SEGMENT INFORMATION AND GEOGRAPHIC DATA

6 Months Ended

Dec. 31, 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 December 31, 2021
	Online Channels		Traditional		Total
Net sales
Finished jewelry	$	8,452,535	$	2,086,631	$	10,539,166
Loose jewels		871,119		2,342,850		3,213,969
Total	$	9,323,654	$	4,429,481	$	13,753,135
Product line cost of goods sold
Finished jewelry	$	3,432,950	$	1,271,026	$	4,703,976
Loose jewels		333,785		1,100,780		1,434,565
Total	$	3,766,735	$	2,371,806	$	6,138,541
Product line gross profit
Finished jewelry	$	5,019,585	$	815,605	$	5,835,190
Loose jewels		537,334		1,242,070		1,779,404
Total	$	5,556,919	$	2,057,675	$	7,614,594
Operating income	$	1,432,727	$	17,868	$	1,450,595
Depreciation and amortization	$	53,470	$	60,528	$	113,998
Capital expenditures	$	27,040	$	350,545	$	377,585

	Three Months Ended December 31, 2020
	Online Channels		Traditional		Total
Net sales
Finished jewelry	$	6,588,338	$	1,676,859	$	8,265,197
Loose jewels		997,939		2,883,654		3,881,593
Total	$	7,586,277	$	4,560,513	$	12,146,790
Product line cost of goods sold
Finished jewelry	$	2,863,733	$	1,138,413	$	4,002,146
Loose jewels		388,426		1,417,177		1,805,603
Total	$	3,252,159	$	2,555,590	$	5,807,749
Product line gross profit
Finished jewelry	$	3,724,605	$	538,446	$	4,263,051
Loose jewels		609,513		1,466,477		2,075,990
Total	$	4,334,118	$	2,004,923	$	6,339,041
Operating income	$	1,494,448	$	1,026,535	$	2,520,983
Depreciation and amortization	$	59,221	$	79,384	$	138,605
Capital expenditures	$	90,852	$	52,350	$	143,202

	Six Months Ended December 31, 2021
	Online Channels		Traditional		Total
Net sales
Finished jewelry	$	12,939,493	$	3,285,960	$	16,225,453
Loose jewels		1,753,966		6,054,027		7,807,993
Total	$	14,693,459	$	9,339,987	$	24,033,446
Product line cost of goods sold
Finished jewelry	$	5,144,174	$	1,894,285	$	7,038,459
Loose jewels		647,890		2,846,121		3,494,011
Total	$	5,792,064	$	4,740,406	$	10,532,470
Product line gross profit
Finished jewelry	$	7,795,319	$	1,391,675	$	9,186,994
Loose jewels		1,106,076		3,207,906		4,313,982
Total	$	8,901,395	$	4,599,581	$	13,500,976
Operating income	$	1,754,398	$	645,530	$	2,399,928
Depreciation and amortization	$	121,172	$	117,038	$	238,210
Capital expenditures	$	86,300	$	689,405	$	775,705

	Six Months Ended December 31, 2020
	Online Channels		Traditional		Total
Net sales
Finished jewelry	$	10,211,799	$	2,388,735	$	12,600,534
Loose jewels		1,839,772		5,632,777		7,472,549
Total	$	12,051,571	$	8,021,512	$	20,073,083
Product line cost of goods sold
Finished jewelry	$	4,197,115	$	1,559,320	$	5,756,435
Loose jewels		701,115		2,848,410		3,549,525
Total	$	4,898,230	$	4,407,730	$	9,305,960
Product line gross profit
Finished jewelry	$	6,014,684	$	829,415	$	6,844,099
Loose jewels		1,138,657		2,784,367		3,923,024
Total	$	7,153,341	$	3,613,782	$	10,767,123
Operating income	$	2,269,113	$	1,126,140	$	3,395,253
Depreciation and amortization	$	113,573	$	157,488	$	271,061
Capital expenditures	$	150,129	$	94,559	$	244,688

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 December 31,					Six Months Ended December 31,
	2021		2020			2021			2020
Product line cost of goods sold	$	6,138,541	$	5,807,749		$	10,532,470		$	9,305,960
Non-capitalized manufacturing and production control expenses		416,828		395,237			759,229			724,641
Freight out		465,207		316,542			682,712			491,881
Inventory write-off		-		25,000			232,000			105,000
Other inventory adjustments		13,370		(376,820	)		(155,915	)		(263,719	)
Cost of goods sold	$	7,033,946	$	6,167,708		$	12,050,496		$	10,363,763

The Company recognizes sales by geographic area based on the country in which the customer is based. Sales to international end consumers made through the Company’s transactional websites, charlesandcolvard.com and moissaniteoutlet.com, are included in international sales for financial reporting purposes. A portion of the Company’s Traditional segment sales made to international wholesale distributors represents products sold internationally that may be re-imported to U.S. retailers.

The following presents net sales by geographic area:

	Three Months Ended December 31,				Six Months Ended December 31,
	2021		2020		2021		2020
Net sales
United States	$	13,021,717	$	11,388,680	$	22,846,447	$	18,888,399
International		731,418		758,110		1,186,999		1,184,684
Total	$	13,753,135	$	12,146,790	$	24,033,446	$	20,073,083