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Charles and Colvard's 3Q sales sink 48 percent

By Michelle Graff
November 13, 2009

Morrisville, N.C.--Net sales declined 48 percent in the third quarter for Charles and Colvard, according to earnings released by the company late Thursday.

The Morrisville, N.C.-based maker of the man-made gem moissanite reported third-quarter sales of $2.1 million, down from $4.2 million in the third quarter 2008.

Net sales for the first nine months of 2009 totaled $6 million, down 47 percent from the same period of 2008, when the company recorded $11.2 million in sales.

During Thursday's earnings conference call, George Cattermole, chairman of Charles and Colvard's board of directors, said while the company is "not satisfied" with its finances, the figures do signify an improvement over the second quarter 2009, when sales stood at $1.3 million.

He also noted that the company now has a strong management team in place, an objective it has been focused on achieving for the past six months.

"I believe we have accomplished that goal," Cattermole said.

In June, the company added Chuck Lein, retired former president and chief operating officer of Stuller, as a board member.

And just this past week, Charles and Colvard announced the addition of two more industry veterans to its team: Randy McCullough, who most recently served as chairman of the board at Samuels Jewelers, is the company's new chief executive officer, while H. Marvin Beasley, who resigned from the top post at Helzberg Diamonds earlier this year, joined the board of directors.

In addition, in June, Charles and Colvard named Timothy Krist its new chief financial officer.

In the release, McCullough commented on Charles and Colvard's third-quarter performance, saying his first week on the job has been "quite pleasing," given the third-quarter results.

"Seasonally, sales in this quarter are generally strong; however, we experienced a larger increase than projections that were based on prior months' trends," McCullough said in the release. "The team also continued identifying cost savings which, when combined with our improved sales, resulted in the lowest quarterly net loss we have recorded since third quarter 2007."

He added that his first priority as Charles and Colvard's new chief executive officer will be to work closely with customers and the management team to leverage the company's strengths, thus creating new opportunities for moissanite in the marketplace.

"We believe our jewel has great potential as we reposition its future," he said.

In August 2008, Nasdaq Stock Market Inc. notified Charles and Colvard that its stock was subject to potential delisting from the Nasdaq Global Select Market because it had closed below the minimum $1 closing bid price requirement for the preceding consecutive 30 days.
 
Due to the extreme economic downturn, however, the Nasdaq temporarily suspended enforcement of the $1 requirement until July 31, 2009.

As a result, Charles and Colvard has until Dec. 2 to regain compliance, which can be achieved if its stock rises to above $1 for 10 consecutive days. It is a goal the company has not yet met, Krist acknowledged during the conference call Thursday.

"We are pursuing every opportunity we can within the Nasdaq rules to try to prevent this from happening," he said. "However there is not guarantee we're going to be able to accomplish that."

If Charles and Colvard is delisted, Krist said the company will trade on The OTC Bulletin Board (OTCBB) market with the goal of returning to the Nasdaq once business is back on track.
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