Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2016 | Jul. 29, 2016 | |
Document and Entity Information [Abstract] | ||
Entity Registrant Name | CHARLES & COLVARD LTD | |
Entity Central Index Key | 1,015,155 | |
Current Fiscal Year End Date | --12-31 | |
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 | 21,479,885 | |
Document Fiscal Year Focus | 2,016 | |
Document Fiscal Period Focus | Q2 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2016 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) | Jun. 30, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 11,111,309 | $ 5,274,305 |
Accounts receivable, net | 2,228,545 | 3,852,651 |
Inventory, net | 10,121,500 | 10,739,798 |
Prepaid expenses and other assets | 922,035 | 701,105 |
Assets related to discontinued operations | 750 | 83,000 |
Total current assets | 24,384,139 | 20,650,859 |
Long-term assets: | ||
Inventory, net | 15,961,283 | 21,588,622 |
Property and equipment, net | 1,317,659 | 1,615,683 |
Intangible assets, net | 5,564 | 71,086 |
Other assets | 165,016 | 214,588 |
Total long-term assets | 17,449,522 | 23,489,979 |
TOTAL ASSETS | 41,833,661 | 44,140,838 |
Current liabilities: | ||
Accounts payable | 3,062,700 | 3,323,148 |
Accrued cooperative advertising | 0 | 58,000 |
Accrued expenses and other liabilities | 770,258 | 891,187 |
Liabilities related to discontinued operations | 183,000 | 349,000 |
Total current liabilities | 4,015,958 | 4,621,335 |
Long-term liabilities: | ||
Accrued expenses and other liabilities | 655,867 | 710,223 |
Accrued income taxes | 427,246 | 420,503 |
Total long-term liabilities | 1,083,113 | 1,130,726 |
Total liabilities | 5,099,071 | 5,752,061 |
Commitments and contingencies | ||
Shareholders' equity: | ||
Common stock, no par value; 50,000,000 shares authorized; 21,507,235 and 21,111,585 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively | 54,243,816 | 54,240,247 |
Additional paid-in capital | 13,918,550 | 13,280,920 |
Accumulated deficit | (31,427,776) | (29,132,390) |
Total shareholders' equity | 36,734,590 | 38,388,777 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 41,833,661 | $ 44,140,838 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - $ / shares | Jun. 30, 2016 | Dec. 31, 2015 |
Shareholders' equity | ||
Common stock, par value (in dollars per share) | $ 0 | $ 0 |
Common stock, shares authorized (in shares) | 50,000,000 | 50,000,000 |
Common stock, shares issued (in shares) | 21,507,235 | 21,111,585 |
Common stock, shares outstanding (in shares) | 21,507,235 | 21,111,585 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) [Abstract] | ||||
Net sales | $ 6,527,004 | $ 6,183,535 | $ 17,920,275 | $ 13,199,621 |
Costs and expenses: | ||||
Cost of goods sold | 3,894,094 | 6,092,858 | 13,057,982 | 10,521,481 |
Sales and marketing | 1,803,010 | 1,787,930 | 3,331,595 | 3,145,874 |
General and administrative | 1,693,123 | 1,191,879 | 3,135,818 | 3,057,242 |
Research and development | 980 | 7,043 | 2,848 | 9,104 |
Total costs and expenses | 7,391,207 | 9,079,710 | 19,528,243 | 16,733,701 |
Loss from operations | (864,203) | (2,896,175) | (1,607,968) | (3,534,080) |
Other income (expense): | ||||
Interest income | 0 | 0 | 0 | 11 |
Interest expense | (5) | (767) | (1,512) | (784) |
Loss on abandonment of property and equipment | (115,548) | 0 | (115,548) | 0 |
Gain on sale of long-term assets | 0 | 0 | 0 | 125 |
Total other expense, net | (115,553) | (767) | (117,060) | (648) |
Loss before income taxes from continuing operations | (979,756) | (2,896,942) | (1,725,028) | (3,534,728) |
Income tax net expense from continuing operations | (3,500) | (3,243) | (6,743) | (6,336) |
Net loss from continuing operations | (983,256) | (2,900,185) | (1,731,771) | (3,541,064) |
Discontinued operations: | ||||
Loss from discontinued operations | (4,708) | (1,147,351) | (579,078) | (2,185,923) |
Gain on sale of assets from discontinued operations | 0 | 0 | 15,463 | 0 |
Income tax benefit from discontinued operations | 0 | 0 | 0 | 0 |
Net loss from discontinued operations | (4,708) | (1,147,351) | (563,615) | (2,185,923) |
Net loss | $ (987,964) | $ (4,047,536) | $ (2,295,386) | $ (5,726,987) |
Net loss per common share: | ||||
Basic - continuing operations (in dollars per share) | $ (0.05) | $ (0.14) | $ (0.08) | $ (0.17) |
Basic - discontinued operations (in dollars per share) | 0 | (0.06) | (0.03) | (0.11) |
Basic - total (in dollars per share) | (0.05) | (0.20) | (0.11) | (0.28) |
Diluted - continuing operations (in dollars per share) | (0.05) | (0.14) | (0.08) | (0.17) |
Diluted - discontinued operations (in dollars per share) | 0 | (0.06) | (0.03) | (0.11) |
Diluted - total (in dollars per share) | $ (0.05) | $ (0.20) | $ (0.11) | $ (0.28) |
Weighted average number of shares used in computing net loss per common share: | ||||
Basic (in shares) | 20,966,256 | 20,326,577 | 20,848,337 | 20,217,646 |
Diluted (in shares) | 20,966,256 | 20,326,577 | 20,848,337 | 20,217,646 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Jun. 30, 2015 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (1,731,771) | $ (3,541,064) |
Adjustments to reconcile net loss to net cash provided by operating activities: | ||
Depreciation and amortization | 330,147 | 387,543 |
Stock-based compensation | 594,728 | 676,664 |
Provision for uncollectible accounts | (59,558) | 19,000 |
Provision for sales returns | (295,000) | (581,000) |
Provision for inventory reserves | 55,000 | 615,000 |
Loss on abandonment of property and equipment | 115,548 | 0 |
Gain on sale of long-term assets | 0 | (125) |
Changes in operating assets and liabilities: | ||
Accounts receivable | 1,978,664 | 1,609,967 |
Inventory | 6,190,637 | 3,794,495 |
Prepaid expenses and other assets, net | (171,358) | (266,933) |
Accounts payable | (260,448) | (77,039) |
Accrued cooperative advertising | (58,000) | (184,000) |
Accrued income taxes | 6,743 | 6,336 |
Other accrued liabilities | (175,285) | 713,860 |
Net cash provided by operating activities of continuing operations | 6,520,047 | 3,172,704 |
Net cash used in operating activities of discontinued operations | (935,326) | (1,897,817) |
Net cash provided by operating activities | 5,584,721 | 1,274,887 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (118,433) | (145,733) |
Patent, license rights, and trademark costs | (255) | (45,742) |
Proceeds from sale of long-term assets | 0 | 175 |
Net cash used in investing activities of continuing operations | (118,688) | (191,300) |
Net cash provided by (used in) investing activities of discontinued operations | 368,671 | (9,452) |
Net cash provided by (used in) investing activities | 249,983 | (200,752) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Stock option exercises | 2,300 | 172,766 |
Net cash provided by financing activities of continuing operations | 2,300 | 172,766 |
NET INCREASE IN CASH AND CASH EQUIVALENTS | 5,837,004 | 1,246,901 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 5,274,305 | 4,007,341 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 11,111,309 | 5,254,242 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest | 1,512 | 784 |
Cash paid during the period for income taxes | $ 0 | $ 0 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 6 Months Ended |
Jun. 30, 2016 | |
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 ® 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 (until March 2016), and through third-party marketplaces. In February 2016, the Company Lulu Avenue ® Note 12, “Discontinued Operations.” |
BASIS OF PRESENTATION AND SIGNI
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended |
Jun. 30, 2016 | |
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 condensed consolidated financial statements as of and for the three and six months ended June 30, 2016 and 2015 included in this Quarterly Report on Form 10-Q are unaudited. The balance sheet as of December 31, 2015 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, 2015 filed with the SEC on March 8, 2016 (the “2015 Annual Report”). The accompanying condensed consolidated financial statements as of and for the three and six months ended June 30, 2016 and 2015 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 - Use of Estimates - T Reclassifications - Recently Adopted/Issued Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board (the “FASB”) issued a new accounting standard that supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the new standard is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The new standard defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of the pending adoption of the standard on its consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2018. In July 2015, the FASB issued new accounting guidance that will require an entity to measure inventory valued under the average cost method from the lower of cost or market to the lower of cost or net realizable value, with net realizable value defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. This guidance is effective on a prospective basis for public entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted as of the beginning of an interim or annual reporting period. The Company does not anticipate early adoption at this time and is currently evaluating the impact of this guidance on its consolidated financial statements. In November 2015, the FASB issued new accounting guidance that requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual report period. The amendments in this guidance may be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. The Company adopted this standard as of December 31, 2015 with prospective application. As a result, the Company reclassified its deferred tax assets classified as current to noncurrent and its deferred tax liabilities classified as current to noncurrent in its December 31, 2015 consolidated balance sheet. In February 2016, the FASB issued new guidance that establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of its pending adoption of the new standard on its consolidated financial statements. In March 2016, the FASB issued updated guidance that changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as the classification of related matters in the statement of cash flows. The update is effective for the Company in the first quarter of 2017. The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements. All other 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 GEOGRAP
SEGMENT INFORMATION AND GEOGRAPHIC DATA | 6 Months Ended |
Jun. 30, 2016 | |
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. Previously, the Company ® T The Company allocates certain general and administrative expenses from its parent entity to its direct-to-consumer distribution segment primarily based on net sales and number of employees to arrive at segment operating loss. Unallocated expenses, which also include interest and taxes, remain in the parent entity’s wholesale distribution segment. Summary financial information by reportable segment is as follows: Three Months Ended June 30, 2016 Wholesale Moissanite.com Total Net sales Loose jewels $ 4,826,839 $ 129,986 $ 4,956,825 Finished jewelry 544,816 1,025,363 1,570,179 Total $ 5,371,655 $ 1,155,349 $ 6,527,004 Product line cost of goods sold Loose jewels $ 2,351,579 $ 18,244 $ 2,369,823 Finished jewelry 775,670 420,004 1,195,674 Total $ 3,127,249 $ 438,248 $ 3,565,497 Product line gross profit Loose jewels $ 2,475,260 $ 111,742 $ 2,587,002 Finished jewelry (230,854 ) 605,359 374,505 Total $ 2,244,406 $ 717,101 $ 2,961,507 Operating loss $ (268,076 ) $ (596,127 ) $ (864,203 ) Depreciation and amortization $ 167,553 $ 16,103 $ 183,656 Capital expenditures $ 51,648 $ 28,280 $ 79,928 Three Months Ended June 30, 2015 Wholesale Moissanite.com Total Net sales Loose jewels $ 3,628,161 $ 138,148 $ 3,766,309 Finished jewelry 1,294,494 1,122,732 2,417,226 Total $ 4,922,655 $ 1,260,880 $ 6,183,535 Product line cost of goods sold Loose jewels $ 3,040,470 $ 21,748 $ 3,062,218 Finished jewelry 1,204,174 533,659 1,737,833 Total $ 4,244,644 $ 555,407 $ 4,800,051 Product line gross profit Loose jewels $ 587,691 $ 116,400 $ 704,091 Finished jewelry 90,320 589,073 679,393 Total $ 678,011 $ 705,473 $ 1,383,484 Operating loss $ (2,617,570 ) $ (278,605 ) $ (2,896,175 ) Depreciation and amortization $ 163,209 $ 31,987 $ 195,196 Capital expenditures $ 35,636 $ - $ 35,636 Six Months Ended June 30, 2016 Wholesale Moissanite.com Total Net sales Loose jewels $ 14,351,193 $ 246,449 $ 14,597,642 Finished jewelry 1,081,286 2,241,347 3,322,633 Total $ 15,432,479 $ 2,487,796 $ 17,920,275 Product line cost of goods sold Loose jewels $ 10,158,834 $ 25,049 $ 10,183,883 Finished jewelry 1,019,882 940,899 1,960,781 Total $ 11,178,716 $ 965,948 $ 12,144,664 Product line gross profit Loose jewels $ 4,192,359 $ 221,400 $ 4,413,759 Finished jewelry 61,404 1,300,448 1,361,852 Total $ 4,253,763 $ 1,521,848 $ 5,775,611 Operating loss $ (797,562 ) $ (810,406 ) $ (1,607,968 ) Depreciation and amortization $ 299,601 $ 30,546 $ 330,147 Capital expenditures $ 88,551 $ 29,882 $ 118,433 Six Months Ended June 30, 2015 Wholesale Moissanite.com Total Net sales Loose jewels $ 7,316,034 $ 271,404 $ 7,587,438 Finished jewelry 3,518,781 2,093,402 5,612,183 Total $ 10,834,815 $ 2,364,806 $ 13,199,621 Product line cost of goods sold Loose jewels $ 5,242,573 $ 40,819 $ 5,283,392 Finished jewelry 2,431,984 1,014,019 3,446,003 Total $ 7,674,557 $ 1,054,838 $ 8,729,395 Product line gross profit Loose jewels $ 2,073,461 $ 230,585 $ 2,304,046 Finished jewelry 1,086,797 1,079,383 2,166,180 Total $ 3,160,258 $ 1,309,968 $ 4,470,226 Operating loss $ (2,851,346 ) $ (682,734 ) $ (3,534,080 ) Depreciation and amortization $ 323,849 $ 63,694 $ 387,543 Capital expenditures $ 145,200 $ 533 $ 145,733 June 30, 2016 Wholesale Moissanite.com Total Total assets $ 41,674,640 $ 158,271 $ 41,832,911 December 31, 2015 Wholesale Moissanite.com Total Total assets $ 43,882,939 $ 174,899 $ 44,057,838 A reconciliation of the Company’s product line cost of goods sold to cost of goods sold as reported in the condensed consolidated financial statements is as follows: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Product line cost of goods sold $ 3,565,497 $ 4,800,051 $ 12,144,664 $ 8,729,395 Non-capitalized manufacturing and production control expenses 331,533 500,460 742,299 647,572 Freight out 91,031 79,534 163,089 147,998 Inventory valuation allowances - 411,000 55,000 615,000 Other inventory adjustments (93,967 ) 301,813 (47,040 ) 381,516 Cost of goods sold $ 3,894,094 $ 6,092,858 $ 13,057,982 $ 10,521,481 The Company’s net inventories by product line maintained in the parent entity’s wholesale distribution segment are as follows: June 30, 2016 December 31, 2015 Loose jewels Raw materials $ 4,550,319 $ 6,741,712 Work-in-process 8,014,873 5,516,799 Finished goods 9,438,017 15,877,436 Finished goods on consignment 44,861 55,388 Total $ 22,048,070 $ 28,191,335 Finished jewelry Raw materials $ 308,415 $ 190,427 Work-in-process 473,846 514,946 Finished goods 3,050,221 3,193,569 Finished goods on consignment 162,555 200,613 Total $ 3,995,037 $ 4,099,555 Supplies inventories of approximately $40,000 and $38,000 at June 30, 2016 and December 31, 2015, respectively, included in finished goods inventories in the condensed 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’s continuing operating subsidiary carries no net inventories, and inventory is transferred without intercompany markup from the parent entity’s wholesale distribution segment as product line cost of goods sold when sold to the end consumer. 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 segment, Moissanite.com LLC, is 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 June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net sales United States $ 5,450,060 $ 5,662,932 $ 16,092,042 $ 12,064,300 International 1,076,944 520,603 1,828,233 1,135,321 Total $ 6,527,004 $ 6,183,535 $ 17,920,275 $ 13,199,621 June 30, 2016 December 31, 2015 Property and equipment, net United States $ 1,317,659 $ 1,615,683 International - - Total $ 1,317,659 $ 1,615,683 June 30, 2016 December 31, 2015 Intangible assets, net United States $ 5,564 $ 15,362 International - 55,724 Total $ 5,564 $ 71,086 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 6 Months Ended |
Jun. 30, 2016 | |
FAIR VALUE MEASUREMENTS [Abstract] | |
FAIR VALUE MEASUREMENTS | 4. FAIR VALUE MEASUREMENTS U · Level 1 - · Level 2 - · Level 3 - 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 financial instruments identified as subject to fair value measurements on a recurring basis are cash and cash equivalents, trade accounts receivable, and trade accounts payable. All financial instruments are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. Assets that are measured at fair value on a non-recurring basis include property and equipment, leasehold improvements, and intangible assets, comprising patents and trademarks. These items are recognized at fair value when they are considered to be impaired. |
INVENTORIES
INVENTORIES | 6 Months Ended |
Jun. 30, 2016 | |
INVENTORIES [Abstract] | |
INVENTORIES | 5. INVENTORIES The Company’s total inventories, net of reserves, consisted of the following as of June 30, 2016 and December 31, 2015: June 30, 2016 December 31, 2015 Raw materials $ 4,858,734 $ 6,932,139 Work-in-process 8,488,719 6,031,745 Finished goods 13,909,914 20,441,535 Finished goods on consignment 247,416 293,001 Less inventory reserves (1,422,000 ) (1,370,000 ) Total $ 26,082,783 $ 32,328,420 Current portion $ 10,121,500 $ 10,739,798 Long-term portion 15,961,283 21,588,622 Total $ 26,082,783 $ 32,328,420 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. 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 June 30, 2016 and December 31, 2015, work-in-process inventories issued to active production jobs approximated $6.01 million and $3.02 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 had the exclusive right in the U.S. through August 2015 and has the exclusive right in many other countries into the third quarter of 2016 to produce and sell created SiC for use in jewelry applications. During the year ended December 31, 2015, management identified an opportunity to sell approximately $2.28 million of slow-moving loose jewel inventory of less desirable quality. As a result of this sale and feedback from customers on the value of some of these goods, the Company determined a lower of cost or market reserve of $528,000 and $352,000 as of June 30, 2016 and December 31, 2015, respectively, was required on some of the remaining inventory of these lower quality goods. The Company manufactures 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. Prior to March 2016, the Company purchased fashion finished jewelry comprising base metals and non-precious gemstones for sale through Lulu Avenue ® 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 . Total net loose jewel inventories at June 30, 2016 and December 31, 2015, including inventory on consignment net of reserves, were $22.05 million and $28.19 million, respectively. The loose jewel inventories at June 30, 2016 and December 31, 2015 include shrinkage reserves of $47,000 and $50,000, respectively, which includes $6,000 and $10,000 of shrinkage reserves on inventory on consignment at June 30, 2016 and December 31, 2015, respectively. Loose jewel inventories at June 30, 2016 and December 31, 2015 also include recut reserves of $400,000 and $449,000, respectively. Total net jewelry inventories at June 30, 2016 and December 31, 2015, including inventory on consignment net of reserves, finished jewelry featuring moissanite manufactured by the Company, and fashion finished jewelry purchased and owned by the Company which was made for sale through Lulu Avenue ® The need for adjustments to inventory reserves is evaluated on a period-by-period basis. |
INCOME TAXES
INCOME TAXES | 6 Months Ended |
Jun. 30, 2016 | |
INCOME TAXES [Abstract] | |
INCOME TAXES | 6. INCOME TAXES The Company recognized an income tax net expense of approximately $4,000 and $3,000, respectively, for the three months ended June 30, 2016 and 2015, and $7,000 and $6,000, respectively, for the six months ended June 30, 2016 and 2015, for estimated tax, penalties, and interest associated with uncertain tax positions. 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. |
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2016 | |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 7. COMMITMENTS AND CONTINGENCIES Lease Commitments On December 9, 2013, the Company entered into a Lease Agreement, as amended on December 23, 2013 and April 15, 2014 (the “Lease Agreement”), for a new corporate headquarters, which occupies approximately 36,350 square feet of office, storage, and light manufacturing space. The Company took possession of the leased property on May 23, 2014 once certain improvements to the leased space were completed, and did not have access to the property before this date. These improvements and other lease signing and moving incentives offered by the landlord totaled approximately $550,000 and $73,000, respectively, which will be amortized over the life of the lease until October 31, 2021. Included in the Lease Agreement is a seven-month rent abatement period effective June 2014 through December 2014. The Company recognizes rent expense on a straight-line basis, giving consideration to the rent holidays and escalations, the lease signing and moving allowance paid to the Company, and the rent abatement. As of June 30, 2016, the Company’s future minimum payments under the operating leases were as follows: 2016 $ 287,778 2017 584,789 2018 600,871 2019 617,395 2020 634,373 Thereafter 541,957 Total $ 3,267,163 Rent expense for the three months ended June 30, 2016 and 2015 was approximately $134,000 and $128,000, respectively. Rent expense for the six months ended June 30, 2016 and 2015 was approximately $276,000 and $255,000, respectively. Purchase Commitments On December 12, 2014, the Company entered into a new exclusive supply agreement (the “Supply Agreement”) with Cree , Inc. (“Cree”), its SiC raw materials supplier During the six months ended June 30, 2016 and 2015, the Company purchased approximately $3.82 million and $3.05 million, respectively, of SiC crystals from Cree. |
LINE OF CREDIT
LINE OF CREDIT | 6 Months Ended |
Jun. 30, 2016 | |
LINE OF CREDIT [Abstract] | |
LINE OF CREDIT | 8. LINE OF CREDIT On June 25, 2014, the Company and its wholly owned subsidiaries, Charles & Colvard Direct, LLC, and Moissanite.com, LLC (collectively, the “Borrowers”), obtained a $10,000,000 asset-based revolving credit facility (the “Credit Facility”) from Wells Fargo Bank, National Association (“Wells Fargo”). The Credit Facility may be used for general corporate and working capital purposes, including transaction fees and expenses incurred in connection therewith and the issuance of letters of credit up to a $1,000,000 sublimit. The Credit Facility will mature on June 25, 2017. The Credit Facility includes a $5,000,000 sublimit for advances that are supported by a 90% guaranty provided by the U.S. Export-Import Bank. Advances under the Credit Facility are limited to a borrowing base, which is computed by applying specified advance rates to the value of the Borrowers’ eligible accounts and inventory, less reserves. Advances against inventory are further subject to an initial $3,000,000 maximum. The Borrowers must maintain a minimum of $1,000,000 in excess availability at all times. There are no other financial covenants. Each advance accrues interest at a rate equal to Wells Fargo’s 3-month LIBOR rate plus 2.50%, calculated on an actual/360 basis and payable monthly in arrears. Principal outstanding during an event of default accrues interest at a rate of 3% in excess of the above rate. Any advance may be prepaid in whole or in part at any time. In addition, the maximum line amount may be reduced by the Company in whole or part at any time, subject to a fee equal to 2% of any reduction in the first year after closing, 1% of any reduction in the second year after closing, and 0% thereafter. There are no mandatory prepayments or line reductions. The Credit Facility is secured by a lien on substantially all assets of the Borrowers, each of which is jointly and severally liable for all obligations thereunder. Wells Fargo’s security interest in certain SiC materials is subordinate to the security interest in such materials pursuant to the Supply Agreement and an Intercreditor Agreement with Wells Fargo. The Credit Facility is evidenced by a credit and security agreement, dated as of June 25, 2014 and amended as of September 16, 2014 and December 12, 2014 (collectively, the “Credit Agreement”), and customary ancillary documents. The Credit Agreement contains customary covenants, representations and cash dominion provisions, including a financial reporting covenant and limitations on dividends, distributions, debt, contingent obligations, liens, loans, investments, mergers, acquisitions, divestitures, subsidiaries, affiliate transactions, and changes in control. Events of default under the Credit Facility include, without limitation, (1) any impairment of the Export-Import Bank guaranty, unless the guaranteed advances are repaid within two business days, (2) an event of default under any other indebtedness of the Borrowers in excess of $200,000, and (3) a material adverse change in the ability of the Borrowers to perform their obligations under the Credit Agreement or in the Borrowers’ assets, liabilities, businesses or prospects, or other circumstances that Wells Fargo believes may impair the prospect of repayment. If an event of default occurs, Wells Fargo is entitled to take enforcement action, including acceleration of amounts due under the Credit Agreement and foreclosure upon collateral. The Credit Agreement contains other customary terms, including indemnity, expense reimbursement, yield protection, and confidentiality provisions. Wells Fargo is permitted to assign the Credit Facility. As of June 30, 2016, the Company had not borrowed against the Credit Facility. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 6 Months Ended |
Jun. 30, 2016 | |
STOCK-BASED COMPENSATION [Abstract] | |
STOCK-BASED COMPENSATION | 9. STOCK-BASED COMPENSATION The following table summarizes the components of the Company’s stock-based compensation included in net loss: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Employee stock options $ 105,543 $ 119,990 $ 244,726 $ 306,461 Consultant stock options 46,862 25,203 97,110 41,448 Restricted stock awards 152,472 248,910 297,063 425,433 Totals $ 304,877 $ 394,103 $ 638,899 $ 773,342 No stock-based compensation was capitalized as a cost of inventory during the three and six months ended June 30, 2016 and 2015. Included in total stock-based compensation are approximately ($5,000) and $75,000 for the three months ended June 30, 2016 and 2015, respectively, related to discontinued operations. Included in total stock-based compensation are approximately $44,000 and $96,000 for the six months ended June 30, 2016 and 2015, respectively, related to discontinued operations. Stock Options - Shares Weighted Average Exercise Price Outstanding, December 31, 2015 2,441,077 $ 2.11 Granted 441,005 $ 1.11 Exercised (2,500 ) $ 0.92 Forfeited (298,747 ) $ 1.40 Expired (261,229 ) $ 1.80 Outstanding, June 30, 2016 2,319,606 $ 2.05 The weighted average grant-date fair value of stock options granted during the six months ended June 30, 2016 was $0.61. The total fair value of stock options that vested during the six months ended June 30, 2016 was approximately $471,000. 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 six months ended June 30, 2016: Dividend yield 0.0 % Expected volatility 61.9 % Risk-free interest rate 1.47 % Expected lives (years) 5.54 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 expected lives of the stock options issued since 2014 represent the estimated period of time until exercise or forfeiture and are based on the simplified method of using the mid-point between the vesting term and the original contractual term. Stock . The following table summarizes information about stock options outstanding at June 30, 2016: Options Outstanding Options Exercisable Options Vested or Expected to Vest Balance as of 6/30/2016 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Balance as of 6/30/2016 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Balance as of 6/30/2016 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price 2,319,606 7.40 $ 2.05 1,389,202 6.16 $ 2.42 2,257,735 7.35 $ 2.06 As of June 30, 2016, the unrecognized stock-based compensation expense related to unvested stock options was approximately $569,000, which is expected to be recognized over a weighted average period of approximately 18 months. The aggregate intrinsic value of stock options outstanding, exercisable, and vested or expected to vest at June 30, 2016 were each approximately $14,000. This amount is before applicable income taxes and represents the closing market price of the Company’s common stock at June 30, 2016 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 each of the three and six months ended June 30, 2016, the aggregate intrinsic value of stock options exercised was approximately $250. During the three and six months ended June 30, 2015, the aggregate intrinsic value of stock options exercised was approximately $169,000 and $167,000, respectively. Restricted Stock - Shares Weighted Average Grant Date Fair Value Unvested, December 31, 2015 425,000 $ 1.87 Granted 509,250 $ 0.93 Vested (295,146 ) $ 1.74 Canceled (116,100 ) $ 1.42 Unvested, June 30, 2016 523,004 $ 1.13 As of June 30, 2016, the unrecognized stock-based compensation expense related to unvested restricted stock was approximately $363,000, which is expected to be recognized over a weighted average period of approximately eight months. Dividends |
NET LOSS PER COMMON SHARE
NET LOSS PER COMMON SHARE | 6 Months Ended |
Jun. 30, 2016 | |
NET LOSS PER COMMON SHARE [Abstract] | |
NET LOSS PER COMMON SHARE | 10. NET LOSS PER COMMON SHARE Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the periods. Diluted net loss 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 consist of stock options and unvested restricted shares that would have been antidilutive in the application of the treasury stock method in accordance with the “Earnings Per Share” topic of the FASB Accounting Standards Codification. The following table reconciles the differences between the basic and diluted earnings per share presentations: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Numerator: Net loss from continuing operations $ (983,256 ) $ (2,900,185 ) $ (1,731,771 ) $ (3,541,064 ) Net loss from discontinued operations (4,708 ) (1,147,351 ) (563,615 ) (2,185,923 ) Net loss $ (987,964 ) $ (4,047,536 ) $ (2,295,386 ) $ (5,726,987 ) Denominator: Weighted average common shares outstanding: Basic 20,966,256 20,326,577 20,848,337 20,217,646 Stock options and restricted stock - - - - Diluted 20,966,256 20,326,577 20,848,337 20,217,646 Net loss per common share: Basic – continuing operations $ (0.05 ) $ (0.14 ) $ (0.08 ) $ (0.17 ) Basic – discontinued operations (0.00 ) (0.06 ) (0.03 ) (0.11 ) Basic – total $ (0.05 ) $ (0.20 ) $ (0.11 ) $ (0.28 ) Diluted – continuing operations $ (0.05 ) $ (0.14 ) $ (0.08 ) $ (0.17 ) Diluted – discontinued operations (0.00 ) (0.06 ) (0.03 ) (0.11 ) Diluted – total $ (0.05 ) $ (0.20 ) $ (0.11 ) $ (0.28 ) For each of the three and six months ended June 30, 2016, stock options to purchase approximately 2.32 million shares were excluded from the computation of diluted net loss 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 per common share. For each of the corresponding period ended June 30, 2015, stock options to purchase approximately 1.56 million shares were excluded. For each of the three and six months ended June 30, 2016, approximately 523,000 unvested restricted shares were excluded because the inclusion of such amounts would be anti-dilutive to net loss per common share. For each of the corresponding period ended June 30, 2015, 554,000 unvested restricted shares were excluded. |
MAJOR CUSTOMERS AND CONCENTRATI
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK | 6 Months Ended |
Jun. 30, 2016 | |
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK [Abstract] | |
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK | 11. 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 and trade accounts receivable. 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 June 30, 2016 and December 31, 2015 approximated $10.71 million and $4.92 million, respectively. 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, . 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 that is verified through trade association reference services, 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. At times, a portion of the Company’s accounts receivable will be due from customers that have individual balances in excess of 10% of the Company’s total net accounts receivable. The following is a summary of customers that represent greater than or equal to 10% of total net accounts receivable: June 30, 2016 December 31, 2015 Customer A 22 % 14 % Customer B 16 % **% Customer C 10 % **% Customer D * % 17 % Customer E * % 11 % Customer F * % 10 % * Customers D, E and F did not have individual balances that represented a significant portion of total net accounts receivable as of June 30, 2016. ** Customers B and C did not have individual balances that represented a significant portion of the total net accounts receivable as of December 31, 2015. 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 from continuing operations: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Customer B 27 % 1 % 14 % 11 % Customer D * % 52 % 38 % 40 % *Customer D did not represent a significant portion of sales for the three months ended June 30, 2016. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 6 Months Ended |
Jun. 30, 2016 | |
DISCONTINUED OPERATIONS [Abstract] | |
DISCONTINUED OPERATIONS | 12. DISCONTINUED OPERATIONS On March 4, 2016, the Company and Charles & Colvard Direct, LLC (“Direct”) a wholly-owned subsidiary of the Company, entered into an asset purchase agreement (the “Purchase Agreement”) with Yanbal, pursuant to which Yanbal agreed to purchase certain assets of Direct (the “Transferred Assets”). The transactions contemplated by the Purchase Agreement also closed on March 4, 2016 (the “Closing Date”). The Company determined that the sale of these assets represented a strategic shift that will have a major effect on the Company’s operations and financial results. The Company made the decision to divest of these assets after careful analysis of the Company’s core competencies, go-to-market strategies, and intent to advance toward profitability. Pursuant to the terms of the Purchase Agreement, the Transferred Assets included, among other things, (i) an inventory credit to be used towards $250,000 in existing non-moissanite and moissanite inventory as of the Closing Date, consisting of Direct’s current jewelry offered under the “Lulu Avenue” trademarks, (ii) all existing marketing collateral such as packaging and catalogs for Direct’s current jewelry offered under the “Lulu Avenue” trademarks as of the Closing Date, (iii) certain assigned contracts, (iv) style advisor and customer lists, and (v) all intellectual property rights owned by the Company and Direct and used solely in connection with the operation of Direct’s direct-to-consumer home party business for the sale of fashion jewelry and related products and services in the United States, excluding the “Lulu Avenue” and “Love Knot” trademarks and other “Lulu Avenue” specific intellectual property such as the domain name www.luluavenue.com and all content located on such website (the “Lulu Intellectual Property”). The inventory credit and an exclusive, nontransferable license to use the Lulu Intellectual Property that was also granted to Yanbal on the Closing Date expired on July 31, 2016. After the Closing Date, the Company and Direct may not engage in the direct-to-consumer home party business and may not solicit style advisors or customers of the direct-to-consumer home party business. The Company has also agreed to provide to Yanbal certain transition services. The purchase price for the Transferred Assets was $500,000 with selling expenses of approximately $131,000 resulting in a net purchase price of approximately $369,000. The Company recorded a liability associated with $35,000 of expense related to certain style advisor incentives and reduced prepaid expenses by $60,000 related to contracts acquired by Yanbal. The following table presents the major classes of line items constituting assets and liabilities related to discontinued operations: June 30, 2016 December 31, 2015 Prepaid expenses and other assets $ 750 $ 83,000 Total assets $ 750 $ 83,000 Accounts payable $ 35,000 $ 140,000 Accrued expenses and other liabilities 148,000 209,000 Total liabilities $ 183,000 $ 349,000 The following table presents the major classes of line items constituting pretax loss from discontinued operations: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net sales $ 53,698 $ 1,293,337 $ 770,771 $ 2,654,315 Costs and expenses: Cost of goods sold 9,501 368,679 268,590 783,959 Sales and marketing 44,389 1,729,940 908,197 3,345,360 General and administrative 4,516 342,069 173,051 710,919 Interest expense - - 11 - Total costs and expenses 58,406 2,440,688 1,349,849 4,840,238 Loss from discontinued operations (4,708 ) (1,147,351 ) (579,078 ) (2,185,923 ) Other income (expense): Gain on sale of long-term assets - - 15,463 - Total other income (expense), net - - 15,463 - Pretax loss from discontinued operations $ (4,708 ) $ (1,147,351 ) $ (563,615 ) $ (2,185,923 ) |
BASIS OF PRESENTATION AND SIG18
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 6 Months Ended |
Jun. 30, 2016 | |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract] | |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation - The condensed consolidated financial statements as of and for the three and six months ended June 30, 2016 and 2015 included in this Quarterly Report on Form 10-Q are unaudited. The balance sheet as of December 31, 2015 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, 2015 filed with the SEC on March 8, 2016 (the “2015 Annual Report”). The accompanying condensed consolidated financial statements as of and for the three and six months ended June 30, 2016 and 2015 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 | Significant Accounting Policies - |
Use of Estimates | Use of Estimates - T |
Reclassifications | Reclassifications - |
Recently Adopted/Issued Accounting Pronouncements | Recently Adopted/Issued Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board (the “FASB”) issued a new accounting standard that supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the new standard is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The new standard defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting the standard recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of the pending adoption of the standard on its consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2018. In July 2015, the FASB issued new accounting guidance that will require an entity to measure inventory valued under the average cost method from the lower of cost or market to the lower of cost or net realizable value, with net realizable value defined as the estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. No other changes were made to the current guidance on inventory measurement. This guidance is effective on a prospective basis for public entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early application is permitted as of the beginning of an interim or annual reporting period. The Company does not anticipate early adoption at this time and is currently evaluating the impact of this guidance on its consolidated financial statements. In November 2015, the FASB issued new accounting guidance that requires that deferred tax assets and liabilities be classified as noncurrent in a classified statement of financial position. The guidance is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. Earlier application is permitted for all entities as of the beginning of an interim or annual report period. The amendments in this guidance may be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. The Company adopted this standard as of December 31, 2015 with prospective application. As a result, the Company reclassified its deferred tax assets classified as current to noncurrent and its deferred tax liabilities classified as current to noncurrent in its December 31, 2015 consolidated balance sheet. In February 2016, the FASB issued new guidance that establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either financing or operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact of its pending adoption of the new standard on its consolidated financial statements. In March 2016, the FASB issued updated guidance that changes how companies account for certain aspects of share-based payment awards to employees, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as the classification of related matters in the statement of cash flows. The update is effective for the Company in the first quarter of 2017. The Company is currently evaluating this guidance and the impact it will have on its consolidated financial statements. All other 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 GEOGR19
SEGMENT INFORMATION AND GEOGRAPHIC DATA (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract] | |
Summary information by segment | Summary financial information by reportable segment is as follows: Three Months Ended June 30, 2016 Wholesale Moissanite.com Total Net sales Loose jewels $ 4,826,839 $ 129,986 $ 4,956,825 Finished jewelry 544,816 1,025,363 1,570,179 Total $ 5,371,655 $ 1,155,349 $ 6,527,004 Product line cost of goods sold Loose jewels $ 2,351,579 $ 18,244 $ 2,369,823 Finished jewelry 775,670 420,004 1,195,674 Total $ 3,127,249 $ 438,248 $ 3,565,497 Product line gross profit Loose jewels $ 2,475,260 $ 111,742 $ 2,587,002 Finished jewelry (230,854 ) 605,359 374,505 Total $ 2,244,406 $ 717,101 $ 2,961,507 Operating loss $ (268,076 ) $ (596,127 ) $ (864,203 ) Depreciation and amortization $ 167,553 $ 16,103 $ 183,656 Capital expenditures $ 51,648 $ 28,280 $ 79,928 Three Months Ended June 30, 2015 Wholesale Moissanite.com Total Net sales Loose jewels $ 3,628,161 $ 138,148 $ 3,766,309 Finished jewelry 1,294,494 1,122,732 2,417,226 Total $ 4,922,655 $ 1,260,880 $ 6,183,535 Product line cost of goods sold Loose jewels $ 3,040,470 $ 21,748 $ 3,062,218 Finished jewelry 1,204,174 533,659 1,737,833 Total $ 4,244,644 $ 555,407 $ 4,800,051 Product line gross profit Loose jewels $ 587,691 $ 116,400 $ 704,091 Finished jewelry 90,320 589,073 679,393 Total $ 678,011 $ 705,473 $ 1,383,484 Operating loss $ (2,617,570 ) $ (278,605 ) $ (2,896,175 ) Depreciation and amortization $ 163,209 $ 31,987 $ 195,196 Capital expenditures $ 35,636 $ - $ 35,636 Six Months Ended June 30, 2016 Wholesale Moissanite.com Total Net sales Loose jewels $ 14,351,193 $ 246,449 $ 14,597,642 Finished jewelry 1,081,286 2,241,347 3,322,633 Total $ 15,432,479 $ 2,487,796 $ 17,920,275 Product line cost of goods sold Loose jewels $ 10,158,834 $ 25,049 $ 10,183,883 Finished jewelry 1,019,882 940,899 1,960,781 Total $ 11,178,716 $ 965,948 $ 12,144,664 Product line gross profit Loose jewels $ 4,192,359 $ 221,400 $ 4,413,759 Finished jewelry 61,404 1,300,448 1,361,852 Total $ 4,253,763 $ 1,521,848 $ 5,775,611 Operating loss $ (797,562 ) $ (810,406 ) $ (1,607,968 ) Depreciation and amortization $ 299,601 $ 30,546 $ 330,147 Capital expenditures $ 88,551 $ 29,882 $ 118,433 Six Months Ended June 30, 2015 Wholesale Moissanite.com Total Net sales Loose jewels $ 7,316,034 $ 271,404 $ 7,587,438 Finished jewelry 3,518,781 2,093,402 5,612,183 Total $ 10,834,815 $ 2,364,806 $ 13,199,621 Product line cost of goods sold Loose jewels $ 5,242,573 $ 40,819 $ 5,283,392 Finished jewelry 2,431,984 1,014,019 3,446,003 Total $ 7,674,557 $ 1,054,838 $ 8,729,395 Product line gross profit Loose jewels $ 2,073,461 $ 230,585 $ 2,304,046 Finished jewelry 1,086,797 1,079,383 2,166,180 Total $ 3,160,258 $ 1,309,968 $ 4,470,226 Operating loss $ (2,851,346 ) $ (682,734 ) $ (3,534,080 ) Depreciation and amortization $ 323,849 $ 63,694 $ 387,543 Capital expenditures $ 145,200 $ 533 $ 145,733 June 30, 2016 Wholesale Moissanite.com Total Total assets $ 41,674,640 $ 158,271 $ 41,832,911 December 31, 2015 Wholesale Moissanite.com Total Total assets $ 43,882,939 $ 174,899 $ 44,057,838 |
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 condensed consolidated financial statements is as follows: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Product line cost of goods sold $ 3,565,497 $ 4,800,051 $ 12,144,664 $ 8,729,395 Non-capitalized manufacturing and production control expenses 331,533 500,460 742,299 647,572 Freight out 91,031 79,534 163,089 147,998 Inventory valuation allowances - 411,000 55,000 615,000 Other inventory adjustments (93,967 ) 301,813 (47,040 ) 381,516 Cost of goods sold $ 3,894,094 $ 6,092,858 $ 13,057,982 $ 10,521,481 |
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: June 30, 2016 December 31, 2015 Loose jewels Raw materials $ 4,550,319 $ 6,741,712 Work-in-process 8,014,873 5,516,799 Finished goods 9,438,017 15,877,436 Finished goods on consignment 44,861 55,388 Total $ 22,048,070 $ 28,191,335 Finished jewelry Raw materials $ 308,415 $ 190,427 Work-in-process 473,846 514,946 Finished goods 3,050,221 3,193,569 Finished goods on consignment 162,555 200,613 Total $ 3,995,037 $ 4,099,555 |
Data by geographic area | The following presents certain data by geographic area: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net sales United States $ 5,450,060 $ 5,662,932 $ 16,092,042 $ 12,064,300 International 1,076,944 520,603 1,828,233 1,135,321 Total $ 6,527,004 $ 6,183,535 $ 17,920,275 $ 13,199,621 June 30, 2016 December 31, 2015 Property and equipment, net United States $ 1,317,659 $ 1,615,683 International - - Total $ 1,317,659 $ 1,615,683 June 30, 2016 December 31, 2015 Intangible assets, net United States $ 5,564 $ 15,362 International - 55,724 Total $ 5,564 $ 71,086 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
INVENTORIES [Abstract] | |
Schedule of inventory, net of reserves | The Company’s total inventories, net of reserves, consisted of the following as of June 30, 2016 and December 31, 2015: June 30, 2016 December 31, 2015 Raw materials $ 4,858,734 $ 6,932,139 Work-in-process 8,488,719 6,031,745 Finished goods 13,909,914 20,441,535 Finished goods on consignment 247,416 293,001 Less inventory reserves (1,422,000 ) (1,370,000 ) Total $ 26,082,783 $ 32,328,420 Current portion $ 10,121,500 $ 10,739,798 Long-term portion 15,961,283 21,588,622 Total $ 26,082,783 $ 32,328,420 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
Future minimum payments under operating lease | As of June 30, 2016, the Company’s future minimum payments under the operating leases were as follows: 2016 $ 287,778 2017 584,789 2018 600,871 2019 617,395 2020 634,373 Thereafter 541,957 Total $ 3,267,163 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
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: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Employee stock options $ 105,543 $ 119,990 $ 244,726 $ 306,461 Consultant stock options 46,862 25,203 97,110 41,448 Restricted stock awards 152,472 248,910 297,063 425,433 Totals $ 304,877 $ 394,103 $ 638,899 $ 773,342 |
Summary of the stock option activity | The following is a summary of the stock option activity for the six months ended June 30, 2016: Shares Weighted Average Exercise Price Outstanding, December 31, 2015 2,441,077 $ 2.11 Granted 441,005 $ 1.11 Exercised (2,500 ) $ 0.92 Forfeited (298,747 ) $ 1.40 Expired (261,229 ) $ 1.80 Outstanding, June 30, 2016 2,319,606 $ 2.05 |
Weighted average assumptions for stock options granted | 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 six months ended June 30, 2016: Dividend yield 0.0 % Expected volatility 61.9 % Risk-free interest rate 1.47 % Expected lives (years) 5.54 |
Information about stock options outstanding | The following table summarizes information about stock options outstanding at June 30, 2016: Options Outstanding Options Exercisable Options Vested or Expected to Vest Balance as of 6/30/2016 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Balance as of 6/30/2016 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Balance as of 6/30/2016 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price 2,319,606 7.40 $ 2.05 1,389,202 6.16 $ 2.42 2,257,735 7.35 $ 2.06 |
Restricted stock activity | The following is a summary of the restricted stock activity for the six months ended June 30, 2016: Shares Weighted Average Grant Date Fair Value Unvested, December 31, 2015 425,000 $ 1.87 Granted 509,250 $ 0.93 Vested (295,146 ) $ 1.74 Canceled (116,100 ) $ 1.42 Unvested, June 30, 2016 523,004 $ 1.13 |
NET LOSS PER COMMON SHARE (Tabl
NET LOSS PER COMMON SHARE (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
NET LOSS 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 diluted earnings per share presentations: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Numerator: Net loss from continuing operations $ (983,256 ) $ (2,900,185 ) $ (1,731,771 ) $ (3,541,064 ) Net loss from discontinued operations (4,708 ) (1,147,351 ) (563,615 ) (2,185,923 ) Net loss $ (987,964 ) $ (4,047,536 ) $ (2,295,386 ) $ (5,726,987 ) Denominator: Weighted average common shares outstanding: Basic 20,966,256 20,326,577 20,848,337 20,217,646 Stock options and restricted stock - - - - Diluted 20,966,256 20,326,577 20,848,337 20,217,646 Net loss per common share: Basic – continuing operations $ (0.05 ) $ (0.14 ) $ (0.08 ) $ (0.17 ) Basic – discontinued operations (0.00 ) (0.06 ) (0.03 ) (0.11 ) Basic – total $ (0.05 ) $ (0.20 ) $ (0.11 ) $ (0.28 ) Diluted – continuing operations $ (0.05 ) $ (0.14 ) $ (0.08 ) $ (0.17 ) Diluted – discontinued operations (0.00 ) (0.06 ) (0.03 ) (0.11 ) Diluted – total $ (0.05 ) $ (0.20 ) $ (0.11 ) $ (0.28 ) |
MAJOR CUSTOMERS AND CONCENTRA24
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK [Abstract] | |
Summary of customers that represent greater than or equal to 10% of total gross sales and receivables | The following is a summary of customers that represent greater than or equal to 10% of total net accounts receivable: June 30, 2016 December 31, 2015 Customer A 22 % 14 % Customer B 16 % **% Customer C 10 % **% Customer D * % 17 % Customer E * % 11 % Customer F * % 10 % * Customers D, E and F did not have individual balances that represented a significant portion of total net accounts receivable as of June 30, 2016. ** Customers B and C did not have individual balances that represented a significant portion of the total net accounts receivable as of December 31, 2015. 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 from continuing operations: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Customer B 27 % 1 % 14 % 11 % Customer D * % 52 % 38 % 40 % *Customer D did not represent a significant portion of sales for the three months ended June 30, 2016. |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 6 Months Ended |
Jun. 30, 2016 | |
DISCONTINUED OPERATIONS [Abstract] | |
Summary of discontinued operations | The following table presents the major classes of line items constituting assets and liabilities related to discontinued operations: June 30, 2016 December 31, 2015 Prepaid expenses and other assets $ 750 $ 83,000 Total assets $ 750 $ 83,000 Accounts payable $ 35,000 $ 140,000 Accrued expenses and other liabilities 148,000 209,000 Total liabilities $ 183,000 $ 349,000 The following table presents the major classes of line items constituting pretax loss from discontinued operations: Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Net sales $ 53,698 $ 1,293,337 $ 770,771 $ 2,654,315 Costs and expenses: Cost of goods sold 9,501 368,679 268,590 783,959 Sales and marketing 44,389 1,729,940 908,197 3,345,360 General and administrative 4,516 342,069 173,051 710,919 Interest expense - - 11 - Total costs and expenses 58,406 2,440,688 1,349,849 4,840,238 Loss from discontinued operations (4,708 ) (1,147,351 ) (579,078 ) (2,185,923 ) Other income (expense): Gain on sale of long-term assets - - 15,463 - Total other income (expense), net - - 15,463 - Pretax loss from discontinued operations $ (4,708 ) $ (1,147,351 ) $ (563,615 ) $ (2,185,923 ) |
DESCRIPTION OF BUSINESS (Detail
DESCRIPTION OF BUSINESS (Details) | Mar. 04, 2016USD ($) |
Yanbal USA Inc. [Member] | |
Business Acquisition [Line Items] | |
Purchase price for transferred assets | $ 500,000 |
SEGMENT INFORMATION AND GEOGR27
SEGMENT INFORMATION AND GEOGRAPHIC DATA (Details) | 2 Months Ended | 3 Months Ended | 6 Months Ended | |||
Mar. 03, 2016Segment | Jun. 30, 2016USD ($) | Jun. 30, 2015USD ($) | Jun. 30, 2016USD ($)Segment | Jun. 30, 2015USD ($) | Dec. 31, 2015USD ($) | |
SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract] | ||||||
Number of operating segments | Segment | 3 | 2 | ||||
Number of reportable segments | Segment | 3 | 2 | ||||
Summary information by segment [Abstract] | ||||||
Net sales | $ 6,527,004 | $ 6,183,535 | $ 17,920,275 | $ 13,199,621 | ||
Operating loss | (864,203) | (2,896,175) | (1,607,968) | (3,534,080) | ||
Depreciation and amortization | 330,147 | 387,543 | ||||
Capital expenditures | 118,433 | 145,733 | ||||
Total assets | 41,833,661 | 41,833,661 | $ 44,140,838 | |||
Cost of goods sold | 3,894,094 | 6,092,858 | 13,057,982 | 10,521,481 | ||
Inventories, net [Abstract] | ||||||
Raw materials | 4,858,734 | 4,858,734 | 6,932,139 | |||
Work-in-process | 8,488,719 | 8,488,719 | 6,031,745 | |||
Supplies inventories | 40,000 | 40,000 | 38,000 | |||
Continuing Operations [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Net sales | 6,527,004 | 6,183,535 | 17,920,275 | 13,199,621 | ||
Product line cost of goods sold | 3,565,497 | 4,800,051 | 12,144,664 | 8,729,395 | ||
Product line gross profit | 2,961,507 | 1,383,484 | 5,775,611 | 4,470,226 | ||
Operating loss | (864,203) | (2,896,175) | (1,607,968) | (3,534,080) | ||
Depreciation and amortization | 183,656 | 195,196 | 330,147 | 387,543 | ||
Capital expenditures | 79,928 | 35,636 | 118,433 | 145,733 | ||
Total assets | 41,832,911 | 41,832,911 | 44,057,838 | |||
Cost of goods sold | 3,894,094 | 6,092,858 | 13,057,982 | 10,521,481 | ||
Continuing Operations [Member] | Loose Jewels [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Net sales | 4,956,825 | 3,766,309 | 14,597,642 | 7,587,438 | ||
Product line cost of goods sold | 2,369,823 | 3,062,218 | 10,183,883 | 5,283,392 | ||
Product line gross profit | 2,587,002 | 704,091 | 4,413,759 | 2,304,046 | ||
Inventories, net [Abstract] | ||||||
Raw materials | 4,550,319 | 4,550,319 | 6,741,712 | |||
Work-in-process | 8,014,873 | 8,014,873 | 5,516,799 | |||
Finished goods | 9,438,017 | 9,438,017 | 15,877,436 | |||
Finished goods on consignment | 44,861 | 44,861 | 55,388 | |||
Total | 22,048,070 | 22,048,070 | 28,191,335 | |||
Continuing Operations [Member] | Finished Jewelry [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Net sales | 1,570,179 | 2,417,226 | 3,322,633 | 5,612,183 | ||
Product line cost of goods sold | 1,195,674 | 1,737,833 | 1,960,781 | 3,446,003 | ||
Product line gross profit | 374,505 | 679,393 | 1,361,852 | 2,166,180 | ||
Inventories, net [Abstract] | ||||||
Raw materials | 308,415 | 308,415 | 190,427 | |||
Work-in-process | 473,846 | 473,846 | 514,946 | |||
Finished goods | 3,050,221 | 3,050,221 | 3,193,569 | |||
Finished goods on consignment | 162,555 | 162,555 | 200,613 | |||
Total | 3,995,037 | 3,995,037 | 4,099,555 | |||
Operating and Reporting Segments [Member] | Continuing Operations [Member] | Wholesale [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Net sales | 5,371,655 | 4,922,655 | 15,432,479 | 10,834,815 | ||
Product line cost of goods sold | 3,127,249 | 4,244,644 | 11,178,716 | 7,674,557 | ||
Product line gross profit | 2,244,406 | 678,011 | 4,253,763 | 3,160,258 | ||
Operating loss | (268,076) | (2,617,570) | (797,562) | (2,851,346) | ||
Depreciation and amortization | 167,553 | 163,209 | 299,601 | 323,849 | ||
Capital expenditures | 51,648 | 35,636 | 88,551 | 145,200 | ||
Total assets | 41,674,640 | 41,674,640 | 43,882,939 | |||
Operating and Reporting Segments [Member] | Continuing Operations [Member] | Wholesale [Member] | Loose Jewels [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Net sales | 4,826,839 | 3,628,161 | 14,351,193 | 7,316,034 | ||
Product line cost of goods sold | 2,351,579 | 3,040,470 | 10,158,834 | 5,242,573 | ||
Product line gross profit | 2,475,260 | 587,691 | 4,192,359 | 2,073,461 | ||
Operating and Reporting Segments [Member] | Continuing Operations [Member] | Wholesale [Member] | Finished Jewelry [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Net sales | 544,816 | 1,294,494 | 1,081,286 | 3,518,781 | ||
Product line cost of goods sold | 775,670 | 1,204,174 | 1,019,882 | 2,431,984 | ||
Product line gross profit | (230,854) | 90,320 | 61,404 | 1,086,797 | ||
Operating and Reporting Segments [Member] | Continuing Operations [Member] | Moissanite.com [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Net sales | 1,155,349 | 1,260,880 | 2,487,796 | 2,364,806 | ||
Product line cost of goods sold | 438,248 | 555,407 | 965,948 | 1,054,838 | ||
Product line gross profit | 717,101 | 705,473 | 1,521,848 | 1,309,968 | ||
Operating loss | (596,127) | (278,605) | (810,406) | (682,734) | ||
Depreciation and amortization | 16,103 | 31,987 | 30,546 | 63,694 | ||
Capital expenditures | 28,280 | 0 | 29,882 | 533 | ||
Total assets | 158,271 | 158,271 | $ 174,899 | |||
Operating and Reporting Segments [Member] | Continuing Operations [Member] | Moissanite.com [Member] | Loose Jewels [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Net sales | 129,986 | 138,148 | 246,449 | 271,404 | ||
Product line cost of goods sold | 18,244 | 21,748 | 25,049 | 40,819 | ||
Product line gross profit | 111,742 | 116,400 | 221,400 | 230,585 | ||
Operating and Reporting Segments [Member] | Continuing Operations [Member] | Moissanite.com [Member] | Finished Jewelry [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Net sales | 1,025,363 | 1,122,732 | 2,241,347 | 2,093,402 | ||
Product line cost of goods sold | 420,004 | 533,659 | 940,899 | 1,014,019 | ||
Product line gross profit | 605,359 | 589,073 | 1,300,448 | 1,079,383 | ||
Segment Reconciling Items [Member] | Continuing Operations [Member] | Product Line Cost of Goods Sold [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Product line cost of goods sold | 3,565,497 | 4,800,051 | 12,144,664 | 8,729,395 | ||
Segment Reconciling Items [Member] | Continuing Operations [Member] | Non-Capitalized Manufacturing and Production Control Expenses [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Product line cost of goods sold | 331,533 | 500,460 | 742,299 | 647,572 | ||
Segment Reconciling Items [Member] | Continuing Operations [Member] | Freight Out [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Product line cost of goods sold | 91,031 | 79,534 | 163,089 | 147,998 | ||
Segment Reconciling Items [Member] | Continuing Operations [Member] | Inventory Valuation allowances [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Product line cost of goods sold | 0 | 411,000 | 55,000 | 615,000 | ||
Segment Reconciling Items [Member] | Continuing Operations [Member] | Other Inventory Adjustments [Member] | ||||||
Summary information by segment [Abstract] | ||||||
Product line cost of goods sold | $ (93,967) | $ 301,813 | $ (47,040) | $ 381,516 |
SEGMENT INFORMATION AND GEOGR28
SEGMENT INFORMATION AND GEOGRAPHIC DATA, Data by Geographic Area (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | |
Net sales [Abstract] | |||||
Net sales | $ 6,527,004 | $ 6,183,535 | $ 17,920,275 | $ 13,199,621 | |
Continuing Operations [Member] | |||||
Net sales [Abstract] | |||||
Net sales | 6,527,004 | 6,183,535 | 17,920,275 | 13,199,621 | |
Continuing Operations [Member] | Property and Equipment, Net [Member] | |||||
Assets by geographical area [Abstract] | |||||
Total | 1,317,659 | 1,317,659 | $ 1,615,683 | ||
Continuing Operations [Member] | Intangible Assets, Net [Member] | |||||
Assets by geographical area [Abstract] | |||||
Total | 5,564 | 5,564 | 71,086 | ||
Reportable Geographical Components [Member] | Continuing Operations [Member] | United States [Member] | |||||
Net sales [Abstract] | |||||
Net sales | 5,450,060 | 5,662,932 | 16,092,042 | 12,064,300 | |
Reportable Geographical Components [Member] | Continuing Operations [Member] | United States [Member] | Property and Equipment, Net [Member] | |||||
Assets by geographical area [Abstract] | |||||
Total | 1,317,659 | 1,317,659 | 1,615,683 | ||
Reportable Geographical Components [Member] | Continuing Operations [Member] | United States [Member] | Intangible Assets, Net [Member] | |||||
Assets by geographical area [Abstract] | |||||
Total | 5,564 | 5,564 | 15,362 | ||
Reportable Geographical Components [Member] | Continuing Operations [Member] | International [Member] | |||||
Net sales [Abstract] | |||||
Net sales | 1,076,944 | $ 520,603 | 1,828,233 | $ 1,135,321 | |
Reportable Geographical Components [Member] | Continuing Operations [Member] | International [Member] | Property and Equipment, Net [Member] | |||||
Assets by geographical area [Abstract] | |||||
Total | 0 | 0 | 0 | ||
Reportable Geographical Components [Member] | Continuing Operations [Member] | International [Member] | Intangible Assets, Net [Member] | |||||
Assets by geographical area [Abstract] | |||||
Total | $ 0 | $ 0 | $ 55,724 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | 6 Months Ended | |
Jun. 30, 2016 | Dec. 31, 2015 | |
Total inventories, net of reserves [Abstract] | ||
Raw materials | $ 4,858,734 | $ 6,932,139 |
Work-in-process | 8,488,719 | 6,031,745 |
Finished goods | 13,909,914 | 20,441,535 |
Finished goods on consignment | 247,416 | 293,001 |
Less inventory reserves | (1,422,000) | (1,370,000) |
Total | 26,082,783 | 32,328,420 |
Current portion | 10,121,500 | 10,739,798 |
Long-term portion | $ 15,961,283 | 21,588,622 |
Period considered for classification of long term inventory | 12 months | |
Work-in-process inventories issued to active production jobs | $ 6,010,000 | 3,020,000 |
Sale of slow moving loose jewel inventory of less desirable quality | 2,280,000 | |
Lower of cost or market reserve | 528,000 | 352,000 |
Inventory reserve for obsolescence | 155,000 | 164,000 |
Carrying value of inventory reserve for obsolescence of moissanite | 185,000 | 225,000 |
Shrinkage reserve for finished goods on consignment | 39,000 | 37,000 |
Inventory of net loose jewels | 22,050,000 | 28,190,000 |
Inventory reserve for shrinkage of loose jewels | 47,000 | 50,000 |
Inventory reserve for shrinkage of loose jewels on consignment | 6,000 | 10,000 |
Inventory reserve for recut | 400,000 | 449,000 |
Inventory of net jewelry | 4,000,000 | 4,100,000 |
Inventory reserve for shrinkage of finished jewelry | 93,000 | 95,000 |
Inventory reserve for shrinkage of finished jewelry on consignment | 33,000 | 27,000 |
Inventory reserve for shrinkage of finished jewelry on repairs | $ 14,000 | $ 31,000 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
INCOME TAXES [Abstract] | ||||
Income tax expense (benefit) | $ (3,500) | $ (3,243) | $ (6,743) | $ (6,336) |
Income tax expense for estimated tax, penalties, and interest for other uncertain tax positions | $ 4,000 | $ 3,000 | $ 7,000 | $ 6,000 |
COMMITMENTS AND CONTINGENCIES31
COMMITMENTS AND CONTINGENCIES (Details) | Dec. 09, 2013 | Jun. 30, 2016USD ($)ft² | Jun. 30, 2015USD ($) | Jun. 30, 2016USD ($)ft²Option | Jun. 30, 2015USD ($) | May 23, 2014USD ($) |
Lease Commitments [Abstract] | ||||||
Land subject to leases | ft² | 36,350 | 36,350 | ||||
Leasehold improvements offered by landlord | $ 550,000 | |||||
Lease signing and moving incentives offered by landlord | $ 73,000 | |||||
Period for which rent is abated | 7 months | |||||
Future minimum payments under operating lease [Abstract] | ||||||
2,016 | $ 287,778 | $ 287,778 | ||||
2,017 | 584,789 | 584,789 | ||||
2,018 | 600,871 | 600,871 | ||||
2,019 | 617,395 | 617,395 | ||||
2,020 | 634,373 | 634,373 | ||||
Thereafter | 541,957 | 541,957 | ||||
Total | 3,267,163 | 3,267,163 | ||||
Rent expense | $ 134,000 | $ 128,000 | $ 276,000 | $ 255,000 | ||
Purchase Commitments [Line Items] | ||||||
Period of exclusive supply agreement | 2 years | |||||
Percentage committed to be purchased | 100.00% | |||||
Number of option to unilaterally extend the term | Option | 1 | |||||
Actual purchases under purchase amendment | $ 3,820,000 | $ 3,050,000 | ||||
Minimum [Member] | ||||||
Purchase Commitments [Line Items] | ||||||
Purchase commitment in initial new order | 29,600,000 | |||||
Maximum [Member] | ||||||
Purchase Commitments [Line Items] | ||||||
Purchase commitment in initial new order | $ 31,500,000 |
LINE OF CREDIT (Details)
LINE OF CREDIT (Details) - Wells Fargo [Member] - Line of Credit [Member] | 6 Months Ended |
Jun. 30, 2016USD ($) | |
Line of Credit Facility [Line Items] | |
Revolving line of credit | $ 10,000,000 |
Line of credit maturity date | Jun. 25, 2017 |
Line of credit, description of variable rate basis | Wells Fargo’s 3-month LIBOR rate |
Line of credit facility, sublimit for letter of credit | $ 1,000,000 |
Line of credit facility, sublimit for advances | $ 5,000,000 |
Percentage of advances, guaranteed by bank | 90.00% |
Interest rate in event of default in excess of standard rate | 3.00% |
Prepaid advance fee for reduction in first year after closing | 2.00% |
Prepaid advance fee for reduction in Second year after closing | 1.00% |
Prepaid advance fee for reduction, thereafter | 0.00% |
Number of business day within which guaranteed advances to be repaid | 2 days |
Advances against line of credit | $ 0 |
Maximum [Member] | |
Line of Credit Facility [Line Items] | |
Advances against inventory | 3,000,000 |
Indebtedness to be maintained in the event of default to avoid triggering of default terms | 200,000 |
Minimum [Member] | |
Line of Credit Facility [Line Items] | |
Excess availability of inventory at all times required for advances | $ 1,000,000 |
LIBOR [Member] | |
Line of Credit Facility [Line Items] | |
Line of credit, spread on variable rate | 2.50% |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) | 3 Months Ended | 6 Months Ended | |||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | |
Components of the Company's stock based compensation included in net income [Abstract] | |||||
Income tax benefit | $ 0 | $ 0 | $ 0 | $ 0 | |
Totals | 304,877 | 394,103 | 638,899 | 773,342 | |
Employee Stock Options [Member] | |||||
Components of the Company's stock based compensation included in net income [Abstract] | |||||
Allocated share-based compensation expense | $ 105,543 | 119,990 | $ 244,726 | 306,461 | |
Shares [Roll Forward] | |||||
Outstanding, beginning balance (in shares) | 2,441,077 | ||||
Granted (in shares) | 441,005 | ||||
Exercised (in shares) | (2,500) | ||||
Forfeited (in shares) | (298,747) | ||||
Expired (in shares) | (261,229) | ||||
Outstanding, ending balance (in shares) | 2,319,606 | 2,319,606 | |||
Weighted Average Exercise Price [Roll Forward] | |||||
Outstanding, beginning balance (in dollars per share) | $ 2.11 | ||||
Granted (in dollars per share) | 1.11 | ||||
Exercised (in dollars per share) | 0.92 | ||||
Forfeited (in dollars per share) | 1.40 | ||||
Expired (in dollars per share) | 1.80 | ||||
Outstanding, ending balance (in dollars per share) | $ 2.05 | $ 2.05 | |||
Weighted average assumptions for stock options [Abstract] | |||||
Dividend yield | 0.00% | ||||
Expected volatility | 61.90% | ||||
Risk-free interest rate | 1.47% | ||||
Expected lives | 5 years 6 months 14 days | ||||
Options Outstanding [Abstract] | |||||
Balance as of 6/30/2016 (in shares) | 2,319,606 | 2,441,077 | 2,319,606 | ||
Weighted average remaining contractual life | 7 years 4 months 24 days | ||||
Weighted average exercise price (in dollars per share) | $ 2.05 | $ 2.11 | $ 2.05 | ||
Options Exercisable [Abstract] | |||||
Balance as of 6/30/2016 (in shares) | 1,389,202 | ||||
Weighted average remaining contractual life | 6 years 1 month 28 days | ||||
Weighted average exercise price (in dollars per share) | $ 2.42 | ||||
Options Vested or Expected to Vest [Abstract] | |||||
Balance as of 6/30/2016 (in shares) | 2,257,735 | ||||
Weighted average remaining contractual life | 7 years 4 months 6 days | ||||
Weighted average exercise price (in dollars per share) | $ 2.06 | ||||
Stock-based compensation capitalized as a cost of inventory | $ 0 | 0 | $ 0 | 0 | |
Fair value of stock options (in dollars per share) | $ 0.61 | ||||
Fair value of stock options vested | $ 471,000 | ||||
Unrecognized stock-based compensation expense related to unvested awards | $ 569,000 | ||||
Total compensation cost not yet recognized, period for recognition | 18 months | ||||
Aggregate intrinsic value of stock options outstanding | 14,000 | ||||
Aggregate intrinsic value of stock options exercisable | 14,000 | ||||
Aggregate intrinsic value of stock options vested and expected to vest | 14,000 | ||||
Aggregate intrinsic value of stock options exercised | 250 | 169,000 | $ 250 | 167,000 | |
Employee Stock Options [Member] | Discontinued Operations [Member] | |||||
Components of the Company's stock based compensation included in net income [Abstract] | |||||
Allocated share-based compensation expense | (5,000) | 75,000 | 44,000 | 96,000 | |
Consultant Stock Options [Member] | |||||
Components of the Company's stock based compensation included in net income [Abstract] | |||||
Allocated share-based compensation expense | 46,862 | 25,203 | 97,110 | 41,448 | |
Restricted Stock [Member] | |||||
Components of the Company's stock based compensation included in net income [Abstract] | |||||
Allocated share-based compensation expense | $ 152,472 | $ 248,910 | $ 297,063 | $ 425,433 | |
Options Vested or Expected to Vest [Abstract] | |||||
Unrecognized stock-based compensation expense related to unvested awards | $ 363,000 | ||||
Total compensation cost not yet recognized, period for recognition | 8 months | ||||
Shares [Roll Forward] | |||||
Unvested, beginning balance (in shares) | 425,000 | ||||
Granted (in shares) | 509,250 | ||||
Vested (in shares) | (295,146) | ||||
Canceled (in shares) | (116,100) | ||||
Unvested, ending balance (in shares) | 523,004 | 523,004 | |||
Weighted Average Grant Date Fair Value [Roll Forward] | |||||
Unvested, beginning balance (in dollars per share) | $ 1.87 | ||||
Granted (in dollars per share) | 0.93 | ||||
Vested (in dollars per share) | 1.74 | ||||
Canceled (in dollars per share) | 1.42 | ||||
Unvested, ending balance (in dollars per share) | $ 1.13 | $ 1.13 |
NET LOSS PER COMMON SHARE (Deta
NET LOSS PER COMMON SHARE (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | |
Numerator [Abstract] | ||||
Net loss from continuing operations | $ (983,256) | $ (2,900,185) | $ (1,731,771) | $ (3,541,064) |
Net loss from discontinued operations | (4,708) | (1,147,351) | (563,615) | (2,185,923) |
Net loss | $ (987,964) | $ (4,047,536) | $ (2,295,386) | $ (5,726,987) |
Weighted average common shares outstanding [Abstract] | ||||
Basic (in shares) | 20,966,256 | 20,326,577 | 20,848,337 | 20,217,646 |
Stock options and restricted stock (in shares) | 0 | 0 | 0 | 0 |
Diluted (in shares) | 20,966,256 | 20,326,577 | 20,848,337 | 20,217,646 |
Net loss per common share [Abstract] | ||||
Basic - continuing operations (in dollars per share) | $ (0.05) | $ (0.14) | $ (0.08) | $ (0.17) |
Basic - discontinued operations (in dollars per share) | 0 | (0.06) | (0.03) | (0.11) |
Basic - total (in dollars per share) | (0.05) | (0.20) | (0.11) | (0.28) |
Diluted - continuing operations (in dollars per share) | (0.05) | (0.14) | (0.08) | (0.17) |
Diluted - discontinued operations (in dollars per share) | 0 | (0.06) | (0.03) | (0.11) |
Diluted - total (in dollars per share) | $ (0.05) | $ (0.20) | $ (0.11) | $ (0.28) |
Stock Options [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Stock options to purchase shares and non vested restricted shares (in shares) | 2,320,000 | 1,560,000 | 2,320,000 | 1,560,000 |
Restricted Stock [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Stock options to purchase shares and non vested restricted shares (in shares) | 523,000 | 554,000 | 523,000 | 554,000 |
MAJOR CUSTOMERS AND CONCENTRA35
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Details) - USD ($) | 3 Months Ended | 6 Months Ended | 12 Months Ended | |||||
Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 | ||||
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 | $ 10,710,000 | 10,710,000 | $ 4,920,000 | |||||
Increase in allowance for doubtful accounts | $ 815,000 | |||||||
Minimum [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Period of customer payments on trade receivables | 30 days | |||||||
Maximum [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Period of customer payments on trade receivables | 90 days | |||||||
Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer A [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk, percentage | 22.00% | 14.00% | ||||||
Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer B [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk, percentage | 16.00% | [1] | ||||||
Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer C [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk, percentage | 10.00% | [1] | ||||||
Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer D [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk, percentage | [2] | 17.00% | ||||||
Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer E [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk, percentage | [2] | 11.00% | ||||||
Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer F [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk, percentage | [2] | 10.00% | ||||||
Total Gross Sales [Member] | Customer Concentration Risk [Member] | Customer B [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk, percentage | 27.00% | 1.00% | 14.00% | 11.00% | ||||
Total Gross Sales [Member] | Customer Concentration Risk [Member] | Customer D [Member] | ||||||||
Concentration Risk [Line Items] | ||||||||
Concentration risk, percentage | [3] | 52.00% | 38.00% | 40.00% | ||||
[1] | Customers B and C did not have individual balances that represented a significant portion of the total net accounts receivable as of December 31, 2015. | |||||||
[2] | Customers D, E and F did not have individual balances that represented a significant portion of total net accounts receivable as of June 30, 2016. | |||||||
[3] | Customer D did not represent a significant portion of sales for the three months ended June 30, 2016. |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) - USD ($) | Mar. 04, 2016 | Jun. 30, 2016 | Jun. 30, 2015 | Jun. 30, 2016 | Jun. 30, 2015 | Dec. 31, 2015 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Inventory credit | $ 155,000 | $ 155,000 | $ 164,000 | |||
Assets Related to Discontinued Operations [Abstract] | ||||||
Total assets | 750 | 750 | 83,000 | |||
Total liabilities | 183,000 | 183,000 | 349,000 | |||
Other income (expense) [Abstract] | ||||||
Gain on sale of long-term assets | 0 | $ 0 | 15,463 | $ 0 | ||
Pretax loss from discontinued operations | (4,708) | (1,147,351) | (579,078) | (2,185,923) | ||
Yanbal USA Inc. [Member] | ||||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Inventory credit | $ 250,000 | |||||
Discontinued operations, purchase price for transferred assets, gross | 500,000 | |||||
Discontinued operations, purchase agreement selling expenses | 131,000 | |||||
Discontinued operations, purchase price for transferred assets, net | 369,000 | |||||
Discontinued operations, expense related to certain style advisor incentives | 35,000 | |||||
Discontinued operations, reduction in prepaid expenses | $ 60,000 | |||||
Assets Related to Discontinued Operations [Abstract] | ||||||
Prepaid expenses and other assets | 750 | 750 | 83,000 | |||
Total assets | 750 | 750 | 83,000 | |||
Accounts payable | 35,000 | 35,000 | 140,000 | |||
Accrued expenses and other liabilities | 148,000 | 148,000 | 209,000 | |||
Total liabilities | 183,000 | 183,000 | $ 349,000 | |||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract] | ||||||
Net sales | 53,698 | 1,293,337 | 770,771 | 2,654,315 | ||
Costs and expenses [Abstract] | ||||||
Cost of goods sold | 9,501 | 368,679 | 268,590 | 783,959 | ||
Sales and marketing | 44,389 | 1,729,940 | 908,197 | 3,345,360 | ||
General and administrative | 4,516 | 342,069 | 173,051 | 710,919 | ||
Interest expense | 0 | 0 | 11 | 0 | ||
Total costs and expenses | 58,406 | 2,440,688 | 1,349,849 | 4,840,238 | ||
Loss from discontinued operations | (4,708) | (1,147,351) | (579,078) | (2,185,923) | ||
Other income (expense) [Abstract] | ||||||
Gain on sale of long-term assets | 0 | 15,463 | ||||
Total other income (expense), net | 0 | 0 | 15,463 | 0 | ||
Pretax loss from discontinued operations | $ (4,708) | $ (1,147,351) | $ (563,615) | $ (2,185,923) |