Charles & Colvard Reports Third Quarter Sales Increase of 35 Percent and Nine Month Sales Increase of 39 Percent over the Prior

  Charles & Colvard Reports Third Quarter Sales Increase of 35 Percent and
  Nine Month Sales Increase of 39 Percent over the Prior Year Periods

Forever Brilliant^® Moissanite Jewels Contribute to Growth Across Distribution
                                   Channels

               Conference Call to be held Today at 4:30 PM EDT

Business Wire

MORRISVILLE, N.C. -- October 30, 2013

Charles & Colvard, Ltd. (NASDAQ:CTHR), the sole manufacturer of created
moissanite gemstones,The Most Brilliant Jewel in the World^®, reports net
sales for the three and nine months ended September 30, 2013 increased 35% and
39%, respectively, over the prior-year periods.

Highlights for the Third Quarter 2013:

  *Third quarter 2013 net sales improved 35% to$6.9 millionvs.$5.1
    millionin third quarter 2012, with increases driven by sales of loose
    jewels including the Company’s new, whiter Forever Brilliant^® moissanite
    jewels, as well as from finished jewelry.
  *Loose jewel sales increased 28% for the quarter to $4.8 million, while
    finished jewelry sales increased 56% to $2.0 million for the quarter.
  *Both distribution channels increased sales for the quarter; the wholesale
    business increased 35% to $6.4 million, while the direct-to-consumer
    businesses, Moissanite.com and Lulu Avenue, increased 33% for the quarter
    to $503,000.
  *International sales increased to $3.0 million for the third quarter and
    comprised 44% of net sales, compared with $1.0 million and 20% of net
    sales for the third quarter of 2012. Loose jewel sales in China accounted
    for much of this increase.
  *U.S. sales decreased 5% for the third quarter, primarily because of timing
    differences in restocking orders with the Company’s existing wholesale
    distributors.
  *The Company continued investments in expanding its operations to support
    larger sales volumes, which affected earnings for the quarter.
  *Operating expenses were $4.2 million in the third quarter compared with
    $2.9 million in the year-ago third quarter, with increased expenditures on
    sales and marketing initiatives and personnel to support the Company’s
    growth. Sales and marketing expenses were used for advertising and
    marketing campaigns to expand the Company’s direct-to-consumer businesses,
    increase the awareness of moissanite in China, and increase brand
    recognition and awareness of the Company’s Forever Brilliant^® gemstones.
  *Third quarter 2013 net loss of $1.2 million or net loss of $0.06 per share
    compared to net income of $124,000 or $0.01 per fully diluted share in
    third quarter 2012. Income tax expense for the current quarter was $89,000
    compared to $3,000 in the year-ago quarter.
  *The Company secured a $10 million line of credit with PNC Bank, which
    provides the Company the ability to pursue strategic initiatives and
    support the growing demand for its Forever Brilliant^® moissanite gem as
    well as fund general corporate working capital requirements.

Highlights for the Nine Months 2013:

  *Net sales for the nine months ended September 30, 2013 increased 39% to
    $19.9 million from $14.3 million in the year-ago nine-month period.
  *Loose jewel sales increased 28% to $13.2 million for the nine-month
    period, with finished jewelry sales increasing 66% to $6.6 million.
  *The Company’s wholesale business increased 36% for the nine-month period
    to $18.3 million, while its direct-to-consumer businesses increased 86% to
    $1.6 million.
  *International sales for the nine months ended September 30, 2013 increased
    95% to $5.5 million from $2.8 million in the year-ago nine-month period.
  *U.S. sales increased 25% for the nine months ended September 30, 2013 to
    $14.3 million from $11.5 million in the year-ago nine-month period.
  *Operating expenses were $11.3 million for the nine-month period compared
    with $8.6 million in the year-ago nine-month period.
  *Net loss of $1.4 million or net loss of $0.07 per share for the nine-month
    period compared with net income of $296,000 or $0.01 per fully diluted
    share for the year-ago nine-month period. For the 2013 nine-month period,
    the Company’s income tax benefit was $49,000 compared with $307,000 for
    the year-ago period.

“Consumer demand for our Forever Brilliant^® brand continues to build, and has
resulted in strong quarterly and year-to-date growth in sales. As consumers
become aware of the quality and fine attributes of our Forever Brilliant^®
gemstones, sales across both our wholesale and direct-to-consumer distribution
channels are benefitting,” said Randy N. McCullough, Chief Executive Officer
ofCharles & Colvard, Ltd.

“We continue to focus on our core business of manufacturing and distributing
loose moissanite gemstones and finished jewelry through wholesale channels,
and believe there is long-term opportunity for us to grow this business and
increase moissanite as a percentage of the worldwide jewelry market. The
recent addition of Kohls.com to our list of retailers is another example of
how we continue to expand our relationships with select retailers. We believe
there are opportunities to expand the sale of loose moissanite gemstones and
finished jewelry across multiple distribution channels.

“We believe our investments in technology and increased capacity to meet the
growing demand for Forever Brilliant^® improves our ability to scale the
business and meet this demand. While in the short term, these investments have
impacted gross margins and operating costs, we view them as a critical aspect
of our long-term strategy.

“Consumer awareness continues to build, as our customers understand the
attributes of moissanite, the advances we have made in developing our Forever
Brilliant^® gemstones, and importantly, the beauty and value they receive from
purchasing our gemstones. We believe we are well-positioned for long-term
continued growth,” Mr. McCullough concluded.

Financial Position

Cash and liquid investments totaled $6.7 million at September 30, 2013, down
$5.7 million from approximately $12.4 million at December 31, 2012, and the
Company had no debt outstanding as of September 30, 2013. Total inventory,
including long-term and consigned inventory, was $40.4 million as of September
30, 2013, which was up $7.6 million from approximately $32.8 million at the
end of 2012.

Investor Conference Call:

The Company will host a conference call today, October 30, 2013 at 4:30 PM
EDT. Shareholders and other interested parties may participate in today’s
investor conference call by dialing 877-317-6789 (international/local
participants dial 412-317-6789) and asking to be connected to the “Charles &
Colvard, Ltd. Conference Call” a few minutes before 4:30 PM EDT. The call will
also be broadcast live on the Internet at
www.visualwebcaster.com/event.asp?id=91623.

A replay of the conference call will be available one hour after the call
until 9:00 AM EDT on Thursday, November 14, 2013 by dialing 877-344-7529
(U.S.) or 412-317-0088 (international) and entering the conference ID number
10023609. The conference call will also be archived for review on the Internet
at www.visualwebcaster.com/event.asp?id=91623 and on the Company’s website at
www.charlesandcolvard.com until Thursday, November 14, 2013.

About Charles & Colvard, Ltd.

Charles & Colvard, Ltd., is the global sole source of moissanite, a unique,
near-colorless created gemstone that is distinct from other gemstones and
jewels based on its exceptional fire, brilliance, luster, durability, and
rarity. Charles & Colvard Created Moissanite^® and Forever Brilliant^® are
currently incorporated into fine jewelry sold through domestic and
international retailers and other sales channels. Charles & Colvard, Ltd.’s
common stock is listed on the NASDAQ Global Select Market under the symbol
“CTHR.” For more information, please visit  www.charlesandcolvard.com.

Forward-Looking Statement

This press release contains forward-looking statements within the meaning of
Section27A of the Securities Act of 1933, as amended, and Section21E of the
Securities Exchange Act of 1934, as amended. Statements expressing
expectations regarding our future and projections relating to products, sales,
revenues, and earnings are typical of such statements and are made under the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, statements about our plans,
objectives, representations, and contentions and are not historical facts and
typically are identified by use of terms such as “may,” “will,” “should,”
“could,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,”
“continue,” and similar words, although some forward-looking statements are
expressed differently.

All forward-looking statements are subject to the risks and uncertainties
inherent in predicting the future. You should be aware that although the
forward-looking statements included herein represent management’s current
judgment and expectations, our actual results may differ materially from those
projected, stated, or implied in these forward-looking statements as a result
of many factors including, but not limited to, our dependence on consumer
acceptance and growth of sales of our products resulting from our strategic
initiatives; dependence on a limited number of customers; our ability to
fulfill orders on a timely basis; the financial condition of our major
customers; dependence on Cree, Inc. as the sole current supplier of the raw
material; our current wholesale customers’ potential perception of us as a
competitor in the finished jewelry business; intense competition in the
worldwide jewelry industry; general economic and market conditions, including
the current economic environment; risks of conducting business in foreign
countries; the pricing of precious metals, which is beyond our control; the
potential impact of seasonality on our business; our ability to protect our
intellectual property; the risk of a failure of our information technology
infrastructure to protect confidential information and prevent security
breaches; possible adverse effects of governmental regulation and oversight;
and the failure to evaluate and integrate strategic opportunities, in addition
to the other risks and uncertainties described in our filings with the
Securities and Exchange Commission, or the SEC, including our Annual Report on
Form 10-K for the fiscal year ended December 31, 2012 and subsequent reports
filed with the SEC. Forward-looking statements speak only as of the date they
are made. We undertake no obligation to update or revise such statements to
reflect new circumstances or unanticipated events as they occur except as
required by the federal securities laws, and you are urged to review and
consider disclosures that we make in the reports that we file with the SEC
that discuss other factors relevant to our business.

CHARLES & COLVARD, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

                Three Months Ended September     Nine Months Ended September
                 30,                               30,
                 2013            2012             2013            2012
Net sales        $ 6,858,252      $ 5,076,364      $ 19,875,826     $ 14,312,976
Costs and
expenses:
Cost of goods      3,805,227        2,092,734        10,076,520       5,763,179
sold
Sales and          2,449,679        1,678,779        7,228,883        4,764,595
marketing
General and        1,723,676        1,192,278        3,917,461        3,834,744
administrative
Research and       6,755            1,490            21,779           18,279
development
Loss on
abandonment of    -               -               95,052          -
assets
Total costs       7,985,337       4,965,281       21,339,695      14,380,797
and expenses
(Loss) income
from               (1,127,085 )     111,083          (1,463,869 )     (67,821    )
operations
Other income
(expense):
Interest           5,135            16,002           19,609           57,690
income
Interest          (202       )    (335       )    (1,176     )    (939       )
expense
Total other       4,933           15,667          18,433          56,751
income, net
(Loss) income
before income      (1,122,152 )     126,750          (1,445,436 )     (11,070    )
taxes
Income tax net
(expense)         (88,550    )    (3,125     )    49,422          307,421
benefit
Net (loss)       $ (1,210,702 )   $ 123,625        $ (1,396,014 )   $ 296,351
income
                                                                                 
Net (loss)
income per
common share:
Basic            $ (0.06      )   $ 0.01           $ (0.07      )   $ 0.02
Fully diluted    $ (0.06      )   $ 0.01           $ (0.07      )   $ 0.01
                                                                                 
Weighted
average number
of shares used
in computing
net (loss)
income per
common share:
Basic              20,001,543       19,638,610       19,825,532       19,558,152
Fully diluted      20,001,543       20,017,147       19,825,532       19,942,891


CHARLES & COLVARD, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS

                                        September 30, 2013    December 31,
                                         (unaudited)            2012
ASSETS
Current assets:
Cash and cash equivalents                $    6,199,803         $ 11,860,842
Accounts receivable, net                      9,038,174           8,138,358
Interest receivable                           4,601               694
Held-to-maturity investments                  500,999             505,068
Inventory, net                                11,469,778          8,442,430
Prepaid expenses and other assets             1,018,921           737,406
Deferred income taxes                        1,211,772          1,211,772
Total current assets                          29,444,048          30,896,570
Long-term assets:
Inventory, net                                28,946,967          24,353,580
Property and equipment, net                   1,835,446           1,746,792
Intangible assets, net                        361,538             346,732
Deferred income taxes                         2,586,910           2,520,818
Other assets                                 13,266             12,199
Total long-term assets                       33,744,127         28,980,121
TOTAL ASSETS                             $    63,188,175        $ 59,876,691
                                                                             
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable                         $    5,078,859         $ 2,112,585
Accrued cooperative advertising               493,000             200,000
Accrued expenses and other liabilities       579,887            574,522
Total current liabilities                     6,151,746           2,887,107
Long-term liabilities:
Accrued income taxes                         392,501            383,730
Total liabilities                            6,544,247          3,270,837
Commitments and contingencies
Shareholders’ equity:
Common stock, no par value                    53,644,382          53,318,044
Additional paid-in capital –                  9,566,770           8,459,020
stock-based compensation
Accumulated deficit                          (6,567,224    )    (5,171,210 )
Total shareholders’ equity                   56,643,928         56,605,854
TOTAL LIABILITIES AND SHAREHOLDERS’      $    63,188,175        $ 59,876,691
EQUITY


CHARLES & COLVARD, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

                                            Nine Months Ended September 30,
                                             2013              2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income                            $  (1,396,014  )   $ 296,351
Adjustments to reconcile net (loss) income
to net cash (used in) provided by
operating activities:
Depreciation and amortization                   584,734           423,419
Amortization of bond premium                    4,069             3,988
Stock-based compensation                        1,192,823         801,119
Provision for uncollectible accounts            17,195            373,396
Provision for sales returns                     (101,000    )     237,000
Provision for inventory reserves                197,000           5,000
Benefit for deferred income taxes               (66,092     )     -
Loss on abandonment of assets                   95,052            -
Changes in assets and liabilities:
Accounts receivable                             (816,011    )     (502,437   )
Interest receivable                             (3,907      )     3,352
Inventory                                       (7,817,735  )     1,314,577
Prepaid expenses and other assets, net          (282,582    )     (282,285   )
Accounts payable                                2,966,274         (127,850   )
Accrued cooperative advertising                 293,000           225,000
Accrued income taxes                            8,771             (355,768   )
Other accrued liabilities                      5,365            (309,646   )
Net cash (used in) provided by operating       (5,119,058  )    2,105,216
activities
                                                                             
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment             (673,588    )     (738,341   )
Proceeds from call of long-term                 -                 2,500,000
investments
Patent, license rights, and trademark          (109,658    )    (41,344    )
costs
Net cash (used in) provided by investing       (783,246    )    1,720,315
activities
                                                                             
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock option exercises                         241,265          156,093
Net cash provided by financing activities      241,265          156,093
                                                                             
NET (DECREASE) INCREASE IN CASH AND CASH        (5,661,039  )     3,981,624
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF        11,860,842       6,701,701
PERIOD
CASH AND CASH EQUIVALENTS, END OF PERIOD     $  6,199,803       $ 10,683,325
                                                                             
Supplemental disclosures of cash flow
information:
Cash paid during the period for interest     $  1,176           $ 939
Cash paid during the period for income       $  7,899           $ 12,221
taxes

Contact:

Public Relations:
Dian Griesel Int’l.
Susan Forman, Laura Radocaj
212-825-3210
or
Investor Relations:
Taglich Brothers, Inc.
Christopher Schreiber
212-661-6886
 
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