Charles & Colvard Reports 23% Decline in Q3 Sales, Faces Going Concern Doubts

Charles & Colvard, Ltd. reported a significant decline in financial performance for the three and nine months ended March 31, 2025, as detailed in its latest 10-Q filing. The company recorded net sales of $4.05 million for the third quarter, down 23% from $5.26 million in the same period last year. For the nine-month period, sales fell 34% to $11.91 million from $18.12 million. The decrease in revenue is attributed to weakened consumer confidence amid economic uncertainties, inflation, and increased competition, which adversely affected demand for both moissanite jewels and finished jewelry.

The company's total costs and expenses also decreased, amounting to $6.02 million for the third quarter, down from $8.96 million a year earlier. This reduction was primarily driven by lower sales and marketing expenses, which fell by 59% to $1.52 million, and a 23% decrease in the cost of goods sold, which totaled $3.12 million. Despite these reductions, Charles & Colvard reported a net loss of $1.97 million for the quarter, an improvement from a loss of $3.63 million in the prior year. For the nine-month period, the net loss was $6.64 million, compared to $9.04 million in the same period last year.

Operationally, the company has made strategic adjustments, including a focus on its Online Channels segment, which encompasses e-commerce platforms. The launch of charlesandcolvarddirect.com in May 2023 aimed to enhance direct-to-wholesaler sales. However, the company faced challenges in its Traditional segment, where sales to U.S. customers decreased significantly. As of March 31, 2025, U.S. sales accounted for 100% of total consolidated net sales, reflecting a shift away from international markets, which saw a complete drop in sales during the quarter.

The company’s balance sheet showed a decline in total assets to $29.1 million from $41.0 million as of June 30, 2024. Current assets decreased significantly, particularly cash and cash equivalents, which fell to $1.26 million from $4.14 million. The company’s liabilities also decreased, with total liabilities at $10.02 million compared to $15.33 million in the previous fiscal period. However, the company reported a substantial accumulated deficit of $64.19 million, up from $57.55 million.

Looking ahead, Charles & Colvard faces substantial doubt about its ability to continue as a going concern within the next year, primarily due to ongoing losses and cash flow challenges. The company is actively exploring financing arrangements and cost-saving measures to address these issues. Additionally, it has entered into a Convertible Secured Note Purchase Agreement with Ethara Capital, LLC, which may provide some liquidity relief. However, the effectiveness of these strategies remains uncertain, and the company continues to evaluate its operational and financial strategies in light of prevailing market conditions.