Q3 2024 Charles & Colvard Ltd Earnings Call

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Operator: Good day, and welcome to the Charles and Colvard third quarter fiscal year 2024 earnings call and webcast. All participants will be in a listen-only mode.

Good day and welcome to the Charles <unk> Colvard third quarter fiscal year 2024 earnings call and webcast. All participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

Operator: Should you need assistance, please signal conference specialists by pressing the star key followed by zero. This earnings call may contain forward-looking statements as defined in Section 27A of the Securities Act of 1933 as amended, including statements regarding, among other things, the company's business strategy and growth. Expressions that identify forward-looking 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.

Operator: Future developments and actual results could differ materially from those set forth in, contemplated by, or underlying the foregoing statements. In light of these risks and uncertainties, there can be no further assurance that the foregoing information will prove to be accurate.

Operator: This earnings call may contain forward looking statements as defined in section 27, a of the Securities Act of 1933 as amended including statements regarding among other things the company's business strategy and growth expressions to identify forward looking statements are based largely on our company's expectations and are subject to a number of risks and uncertainty.

Operator: Keith.

Operator: 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 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.

Operator: Accompanying today's call is a supporting PowerPoint slide deck, which is available in the investor relations section of the company's website at ir.charlesandcolvard.com front slash events. The company will be hosting a question-and-answer session at the conclusion of the prepared remarks. Should you have any questions you would like to submit, please email IR at charlesandcolvard.com. Please note this event is being recorded. I would now like to turn the conference over to Mr. Don O'Connell, President and Chief Executive Officer. Please go ahead. Good afternoon.

Operator: Accompanying today's call is a supporting Powerpoint slide deck, which is available in the Investor Relations section of the company's website at IR Dot Charles M. Call-board Dotcom French slash events. The company will be hosting a question and answer session at the conclusion of the prepared remarks.

Operator: Did you have any questions you would like to submit please email I are at Taro and Colborne dotcom.

Don O'Connell: Note. This event is being recorded I would now like to turn the conference over to Mr. Don O'connell, President and Chief Executive Officer. Please go ahead good.

Don O'Connell: Good afternoon everyone, and welcome to our third quarter fiscal 2024 financial results conference call. Fashion industry leaders predicted uncertainty for 2024 amid subdued economic growth, weak consumer confidence, and persistent inflation, according to a recent McKenzie report, and Charles and Colvard continue to experience these challenges during Q3. The global luxury group behind fashion houses such as Gucci, Alexander McQueen, and others recently reported downward pressures on their top lines, citing linger Though these trends have impacted us for the last several quarters, we remain optimistic about the company's long-term value as we've seen revenue declines shrink across sequential quarters.

Don O'Connell: Good afternoon, everyone and welcome to our third quarter fiscal 2024 financial results Conference call.

Don O'Connell: Fashion industry leaders predicted uncertainty for 2024 amid subdued economic growth weak consumer confidence and a persistent inflation. According to a recent Mckinsey report.

Don O'Connell: And Charles and Colvard continue to experience these challenges during Q3.

Don O'Connell: Here, the global luxury group behind fashion houses, such as Gucci, Alexander Mcqueen, and others recently reported downward pressures on their topline, citing lingering luxury buying slowdowns and sluggish market conditions.

Don O'Connell: So these trends have impacted us for the last several quarters, we remain optimistic about the company's long term value as we've seen revenue declines shrink across sequential quarters. Overall revenue for Q3 was $5 $3 million and while down 21% compared to Q3 FY 2023.

Don O'Connell: Overall revenue for Q3 was $5.3 million, and while down 21% compared to Q3 FY2023, that figure is a 12 basis points improvement over the Q1 FY2024 decline and a 3 basis points improvement over the Q2 FY2024 decline. We believe that we continue to close the gap and make progress towards profitability. Margin erosion, however, continued during the quarter, due, we believe, to the significant rise in gold pricing.

Don O'Connell: That figure is a 12 basis points improvement over the Q1, FY 'twenty 'twenty four decline and a three basis points improvement over the Q2, FY 'twenty 'twenty four decline.

Don O'Connell: We believe that we continue to close the gap and make progress towards profitability.

Don O'Connell: Margin erosion. However continued during the quarter due we believe to the significant rise in gold pricing greater promotional pricing pressure amid a deeply discounted retail environment driving an increase sell cadence on increased demand for Arcadia lab grown diamonds as a percentage of sales on Charles and Colvard.

Don O'Connell: Greater promotional pricing pressure amid a deeply discounted retail environment driving an increased sell cadence, an increased demand for Arcadia lab-grown diamonds as a percentage of sales on charlesandcobar.com, elevated shipping costs, a disposition strategy to liquidate some obsolescence inventory, and other inflationary impacts. We are working to mitigate additional margin creep and stabilize product margins by reviewing our vendor agreements and relationships and negotiating, when possible, to reduce the cost of goods sold, evaluating our overall product assortment, and mindfully managing our overall advertising and marketing spend. We're encouraged by the opportunities that conscious consumerism and our forward momentum on our strategic initiative.

Don O'Connell: Dot com.

Don O'Connell: Elevated shipping cost.

Don O'Connell: Disposition strategy to liquidate some obsolescence inventory and other inflationary impacts.

Don O'Connell: We are working to mitigate additional margin creep and stabilized product margins by reviewing our vendor agreements and relationships and negotiating when possible to reduce cost of goods salt evaluating our overall product assortment and mindfully, managing our overall advertising and marketing spend.

Don O'Connell: But the current environment, we're encouraged by the opportunities that conscious consumerism and ethical manufacturing awareness create for Charles and Colbert and our forward momentum on our strategic initiatives.

Don O'Connell: Forever One, the company's quarterstone and pinnacle lab grown Moissanite gemstone product brand, saw revenues increase 5% compared to Q3 FY 2023, while Cadia lab grown diamond sales on Charles and Colvard were up 16% compared to the year-ago quarter. We believe we're well positioned to capitalize on increased consumer awareness of lab-grown gems, particularly Moissanite and lab-grown diamonds, Prada joined LVMH brands Fred and Tag Heuer as one of the first high jewelry houses to adopt lab-grown gems, launching a collection featuring lab-grown diamonds and recycled gold last year.

Don O'Connell: Forever, one the company's cornerstone and Pinnacle lab run Watchnight gemstone product brand saw revenues increased 5% compared to Q3, FY 2023, while Kt of lab grown diamonds sales on Charles and Colvard were up 16% compared to the year ago quarter.

Don O'Connell: We believe we're well positioned to capitalize on increased consumer awareness of lab grown jobs, particularly moist night and lab grown diamonds as more brands and retailers continue to embrace the lab ground movement.

Don O'Connell: Pronto joined L. B M H brands, Fred and Tag Hoyer as one of the first high jewelry houses to adopt lab grown jams launching a collection featuring lab grown diamonds in recycled gold last year, we feel that the wider acceptance of lab grown diamonds in recycled metals further validates the Charles and Colvard made not mined story.

Don O'Connell: We feel that the wider acceptance of lab-grown diamonds and recycled metals further validates the Charles and Colbert Made Not Mined story. Additionally, we've rebranded Moissanite by Charles and Colbert as our newest gem brand, Forever Bright. To further distinguish our premium Moissanite gemstones in the market, Forever Bright Moissanite will replace Moissanite by Charles & Colbart's listings on our Drop Ship and Marketplace partner sites, including Macy's.com, Belk.com, Kohl's.com, FredMeyerJewelers.com, ShopMyExchange.com, the Army and Air Force Exchange Services online store, and others.

Don O'Connell: Additionally, we've rebranded and voice and I by Charles and Colbert to our newest John Brannan Forever bright.

Don O'Connell: To further distinguish our premium moist night gemstones and the market forever, Brian Morris and I will replace moist tonight by Charles and Colvard listings on our drop ship and marketplace partner sites, including Macy's Dot Com Belk Dot Com Kohl's Dotcom, Fred Meyer Jewelers Dotcom shop, My exchange Dotcom.

Don O'Connell: Army and Air Force Exchange services online store and others.

Don O'Connell: The new Gemstone brand will also be available for purchase by approved independent jewelers and retailers on CharlesAndCulverDirect.com, a downstream solution for value-oriented consumers seeking quality synonymous with Charles and Culver Moissanite at lower price points to broaden our overall reach. Inventory decreased 24% for the quarter as the company continued to refine its jewelry offerings in response to consumer preferences.

Don O'Connell: New gemstone brand will also be available for purchase by approved independent doors.

Don O'Connell: When retailers on Charles and Colvard direct dotcom eight downstream solution for value oriented consumers seeking quality synonymous with Charles and Colvard more tonight at lower price points to broaden our overall reach.

Don O'Connell: Inventory decreased 24% for the quarter as the company continues to refine its jewelry offerings in response to consumer preferences.

Don O'Connell: On charlesandcobart.com, the company expanded engagement in fashion jewelry categories in both Forever One Moist Night and Cadia Lab Ground Diamond product brands during the quarter. To better penetrate the low-cost consumer market and capture additional market share, the company updated its moissaniteoutlet.com website with improved item filters for a better user experience, a fresh look and feel, refreshed assortment, and increased frequency of its marketing campaigns and emails. The company continues to make significant investments in its people resources, its next-generation web platform, and its marketing and advertising assets and capabilities, which we deem to be essential for a lifestyle brand to better align with consumers in a crowded and competitive environment.

Don O'Connell: And Charles and cobalt Dotcom, the company expanded engagement and fashion jewelry categories in both forever, one moist tonight and Kt of lab grown diamond product brands during the quarter.

Don O'Connell: To better penetrate the low cost consumer market and capture additional market share. The company updated its more tonight outlet dotcom website with improved item filters for a better user experience a fresh look and feel refreshed assortment and increased frequency of its marketing campaigns and emails.

Don O'Connell: The company continued to make significant investments in its people resources. Its next generation web platform and its marketing and advertising assets and capabilities with what we deemed to be essential for our lifestyle brand to better align with consumers in a crowded and competitive environment, keeping us top of mind with more concentrated social media.

Don O'Connell: Keeping us top of mind with more concentrated social media campaigns, refreshed evergreen assets across paid media platforms, and new brand ambassadorships, such as the recently announced strategic partnership with American actress Skylar Samuels. Aaron Lim, host of E!

Don O'Connell: Campaigns refreshed evergreen assets across paid media platforms.

Don O'Connell: And new brand ambassadorship, such as the recently announced strategic partnership with American actress Skyler Samuels.

Don O'Connell: The Rundown, donned Katie of Lab Grown Diamonds on the red carpet for the People's Choice Awards in February, and the company's successful Valentine's Day sale comprised 52% of charlesandcolvard.com's revenue for the quarter. We strategically incorporated more user-generated content this quarter as we have seen positive results from the company's paid search and paid social campaigns by implementing these new assets. In Q3, the company launched an ethical consumerism campaign across its digital marketing efforts, focusing on Charles and Colbert's Made Not Mine stories.

Don O'Connell: Erinn, let me host of eat the run down Don Katy lab grown diamonds on the Red carpet for the People's Choice Awards in February.

Don O'Connell: And the company's successful Valentine's day itself comprise 52% of Charles and Colvard Dotcoms revenue for the quarter.

Don O'Connell: We strategically incorporated more user generated content this quarter as we have seen positive results from the company's paid search paid social campaigns by implementing these new assets.

Don O'Connell: In Q3, the company launched an ethical consumerism campaign across its digital marketing efforts focusing on Charles and Colvard, It's made in online story.

Don O'Connell: We believe our increased digital marketing efforts and e-commerce presence enable us to reach a broader audience and drive more customers online. The more places consumers can reach Charles and Colbard, the stronger the company's brand equity can become, showcasing our quality, craftsmanship, and innovation, thereby seeking to capture a greater market share. Bottom line, we believe that our marketing efforts are gaining traction. We continue to beta test our made shopping broadcast and streaming initiatives, gleaning valuable insights into a new customer base while recognizing a lift in top of funnel brand awareness. We have recently begun to scale back spending while effectively fine-tuning the programming to appeal to optimal markets for our product.

Don O'Connell: We believe our increased digital marketing efforts and ecommerce presence enable us to reach a broader audience and drive more customers online.

Don O'Connell: The more places consumers can reach Charles and colvard, the stronger the company's brand equity can become.

Don O'Connell: <unk>, our quality craftsmanship and innovation, thereby seeking to capture greater market share.

Don O'Connell: Bottom line, we believe that our marketing efforts are gaining traction.

Don O'Connell: We continue to beta test, our made shopping broadcast and streaming initiatives gleaning valuable insights into a new customer base while recognizing.

Don O'Connell: A list and top of funnel brand awareness, we have recently begun to scale back spending while effectively fine tuning the programming to appeal to optimal markets for our products. We look forward to updating you with further made shopping plans in more detail on future calls as we believe that network will enable us to cross more verticals beyond.

Don O'Connell: We look forward to updating you with further made shopping plans and more detail on future calls as we believe this network will enable us to cross more verticals beyond the jewelry and gemstone industry. As we look to hedge against the pricing pressures that continue to impact the jewelry and gemstone industry, as well as our traditional segment, we believe that the new launch of our Charles and Colvard Direct.com Wholesale Portal enables the company to be more competitive while incentivizing independent jewelers and retailers to buy direct in support of this initiative.

Don O'Connell: The jewelry the gemstone industry.

Don O'Connell: As we look to hedge against the pricing pressures that continue to impact the jewelry or jumps down industry as well as our traditional segment. We believe that the new launch of our Charles <unk> Colvard direct dotcom wholesale portal enables the company to be more competitive while incentivizing independent, Georgia retailers to buy direct in support of this.

Don O'Connell: Initiative.

Don O'Connell: We launched a trade campaign announcing Charles and Colvard Direct with bi-weekly newsletter ads on jck.com, a leading industry website publication. We partnered with JCK to send a dedicated email to more than 30,000 independent jewelers and retailers announcing Charles and Colvard Direct. We revamped the Charles and Colbert Direct.com website with updated marketing assets and simple to use account registration, and most recently, we issued a press release announcing the strategic shift with our traditional segment.

Don O'Connell: We launched the trade campaign announcing Charles and Colvard direct website with biweekly newsletter ads on J C. K dot com, a leading industry website publication.

Don O'Connell: We partnered with J C K to send a dedicated email to more than 30000, independent jewelers and retailers announcing Charles and Colvard direct.

Don O'Connell: We revamped it Charles and Colvard direct dotcom website with updated marketing assets and simple to use account registration and most recently, we issued a press release announcing the strategic shift with our traditional segment.

Don O'Connell: I firmly believe that while we face challenges within our industry, we are confident that our team's agility in the face of adversity will guide us towards success and growth. I will now turn the presentation over to Clint Pete, our CFO, to provide detailed insight into our financial performance during Q3. Clint, please proceed.

Don O'Connell: I firmly believe while we face challenges within our industry. We are confident that our team's agility in the face of adversity will guide us towards success and growth.

Don O'Connell: I will now turn the presentation over to Clint Pete our CFO to provide detailed insight into our financial performance during Q3.

Clint J. Pete: Please proceed.

Clint J. Pete: Thanks Don. Today I'll provide a summary of key financials for the third quarter ended March 31st, 2024. Additional details can be found in our early press release that we issued this afternoon in our 4-10 queue, which we expect to follow early next week. Please note that all percentage comparisons are to the 3rd quarter end of March 31, 2023, unless specified otherwise. First, we'll start on slide 8 with a comparative analysis of the third quarter of fiscal 2024 compared to the same period one year ago.

Clint J. Pete: Thanks Dawn today I'll provide a summary of key financials for the third quarter ended March 31 2020 for.

Clint J. Pete: Additional details can be found in our earnings press release that we issued this afternoon and our foreign 10-K, which we expect to file early next week.

Clint J. Pete: Please note that all percentage comparisons are to the third quarter ended March 31st 2023, unless specified otherwise.

Clint J. Pete: First I will start on slide eight with a comparative analysis of the third quarter of fiscal 2024 compared to the same period one year ago.

Clint J. Pete: In total, net sales for Q3 2024 totaled $5.3 million versus $6.6 million, a decrease of 21%. This is due primarily to continued weak consumer confidence, continued pricing pressures on the lab-grown diamond market, and the expected decline in the company's wholesale revenue as we continue to build a more robust direct-to-consumer business, and as our independent juror and retailer initiative on charlesandcohortdirect.com Net sales for our online channel segment, which is primarily direct-to-consumer and includes charlesandcobar.com, moysenoutlet.com, Charles & Colbert Direct dot com, Mateshopping dot com Marketplaces Dropship Retail, and other pure play outlets totaled $4.1 million for the quarter, now representing 77% of total net sales, up 7% from a year ago.

Clint J. Pete: In total net sales for Q3, 2024 totaled $5 $3 million versus $6 $6 million a decrease of 21%.

Clint J. Pete: Due primarily to the continued weak consumer confidence continued pricing pressures on our lives on diamond market.

Clint J. Pete: And the expected decline in the company's wholesale revenue as we continue to build a more robust direct to consumer business.

Clint J. Pete: And as our independent juror in retailer and it should have a childhood cohort direct dot com continues to mature.

Clint J. Pete: Net sales for our online channels segment, which is primarily direct to consumer and includes Charles and Colvard Dot com.

Clint J. Pete: I'll, let dot com.

Clint J. Pete: Charles and Colvard direct dot com.

Clint J. Pete: Shopping dot com marketplaces drop ship retail and other pure play outlets.

Clint J. Pete: $4 $1 million for the quarter now representing 77% of total net sales up 7% from a year ago.

Clint J. Pete: Net sales for our traditional segment, which consists of wholesale and brick-and-mortar customers, totaled $1.2 million for the quarter, representing now 23% of total net sales, compared to 30% of sales in the year-ago quarter. Finished jewelry net sales represented 93% of total sales in the quarter, up from 80% of sales in the third quarter one year ago.

Clint J. Pete: Net sales for our traditional segment, which consists of wholesale and brick and mortar customers totaled $1 $2 million for the quarter, representing now 23% of total net sales compared to 30% of cells and the yoga quarter.

Clint J. Pete: Finished jewelry net sales represented 93% of total sales in the quarter up from 80% of sales in the third quarter one year ago.

Clint J. Pete: As previously mentioned, due to the company's strategic shift in its traditional segment strategy..., loose jewel net cells decreased 71% Domestic sales on charlesandcobar.com represented 98% of all sales in the third quarter, with international sales totaling 2%. Moving to slide 9, to discuss gross margin, we reported a gross margin of 23% versus 32% in the year-ago quarter, or a gross profit of $1.2 million versus $2.1 million in the year-ago quarter.

Clint J. Pete: As previously mentioned due to the cafe strategic shift in its traditional segment strategies.

Clint J. Pete: This drove net sales decreased 71% for the quarter.

Clint J. Pete: Domestic sales and Charles and cohort Dot com represent a 98% of all sales in the third quarter with international sales totaling 2%.

Clint J. Pete: Moving to slide nine to discuss gross margin, we reported a gross margin of 23% versus 32% gross margin in the year ago quarter.

Clint J. Pete: Or a gross profit of $1 $2 million versus $2 $1 billion in gross profit in the year ago quarter.

Clint J. Pete: Due in large part to rising commodity prices, the company's sale cadence, and a disposition strategy to litigate some obsolescence investors. 4-2-3-2024 Operating expenses increased 13% from the year-ago quarter. So marketing expenses increased 13% to $3.7 million. This increase reflects our continuing investments in people resources, top of the funnel, and influencer marketing campaigns, and brand awareness initiatives that, we believe, allow us to elevate our brand's position. General and administrative expenses were $1.2 million for the quarter compared to $1.1 million in the year-ago quarter. The increase in GNA for Q3 2024 was due, in large part, to increased legal fees compared to the prior year quarter.

Clint J. Pete: Due in large part to rising commodity prices companies sell cadence and a disposition strategy to little quite some obsolescence inventory.

Clint J. Pete: For Q3, 2024 operating expenses increased 13% from the year ago quarter.

Clint J. Pete: Sales and marketing expenses increased 13% to $3 $7 million.

Clint J. Pete: This increase reflects our continued investments in people resources top of funnel and Influencer marketing campaigns and brand awareness initiatives that we believe will allow us to elevate our brand positioning.

Clint J. Pete: General and administrative expenses were $1 $2 million for the quarter compared to $1 $1 million in yoga quarter or 14% increase.

Clint J. Pete: The increase in G&A for Q3, 2024 was due in large part to increased legal fees as compared to the prior year quarter.

Clint J. Pete: We reported a net loss for Q3 2024 of $3.6 million, or $0.12 loss per diluted share, compared with a net loss of $8.4 million, or $0.28 loss per diluted share, in the year-go period. The main driver for the decreased net loss was the $6.3 million tax expense in the Urgo quarter, driven by the establishment of a Deferred Tax Asset Valuation Allowance on our Net Deferred Tax Asset Our weighted average shares outstanding on a diluted basis used in the calculation of loss per share for the quarter were approximately 30.3 million shares for the period ended March 31st, 2024, the same as in the year-ago period. Now, let's move on to Snapshot Overbalance.

Clint J. Pete: We reported a net loss for Q3 2020 for $3 $6 million or 12 cents loss per diluted share compared with a net loss of $8 $4 million or 28 cents loss per diluted share in the year ago period.

Clint J. Pete: The main driver for a decrease in net loss was $6 3 million tax expense in the year ago quarter.

Clint J. Pete: Driven by the establishment of a deferred tax asset valuation allowance on our net deferred tax assets.

Clint J. Pete: Our weighted average shares outstanding diluted basis used in the calculation of loss per share for the quarter were approximately 33 million shares for the period ended March 31 2024.

Clint J. Pete: Same as in the year ago period.

Clint J. Pete: Now, let's move on to a snapshot over balance sheet.

Clint J. Pete: Our liquidity and capital position remain strong as we end the quarter with $9.2 million of total cash, compared to $11.1 million at the end of Q2. Working capital remains strong at $12.7 million. As of March 31, 2024, the company had $500,000 in short-term outstanding debt. Our cash flow used in operations was $2.1 million during the quarter, compared to $800,000 of cash flow used in operations in the same quarter a year ago. In terms of other liquidity, we have access to our $5 million cash-secured credit facility with JPMorgan Chase Bank. As of March 31, 2024, the company had $500,000 outstanding on the credit facility.

Clint J. Pete: Liquidity and capital position remains strong as we ended the quarter with $9 $2 million of total cash.

Clint J. Pete: Compared to $11.1 million at the end of Q2.

Clint J. Pete: Working capital remained strong at $12 $7 million.

Clint J. Pete: As of March 31, 2024, the company had $500000 in short term outstanding debt.

Clint J. Pete: Our cash flow used in operations was $2 $1 million during the quarter.

Clint J. Pete: Fair to $800000 of cash flow used in operations in the same quarter a year ago.

Clint J. Pete: In terms of other liquidity, we have access to a 5 million dollar cash secured credit facility with Jpmorgan Chase Bank.

Clint J. Pete: As of March 31, 2024, the company had $500000 outstanding on the credit facility.

Clint J. Pete: Inventory as of March 31st, 2024 totaled $25.3 million compared to June 30th, 2023 when it totaled $26.8 million, paired to $33.3 million at March 31st, 2023. A year-over-year decrease of $8 million due to the inventory write-down in Q4 FY21. Loose drills inventory was $8.2 million as of March 31st, 2024, compared to $9.1 million as of June 30th, 2023, and compared to $15.6 million as of March 31st, 2023. A year-over-year decrease, again due to the inventory write-down referred to above.

Clint J. Pete: Inventory as of March 31st two out 24 totaled $25 $3 million compared to June 32023, when it totaled $26 $8 million.

Clint J. Pete: <unk> to $33 $3 million at March 31, 2023, a.

Clint J. Pete: Our year over year decrease of $8 million due to the inventory write down in Q4 FY 2023.

Clint J. Pete: Those jewels inventory was $8 $2 million as of March 31, 2024, compared to $9 $1 million as of June 32023, and compared to $15 $6 million as of March 31 2023.

Clint J. Pete: Year over year decrease again due to the inventory write down referred to above.

Clint J. Pete: The finished jewelry inventory was $16.9 million as of March 31st, 2024, compared to $17.3 million as of June 30th, 2023, and compared to $17.4 million as of March 31st, 2023. The company remains focused on prudent inventory management strategies in support of our in-stock requirements with select dropship marketplace partners. Book value per share at the end of the third quarter was $1.01 per share, trading well below market. In summary, we remain confident in our continued efforts to increase shareholder value and brand equity. With that, I'll turn it back over to Don.

Clint J. Pete: Finished jewelry inventory was $16 $9 billion as of March 31st 2024, compared to $17 $3 million as of June 32023, and compared to $17 $4 million as of March 31 2023.

Clint J. Pete: The company remains focused on prudent inventory management strategies in support of our in stock requirements with select drop ship marketplace partners.

Clint J. Pete: Book value per share at the end of the third quarter was $1.01 per share trading well below market.

Don O'Connell: In summary, we remain confident in our continued efforts to increase shareholder value and brand equity.

Don O'Connell: With that I'll turn it back over to dawn.

Don O'Connell: Thank you Claire.

Don O'Connell: As we approach our fiscal year-end, our focus remains steadfast on launching key initiatives while diligently working to navigate the challenge of reducing expenses while driving revenue. By leveraging our resources more efficiently and better maximizing our efforts, we are committed to achieving sustainable growth and delivering value to our stakeholders. With a collective dedication to innovation and operational excellence, we believe we are poised to capitalize on the opportunities we've created and overcome challenges as we chart a successful path forward.

Don O'Connell: As we approach our fiscal year and our focus remains steadfast on launching key initiatives, while diligently working to navigate the challenge of reducing expenses, while driving revenue.

Don O'Connell: Leveraging our resources more efficiently and better maximizing our efforts, we are committed to achieving sustainable growth and delivering value to our stakeholders.

Don O'Connell: With a collective dedication to innovation and operational excellence. We believe we are poised to capitalize on the opportunities we've created and to overcome challenges as we chart a successful path forward.

Don O'Connell: Thank you for your unwavering support as we continue this journey together. With that, I'll turn the call back over to the operator who will open the lines for any questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch tone.

Don O'Connell: For your unwavering support as we continue this journey together.

Don O'Connell: With that I'll turn the call back over to the operator, who will open the lines for any questions.

Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up, and if you have further questions, you may re-enter the question queue. And at this time, we'll pause momentarily to assemble our roster, and the first question will come from Bruce Lindenman, investor. Please go ahead, sir.

Speaker Change: Thank you we will now begin the question and answer session.

Bruce Lindenman: To ask a question you May Press Star then one on your Touchtone phone.

Bruce Lindenman: If youre using a speakerphone please pick up your handset before pressing the keys.

Bruce Lindenman: To withdraw your question. Please press Star then two.

Bruce Lindenman: Please limit yourself to one question and one follow up and if you have further questions. You may reenter the question queue and at this time, we'll pause momentarily to assemble our roster.

Bruce Lindenman: And the first question will come from Bruce London Investor. Please go ahead Sir.

Bruce Lindenman: Uh, hi. Um... Do you still have your stock buyback in place, and are you still... and the management buying stock personally?

Bruce Lindenman: Oh hi.

Bruce Lindenman: Do you still have your stock buyback in.

Bruce Lindenman: In place and are you still.

Bruce Lindenman: The management buying stock back buying stock personally.

Don O'Connell: Yeah, hi, Bruce. Yeah, if you look at the last historical purchases right when we had the ability to purchase and it wasn't a quiet period, you'll look at the directors, inclusive of myself, that bought a significant amount of shares recently.

Bruce Lindenman: Yes, Hi, Bruce Yes, if you look at the last historical purchases right, where we're at.

Don O'Connell: You don't have the ability to purchase and it wasn't a quiet period Youll look at the directors inclusive of myself that bought significant.

Don O'Connell: Out of shares recently.

Don O'Connell: Do you think you'll continue doing that?

Speaker Change: Do you think you'll continue that.

Don O'Connell: Certainly, we believe that this is an opportunity at these prices, you know. That is the first part of it. The second part is in relation to the stock buyback repurchase program. We currently have, I believe, $4.5 million left within the repurchase program to be able to buy.

Bruce Lindenman: Certainly we believe that this is an opportunity at these prices you know.

Don O'Connell: That.

Don O'Connell: The first part of it the second part is in relation to the stock buyback repurchase program. We currently have I believe four and a half million dollars left within the repurchase program to be able to buy.

Don O'Connell: Are you gentlemen going to buy back stock at its book value here?

Speaker Change: Hi, gentlemen.

Don O'Connell: Buyback stock because it's sort of book value here.

Don O'Connell: So that's an executive decision that is always contemplated on a daily basis. And we certainly believe that we're trading way below book. We believe that it's a wise move in capital. You know, one thing, just to be very clear, we want to make sure that we maintain liquidity. We want to make sure that we have, you know, the cash to be able to operate the business. We want to make sure that we... complete a lot of these initiatives that we had initiated and we're funding. So, you know, we weigh all these things on a daily basis. But at what point...

Don O'Connell: So that's a you know an executive decision that has always contemplated on a daily basis.

Don O'Connell: So we certainly believe that we're trading way below book and we believe that it's a.

Don O'Connell: A wise move and capital you know one thing just to be very clear, we want to make sure that we maintain liquidity we want to make sure that we have the cash to be able to operate the business. We want to make sure that you know we.

Don O'Connell: You know complete a lot of these initiatives that we had initiated and were funding.

Don O'Connell: So you know we weigh all of these things on a daily basis.

Don O'Connell: At what point do you think the company could at least turn cash flow positive? (inaudible)

Speaker Change: At what point do you see the company could.

Don O'Connell: At least turn cash flow positive.

Don O'Connell: Times of.

Don O'Connell: <unk> business.

Don O'Connell: Yeah, I mean, I don't give forward-looking statements, but I will tell you that we're completing a lot of the goals and initiatives that we put forth in the last few quarters, kind of building out capabilities, content capabilities, and marketing strategy. A lot of this spend, though, as of late, has been on performance marketing and so forth. So that really is something that we need to kind of look at, and we need to do a better job of kind of getting a return on our ad spend.

Speaker Change: Yes, we do.

Speaker Change: Don't give forward looking statements, but I will tell you that.

Don O'Connell: We're completing a lot of the goals and initiatives that we put forth in the last few quarters kind of building out capabilities content capabilities marketing strategy.

Don O'Connell: Lot of the spend though as of late has been on performance marketing and so forth. So.

Don O'Connell: That really is something that we need to kind of look at and we need to do a better job in kind of getting a return on their AD spend so we're looking at it diligently but.

Don O'Connell: So we're looking at that diligently, but look to us to wind down and start to really... you know, look for the path of profitability now. So, as we have in the last couple of quarters, we've been kind of building and making these investments to be able to build out what we believe is the future state of the company and what we believe is necessary to be able to build a next-generation company in the long run. So we've made strategic investments in our web property. We're building out a new, what we call the next-gen website. It has unbelievable functionality, a lot better than what we have today.

Don O'Connell: Look to us to wind down and start to really.

Don O'Connell: You know look for the path of profitability now so as we were in the last couple of quarters, we've been kind of building in making these investments to be able to build out what we believe is the future state of the company and what we believe is necessary to be able to build.

Don O'Connell: Our next generation company in the long run so we made strategic investments in our web property, we're building out a new what we call the Nextgen website.

Don O'Connell: Has unbelievable functionality a lot better than what we have today.

Don O'Connell: It's literally a single point for the consumer to be able to click and buy any shape, any size, any configuration of the actual piece of jewelry they're buying. So that's really important. They can pick whatever color they want.

Don O'Connell: Literally a single point for the consumer to be able to click and buy any shape any size any configuration between the actual piece of jewelry or they're buying so thats really important they can pick whatever color. They want and so we believe that that investment was very very strategic and very critical it's taken us a little bit longer than we anticipated to be able to.

Don O'Connell: So we believe that that investment was very, very strategic and very critical. It's taken us a little bit longer than we anticipated to be able to kind of launch that, but we stated on the last call that we'd be launching in Q4. So that still is the target.

Don O'Connell: Kind of launch that but we stated on the last call that we'd be launching in Q4. So that still is the target. So once we get that launch we get it up and running the spend will level out a little bit there.

Don O'Connell: So once we get that launch, get it up and running, the spend will level out a little bit there, and then we believe that's probably the most significant driver for future growth for us. And then that'll get us really to the path of profitability because we'll start to save dollars there and gain economies of scale. So the new next-gen property will enable us to peel off a lot of these, for all intents and purposes, APIs or third-party resources and partnerships that we have that we won't need once we launch the next-gen platform. So that'll help us also become more, you know, profitable in the long run. So we're pretty excited about getting this thing up and running. And, you know, feeling the benefits and the cost savings.

Don O'Connell: And then we believe that's probably the most significant driver for future growth for US and then that will get us really to the path of profitability, because we will start to save dollars.

Don O'Connell: Dollars Dara and economies of scale, so the new Nextgen property.

Don O'Connell: We will enable us to Peel off a lot of these.

Don O'Connell: For all intensive purposes, API or third party resources and partnerships that we have that we won't need once we launch the nexgen platform. So that'll help us also become more.

Don O'Connell: You know profitable in the long run so we're pretty excited about getting this thing up and running and.

Don O'Connell: You know.

Don O'Connell: Feeling the benefits and the cost savings.

Don O'Connell: Have you discussed or tried to form any partnerships in terms of companies that you sell through to invest in the company or to help you with any of this stuff?

Don O'Connell: Two.

Eddie: Eddie have you.

Speaker Change: Discussed or try to form any partnerships in terms of.

Speaker Change: Companies that you sell through.

Speaker Change: <unk> invested in the company or to help you with any of this stuff.

Speaker Change: In terms of finance.

Don O'Connell: Yeah, I mean, that's always a concern.

Speaker Change: Yes, I mean, that's always a can sell much cash every quarter.

Don O'Connell: No, I mean, that's no question, right? So, you know, for us, these are investments. That's the way we look at it right now. I mean, we knew the horizon for us to peel back these investments, and we knew what we wanted to be kind of focused on and strategically spending the dollars where we needed to spend them. So that is actually starting to come down. Certainly, every day, we have a lot of conversations between partners out there. We've been in the jewelry industry for a long time. There are certainly a lot of viable partnerships, alliances, or things that could be... But at this point, you know, there's nothing to be spoken about about that.

Speaker Change: No I mean thats.

Speaker Change: No question right. So.

Don O'Connell: For us these are investments thats the way, we look at it right now I mean, we knew the horizon for us to Peel back these investments and we knew what we wanted to be kind of focused on in strategically spending the dollars, where we needed to spend them. So that actually is starting to come down.

Don O'Connell:

Don O'Connell: You know, but he certainly every damn moderately every day, we have a lot of you know com.

Don O'Connell: Conversations between you know partners out there I mean, we've been in the jewelry industry for a long time, there's certainly a lot of viable partnerships alliances or things that could be.

Don O'Connell: Could come to fruition, but at this point.

Don O'Connell: There's nothing to be spoken about them that we're going to do.

Don O'Connell: But don't lie, so... I would just like to see something happen or something good or before you guys run out of money.

Speaker Change: So because I just like I, just like to see something happen or good or before you guys run out of money.

Speaker Change: Right. So let's talk about that and you want to talk about the liquidity. So you know given the fact that we have and thank you for bringing that up so we have $9 $2 million in cash at the end of the quarter. We certainly have the credit line capability.

Don O'Connell: We certainly have the credit line capability and have the capability to draw on that. We believe that our inventory of finished jewelry is comprised of really valuable inventory. So that means active inventory. And that means finished jewelry inventory. That means a large portion of that inventory contains a commodity in the metals gold, right? So I don't need to say to anybody right now that gold is really rising and climbing. It has, you know, it has an adverse effect on new orders that are priced at a prior gold price.

Don O'Connell: And have the capability to draw on that.

Don O'Connell: We believe that our inventory in finished jewelry is.

Don O'Connell: It is comprised of really.

Don O'Connell: [noise] valuable inventory so that means active inventory that means finished jewelry inventory that means a large portion of that inventory contains a commodity in the metals gold rate. So I don't need to say to anybody right now, but gold is really ryzen and climbing.

Don O'Connell: It has it has an adverse effect on new orders that are priced at a prior gold price and then it has a benefit when the inventory that we have that's been on the shelf.

Don O'Connell: And then it has a benefit when the inventory that we have that's been on the shelf increases in value to the current market. So we know that if you just said, you know, we wanted to raise capital or we wanted to get more liquid, we would sell off the finished jewelry first. Then the other thing I want to point out is that Charles and Colbert Direct is a real new initiative for us to be able to control our destiny.

Don O'Connell: Valuation of that inventory increases to the current market. So we know that if you just said.

Don O'Connell: We wanted to raise capital, where we wanted to get more liquid we would sell off the finished jewelry first then the other thing I want to point out is Charles <unk> Colvard direct is a real new initiative for us to be able to control. Our destiny, we started moving more toward direct to consumer but as of late we realize the fact that we've got.

Don O'Connell: We started moving more toward direct to consumer, but as of late, we realized the fact that we've got over $8.2 million in loose jewels and loose gems. So that's another avenue for us to raise capital or generate some more cash. So look to us to kind of build out and lean in on that and go after the trade for the loose jewels. I know it's been my messaging quarter over quarter to go more direct to consumer.

Don O'Connell: Over.

Don O'Connell: Over $8 $2 million in loose jewels and loose gems. So thats another avenue for us to raise capital or generate some more cash so look to us to kind of build out and lean in on that and going after the trade for loose jewels I know, it's been my messaging quarter over quarter to go more direct to consumer that hasn't wavered and that hasnt changed at all.

Don O'Connell: That hasn't wavered, and that hasn't changed at all. The difference is now we're going to go Charles and Cobar direct with this portal and be able to tap into thousands of independent retailers. So those retailers will buy the loose jewels and, therefore, will be able to convert them to cash. The next question will come from Ben Franklin with River Styx Capital.

Ben Franklin: All the differences now we're going to go Charles and Colvard direct with this portal and be able to tap thousands of independent retailers. So in those retailers will buy the loose jewels and therefore, we'll be able to convert it to cash.

Operator: The next question will come from Ben Franklin with River Styx Capital. Please go ahead. Hey guys, I just have one question. Why draw?

Don O'Connell: The next question will come from Ben Franklin with reverse <unk> capital. Please go ahead.

Ben Franklin: Hey, guys I just have one question why draw on the credit facility, considering the high cash balance.

Ben Franklin: Yeah, that's a good question. So we're making, you know, I mean, we only drew, it's a half a million dollars. We felt that, you know, we wanted to draw it down.

Ben Franklin: Yes, that's a good question so we're making.

Ben Franklin: We only drew it's a half a million dollars we felt that.

Ben Franklin: You know we wanted to.

Ben Franklin: Draw down I mean.

Don O'Connell: You know, we haven't used a credit facility since we've been in operation here for, you know, several years. So, we want to make sure that the credit facility, should we want to draw on it, is available and that everything flows in and out the way it does. Certainly, the money factor there is very fractional. So, to preserve cash, sometimes it's in and out. It really depends. So, we just wanted to go ahead and draw on it. So, we thought it was a good thing for us to do at the time.

Speaker Change: Yeah, we haven't used the credit facility since we've been in operation here in for several years. So we want to make sure that the credit facilities should we want to draw on it is available and everything flows in and out the way. It does certainly the money factor there is very fractional.

Don O'Connell: So to preserve cash sometimes it's in and out it really depends.

Don O'Connell: So we just we just wanted to go ahead and draw on it. So we thought it was a good thing for us to do at the time.

Don O'Connell: Yeah.

Don O'Connell: Yeah.

Don O'Connell: Okay.

Don O'Connell: This.

Don O'Connell: <unk> our question and answer session I would like to turn the conference back over to Mr. Don O'connell, President and Chief Executive Officer for any closing remarks. Please go ahead.

Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. Don O'Connell, President and Chief Executive Officer, for any closing remarks. Please go ahead.

Don O'Connell: Thank you, Chuck. I just want to thank you for your support with Charles and Colvard. We look forward to continuing updates for our shareholders in future quarters. I want to thank everyone for their support, and we'll talk to you next quarter, and we look forward to telling you some great things that are coming up.

Don O'Connell: Thank you Chuck.

Don O'Connell: I just wanted to thank you for your support with Charles <unk> Colvard, we look forward to continuing updates.

Don O'Connell: For our shareholders in future quarters.

Don O'Connell: I want to thank everyone's support and we'll talk to you next quarter and we look forward to Tony some great things that are coming on board.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

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

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