SEGMENT INFORMATION AND GEOGRAPHIC DATA

3 Months Ended

Sep. 30, 2021

SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract]

SEGMENT INFORMATION AND GEOGRAPHIC DATA

3. SEGMENT INFORMATION AND GEOGRAPHIC DATA

The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making operating decisions and assessing performance as the source of the Company’s operating and reportable segments.

The Company manages its business through two operating and reportable segments based on its distribution channels to sell its product lines, loose jewels and finished jewelry: its “Online Channels” segment, which consists of e-commerce outlets including charlesandcolvard.com, moissaniteoutlet.com, third-party online marketplaces, drop-ship retail, and other pure-play, exclusively e-commerce outlets; and its “Traditional” segment, which consists of wholesale and retail customers. The accounting policies of the Online Channels segment and Traditional segment are the same as those described in Note 2, “Basis of Presentation and Significant Accounting Policies” of this Quarterly Report on Form 10-Q and in the Notes to the Consolidated Financial Statements in the 2021 Annual Report.

The Company evaluates the financial performance of its segments based on net sales; product line gross profit, or the excess of product line sales over product line cost of goods sold; and operating income. The Company’s product line cost of goods sold is defined as product cost of goods sold, excluding non-capitalized expenses from the Company’s manufacturing and production control departments, comprising personnel costs, depreciation, leases, utilities, and corporate overhead allocations; freight out; inventory write-downs; and other inventory adjustments, comprising costs of quality issues, and damaged goods.

The Company allocates certain general and administrative expenses between its Online Channels segment and its Traditional segment based on net sales and number of employees to arrive at segment operating income. Unallocated expenses remain in its Traditional segment.

Summary financial information by reportable segment is as follows:

	Three Months Ended September 30, 2021
	Online Channels		Traditional		Total
Net sales
Finished jewelry	$	4,486,958	$	1,199,329	$	5,686,287
Loose jewels		882,847		3,711,177		4,594,024
Total	$	5,369,805	$	4,910,506	$	10,280,311
Product line cost of goods sold
Finished jewelry	$	1,711,224	$	623,258	$	2,334,482
Loose jewels		314,105		1,745,341		2,059,446
Total	$	2,025,329	$	2,368,599	$	4,393,928
Product line gross profit
Finished jewelry	$	2,775,734	$	576,071	$	3,351,805
Loose jewels		568,742		1,965,836		2,534,578
Total	$	3,344,476	$	2,541,907	$	5,886,383
Operating income	$	321,671	$	627,662	$	949,333
Depreciation and amortization	$	67,702	$	56,510	$	124,212
Capital expenditures	$	59,260	$	338,861	$	398,121

	Three Months Ended September 30, 2020
	Online Channels		Traditional		Total
Net sales
Finished jewelry	$	3,623,462	$	711,876	$	4,335,338
Loose jewels		841,833		2,749,122		3,590,955
Total	$	4,465,295	$	3,460,998	$	7,926,293
Product line cost of goods sold
Finished jewelry	$	1,333,383	$	420,906	$	1,754,289
Loose jewels		312,689		1,431,233		1,743,922
Total	$	1,646,072	$	1,852,139	$	3,498,211
Product line gross profit
Finished jewelry	$	2,290,079	$	290,970	$	2,581,049
Loose jewels		529,144		1,317,889		1,847,033
Total	$	2,819,223	$	1,608,859	$	4,428,082
Operating income	$	774,665	$	99,605	$	874,270
Depreciation and amortization	$	54,352	$	78,103	$	132,456
Capital expenditures	$	59,250	$	42,209	$	101,459

The Company does not allocate any assets to the reportable segments, and, therefore, no asset information is reported to the chief operating decision maker or disclosed in the financial information for each segment.

A reconciliation of the Company’s product line cost of goods sold to cost of goods sold as reported in the condensed consolidated financial statements is as follows:

	Three Months Ended September 30,
	2021			2020
Product line cost of goods sold	$	4,393,928		$	3,498,211
Non-capitalized manufacturing and production control expenses		342,401			329,406
Freight out		217,506			175,338
Inventory write-off		232,000			80,000
Other inventory adjustments		(169,285	)		113,100
Cost of goods sold	$	5,016,550		$	4,196,055