Charles & Colvard Ltd.

And welcome to the Charles and Cozart First Quarter FY2024 Earnings Conference Call and Webcast. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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. Expressions that identify 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 further assurance that the forward-looking information will prove to be accurate. Accompanying today's call is a supporting PowerPoint slide deck, which is available on the Investor Relations section of the company's website at The company will be hosting a Q&A session at the conclusion of the prepared remarks. Should you have any questions you'd like to submit, please email cthr at rhythmpartners.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.

Good afternoon everyone and welcome to our first quarter fiscal 2024 financial results conference call. My comments will be briefer than usual as we spoke with investors just one month ago and you'll recognize a lot of the same themes. During the first quarter, we continue to experience headwinds from a challenging economy that has created weakened consumer spending as well as softening engagement activity. While there is definite outside pressure on the industry as a whole, we continue to forge ahead with several new initiatives leading into the important holiday season through Valentine's Day. While we work through these dynamics, it's important to note that we believe our strategies will soon begin to offset the downward pricing pressure as the company's Charles and Colvard direct initiatives take hold and as consumers continue to seek alternatives to mine diamonds. such as lab-grown diamonds, moissanite, and lab-created colored gemstones. As we discussed in prior quarters, the consumer is gravitating towards products that are sustainable and ethically sourced. We believe we are well-positioned to navigate this meaningful shift in the industry as our lab-grown diamond revenue, as a percentage of sales quarter over quarter, continue to grow. While early indicators within our industry suggest that consumer spending will likely be down this holiday season compared to recent years, with our enhanced sales initiatives, Charles and ColvardDirect.com, and our direct-to-consumer digital streaming made shopping experience, our product assortment, and our inventory levels, we believe that we'll be able to provide an enticing value proposition for those retailers and consumers seeking quality made-not-mine gemstones and fine jewelry products. With that being said, closing out the quarter with over $12.7 million in cash and cash equivalents, $27 million in inventory, and investments made to maintain our retail partner service level commitments for the quarter, reaching 94% in stock, we believe this position is well into the holiday quarter. As we stated last quarter, and as we move into Q2, look to us to continue to stabilize our business. While we make strategic investments in global brand awareness campaigns, innovative technology, including key personnel and our product assortment to meet consumer expectations and to stay ahead of the competition, to deliver additional products and services designed to unlock new revenue streams. More specifically, we continue to invest in our technology and our web properties, including Charles and Colvard direct.com. which we believe enables us to engage thousands of independent jewelers directly, capturing an untapped wholesale market for our multiple grades of loose gemstones. While we continue to make capital investments to transform CharlesandColvard.com into what we believe will be the best-in-class web experience, we continue to expand our product offerings to include more fashion-forward styles and larger Acadia lab-grown diamond total weights in response to consumer demand. Additionally, we received positive responses to Arcadia lab-grown diamond and precious created color assortments, which can help us to broaden our consumer appeal. Lastly, we continue to shift our moissanite assortments to leverage their value proposition against increased pricing pressure from lab-grown diamonds. On the traditional side of our business, we continue to work with our existing brick-and-mortar partners, modifying our Forever One Moissanite assortments with fresh new designs and increased carat weights to highlight the value proposition and differentiate against competitive diamond alternatives. In addition, we have introduced Arcadia lab-grown diamond-finished jewelry assortments in key markets through these brick-and-mortar partners. We believe that significant growth opportunities remain within this channel in future quarters and thus will remain top of mind to the organization. As I mentioned on our last call, we have been expanding our business to directly interface with the consumer while controlling the customer experience. To achieve this, we have built an environment to meet today's consumers with shoppable interactive live streaming on connected TV, linear broadcasting, satellite, and social media platforms like Facebook, YouTube, X, formerly Twitter, and LinkedIn with TikTok to come, allowing our consumers the ability to click and buy anywhere they see us. This initiative not only enables us to reach a broader audience, it also allows us to generate vast amounts of content supporting our social media channels and marketing efforts. We see potential for future revenue growth as we leverage these platforms to showcase our product and brands in new and exciting ways. While intended to provide an exceptional user experience, We are excited about the possibilities that lie ahead and the positive impact of this initiative on our marketing and growth trajectory. As we look ahead, while we most certainly recognize the impact of the pricing pressures and the macro elements of the economy on our business, we remain focused on cash preservation, diligence sourcing, and increased brand focus initiatives to help ensure we are all well positioned to capture greater market share. I will now turn the presentation over to Clint Peet, our CFO, to provide detailed insight into Q1's financial performance. Clint, please proceed. Thanks, Don.

Today I'll provide a summary of key financials for the first quarter ended September 30, 2023. Additional details can be found in our earnings press release that we issued this afternoon and our foreign TimQ, which we expect to follow along. Please note that all percentage comparisons to the first quarter ended September 30, 2022, unless specified otherwise. First, we will start on slide eight with the comparative analysis of the first quarter of fiscal 2024 compared to the same period one year ago. In total, net sales for Q1 2024 total $5 million versus $7.4 million, a decrease of 33%, due primarily to a changing economic environment and our declining wholesale business. Net sales for our online channel segment, which is primarily direct-to-consumer and includes CharlesMCovard.com, MoistureNetOutlet.com, CharlesMCovardDirect.com, Marketplaces, Drop Ship Retail, and other pure play outlets, total $3.9 million for the quarter, or a decrease of 19%. but now representing 79% of total net sales, up from 66% one year ago. Net sales for our traditional segment, which consists of wholesale and brick and mortar customers, totaled $1 million for the quarter, or a decrease of 59%, representing now 21% of total net sales, down from 34% of sales in the year-ago quarter. While finished jewelry net sales decreased 22% for the quarter, it represented 87% of total sales in the quarter, up from 75% of sales in the first quarter one year ago, as we further positioned ourselves in the fine jewelry market. As we mentioned in prior calls, due in part to our shift towards finished jewelry and direct-to-consumer strategies, loose jewel net sales decreased 64% for the quarter, while continuing to experience weak demand with our domestic and international distributors. Looking at sales by geography, nearly all sales in the first quarter were derived in the US, while international net sales reported in the quarter were $180,000. Moving to slide nine to discuss gross margin, we reported a gross margin of 39% versus 45% gross margin a year ago quarter, or a gross profit of $1.9 million versus $3.3 million and gross profit in the year-ago quarter. For Q1 2024, total operating expenses increased 1% from the year-ago quarter, though the marketing expenses decreased 12% to $2.7 million. Journal and administrative expenses were $1.9 million for the quarter compared to $1.4 million in the year-ago quarter, or a 31% increase. The increase in G&A for Q1 was due in large part to expenses occurred as a result of the cybersecurity matter in late Q4, totaling approximately $300,000 in the quarter. We reported a net loss for Q1 2024 of $2.5 million, or $0.08 loss per diluted share, compared with a net loss of $890,000, or $0.03 loss per diluted share in the year-ago period. The main drivers for our increased net loss were the decline in revenue and added expenses due to the cybersecurity event. Our weighted average shares outstanding on a diluted basis used in the calculation of the loss per share for the quarter were approximately 30.4 million shares for the period ended September 30, 2023, same as in the year-ago quarter. Now, let's move on to a snapshot of our balance sheet. Our liquidity and capital position remained strong as we ended the quarter with $12.7 million of total cash, compared to $15.6 million at the end of the fourth quarter ended June 30, 2023. Working capital remained strong at $15.1 million. In addition, the company remained debt-free. Our cash flow used in operations was $2.7 million during the quarter. compared to $3.7 million of cash flow used in operations during the same quarter a year ago. In terms of other sources of liquidity, we have access to our $5 million cash-secured credit facility with JPMorgan Chase Bank, which was renewed for another year in June 2023. As of September 30, 2023, we have not accessed funds through our credit facility agreement. Inventory as of September 30, 2023, totaled $27 million. compared to June 30, 2023, when it totaled $26.8 million, and compared to $36.6 million at September 30, 2022, a year-over-year decrease of nearly $9.3 million due to the inventory write-down in Q4 FY2023. Bruce Jewell's inventory was $8.6 million as of September 30, 2023. compared to $9.1 million as of June 30, 2023, and compared to $16.6 million as of September 30, 2022, a year-over-year decrease, again, due to the inventory write-down referred to above. Venice Jewelry inventory was $18.4 million as of September 30, 2023, compared to $17.3 million as of June 30, 2023, and compared to $19.9 million as of September 30, 2022, The increase to June 30th is due to our preparation for the upcoming holiday season. That said, we remain focused on prudent inventory management strategies going forward. Book value per share at the end of the first quarter was $1.22 per share, sequentially lowered to Q4 2023. In summary, we remain diligent in our cash management in support of our ongoing business and technological advances towards growth initiatives and further brand awareness.

With that, I'll turn it back over to Don. Thanks, Clint. In conclusion, while acknowledging the challenging economic environment and industry pressures, we remain steadfast in our commitment to adapt, evolve, and to thrive. We firmly believe that the strategic initiatives, pricing strategies, and product expansions reflect our proactive response to current market conditions. We are confident that these measures will help to enhance and elevate our overall position in the marketplace. As always, I would like to express our gratitude for your continued support and look forward to updating you on a future call. At this time, I will turn the call back over to the operator who will open the lines for any questions.

Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two. Please limit yourself to one question and one follow-up. If you have further questions, you may re-enter the question queue. At this time, we will pause momentarily to assemble our roster. Our first question comes from Eric Landry, private investor. Please go ahead.

Hello.

Hey, Eric. How are you doing?

Okay. What is the state of the litigation regarding the supply agreement with Wolfspeed?

Yeah, that's a great question. So, you know, we did publish in the K what the status was at this particular time right now. We did set a date for the arbitration date. It's almost a year from now. So that's pretty much all I can elaborate on that. But, you know, we believe that, you know, it's pretty clear, you know, the arbitration will come up and we'll continue to process forward.

Okay. So from what I understand, you haven't taken delivery of anything for nine months and they want $3 million, so to speak. Is that basically what it comes down to?

Yeah, I mean, basically that is correct. So we opted that, you know, we don't wish to pursue more material at this time, right, and we didn't over the course of nine months. And they believe that, you know, there's $3 million in material that we should have, and we, you know, everything's subject to interpretation. So that's basically where we're at right now.

Okay, so that's not on the balance sheet, correct, Clint? That agreement is nowhere on the balance sheet, correct?

The agreement as far as the material?

The $18 million that the case says is still outstanding on the supply agreement. There's no liability on the balance sheet, correct?

No, again, that's the whole purpose for arbitration, right? Everything is subjective to the agreement. So there is nothing on the balance sheet in relation to the $18 million outstanding, correct?

So Charles and Covart does not believe that that's a liability?

Whether we believe or don't believe is open for arbitration and for the consideration that we're going to be discussing in the future months to come.

Okay. So is there a scenario where you could pay them a couple million bucks and be done with it?

Well, the scenario would be we need to do what's best for the business. And right now, if what's best for the business is to take simply what the business needs and kind of negotiate future state or terms or whatever both parties agree to, then we're open for discussion. But at this point in time, we have ample inventory to support our business. We believe that we've got what we need for kind of the short and long term at this point. If there's other needs or considerations, then we'll we'll kind of seek that out from them or from others. But at this point in time, we feel that at the current price and where we're at in the market, it's not within the best interest of our shareholders or the company at this time to seek out and get more goods. Now, whether they have goods available for us or don't have goods available, all that's subject to interpretation and negotiation.

Yeah, it's obviously not good to take on any more inventory. The question is, how much is it going to cost us to get out of this thing? Is it going to be the full $18 million? Is it going to be the $3 million they think you owe them right now? I don't know. It seems like a pretty difficult situation.

We have to understand that we've been in this situation where we've come to the table and negotiated over the past, the supply agreement. They've been a great partner for almost three decades. Maybe we have an impasse related to pricing. Maybe we have an impasse to other things, but Certainly, you know, we do have a good relationship back and forth with them. It's just, you know, we personally cannot take on goods right now. And whether we believe that, you know, the future of their product is for us or not or, you know, it's at a price that we could afford to take and be competitive in the market is all things that we need to consider. For us, we believe that we're in a position within the agreement where there's certain provisions within the agreement that that we believe that we're in a good place, and certainly they have their own position that they decide to take. So that's where we're at. So at this point, we don't have any other obligation to them, you know, other than what's in writing and the interpretation of what the agreement is.

How quickly are lab-grown diamond prices going down right now, if any?

So I can tell you right now is over the last nine months, the movement and the downward pressure has been considerable. We are seeing some stabilization now and some stability in the pricing, and really it's the retailers that are actually holding the levels up and maintaining a pretty respectful and moderate retail, but it did absolutely put pressure on Moist Tonight considerably, as I've been alluding to in the past quarter at our year end and also now in this quarter. So what we're doing right now is we're looking for ways to come to market and be able to create a bigger delta between the two. We believe we have a solution for that, but look to us in the coming quarters to kind of talk that through and speak to it. But we believe there's some stabilization coming on. But price of lab grown has come down unbelievably low.

Right. I'm trying to get a sense for is it bottoming or is there still more significant declines to go?

It depends on where you go and who you speak to. So from the grower's perspective, it probably is bottoming a little bit. But you still have distributors that are in the middle that are what we'll call bottom feeders that are going into the market with a lot of cash, and they're buying up oversupplied goods at an unbelievable price, and they're willing to take very small margins on it. So, you know, for us, I mean, those are opportunistic buys for us. So we are acquiring those goods to put us in a better position to make higher margin. So we're also going into the market in the lab-grown diamond space and seeking those opportunities ourselves, too, as well.

All right. Last question for me. How far is the board willing to go with this thing? We're six quarters. We've lost money now or we've declined money. in revenue, lost money for several quarters in a row here. You know, at this pace, the cash is not going to last forever. At what point does the board say, hey, we need to do some, we need to think about strategic alternatives here. We need to do something. The house is on fire.

Well, so, you know, that's a good question, right? So you would understand, one would believe that the board and the executive team is looking at all considerations every single day. So it's a question of the environment, you know, the economic impacts on the business. It's the lab-grown diamond impact. It's the moist night impact. But our ability to pivot the company and change or effectively change the company's direction is really where we're going. And strategically, we believe we're going in a really good place, and we believe that we've got great initiatives. I will tell you that, you know, the old co or like the old methodology of the business with, you know, leaning on more traditional partners and distributors is no longer a viable solution for the company or a direction we want to go. And if you, you know, obviously, you know, Eric, you've been with the company a long time. So, you know, that wholesale arm and that wholesale piece represented a really big piece of the company and the business overall for years and years. So we've had to reinvent ourselves and move forward. And you know what? I get it. You know, I'm a pretty decent shareholder myself and, You know, my board members certainly, you know, have significant positions within the company. But, you know, we're all weighing every option of the business, and we're moving in the direction that we believe that is a really good direction for the company, and that's more direct to consumer. And if you kind of listened to my remarks a little bit earlier when we talked about Charles and Colvard Direct, I mean, for a lot of years and many, many years, we relied on strategic partners and distributors to reach the independent jewelers for us. Now, of course, they've got margin that they need to deal with, and, of course, they've got costs associated with that, and they have sales teams. But the reality of it is they're not doing us a service anymore. They're not providing enough sales and revenue for us because of the downward pressure of lab grown or they're seeking alternatives or whatever that is. So that's why quarter over quarter over the last several quarters we've been talking about repositioning and going direct ourselves. So we just launched our Charles and Colbert direct portal, so that gives the opportunity to independent jewelers now at a greater margin for us as a company to reach out and let them buy direct from us. That's a big step for this company, and it's something that we haven't done in decades. So we believe there's growth there, and that's a great position for us, and we believe that's going to be a viable business moving forward. But I will tell you that all the talk and consideration and the strength of this company is moving forward is going to be the direct-to-consumer initiatives. Also, maintaining support for our brick-and-mortar partners, giving them what they need, giving them what they're asking for, and supporting them. We have very strong brick-and-mortar partners that are doing a really, really nice job. We've gotten lab-grown diamonds into Helzberg Diamonds, which we're pretty excited about that. So there's just a shift going on right now, and we're going to have to painfully go through the shift which is what we've been experiencing to get to the other side to some of these initiatives and you know we talked about made shopping so if you go to made shopping.com you can see a live stream show now some people say okay live streaming television shopping you know that's old well it still does hundreds and hundreds of millions of dollars and billions of dollars in business so we're looking to pick up some additional revenue with our streaming capability and kind of building out that base but it's really not shopping for TV, it's about streaming our digital content throughout everywhere that consumer is shopping. So we believe that's going to be like a change in the entire kind of dynamic of the business moving forward where we can have consumers that are on Facebook, Instagram, TikTok, Twitter, wherever they are, click and buy at that moment individual items at that particular second. So shoppable commerce is here. It's growing. It's big. It's important. And it's relevant. So the difference with us and anybody else is we have the entire infrastructure. And I'd love to welcome anybody or have an investor summit to come by and see what we've built. It's pretty impressive. And what that's going to enable us to do, Eric, is it's going to enable us to reach consumers through editorial pieces, educational pieces, shoppable commerce, small little segments, in all different channels, as well as broadcast satellite, like we said. So it isn't traditional shopping as people know it. Maybe that's the way they're seeing it right now, but the future is not that. The future is our ability to create and stream content in a meaningful way that's aligned with, you know, kind of the values and kind of what the consumer is looking for at that time. So we think we've got a pretty good roadmap to that. We're doing some phasing. We're doing some testing. And we're building out an individual web property to be able to support that business under made shopping. So look to that to come out here shortly. And that's everything that's manufactured and developed ethically. So that means made intentional, made for special moments, made for the earth, made for all these things. And it's not limited to the single vertical or the pillar of fine jewelry. we have the opportunity within these vertical streams to be able to sell multiple products should we choose to go in that direction. So we're pretty excited about it. And I believe the board's excited about it too as well, but to your point, we're always looking at options and considerations, and it's a challenge, you know. And again, I'm long-winded here, but I know you're a valued shareholder and you've been around a long time, but I will tell you candidly that, you know, Other companies out there that are not public, basically to drive their business, they're spending millions and millions of dollars to chase revenue. So we believe that we need to find organic ways instead of traditional click and performance marketing tactics and kind of build awareness with that consumer. And more in a streaming way that doesn't cost so much to do every day. We can't outspend certain big leaders in the space right now because they're literally just buying the business. We just don't have the capital to do that at this point.

Right, which is why I would hope that the board is considering strategic alternatives. Last thing I'll say, and then I'll get off. I'm glad that you're confident, but I haven't seen an insider buy in over a year, and the stock is now about a quarter to a third of where people were buying this thing.

Well, let's talk about that. Yeah, so let's talk about that. So we've had a lot of things going on in the last quarters that preclude us from buying. Just so you know, to be very candid with you, we don't have open to buys or we have quiet periods within the quarters or we had, you know, a cybersecurity situation or whether we insiders know things that are going on in the business, you know, whether the wolf speed matter. You know, there's several things that preclude us from, you know, I will tell you that we believe that we're an incredible value right now. That's an understatement for where my personal belief is, but I can't speak on behalf of all my other directors and board members. But I can tell you right now that it definitely is a value for us, and I believe that several board members did purchase within a certain period of time. But if there's no purchases, it's just because we were closed out, so to speak.

Okay, whatever that means. Thanks. I'll move on. Okay, great. Thanks. Thanks, Eric.

Again, if you'd like to ask a question, please press star, then one at this time. Our next question comes from Jason Ersinger with Bumbershoot Holdings. Please go ahead.

Thanks for taking the questions. On the cybersecurity issue, the elevated spending, is that done at this point in your mind, or is there... any likelihood to be ongoing spending at elevated levels related to that?

Yeah, great question. So we believe we're in a good place with that right now. We did, as we kind of stated, there was a $300,000 spend or expense related to that, and that was on several things that we kind of felt the impact on. We'll have a few other expenses related to that, we believe, moving forward. but we did a really, really good job, and I'm proud of my team, you know, for its business continuity efforts to be able to do that, and we didn't pay out any ransom, and, you know, we are business as usual now. That's not to say that we weren't impacted with, you know, a lot of folks doing a lot of things and working a lot of hours to kind of stabilize and keep things moving, but we think we have that behind us. Also, one would also consider that there be some type of – insurance associated with that. So we believe that we'll be in a good place with that.

Okay. And just specifically in terms of the made brand, I guess, that you're creating, in terms of the roadmap, I guess, I don't know if you have said this. I didn't hear if you did. What are a couple of the next steps? And I think maybe to the last caller's point, at what point can you tell if some of them are working? How are you defining success for some of the new brand initiatives? Just because I guess I see that as now being a platform gatekeeper for some of the other brands like KB and Forever One and all that working. So maybe just, I guess, how those tie together in your mind or where they're headed.

Yeah, so for right now, let's talk about kind of the value and the benefit of made and what it's doing to the organization. So With made shopping, it basically puts us in a place where we can have a separate destination for the consumers to shop. That destination can do all things made. That's number one. Number two is the streaming video and the broadcast that we're doing is allowing for us to create, as I said in my prepared remarks, a lot, a lot of content that would be cost prohibitive if we were just to hire independent or outside people to do video segments here and there or educational segments. So it's enabled us to build hours upon hours of content. With that being said, while we're building that content, it's being subsidized by transactional shoppers that are shopping within those streams and on the network. So right now we're at the early innings of that. So, uh, The early innings are very positive. I mean, I could just tell you that the items that we're featuring, I mean, today's consumers are a little different than, you know, prior years consumers where, you know, they're more sophisticated today. They're looking at a QR code, and they're scanning the code, and it goes right to made shopping. And then they click and buy and purchase. They'll see a stream, and they'll hit the QR code, and they'll go right to the product page, and they'll be able to click and buy. So we envision a future where we have multiple properties. Our main property, charlesandcolvard.com, and Charles and Colvard proper is really kind of the fine jewelry aspect of the business, creating incredible products that live in pillar one of made shopping. So made shopping will feature Charles and Colvard and all of its product brands. That's not to say that in the future made shopping won't bring forward other product brands and other collections and other items that we can sell under the made shopping label. all streaming within the same infrastructure, all utilizing the same infrastructure within the organization. So look to us to build that out in the coming quarters.

And so for right now, though, 100% of what you're selling through Made is your own product. Over the breadth of your different brands, I guess you could say.

Let's talk that through a little bit. The bottom line is we have multiple product categories. For example, we have Moisture Night by Charles and Colvard. We don't sell that on charlesandcolvard.com. We sell those goods into our dropship partners. So that would mean like the Macy's, the Helzberg's, the Belk's, the Hudson Bay, the APHIS Military. Those particular customers take that product and they sell and distribute. This made shopping now gives us the ability to allow that consumer to transact with on made shopping for those particular goods that don't meet the criteria for Charles and Colvard.com classification or quality standard, et cetera. So Charles and Colvard only does Forever One, which is our pinnacle premium brand of products, and Arcadia Lab Grown Diamonds, et cetera, in the higher elevated classes. Made shopping will enable us to bring forward different grades or classes of products that we can actually sell through that channel without kind of diminishing the value of the products and the brand of Charles and Colvard proper. Does that make sense? And then you're right. We're only focusing on our inventory and our products. So basically right now, made shopping exclusively is featuring all Charles and Colvard product brands. Okay, so for right now you're... Yeah, it's another vehicle, Jason, for us to move more goods and then look to us to create new product brands in the fine jewelry space that makes sense for a shopper that's looking for more promotional type products or lower cost items, if that makes sense.

Okay, and in terms of the platform that you've built kind of going to all these other, you know, the Facebook... TikTok, Instagram, whatever, where in the path are you in terms of how many of those you're hitting now versus where you, I guess, want it to get to?

Yeah, so right now what you're seeing, we're already pushing out right now made shopping, right? So made shopping.com. We're streaming that to charlesandculvard.com right now. So they're landing on Charles and Culvard. But effectively, in the next week or so, you'll be able to go directly streaming to Made Shopping, which will be its own property, with the streaming show, and cross-streaming and being promoted by Charles and Colvard and touching their followers too as well. Right now, to answer your question, we are streaming right now. Facebook, TikTok is to come as soon as we get a couple more followers and requirements on that. LinkedIn we're streaming, YouTube we're streaming across the board, and LinkedIn too as well. So we are streaming right now, but the way we're streaming is we're streaming live six-hour blocks between 4 p.m. Wednesday, Thursday, Friday to 10 p.m. on those same days. Look to us to kind of learn more and understand what that consumer wants and not just, blanket out six hours of shopping like a regular shopping network, look to us to start to cut and splice those into shoppable segments, splice them into hour segments, 15-minute segments, and all the way down to three-minute segments just on educational pieces for each individual item that if they click an item on our website, we'll be able to have our hosts or storytellers kind of translate that item into meaningful content content that they can actually understand and relate to and want to click and buy. So what we're seeing today is just a phase one where we're trying to understand it, we're trying to learn it, we're trying to build more video content. We are streaming now to all these places right now, and we're seeing the traffic, we're seeing the awareness. Now again, just because we're streaming today doesn't mean that consumer doesn't come back two days and watch those segments. So we're seeing residual effects and residual opportunities to capture and retarget those customers when they come back after the streams. So look to us to continue to expand, to learn, and kind of fine-tune what that looks like for the future.

Okay, and the Moissanite Outlet brand, is that part of the MADE platform? Are you planning to push that through the MADE platform as well, or that's kind of a separate brand platform at this point?

So at this point, Moissanite outlet runs pretty much on its own, and we have a normal disposition cadence of and legacy inventory as it pushes down the funnel. It goes into Moissanite Outlet where it's at its end of life, so to speak, and it's working nicely. It's not breaking any records. The business is always up and it's growing. That's because people are looking for that low-cost item. They're looking for the bargains. They're looking for discounts. That's our answer to the competitive Chinese Moissanite. It's not to say that made shopping can't take the entire – you know, disposition goods and have segments and featured segments on made shopping. We just need to know, you know, do we want that persona or are those personas shopping on made shopping? So those are some things that we're answering. But for right now, it's independent on its own.

Okay. And just kind of following up on that, this aspect of persona. So in terms of the brand persona of Charles and Colvard, I guess .com itself, Cadia itself, Forever One itself. Have any of those changed over the last year or so, either based on the market, just economically, consumer weakening, anything like that, or based on, obviously, feedback, trends you've seen that have either not translated into things? Have the brand personas changed at all with Charles and Colbert?

So I will tell you that the brand persona of Charles Colbert is actually elevated. So it's starting to go up by design, up market. We're bringing more higher-end goods. The fact that lab-grown diamond pricing has come down so much, it gives us the ability. And, you know, my incredible, you know, product team and design team coming forward with beautiful designs. The couture stuff is fantastic. and not stop, but the couture designs and product is performing quite well. And because it's affordable now, like people couldn't afford these particular items are 30, $40,000. So now you can afford a, you know, a four carat lab grown diamond for, you know, under $12,000. If you try to buy a four-carat natural mine diamond, it's $40,000, $50,000, $60,000. So it gives us the opportunity to go upmarket and elevate the brand and elevate Charles & Colvard. That's not to say that we're still not targeting the millennials, but certainly the millennials are choosing and they're opting for bigger stones and they're choosing to get the value. But the quality of Charles & Colvard remains intact. And we at one point in time thought about doing more promotional cadence of a higher discount and things like that given the market. But we found that it really started to suck out our average order value or AOV in a way that we did not like what was happening. So we shifted back to making sure that it remains the Charles and Colvard proper. We're bringing forward the highest quality. That also brings price, quality, and value into consideration. But made shopping is going to have kind of a story in its own, and it's going to have a persona in its own. It's going to look for like-minded people that are looking for all things made. I mean, it's got a great, you know, trajectory as far as, you know, where we can go with it, we believe.

Okay, great. I appreciate all the commentary, and best of luck.

Yeah, I always appreciate your comments. Thank you, and your questions. Take care.

Hi, Sarah. This is Adam Lowensteiner from Lithium Partners. I have a few follow-up questions. Hey, Don and Clint. Given the race towards lab-grown diamonds, where does this leave moissanite? What can be done to elevate moissanite in comparison?

Yeah. Hey, Adam. How are you doing? You know, look, first of all, we're going to continue to grow lab-grown diamonds. We're going to continue to start to capitalize on that. We had some limitations because we have a lot of inventory that's in moissanite. So we had to focus on the moissanite. That was always top of mind. That was where we needed to go. So we tried to do our best not to cannibalize certain styles and caratweights within, you know, kind of the moissanite business. But now we have to do, you know, what we need to to kind of reach that consumer and answer what they're looking for. So with that being said, several things are happening. We're expanding all of our assortments in lab-grown diamond. We're bringing forward larger carat weights, which we were reluctant to do in the past. Then we took pretty much a bottoms-up, a top-down approach to analyzing all of our moissanite, the moissanite material that we have in the building, the moissanite material that we have in jewelry, and kind of saying, okay, where do we need to be to position us that creates that value proposition for that consumer and still maintain the incredible, you know, kind of value of Moissanite in the marketplace and in that consumer's journey to buy a piece of jewelry. We believe we've got the answer to that and we believe we're going to come forward with that here shortly. I'm not going to discuss it on this call, but we believe we've got something that brings a little bit more value to Moissanite than anyone else in the industry. We know we bring the best products to market in moissanite. We also know that moissanite still represents the bulk of our business because all of our other channels focus on moissanite, elevate the moissanite, and promote moissanite. So we're going to expand lab-grown diamonds in those other channels, and we have already begun to do so. So there's growth there, and we're looking forward to that growth. We were a little bit reluctant to do that before, but we are now moving in that direction. But with the Moissanite, look to us to come forward here shortly with some significant, meaningful things that is going to enable us to tell that consumer why Charles and Colvard is, in fact, the best place and the destination for all of their gemstones or responsible gemstones. And it's really important because we believe that a lot of people are commercializing Moissanite when they shouldn't. a lot of people are saying that they have the best in class or similar to Charles and Colvard when, in fact, they don't. So with our whole video capability and everything moving forward, we're going to be able to tell the story in a real-time way that's meaningful, that's important to that consumer, that we can show. Basically, I don't want to say that people are fraudulent or making false claims or anything like that, I mean, we're a publicly traded company. If we say we're bringing DEF color, it's DEF color. Other folks are printing and making claims, and we know that's not the fact. So, you know, we don't mind being on a playing field where we're all even and we're all saying what we're saying, and it's factual, but it's not fair to somebody making claims that are false claims and false. you know, we need to kind of call them out. So look to us to do that and answer that. Look to us also to look at the pricing and maybe coming forward with some other categories that we haven't in the past where we went Forever One and all things Forever One. So look to us to come forward with other meaningful product brands that we believe in the Moissanite category will kind of change some things up for us a little bit.

So I wanted to ask about repeat customers. What are you seeing there with these types of customers? Are they coming back, and can you add any color there?

Yeah, so that's always really been a very, very important topic in all of our State of the Union, all of our meetings. The bridal business, I mean, we've talked about it. The bridal businesses have been a little bit soft. I mean, we're starting to see some light back coming into the bridal business and the bridal category. But we were impacted by it for folks looking for affordable moissanite and so forth. But, you know, I just believe that, you know, we're in the right place.

One more housekeeping here. The stock is below. I'm sorry.

Sorry. No, I had to take a drink there real quick there.

Okay. With a stock below a dollar.

Let me just kind of answer the question. Okay. We've been running about 17% to 19% on repeat customers. We're now at about 23%, which we're pretty excited about that. We're doing more retargeting campaigns. We've initiated some new partnerships as of late between SMS retargeting, more aggressive with subscribers so that we can kind of reach out to those consumers and tell them all these great things that we've got going on. And really, you know, my production team and product team have really done a really good job of bringing more fashion forward items, gifting items and things that we'll continue to do more of to get more repeat customers. I mean, long-time value is really important in all of our, you know, conversations and kind of building that customer base. So that's really critical to kind of the next steps for success for us.

One more, with a stock below $1, what's your status with NASDAQ? Can you get us updated on that and if you have any plans to deal with the compliance?

Yeah, so look, our plan is to continue to path forward, continue to build this business, bring incredible results so it organically goes up on its own. We certainly have to do what we need to do. I believe the date is December 11th for us to be in compliance. And then after that, like we've done in the past, we would file for an extension, which would get us an additional six months. So, you know, we're doing all the things we need to do necessary to kind of drive value, and we believe we're undervalued right now and we shouldn't be trading at this price. But, you know, who am I to say that? I mean, we'll just continue the path forward. We know it's been a difficult time, Adam. We know that, you know, it's not exclusive to us, but everybody needs to understand that, you know, kind of what motivates them to buy and invest in a company. And we certainly believe we have, you know, all the ingredients to kind of the future of a successful company. And we're going to continue moving forward, and we're going to strive to be in compliance here by December 11th and kind of speak to the investor community and tell them why we're, you know, making the right moves and we're pivoting the company and we're changing. And we'll certainly maintain every effort to be in compliance along the way.

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

Thank you for your attention and continued belief in our company. We look forward to sharing our progress and achievements with you in the future. Appreciate everyone's time tonight. Thank you.

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