Good day, and welcome to the Charles & Colvard Third Quarter Fiscal Year 2021 Earnings Conference Call and Webcast. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions].

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 strategy. Expressions which identify forward-looking statements speak only as of the date the statement is made.

These 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.

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

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/events. The company will be hosting a Q&A session at the conclusion of prepared remarks. Should you have questions and you'd like to submit, please e-mail ir@charlesandcolvard.com.

Please note this event is being recorded. I would now like to turn the conference over to Don O'Connell, President and Chief Executive Officer. Please go ahead sir..

Welcome everyone. Good afternoon. Today, we're going to report Charles & Colvard's fiscal 2021 third quarter results. I'm excited to share with you that the company's momentum continues.

In Q3 fiscal 2021, we were able to deliver $9.4 million in revenue with a meaningful gross margin of 46%, achieving a net income of $1 million or $0.03 per diluted share. We increased our cash position by 65% from a year ago quarter to $19.7 million which is a 17% increase over our cash position from the prior quarter.

Our strong performance is the result of our continued execution of our strategic initiatives. I look forward to discussing this in more detail later during the call, but now I'll turn the call over to our CFO, Clint Pete to unwrap the numbers for you..

Thanks, Don. Today, I'll provide a summary of key financials for Q3 fiscal 2021. Additional detail can be found in our earnings press release that we issued this afternoon and our Form 10-Q which we expect to file this evening. Please note that all percentage comparisons are to the year ago quarter unless specified otherwise. We'll start with revenue.

In total, net sales for Q3 2021 totaled $9.4 million versus $6.5 million or an increase of 45%. Net sales for our online channel segment, which includes charlesandcolvard.com, moissaniteoutlet.com, marketplaces drop ship retail and other pure-play outlets totaled $5.6 million for the quarter or an increase of 45%, representing 59% of total net sales.

More specifically, net sales from our transactional website charlesandcolvard.com increased by 65%. Net sales for our traditional segment which consists of wholesale and brick-and-mortar customers totaled $3.8 million for the quarter or an increase of 45%, representing 41% of total net sales.

Finished jewelry net sales increased 79% for the quarter, as we continue to see strong demand for our premium jewelry on our online direct-to-consumer channels and with our brick-and-mortar retail customers. Loose jewel net sales increased 7% for the quarter. This is due to increased demand from our domestic and international distributors.

Overall, international net sales increased 38%, while cross-border trade sales on our transactional website charlesandcolvard.com increased 15%. Additionally, we saw an increase in demand from our Asian distributors as they began to rebound from the impacts of COVID-19. Moving on, we delivered a gross margin of 46%.

The year ago quarter included a write-off totaling approximately $5.3 million of legacy material inventory which led to a negative 41% gross margin for the year ago quarter. For Q3 2021, total operating expenses decreased 6% representing 35% of total net sales compared to 54% in the year ago quarter.

Sales and marketing expenses decreased 12% to $2.2 million and G&A expenses increased 10% to $1.1 million for the quarter. We reported net income for Q3 2021 of $1 million or $0.04 per basic share and $0.03 per diluted share compared with a net loss of approximately $6.2 million or a loss of $0.21 per diluted share in the year ago period.

Our weighted average shares outstanding used in the calculation of diluted earnings per share were approximately 30.5 million shares at March 31, 2021 compared to 29 million shares at June 30, 2020.

This increase was driven by the issuance of approximately 800,000 shares related to stock option exercises during the quarter along with the dilutive effect of outstanding stock options based on stock price as of March 31, 2021. Now let's move on to a snapshot of our balance sheet.

Our liquidity and capital position remained solid, as we ended the quarter with $19.7 million of total cash compared to $14.6 million at our last fiscal year-end June 30, 2020. Our cash flow from operations was $2.3 million for the quarter compared to a negative $1.3 million in the year ago quarter.

Our working capital at March 31 increased from June 30, 2020 by $12.2 million to $29.7 million. In terms of other sources of liquidity, we continue to have access to a $5 million asset-based credit facility with White Oak Commercial Finance. As of March 31, 2021 we have not accessed funds of this credit facility.

In January of this year, we extended the lease on our corporate headquarters for an additional five years. This amendment which required a remeasurement for accounting purposes did not have a material impact on our income statement or cash flows.

Balance sheet impact resulted in an increase in our right-of-use asset of $3.9 million and lease liability of approximately $4.4 million. Inventory as of March 31, 2021 totaled $28.9 million compared to $30.6 million as of June 30, 2020. Loose jewels inventory was $16.9 million compared to $20.8 million as of June 30, 2020.

Finished jewelry inventory was $12 million compared to $9.7 million as of June 30, 2020 to maintain stock levels for our growing demand requirements. In conclusion, we believe we had a strong quarter from both a net sales and profitability perspective. With that I'll turn the call back over to Don. .

Thanks Clint. These positive results are a reflection of our team's ability to execute and deliver on our strategic initiatives and business goals. We continue to make strides in building robust reporting tools, furthering our ability to make measurable data-driven decisions.

Operationally, we expanded our capacity in order to meet the growing demand, all the while decreasing operating expenses by 6%. Overall, we believe we become more efficient allowing us to successfully flex all areas of the business, especially during the important Valentine's Day season.

For example from January 1 to February 14, our online channel segment revenue increased 21% and the demand on our transactional website charlesandcolvard.com grew by 38% over the same period last year. And as our full quarter results reflect, we continue to see significant top line growth beyond that holiday period.

As Clint stated also, in January, we renewed the lease on our corporate headquarters ensuring business continuity. Included in the lease amendment, we negotiated an allowance for leasehold improvements for up to $545,000 and a rent abatement of approximately $214,000.

These building improvements will allow us to support ongoing initiatives scale distribution and manufacturing and expand sales and marketing functional areas to increase our digital and video capabilities. Our sales and marketing teams continue to enhance our digital functionality and build out our digital roadmap.

This positions us to capitalize on innovative technology that is creating new digital commerce opportunities to generate new sources of revenue for the company. Merchandising and product development continue to play an integral role in our success.

During the quarter, we were able to introduce new Caydia lab-grown diamond offerings, as well as expanded on our patented Signature Collection with new designs featuring additional Forever One moissanite gem shapes and sizes.

Our moissanite business grew 49% over the year ago quarter and our Caydia lab-grown diamond business grew by 34% over Q2 fiscal 2021. We believe this proves the value of our product line expansion and validates our belief that we're not experiencing cannibalization.

We were pleased to see significant growth in our traditional segment with a 45% increase in revenue, as our distribution and brick-and-mortar retail partners continue to gain momentum post COVID-19 related impacts. Our product brand strategy to elevate Forever One is resonating with the consumers and thus driving higher demand for our products.

Additionally, we expanded our Macy's in-store program, adding nearly 20 moissanite jewelry styles within the quarter. Our online channel segment remained strong with a 45% growth in revenue over the year ago quarter which was largely fueled by increased net sales on our transactional website and from our drop ship retail partners.

Also during the quarter, we expanded product assortments with our online retailers to support their growing moissanite demand. Based on these positive results we believe our current marketing strategy is working.

We continue to gain traction in building and elevating the Charles & Colvard brand and our product lines Forever One moissanite and Caydia lab-grown diamonds. Our more immersive shopping experiences such as live virtual consultations and live videos create a stronger bond with the consumer.

This allows us to be part of their buying journey in a meaningful way. Looking forward it's important for us to build out our internal video capabilities to educate and engage with our customers in real-time and on demand. Live stream shopping is a $66 billion business in China and gaining popularity now in the US.

We expect to be well positioned to capitalize on this digital transformation and other opportunities in order to increase our market share. We will continue to elevate the Charles & Colvard brand. expand product offerings with Forever One moissanite and Caydia lab-grown diamonds engage with the consumers and shareholders to ensure.

we're meeting their expectations support our retail and distribution partners as they experience positive trends with moissanite and explore new opportunities to expand Caydia lab-grown diamonds into our sales and operations pipeline. We're proud of the meaningful growth we've experienced over the past three quarters but we will not grow complacent.

We will be diligent in our quest to capture greater market share drive brand equity and further increase shareholder value. With that Garrett I'd like to turn it back over to you for questions. .

[Operator Instructions] Our first question comes from Araya Cole [ph] of Cole Capital..

Good afternoon, gentlemen. Thank you for doing the conference call today. One question. As your press release shows your sales and marketing expenses of $2.2 million declined 12% year-over-year yet remarkably your sales grew by 45% year-over-year.

Could you explain what you're doing differently from a marketing perspective that you're spending less money, but still generating very healthy growth?.

Yes. Sure, Araya. Thanks for pointing that out. So strategically during what we call the transition into Q1 and Q2 and we've been speaking to it as we changed our entire marketing methodology or strategy. So more focused on a mid to lower funnel-type conversion-based model. That's really critical for us. Also we can measure the ROI.

We've also expanded on our analytics side of the business for really just knowing where that consumer is and getting to those consumers that are predisposed to buying lab-grown products in general or, for example, Moissanite or lab-grown diamond specific to their needs.

In conjunction with that our marketing team has kind of had a complete transformation from personnel across the board. We did decrease some of the marketing spend just related to salaries and so forth. So that actually helped the cause a little bit. We were able to kind of meaningfully deploy some of those dollars into direct to paid and search.

We also adopted a PESO model which is paid, earned, shared and owned marketing strategy. So focusing more on shared content through our PR firm also through our marketing team earned media content and exposure further building awareness has really helped the cause.

And actually the marketing team is doing a phenomenal job in kind of changing the aesthetic of the brand the look and feel and really just targeting those consumers that are effectively converting. So they're doing a great job there.

So we will look into future to be able to kind of capitalize and expand on the spend to be able to increase top-line growth too as well now. .

Got it.

So given your success with marketing this quarter do you have enough confidence in what you're doing in terms of its repeatability that you'd have confidence in materially increasing your marketing dollar spend and have confidence that it will result in even faster sales growth as the marketing traction takes place and converts into sales?.

In short, yes, absolutely. But we will also add to that that we also expanded our product offerings too as well.

So what does that do for us that gives us the opportunity to buy keywords in the lab-grown diamond space market more towards a lab-grown diamond consumer to be able to kind of lift the overall business on both sides of the house now that we offer that consumer the choice. Prior we weren't able to do that.

So really that also helps the cause and also increases our market ability and our total TAM effect for the business..

Okay. And last question. As you know De Beers has entered this space with their Lightbox brand and they're selling through Blue Nile.

How do you go about trying to compete effectively with them? I know there's room obviously for multiple players, but De Beers evidently is investing large amounts of money like $100 million plus has nice shelf space at Blue Nile on an exclusive basis.

And the question then is how do you go about trying to compete and hopefully maybe even grow faster than Lightbox?.

Well that's a tough question. So the way we look at De Beers, we look at De Beers as the probably 30,000 pound gorilla so to speak in the natural mine business, right? It's a testament to the lab grown movement that they've actually ventured into that business too as well and really are spending tremendous amount of capital in that space.

So that validates the overall entire market. And then also you're looking at Diamond Foundry who just recently had a capital raise of $200 million with a valuation of $1.8 billion or $1.7 billion, $1.8 billion. So that also further elevates kind of the overall awareness of lab-grown gemstones as a whole. So we're pleased with that.

The early on estimates of the lab-grown diamonds space was $5.2 billion. So we believe that there's plenty of room.

But to answer your question specifically as it relates to Lightbox we -- what they're doing more of a basic-type product right now and they're actually -- they've introduced colored diamonds to their product in different colors assortments, but really just focusing on core basics.

Our business is going after from the fashion side to the bridal and we believe that our product mix is a premium grade of gemstones. So what differentiates us from them is we're specifically focused on that premium consumer that wants to do EF&G color grades and qualities that are VS1 or better. They actually come to market. They do nice goods.

They do come to market with good quality and good standards, but we believe there's plenty of room for all of us. .

All right. Thank you. Well, congratulations and best of luck..

Don O'Connell:.

.:.

[Operator Instructions] Our next question comes from Richard Molinsky..

Don, congratulations. Great quarter. I love the momentum.

And if you could give us your thoughts on the big news that came out yesterday from Pandora about them doing strictly lab-grown diamonds how does it affect you guys? Do you think in a positive negative light? And also with -- are you looking at other things like a Macy's that you could start a program first maybe on the Internet with them and then get into their stores because of the success you've had with Macy's? Are you using that for other chains possibly in the next 6 months to 12 months?.

Yes. Richard, thanks for the call. So, let's address the Pandora conversation, because it's all over the news right now. Absolutely, a positive move not only on their part, but overall it just solidifies the fact of what we've been saying for 25 years as a lab-grown company.

It's really important to be mindful of the earth and mindful of kind of what we're bringing to market. So, sustainable and ethically sourced products. So certainly we do recycled and responsible metals all the time, which is really critical for our business. And certainly, the moissanite is totally sustainable and ethically sourced and manufactured.

The Pandora model for them to shift completely to lab-grown diamonds is very significant. It's significant for us. It's significant for the movement. And I believe that we'll all capture greater market share because of it. Certainly, we're excited about it.

They have a different type of business too as well like I was referring prior to the prior call with Arya that certainly they're more gift giving and they do some nice fashion product too as well, but they have a very unique and distinct product and we believe there's plenty of room for us and we're excited about their entry and their foray.

And really the overall awareness that it's creating right now even for us. So we believe we're going to get a lot of lift from that too as well..

Yes. Thank you so much.

And the second question is just other retail like a Macy's that possibly we could sign up with?.

Yes. If you just kind of listened a little bit I kind of led you a little bit there that we're going to expand Caydia lab-grown diamonds into our sales and distribution pipeline. I don't want to get into specifics right now, but it's specific with motor. It could be our drop ship partners. It could be in multiple areas of the business.

Right now we're specific to charlesandcolvard.com, which we've experienced at 34% growth over the quarter. Now mind you last quarter was our holiday quarter.

So they have a 34% growth in the diamond space, in the lab-grown diamond space, we believe is meaningful but also I just wanted to call out too as well 49% increase in the moissanite business too as well. So we'll look to expand different channels for the Caydia lab-grown diamond here shortly, and we'll be talking about that in the coming quarters. .

Thank you so much. Appreciate it. Great job again. Keep up..

Thank you, sir. Appreciate it..

Our next question comes from Edward Gilmor [ph]. .

Hi, Don. Congrats on the quarter. Just a quick question on the inventory position. I wondered if you could add a little color as to what's in inventory currently? And then also do you have a target number that you're looking to kind of get that down to? Thank you..

You know we get this question a lot, but really the makeup of the inventory is real critical. So our inventory levels have actually decreased, all the while increasing our product offering between the lab-grown diamonds, all the while increasing our position in-store with Macy's in our consignment program and/or our asset programs.

So we need to support those businesses. Those are critical for us. And also we need to understand that the supply chain constraints are affecting a lot of folks around the world in our industry. Certainly, you've heard the news with India and so forth. So I want to be mindful of that. I want to be ahead of it.

I want to be able to make sure that my sales and operations pipeline team, forecasting teams have what they need to support kind of this momentum and this growth trajectory that we're on. So the composition of the inventory is largely based on finished gems and finished jewelry. And those percentages we feel we're very consistent with where we are.

On our finished jewelry side we probably have what Clint? $12 million? What's….

Yes. Just at $12 million..

Right. We're right at $12 million on the finished jewelry side, which we think that's important. Let's keep in mind that the SLAs and the requirements for the Amazon -- the marketplaces customers as well as our drop ship partners are very, very stringent.

We need to ship either that day if they order within a certain period of time and we need to be able to execute. And with the largest portion of our business driving to the online customer base, we need to make sure that we have adequate inventory to be able to support that cause.

As far as the gemstone raw materials and stuff, we've actually decreased that number significantly. So we're real pleased with that. And the makeup of those goods are really active and we're real pleased with that. We also want to note too as well, Ed, that there is a cycle related to our cutting and fastening of our gemstones too as well.

So we have to be mindful of that and we have to be mindful of when we're going to go to market with the given goods and what our strategy is for the holiday season coming up which we generally start to begin now to build out to. So we're pleased with the inventory.

We'll also look to be mindful and really kind of drive down where it needs to be driven. Keep in mind, we also launched our moissaniteoutlet.com which is our disposition strategy and our direct-to-consumer website.

That is absolutely under its own label under moissaniteoutlet.com and then we'll be moving any inactive or non-performing goods throughout that which we spoke to in the last quarter and I've been speaking to the investor community.

So we'll be pushing what we can through those channels and through that channel to be able to kind of maintain the level of inventory that's critical to the business and critical to the growth that we anticipate the business going to..

Got it. Thank you and congrats again you and team on a good quarter. .

Thanks, sir. I appreciate it..

Our next question comes from Paul Zimnisky of PZDA. .

Hi, guys. Just a quick one on the 34% growth in lab diamond sales, and 49% growth in moissanite. What was the comparable on that? It cut out a little bit in the prepared remarks..

That's the -- you say, the comparable, I mean, actually we just launched lab-grown diamonds in late September of 2020. So I don't know if you're talking about comparable to the year ago quarter or….

Yes. Well, you just said that you saw 34% growth in lab diamond sales.

What is that growth relative to?.

Yes. So basically, we're just comparing it to the sales that we had once we launched it the tail end of Q1 into Q2 and then we're just getting that percentage number. At this time, we're not disclosing what the overall market is. We don't discuss product brands and what that is besides the growth trajectory..

So it was up 34% relative to the tail end of Q1 2020?.

Relative to the tail end of Q1 2021, as far as the LGD diamonds..

Okay. Okay.

And then can you maybe talk a little bit about, how you see growing the two primary products the moissanite and the diamonds? And if you – one of those is a greater priority than the other as far as investment in the category in the near and the medium term?.

Yeah. So that's a great question, Paul. I mean, certainly the moissanite business we've been in business for 25 years. We've been making strategic investments. We believe that now that we have the diamond choice, it's actually kind of building more awareness to the moissanite.

To those, who didn't know about moissanite or never being heard about it are actually driving to our website and they're learning about it, and they're making that purchase. As far as the investments, we're continuing our straightforward trajectory and the momentum and the investments in our moissanite, which is our house product in Forever One.

And we're actually working towards making meaningful investments into the diamond space and continue to grow that. Certainly, in the lab-grown diamond, we believe that the market opportunity is tremendous probably more so than the moissanite. So I mean, you can probably read between the lines there that we'll see significant growth on both sides.

But for right now, what we're seeing is the moissanite business is growing at a higher level and a higher pace than the diamond business. But again, we're deploying capital towards marketing spend that speaks to both sides and we're letting that consumer choose.

So in the coming quarters, I'll be able to kind of tell you, where that customer is and what that customer is choosing..

Got it. Thank you very much..

Thank you. Appreciate it, Paul..

Our next question comes from Eric Landry of BML Capital..

All right. Thanks..

Hi, Eric..

So – the, hi.

Anything you could say about the gross margin down a couple hundred basis points, or should we just wait for the Q?.

No. I mean, sure we could talk about it. So 46% margin is pretty strong, right? We're still excited about that we're delivering 46%. We from time to time have to make certain decisions within the business from certain melts and different things like that. And we certainly, had an opportunity to do that and there was some impact related to that.

There was also some impact related to Valentine's Day sales, right? So we had a beautiful Valentine's Day sales event and we were able to really capitalize on kind of the marketing plan and everything related to that. And we did forego a little bit of margin creep on that. But for the most part, it's tied to the melt..

Tied to the melt something to do with the metals?.

Yeah. So let's talk about that a little bit. Sorry about that. Sometimes people don't understand what that means. So in every course of business, you get returns, you get defective product from either the shops and the factories and even customers' returns, or even broken stones, or whatever that is.

And we take that and we compile that, and it goes into a bucket for all intents and purposes. And that bucket starts to be comprised of loose gemstones that we can actually dismount and use those gemstones to be able to re-cut those gemstones into fresh new product.

And then as far as the metals, we're able to take those metals and we're able to recycle those metals because we are a recycled company. So we like to recycle those metals and put it back to production. But there is some losses associated with those metals in the shrinkage and so forth.

So does that clear it up for you a little bit?.

A little bit. So it sounds like there may be a small element of a one-timer in the sort of –.

You're right. So we do that periodically, right? So responsibly, we've got to look at that. And if it gets too big, we want to manage that. We don't want it to get too big to where it actually has a material effect on the business.

All the while we're delivering great EPS here or a nice – we believe to be a nice EPS, and we believe a nice strong profit of $1 million. There's times when it's more meaningful to be able to take those..

I got you. So without that event that may or may not be – may kind of be termed a one-timer, the gross margin would have been a little bit higher who knows how much.

Correct?.

I mean, you can come to your conclusions. But certainly that's specific to what I addressed..

Good. Okay. Great. So now here's a question that you probably can't answer, but I'll go ahead and ask it anyways..

Terrific..

What – how much – I mean, the growth was fantastic. It was off the charts. I can't complain about it.

How much of that growth do you think you could attribute to just a pent-up demand effect, and how much is sort of a secular growth story, while you take share from the mined diamonds so to speak? Anything you could say about that? Any thoughts or anything would be very helpful. .

Sure. So, I'd like to believe that, it's a secular effect, right? From adding the product brand of lab-grown diamonds from changing the marketing strategy really kind of the overall culture of the business, and the shift in what we're doing and the effectiveness of that. I know for sure that, there is some pent-up demand, COVID-wise out there.

There's stimulus happening. There's things like that. So that's why it's really important that we kind of keep the foot on the throttle and we kind of watch every single thing that's going on within the business. But for us, we're confident in kind of the growth where we are and what we've accomplished.

But certainly, the added product mix and the added product offering certainly helps the business, certainly, drives more awareness to us as a brand. And really our overall positioning is just different, right? And we'll continue to focus on capitalizing on that..

Okay. Here's the last one.

How much do you think that the growth can be attributed to your designs – the designs that only you have and nobody else has as opposed to just the popularity of lab grown and moissanite?.

Yes. That's actually a fantastic question. So we've been speaking about it over several quarters and even prior. Our launch of Signature Collection, which is our own proprietary patented collection, patented designs and it's having a significant impact we believe within our business.

And actually the consumer understands that red thread and a theme that it is Charles & Colvard specific to the brand furthering bolstering our brand equity and who we are and what we bring to market. So we don't actually disclose the percentages or numbers on that, but it's also climbing as well and it's a value-add to everything we do here. .

All right. Great. Thanks. And keep it up. Keep kicking..

Thanks. Appreciate you, man..

Our next question comes from Jason Ursaner from Bumbershoot Holdings..

Congratulations on another strong quarter here. .

Hi, Jason.

How are you doing?.

First question. The PPP loan obviously still had it through the end of the quarter.

Could you talk about forgiveness on that or where it stands today or when you're expecting that?.

Sure. I'll let Clint address that. .

Thanks, Jason. Yes, we currently have not filed for our application for forgiveness today. Our lenders recently told us that we could probably -- they'll start taking the applications in the fourth quarter.

We expect maybe around June 1st, we'll be able to submit and then follow the process of that forgiveness approval process with both the SBA and the lender. .

Okay. And then just to go back to Caydia, just I guess I need clarity now.

So what you're saying on the growth rate in lab grown so excluding all the moissanite fiscal Q3 grew 34% sequentially on top of the holiday period fiscal Q2 or versus the initial launch period?.

So it's versus Q2. So that is specific. So both the moissanite and the Caydia lab grown diamond grew within this quarter. But it's specific to the Q2 sales versus the Q3 sales. .

So you grew on top of the holiday period?.

So we grew 49% on the moissanite over the year ago quarter. But on the lab grown diamonds we only launched the end of Q3. So we generated revenue at the end of Q3 whatever those sales were there, but it was nominal because we basically had eight days in that quarter when we launched it or whatever reporting days there was.

And then from there we went into Q2 holiday where when we launched the program. So we generated sales in Q2 right out of the gate and we continued to kind of increase the velocity of the sales and the lab grown Caydia brand. And then from there we stopped it at the end of Q2. We took those numbers of revenue.

And then we actually just used all of Q3 sales against those numbers and that's where we had the 34% increase over Q2 fiscal 2021. .

Got it. Fantastic. And so then with -- just with the lab grown diamonds, how vertically integrated or technical know-how is that piece? I know in moissanite, there's very deep roots in the company versus lab grown with Caydia.

Are you developing that or is it more of a sourcing and branding aspect?.

Yes. So let's talk about that a little bit. So I mean I've been in the industry for over 3.5 decades. So from the transfer of knowledge in the diamond world, it's second nature to me. So that's really my forte is diamonds and gems and then I came to Charles & Colvard and then we now only do lab grown moissanite and lab grown diamonds.

So for me a diamond is a diamond. And certainly our lab grown diamonds Caydia is a diamond. So same entire language and conversation and dialogue and marketing strategy and plans and designs and everything is exactly the same. Some of the differentiators between Caydia and others is we only bring to market the premium grades of gemstones.

So that's really important. Really all the gemstones are IGI-certified or GCAL or even GIA for that matter. So basically, we allow the third -- resident experts out there to third-party confirmations to be able to do that. Certainly, the styling is important.

Certainly, the signature collection bringing Caydia lab grown diamond mounted in our proprietary signature, patented collections is critical and that's a delineation from others. And you'll look to us to try to become more vertically integrated as the road kind of continues and the business case continues and we continue to grow the business. .

In terms of the technology for making it or expanding the brand from a sales perspective?.

So expanding the brand from a sales perspective is a given. That's the natural progression. If that consumer is there that consumer is buying, we have the capacity. We have the infrastructure. We have all elements in place to grow this thing as big as it wants to grow. As far as the actual cutting and fastening, we do that with our moissanite gemstones.

We do not do that on the lab grown diamonds at this time, right? So the progression could be, one could think that we could actually be more vertically integrated on the diamond as the business starts to evolve and grow. .

All right. Awesome. I appreciate the answers. Thanks..

Great. Appreciate it..

This concludes our question-and-answer session. I would like to turn the conference back over to Don O'Connell, President and CEO for closing remarks. .

So we appreciate your time today. On behalf of the entire Charles & Colvard team. I want to thank you for your continued interest and support for CTHR. We look forward to the next calls.

Keep in mind that if you want to reach out and have a one-on-one certainly you can go to ir@charlesandcolvard.com request an appointment and Clint or myself will get on that call. And we'll be happy to be as transparent as we can to answer any questions or comments. But thanks again. We enjoyed the time. You all be well. .

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