Q4 2023 Charles & Colvard Ltd Earnings Call

Speaker 1: Good day and welcome to the Charles and Colvard Q4 fiscal year 2023 earnings conference call and webcast. All participants will be in listen-only mode. Should you need assistance, please signal conference specialist by pressing star key followed by zero.

Good day and welcome to the Charles <unk> Colvard Q4 fiscal year 2023 earnings conference call and webcast.

All participants will be in listen only mode should you need assistance. Please signal conference specialist by pressing Starkey followed by zero.

Speaker 1: This earnings call may contain forward looking statements as defined in section 27A of the Securities Act of 1933 as amended.

This earnings call may contain forward looking statements as defined in section 27, a M securities.

33.

Bad debt.

Speaker 1: including statements regarding, among other things, the company's business strategy and growth.

Including statements regarding among other things the companys business strategy and growth.

Speaker 1: Expressions that identify forward-speaking statements are based largely on our company's expectations and are subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those that

Expressions that identifies forward speaking statements our baseball or larger.

Largely on our company's expectations and are subject to a number of risks and uncertainties some of which cannot be predicted or quantified and are beyond our control future developments and actual results could differ materially from those set forth.

Speaker 1: forth in, contemplated by, or underlined the forward-looking statements. In light of these risks and uncertainties, there can be no further assurance that the forward-looking information will prove to be accurate. A company today's call is a supporting PowerPoint slide deck, which is available in the investor relations section of the company's website at ir.charlesandcovard.com.

And contemplated by or underlying the forward looking statements in light of these risks and uncertainties. There can be no further assurance that the forward looking information will prove to be accurate accompany today's call is a supporting Powerpoint slide deck, which is available in the Investor Relations section.

At the company's website at IR Dot, Charles and Colbert Dot Com slash about.

Speaker 2: The company will be hosting a Q&A session at the conclusion of the prepared remarks. Should you have any questions you'd like to submit, please email cthr at lythampartners.com. Please note this event is being recorded. I would now like to turn the conference over to Don O'Connell, President and Chief Executive Officer. Please go ahead. Good afternoon, everyone, and welcome to our fourth quarter in fiscal 2023 financial results conference call.

The company will be hosting a Q&A session at the conclusion of the prepared remarks.

Do you have any questions you'd like to submit please email E T. H R. At Lytham partners Dot Com. Please not just about this is being recorded I would now like to turn the conference over to Don O'connell, President and Chief Executive Officer. Please go ahead, good afternoon, everyone and welcome to our fourth quarter and fiscal two.

1023 financial results conference call.

Speaker 2: The challenging macroeconomic backdrop, a weakened consumer outlook, and a softening engagement market greatly impacted our quarter and fiscal year.

The challenging macroeconomic backdrop of weakened consumer outlook, and a softening engagement market greatly impacted our quarter and fiscal year.

Speaker 2: We're not alone. As these circumstances and heightened downward pricing pressure on both lab-grown and mined diamonds created significant headwinds for the entire jewelry and gemstone industry.

We're not alone as these circumstances and heightened downward pricing pressure on both lab grown in mind Diamond created significant headwinds for the entire jewelry and gemstone industry.

Speaker 2: Until now, these challenges have not greatly affected our overall business.

So until now these challenges have not greatly affected our overall business.

Speaker 2: These trends in the diamond market have now put considerable pricing pressure on moistenite, affecting our overall traditional wholesale business and consumption of raw materials.

These trends in the diamond market have now put considerable pricing pressure on voice.

Affecting our overall traditional wholesale business and consumption of raw materials.

Speaker 2: This has caused us to re-evaluate our supply chain and gemstone cost, pricing methodology, and go-to-market strategy, as we experience margin erosion of softer cells.

This has caused us to reevaluate our supply chain and gemstone cost pricing methodologies and go to market strategy.

As we experienced margin erosion of soft herself.

Speaker 2: In addition, late in Q4, we identified a cybersecurity incident that temporarily disrupted the company's IT network and resulted in some limited downtime for certain systems.

In addition, late in Q4, we identify the cyber security incident that temporarily disrupted the company's network and resulted in some limited downtime for certain systems.

Speaker 2: Our investigation revealed no evidence that any sensitive customer data was compromised as a result of this incident. Our relationship with our customers has not been negatively impacted and no payments were made to the ransomware threat act.

Our investigation revealed no evidence that any sensitive customer data was compromised as a result of this incident our relationship with our customers has not been negatively impacted and no payments were made to the ransomware threat actors. We have however incurred cost in the first quarter of the fiscal year ending June 32.

Speaker 2: We have, however, incurred costs in the first quarter of the fiscal year ending June 30th, 2024, and expect to continue to incur some additional costs in the future related to enhancements to our cybersecurity measures.

2024.

And expect to continue to incur some additional costs in the future related to enhancements to our cyber security measures.

Speaker 2: Despite these challenges, our balance sheet remained strong and the company continued to manage cash effectively, closing out the quarter and fiscal year with over $15.6 million.

Despite these challenges our balance sheet remains strong and the company continued to manage cash effectively closing out the quarter and fiscal year with over $15 $6 million the.

The company remains debt free.

Speaker 2: all the while making strategic investments in support of our future growth opportunities and initiatives.

All the while making strategic investments in support of our future growth opportunities and initiatives.

Other notable highlights for Q4 include.

Speaker 2: We launched both successful Mother's Day and Father's Day campaigns on CharlesandCobar.com.

We launched both successful mother's day and father's day campaigns on Charles and Colvard Dotcom.

Speaker 2: as we look to expand our repeat customer base highlighting men's and unisex jewelry.

As we look to expand our repeat customer base, highlighting men's and unisex jewelry.

Speaker 2: We hosted a private invite only spring preview in New York City in April with more than 30 editors and influencers from well-known publications and websites such as The Knot, NBCU, Today, and US Weekly to showcase our new expanded fine jewelry styles.

We hosted a private invite only spring preview in New York City in April with more than 30 editors and Influencers from well known publications and websites such as the knot NBC you today in U S weekly to showcase our new expanded fine jewelry styles.

Speaker 2: We launched the company's new owned B2B web property, Charles and Colvard Direct dot com, selling loose Moist Night Gems Forever One and Moist Night by Charles and Colvard to select the retailer.

We launched the company's new own B to B web property Charles in Khobar direct dotcom.

Selling loose moist night Jim's forever, one and we're excited by Charles and Colbert to select retailers.

Speaker 2: We expanded our assortment of new Forever One Moist Night and Cadia Lab Grown Diamond Fine Jewelry styles on CharlesandCullbar.com across all categories, including our signature and exotics collections, along with our fashion jewelry assortment in both lab grown diamonds and Moist Night.

We expanded our assortment of new forever, one moist night, Acadia lab grown diamonds, and fine jewelry styles on Charles and Colvard dotcom across all categories, including our signature and exotic collections, along with our fashion jewelry assortment.

And both lab grown diamonds in moist Tonight.

Speaker 2: and our maiden color collection and unisex bands in lab-grown diamonds.

And our maiden colored collection, and unisex bands and lab grown diamonds.

Speaker 2: We launched three new Drop Shift partnerships featuring Moist Night by Charles and Colvard Fine Jewelry.

We launched three new drop ship partnerships, featuring moist <unk> by Charles <unk> Colvard fine jewelry.

Speaker 2: We attended JCK in Las Vegas in June to engage with customers and our vendors in support of growing our customer base and product assortment.

We attended J C K in Las Vegas in June to engage with customers and our vendors in support of growing our customer base and product Assortments.

Speaker 2: We launched an ad campaign promoting the company's signature showroom in the local Midtown magazine.

We launched an AD campaign promoting the company's signature showroom and the local Midtown magazine.

Speaker 2: We showcased and highlighted our brand at the Direct Selling Association's annual conference in Scottsdale, Arizona in June to further build our brand awareness and establish non-traditional partnerships.

We showcased and highlighted our brand of direct selling associations annual conference in Scottsdale, Arizona in June to further build our brand awareness and establish non traditional partnerships.

Speaker 2: We appeared in 34 brand and product placements and 23 features, including notable outlets such as Marie Claire, The Hollywood Reporter, Brides, JCK, The Knot, and AC Magazine.

We appeared in 34 brand and product placements in 'twenty three features including notable outlets such as Marie Claire The Hollywood reporter Brides, JC case than not and AC magazine.

Speaker 2: and revenue on our moissaniteoutlet.com owned property increased by 64% for the quarter, which enabled us to capture a greater market share of those consumers seeking lower price fine jewelry items.

And revenue on or more Tonight outlet dotcom owned the property increased by 64% for the quarter, which enabled us to capture a greater market share of those consumers seeking lower priced fine jewelry items.

Speaker 2: We believe responsible inventory management is crucial for maintaining competitiveness amidst a challenging economic landscape.

We believe responsible inventory management is crucial for maintaining competitiveness amidst a challenging economic landscape.

Speaker 2: Given the seismic shifts in the industry, pricing pressure, and constrained consumer demand, we have taken the position to write down $5.9 million of certain lower grade non-forever one moissanite and lab grown diamond raw material and gems.

Given the seismic shifts in the industry pricing pressure and constrained consumer demand, we have taken a position to write down $5 $9 million of certain lower grade non forever, one voice Tonight and lab grown diamond raw material and jobs.

Speaker 2: The company's inventory level remains solid at $26.75 million, which we deem adequate to support the demand for our Forever One product category for the foreseeable future.

The company's inventory level remained solid at $26 $75 million, which we deem adequate to support the demand for our forever one product category for the foreseeable future.

Speaker 2: We are confident that advancements in our technology, our proprietary cutting and faceting methods, and our ability to procure alternative SIC material as needed.

We are confident that advancements in our technology, our proprietary cutting and fastening methods.

And our ability to procure alternative FSIC material as needed.

Speaker 2: enable us to navigate the fluid environment more responsibly.

Enable us to navigate the fluid environment more responsibly.

Speaker 2: As we look ahead, let's take a moment to look at the positive that we believe will better position us for future growth beyond the macroeconomic and industry headwinds in the short term.

As we look ahead, let's take a moment to look at the positives that we believe will better position us for future growth beyond the macroeconomic and industry headwinds in the short term.

Speaker 2: The holiday season fast approaching has historically been our strongest quarter as consumers are predisposed to purchase

The holiday season fast approaching has historically been our strongest quarter as consumers are predisposed to purchase.

Speaker 2: Our proprietors signature collection continues to resonate with the consumer as we seek to differentiate the brands and products we have to offer, supported by a 36% increase in revenue for Q4 compared to one year ago.

Our proprietary signature collection continues to resonate with the consumer as we seek to differentiate their brands and products. We have to offer supported by a 36% increase their revenue for Q4 compared to one year ago.

Speaker 2: In addition, during the fiscal year and quarter, the company's AOV, or average order value, remains stable, which reflects that we've been able to maintain our price points despite the macroeconomic backdrop.

In addition, during the fiscal year and quarter, the Companys B or average order value remains stable, which reflects that we have been able to maintain our price points. Despite the macroeconomic backdrop.

Speaker 2: While we believe that lab-grown diamonds have gained significant market penetration and that Arcadia lab-grown diamonds will become the highest growth product category for us.

While we believe the lab grown diamonds have gained significant market penetration and that Arcadia lab grown diamonds will become the highest growth product category for us witnessed by more than a 20% increase over the comparable periods.

Speaker 2: Witnessed by more than a 20% increase over the comparable period, we also believe that Moist Night will remain an integral part of our overall business composition as it continues to offer an attractive value proposition to the price-conscious consumer looking for quality fine jewelry products.

We also believe that moist I will remain an integral part of our overall business composition as it continues to offer an attractive value proposition to the price conscious consumer looking for quality fine jewelry products.

Speaker 2: The increased demand for lab-grown diamonds amplifies the need to grow Arcadia lab-grown diamond business in a responsive way as we seek to migrate our diamond products into existing channels to capture a greater share of wallet.

The increased demand for lab grown diamonds amplifies their need to grow Arcadia lab grown diamonds business and a responsive way as we seek to migrate our diamond products into existing channels to capture a greater share of wallet.

Speaker 2: We believe that the lab grown movement plays into our hands and as more consumers come to understand that lab grown diamonds are identical to their mined counterparts, the only difference being the org.

We believe that the lab grown movement plays into our hands and as more consumers come to understand that lab grown diamonds are identical to their mind counterparts, the only difference being the origin.

Speaker 2: According to the knot.com, a wedding planning website...

According to the non dotcom a wedding planning website.

Speaker 2: Of the 12,000 couples surveyed, more than one third opted for a lab-grown diamond.

Of the 12000, coupled surveyed more than one third opted for a lab grown diamonds.

Speaker 2: as their ring centerstone, double the number just three years ago. As a result of these trends, sales of lab-grown diamonds are expected to double to $55.5 billion by 2031. As we move forward, we will continue to evaluate the competitive landscape and the value proposition between moissanite and lab-grown diamonds and its overall impact on our business.

As their ring center stuff.

Double the number just three years ago as a result of these trends sales of lab grown diamonds are expected to double to $55 5 billion by 2031.

As we move forward, we will continue to evaluate the competitive landscape and the value proposition between voice and lab grown diamonds and its overall impact on our business. We will continue to invest responsibly and seek opportunities to make our branded products top of mind.

Speaker 2: We will continue to invest responsibly and seek opportunities to make our brand and products top of mind.

Speaker 2: look to us to stabilize our current state, amplify our brand, diversify revenue streams, and strategically adapt our technology. Now I'd like to highlight

Look to us to stabilize our current state amplify our brand diversify revenue streams and strategically adapt our technology.

Now I'd like to highlight our upcoming strategic initiatives.

Speaker 2: For fiscal 2024, the company's core focus will be to continue to enhance its global brand awareness campaigns, diversify its product categories, and innovate its technology to stay ahead of the competition to deliver additional products and services, unlocking new revenue streams.

For fiscal 2024 of the company's core focus will be to continue to enhance its global brand awareness campaigns diversify its product categories and innovative technology to stay ahead of the competition to deliver additional products and services unlocking new revenue streams.

Speaker 2: More specifically, as it relates to global brand awareness, we plan to continue strengthening the fine jewelry brand we have been building for nearly three decades.

More specifically as it relates to global brand awareness, we plan to continue strengthening the fine jewelry brand we are rebuilding for nearly three decades.

Speaker 2: As the consumer landscape continues to shift and factors beyond price, craftsmanship, and origin are driving decisions to purchase, brand equity is more important than ever. We believe.

How does the consumer landscape continues to shift and factors beyond price craftsmanship and origin are driving decisions to purchase brand equity is more important than ever we believe.

Speaker 2: We will continue to invest in paid media campaigns targeting the trade and consumers as we reinforce our made-not-mind providence.

We will continue to invest in paid media campaigns.

Targeting the trade and consumers as we reinforce our made not mined Providence.

Speaker 2: We will also remain steadfast in our quest for sustained top line organic growth as our brand messaging resonates with new audiences.

We will also remain steadfast in our quest for sustained top line organic growth as our brand messaging resonates with new audiences.

Speaker 2: To diversify our product categories, we will continue to evaluate opportunities for growth with synergistic brands, products, and verticals beyond our current offering.

To diversify our product categories, we will continue to evaluate opportunities for growth with synergistic brands products and verticals beyond our current offerings.

Speaker 2: Emerging consumer trends and data will inform new product lines, collections, partnerships with designers and influencers. We will explore strategic alliances to fuel growth and deliver incremental long-term shareholder value while prioritizing our sustainable practices and our core values.

Emerging consumer trends and data will inform new product lines collections partnerships with designers and Influencers, we will explore strategic alliances to fuel growth and deliver incremental long term shareholder value, while prioritizing our sustainable practices and our core values.

Speaker 2: Lastly, evolving technology continues to shape how consumers discover, research, and ultimately purchase.

Lastly, evolving technology continues to shape, how consumers discover research and ultimately purchase.

Speaker 2: We will continue to invest strategically in technology to service customers in existing and new outlets. We believe that our investment in innovative technology and predictive analytics will further maximize our ability to be agile and efficient in our business. We will enhance our consumer experience through immersive virtual selling and fully customizable products driven by actionable data.

We will continue to invest strategically in technology to service customers in existing and new outlets, we believe that our investment in innovative technology and predictive analytics will further maximize our ability to be agile and efficient in our visits we want to enhance our consumer experience through immersive virtual selling and fully accustomed.

Sizable products driven by actionable data.

Speaker 2: Additionally, we'll continue to capitalize on our leading edge streaming broadcast technology to digitally attract new audiences, each with unique characteristics while broadening our footprint and ability to drive organic growth.

Additionally, we will continue to capitalize on our leading edge streaming broadcast technology to digitally attract new audiences each with unique characteristics, while broadening our footprint and ability to drive organic growth.

Speaker 2: Fundamentally, our goal is to find ways to reach consumers more efficiently and cost effectively while strengthening our moat and overall position in the market.

Fundamentally our goal is to find ways to reach consumers more efficiently and cost effectively while strengthening our moat and overall position in the market.

Speaker 2: Expanding our business to directly interface with the consumer while controlling the customer experience is critical. As highlighted by the challenges in our wholesale channels.

Expanding our business to directly interface with the consumer while controlling the customer experience is critical as highlighted by the challenges in our wholesale channels.

Speaker 2: A quick look at the numbers shows that our traditional segment

A quick look at the numbers shows that our traditional segment.

Speaker 2: which is comprised primarily of wholesale loose gemstones with down 61% during the fourth quarter. This shrinking segment is in part by design and a primary reason we will continue to seek and open new channels that enable us to interact directly with the customer at all points along their buying journey.

Which is comprised primarily of wholesale loose gemstones was down 61% during the fourth quarter. This shrinking segment is in part by design and the primary reason, we will continue to seek and open new channels that enable us to interact directly with the customer at all points along their buying journey.

Speaker 2: to achieve this, we are building an environment to meet today's consumers, which shoppable interactive live streaming, on-connected TV, linear broadcasting, satellite, and social media platforms.

To achieve this we are building an environment to meet today's consumers, which shop interactive live streaming on connected TV linear broadcasting satellite and social media platforms.

Speaker 2: Taking a step back, for those not familiar with it, we believe this is a growth opportunity for the company.

Taking a step back for those not familiar with it. We believe this is a growth opportunity for the company.

Speaker 2: This technology is being embraced by industry leaders such as Roku and Shopify's recent announcement of a strategic partnership. Amazon's announcement of Amazon Live and Pinterest's announcement of PIN TV.

This technology is being embraced by industry leaders, such as Roku and Shopify as recent announcement of a strategic partnership.

Amazon's announcement of Amazon lives and Pinterest announcement of <unk> TV.

Speaker 2: Fueling these trends is the increased usage of smart TVs, along with the new payment alternatives which make shopping via TV easier and more streamlined.

These trends is the increased usage of smart Tvs, along with the new payment alternatives, which makes shopping via television easier and more streamlined.

Speaker 2: The global TV shopping market size is vast and expected to grow by 6% annually to 440 billion by 2030.

The global TV shopping market size is vast and expected to grow by 6% annually to 440 billion by 2030.

Speaker 2: In addition, among the several product categories within the TV shopping market, jewelry is expected to dominate this space and be the largest offering within this selling vertical by 2028.

In addition, among the several product categories within the TV shopping market jewelry is expected to dominate this space would be the largest offering within this selling vertical by 2028.

Speaker 2: We're excited to introduce this beta phase of our interactive shopping initiative by going live on select cable and satellite TV providers broadcasting our made shopping content. Highlighting our made not mind forever one moist night and Katie lab grown diamonds to over 20 million households weekly and streaming via YouTube Facebook linked in to potentially millions of households we believe the holiday season is an ideal time of year to debut.

We're excited to introduce this beta phase of our interactive shopping initiative by going live on select cable and satellite TV providers broadcasting are made shopping content.

Highlighting our made not mined forever, one moist night and Katy lab grown diamonds.

20 million households, weekly and streaming via Youtube Facebook Linkedin to potentially millions of households, we believe the holiday season is an ideal time of year to debut.

Speaker 2: In addition, we believe this will be accretive to our existing business as we view this as a new channel opportunity utilizing our existing infrastructure and resources to enhance our growth opportunity and control our destiny and perhaps meet consumers in different verticals.

In addition, we believe this will be accretive to our existing business as we view this as a new channel opportunity utilizing our existing infrastructure and resources to enhance our growth opportunity and control, our destiny and perhaps meet consumers in different verticals.

Speaker 2: While our operations have been negatively affected by the macro elements of the economy and pricing disruptions, we believe our strategic initiatives of enhancing our global brand awareness campaigns, diversifying our product categories, and innovating our technology will help drive measurable growth in years to come.

While our operations have been negatively affected by the macro elements of the economy and pricing disruptions, we believe our strategic initiatives of enhancing our global brand awareness campaigns, diversifying our product categories and innovating our technology will help drive measurable growth in the years to come.

Speaker 2: I will now turn the presentation over to Cliff Pete, our CFO to provide detailed insight into Q4's financial performance. Cliff, please.

I will now turn the presentation over to Clint Pete our CFO to provide detailed insight into Q4 financial performance. Please proceed.

Speaker 2: Thanks Don. Today I'll provide a summary of key financials for the fourth quarter into June 30, 2012.

Thanks Doc.

Today I'll provide a summary of key financials for the fourth quarter ended June 32023.

Speaker 3: Additional details can be found in our earnings press release that we issued this afternoon in our Form 10-K which we expect to follow.

Additional details can be found in our earnings press release that we issued this afternoon and our Form 10-K, which we expect to file this evening.

Speaker 3: Please note that all percentage comparisons are to the fourth quarter and to June 30, 2022. And let's specify it otherwise.

Please note that all percentage comparisons are to the fourth quarter ended June 32022, unless specified otherwise.

Speaker 3: First, we'll start on slide 8 with the comparative analysis of the fourth quarter of fiscal 2023 compared to the same period one year ago.

First we will start on slide eight with the comparative analysis of the fourth quarter of fiscal 2023 compared to the same period one year ago.

Speaker 3: In total, net sales for Q4 2023 totaled $5.6 million versus $9.3 million, a decrease of 40%, due primary to the factors drawn previously.

In total net sales for Q4, 2023 totaled $5 $6 million versus $9 $3 million, a decrease of 40% due primary to the factors dock previously mentioned.

Speaker 3: Net sales for our online channel segment, which is primary direct to consumer and includes CharlesandCovard.com, MotionOutlet.com, CharlesandCovardDirect.com, Marketplaces, Dropship Retail, and other pure play outlets, total $4.2 million for the quarter, or a decrease of 27%. But now representing 75% of total net sales, up from 62% one year.

Net sales for our online channels segment, which is primarily direct to consumer and includes Charles and cohort Dot com outlet Dot com, Charles and Colvard direct dot com marketplaces drop ship retail and other pure play outlets totaled $4 $2 million for the quarter or a decrease of 27%.

Now representing 75% of total net sales up from 62% one year ago.

Speaker 3: That sells for our traditional segment, which consists of wholesale and brick and mortar customers, total $1.4 million for the quarter, or a decrease of 61%.

Net sales for our traditional segment, which consists of wholesale and brick and mortar customers totaled $1 $4 million for the quarter or a decrease of 61%.

Speaker 3: representing now 25% of total net sales, down from 38% of net sales in the year-ago quarter.

Representing now 25% of total net sales down from 38% of net sales in the year ago quarter.

Speaker 3: Then its jury net sales decreased 23% for the quarter, but represented 84% of total sales in the quarter, up from 65% of sales in the fourth quarter one year ago. As we further position ourselves.

Finished jewelry net sales decreased 23% for the quarter represented 84% of total sales in the quarter up from 65% of sales in the fourth quarter one year ago.

We further position ourselves in the fine jewelry market.

Speaker 3: Whose jewel nut sales decreased 73% for the quarter, as we mentioned in prior calls, due in part to our shift towards finished jewelry and direct-to-consumer strategy.

Whose jewel net sales decreased 73% for the quarter as we mentioned in prior calls due in part to our shifts towards finished jewelry and direct to consumer strategies.

Speaker 3: while many domestic and international distributors reduce their forecasts and overall inventories to the softer economic environment.

Many domestic and international distributors reduced our forecast and overall inventories to the softer economic environment.

Speaker 3: Looking at cells by geography. Nearly all the cells in the fourth quarter were derived in the U.S.

Looking at sales by geography.

All of those sales in the fourth quarter, we are driving in the U S.

Speaker 3: Well, international net sales reported in a quarter were only $100,000.

While international net sales reported in the quarter or only $100000.

Speaker 3: direct to consumer finished jewelry opportunities which remain core to the company.

Direct to consumer and finished jewelry opportunities, which remain core to the company or somewhat less impacted as.

Speaker 3: somewhat less impacted, as evidenced by the lesser decline in online channels and finished jewelry net sells in our traditional segment, in particular, Luce Jules net sell.

Evidenced by that lesser decline in online channels in finished jewelry net sales and our traditional segment in particular loose jewels net sales.

Speaker 3: Moving to slide 9 to discuss gross margin, we reported a negative gross margin of 90% versus 41% positive gross margin in the year goal quarter or gross loss of $5 million versus a $3.8 million in gross profit in the year goal quarter.

Moving to slide nine to discuss gross margin, we reported a negative gross margin of 90% versus 41% positive gross margin in the yoga quarter or a gross loss of $5 million versus a $3 $8 million and gross profit in the Yoko quarter.

Speaker 3: Primary driver for this negative gross margin in Q4 2023 is a $5.9 million image.

Primary driver for this negative gross margin in Q4 2023.

Is it $5 $9 million of inventory write down at.

Speaker 3: pricing pressure and constrained consumer demand impacted the net realizable value of certain grades of our non-forever one moissanite and lab grown diamond raw material gems falling below the current current.

Is pricing pressure and constrained consumer demand impacted the net realizable value.

Certain grades of our not for everyone poison Ivy and lab grown diamonds raw materials Jens falling below the current carrying costs.

Speaker 3: Q4 2023, total operating expenses increased 16%, representing 77% of total net sales.

For Q4, 2023 total operating expenses increased 16%, representing 77% of total net sales.

Compared to 40% in the year ago quarter.

Speaker 3: Sales and marketing expenses increased 11% to $3 million in support of our TopoFunnel brand awareness initiatives.

Sales and marketing expenses increased 11% to $3 million and supported by top of funnel brand awareness initiatives and G&A expenses were $1 $4 million for the quarter compared to $1 $1 million, a year ago quarter or 28% increase.

Speaker 3: The G&A expenses were $1.4 million for the quarter, compared to $1.1 million in the year of the quarter, or 28%.

Speaker 3: sales and marketing, we continue to invest in marketing and brand awareness. And it's just that we believe will allow us to build upon our brands and have direct access to the

Our sales and marketing we continue to invest in marketing and brand awareness initiatives that we believe will allow us to build upon our brands and have direct access to the consumer.

Speaker 3: The primary increase in G&A for Q4 2023 was due, in large part, to an increase in bad debt expense and legal...

The primary increase in G&A for Q4 2023 was due in large part.

To an increase in bad debt expense and legal fees.

Speaker 3: We reported a net loss for Q42023, a $9.3 million.

We reported a net loss for Q4, 2023, a $9 3 million or 30 loss per diluted share compared to a net income of $40000 or zero cents earnings per diluted share a year ago period.

Speaker 3: 30 cents lost per diluted share compared to a net income of $40,000 or 0 cents earnings per diluted share in the EEOGO period.

Speaker 3: The main drivers for a net loss were the $5.9 million inventory write-down noted earlier and increased expenses incurred in support of top-of-funnel market conditions.

The main drivers for our net loss was $5 9 million dollar inventory Writedown noted earlier and increased expenses incurred in support of top of funnel marketing.

Speaker 3: Our weighted average shares outstanding on a diluted basis used in the calculation of loss per share flow of a quarter or approximately 30.4 million shares for the period in the June 30, 2023.

Our weighted average shares outstanding on a diluted basis used in the calculation of loss per share for a quarter or approximately 34 million shares for the period ended June 32023.

Speaker 3: We're prepared to 31.2 main shares for the period ended June 30th, 2022. Now, let's...

Paired with $31 2 million shares for the period ended June 32022.

Now, let's move on to a snapshot of our balance sheet.

Speaker 3: Our liquidity and cap-up position remains strong as we ended the quarter with $15.6 million of total cash compared to $60 million at the end of the third quarter ended March 31, and $21.2 million as a June 30, 2020.

Our liquidity and capital position remains strong as we ended the quarter with $15 $6 million of total cash compared to $16 million at the end of the third quarter ended March 31st 2023, and $21 $2 million as of June 32022.

Operator: Good day, and welcome to the Charles and Colvard Q4 fiscal year 2023 earnings conference call and webcast. All participants will be in list and only mode. Should you need assistance, please signal a conference specialist by pressing the start key, followed by zero. This earnings call may contain forward-looking statements as described in section 27A of the Securities Act of 1933 as amended, including statements regarding among other things the company's business strategy and growth.

Speaker 3: Working capital remains strong at $17.3 million. It's no longer an institution, it's anGhost powered city in addition to copy & OK.

Working capital remained strong at $17 $3 million.

In addition, the company continues to be debt free.

Speaker 3: The cash flow using operations was $48,000 in the quarter. Compared to $500,000 of cash flow used in operations during the same quarter.

Our cash flow used in operations was $48000 during the quarter compared to $500000 of cash flow used in operations during the same quarter a year ago.

Operator: Expressions that identify forward speaking statements are based largely on our company's expectations and our subject to a number of risks and uncertainties, some of which cannot be predicted or quantified and are beyond our control. Future developments and actual results could differ materially from those that support in, contemplated by or underlying the forward-looking statement. In light of these risks and uncertainties, there can be no further assurance that the forward-looking information will prove to be accurate.

Speaker 3: In terms of other sources of liquidity, we have access to our $5 million cash-recured credit facility with JP Morgan Chase Bank.

In terms of other sources of liquidity, we have access to a $5 million cash secured credit facility with Jpmorgan Chase Bank.

Speaker 3: which was renewed for another year in June 30th, 2000.

Which was renewed for another year and June 32023.

Speaker 3: As of June 30th, 2023 and through today, we have not access funds to our credit facilities.

As of June 32023, and through today, we have not accessed funds through our credit facility agreement.

Speaker 3: Inventory as of June 30, 2023 totaled $26.8 million.

Inventory as of June 32023 totaled $26 $8 million compared to $33 $3 million at March 31, 2023.

Speaker 3: in pair to 33.3 million dollars at March 31st, 2000.

Speaker 3: A reduction of nearly $6.9 million due to the inventory right down PVC-MIT.

Reduction of nearly $6 $9 million due to the inventory write down previously mentioned.

Speaker 3: Inventory as a June 30th, 2022, was $33.5 million.

Inventory as of June 32022 was $33 $5 million.

Operator: A company today's call is a supporting PowerPoint fly deck, which is available in the investor relation section of the company's website at ir.Charles and Colvard.com slash events. The company will be hosting a Q&A session of the conclusion of the prepared remarks. Should you have any questions you'd like to submit, please email cthr.com. Please note this event is being recorded.

Speaker 3: This Jewel's inventory was $9.1 million as of June 32, 2021.

Loose jewels inventory was $9 $1 million as of June 32023, compared to $15 $6 million as of March 31, 2023, again due to the inventory write down which was all related to loose jewels inventory.

Speaker 3: Compared to $15.6 million as a March 31st,

Speaker 3: Again, due to the inventory right down, which was all related to these tools.

Speaker 3: This jewel's inventory is of June 30th out in 22 with 16.2 million.

<unk> inventories at June 32, 22% to $16 $2 million.

Speaker 3: Venice jewelry inventory was $17.3 million as of June 30, 2023.

Finished jewelry inventory was $17 $3 million as of June 32023, compared to $17 $4 million as of March 31 2023.

Donna Cornel: I would now like to turn the conference over to Donna, Colonel, President and Chief Executive Officer. Please go ahead. Good afternoon, everyone, and welcome to our fourth quarter in fiscal 2023 financial results conference call. The challenging macroeconomic backdrop, a weekend consumer outlook and a softening engagement market greatly impacted our quarter in fiscal year. We're not alone as these circumstances and heightened downward pricing pressure on both lab ground and mine diamonds created significant headwinds for the entire jewelry and gemstone industry.

Speaker 3: and paired to $17.4 as of March 31, 2023. Showing every...

Showing a reduction of $100000.

Speaker 3: Demonstrating a solid self-due of our finished jewelry in our direct to consumer online channels will maintain a higher percentage of in-stock rates above 90% to me.

Demonstrating a solid sell through of our finished jewelry and our direct to consumer online channels while.

While maintaining a higher percentage of in stock rates above 90%.

To meet our service level agreements.

Speaker 3: Plan to remain focused on Putin inventory management strategies.

Plan to remain focused on prudent inventory management strategies.

Going forward.

Speaker 3: finished jewelry as of June 30th, 23, for $17.2 million.

Finished jewelry as of June 32023 of $17 $2 million.

Donna Cornel: Until now, these challenges have not greatly affected our overall business. These trends in the diamond market have now put considerable pricing pressure on voice night affecting our overall traditional wholesale business and consumption of raw materials. This has caused us to re-evaluate our supply chain and gemstone cost pricing methodology and go-to-market strategy as we experience margin erosion and softer sales. In addition, late in Q4, we identified a cybersecurity incident that temporarily disrupted the company's IT network and resulted in some limited downtime for certain systems.

Speaker 3: Book value for sure at the end of the quarter and the year was $1.30 per share. So, I'm going to be lower to Q3 to 23 and at June 30, 2022.

Book value per share at the end of the quarter.

And the year was $1 30 per share sequentially lower to Q3 2023 and at June 32022.

Speaker 3: Due to the inventory write down that I described earlier in my comments, as well as the tax valuation allowance in cumulative losses over the quarters of F-White.

Due to the inventory write down that I described earlier in my comments as well as the tax valuation allowance and cumulative losses over the quarters in FY 2023.

Speaker 3: In summary, we've managed that fast in our cast management, while diligently deploying capital and support about ongoing business and technology advancements towards growth initiatives and further brand awareness. With.

In summary, we remain steadfast in our cash management, while diligently deploying capital and supported by the ongoing business and technology advancements towards growth initiatives and further brand awareness.

Donna Cornel: Our investigation revealed no evidence that any sensitive customer data was compromised as a result of this incident. Our relationship with our customers has not been negatively impacted and no payments were made to the ransomware threat actors. We have, however, incurred costs in the first quarter of the fiscal year ending June 30th, 2024, and expect to continue to incur some additional cost in the future related to enhancements to our cybersecurity measures. Despite these challenges, our balance sheet remains strong and the company continued to manage cash effectively, closing out the quarter in fiscal year with over $15.6 million.

With that I'll turn it back over to dawn.

Speaker 2: Thank you, Clint. In conclusion, despite the facing headwinds throughout the full fiscal year, we remain optimistic and excited about the future of our company. While we acknowledge the challenges we've encountered, we have also made significant progress in implementing strategic initiatives that we believe will drive growth and enhance our overall performance.

Thank you.

In conclusion, despite the facing headwinds throughout the full fiscal year, we remain optimistic and excited about the future of our company. While we acknowledge the challenges we have encountered we have also made significant progress in implementing strategic initiatives that we believe will drive growth and enhance our overall performance.

Speaker 2: Moving forward, we are committed to leveraging our strengths, refining our strategies, and capitalizing our new opportunities.

Moving forward, we are committed to leveraging our strengths refining our strategies and capitalizing on new opportunities our dedicated team coupled with our innovative approach positions us well for success in the coming years, we firmly believe that our proactive measures combined with our unwavering determination will enable us to overcome the obstacles we.

Speaker 2: Our dedicated team coupled with our innovative approach positions as well for success in the coming years.

Speaker 2: We firmly believe that our proactive measures combined with our unwavering determination will enable us to overcome the obstacles we have encountered and pave the way for a brighter future. We are confident our long-term business strategy will yield favorable results and create long-term value for our shareholders.

Donna Cornel: The company remains debt-free all the while, making strategic investments in support of our future growth opportunities and initiatives. Other notable highlights for 2.4 include, we launched both Successful Mother's Day and Father's Day campaigns on Charles and Cullbar.com. As we look to expand our repeat customer base, highlighting men's and unisex jewelry, we hosted a private invite-only spring preview in New York City in April, with more than 30 editors and influencers from well-known publications and websites, such as The Not NBCU, Today and US Weekly, to showcase our new expanded find jewelry styles.

We have encountered and paved the way for a brighter future. We are confident in our long term business strategy will yield favorable results and create long term value for our shareholders.

Speaker 2: We extend our gratitude to our valued investors, employees, and stakeholders for their continued support and trust in our company. Together, we will navigate these challenges and we believe emerge stronger than ever. At this time, I will turn the call back over to the operator who will open the lines for any questions. Thank you.

We extend our gratitude to our valued investors employees and stakeholders for their continued support and trust in our company together, we will navigate these challenges and we believe emerge stronger than ever at this time I will turn the call back over to the operator, who will open the lines for any questions.

Thank you.

We will now begin the question answer session.

Speaker 1: To ask a question, you may press star then one on your touch turn phone.

You ask a question you May press Star then one on your Touchtone phone.

Speaker 1: If you're using a speaker phone, please pick up your hands at the floor, pressing the keys.

Donna Cornel: We launched the company's new own B2B Web Property, Charles and Cullbar.com, selling loose Moisonite Gems forever one and Moisonite by Charles and Cullbar to select the retailers. We expanded our assortment of new forever one Moisonite and Katie Lavgrone Diamond Find jewelry styles on Charles and Cullbar.com across all categories, including our signature and exhaust collections, along with our fashion jewelry assortment, in both Lavgrone Diamonds and Moisonite, and our Made in Color collection and unisex bands in Lavgrone Diamonds.

If youre using a speakerphone please pick up your stat before presently Keith.

Speaker 4: To withdraw your question, please press star then to you. Please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the queue. At this time, we'll pause them eventually to assemble a roster.

Your question. Please press Star then.

Teo please.

Limit yourself to one question and one follow up.

If you have further questions you may reenter the queue.

At this time, we will pause momentarily to assemble Iraq okay.

Hi, Sara this is Adam Owen Steiner from Lytham partners I'm going to pose a few questions to the management team.

Donna Cornel: We launched three new dropship partnerships featuring Moisonite by Charles and Cullbar Find jewelry. We attended JCK in Las Vegas in June to engage with customers in our vendors in support of growing our customer base and product assortments. We launched an ad campaign promoting the company's signature showroom in the local Midtown magazine. We showcased and highlighted our brand and direct selling associations annual conference in Scottsdale, Arizona in June to further build our brand awareness and establish non-traditional partnerships.

Okay.

Hey, Adam.

Speaker 5: Hi, Jonathan. Where do you see the company streaming made shopping?

Hi, John Mcclain, where where do you see the company streaming Mead shopping going.

Speaker 2: Well thanks for bringing that up. So basically we're about a week into MADE or MADE shopping which is our digital streaming broadcasting interactive shopping experience. Allowing the consumer to shop anywhere they want. Whether they want to stream through Facebook, Instagram, YouTube, LinkedIn, wherever they are, we're gonna give them the ability to see the products that we offer and be able to click and buy right there.

Thanks for bringing that up.

So basically we're about a week into made are made shopping which is our digital streaming broadcasting interactive shopping experience, allowing the consumer to shop anywhere they want whether they want to stream through Facebook Instagram Youtube linked in wherever they are we're going to give them the ability to.

Donna Cornel: We appeared in 34 brand and product placements and 23 features, including notable outlets such as Marie Claire, the Hollywood Reporter, Brides, JCK, The Not, and A.C. Magazine. In revenue, Moisonite Outlet dot com owned property increased by 64% for the quarter, which enabled us to capture a greater market share of those consumers seeking lower price behind jewelry items. We believe responsible inventory management is crucial for maintaining competitiveness amidst a challenging economic landscape.

See the products that we offer and be able to click and buy right there.

Speaker 2: In conjunction with that, we're also spread across in a beta phase, with the broadcasting side where we're streaming through direct TV and those type of mediums like satellite and also different cable providers.

In conjunction with that we're also spread across in a beta phase with the broadcasting side, where we're screaming through Directv and those type of mediums like satellite and also different cable providers look to us to gather the data that we've kind of learned and the learnings from where our customers are shopping and where they are.

Speaker 2: Look to us to gather the data that we've kind of learned and the learnings from where our customers are shopping and where they're located, you know, from a demographic standpoint, and be able to geo target them and be able to buy either cable, either direct response type opportunities and be able to target those customers.

Okay.

From a demographic standpoint, and be able to geo target them and be able to buy either cable either direct response type.

Donna Cornel: Given the seismic shifts in the industry, pricing pressure, and constrained consumer demand, we have taken a position to write down $5.9 million of certain lower-grade, non-forever one, Moisonite, and Landgrown Diamond raw material in gems. The company's inventory level remains solid at $26.75 million, which we deem adequate to support the demand for our forever one product category for the foreseeable future. We are confident that advancements in our technology are proprietary cutting and fascinating methods, and our ability to procure alternative SIC material, as needed, enable us to navigate the fluid environment more responsibly.

Opportunities and be able to target those customers.

Speaker 2: and also it allows us to be more diverse in the product offerings that we bring.

And also it allows us to be more diverse and the product offerings that we bring.

Speaker 2: So moving ahead and moving forward, you know, we believe in anticipate that we're broadcasting a really beautiful signal, a really great show. I mean, for those interested right now, we're actually broadcasting mainshopping.com. You can find this, you can find a streaming. So if you just go there, you can look at the quality of the show and what we're putting out. And we believe that it's a state of the art. We believe it's...

Moving ahead and moving forward, we believe and anticipate that were broadcasting a really beautiful signal a really great show for those <unk>.

Interested right now we're actually broadcasting made shopping dot com you can find US you could find a streaming. So if you just go there you can look at the quality of the show and what we're putting out and we believe that its state of the art we believe it's.

Speaker 2: Probably the best of the best in technology. We're producing 4K HD. Also we're producing and streaming and...

Probably the best of the best in Technology, we're producing four K.

H D also we're producing in streaming and <unk>.

Speaker 2: and 1080p too as well and really

10, ADP too as well and.

<unk> really.

Speaker 2: We're pretty excited about this new initiative. We think this is another way that we can reach a bigger broader audience.

We're pretty excited about this new initiative. We think this is another way that we can reach a bigger broader audience.

Donna Cornel: As we look ahead, let's take a moment to look at the positives that we believe will better position us for future growth beyond the macroeconomic and industry headwinds in The holiday season, fast approaching has historically been our strongest quarter as consumers are predisposed to purchase. Our proprietary signature collection continues to resonate with the consumer as we seek to differentiate the brands and products we have to offer, supported by a 36% increase in revenue for Q4 compared to one year ago.

Speaker 2: It's also an answer to this incredibly expensive performance marketing cost per click that's going up. And really

It's also an answer to this incredibly expensive performance marketing.

Cost per clicks, that's going up and really just enabling us to navigate in a different way to be able to clear the noise of all the other competition out there and showcase our products and showcase our product brands like we've never been able to do before for example forever. One is the premium moist night, we innovated at we created it we <unk>.

Speaker 2: enabling us to navigate in a different way to be able to clear the noise of all the other competition out there. And showcase our products and showcase our product brands like we've never been able to do-

Speaker 2: You know, for example, Forever One is the premium voice tonight. We innovated it. We created it.

Speaker 2: We developed it and brought it to market. We need to let the consumers know that that's really what they're looking for. And this enables us to create long form content that we can actually educate those consumers in a much better way and show the competitive advantage as to why they need to be shopping with our brand and all the brand equity that comes along with it. For example, lifetime warranty on our gemstone, certifications, different things like that, that will separate us from the Moisonite perspective. And also in a lab-grown diamond market, it's a very...

<unk> brought it to market, we need to let the consumers know that that's really what they're looking for.

Donna Cornel: In addition, during the fiscal year and quarter, the company's AOV or average order value remains stable, which reflects that we've been able to maintain our price points despite the macroeconomic backdrop. While we believe the lab-grown diamonds have gained significant market penetration, and that Arcadia lab-grown diamonds will become the highest growth product category for us, witnessed by more than a 20% increase over the comparable periods, we also believe that Moist Night will remain an integral part of our overall business composition, as it continues to offer an attractive value proposition to the price conscious consumer looking for quality fine jewelry products.

This enables us to create long form content that we can actually educate those consumers in a much better way and show the competitive advantage as to why they.

They need to be shopping with our brand and all the brand equity that comes along with it for example lifetime warranty other gemstones certifications different things like that that will separate us from the moist.

Perspective, and also in our lab grown diamonds market, it's a very crowded space in very short order and it's very price sensitive and the pricing is coming down across the board.

Speaker 2: in very short order and it's very price sensitive and the pricing is coming down across.

Speaker 2: for everyone. So we need to be able to bring our own brand forward, which is KDA. K means pure in Greek symbol. I think some symbolic, can't pronounce that word, so sorry about that Adam, but.

For everyone. So we need to be able to bring our own brand forward, which is <unk> K means pure and simple.

I think some symbiotic.

Donna Cornel: The increased demand for lab-grown diamonds amplifies the need to grow Arcadia lab-grown diamond business in a responsive way as we seek to migrate our diamond products into existing channels that capture a greater share of wallet. We believe that the lab-grown movement plays into our hands, and as more consumers come to understand that lab-grown diamonds are identical to their mine counterparts, the only difference being the origin. According to the Not.com or Wedding Planning website, of the 12,000-coupled surveyed more than one-third opted for a lab-grown diamond as their ringed centerstone doubled the number just three years ago.

I can't pronounce that word so sorry about that Adam but.

Speaker 2: So we believe in diamond is diamond. So, you know, lab-run diamonds are pure diamonds as far as work and science and chemical and physical properties.

<unk>.

So we believe in Diamond Diamond so.

Lab grown diamonds are pure diamonds as far as we're concerned the same chemical and physical properties.

Speaker 2: And we're bringing them to market in a beautiful way through our incredible designs. And we believe that in order to be a leader in the lab-grown space, we need to push out our brand where customers are gravitating mortar brands. So stay tuned for a bigger footprint, stay tuned for seeing made in a much different light, and also the shopping network or the shopping made.

And we're bringing them to market in a beautiful way through our incredible designs and we believe that in order to be a leader in the lab grown space, we needed to push out our brand where customers are gravitating more to brands. So stay tuned for a bigger footprint stay tuned for seeing made in a much different light and also the shopping.

Network or the shopping made will enable us to bring different brands forward to be able to highlight those brands and be able to offer those brands in the stream so not just limiting to judge.

Speaker 6: Well, enable us to bring different brands forward to be able to highlight those brands and be able to offer those brands in this stream. So not just limiting to, you know, just primarily find jewelry, but anything that we believe that's aligned with the brand and aligned with what we stand for as a company and enables us to grow in a much bigger way. And we believe brings a lot more value to the shareholders and two Charles and Colbert. I know that was long-winded, but I figured I'd have to get that out there. I appreciate the color.

Donna Cornel: As a result of these trends, sales of lab-grown diamonds are expected to double to 55.5 billion by 2031. As we move forward, we will continue to evaluate the competitive landscape and the value proposition between Moist Night and lab-grown diamonds and its overall impact on our business. We will continue to invest responsibly in seek opportunities to make our brand of products top of mind. Look to us to stabilize our current state, amplify our brand, diversify revenue streams, and strategically adapt our technology.

Primarily fine jewelry, but anything that we believe that's aligned with the brand and aligned with what we stand for as a company and enables us to grow at a much bigger way and we believe brings a lot more value to the shareholders and to Charles and cobalt.

That was long winded, but I.

Figured out how to get that out there.

No I appreciate the color.

Was the decline in wholesale revenue was surprised.

Speaker 2: Well, we've kind of been deluding a quarter over quarter that we've been pushing more direct to consumer.

Well, we've kind of been diluting our quarter over quarter that we've been pushing more direct to consumer now thats not to say that the wholesale brick and mortar business is not top of mind for us and our brick and mortar partners are very dear to our heart.

Donna Cornel: Now, I'd like to highlight our upcoming strategic initiatives. For fiscal 2024, the company's core focus will be to continue to enhance its global brand awareness campaigns, diversify its product categories, and innovate its technology to stay ahead of the competition to deliver additional products and services unlocking new revenue streams. More specifically, as it relates to global brand awareness, we plan to continue strengthening the fine jewelry brand we have been building for nearly three decades.

Speaker 2: now that's not the state of the whole cell brick and mortar business is not top of mind for us and the brick and mortar partners are very dear to our heart part of our strategy moving forward and we support them and matter of fact we uh... we didn't make the press announcement yet but i can go ahead and make the statement that uh... we did launch lab-grown diamonds cadia in health bird uh... stores

Our strategy moving forward and we support them in a matter of fact, we.

We didn't make the press announcement, yet, but I can go ahead and make the statement that we did launch lab grown diamonds cavia in Hillsboro stores. So we've just launched at <unk>.

Speaker 2: So we just launched that, basically, we can a half ago.

Basically we can a half ago, so brick and mortar in our wholesale segment is still very very strong will continue to support our brick and mortar partners on the wholesale side, we've been talking about a declining market on the wholesale and that could be because the downward pressure on the pricing. So let's start from the top right. So.

Speaker 2: So brick and mortar in our wholesale segment is still very, very strong. We'll continue to support our brick and mortar partners on the wholesale side. We've been talking about a declining market on the wholesale. And that could be because the downward pressure on the pricing starts from the top. So it's no secret that everybody in the industry has been talking about the downward pressure of natural diamonds.

Donna Cornel: As the consumer landscape continues to shift in factors beyond price, craftsmanship, and origin or driving decisions to purchase, brand equity is more important than ever. We believe we will continue to invest in paid media campaigns, targeting the trade and consumers as we reinforce our made-not-mind providence. We will also remain steadfast in our quest for sustained top-line organic growth as our brand messaging resonates with new audiences. To diversify our product categories, we will continue to evaluate opportunities for growth with synergistic brands, products, and verticals beyond our current offerings.

It's no secret that everybody in the industry has been talking about the downward pressure of.

Natural diamonds.

Speaker 2: you know dropping nearly forty percent believe the number is i mean we get the actual fact on that the quotes but i believe it's forty percent drop unnatural because lab ground diamonds is pushing downward and becoming uh...

Dropping nearly 40% I believe the number is I mean, we can get the actual facts on vendor quotes, but I believe its 40% drop on natural because lab grown diamonds is pushing downward and.

And becoming.

Speaker 2: Also a problem as I alluded to in my prior remarks for moist and I pushing down on the moist and I pricing. So what we need to do is what we have been doing is looking at that very closely over the quarters focusing more on directed consumer maintaining our brick and mortar presence and strength with our customers in brick and mortar supporting them in our brand.

It's also a problem as I alluded to in my prior remarks.

For voice night, pushing down on the mortgage side pricing. So what we need to do is and what we have been doing is looking at that very closely over the quarters, focusing more on direct to consumer maintaining our brick and mortar presence in straight with our customers in brick and mortar supporting them in our brand.

Donna Cornel: Emerging consumer trends in data will inform new product lines, collections, partnerships with designers and influencers. We will explore strategic alliances to fuel growth and deliver incremental long-term shareholder value while prioritizing our sustainable practices in our core values. Lastly, evolving technology continues to shape how consumers discover research and ultimately purchase. We will continue to invest strategically in technology to serve as customers in existing and new outlets. We believe that our investment in innovative technology and predictive analytics will further maximize our ability to be agile and efficient in our business.

Speaker 2: All the while looking at our wholesale business and saying, okay, maybe we need to consolidate a little bit here. Maybe we need to kind of key in our strategic partners within the distribution model. And then also we just spoke about Charles and Colbert Direct.

All the while looking at our wholesale business and saying, Okay, maybe we need to consolidate a little bit here, maybe we need to.

Kind of key in on our strategic partners within the distribution model and then also we just spoke about Charles <unk> Colvard direct.

Speaker 2: So Charles, we call our direct, we just launched recently here, and that's also in beta. So we have a select amount of independent retailers that we have direct relationships with, and that basically we can be more competitive and give them better pricing on certain quality of goods that are outside the forever one.

Charles will cover our direct we just launched recently here and Thats also in beta so we have a select amount of.

Independent retailers that we have direct relationships with and that basically we can be more competitive and give them better pricing on certain quality of goods that are outside the forever one.

Donna Cornel: We want to enhance our consumer experience through immersive virtual selling and fully customizable products driven by actionable data. Additionally, we'll continue to capitalize on our leading edge streaming broadcast technology to digitally attract new audiences, each with unique characteristics, while broadening our footprint and ability to drive organic growth. Fundamentally, our goal is to find ways to reach consumers more efficiently and cost effectively while strengthening our mode and overall position in the market. Expanding our business to directly interface with the consumer while controlling the customer experience is critical.

Speaker 2: So we believe this could be a solution to an automated process to be able to support the entire wholesale market. But right now our focus is really pushing more direct consumer becoming a brand that's meaningful that resonates with all consumers and all products and all categories. So how do we do that? We do that through this new streaming technology. We do it through analyzing where that customer is.

So we believe this could be a solution to an automated process to be able to support the entire wholesale market, but right. Now our focus is is really pushing more direct to consumer it becoming a brand that's meaningful that resonates with all consumers and all products in all categories. So how.

We do that we do that through this new streaming technology, we do it through analyzing where that customers.

<unk>.

Speaker 2: you know, located and given that customer what they're looking for to purchase. So, you know, make no mistake.

Located and given that customer what they're looking for to purchase.

Make no mistake.

Speaker 2: you know, this could be something that's very significant for us and we believe that it's really important to the business.

This could be something thats very significant for us and we believe that.

Donna Cornel: As highlighted by the challenges in our wholesale channels, a quick look at the numbers shows that our traditional segment, which is comprised primarily of wholesale loose gemstones with down 61 percent during the fourth quarter. This shrinking segment is, in part, by design and in primary reason, we will continue to seek and open new channels that enable us to interact directly with the customer at all points along their buying journey. To achieve this, we are building an environment to meet today's consumers with shoppable interactive live streaming, on-connected TV, linear broadcasting, satellite and social media platforms.

It's really important to the business and.

Speaker 2: given the decline on the wholesale side. Now again, it's difficult because we have to report quarter over quarter and say, okay, wholesale declining by X number percent. But the reality is it's going to continue to decline as long as we keep pushing more to direct consumer.

Given the decline in the wholesale side now again, it's difficult because we have to report quarter over quarter and say, okay wholesale declining by X number of percent, but the reality is it's going to continue to decline as long as we keep pushing more to direct to consumer.

Speaker 2: And then we anticipate some strength on the brick and mortar side, some strength and additional product brands that will introduce some more brick and mortar partners as we expand more in the lab-grown diamond too as well. So, again, long-winded answer there, but hopefully I'll cover it with you right.

And then.

We anticipate some strength on the brick and mortar side some strength in additional <unk>.

Product brands I will introduce to more brick and mortar partners as we expand more in the lab grown diamonds too as well so again long winded answer there, but hopefully that covered what you were asking for.

Donna Cornel: Taking a step back for those not familiar with it, we believe this is a growth opportunity for the company. This technology is being embraced by industry leaders such as Roku and Shopify's recent announcement of a strategic partnership. Amazon's announcement of Amazon Live and Pinterest's announcement of PIN TV. Filling these trends is the increased usage of smart TVs, along with the new payment alternatives which makes shopping via TV easier and more streamlined.

Thank you.

Speaker 5: Given the move towards lab-grown diamonds, how should investors view the company's inventory? Will you build more lab-grown diamonds and less moys in Icon?

Given the move towards lab grown diamonds, how should investors view the company's inventory will you build more lab grown diamonds and less noise and high going forward.

Speaker 2: That's a great question. So in our

That's a great question so in our.

Speaker 2: history we've accumulated a pretty solid amount of inventory through a supply agreement that we have with with our strategic partner and if anybody's been tracking or following the company over the years we've maintained a significant silicon carbide or moistened inventory we're we're pretty

The history, we've accumulated.

Pretty solid amount of inventory through a supply agreement that we have with with our strategic partner and if anybody has been tracking are following the company over the years, we've maintained a significant silicon carbide or moist night inventory, where we're pretty comfortable that we have ample inventory to support our overall business.

Donna Cornel: The global TV shopping market size is vast and expected to grow by 6 percent annually to $440 billion by 2030. In addition, among the several product categories within the TV shopping market, jewelry is expected to dominate this space and be the largest offering within this selling vertical by 2028.

Speaker 2: that we have ample inventory to support our overall business. And as I said earlier for the foreseeable future. That inventory has, as recently, come down a little bit through this right down that we just did. But it's a much different business than the diamond business. So from the lab-grown diamond business, there's so much material that's in the market readily available with our strategic alliances and partnerships and relationships in the vendor community. We're able to buy more in just in time.

And as I said earlier for the foreseeable future that inventory has downcome.

As recently come down a little bit through this write down that we just did.

But it's a much different business than the diamond business. So from the lab grown diamonds business. There is so much material that's in the market readily available.

Donna Cornel: We're excited to introduce this beta phase or interactive shopping initiative by going live on select cable and satellite TV providers broadcasting our made shopping content. Highlighting our made-not mind for ever one voice night in Katie Lavgrond diamonds to over 20 million households weekly and streaming via YouTube, Facebook, LinkedIn to potentially millions of households. We believe the holiday season is an ideal time of year to debut. In addition, we believe this will be a creative to our existing business as we view this as a new channel opportunity utilizing our existing infrastructure and resources to enhance our growth opportunity and control our destiny and perhaps meet consumers in different verticals.

With our strategic alliances and partnerships and relationships in the vendor community, we're able to buy more and just in time now that's not to say that there wasn't some of that material bundled up in the write down.

Speaker 2: Now that's not to say that there wasn't some of that material bundled up in the right down.

Speaker 2: And that was large in part due to our early entry to market of getting into lab-grown space, which we believe was a great move for the company. And now we offer the choice to that consumer. But...

And that was large in part due to our early entry to market of getting into lab grown space.

Which we believe was a great move for the company and now we offer the choice to their consumer but.

Speaker 2: The difficult scenario there was the market really pushed down and the pricing pressure was intense on the lab run side from the early days to where it is today.

The difficult scenario, there was the market really pushed down in the <unk>.

Pricing pressure was intense on the lab grown site from the early days to where it is today. So we believe that.

Speaker 2: We believe that with this consideration that we just did in the right down, we're in a great position as far as on the diamond inventory and then purchasing just in time our needs.

With this consideration that we just did and the write down we are in a great position as far as on the Diamond inventory and then purchasing just in time, our needs and then the moist and I will continue to kind of look at that in a way that but we have a lot of options there, but if you look at our consumption of material if anyone wants to look back from our supply agreement.

Donna Cornel: While our operations have been negatively affected by the macro elements of the economy and pricing disruptions, we believe our strategic initiatives of enhancing our global brand awareness campaigns, diversifying our product categories and innovating our technology will help drive measurable growth in the years to come.

Speaker 2: And then the moistener will continue to kind of look at that and weigh that, but you know, we have a lot of options there. But if you look at our consumption of material, if anyone wants to look back,

Speaker 2: from our supply agreement, year to date, for not year to date, but for the full year, we purchased $1.8 million worth of material, which

Year to date.

For the <unk> year to date, but for the full year, we purchased.

Clint Pete: I will now turn to presentation over to Clint Pete, our CFO to provide detailed insight into Q4's financial performance. Clint, please proceed. Thanks, Don. Today, I'll provide a summary of key financials for the fourth quarter in the June 30, 2023. Additional details can be found in our earnings press release that we issued this afternoon in our foreign 10K, which we expect to file as we need. Please note that all percentage comparisons are to the fourth quarter in the June 30, 2022, and that's specified otherwise.

$1 $8 million worth of material, which.

Which you can kind of.

Speaker 2: understand what the consumption was. So we didn't feel that we needed any more material. We had plenty of material. We're servicing all of our customers all of the needs and we believe that forever one is the pinnacle and it will continue to be so for the foreseeable future and beyond.

Understand what the consumption was so we didn't feel that we needed any more material. We had plenty of material. We're servicing all of our customers all of the needs and we believe that forever. One is the pinnacle and it will continue to be so for the foreseeable future.

Beyond.

Speaker 1: Again, if you have a question, please press star then one.

Okay. Thank.

Thank you have a question please press star.

Then one.

Clint Pete: First, we'll start on slide 8 with the comparative analysis of the fourth quarter of physical 2023 compared to the same period one year ago. In total, net sales for Q4 2023 totaled $5.6 million versus $9.3 million, a due key of 40%, due primary to the factors Don previously mentioned. Net sales for our online channel segment, which is primary direct to consumer and includes charlesandcovar.com, moysandoutoutlet.com, charlesandcovar.com, marketplaces, dropship retail, and other peer-play outlets total $4.2 million for the quarter, or a decrease of 27%, but now red is in each 75% of total net sales up from 62% one year ago.

Speaker 1: So we know further questions, so it's complete request in the answer section. I would like to turn the conference back over to Dono, Cornel, Ferns, and any closing remarks.

There are no further questions. This concludes our question and answer session I would like to turn the conference back over to Donna Brian any closing remarks.

Speaker 2: Thank you, Sarah. I'd like to thank you and everyone else for your attention and continue to believe in our company. We look forward to sharing our progress and achievements with you and the people.

Thank you Sarah I'd like to thank you and everyone else for your attention and continued belief in our company. We look forward to sharing our progress and achievements with you in the future.

Speaker 1: The conference is now concluded. When he referred to him today's presentation, he may now disconnect.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Clint Pete: Net sales for our traditional segment, which consists of wholesale and brick and mortar customers, totaled $1.4 million for the quarter, or a decrease of 61%, representing now 25% of total net sales, down from 38% of net sales in the year ago quarter. Finis during net sales decreased 23% for the quarter, or represented 84% of total sales in the quarter, up from 65% of the sales in the fourth quarter one year ago, as we further position ourselves in the fine jewelry market.

Clint Pete: Whose jewel net sales decreased 73% for the quarter, as we mentioned in parry calls, due in part, to our shift towards finisjury and direct to consumer strategy. Well, many domestic and international distributors reduced their forecast and over all inventories to the softer economic environment. Looking at sales by geography, nearly all the sales in the fourth quarter were derived in the U.S. While international net sales reported in the quarter were only $100,000.

Clint Pete: Right to consumer and finished jury opportunities, which remained cord to the company, were somewhat less impacted, as evidenced by the lesser decline in online channels that finished jury net sales in our traditional segment, in particular, lose Jules net sales.

Clint Pete: Moving to slide 9 to discuss gross margin, we reported a negative gross margin of 90%, versus 41% positive gross margin in the year-go quarter, or gross loss of $5,000 versus a $3.8 million in gross profit in the year-go quarter. Primary driver for the negative gross margin in Q4 2023 is a $5.9 million inventory write-down as pricing pressure and constraint consumer demand impacted the net's realizable value of certain grades of our non-forever one moisonite and lab-grown diamond raw material gems, falling below the current care and cost.

Clint Pete: With Q4 2023, total operating expenses increased 16%, representing 77% of total net sales, compared to 40% in the year-go quarter. Sales and marketing expenses increased 11% to $3 million in support of our top-of-frontal brand awareness initiatives, and G&A expenses were $1.4 million for the quarter, compared to $1.1 million in the year-go quarter for 28% increase. For sales and marketing, we continue to invest in marketing and brand awareness initiatives that we believe will allow us to build upon our brands and have direct access to the consumer. The primary increase in G&A for Q4 2023 was due, in large part, to increase in bad debt expense and legal fees.

Clint Pete: We reported a net loss for Q4 2023 at $9.3 million, or $0.30 loss per diluted share, compared to a net income of $40,000, or $0 since earnings per diluted share in the year-go period. The main drivers for a net loss with a $5.9 million inventory write-down noted earlier, an increase expenses incurred in support of top-of-frontal marketing. Our weighted average share is outstanding on a diluted basis used in the calculation of loss per share for a quarter, or approximately $30.4 million shares for the period in the June 30, 2023, compared to $31.2 million shares for the period in the June 30, 2022.

Clint Pete: Now, let's move on to snatch out of our balance sheet. Our liquidity and capital position remain strong as we ended the quarter with $15.6 million a total cash, compared to $60 million at the end of the third quarter ended March 31, 2023, and $21.2 million as a June 30, 2022. Working capital remains strong at $17.3 million, in addition, the company continues to be debt-free. Our cash flow using operations was $48,000 in the quarter, compared to $500,000 of cash flow used in operations during the same quarter a year ago.

Clint Pete: In terms of other sources of liquidity, we have access to our $5,000 cash-recured credit facility with JP Morgan Chase Bank, which was renewed for another year in June 30, 2023. As of June 30, 2023 and through today, we have not access funds to our credit facility agreement. Dimitory as of June 30, 2023 totaled $26.8 million, compared to $33.3 million of March 31, 2023. A reduction of nearly $6.9 million due to the inventory right down previously mentioned.

Clint Pete: Dimitory as of June 30, 2022 was $33.5 million. Lose Jules inventory was $9.1 million as of June 30, 2023, compared to $15.6 million as of March 31, 2023. Again, due to the inventory right down, which was all related to Lose Jules inventory. Lose Jules inventory is of June 30, 2022 was $16.2 million. In its jewelry inventory was $17.3 million as of June 30, 2023, compared to $17.4 million as of March 31, 2023, shown a reduction of $100,000.

Clint Pete: Dimitrating a solid cell through of our finished jewelry in our direct-to-consumer online channels, while maintaining a higher percentage of in-stock rates above 90% to meet our service level agreements. Plan to remain focused on put in inventory management strategies, born forward. Finish jewelry as of June 30, 2023 was $17.2 million. Hook value for sure at the end of the quarter and the year was $1.30 per share. Sequentially lowered to Q3 to on 23, and at June 30, 2022, due to the inventory right down that I described earlier in my comments, as well as the tax valuation allowance and cumulative losses over the quarters at FY 2023.

Clint Pete: In summary, we've managed that task in our cast management, while diligently deploying capital and support about ongoing business and technology advancements towards growth initiatives and further brand awareness.

Donna Cornel: With that, I'll turn on back over to Don. Thank you, Clint.

Donna Cornel: In conclusion, despite the facing headwinds throughout the full fiscal year, we remain optimistic and excited about the future of our company. While we acknowledge the challenges we've encountered, we have also made significant progress in implementing strategic initiatives that we believe will drive growth and enhance our overall performance. Moving forward, we are committed to leveraging our strengths, refining our strategies and capitalizing on new opportunities. Our dedicated team coupled with our innovative approach positions as well for success in the coming years.

Donna Cornel: We firmly believe that our proactive measures combined with our unwavering determination will enable us to overcome the obstacles we have encountered and pave the way for a brighter future. We are confident in our long-term business strategy. We'll yield favorable results and create long-term value for our shareholders.

Donna Cornel: We extend our gratitude to our valued investors, employees, and stakeholders for their continued support and trust in our company. Together, we will navigate these challenges and we believe emerge stronger than ever.

Operator: At this time, I will turn the call back over to the operator who will open the lines for any questions. Thank you.

Operator: We will now begin the question at the end of the session to ask a question you may press star, then one on your touch to your phone. If you are using a speaker phone, please pick up your hand set before pressing the keys. To withdraw your question, please press star then two.

Operator: Please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the queue.

Operator: At this time, we will pause the momentarily to assemble a roster.

Adam Lowensteiner: Hi Sarah, this is Adam Lowensteiner from Lithium Partners, I am going to pose a few questions to the management team. Hey Adam, good to see you. Hi, Dominic.

Donna Cornel: Where do you see the company streaming made shopping going? Well thanks for bringing that up. So basically, we re about a week into made or made shopping, which is our digital streaming broadcasting interactive shopping experience, allowing the consumer to shop anywhere they want, whether they want to stream through Facebook, Instagram, YouTube, LinkedIn, wherever they are, we re going to give them the ability to see the products that we offer and be able to click and buy right there.

Donna Cornel: In conjunction with that, we re also spread across in a beta phase with the broadcasting side where we re streaming through direct TV and those type of mediums like satellite and also different cable providers. Look to us to gather the data that we re kind of learned and the learnings from where our customers are shopping and where they re located from a demographic standpoint and be able to target them and be able to buy their cable, their direct response type opportunities and be able to target those customers.

Donna Cornel: And also, it allows us to be more diverse in the product offerings that we bring. So moving ahead and moving forward, we believe and anticipate that we re broadcasting a really beautiful signal, a really great show. I mean, for those interested right now, we re actually broadcasting made shopping.com. You can find this, you can find a streaming. So if you just go there, you can look at the quality of the show and what we re putting out.

Donna Cornel: And we believe that it s a state of the art. We believe it s probably the best of the best in technology. We re producing 4K, HD, also we re producing and streaming in 1080p too as well. And really, we re pretty excited about this new initiative. We think this is another way that we can reach a bigger, broader audience. It s also an answer to this incredibly expensive performance marketing, cost per clicks that s going up and really just enabling us to navigate in a different way to be able to clear the noise of all the other competition out there and showcase our products and showcase our product brands like we ve never been able to do before.

Donna Cornel: For example, Forever One is the premium voice night. We innovated it, we created it, we developed it and brought it to market. We need to let the consumers know that that s really what they re looking for. And this enables us to create long form content that we can actually educate those consumers in a much better way and show the competitive advantage as to why they need to be shopping with our brand and all the brand equity that comes along with it.

Donna Cornel: For example, lifetime warranty on our gemstone, certifications, different things like that that will separate us from the voice night perspective. And also in a lab-grown diamond market, it s a very crowded space in very short order and it s a very price-sensitive and the pricing is coming down across the board, for everyone. So we need to be able to bring our own brand forward, which is KDIA. K means pure and in Greek symbolism.

Donna Cornel: I think some some symbolic, I can't pronounce that word, so sorry about that, Adam, but so we believe in diamond as diamond. So you know, lab-grown diamonds are pure diamonds as far as work concerns and chemical and physical properties. And we're bringing them to market in a beautiful way through our incredible designs. And we believe that in order to be a leader in the lab-grown space, we need to push out our brand where customers are gravitating mortar brands.

Donna Cornel: So stay tuned for a bigger footprint, stay tuned for seeing made in a much different light, and also the shopping network or the shopping made. We'll enable us to bring different brands forward to be able to highlight those brands and be able to offer those brands in this stream. So not just limiting to, you know, just primarily find jewelry, but anything that we believe that's aligned with the brand and aligned with what we stand for as a company and enables us to grow in a much bigger way. And we believe brings a lot more value to the shareholders and two Charles and Colbert. I know that was long-winded, but I figured I'd have to get that out there. I appreciate the color.

Donna Cornel: Was the client in wholesale revenue a surprise? Well, we've kind of been deluding a quarter over a quarter that we've been pushing more direct to consumer. Now, that's not to say that the wholesale brick and mortar business is not top of mind for us. And the brick and mortar partners are very dear to our heart and part of our strategy moving forward. And we support them. And no matter of fact, we didn't make the press announcement yet, but I can go ahead and make the statement that we did launch lab-grown diamonds, Katie in Hellsburg stores.

Donna Cornel: So we just launched that basically a week and a half ago. So brick and mortar in our wholesale segment is still very, very strong. We'll continue to support our brick and mortar partners on the wholesale side. You know, we've been talking about a declining market on the wholesale. And that could be because the downward pressure on the pricing starts from the top. So it's no secret that everybody in the industry has been talking about the downward pressure of natural diamonds dropping nearly 40%.

Donna Cornel: I believe the number is. We can get the actual facts on that in quotes. But I believe it's 40% drop on natural because lab-grown diamonds is pushing downward and becoming also a problem as I alluded to in my prior remarks for moist and I'm pushing down on the moist and I'm pricing. So what we need to do is what we have been doing is looking at that very closely over the quarters, focusing more on direct consumer, maintaining our brick and mortar presence and strength with our customers and brick and mortar, supporting them and our brand.

Donna Cornel: All the while looking at our wholesale business and saying, okay, maybe we need to consolidate a little bit here. Maybe we need to kind of key in our strategic partners within the distribution model. And then also we just spoke about Charles and Colbert Direct. So Charles and Colbert Direct we just launched recently here and that's also in beta. So we have a select amount of independent retailers that we have direct relationships with and that basically we can be more competitive and give them better pricing on certain quality of goods that are outside the forever one.

Donna Cornel: So, we believe this could be a solution to an automated process to be able to support the entire wholesale market, but right now our focus is really pushing more direct consumer becoming a brand that's meaningful that resonates with all consumers in all products and all categories. So, how do we do that? We do that through this new streaming technology, we do it through analyzing where that customer's located and given that customer what they're looking for to purchase.

Donna Cornel: So, you know, make no mistake, you know, this could be something that's very significant for us and we believe that it's really important to the business and given the decline on the wholesale side. Now again, it's difficult because we have to report quarter over quarter and say, okay, wholesale is declining by X number percent, but the reality is it's going to continue to decline as long as we keep pushing more direct consumer.

Donna Cornel: And then we anticipate some strength on the brick and mortar side, some strength and additional product brands that will introduce some more brick and mortar partners as we expand more in the lab-grown diamond too as well. So, again, long-winded answer there, but hopefully I covered it which we were asking for. Thank you.

Donna Cornel: Given the move towards lab-grown diamonds, how should investors view the company's inventory? Will you build more lab-grown diamonds and less noise in that going forward? That's a great question. So, in our history we've accumulated a pretty solid amount of inventory through a supply agreement that we have with our strategic partner and if anybody's been tracking or following the company over the years, we've maintained a significant silicon carbide or moistenite inventory. We're pretty comfortable that we have ample inventory to support our overall business.

Donna Cornel: And as I said earlier, for the foreseeable future, that inventory has, as recently come down a little bit through this right down that we just did, but it's a much different business than the diamond business. So, from the lab-grown diamond business, there's so much material that's in the market readily available with our strategic alliances and partnerships and relationships in the vendor community, we're able to buy more in just in time. Now, that's not to say that there wasn't some of that material bundled up in the right down, and that was large in part due to our early entry to market of getting into lab-grown space, which we believe was a great move for the company and now we offer the choice to that consumer, but the difficult scenario there was the market really pushed down and the pricing pressure was intense on the lab-grown side from the early days to where it is today.

Donna Cornel: So, we believe that with this consideration that we just did in the right down, we're in a great position as far as on the diamond inventory, and then purchasing just in time are needs. And then the moistenite will continue to kind of look at that and weigh that, but we have a lot of options there, but if you look at our consumption of material, if anyone wants to look back from our supply agreement, year-to-date, for not year-to-date, but for the full year we purchased $1.8 million worth of material, which you can kind of understand what the consumption was.

Donna Cornel: So we didn't feel that we needed any more material, we had plenty of material, we're servicing all of our customers, all of the needs, and we believe that forever-one is dependent and it will continue to be so for the foreseeable future and beyond. Again, if you have a question, please press star, Ben 1.

Operator: So we know for the question, so it's complete by question and answer section.

Donna Cornel: I would like to turn the conference back over to Donald Cornel for any closing remarks. Thank you, Sarah. I'd like to thank you and everyone else for your attention and continue the lease in our company. We look forward to sharing our progress and achievements with you in the future.

Operator: The conference is now concluded when you are attending today's presentation.

Operator: You may now disconnect.