised this right to terminate the lease by giving notice to the lessor prior to October 31, 2013.  The expected cost to terminate the lease effective July 31, 2014 is approximately $112,000, which the Company paid at the time notice was given to terminate the lease.  See Note 13, “Subsequent Events” for further discussion. The Company recognizes rent expense on a straight-line basis, giving consideration to the rent holidays, the moving allowance paid to the Company, and the rent abatement.
	As of September 30, 2013, the Company’s future minimum payments under this operating lease were as follows:
	2013		$	34,827
	2014			143,486
	2015			147,791
	2016			152,224
	2017			13,066
	Total		$	491,394
	Rent expense for the three months ended September 30, 2013 and 2012 was approximately $55,000 and $48,000, respectively. Rent expense for the nine months ended September 30, 2013 and 2012 was approximately $188,000 and $148,000, respectively.
	Purchase Commitments
	On June 6, 1997, the Company entered into an amended and restated exclusive supply agreement with Cree, Inc. (“Cree”). The exclusive supply agreement had an initial term of ten years that was extended in January 2005 to July 2015. In connection with the amended and restated exclusive supply agreement, the Company has committed to purchase from Cree a minimum of 50%, by dollar volume, of its raw material SiC crystal requirements. If the Company’s orders require Cree to expand beyond specified production levels, the Company must commit to purchase certain minimum quantities. In February 2013, the Company entered into an amendment to a prior letter agreement with Cree, which provides a framework for the Company’s purchases of SiC crystals under the amended and restated exclusive supply agreement. Pursuant to this amendment, the Company agreed to purchase at least $4.00 million of SiC crystals in an initial new order. After the initial new order, the Company has agreed to issue non-cancellable, quarterly orders that must equal or exceed a set minimum order quantity. The total purchase commitment under the amendment (as subsequently amended) until July 2015, including the initial new order, is dependent upon the grade of the material and ranges between approximately $7.64 million and approximately $18.56 million.  During the nine months ended September 30, 2013, the Company purchased $9.54 million of raw material SiC crystals from Cree.

LINE_OF_CREDIT

LINE OF CREDIT	9 Months Ended
	Sep. 30, 2013
LINE OF CREDIT [Abstract]
LINE OF CREDIT	9	LINE OF CREDIT
	On September 20, 2013, the Company obtained a $10,000,000 revolving line of credit (the “Line of Credit”) from PNC Bank, National Association (“PNC Bank”) for general corporate and working capital purposes. The Line of Credit is evidenced by a Committed Line of Credit Note, dated September 20, 2013 (the “Note”), which matures on June 15, 2015. Amounts outstanding under the Note accrue interest at the 1-month LIBOR rate (adjusted daily) plus 1.50%, calculated on an actual / 360 basis and payable monthly in arrears. Amounts outstanding during an event of default accrue interest at a rate 3.00% in excess of the standard rate, and late payments are subject to a 5.00% late charge. The Note may be repaid in whole or in part at any time, without penalty or premium.
	The Line of Credit is also governed by a loan agreement, dated September 20, 2013 (the “Loan Agreement”) and is guaranteed by Charles & Colvard Direct, LLC, and Moissanite.com, LLC. The Line of Credit is secured by a lien on substantially all assets of the Company and its subsidiaries.  Under the Loan Agreement, the Company is required to comply with the following financial covenants, each tested on a quarterly basis: (1) interest coverage ratio, (2) funded debt to EBITDA ratio, and (3) ratio of current assets to funded debt. The Loan Agreement contains other customary covenants and representations, including a financial reporting covenant and limitations on dividends, debt, contingent obligations, liens, loans, investments, mergers, acquisitions, divestitures, subsidiaries, and change in control.
	The events of default under the Line of Credit include, without limitation, (1) a material casualty or material adverse change in the collateral value or business and (2) an event of default under any other indebtedness. If an event of default occurs, PNC Bank is entitled to take various enforcement actions, including acceleration of amounts due under the Note.  The Loan Agreement also contains other customary provisions, such as yield protection, expense reimbursement, and confidentiality. PNC Bank has indemnification rights and the right to assign the Line of Credit.
	As of September 30, 2013, the Company has not taken any advances against the Line of Credit.

STOCKBASED_COMPENSATION

STOCK-BASED COMPENSATION	9 Months Ended
	Sep. 30, 2013
STOCK- BASED COMPENSATION [Abstract]
STOCK- BASED COMPENSATION	10	STOCK-BASED COMPENSATION
	The following table summarizes the components of the Company’s stock-based compensation included in net (loss) income:
			Three Months Ended							Nine Months Ended
			September 30,							September 30,
			2013			2012				2013			2012
	Employee stock options		$	246,771		$	98,966			$	547,268		$	379,612
	Restricted stock awards			202,419			132,923				645,555			421,507
	Income tax expense/(benefit)			190,855			(48,193	)			(10,329	)		(152,822	)
	Totals		$	640,045		$	183,696			$	1,182,494		$	648,297
	No stock-based compensation was capitalized as a cost of inventory during the three and nine months ended September 30, 2013 and 2012.
	Stock Options - The following is a summary of the stock option activity for the nine months ended September 30, 2013:
			Shares			Weighted
						Average
						Exercise Price
	Outstanding, December 31, 2012			1,147,847		$	2.31
	Granted			306,002		$	4.71
	Exercised			(113,736	)	$	2.12
	Forfeited			(71,460	)	$	2.12
	Expired			(70,786	)	$	2.21
	Outstanding, September 30, 2013			1,197,867		$	2.96
	The weighted average grant-date fair value of stock options granted during the nine months ended September 30, 2013 was $3.27. The total fair value of stock options that vested during the nine months ended September 30, 2013 was approximately $491,000. The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted average assumptions for stock options granted during the nine months ended September 30, 2013:
	Dividend yield			0	%
	Expected volatility			92.7	%
	Risk-free interest rate			1.01	%
	Expected lives (years)			4.9
	Although the Company issued dividends in prior years, a dividend yield of zero was used due to the uncertainty of future dividend payments. Volatility is a measure of the amount by which a financial variable such as share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company estimates expected volatility giving primary consideration to the historical volatility of its common stock. The risk-free interest rate is based on the published yield available on U.S. Treasury issues with an equivalent term remaining equal to the expected life of the stock option. The expected lives of the stock options represent the estimated period of time until exercise or forfeiture and are based on historical experience of similar awards.
	The following table summarizes information about stock options outstanding at September 30, 2013:
	Options Outstanding											Options Exercisable								Options Vested or Expected to Vest
	Balance				Weighted			Weighted				Balance			Weighted		Weighted			Balance		Weighted		Weighted
	as of				Average Remaining			Average Exercise				as of			Average Remaining		Average			as of		Average Remaining		Average Exercise
	9/30/13				Contractual Life			Price				9/30/13			Contractual Life		Exercise			9/30/13		Contractual Life		Price
					(Years)										(Years)		Price					(Years)
			1,197,867			7.76			$	2.96			752,592			7.13		$	2.39		1,147,725		7.7		$	2.9
	As of September 30, 2013, the unrecognized stock-based compensation expense related to unvested stock options was approximately $981,000, which is expected to be recognized over a weighted average period of approximately 27 months.
	The aggregate intrinsic value of stock options outstanding, exercisable, and vested or expected to vest at September 30, 2013 was approximately $4.89 million, $3.51 million, and $4.74 million, respectively. This amount is before applicable income taxes and represents the closing market price of the Company’s common stock at September 30, 2013 less the grant price, multiplied by the number of stock options that had a grant price that is less than the closing market price. This amount represents the amount that would have been received by the optionees had these stock options been exercised on that date. During the three and nine months ended September 30, 2013, the aggregate intrinsic value of stock options exercised was approximately $515,000 and $552,000, respectively.
	Restricted Stock - The following is a summary of the restricted stock activity for the nine months ended September 30, 2013:
			Shares			Weighted
						Average
						Grant Date
						Fair Value
	Unvested, December 31, 2012			191,843		$	3.38
	Granted			333,403		$	4.45
	Vested			(180,092	)	$	3.76
	Canceled			-		$	-
	Unvested, September 30, 2013			345,154		$	4.22
	As of September 30, 2013, the unrecognized stock-based compensation expense related to unvested restricted stock was approximately $1.23 million, which is expected to be recognized over a weighted average period of approximately 26 months.
	Dividends - The Company has not paid any cash dividends in the current year through September 30, 2013.

NET_LOSS_INCOME_PER_COMMON_SHA

NET (LOSS) INCOME PER COMMON SHARE	9 Months Ended
	Sep. 30, 2013
NET (LOSS) INCOME PER COMMON SHARE [Abstract]
NET (LOSS) INCOME PER COMMON SHARE	11	NET (LOSS) INCOME PER COMMON SHARE
	Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the periods. Fully diluted net (loss) income per common share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Common equivalent shares consist of stock options that are computed using the treasury stock method. Antidilutive stock awards are comprised of stock options and unvested restricted shares which would have been antidilutive in the application of the treasury stock method in accordance with the “Earnings Per Share” topic of the Financial Accounting Standard Board Accounting Standards Codification.
	The following table reconciles the differences between the basic and fully diluted earnings per share presentations:
			Three Months Ended					Nine Months Ended
			September 30,					September 30,
			2013			2012		2013			2012
	Numerator:
	Net (loss) income		$	(1,210,702	)	$	123,625	$	(1,396,014	)	$	296,351
	Denominator:
	Weighted average common shares outstanding:
	Basic			20,001,543			19,638,610		19,825,532			19,558,152
	Stock options			-			378,537		-			384,739
	Fully diluted			20,001,543			20,017,147		19,825,532			19,942,891
	Net (loss) income per common share:
	Basic		$	(0.06	)	$	0.01	$	(0.07	)	$	0.02
	Fully diluted		$	(0.06	)	$	0.01	$	(0.07	)	$	0.01
	For the three months ended September 30, 2013 and 2012, stock options to purchase approximately 176,000 and 383,000 shares, respectively, were excluded from the computation of fully diluted net (loss) income per common share because the exercise price of the stock options was greater than the average market price of the common shares or the effect of inclusion of such amounts would be anti-dilutive to net (loss) income per common share. For the nine months ended September 30, 2013 and 2012, stock options to purchase approximately 405,000 and 383,000 shares, respectively, were excluded from the computation of fully diluted net (loss) income per common share because the exercise price of the stock options was greater than the average market price of the common shares or the effect of inclusion of such amounts would be anti-dilutive to net (loss) income per common share.

MAJOR_CUSTOMERS_AND_CONCENTRAT

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK	9 Months Ended
	Sep. 30, 2013
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK [Abstract]
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK	12	MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK
	Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, investments, and trade accounts receivable. The Company maintains cash, cash equivalents, and investments with high-quality financial institutions and invests in low-risk securities, primarily money market funds or long-term U.S. government agency obligations. At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurable limits of $250,000 per depositor at each financial institution. Amounts on deposit in excess of FDIC insurable limits at September 30, 2013 approximated $2.28 million.
	Trade receivables potentially subject the Company to credit risk. The Company’s standard wholesale customer payment terms on trade receivables are generally between 30 and 90 days, though it may offer extended terms from time to time. The Company believes its competitors and other vendors in the wholesale jewelry industry have also expanded their use of extended payment terms and, in aggregate, the Company believes that by expanding its use of extended payment terms, it has provided a competitive response in its market and that its net sales have been favorably impacted. The Company is unable to estimate the impact of this program on its net sales, but if it ceased providing extended payment terms in select instances, the Company believes it would not be competitive for some wholesale customers in the marketplace and that its net sales and profits would likely decrease. The Company extends credit to its customers based upon a number of factors, including an evaluation of the customer’s financial condition and credit history, the customer’s payment history with the Company, the customer’s reputation in the trade, and/or an evaluation of the Company’s opportunity to introduce its moissanite jewels or finished jewelry featuring moissanite to new or expanded markets. Collateral is not generally required from customers. The need for an allowance for doubtful accounts is determined based upon factors surrounding the credit risk of specific customers, historical trends, and other information. The Company has not experienced any significant accounts receivable write-offs related to revenue arrangements with extended payment terms.
	As of September 30, 2013, five customers accounted for 16%, 14%, 13%, 13%, and 12% of trade accounts receivable, respectively. As of December 31, 2012, one customer accounted for 30% of trade accounts receivable.
	A significant portion of sales is derived from certain customer relationships. The following is a summary of customers that represent greater than or equal to 10% of total gross sales:
			Three Months Ended						Nine Months Ended
			September 30,						September 30,
			2013			2012			2013			2012
	Customer A			19	%		0	%		7	%		0	%
	Customer B			17	%		16	%		16	%		25	%
	Customer C			17	%		2	%		8	%		2	%
	Customer D			7	%		9	%		8	%		11	%

SUBSEQUENT_EVENTS

SUBSEQUENT EVENTS	9 Months Ended
	Sep. 30, 2013
SUBSEQUENT EVENTS [Abstract]
SUBSEQUENT EVENTS	13	SUBSEQUENT EVENTS
	Termination of Lease
	On October 31, 2013, the Company exercised its right under the Lease Agreement, dated March 26, 2004, by and between Duke Realty Limited Partnership and the Company, as amended on September 22, 2004, July 30, 2010, and January 1, 2011 (collectively, the “Lease Agreement”), to terminate the Lease Agreement effective July 31, 2013.  As provided by the Lease Agreement, the delivery of the termination notice was accompanied by the Company’s payment of approximately $112,000 to Raleigh Flex Owner I, LLC, the current landlord under the Lease Agreement.  This amount reflects all unamortized lease transaction costs, including, without limitation, all rent abated since January 1, 2011, plus two months’ rent at the current rental rate.
	On October 11, 2013 the Company entered into a non-binding letter of intent to lease approximately 36,000 square feet of mixed-use space from an unaffiliated third party, which the Company intends to use for its headquarters upon termination of the Lease Agreement.  The Company expects to execute a definitive lease agreement related to this property during the fourth quarter of 2013.

BASIS_OF_PRESENTATION_AND_SIGN1

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)	9 Months Ended
	Sep. 30, 2013
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Basis of Presentation and Principles of Consolidation	Basis of Presentation and Principles of Consolidation - The accompanying unaudited consolidated financial statements included in this Quarterly Report on Form 10-Q have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. However, certain information or footnote disclosures normally included in complete financial statements prepared in accordance with U.S. GAAP have been condensed, or omitted, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). In the opinion of the Company’s management, the unaudited statements in this Quarterly Report on Form 10-Q include all normal and recurring adjustments necessary for the fair statement of the results for the interim periods presented. The results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2013.
	The consolidated financial statements as of and for the three and nine months ended September 30, 2013 and 2012 included in this Quarterly Report on Form 10-Q are unaudited. The balance sheet as of December 31, 2012 is derived from the audited financial statements as of that date. The accompanying statements should be read in conjunction with the audited financial statements and related notes, together with Management’s Discussion and Analysis of Financial Condition and Results of Operations, contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2012 filed with the SEC on March 29, 2013 (the “2012 Annual Report”).
	The accompanying consolidated financial statements as of and for the three and nine months ended September 30, 2013 and 2012 include the accounts of the Company and its wholly owned subsidiaries Moissanite.com, LLC, formed in 2011; Charles & Colvard Direct, LLC, formed in 2011; and Charles & Colvard (HK) Ltd., the Company’s Hong Kong subsidiary that became a dormant entity in the second quarter of 2009 and the operations of which ceased in 2008. All intercompany accounts have been eliminated.
Use of Estimates	Use of Estimates -The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates impacting the Company’s consolidated financial statements relate to valuation and classification of inventories, accounts receivable reserves, deferred tax assets, uncertain tax positions, stock compensation expense, and cooperative advertising. Actual results could differ materially from those estimates.
Reclassifications	Reclassifications - Certain amounts in the prior year’s condensed consolidated financial statements have been reclassified to conform to the current year presentation.
Recently Adopted/Issued Accounting Pronouncements	Recently Adopted/Issued Accounting Pronouncements - All new and recently issued, but not yet effective, accounting pronouncements have been deemed to be not relevant to the Company and therefore are not expected to have any impact once adopted.

SEGMENT_INFORMATION_AND_GEOGRA1

SEGMENT INFORMATION AND GEOGRAPHIC DATA (Tables)	9 Months Ended
	Sep. 30, 2013
SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract]
Summary information by segment	Summary financial information by reporting segment is as follows:
			Three Months Ended September 30,
			2013											2012
			Wholesale			Direct-to-				Total				Wholesale				Direct-to-				Total
						Consumer												Consumer
	Net sales
	Loose jewels		$	4,744,308		$	77,011			$	4,821,319			$	3,718,706			$	55,035			$	3,773,741
	Finished jewelry			1,610,485			426,448				2,036,933				978,606				324,017				1,302,623
	Total		$	6,354,793		$	503,459			$	6,858,252			$	4,697,312			$	379,052			$	5,076,364
	Product line cost of goods sold
	Loose jewels		$	2,214,152		$	16,878			$	2,231,030			$	1,337,451			$	-			$	1,337,451
	Finished jewelry			795,711			213,566				1,009,277				538,196				10,094				548,290
	Total		$	3,009,863		$	230,444			$	3,240,307			$	1,875,647			$	10,094			$	1,885,741
	Product line gross profit
	Loose jewels		$	2,530,156		$	60,133			$	2,590,289			$	2,381,255			$	55,035			$	2,436,290
	Finished jewelry			814,774			212,882				1,027,656				440,410				313,923				754,333
	Total		$	3,344,930		$	273,015			$	3,617,945			$	2,821,665			$	368,958			$	3,190,623
	Operating income (loss)		$	175,342		$	(1,302,427	)		$	(1,127,085	)		$	762,973			$	(651,890	)		$	111,083
	Depreciation and amortization		$	108,763		$	91,222			$	199,985			$	69,117			$	36,244			$	105,361
	Capital expenditures		$	452,288		$	18,600			$	470,888			$	22,520			$	229,943			$	252,463
			Nine Months Ended September 30,
			2013											2012
			Wholesale			Direct-to-				Total				Wholesale				Direct-to-				Total
						Consumer												Consumer
	Net sales
	Loose jewels		$	13,022,685		$	221,957			$	13,244,642			$	10,164,361			$	148,618			$	10,312,979
	Finished jewelry			5,244,474			1,386,710				6,631,184				3,285,547				714,450				3,999,997
	Total		$	18,267,159		$	1,608,667			$	19,875,826			$	13,449,908			$	863,068			$	14,312,976
	Product line cost of goods sold
	Loose jewels		$	5,264,563		$	35,420			$	5,299,983			$	3,253,724			$	12,014			$	3,265,738
	Finished jewelry			2,726,789			687,034				3,413,823				1,274,617				147,775				1,422,392
	Total		$	7,991,352		$	722,454			$	8,713,806			$	4,528,341			$	159,789			$	4,688,130
	Product line gross profit
	Loose jewels		$	7,758,122		$	186,537			$	7,944,659			$	6,910,637			$	136,604			$	7,047,241
	Finished jewelry			2,517,685			699,676				3,217,361				2,010,930				566,675				2,577,605
	Total		$	10,275,807		$	886,213			$	11,162,020			$	8,921,567			$	703,279			$	9,624,846
	Operating income (loss)		$	2,443,939		$	(3,907,808	)		$	(1,463,869	)		$	1,912,231			$	(1,980,052	)		$	(67,821	)
	Depreciation and amortization		$	301,618		$	283,116			$	584,734			$	281,645			$	141,774			$	423,419
	Capital expenditures		$	641,694		$	31,894			$	673,588			$	391,637			$	346,704			$	738,341
		30-Sep-13											31-Dec-12
		Wholesale			Direct-to-				Total				Wholesale				Direct-to-				Total
					Consumer												Consumer
	Total assets		$	54,493,320		$	8,694,855			$	63,188,175			$	58,823,642			$	1,053,049			$	59,876,691
Schedule of reconciliation of product line cost of goods sold to cost of goods sold as reported in consolidated financial statements	A reconciliation of the Company’s product line cost of goods sold to cost of goods sold as reported in the consolidated financial statements is as follows:
			Three Months Ended							Nine Months Ended
			September 30,							September 30,
			2013			2012				2013				2012
	Product line cost of goods sold		$	3,240,307		$	1,885,741			$	8,713,806			$	4,688,130
	Non-capitalized manufacturing and production control expenses			380,369			300,025				989,009				1,038,413
	Freight out			39,850			25,450				127,812				66,946
	Inventory valuation allowances			122,000			(21,000	)			197,000				5,000
	Other inventory adjustments			22,701			(97,482	)			48,893				(35,310	)
	Cost of goods sold		$	3,805,227		$	2,092,734			$	10,076,520			$	5,763,179
Schedule of inventories by product line maintained in its wholesale distribution segment	The Company’s net inventories by product line maintained in the parent entity’s wholesale distribution segment are as follows:
			September 30,			December 31,
			2013			2012
	Loose jewels
	Raw materials		$	4,006,655		$	3,189,320
	Work-in-process			9,048,269			3,650,322
	Finished goods			18,224,036			19,074,526
	Finished goods on consignment			77,725			75,131
	Total		$	31,356,685		$	25,989,299
	Finished jewelry
	Raw materials		$	283,167		$	259,366
	Work-in-process			730,298			250,628
	Finished goods			7,378,672			5,451,178
	Finished goods on consignment			575,919			748,022
	Total		$	8,968,056		$	6,709,194
Data by geographic area	The Company recognizes sales by geographic area based on the country in which the customer is based. A portion of the Company’s international wholesale distribution segment sales represents products sold internationally that may be re-imported to United States (“U.S.”) retailers. Sales to international end consumers made by the Company’s direct-to-consumer distribution segment are included in U.S. sales because products are shipped and invoiced to a U.S.-based intermediary party that assumes all international shipping and credit risks. The following presents certain data by geographic area:
			Three Months Ended							Nine Months Ended
			September 30,							September 30,
			2013			2012				2013				2012
	Net sales
	United States		$	3,852,627		$	4,057,050			$	14,338,094			$	11,476,209
	International			3,005,625			1,019,314				5,537,732				2,836,767
	Total		$	6,858,252		$	5,076,364			$	19,875,826			$	14,312,976
			September 30,			December 31,
			2013			2012
	Property and equipment, net
	United States		$	1,835,446		$	1,746,792
	International			-			-
	Total		$	1,835,446		$	1,746,792
			September 30,			December 31,
			2013			2012
	Intangible assets, net
	United States		$	197,747		$	152,038
	International			163,791			194,694
	Total		$	361,538		$	346,732

INVESTMENTS_Tables

INVESTMENTS (Tables)	9 Months Ended
	Sep. 30, 2013
INVESTMENTS [Abstract]
Held-to-maturity Securities	The following table summarizes information about held-to-maturity investments at September 30, 2013:
		Amortized			Gross			Estimated
		Cost			Unrealized			Fair Value
					Gains
	U.S. government agency securities		$	500,999		$	2,046		$	503,045
Maturities of held-to-maturity investments	The maturities of held-to-maturity investments at September 30, 2013 were as follows:
		Less than 1			Total
		Year
	U.S. government agency securities		$	500,999		$	500,999

INVENTORIES_Tables

INVENTORIES (Tables)	9 Months Ended
	Sep. 30, 2013
INVENTORIES [Abstract]
Schedule of inventory, net of reserves	The Company’s total inventories, net of reserves, consisted of the following as of September 30, 2013 and December 31, 2012:
		September 30,			December 31,
		2013			2012
	Raw materials	$	4,289,822		$	3,448,686
	Work-in-process		9,778,567			3,900,950
	Finished goods		26,211,712			24,978,221
	Finished goods on consignment		708,644			843,153
	Less inventory reserves		(572,000	)		(375,000	)
	Total	$	40,416,745		$	32,796,010
	Current portion	$	11,469,778		$	8,442,430
	Long-term portion		28,946,967			24,353,580
	Total	$	40,416,745		$	32,796,010

COMMITMENTS_AND_CONTINGENCIES_

COMMITMENTS AND CONTINGENCIES (Tables)	9 Months Ended
	Sep. 30, 2013
COMMITMENTS AND CONTINGENCIES [Abstract]
Future minimum payments under operating lease	As of September 30, 2013, the Company’s future minimum payments under this operating lease were as follows:
	2013	$	34,827
	2014		143,486
	2015		147,791
	2016		152,224
	2017		13,066
	Total	$	491,394

STOCKBASED_COMPENSATION_Tables

STOCK-BASED COMPENSATION (Tables)	9 Months Ended
	Sep. 30, 2013
STOCK- BASED COMPENSATION [Abstract]
Schedule for components of stock based compensation	The following table summarizes the components of the Company’s stock-based compensation included in net (loss) income:
		Three Months Ended							Nine Months Ended
		September 30,							September 30,
		2013			2012				2013			2012
	Employee stock options	$	246,771		$	98,966			$	547,268		$	379,612
	Restricted stock awards		202,419			132,923				645,555			421,507
	Income tax expense/(benefit)		190,855			(48,193	)			(10,329	)		(152,822	)
	Totals	$	640,045		$	183,696			$	1,182,494		$	648,297
Summary of the stock option activity	The following is a summary of the stock option activity for the nine months ended September 30, 2013:
		Shares			Weighted
					Average
					Exercise Price
	Outstanding, December 31, 2012		1,147,847		$	2.31
	Granted		306,002		$	4.71
	Exercised		(113,736	)	$	2.12
	Forfeited		(71,460	)	$	2.12
	Expired		(70,786	)	$	2.21
	Outstanding, September 30, 2013		1,197,867		$	2.96
Weighted average assumptions for stock options granted	The weighted average grant-date fair value of stock options granted during the nine months ended September 30, 2013 was $3.27. The total fair value of stock options that vested during the nine months ended September 30, 2013 was approximately $491,000. The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted average assumptions for stock options granted during the nine months ended September 30, 2013:
	Dividend yield		0	%
	Expected volatility		92.7	%
	Risk-free interest rate		1.01	%
	Expected lives (years)		4.9
Information about stock options outstanding	The following table summarizes information about stock options outstanding at September 30, 2013:
	Options Outstanding										Options Exercisable								Options Vested or Expected to Vest
	Balance			Weighted			Weighted				Balance			Weighted		Weighted			Balance		Weighted		Weighted
	as of			Average Remaining			Average Exercise				as of			Average Remaining		Average			as of		Average Remaining		Average Exercise
	9/30/13			Contractual Life			Price				9/30/13			Contractual Life		Exercise			9/30/13		Contractual Life		Price
				(Years)										(Years)		Price					(Years)
		1,197,867			7.76			$	2.96			752,592			7.13		$	2.39		1,147,725		7.7		$	2.9
Restricted stock activity	The following is a summary of the restricted stock activity for the nine months ended September 30, 2013:
		Shares			Weighted
					Average
					Grant Date
					Fair Value
	Unvested, December 31, 2012		191,843		$	3.38
	Granted		333,403		$	4.45
	Vested		(180,092	)	$	3.76
	Canceled		-		$	-
	Unvested, September 30, 2013		345,154		$	4.22

NET_LOSS_INCOME_PER_COMMON_SHA1

NET (LOSS) INCOME PER COMMON SHARE (Tables)	9 Months Ended
	Sep. 30, 2013
NET (LOSS) INCOME PER COMMON SHARE [Abstract]
Reconciliation of the differences between the basic and fully diluted earnings per share	The following table reconciles the differences between the basic and fully diluted earnings per share presentations:
		Three Months Ended					Nine Months Ended
		September 30,					September 30,
		2013			2012		2013			2012
	Numerator:
	Net (loss) income	$	(1,210,702	)	$	123,625	$	(1,396,014	)	$	296,351
	Denominator:
	Weighted average common shares outstanding:
	Basic		20,001,543			19,638,610		19,825,532			19,558,152
	Stock options		-			378,537		-			384,739
	Fully diluted		20,001,543			20,017,147		19,825,532			19,942,891
	Net (loss) income per common share:
	Basic	$	(0.06	)	$	0.01	$	(0.07	)	$	0.02
	Fully diluted	$	(0.06	)	$	0.01	$	(0.07	)	$	0.01

MAJOR_CUSTOMERS_AND_CONCENTRAT1

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Tables)	9 Months Ended
	Sep. 30, 2013
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK [Abstract]
Summary of customers that represent greater than or equal to 10% of total gross sales	A significant portion of sales is derived from certain customer relationships. The following is a summary of customers that represent greater than or equal to 10% of total gross sales:
		Three Months Ended						Nine Months Ended
		September 30,						September 30,
		2013			2012			2013			2012
	Customer A		19	%		0	%		7	%		0	%
	Customer B		17	%		16	%		16	%		25	%
	Customer C		17	%		2	%		8	%		2	%
	Customer D		7	%		9	%		8	%		11	%

SEGMENT_INFORMATION_AND_GEOGRA2

SEGMENT INFORMATION AND GEOGRAPHIC DATA (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
			Segment
SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract]
Number of operating segments			2
Number of reportable segments			2
Summary information by segment [Abstract]
Net sales	$6,858,252	$5,076,364	$19,875,826	$14,312,976
Product line cost of goods sold	3,240,307	1,885,741	8,713,806	4,688,130
Product line gross profit	3,617,945	3,190,623	11,162,020	9,624,846
Operating income (loss)	-1,127,085	111,083	-1,463,869	-67,821
Depreciation and amortization	199,985	105,361	584,734	423,419
Capital expenditures	470,888	252,463	673,588	738,341
Total assets	63,188,175		63,188,175		59,876,691
Cost of goods sold	3,805,227	2,092,734	10,076,520	5,763,179
Inventories, net [Abstract]
Raw materials	4,289,822		4,289,822		3,448,686
Work-in-process	9,778,567		9,778,567		3,900,950
Supplies inventories	92,000		92,000		98,000
Product Line Cost of Goods Sold [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	3,240,307	1,885,741	8,713,806	4,688,130
Non-Capitalized Manufacturing and Production Control Expenses [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	380,369	300,025	989,009	1,038,413
Freight Out [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	39,850	25,450	127,812	66,946
Inventory Valuation Allowances [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	122,000	-21,000	197,000	5,000
Other Inventory Adjustments [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	22,701	-97,482	48,893	-35,310
Loose Jewels [Member]
Summary information by segment [Abstract]
Net sales	4,821,319	3,773,741	13,244,642	10,312,979
Product line cost of goods sold		1,337,451		3,265,738
Product line gross profit	2,590,289	2,436,290	7,944,659	7,047,241
Inventories, net [Abstract]
Raw materials	4,006,655		4,006,655		3,189,320
Work-in-process	9,048,269		9,048,269		3,650,322
Finished goods	18,224,036		18,224,036		19,074,526
Finished goods on consignment	77,725		77,725		75,131
Total	31,356,685		31,356,685		25,989,299
Loose Jewels [Member] | Product Line Cost of Goods Sold [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	2,231,030		5,299,983
Finished Jewelry [Member]
Summary information by segment [Abstract]
Net sales	2,036,933	1,302,623	6,631,184	3,999,997
Product line cost of goods sold		548,290		1,422,392
Product line gross profit	1,027,656	754,333	3,217,361	2,577,605
Inventories, net [Abstract]
Raw materials	283,167		283,167		259,366
Work-in-process	730,298		730,298		250,628
Finished goods	7,378,672		7,378,672		5,451,178
Finished goods on consignment	575,919		575,919		748,022
Total	8,968,056		8,968,056		6,709,194
Finished Jewelry [Member] | Product Line Cost of Goods Sold [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	1,009,277		3,413,823
Wholesale [Member]
Summary information by segment [Abstract]
Net sales	6,354,793	4,697,312	18,267,159	13,449,908
Product line cost of goods sold		1,875,647		4,528,341
Product line gross profit	3,344,930	2,821,665	10,275,807	8,921,567
Operating income (loss)	175,342	762,973	2,443,939	1,912,231
Depreciation and amortization	108,763	69,117	301,618	281,645
Capital expenditures	452,288	22,520	641,694	391,637
Total assets	54,493,320		54,493,320		58,823,642
Wholesale [Member] | Product Line Cost of Goods Sold [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	3,009,863		7,991,352
Wholesale [Member] | Loose Jewels [Member]
Summary information by segment [Abstract]
Net sales	4,744,308	3,718,706	13,022,685	10,164,361
Product line cost of goods sold		1,337,451		3,253,724
Product line gross profit	2,530,156	2,381,255	7,758,122	6,910,637
Wholesale [Member] | Loose Jewels [Member] | Product Line Cost of Goods Sold [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	2,214,152		5,264,563
Wholesale [Member] | Finished Jewelry [Member]
Summary information by segment [Abstract]
Net sales	1,610,485	978,606	5,244,474	3,285,547
Product line cost of goods sold		538,196		1,274,617
Product line gross profit	814,774	440,410	2,517,685	2,010,930
Wholesale [Member] | Finished Jewelry [Member] | Product Line Cost of Goods Sold [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	795,711		2,726,789
Direct-to-Consumer [Member]
Summary information by segment [Abstract]
Net sales	503,459	379,052	1,608,667	863,068
Product line cost of goods sold		10,094		159,789
Product line gross profit	273,015	368,958	886,213	703,279
Operating income (loss)	-1,302,427	-651,890	-3,907,808	-1,980,052
Depreciation and amortization	91,222	36,244	283,116	141,774
Capital expenditures	18,600	229,943	31,894	346,704
Total assets	8,694,855		8,694,855		1,053,049
Direct-to-Consumer [Member] | Product Line Cost of Goods Sold [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	230,444		722,454
Direct-to-Consumer [Member] | Loose Jewels [Member]
Summary information by segment [Abstract]
Net sales	77,011	55,035	221,957	148,618
Product line cost of goods sold		0		12,014
Product line gross profit	60,133	55,035	186,537	136,604
Direct-to-Consumer [Member] | Loose Jewels [Member] | Product Line Cost of Goods Sold [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	16,878		35,420
Direct-to-Consumer [Member] | Finished Jewelry [Member]
Summary information by segment [Abstract]
Net sales	426,448	324,017	1,386,710	714,450
Product line cost of goods sold		10,094		147,775
Product line gross profit	212,882	313,923	699,676	566,675
Direct-to-Consumer [Member] | Finished Jewelry [Member] | Product Line Cost of Goods Sold [Member]
Summary information by segment [Abstract]
Product line cost of goods sold	$213,566		$687,034

SEGMENT_INFORMATION_AND_GEOGRA3

SEGMENT INFORMATION AND GEOGRAPHIC DATA, Continued (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Dec. 31, 2012	Sep. 30, 2013	Dec. 31, 2012
					Property and Equipment, Net [Member]	Property and Equipment, Net [Member]	Intangible Assets, Net [Member]	Intangible Assets, Net [Member]
Net sales [Abstract]
United States	$3,852,627	$4,057,050	$14,338,094	$11,476,209
International	3,005,625	1,019,314	5,537,732	2,836,767
Net sales	6,858,252	5,076,364	19,875,826	14,312,976
Assets by geographical area [Abstract]
United States					1,835,446	1,746,792	197,747	152,038
International					0	0	163,791	194,694
Total					$1,835,446	$1,746,792	$361,538	$346,732

INVESTMENTS_Details

INVESTMENTS (Details) (U.S. Government Agency Securities [Member], USD $)	Sep. 30, 2013
U.S. Government Agency Securities [Member]
Summarization of information about held to maturity investments [Abstract]
Amortized Cost	$500,999
Gross Unrealized Gains	2,046
Estimated Fair Value	503,045
Maturities of held-to-maturity investments [Abstract]
Less than 1 Year	500,999
Total	$500,999

INVENTORIES_Details

INVENTORIES (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Dec. 31, 2012
Total inventories, net of reserves [Abstract]
Raw materials	$4,289,822	$3,448,686
Work-in-process	9,778,567	3,900,950
Finished goods	26,211,712	24,978,221
Finished goods on consignment	708,644	843,153
Less inventory reserves	-572,000	-375,000
Total	40,416,745	32,796,010
Current portion	11,469,778	8,442,430
Long-term portion	28,946,967	24,353,580
Period considered for classification of long term inventory	12 months
Work-in-process inventories issued to active production jobs	4,640,000	1,120,000
Inventory reserve for obsolescence	108,000
Shrinkage reserve for finished goods on consignment	55,000	20,000
Inventory of net loose jewels	31,360,000	25,990,000
Inventory reserve for shrinkage of loose jewels	50,000	36,000
Inventory reserve for shrinkage of loose jewels on consignment	0	17,000
Inventory reserve for recuts	167,000	109,000
Inventory of net jewelry	8,970,000	6,710,000
Scrap reserve	152,000	132,000
Inventory reserve for shrinkage of finished jewelry	95,000	98,000
Inventory reserve for shrinkage of finished jewelry on consignment	$55,000	$3,000

INCOME_TAXES_Details

INCOME TAXES (Details) (USD $)	3 Months Ended			9 Months Ended
	Sep. 30, 2013	Mar. 31, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
INCOME TAXES [Abstract]
Income tax net	($88,550)		($3,125)	$49,422	$307,421
Current period income tax benefit (expense)	-89,000	138,000		49,000
Effective income tax rate (in hundredths)				1.60%
Federal statutory income tax rate (in hundredths)				34.00%
Increases related to prior year tax positions		7,000
Income tax benefit for discreet permanent tax deduction	44,000			48,000
State and local income tax expense	1,000
Income tax expense recorded to reflect lower anticipated taxable income	129,000
Reduced tax benefit due to lower anticipated taxable income				18,000
Reduction in recorded liabilities for uncertain tax positions					320,000
Income tax expense for estimated tax, penalties, and interest for other uncertain tax positions	$3,000		$4,000	$9,000	$9,000

COMMITMENTS_AND_CONTINGENCIES_1

COMMITMENTS AND CONTINGENCIES (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012	Oct. 31, 2013
	sqft		RentHoliday		Subsequent Event [Member]
			sqft
Lease Commitments [Abstract]
Period of lease			7 years
Land subject to leases (in square feet)	16,500		16,500
Number of rent holidays			2
Percentage of rent abatement (in hundredths)			50.00%
Period for which rent is abated			12 months
Annual rent escalations (in hundredths)			3.00%
Expected cost to terminate lease					$112,000
Period for which amended lease can be extended			5 years
Future minimum payments under operating lease [Abstract]
2013	34,827		34,827
2014	143,486		143,486
2015	147,791		147,791
2016	152,224		152,224
2017	13,066		13,066
Total	491,394		491,394
Rent expense	55,000	48,000	188,000	148,000
Purchase Commitments [Abstract]
Period of exclusive supply agreement			10 years
Percentage committed to be purchased (in hundredths)			50.00%
Minimum purchase commitment in initial new order	4,000,000		4,000,000
Minimum purchase commitment under the amendment	7,640,000		7,640,000
Maximum purchase commitment under amendment	18,560,000		18,560,000
Actual purchases under purchase amendment			$9,540,000

LINE_OF_CREDIT_Details

LINE OF CREDIT (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 20, 2013
LINE OF CREDIT [Abstract]
Revolving line of credit		$10,000,000
Line of credit maturity date	15-Jun-15
Line of credit, description of variable rate basis	1-month LIBOR rate (adjusted daily)
Line of credit, spread on variable rate (in hundredths)		1.50%
Basis for calculation of LIBOR rate (adjusted daily)	actual / 360
Interest rate in event of default in excess of standard rate (in hundredths)		3.00%
Late payment charge (in hundredths)		5.00%
Advances against line of credit	$0

STOCKBASED_COMPENSATION_Detail

STOCK-BASED COMPENSATION (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Components of the Company's stock based compensation included in net income [Abstract]
Income tax expense/(benefit)	$190,855	($48,193)	($10,329)	($152,822)
Total	640,045	183,696	1,182,494	648,297
Employee Stock Options [Member]
Components of the Company's stock based compensation included in net income [Abstract]
Allocated share-based compensation expense	246,771	98,966	547,268	379,612
Stock Options [Member]
Components of the Company's stock based compensation included in net income [Abstract]
Stock-based compensation capitalized as a cost of inventory	0	0	0	0
Shares [Roll Forward]
Outstanding, December 31, 2012 (in shares)			1,147,847
Granted (in shares)			306,002
Exercised (in shares)			-113,736
Forfeited (in shares)			-71,460
Expired (in shares)			-70,786
Outstanding, March 31, 2013 (in shares)	1,197,867		1,197,867
Weighted Average Exercise Price [Roll Forward]
Outstanding (in dollars per share)			$2.31
Granted (in dollars per share)			$4.71
Exercised (in dollars per share)			$2.12
Forfeited (in dollars per share)			$2.12
Expired (in dollars per share)			$2.21
Outstanding (in dollars per share)	$2.96		$2.96
Fair value of stock options (in dollars per share)			$3.27
Fair value of stock options vested			491,000
Weighted average assumptions for stock options [Abstract]
Dividend yield (in hundredths)			0.00%
Expected volatility (in hundredths)			92.70%
Risk-free interest rate (in hundredths)			1.01%
Expected lives			4 years 10 months 24 days
Options Outstanding [Abstract]
Balance as of 3/31/2013 (in shares)	1,197,867		1,197,867
Weighted Average Remaining Contractual Life			7 years 9 months 4 days
Weighted Average Exercise Price (in dollars per share)	$2.96		$2.96
Options Exercisable [Abstract]
Balance as of 3/31/2013 (in shares)	752,592		752,592
Weighted Average Remaining Contractual Life			7 years 1 month 17 days
Weighted Average Exercise Price (in dollars per share)	$2.39		$2.39
Options Vested or Expected to Vest [Abstract]
Balance as of 3/31/2013 (in shares)	1,147,725		1,147,725
Weighted Average Remaining Contractual Life			7 years 8 months 12 days
Weighted Average Exercise Price (in dollars per share)	$2.90		$2.90
Unrecognized stock-based compensation expense related to unvested awards	981,000		981,000
Total compensation cost not yet recognized, period for recognition			27 months
Aggregate intrinsic value of stock options outstanding	4,890,000		4,890,000
Aggregate intrinsic value of stock options exercisable	3,510,000		3,510,000
Aggregate intrinsic value of stock options vested and expected to vest	4,740,000		4,740,000
Aggregate intrinsic value of stock options exercised	515,000		552,000
Restricted Stock [Member]
Components of the Company's stock based compensation included in net income [Abstract]
Allocated share-based compensation expense	202,419	132,923	645,555	421,507
Options Vested or Expected to Vest [Abstract]
Unrecognized stock-based compensation expense related to unvested awards	$1,230,000		$1,230,000
Total compensation cost not yet recognized, period for recognition			26 months
Shares [Roll Forward]
Unvested (in shares)			191,843
Granted (in shares)			333,403
Vested (in shares)			-180,092
Canceled (in shares)			0
Unvested (in shares)	345,154		345,154
Weighted Average Grant Date Fair Value [Roll Forward]
Unvested, December 31, 2012 (in dollars per share)			$3.38
Granted (in dollars per share)			$4.45
Vested (in dollars per share)			$3.76
Canceled (in dollars per share)			$0
Unvested, March 31, 2013 (in dollars per share)	$4.22		$4.22

NET_LOSS_INCOME_PER_COMMON_SHA2

NET (LOSS) INCOME PER COMMON SHARE (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Numerator [Abstract]
Net (loss) income	($1,210,702)	$123,625	($1,396,014)	$296,351
Weighted average common shares outstanding [Abstract]
Basic (in shares)	20,001,543	19,638,610	19,825,532	19,558,152
Stock options (in shares)	0	378,537	0	384,739
Fully diluted (in shares)	20,001,543	20,017,147	19,825,532	19,942,891
Net (loss) income per common share [Abstract]
Basic (in dollars per share)	($0.06)	$0.01	($0.07)	$0.02
Fully diluted (in dollars per share)	($0.06)	$0.01	($0.07)	$0.01
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options to purchase shares (in shares)	176,000	176,000	405,000	383,000

MAJOR_CUSTOMERS_AND_CONCENTRAT2

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Details) (USD $)

9 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

3 Months Ended

9 Months Ended

12 Months Ended

9 Months Ended

3 Months Ended

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Sep. 30, 2013

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Dec. 31, 2012

Sep. 30, 2013

Sep. 30, 2013

Sep. 30, 2013

Sep. 30, 2013

Sep. 30, 2013

Sep. 30, 2013

Sep. 30, 2012

Sep. 30, 2013

Sep. 30, 2012

Customer

Customer

Minimum [Member]

Maximum [Member]

Customer A [Member]

Customer A [Member]

Customer B [Member]

Customer B [Member]

Customer C [Member]

Customer C [Member]

Customer C [Member]

Customer C [Member]

Customer D [Member]

Customer D [Member]

Customer D [Member]

Customer D [Member]

Trade Accounts Receivable [Member]

Trade Accounts Receivable [Member]

Trade Accounts Receivable [Member]

Trade Accounts Receivable [Member]

Trade Accounts Receivable [Member]

Trade Accounts Receivable [Member]

Total Gross Sales [Member]

Total Gross Sales [Member]

Total Gross Sales [Member]

Total Gross Sales [Member]

Total Gross Sales [Member]

Customer Concentration Risk [Member]

Customer Concentration Risk [Member]

Customer Concentration Risk [Member]

Customer Concentration Risk [Member]

Customer Concentration Risk [Member]

Customer Concentration Risk [Member]

Customer Concentration Risk [Member]

Customer Concentration Risk [Member]

Customer Concentration Risk [Member]

Customer Concentration Risk [Member]

Customer 1 [Member]

Customer 1 [Member]

Customer 2 [Member]

Customer 3 [Member]

Customer 4 [Member]

Customer 5 [Member]

Customer A [Member]

Customer A [Member]

Customer B [Member]

Customer B [Member]

Concentration Risk [Line Items]

Insurance coverage per depositor at each financial institution

$250,000

Interest-bearing amounts on deposit in excess of FDIC insurable limits

$2,280,000

Period of customer payments on trade receivables

30 days

90 days

Number of Customers

5

1

Concentration risk, percentage (in hundredths)

7.00%

0.00%

16.00%

25.00%

17.00%

2.00%

8.00%

2.00%

7.00%

9.00%

8.00%

11.00%

16.00%

30.00%

14.00%

13.00%

13.00%

12.00%

19.00%

0.00%

17.00%

16.00%

Percentage of gross sales used as benchmark (in hundredths)

10.00%

SUBSEQUENT_EVENT_Details

SUBSEQUENT EVENT (Details) (Subsequent Event [Member], USD $)	0 Months Ended
	Oct. 31, 2013	Oct. 11, 2013
		sqft
Subsequent Event [Member]
Subsequent Event [Line Items]
Payments for lease agreements	$112,000
Square feet of mixed-use space leased		36,000