Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2017 | Oct. 30, 2017 | |
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 | 21,594,685 | |
Document Fiscal Year Focus | 2,017 | |
Document Fiscal Period Focus | Q3 | |
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Sep. 30, 2017 |
CONDENSED CONSOLIDATED BALANCE
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) - USD ($) | Sep. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 5,127,906 | $ 7,427,273 |
Accounts receivable, net | 2,612,188 | 2,794,626 |
Inventory, net | 11,115,715 | 9,770,206 |
Prepaid expenses and other assets | 736,493 | 682,083 |
Total current assets | 19,592,302 | 20,674,188 |
Long-term assets: | ||
Inventory, net | 19,782,460 | 18,360,211 |
Property and equipment, net | 1,319,962 | 1,391,116 |
Intangible assets, net | 9,026 | 8,808 |
Other assets | 66,330 | 71,453 |
Total long-term assets | 21,177,778 | 19,831,588 |
TOTAL ASSETS | 40,770,080 | 40,505,776 |
Current liabilities: | ||
Accounts payable | 4,884,461 | 3,977,149 |
Accrued cooperative advertising | 86,173 | 50,000 |
Accrued expenses and other liabilities | 787,449 | 581,107 |
Total current liabilities | 5,758,083 | 4,608,256 |
Long-term liabilities: | ||
Accrued expenses and other liabilities | 498,068 | 594,916 |
Accrued income taxes | 457,085 | 433,983 |
Total long-term liabilities | 955,153 | 1,028,899 |
Total liabilities | 6,713,236 | 5,637,155 |
Commitments and contingencies (Note 7) | ||
Shareholders' equity: | ||
Common stock, no par value; 50,000,000 shares authorized; 21,594,685 and 21,369,885 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 54,243,816 | 54,243,816 |
Additional paid-in capital | 14,608,145 | 14,282,956 |
Accumulated deficit | (34,795,117) | (33,658,151) |
Total shareholders' equity | 34,056,844 | 34,868,621 |
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ 40,770,080 | $ 40,505,776 |
CONDENSED CONSOLIDATED BALANCE3
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited) (Parenthetical) - $ / shares | Sep. 30, 2017 | Dec. 31, 2016 |
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) | 21,594,685 | 21,369,885 |
Common stock, shares outstanding (in shares) | 21,594,685 | 21,369,885 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) [Abstract] | ||||
Net sales | $ 6,208,808 | $ 5,212,973 | $ 18,495,982 | $ 23,133,248 |
Costs and expenses: | ||||
Cost of goods sold | 3,483,603 | 3,221,007 | 10,544,303 | 16,278,989 |
Sales and marketing | 1,757,007 | 1,891,162 | 5,449,195 | 5,222,757 |
General and administrative | 1,137,736 | 1,244,400 | 3,612,618 | 4,380,218 |
Research and development | 489 | 0 | 3,633 | 2,848 |
Loss on abandonment of property and equipment | 0 | 473 | 0 | 116,021 |
Total costs and expenses | 6,378,835 | 6,357,042 | 19,609,749 | 26,000,833 |
Loss from operations | (170,027) | (1,144,069) | (1,113,767) | (2,867,585) |
Other expense: | ||||
Interest expense | (5) | (36) | (97) | (1,548) |
Total other expense | (5) | (36) | (97) | (1,548) |
Loss before income taxes from continuing operations | (170,032) | (1,144,105) | (1,113,864) | (2,869,133) |
Income tax net expense from continuing operations | (4,507) | (3,325) | (23,102) | (10,068) |
Net loss from continuing operations | (174,539) | (1,147,430) | (1,136,966) | (2,879,201) |
Discontinued Operations: | ||||
Loss from discontinued operations | 0 | (6,949) | 0 | (586,027) |
(Loss) gain on sale of assets from discontinued operations | 0 | (3,065) | 0 | 12,398 |
Net loss from discontinued operations | 0 | (10,014) | 0 | (573,629) |
Net loss | $ (174,539) | $ (1,157,444) | $ (1,136,966) | $ (3,452,830) |
Net loss per common share: | ||||
Basic - continuing operations (in dollars per share) | $ (0.01) | $ (0.06) | $ (0.05) | $ (0.14) |
Basic - discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.03) |
Basic - total (in dollars per share) | (0.01) | (0.06) | (0.05) | (0.17) |
Diluted - continuing operations (in dollars per share) | (0.01) | (0.06) | (0.05) | (0.14) |
Diluted - discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.03) |
Diluted - total (in dollars per share) | $ (0.01) | $ (0.06) | $ (0.05) | $ (0.17) |
Weighted average number of shares used in computing net loss per common share: | ||||
Basic (in shares) | 21,218,468 | 20,997,686 | 21,184,211 | 20,898,484 |
Diluted (in shares) | 21,218,468 | 20,997,686 | 21,184,211 | 20,898,484 |
CONDENSED CONSOLIDATED STATEME5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) - USD ($) | 9 Months Ended | |
Sep. 30, 2017 | Sep. 30, 2016 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss | $ (1,136,966) | $ (3,452,830) |
Net loss from discontinued operations | 0 | (573,629) |
Net loss from continuing operations | (1,136,966) | (2,879,201) |
Adjustments to reconcile net loss from continuing operations to net cash (used in) provided by operating activities of continuing operations: | ||
Depreciation and amortization | 318,722 | 445,576 |
Stock-based compensation | 325,189 | 829,381 |
Provision for uncollectible accounts | 96,000 | (60,300) |
Provision for sales returns | (19,000) | (430,000) |
Provision for inventory reserves | 44,000 | 54,000 |
Loss on abandonment of property and equipment | 0 | 116,021 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 105,438 | 2,396,925 |
Inventory | (2,811,758) | 5,092,381 |
Prepaid expenses and other assets, net | (49,287) | (87,071) |
Accounts payable | 907,312 | 281,477 |
Accrued cooperative advertising | 36,173 | (49,000) |
Accrued income taxes | 23,102 | 10,068 |
Accrued expenses and other liabilities | 109,494 | (151,071) |
Net cash (used in) provided by operating activities of continuing operations | (2,051,581) | 5,569,186 |
Net cash used in operating activities of discontinued operations | 0 | (1,123,381) |
Net cash (used in) provided by operating activities | (2,051,581) | 4,445,805 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Purchases of property and equipment | (246,284) | (410,306) |
Intangible assets | (1,502) | (2,446) |
Net cash used in investing activities of continuing operations | (247,786) | (412,752) |
Net cash provided by investing activities of discontinued operations | 0 | 368,671 |
Net cash used in investing activities | (247,786) | (44,081) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Stock option exercises | 0 | 2,300 |
Net cash provided by financing activities of continuing operations | 0 | 2,300 |
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (2,299,367) | 4,404,024 |
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 7,427,273 | 5,274,305 |
CASH AND CASH EQUIVALENTS, END OF PERIOD | 5,127,906 | 9,678,329 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the period for interest | $ 97 | $ 1,548 |
DESCRIPTION OF BUSINESS
DESCRIPTION OF BUSINESS | 9 Months Ended |
Sep. 30, 2017 | |
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 prices to distributors, manufacturers, retailers, TV shopping networks, and designers, including some of the largest distributors and jewelry manufacturers in the world, which mount them into fine jewelry to be sold at retail outlets and via the Internet. The Company sells at retail prices to end consumers through its wholly owned operating subsidiaries, charlesandcolvard.com, LLC (formerly Moissanite.com, LLC) and Charles & Colvard Direct, LLC (until March 2016), third-party online marketplaces, drop-ship, and other pure-play, exclusively e-commerce outlets. As of September 30, 2016, the Company changed the name of its wholly owned subsidiary Moissanite.com, LLC to charlesandcolvard.com, LLC. The Company In February 2016, the Company Lulu Avenue ® Note 12, “Discontinued Operations.” |
BASIS OF PRESENTATION AND SIGNI
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 9 Months Ended |
Sep. 30, 2017 | |
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 nine months ended September 30, 2017 and the three and nine months ended September 30, 2016 included in this Quarterly Report on Form 10-Q are unaudited. The balance sheet as of December 31, 2016 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, 2016 filed with the SEC on March 10, 2017 (the “2016 Annual Report”). The accompanying condensed consolidated financial statements as of and for the three and nine months ended September 30, 2017, as of and for the three and nine months ended September 30, 2016, and as of December 31, 2016 include the accounts of the Company and its wholly owned subsidiaries charlesandcolvard.com, LLC (formerly 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 - Discontinued Operations - Use of Estimates - T Reclassifications - Recently Adopted/Issued Accounting Pronouncements – In May 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standard that supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the 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 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 will complete its review of contracts, the related documentation and the new disclosure requirements in the fourth quarter of 2017. The Company anticipates using the modified retrospective method of adoption and does not anticipate a material effect on the timing and measurement of revenue recognition. In February 2016, the FASB issued 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 statement of operations. The 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 currently expects that upon adoption of this standard, ROU assets and liabilities will be recognized in the balance sheet in amounts that will be material. |
SEGMENT INFORMATION AND GEOGRAP
SEGMENT INFORMATION AND GEOGRAPHIC DATA | 9 Months Ended |
Sep. 30, 2017 | |
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 managed its business through two operating and reportable segments: wholesale distribution transacted through the parent entity, and the direct-to-consumer distribution channel transacted through the Company’s wholly owned operating subsidiary, charlesandcolvard.com, LLC (formerly Moissanite.com, LLC). During the first quarter of 2017, the Company T The Company allocates certain general and administrative expenses from its Traditional segment to its Online Channels 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 its Traditional segment. Summary financial information by reportable segment is as follows: Three Months Ended September 30, 2017 Traditional Online Channels Total Net sales Loose jewels $ 3,407,092 $ 691,380 $ 4,098,472 Finished jewelry 726,985 1,383,351 2,110,336 Total $ 4,134,077 $ 2,074,731 $ 6,208,808 Product line cost of goods sold Loose jewels $ 1,877,210 $ 367,378 $ 2,244,588 Finished jewelry 378,799 610,762 989,561 Total $ 2,256,009 $ 978,140 $ 3,234,149 Product line gross profit Loose jewels $ 1,529,882 $ 324,002 $ 1,853,884 Finished jewelry 348,186 772,589 1,120,775 Total $ 1,878,068 $ 1,096,591 $ 2,974,659 Operating income (loss) $ 110,601 $ (280,628 ) $ (170,027 ) Depreciation and amortization $ 74,281 $ 30,277 $ 104,558 Capital expenditures $ 19,651 $ - $ 19,651 Three Months Ended September 30, 2016 Traditional Online Channels Total Net sales Loose jewels $ 3,165,142 $ 432,337 $ 3,597,479 Finished jewelry 302,652 1,312,842 1,615,494 Total $ 3,467,794 $ 1,745,179 $ 5,212,973 Product line cost of goods sold Loose jewels $ 1,654,137 $ 154,842 $ 1,808,979 Finished jewelry 148,760 557,419 706,179 Total $ 1,802,897 $ 712,261 $ 2,515,158 Product line gross profit Loose jewels $ 1,511,005 $ 277,495 $ 1,788,500 Finished jewelry 153,892 755,423 909,315 Total $ 1,664,897 $ 1,032,918 $ 2,697,815 Operating loss $ (612,526 ) $ (531,070 ) $ (1,143,596 ) Depreciation and amortization $ 100,720 $ 14,709 $ 115,429 Capital expenditures $ 58,695 $ 233,178 $ 291,873 Nine Months Ended September 30, 2017 Traditional Online Channels Total Net sales Loose jewels $ 10,506,456 $ 2,264,379 $ 12,770,835 Finished jewelry 1,512,310 4,212,837 5,725,147 Total $ 12,018,766 $ 6,477,216 $ 18,495,982 Product line cost of goods sold Loose jewels $ 5,546,616 $ 1,101,245 $ 6,647,861 Finished jewelry 893,600 1,712,728 2,606,328 Total $ 6,440,216 $ 2,813,973 $ 9,254,189 Product line gross profit Loose jewels $ 4,959,840 $ 1,163,134 $ 6,122,974 Finished jewelry 618,710 2,500,109 3,118,819 Total $ 5,578,550 $ 3,663,243 $ 9,241,793 Operating loss $ (475,236 ) $ (638,531 ) $ (1,113,767 ) Depreciation and amortization $ 225,906 $ 92,816 $ 318,722 Capital expenditures $ 242,663 $ 3,621 $ 246,284 Nine Months September 30, 2016 Traditional Online Channels Total Net sales Loose jewels $ 16,572,061 $ 1,623,309 $ 18,195,370 Finished jewelry 723,545 4,214,333 4,937,878 Total $ 17,295,606 $ 5,837,642 $ 23,133,248 Product line cost of goods sold Loose jewels $ 11,444,109 $ 548,753 $ 11,992,862 Finished jewelry 842,147 1,824,813 2,666,960 Total $ 12,286,256 $ 2,373,566 $ 14,659,822 Product line gross profit (loss) Loose jewels $ 5,127,952 $ 1,074,556 $ 6,202,508 Finished jewelry (118,602 ) 2,389,520 2,270,918 Total $ 5,009,350 $ 3,464,076 $ 8,473,426 Operating loss $ (2,111,576 ) $ (756,009 ) $ (2,867,585 ) Depreciation and amortization $ 400,321 $ 45,255 $ 445,576 Capital expenditures $ 147,246 $ 263,060 $ 410,306 The Company does not allocate any assets to the reportable segments, and, therefore, no asset information is reported to the chief operating decision maker or disclosed in the financial information for each segment. 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 September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Product line cost of goods sold $ 3,234,149 $ 2,515,158 $ 9,254,189 $ 14,659,822 Non-capitalized manufacturing and production control expenses 298,858 448,038 1,021,676 1,190,321 Freight out 100,016 105,616 273,088 268,705 Inventory valuation allowances (3,000 ) (1,000 ) 44,000 54,000 Other inventory adjustments (146,420 ) 153,195 (48,650 ) 106,141 Cost of goods sold $ 3,483,603 $ 3,221,007 $ 10,544,303 $ 16,278,989 The Company recognizes sales by geographic area based on the country in which the customer is based. A portion of the Company’s Traditional segment sales made to international wholesale distributors represents products sold internationally that may be re-imported to U.S. retailers. Sales to international end consumers made by the Company’s Online Channels segment are included in U.S. sales because products are shipped and invoiced to a U.S.-based intermediary party that assumes all international shipping and credit risks. All intangible assets and property and equipment as of September 30, 2017 and December 31, 2016 are held and located in the United States. The following presents net sales by geographic area: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net sales United States $ 5,750,825 $ 4,590,299 $ 17,206,485 $ 20,682,341 International 457,983 622,674 1,289,497 2,450,907 Total $ 6,208,808 $ 5,212,973 $ 18,495,982 $ 23,133,248 |
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS | 9 Months Ended |
Sep. 30, 2017 | |
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, license rights, and trademarks. These items are recognized at fair value when they are considered to be impaired. |
INVENTORIES
INVENTORIES | 9 Months Ended |
Sep. 30, 2017 | |
INVENTORIES [Abstract] | |
INVENTORIES | 5. INVENTORIES The Company’s total inventories, net of reserves, consisted of the following as of the dates presented: September 30, 2017 December 31, 2016 Raw materials $ 4,076,977 $ 3,106,617 Work-in-process 10,715,382 11,048,126 Finished goods 16,749,663 15,057,668 Finished goods on consignment 944,957 467,778 Supplies Inventory 22,196 17,228 Less inventory reserves (1,611,000 ) (1,567,000 ) Total $ 30,898,175 $ 28,130,417 Current portion $ 11,115,715 $ 9,770,206 Long-term portion 19,782,460 18,360,211 Total $ 30,898,175 $ 28,130,417 Inventories are stated at the lower of cost or net realizable value 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 September 30, 2017 and December 31, 2016, work-in-process inventories issued to active production jobs approximated $5.20 million and $7.18 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 had the exclusive right in the U.S. through August 2015 and the exclusive right in many other countries into the third quarter of 2016 to produce and sell created SiC for use in jewelry applications. 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 customers. Prior to March 2016, the Company purchased fashion finished jewelry comprising base metals and non-precious gemstones for sale through Lulu Avenue ® The Company’s total inventories, net of reserves, consisted of the following as of the dates presented: September 30, 2017 December 31, 2016 Loose jewels Raw materials $ 3,439,841 $ 2,586,045 Work-in-process 9,344,185 10,589,424 Finished goods 9,512,647 9,455,393 Finished goods on consignment 41,107 5,473 Total loose jewels $ 22,337,780 $ 22,636,335 Finished jewelry Raw materials $ 637,136 $ 520,572 Work-in-process 1,371,197 458,702 Finished goods 5,645,016 4,081,275 Finished goods on consignment 884,850 416,305 Total finished jewelry 8,539,199 5,476,854 Total supplies inventory 22,196 17,228 Total inventory $ 30,898,175 $ 28,130,417 Total net loose jewel inventories at September 30, 2017 and December 31, 2016, including inventory on consignment net of reserves, were $22.34 million and $22.64 million, respectively. Total net finished jewelry inventories at September 30, 2017 and December 31, 2016, including inventory on consignment net of reserves and finished jewelry featuring moissanite manufactured by the Company, were $8.54 million and $5.48 million, respectively. As of September 30, 2017 and December 31, 2016, management established an obsolescence reserve of $921,000 and $944,000, respectively. Typically, in the jewelry industry, slow-moving or discontinued lines are sold as closeouts or liquidated in alternative sales channels. During the years ended December 31, 2016 and 2015, management identified an opportunity to sell approximately $6.77 million and $2.28 million, respectively, of legacy loose jewel inventory of less desirable quality. As a result of these sales and feedback from customers on the value of some of these goods, the Company determined an obsolescence reserve for lower of cost or net realizable value of $838,000 and $517,000 as of September 30, 2017 and December 31, 2016, respectively, was required on some of the remaining loose jewel inventory of these lower quality goods. As of September 30, 2017 and December 31, 2016, management identified certain finished jewelry that was obsolete due to damage and other factors that indicate the finished jewelry is unsaleable, and established an obsolescence reserve of $83,000 and $427,000, respectively, for the carrying costs in excess of any estimated scrap values. Management reviews the finished jewelry inventory on an ongoing basis for any lower of cost or net realizable value and obsolescence issues. As of September 30, 2017 and December 31, 2016 management established a rework reserve for recut and repairs of $534,000 and $454,000, respectively. Loose jewel inventories at September 30, 2017 and December 31, 2016 included recut reserves of $430,000 and $425,000, respectively. The finished jewelry inventories at September 30, 2017 and December 31, 2016 include a repairs reserve of $104,000 and $29,000, respectively. As of September 30, 2017 and December 31, 2016 management established a shrinkage reserve of $156,000 and $169,000, respectively. The loose jewel inventories at September 30, 2017 and December 31, 2016 include shrinkage reserves of $36,000 and $67,000, respectively. The finished jewelry inventories at September 30, 2017 and December 31, 2016 include shrinkage reserves of $120,000 and $102,000, respectively. Periodically, the Company ships finished goods inventory to certain Traditional segment 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. Included in the total shrinkage reserve is the shrinkage reserve for finished goods on consignment . The need for adjustments to inventory reserves is evaluated on a period-by-period basis. |
INCOME TAXES
INCOME TAXES | 9 Months Ended |
Sep. 30, 2017 | |
INCOME TAXES [Abstract] | |
INCOME TAXES | 6. INCOME TAXES The Company recognized an income tax net expense for estimated tax, penalties, and interest associated with uncertain tax positions of approximately $5,000 and $3,000, respectively, for the three months ended September 30, 2017 and 2016, and $23,000 and $10,000, respectively, for the nine months ended September 30, 2017 and 2016. 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 | 9 Months Ended |
Sep. 30, 2017 | |
COMMITMENTS AND CONTINGENCIES [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 7. COMMITMENTS AND CONTINGENCIES Purchase Commitments On December 12, 2014, the Company entered into a new exclusive supply agreement (the “Supply Agreement”) with Cree , Inc. (“Cree”), which superseded and replaced the exclusive supply agreement that was set to expire in 2015. During the nine months ended September 30, 2017 and 2016, the Company purchased approximately $6.90 million and $6.01 million, respectively, of SiC crystals from Cree. |
LINE OF CREDIT
LINE OF CREDIT | 9 Months Ended |
Sep. 30, 2017 | |
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 (now charlesandcolvard.com, LLC) (collectively, the “Borrowers”), obtained a $10.00 million 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 $1.00 million sublimit. The Credit Facility was scheduled to mature on June 25, 2017. Effective June 22, 2017, the Credit Facility was amended to extend the maturity date to June 25, 2018. The Credit Facility was also amended to reduce the interest rate payable on advances under the Credit Facility to a rate equal to Wells Fargo’s daily three-month LIBOR rate plus 2.00%, calculated on an actual/360 basis and payable monthly in arrears. In addition, the Credit Facility was amended further to include the addition of an EBITDA covenant, whereby the Borrowers must maintain a specified minimum monthly EBITDA through December 2017 if the cash position for the Borrowers’ demand deposit account maintained at Wells Fargo falls below $3.00 million or the Borrowers draw upon the Credit Facility. The Credit Facility includes a $5.00 million 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 $3.00 million maximum. The Borrowers must maintain a minimum of $1.00 million in excess availability at all times. Each advance accrues interest at a rate equal to either (i) Wells Fargo’s three-month LIBOR rate plus 2.00% or (ii) Wells Fargo’s Prime Rate plus 1.00%, each 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. 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 Cree’s 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, as amended (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, (i) any impairment of the Export-Import Bank guaranty, unless the guaranteed advances are repaid within two business days, (ii) an event of default under any other indebtedness of the Borrowers in excess of $200,000, and (iii) 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 September 30, 2017, the Company had not borrowed against the Credit Facility. |
STOCK-BASED COMPENSATION
STOCK-BASED COMPENSATION | 9 Months Ended |
Sep. 30, 2017 | |
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 September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Employee stock options $ 93,631 $ 94,715 $ 249,969 $ 339,441 Consultant stock options - 39,143 - 136,253 Restricted stock awards 25,472 100,796 75,220 397,859 Totals $ 119,103 $ 234,654 $ 325,189 $ 873,553 No stock-based compensation was capitalized as a cost of inventory during the three and nine months ended September 30, 2017 and 2016. Included in total stock-based compensation is approximately $0 for each of the three-month periods ended September 30, 2017 and 2016, related to discontinued operations. Included in total stock-based compensation are approximately $0 and $44,000 for the nine months ended September 30, 2017 and 2016, respectively, related to discontinued operations. Stock Options - Shares Weighted Average Exercise Price Outstanding, December 31, 2016 2,134,898 $ 1.99 Granted 681,369 $ 0.92 Forfeited (68,000 ) $ 1.38 Expired (603,252 ) $ 3.08 Outstanding, September 30, 2017 2,145,015 $ 1.36 The weighted average grant date fair value of stock options granted during the nine months ended September 30, 2017 was $0.51. The total fair value of stock options that vested during the nine months ended September 30, 2017 was approximately $312,000. The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted average assumptions for stock options granted during the nine months ended September 30, 2017: Dividend yield 0.0 % Expected volatility 63.0 % Risk-free interest rate 1.86 % Expected lives (years) 5.49 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 . Expected forfeitures are based on the historical forfeiture rates by employee class. The following table summarizes information about stock options outstanding at September 30, 2017: Options Outstanding Options Exercisable Options Vested or Expected to Vest Balance as of 9/30/2017 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Balance as of 9/30/2017 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Balance as of 9/30/2017 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price 2,145,015 8.14 $ 1.36 1,256,146 7.32 $ 1.62 2,039,272 8.08 $ 1.38 As of September 30, 2017, the unrecognized stock-based compensation expense related to unvested stock options was approximately $350,000, which is expected to be recognized over a weighted average period of approximately 23 months. The aggregate intrinsic value of stock options outstanding, exercisable, and vested or expected to vest at September 30, 2017 was approximately $9,000. This amount is before applicable income taxes and represents the closing market price of the Company’s common stock at September 30, 2017 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. No stock options were exercised during the three and nine months ended September 30, 2017. During each of the three- and nine-month periods ended September 30, 2016, the aggregate intrinsic value of stock options exercised was approximately $250. Restricted Stock - Shares Weighted Average Grant Date Fair Value Unvested, December 31, 2016 359,400 $ 0.91 Granted 420,000 $ 1.11 Vested (210,453 ) $ 0.92 Canceled (195,200 ) $ 0.95 Unvested, September 30, 2017 373,747 $ 1.11 As of September 30, 2017, the estimated unrecognized stock-based compensation expense related to unvested restricted shares subject to achievement of performance goals was approximately $227,000, all of which is expected to be recognized over a weighted average period of approximately five months. Dividends |
NET LOSS PER COMMON SHARE
NET LOSS PER COMMON SHARE | 9 Months Ended |
Sep. 30, 2017 | |
NET LOSS PER COMMON SHARE [Abstract] | |
NET LOSS PER COMMON SHARE | 10. NET LOSS PER COMMON SHARE Basic net loss from continuing and discontinued operations per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the periods. Diluted net loss from continuing and discontinued operations 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 net loss per share presentations: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Numerator: Net loss from continuing operations $ (174,539 ) $ (1,147,430 ) $ (1,136,966 ) $ (2,879,201 ) Net loss from discontinued operations - (10,014 ) - (573,629 ) Net loss $ (174,539 ) $ (1,157,444 ) $ (1,136,966 ) $ (3,452,830 ) Denominator: Weighted average common shares outstanding: Basic 21,218,468 20,997,686 21,184,211 20,898,484 Stock options and restricted stock - - - - Diluted 21,218,468 20,997,686 21,184,211 20,898,484 Net loss per common share: Basic – continuing operations $ (0.01 ) $ (0.06 ) $ (0.05 ) $ (0.14 ) Basic – discontinued operations - (0.00 ) - (0.03 ) Basic – total $ (0.01 ) $ (0.06 ) $ (0.05 ) $ (0.17 ) Diluted – continuing operations $ (0.01 ) $ (0.06 ) $ (0.05 ) $ (0.14 ) Diluted – discontinued operations - (0.00 ) - (0.03 ) Diluted – total $ (0.01 ) $ (0.06 ) $ (0.05 ) $ (0.17 ) For each of the three- and nine-month periods ended September 30, 2017, stock options to purchase approximately 2.15 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 three- and nine-month periods ended September 30, 2016, stock options to purchase approximately 2.23 million shares were excluded. For each of the three- and nine-month periods ended September 30, 2017, approximately 374,000 restricted shares that have been issued but not yet vested have been excluded from the computation of diluted net loss per common share. For each of the three- and nine-month periods ended September 30, 2016, approximately 438,000 unvested restricted shares were excluded. |
MAJOR CUSTOMERS AND CONCENTRATI
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK | 9 Months Ended |
Sep. 30, 2017 | |
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. The Company has never experienced any losses related to these balances. Non-interest-bearing amounts on deposit in excess of FDIC insurable limits at September 30, 2017 approximated $4.85 million. Trade receivables potentially subject the Company to credit risk. The Company’s standard Traditional segment customer payment terms on trade receivables are generally between 30 and 120 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 of 10% or more of the Company’s total gross accounts receivable. The following is a summary of customers that represent greater than or equal to 10% of total gross accounts receivable: September 30, 2017 December 31, 2016 Customer A 21 % * % Customer B 17 % * % Customer C ** % 13 % * Customers A and B did not have individual balances that represented 10% or more of total gross accounts receivable as of December 31, 2016. ** Customer C did not have an individual balance that represented 10% or more of total gross accounts receivable as of September 30, 2017. A significant portion of sales is derived from certain customer relationships. The following is a summary of customers that represent 10% or more of total net sales: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Customer A 23 % 27 % 25 % 17 % Customer B 11 % * % * % * % Customer D 10 % ** % 10 % ** % Customer E *** % *** % *** % 29 % * Customer B did not have net sales that represented 10% or more of total net sales for the three months ended September 30, 2017 or the three and nine months ended September 30, 2016. ** Customer D did not have net sales that represented 10% or more of total net sales for the three and nine months ended September 30, 2016. *** Customer E did not have net sales that represented 10% or more of total net sales for the three and nine months ended September 30, 2017 or the three months ended September 30, 2016. |
DISCONTINUED OPERATIONS
DISCONTINUED OPERATIONS | 9 Months Ended |
Sep. 30, 2017 | |
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. Following 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 had also agreed to provide to Yanbal certain transition services, which services ended August 31, 2016. 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. There were no assets or liabilities related to discontinued operations at September 30, 2017 or December 31, 2016. The following table presents the major classes of line items constituting pretax loss from discontinued operations: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net sales $ - $ 29,850 $ - $ 804,585 Costs and expenses: Cost of goods sold - 7,188 - 276,100 Sales and marketing - 29,611 - 940,592 General and administrative - - - 173,909 Interest expense - - - 11 Total costs and expenses - 36,799 - 1,390,612 Loss from discontinued operations - (6,949 ) - (586,027 ) Other income: (Loss) gain on sale of long-term assets - (3,065 ) - 12,398 Total other (loss) income, net - (3,065 ) - 12,398 Pretax loss from discontinued operations $ - $ (10,014 ) $ - $ (573,629 ) |
BASIS OF PRESENTATION AND SIG18
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) | 9 Months Ended |
Sep. 30, 2017 | |
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 nine months ended September 30, 2017 and the three and nine months ended September 30, 2016 included in this Quarterly Report on Form 10-Q are unaudited. The balance sheet as of December 31, 2016 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, 2016 filed with the SEC on March 10, 2017 (the “2016 Annual Report”). The accompanying condensed consolidated financial statements as of and for the three and nine months ended September 30, 2017, as of and for the three and nine months ended September 30, 2016, and as of December 31, 2016 include the accounts of the Company and its wholly owned subsidiaries charlesandcolvard.com, LLC (formerly 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 - |
Discontinued Operations | Discontinued Operations - |
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 an accounting standard that supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of the 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 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 will complete its review of contracts, the related documentation and the new disclosure requirements in the fourth quarter of 2017. The Company anticipates using the modified retrospective method of adoption and does not anticipate a material effect on the timing and measurement of revenue recognition. In February 2016, the FASB issued 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 statement of operations. The 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 currently expects that upon adoption of this standard, ROU assets and liabilities will be recognized in the balance sheet in amounts that will be material. |
SEGMENT INFORMATION AND GEOGR19
SEGMENT INFORMATION AND GEOGRAPHIC DATA (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract] | |
Summary information by reportable segment | Summary financial information by reportable segment is as follows: Three Months Ended September 30, 2017 Traditional Online Channels Total Net sales Loose jewels $ 3,407,092 $ 691,380 $ 4,098,472 Finished jewelry 726,985 1,383,351 2,110,336 Total $ 4,134,077 $ 2,074,731 $ 6,208,808 Product line cost of goods sold Loose jewels $ 1,877,210 $ 367,378 $ 2,244,588 Finished jewelry 378,799 610,762 989,561 Total $ 2,256,009 $ 978,140 $ 3,234,149 Product line gross profit Loose jewels $ 1,529,882 $ 324,002 $ 1,853,884 Finished jewelry 348,186 772,589 1,120,775 Total $ 1,878,068 $ 1,096,591 $ 2,974,659 Operating income (loss) $ 110,601 $ (280,628 ) $ (170,027 ) Depreciation and amortization $ 74,281 $ 30,277 $ 104,558 Capital expenditures $ 19,651 $ - $ 19,651 Three Months Ended September 30, 2016 Traditional Online Channels Total Net sales Loose jewels $ 3,165,142 $ 432,337 $ 3,597,479 Finished jewelry 302,652 1,312,842 1,615,494 Total $ 3,467,794 $ 1,745,179 $ 5,212,973 Product line cost of goods sold Loose jewels $ 1,654,137 $ 154,842 $ 1,808,979 Finished jewelry 148,760 557,419 706,179 Total $ 1,802,897 $ 712,261 $ 2,515,158 Product line gross profit Loose jewels $ 1,511,005 $ 277,495 $ 1,788,500 Finished jewelry 153,892 755,423 909,315 Total $ 1,664,897 $ 1,032,918 $ 2,697,815 Operating loss $ (612,526 ) $ (531,070 ) $ (1,143,596 ) Depreciation and amortization $ 100,720 $ 14,709 $ 115,429 Capital expenditures $ 58,695 $ 233,178 $ 291,873 Nine Months Ended September 30, 2017 Traditional Online Channels Total Net sales Loose jewels $ 10,506,456 $ 2,264,379 $ 12,770,835 Finished jewelry 1,512,310 4,212,837 5,725,147 Total $ 12,018,766 $ 6,477,216 $ 18,495,982 Product line cost of goods sold Loose jewels $ 5,546,616 $ 1,101,245 $ 6,647,861 Finished jewelry 893,600 1,712,728 2,606,328 Total $ 6,440,216 $ 2,813,973 $ 9,254,189 Product line gross profit Loose jewels $ 4,959,840 $ 1,163,134 $ 6,122,974 Finished jewelry 618,710 2,500,109 3,118,819 Total $ 5,578,550 $ 3,663,243 $ 9,241,793 Operating loss $ (475,236 ) $ (638,531 ) $ (1,113,767 ) Depreciation and amortization $ 225,906 $ 92,816 $ 318,722 Capital expenditures $ 242,663 $ 3,621 $ 246,284 Nine Months September 30, 2016 Traditional Online Channels Total Net sales Loose jewels $ 16,572,061 $ 1,623,309 $ 18,195,370 Finished jewelry 723,545 4,214,333 4,937,878 Total $ 17,295,606 $ 5,837,642 $ 23,133,248 Product line cost of goods sold Loose jewels $ 11,444,109 $ 548,753 $ 11,992,862 Finished jewelry 842,147 1,824,813 2,666,960 Total $ 12,286,256 $ 2,373,566 $ 14,659,822 Product line gross profit (loss) Loose jewels $ 5,127,952 $ 1,074,556 $ 6,202,508 Finished jewelry (118,602 ) 2,389,520 2,270,918 Total $ 5,009,350 $ 3,464,076 $ 8,473,426 Operating loss $ (2,111,576 ) $ (756,009 ) $ (2,867,585 ) Depreciation and amortization $ 400,321 $ 45,255 $ 445,576 Capital expenditures $ 147,246 $ 263,060 $ 410,306 |
Schedule of reconciliation of product line cost of goods sold to cost of goods sold as reported in condensed 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 September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Product line cost of goods sold $ 3,234,149 $ 2,515,158 $ 9,254,189 $ 14,659,822 Non-capitalized manufacturing and production control expenses 298,858 448,038 1,021,676 1,190,321 Freight out 100,016 105,616 273,088 268,705 Inventory valuation allowances (3,000 ) (1,000 ) 44,000 54,000 Other inventory adjustments (146,420 ) 153,195 (48,650 ) 106,141 Cost of goods sold $ 3,483,603 $ 3,221,007 $ 10,544,303 $ 16,278,989 |
Net sales by geographic area | The following presents net sales by geographic area: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net sales United States $ 5,750,825 $ 4,590,299 $ 17,206,485 $ 20,682,341 International 457,983 622,674 1,289,497 2,450,907 Total $ 6,208,808 $ 5,212,973 $ 18,495,982 $ 23,133,248 |
INVENTORIES (Tables)
INVENTORIES (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
INVENTORIES [Abstract] | |
Schedule of inventory, net of reserves | The Company’s total inventories, net of reserves, consisted of the following as of the dates presented: September 30, 2017 December 31, 2016 Raw materials $ 4,076,977 $ 3,106,617 Work-in-process 10,715,382 11,048,126 Finished goods 16,749,663 15,057,668 Finished goods on consignment 944,957 467,778 Supplies Inventory 22,196 17,228 Less inventory reserves (1,611,000 ) (1,567,000 ) Total $ 30,898,175 $ 28,130,417 Current portion $ 11,115,715 $ 9,770,206 Long-term portion 19,782,460 18,360,211 Total $ 30,898,175 $ 28,130,417 |
Schedule of inventories by product line maintained in its wholesale distribution segment | The Company’s total inventories, net of reserves, consisted of the following as of the dates presented: September 30, 2017 December 31, 2016 Loose jewels Raw materials $ 3,439,841 $ 2,586,045 Work-in-process 9,344,185 10,589,424 Finished goods 9,512,647 9,455,393 Finished goods on consignment 41,107 5,473 Total loose jewels $ 22,337,780 $ 22,636,335 Finished jewelry Raw materials $ 637,136 $ 520,572 Work-in-process 1,371,197 458,702 Finished goods 5,645,016 4,081,275 Finished goods on consignment 884,850 416,305 Total finished jewelry 8,539,199 5,476,854 Total supplies inventory 22,196 17,228 Total inventory $ 30,898,175 $ 28,130,417 |
STOCK-BASED COMPENSATION (Table
STOCK-BASED COMPENSATION (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
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 September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Employee stock options $ 93,631 $ 94,715 $ 249,969 $ 339,441 Consultant stock options - 39,143 - 136,253 Restricted stock awards 25,472 100,796 75,220 397,859 Totals $ 119,103 $ 234,654 $ 325,189 $ 873,553 |
Summary of the stock option activity | The following is a summary of the stock option activity for the nine months ended September 30, 2017: Shares Weighted Average Exercise Price Outstanding, December 31, 2016 2,134,898 $ 1.99 Granted 681,369 $ 0.92 Forfeited (68,000 ) $ 1.38 Expired (603,252 ) $ 3.08 Outstanding, September 30, 2017 2,145,015 $ 1.36 |
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 nine months ended September 30, 2017: Dividend yield 0.0 % Expected volatility 63.0 % Risk-free interest rate 1.86 % Expected lives (years) 5.49 |
Information about stock options outstanding | The following table summarizes information about stock options outstanding at September 30, 2017: Options Outstanding Options Exercisable Options Vested or Expected to Vest Balance as of 9/30/2017 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Balance as of 9/30/2017 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price Balance as of 9/30/2017 Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price 2,145,015 8.14 $ 1.36 1,256,146 7.32 $ 1.62 2,039,272 8.08 $ 1.38 |
Restricted stock activity | The following is a summary of the restricted stock activity for the nine months ended September 30, 2017: Shares Weighted Average Grant Date Fair Value Unvested, December 31, 2016 359,400 $ 0.91 Granted 420,000 $ 1.11 Vested (210,453 ) $ 0.92 Canceled (195,200 ) $ 0.95 Unvested, September 30, 2017 373,747 $ 1.11 |
NET LOSS PER COMMON SHARE (Tabl
NET LOSS PER COMMON SHARE (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
NET LOSS PER COMMON SHARE [Abstract] | |
Reconciliation of basic and diluted net loss per share | The following table reconciles the differences between the basic and diluted net loss per share presentations: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Numerator: Net loss from continuing operations $ (174,539 ) $ (1,147,430 ) $ (1,136,966 ) $ (2,879,201 ) Net loss from discontinued operations - (10,014 ) - (573,629 ) Net loss $ (174,539 ) $ (1,157,444 ) $ (1,136,966 ) $ (3,452,830 ) Denominator: Weighted average common shares outstanding: Basic 21,218,468 20,997,686 21,184,211 20,898,484 Stock options and restricted stock - - - - Diluted 21,218,468 20,997,686 21,184,211 20,898,484 Net loss per common share: Basic – continuing operations $ (0.01 ) $ (0.06 ) $ (0.05 ) $ (0.14 ) Basic – discontinued operations - (0.00 ) - (0.03 ) Basic – total $ (0.01 ) $ (0.06 ) $ (0.05 ) $ (0.17 ) Diluted – continuing operations $ (0.01 ) $ (0.06 ) $ (0.05 ) $ (0.14 ) Diluted – discontinued operations - (0.00 ) - (0.03 ) Diluted – total $ (0.01 ) $ (0.06 ) $ (0.05 ) $ (0.17 ) |
MAJOR CUSTOMERS AND CONCENTRA23
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK [Abstract] | |
Summary of customers that represent greater than or equal to 10% of total net sales and receivables | The following is a summary of customers that represent greater than or equal to 10% of total gross accounts receivable: September 30, 2017 December 31, 2016 Customer A 21 % * % Customer B 17 % * % Customer C ** % 13 % * Customers A and B did not have individual balances that represented 10% or more of total gross accounts receivable as of December 31, 2016. ** Customer C did not have an individual balance that represented 10% or more of total gross accounts receivable as of September 30, 2017. A significant portion of sales is derived from certain customer relationships. The following is a summary of customers that represent 10% or more of total net sales: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Customer A 23 % 27 % 25 % 17 % Customer B 11 % * % * % * % Customer D 10 % ** % 10 % ** % Customer E *** % *** % *** % 29 % * Customer B did not have net sales that represented 10% or more of total net sales for the three months ended September 30, 2017 or the three and nine months ended September 30, 2016. ** Customer D did not have net sales that represented 10% or more of total net sales for the three and nine months ended September 30, 2016. *** Customer E did not have net sales that represented 10% or more of total net sales for the three and nine months ended September 30, 2017 or the three months ended September 30, 2016. |
DISCONTINUED OPERATIONS (Tables
DISCONTINUED OPERATIONS (Tables) | 9 Months Ended |
Sep. 30, 2017 | |
DISCONTINUED OPERATIONS [Abstract] | |
Summary of discontinued operations | The following table presents the major classes of line items constituting pretax loss from discontinued operations: Three Months Ended September 30, Nine Months Ended September 30, 2017 2016 2017 2016 Net sales $ - $ 29,850 $ - $ 804,585 Costs and expenses: Cost of goods sold - 7,188 - 276,100 Sales and marketing - 29,611 - 940,592 General and administrative - - - 173,909 Interest expense - - - 11 Total costs and expenses - 36,799 - 1,390,612 Loss from discontinued operations - (6,949 ) - (586,027 ) Other income: (Loss) gain on sale of long-term assets - (3,065 ) - 12,398 Total other (loss) income, net - (3,065 ) - 12,398 Pretax loss from discontinued operations $ - $ (10,014 ) $ - $ (573,629 ) |
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 GEOGR26
SEGMENT INFORMATION AND GEOGRAPHIC DATA (Details) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017USD ($) | Sep. 30, 2016USD ($) | Sep. 30, 2017USD ($)Segment | Sep. 30, 2016USD ($) | |
SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract] | ||||
Number of operating segments | Segment | 2 | |||
Number of reportable segments | Segment | 2 | |||
Summary information by segment [Abstract] | ||||
Net sales | $ 6,208,808 | $ 5,212,973 | $ 18,495,982 | $ 23,133,248 |
Product line cost of goods sold | 3,483,603 | 3,221,007 | 10,544,303 | 16,278,989 |
Operating income (loss) | (170,027) | (1,144,069) | (1,113,767) | (2,867,585) |
Depreciation and amortization | 318,722 | 445,576 | ||
Capital expenditures | 246,284 | 410,306 | ||
Continuing Operations [Member] | ||||
Summary information by segment [Abstract] | ||||
Net sales | 6,208,808 | 5,212,973 | 18,495,982 | 23,133,248 |
Product line cost of goods sold | 3,234,149 | 2,515,158 | 9,254,189 | 14,659,822 |
Product line gross profit | 2,974,659 | 2,697,815 | 9,241,793 | 8,473,426 |
Operating income (loss) | (170,027) | (1,143,596) | (1,113,767) | (2,867,585) |
Depreciation and amortization | 104,558 | 115,429 | 318,722 | 445,576 |
Capital expenditures | 19,651 | 291,873 | 246,284 | 410,306 |
Continuing Operations [Member] | Loose Jewels [Member] | ||||
Summary information by segment [Abstract] | ||||
Net sales | 4,098,472 | 3,597,479 | 12,770,835 | 18,195,370 |
Product line cost of goods sold | 2,244,588 | 1,808,979 | 6,647,861 | 11,992,862 |
Product line gross profit | 1,853,884 | 1,788,500 | 6,122,974 | 6,202,508 |
Continuing Operations [Member] | Finished Jewelry [Member] | ||||
Summary information by segment [Abstract] | ||||
Net sales | 2,110,336 | 1,615,494 | 5,725,147 | 4,937,878 |
Product line cost of goods sold | 989,561 | 706,179 | 2,606,328 | 2,666,960 |
Product line gross profit | 1,120,775 | 909,315 | 3,118,819 | 2,270,918 |
Operating and Reportable Segments [Member] | Continuing Operations [Member] | Traditional [Member] | ||||
Summary information by segment [Abstract] | ||||
Net sales | 4,134,077 | 3,467,794 | 12,018,766 | 17,295,606 |
Product line cost of goods sold | 2,256,009 | 1,802,897 | 6,440,216 | 12,286,256 |
Product line gross profit | 1,878,068 | 1,664,897 | 5,578,550 | 5,009,350 |
Operating income (loss) | 110,601 | (612,526) | (475,236) | (2,111,576) |
Depreciation and amortization | 74,281 | 100,720 | 225,906 | 400,321 |
Capital expenditures | 19,651 | 58,695 | 242,663 | 147,246 |
Operating and Reportable Segments [Member] | Continuing Operations [Member] | Traditional [Member] | Loose Jewels [Member] | ||||
Summary information by segment [Abstract] | ||||
Net sales | 3,407,092 | 3,165,142 | 10,506,456 | 16,572,061 |
Product line cost of goods sold | 1,877,210 | 1,654,137 | 5,546,616 | 11,444,109 |
Product line gross profit | 1,529,882 | 1,511,005 | 4,959,840 | 5,127,952 |
Operating and Reportable Segments [Member] | Continuing Operations [Member] | Traditional [Member] | Finished Jewelry [Member] | ||||
Summary information by segment [Abstract] | ||||
Net sales | 726,985 | 302,652 | 1,512,310 | 723,545 |
Product line cost of goods sold | 378,799 | 148,760 | 893,600 | 842,147 |
Product line gross profit | 348,186 | 153,892 | 618,710 | (118,602) |
Operating and Reportable Segments [Member] | Continuing Operations [Member] | Online Channels [Member] | ||||
Summary information by segment [Abstract] | ||||
Net sales | 2,074,731 | 1,745,179 | 6,477,216 | 5,837,642 |
Product line cost of goods sold | 978,140 | 712,261 | 2,813,973 | 2,373,566 |
Product line gross profit | 1,096,591 | 1,032,918 | 3,663,243 | 3,464,076 |
Operating income (loss) | (280,628) | (531,070) | (638,531) | (756,009) |
Depreciation and amortization | 30,277 | 14,709 | 92,816 | 45,255 |
Capital expenditures | 0 | 233,178 | 3,621 | 263,060 |
Operating and Reportable Segments [Member] | Continuing Operations [Member] | Online Channels [Member] | Loose Jewels [Member] | ||||
Summary information by segment [Abstract] | ||||
Net sales | 691,380 | 432,337 | 2,264,379 | 1,623,309 |
Product line cost of goods sold | 367,378 | 154,842 | 1,101,245 | 548,753 |
Product line gross profit | 324,002 | 277,495 | 1,163,134 | 1,074,556 |
Operating and Reportable Segments [Member] | Continuing Operations [Member] | Online Channels [Member] | Finished Jewelry [Member] | ||||
Summary information by segment [Abstract] | ||||
Net sales | 1,383,351 | 1,312,842 | 4,212,837 | 4,214,333 |
Product line cost of goods sold | 610,762 | 557,419 | 1,712,728 | 1,824,813 |
Product line gross profit | 772,589 | 755,423 | 2,500,109 | 2,389,520 |
Segment Reconciling Items [Member] | Continuing Operations [Member] | ||||
Summary information by segment [Abstract] | ||||
Product line cost of goods sold | 3,483,603 | 3,221,007 | 10,544,303 | 16,278,989 |
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 | 3,234,149 | 2,515,158 | 9,254,189 | 14,659,822 |
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 | 298,858 | 448,038 | 1,021,676 | 1,190,321 |
Segment Reconciling Items [Member] | Continuing Operations [Member] | Freight Out [Member] | ||||
Summary information by segment [Abstract] | ||||
Product line cost of goods sold | 100,016 | 105,616 | 273,088 | 268,705 |
Segment Reconciling Items [Member] | Continuing Operations [Member] | Inventory Valuation Allowances [Member] | ||||
Summary information by segment [Abstract] | ||||
Product line cost of goods sold | (3,000) | (1,000) | 44,000 | 54,000 |
Segment Reconciling Items [Member] | Continuing Operations [Member] | Other Inventory Adjustments [Member] | ||||
Summary information by segment [Abstract] | ||||
Product line cost of goods sold | $ (146,420) | $ 153,195 | $ (48,650) | $ 106,141 |
SEGMENT INFORMATION AND GEOGR27
SEGMENT INFORMATION AND GEOGRAPHIC DATA, Data by Geographic Area (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Net sales [Abstract] | ||||
Net sales | $ 6,208,808 | $ 5,212,973 | $ 18,495,982 | $ 23,133,248 |
Continuing Operations [Member] | ||||
Net sales [Abstract] | ||||
Net sales | 6,208,808 | 5,212,973 | 18,495,982 | 23,133,248 |
Reportable Geographical Components [Member] | Continuing Operations [Member] | United States [Member] | ||||
Net sales [Abstract] | ||||
Net sales | 5,750,825 | 4,590,299 | 17,206,485 | 20,682,341 |
Reportable Geographical Components [Member] | Continuing Operations [Member] | International [Member] | ||||
Net sales [Abstract] | ||||
Net sales | $ 457,983 | $ 622,674 | $ 1,289,497 | $ 2,450,907 |
INVENTORIES (Details)
INVENTORIES (Details) - USD ($) | 9 Months Ended | ||
Sep. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Total inventories, net of reserves [Abstract] | |||
Raw materials | $ 4,076,977 | $ 3,106,617 | |
Work-in-process | 10,715,382 | 11,048,126 | |
Finished goods | 16,749,663 | 15,057,668 | |
Finished goods on consignment | 944,957 | 467,778 | |
Total supplies inventory | 22,196 | 17,228 | |
Less inventory reserves | (1,611,000) | (1,567,000) | |
Total | 30,898,175 | 28,130,417 | |
Current portion | 11,115,715 | 9,770,206 | |
Long-term portion | $ 19,782,460 | 18,360,211 | |
Period considered for classification of long term inventory | 12 months | ||
Work-in-process inventories issued to active production jobs | $ 5,200,000 | 7,180,000 | |
Inventory of net loose jewels | 22,340,000 | 22,640,000 | |
Inventory of net jewelry | 8,540,000 | 5,480,000 | |
Inventory reserve for obsolescence | 921,000 | 944,000 | |
Sale of slow moving loose jewel inventory of less desirable quality | 6,770,000 | $ 2,280,000 | |
Lower of cost or net realized value reserve | 838,000 | 517,000 | |
Carrying value of inventory reserve for obsolescence of moissanite | 83,000 | 427,000 | |
Inventory rework reserve for recut | 534,000 | 454,000 | |
Inventory reserve for recut | 430,000 | 425,000 | |
Inventory reserve for shrinkage of finished jewelry on repairs | 104,000 | 29,000 | |
Inventory reserve for shrinkage | 156,000 | 169,000 | |
Inventory reserve for shrinkage of loose jewels | 36,000 | 67,000 | |
Inventory reserve for shrinkage of finished jewelry | 120,000 | 102,000 | |
Shrinkage reserve for finished goods on consignment | 19,000 | 46,000 | |
Inventory reserve for shrinkage of loose jewels on consignment | 1,000 | 7,000 | |
Inventory reserve for shrinkage of finished jewelry on consignment | 18,000 | 39,000 | |
Loose Jewels [Member] | |||
Total inventories, net of reserves [Abstract] | |||
Raw materials | 3,439,841 | 2,586,045 | |
Work-in-process | 9,344,185 | 10,589,424 | |
Finished goods | 9,512,647 | 9,455,393 | |
Finished goods on consignment | 41,107 | 5,473 | |
Total | 22,337,780 | 22,636,335 | |
Finished Jewelry [Member] | |||
Total inventories, net of reserves [Abstract] | |||
Raw materials | 637,136 | 520,572 | |
Work-in-process | 1,371,197 | 458,702 | |
Finished goods | 5,645,016 | 4,081,275 | |
Finished goods on consignment | 884,850 | 416,305 | |
Total | $ 8,539,199 | $ 5,476,854 |
INCOME TAXES (Details)
INCOME TAXES (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
INCOME TAXES [Abstract] | ||||
Income tax expense for estimated tax, penalties, and interest for other uncertain tax positions | $ 5,000 | $ 3,000 | $ 23,000 | $ 10,000 |
COMMITMENTS AND CONTINGENCIES (
COMMITMENTS AND CONTINGENCIES (Details) $ in Thousands | 9 Months Ended | |
Sep. 30, 2017USD ($)Option | Sep. 30, 2016USD ($) | |
Long-term Purchase Commitment [Line Items] | ||
Percentage committed to be purchased | 100.00% | |
Number of option to unilaterally extend the term | Option | 1 | |
Period of exclusive supply agreement | 2 years | |
Actual purchases under purchase amendment | $ 6,910 | $ 6,010 |
Minimum [Member] | ||
Long-term Purchase Commitment [Line Items] | ||
Purchase commitment in initial new order | 29,600 | |
Remaining purchase commitment | 7,640 | |
Maximum [Member] | ||
Long-term Purchase Commitment [Line Items] | ||
Purchase commitment in initial new order | 31,500 | |
Remaining purchase commitment | $ 9,540 |
LINE OF CREDIT (Details)
LINE OF CREDIT (Details) - Wells Fargo [Member] - Line of Credit [Member] - USD ($) | Jun. 22, 2017 | Sep. 30, 2017 |
Line of Credit Facility [Line Items] | ||
Revolving line of credit | $ 10,000,000 | |
Line of credit maturity date | Jun. 25, 2017 | |
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% | |
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] | ||
Line of credit facility, sublimit for letter of credit | 1,000,000 | |
Advances against inventory | 3,000,000 | |
Borrowers' demand deposit account to be maintained | 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 | 2.00% | 2.00% |
Line of credit, description of variable rate basis | Wells Fargo’s three-month LIBOR rate | Wells Fargo’s three-month LIBOR rate |
Debt instrument, term of variable rate | 3 months | 3 months |
Prime Rate [Member] | ||
Line of Credit Facility [Line Items] | ||
Line of credit, spread on variable rate | 1.00% | |
Line of credit, description of variable rate basis | Wells Fargo’s Prime Rate |
STOCK-BASED COMPENSATION (Detai
STOCK-BASED COMPENSATION (Details) - USD ($) | 3 Months Ended | 9 Months Ended | |||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | |
Components of the Company's stock based compensation included in net income [Abstract] | |||||
Share-based compensation expense | $ 119,103 | $ 234,654 | $ 325,189 | $ 873,553 | |
Employee Stock Options [Member] | |||||
Components of the Company's stock based compensation included in net income [Abstract] | |||||
Share-based compensation expense | $ 93,631 | 94,715 | $ 249,969 | 339,441 | |
Stock Option Activity [Roll Forward] | |||||
Outstanding, beginning balance (in shares) | 2,134,898 | ||||
Granted (in shares) | 681,369 | ||||
Forfeited (in shares) | (68,000) | ||||
Expired (in shares) | (603,252) | ||||
Outstanding, ending balance (in shares) | 2,145,015 | 2,145,015 | |||
Weighted Average Exercise Price [Roll Forward] | |||||
Outstanding, beginning balance (in dollars per share) | $ 1.99 | ||||
Granted (in dollars per share) | 0.92 | ||||
Forfeited (in dollars per share) | 1.38 | ||||
Expired (in dollars per share) | 3.08 | ||||
Outstanding, ending balance (in dollars per share) | $ 1.36 | $ 1.36 | |||
Weighted average assumptions for stock options [Abstract] | |||||
Dividend yield | 0.00% | ||||
Expected volatility | 63.00% | ||||
Risk-free interest rate | 1.86% | ||||
Expected lives | 5 years 5 months 26 days | ||||
Options Outstanding [Abstract] | |||||
Balance as of end of period (in shares) | 2,145,015 | 2,134,898 | 2,145,015 | ||
Weighted average remaining contractual life | 8 years 1 month 20 days | ||||
Weighted average exercise price (in dollars per share) | $ 1.36 | $ 1.99 | $ 1.36 | ||
Options Exercisable [Abstract] | |||||
Balance as of end of period (in shares) | 1,256,146 | ||||
Weighted average remaining contractual life | 7 years 3 months 25 days | ||||
Weighted average exercise price (in dollars per share) | $ 1.62 | ||||
Options Vested or Expected to Vest [Abstract] | |||||
Balance as of end of period (in shares) | 2,039,272 | ||||
Weighted average remaining contractual life | 8 years 29 days | ||||
Weighted average exercise price (in dollars per share) | $ 1.38 | ||||
Additional Disclosures [Abstract] | |||||
Stock-based compensation capitalized as a cost of inventory | $ 0 | 0 | $ 0 | 0 | |
Fair value of stock options (in dollars per share) | $ 0.51 | ||||
Fair value of stock options vested | $ 312,000 | ||||
Unrecognized stock-based compensation expense related to unvested awards | $ 350,000 | ||||
Total compensation cost not yet recognized, period for recognition | 23 months | ||||
Aggregate intrinsic value of stock options outstanding | 9,000 | ||||
Aggregate intrinsic value of stock options exercisable | 9,000 | ||||
Aggregate intrinsic value of stock options vested or expected to vest | 9,000 | ||||
Aggregate intrinsic value of stock options exercised | 0 | 250 | $ 0 | 250 | |
Employee Stock Options [Member] | Discontinued Operations [Member] | |||||
Components of the Company's stock based compensation included in net income [Abstract] | |||||
Share-based compensation expense | 0 | 0 | 0 | 44,000 | |
Consultant Stock Options [Member] | |||||
Components of the Company's stock based compensation included in net income [Abstract] | |||||
Share-based compensation expense | 0 | 39,143 | 0 | 136,253 | |
Restricted Stock Awards [Member] | |||||
Components of the Company's stock based compensation included in net income [Abstract] | |||||
Share-based compensation expense | $ 25,472 | $ 100,796 | $ 75,220 | $ 397,859 | |
Additional Disclosures [Abstract] | |||||
Unrecognized stock-based compensation expense related to unvested awards | $ 227,000 | ||||
Total compensation cost not yet recognized, period for recognition | 5 months | ||||
Restricted Stock Activity [Roll Forward] | |||||
Unvested, beginning balance (in shares) | 359,400 | ||||
Granted (in shares) | 420,000 | ||||
Vested (in shares) | (210,453) | ||||
Canceled (in shares) | (195,200) | ||||
Unvested, ending balance (in shares) | 373,747 | 373,747 | |||
Weighted Average Grant Date Fair Value [Roll Forward] | |||||
Unvested, beginning balance (in dollars per share) | $ 0.91 | ||||
Granted (in dollars per share) | 1.11 | ||||
Vested (in dollars per share) | 0.92 | ||||
Canceled (in dollars per share) | 0.95 | ||||
Unvested, ending balance (in dollars per share) | $ 1.11 | $ 1.11 |
NET LOSS PER COMMON SHARE (Deta
NET LOSS PER COMMON SHARE (Details) - USD ($) | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | |
Numerator [Abstract] | ||||
Net loss from continuing operations | $ (174,539) | $ (1,147,430) | $ (1,136,966) | $ (2,879,201) |
Net loss from discontinued operations | 0 | (10,014) | 0 | (573,629) |
Net loss | $ (174,539) | $ (1,157,444) | $ (1,136,966) | $ (3,452,830) |
Weighted average common shares outstanding [Abstract] | ||||
Basic (in shares) | 21,218,468 | 20,997,686 | 21,184,211 | 20,898,484 |
Stock options and restricted stock (in shares) | 0 | 0 | 0 | 0 |
Diluted (in shares) | 21,218,468 | 20,997,686 | 21,184,211 | 20,898,484 |
Net loss per common share [Abstract] | ||||
Basic - continuing operations (in dollars per share) | $ (0.01) | $ (0.06) | $ (0.05) | $ (0.14) |
Basic - discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.03) |
Basic - total (in dollars per share) | (0.01) | (0.06) | (0.05) | (0.17) |
Diluted - continuing operations (in dollars per share) | (0.01) | (0.06) | (0.05) | (0.14) |
Diluted - discontinued operations (in dollars per share) | 0 | 0 | 0 | (0.03) |
Diluted - total (in dollars per share) | $ (0.01) | $ (0.06) | $ (0.05) | $ (0.17) |
Stock Options [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Shares excluded from the computation of diluted net loss per common share (in shares) | 2,150,000 | 2,230,000 | 2,150,000 | 2,230,000 |
Restricted Shares [Member] | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Shares excluded from the computation of diluted net loss per common share (in shares) | 374,000 | 438,000 | 374,000 | 438,000 |
MAJOR CUSTOMERS AND CONCENTRA34
MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |||||||
Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 | ||||||
Concentration Risk [Line Items] | ||||||||||
Insurance coverage per depositor at each financial institution | $ 250,000 | $ 250,000 | ||||||||
Interest-bearing amounts on deposit in excess of FDIC insurable limits | $ 4,850,000 | $ 4,850,000 | ||||||||
Write-off of accounts receivable related to customer | $ (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 | 120 days | |||||||||
Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer A [Member] | ||||||||||
Concentration Risk [Line Items] | ||||||||||
Concentration risk, percentage | 21.00% | [1] | ||||||||
Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer B [Member] | ||||||||||
Concentration Risk [Line Items] | ||||||||||
Concentration risk, percentage | 17.00% | [1] | ||||||||
Trade Accounts Receivable [Member] | Customer Concentration Risk [Member] | Customer C [Member] | ||||||||||
Concentration Risk [Line Items] | ||||||||||
Concentration risk, percentage | [2] | 13.00% | ||||||||
Total Gross Sales [Member] | Customer Concentration Risk [Member] | Customer A [Member] | ||||||||||
Concentration Risk [Line Items] | ||||||||||
Concentration risk, percentage | 23.00% | 27.00% | 25.00% | 17.00% | ||||||
Total Gross Sales [Member] | Customer Concentration Risk [Member] | Customer B [Member] | ||||||||||
Concentration Risk [Line Items] | ||||||||||
Concentration risk, percentage | 11.00% | [3] | [3] | [3] | ||||||
Total Gross Sales [Member] | Customer Concentration Risk [Member] | Customer D [Member] | ||||||||||
Concentration Risk [Line Items] | ||||||||||
Concentration risk, percentage | 10.00% | [4] | 10.00% | [4] | ||||||
Total Gross Sales [Member] | Customer Concentration Risk [Member] | Customer E [Member] | ||||||||||
Concentration Risk [Line Items] | ||||||||||
Concentration risk, percentage | [5] | [5] | [5] | 29.00% | ||||||
[1] | Customers A and B did not have individual balances that represented 10% or more of total gross accounts receivable as of December 31, 2016. | |||||||||
[2] | Customer C did not have an individual balance that represented 10% or more of total gross accounts receivable as of September 30, 2017. | |||||||||
[3] | Customer B did not have net sales that represented 10% or more of total net sales for the three months ended September 30, 2017 or the three and nine months ended September 30, 2016. | |||||||||
[4] | Customer D did not have net sales that represented 10% or more of total net sales for the three and nine months ended September 30, 2016. | |||||||||
[5] | Customer E did not have net sales that represented 10% or more of total net sales for the three and nine months ended September 30, 2017 or the three months ended September 30, 2016. |
DISCONTINUED OPERATIONS (Detail
DISCONTINUED OPERATIONS (Details) - USD ($) | Mar. 04, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Sep. 30, 2017 | Sep. 30, 2016 | Dec. 31, 2016 |
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||||
Inventory credit | $ 921,000 | $ 921,000 | $ 944,000 | |||
Other income [Abstract] | ||||||
(Loss) gain on sale of long-term assets | 0 | $ (3,065) | 0 | $ 12,398 | ||
Pretax loss from discontinued operations | 0 | (6,949) | 0 | (586,027) | ||
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] | ||||||
Discontinued operations, assets | 0 | 0 | 0 | |||
Discontinued operations, liabilities | 0 | 0 | $ 0 | |||
Disposal Group, Including Discontinued Operation, Income Statement Disclosures [Abstract] | ||||||
Net sales | 0 | 29,850 | 0 | 804,585 | ||
Costs and expenses [Abstract] | ||||||
Cost of goods sold | 0 | 7,188 | 0 | 276,100 | ||
Sales and marketing | 0 | 29,611 | 0 | 940,592 | ||
General and administrative | 0 | 0 | 0 | 173,909 | ||
Interest expense | 0 | 0 | 0 | 11 | ||
Total costs and expenses | 0 | 36,799 | 0 | 1,390,612 | ||
Loss from discontinued operations | 0 | (6,949) | 0 | (586,027) | ||
Other income [Abstract] | ||||||
(Loss) gain on sale of long-term assets | 0 | (3,065) | 0 | 12,398 | ||
Total other (loss) income, net | 0 | (3,065) | 0 | 12,398 | ||
Pretax loss from discontinued operations | $ 0 | $ (10,014) | $ 0 | $ (573,629) |