Charles & Colvard(CTHR) - 2025 Q4 - Annual Report

Financial Performance - Consolidated net sales for the three months ended September 30, 2024, were $3.23 million, a decrease of approximately $1.72 million, or 35%, compared to $4.95 million for the same period in 2023[110] - Sales of finished jewelry represented 92% of total consolidated net sales for the three months ended September 30, 2024, totaling $2.96 million, down 31% from $4.30 million in the prior year[112] - Sales of loose jewels accounted for 8% of total consolidated net sales, amounting to $270,000, a decrease of approximately $382,000, or 59%, compared to $652,000 in the same period last year[113] - U.S. net sales decreased to $3.23 million, or 32%, in the three months ended September 30, 2024, compared to $4.77 million in the prior year, with 100% of total consolidated net sales coming from the U.S.[114] - International net sales dropped to $0, a decrease of 100%, for the three months ended September 30, 2024, compared to $184,000 in the same period of 2023[116] Costs and Expenses - Total costs and expenses for the three months ended September 30, 2024, were $5.37 million, down from $7.58 million in the same period of 2023[110] - Total cost of goods sold decreased to $2.2 million for the three months ended September 30, 2024, down approximately $800,000, or 26%, from $3.0 million in 2023[119] - Sales and marketing expenses were $1.88 million for the three months ended September 30, 2024, a decrease of approximately $845,000, or 31%, from $2.72 million in 2023[123] - General and administrative expenses decreased to $1.26 million for the three months ended September 30, 2024, down approximately $590,000, or 32%, from $1.85 million in 2023[128] Operational Loss - The loss from operations for the three months ended September 30, 2024, was $2.14 million, an improvement from a loss of $2.63 million in the prior year[110] - During the three months ended September 30, 2024, approximately $1.29 million of cash was used in operations, primarily due to a net loss of approximately $2.13 million[146] Economic Challenges - The company continues to face challenges due to general economic uncertainties, inflation, and rising interest rates, impacting consumer confidence and demand for products[111] Strategic Initiatives - The company plans to focus on affordability initiatives and invest in lab-created gemstone technologies to meet evolving customer requirements[107] - The company is committed to expanding its product portfolio while maintaining a focus on domestic markets and growing global sales[107] Supplier Dependency - The company has historically depended on a single supplier for silicon carbide crystals, which poses a risk to its operations if supply is interrupted[100] - The company has a future minimum annual purchase commitment of SiC crystals ranging from approximately $4.00 million to $10.00 million each year under the Supply Agreement with Wolfspeed[157] - The company purchased $0 of SiC crystals from Wolfspeed during the three months ended September 30, 2024 and 2023[157] - The company agreed to pay Wolfspeed a total of $4.77 million as part of a settlement agreement related to a breach of contract claim[158] Financial Position - As of September 30, 2024, the company's cash and cash equivalents totaled $2.74 million, down from $4.14 million as of June 30, 2024[144] - The company's working capital decreased by approximately $2.04 million to $2.65 million from $4.69 million at June 30, 2024[145] - The company had $2.3 million in short-term borrowings on its line of credit as of September 30, 2024, with no long-term outstanding debt[140] - The company has access to a $5.00 million cash collateralized line of credit facility, which was amended multiple times since its inception[152] Tax and Regulatory Matters - The company recognized zero net income tax benefit or expense for the quarters ended September 30, 2024, and 2023[135] - The company had federal tax net operating loss carryforwards of approximately $24.76 million expiring between 2034 and 2037[151] - The company has substantial doubt about its ability to continue as a going concern within one year from the issuance of its financial statements[137] Interest Income - Interest income for the three months ended September 30, 2024, was $43,635, a decrease of $48,625, or 53%, from $92,260 in 2023[132] Market Impact - The company expects fluctuations in the price of gold and other precious metals to impact operating cash flow as it manufactures finished jewelry[148]