Charles & Colvard Reports First Quarter Results.

Issue: April 25, 2000

MORRISVILLE, N.C., April 25 /PRNewswire/ --

Charles & Colvard (Nasdaq: CTHR) formerly C3, Inc., the sole source of moissanite -- a created jewel available for use in fine jewelry -- today reported operating results for the first quarter of 2000 which ended March 31, 2000.

The company reported first quarter revenues of approximately $3.0 million consisting of approximately $2.9 million of loose moissanite jewels and jewelry sales and approximately $100,000 of test instrument sales. The net loss for the quarter was approximately $2.1 million or $.30 per share. In the year-earlier quarter, the company reported sales of $3.2 million, and a net loss of $700,000 or approximately $.10 per share. The company shipped in excess of 15,000 carats of Charles & Colvard created moissanite during the first quarter of 2000 as compared to approximately 14,000 carats during the first quarter of 1999.

Charles & Colvard also reported gross margins of 54 percent, up sequentially from last quarter's 48 percent. Gross margins are expected to vary over the next few quarters as the yield of salable jewels from each crystal fluctuates and as the company's average selling price per carat decreases due to the volume discounts offered to the company's large distributors. The company expects margins to decrease in the short-term and, as yields improve, increase gradually in the long-term.

Charles & Colvard also announced that the company is in negotiations with an undisclosed organization. This transaction is expected to provide an additional $5 million in working capital for the company and should close in the next several weeks. The company is also continuing its financing activities with Scott & Stringfellow to raise additional capital.

As previously disclosed, effective May 1, 2000, the company will transition its domestic distribution strategy from selling directly to independent jewelry retailers to selling through two of the largest jewelry suppliers in North America. This distribution model allows the more than 50,000 combined customers of these suppliers access to loose Charles & Colvard created moissanite jewels. This change is intended to rapidly increase the introduction of the product into the domestic jewelry market.

Jeff N. Hunter, chairman and chief executive officer of Charles & Colvard, said, "We are confident in our new distribution strategy which integrates seamlessly into our branding program. Our partners have shown great enthusiasm and an understanding of the branding which highlights the unique characteristics of this jewel; both Stuller Settings and Rio Grande are moving forward with comprehensive advertising and promotional programs to their respective customers and the jewelry industry."

In other corporate news, the company announced the addition of a new domestic jewelry manufacturer, Iraj & Sons of New York City, that will build lines of jewelry featuring Charles & Colvard created moissanite. Additionally, the company has licensed the use of certain proprietary technology for the display of jewelry over the Internet to . The company has been informed that will offer jewelry featuring Charles & Colvard created moissanite for sale via the Internet by the end of May 2000.

Hunter continued, "In addition to working with our new domestic distribution partners, the company also continues to seek jewelry designers and manufacturers that can provide a broad selection of jewelry containing Charles & Colvard created moissanite."

Charles & Colvard, based in the Research Triangle Park area of North Carolina, became a public company in 1997. For more information, please access .

This press release contains forward-looking statements that relate to the company's future plans and objectives. These statements are subject to numerous risks and uncertainties, including without limitation the limited operating history upon which the company and its prospects can be evaluated, the need for further development of the company's products, the company's reliance on Cree, Inc. as a developer and supplier of silicon carbide crystals, the small size of the current market for the company's products and uncertainty of market acceptance and demand for such products in the future. These and other risks and uncertainties, which are detailed in the company's filings with the SEC including Forms 10-K and 10-Q, (filed under C3, Inc.) could cause actual results and developments to be materially different from those expressed or implied by any of the forward-looking statements included in this press release.

C3, Inc.

Statements of Operations

Three months ended March 31,

2000 1999

(unaudited) (unaudited)

Sales $ 3,011,250 $ 3,229,464

Cost of goods sold 1,376,748 2,095,578

Gross profit 1,634,502 1,133,886

Operating expenses:

Marketing and sales 2,456,176 603,304

General and administrative 989,329 798,934

Research and development 439,632 803,056

Total operating expenses 3,885,137 2,205,294

Operating loss (2,250,635) (1,071,408)

Interest income, net 140,474 364,977

Net Loss $( 2,110,161) $ (706,431)

Basic and diluted net loss per share $ (0.30) $ (0.10)

Weighted-average common shares, basic

and diluted 7,109,304 6,997,726

C3, Inc.

Balance Sheets

March 31, December 31,

2000 1999

Assets (unaudited)

Current Assets

Cash and equivalents $ 7,451,580 $ 13,161,665

Accounts receivable, net 876,337 1,331,528

Interest receivable 43,845 74,999


Continued from page 2

Inventories 17,775,598 14,767,888

Prepaid expenses and other assets 406,354 659,821

Total current assets 26,553,714 29,995,901

Equipment, net 6,082,058 6,292,221

Patent and license rights, net 473,173 492,780

33,108,945 36,780,902

Liabilities & Shareholders' Equity

Current Liabilities

Accounts payable:

Cree, Inc. 998,002 2,305,218

Other 346,733 627,704

Accrued expenses 205,853 235,107

Deferred revenue 22,815 118,730

Total current liabilities 1,573,403 3,286,759

Commitments and Contingencies

Shareholders' Equity

Common stock 48,979,750 48,757,702

Additional paid-in capital -- stock options 1,881,078 1,951,566

Accumulated deficit (19,325,286) (17,215,125)

Total shareholders' equity 31,535,542 33,494,143

$ 33,108,945 $ 36,780,902

COPYRIGHT 2000 PR Newswire Association, Inc.

COPYRIGHT 2000 Gale Group

Charles Bronson

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