SEGMENT INFORMATION AND GEOGRAPHIC DATA

12 Months Ended

Jun. 30, 2023

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, including its own Charles & Colvard Signature Showroom and charlesandcolvarddirect.com. 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.”

The Company evaluates the financial performance of its segments based on net sales and product line gross profit, or the excess of product line sales over product line cost of goods sold. 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.

Summary financial information by reportable segment for the periods presented is as follows:

	Year Ended June 30, 2023
	Online Channels		Traditional		Total
Net sales
Finished jewelry	$	19,607,941	$	4,377,673	$	23,985,614
Loose jewels		1,884,939		4,075,681		5,960,620
Total	$	21,492,880	$	8,453,354	$	29,946,234
Product line cost of goods sold
Finished jewelry	$	9,214,749	$	3,182,342	$	12,397,091
Loose jewels		705,576		2,039,401		2,744,977
Total	$	9,920,325	$	5,221,743	$	15,142,068
Product line gross profit
Finished jewelry	$	10,393,192	$	1,195,331	$	11,588,523
Loose jewels		1,179,363		2,036,280		3,215,643
Total	$	11,572,555	$	3,231,611	$	14,804,166
Depreciation and amortization	$	215,978	$	437,179	$	653,157
Capital expenditures	$	423,150	$	806,421	$	1,229,571

	Year Ended June 30, 2022
	Online Channels		Traditional		Total
Net sales
Finished jewelry	$	23,539,347	$	6,172,883	$	29,712,230
Loose jewels		3,240,702		10,136,092		13,376,794
Total	$	26,780,049	$	16,308,975	$	43,089,024
Product line cost of goods sold
Finished jewelry	$	9,837,830	$	4,094,870	$	13,932,700
Loose jewels		1,209,832		4,959,958		6,169,790
Total	$	11,047,662	$	9,054,828	$	20,102,490
Product line gross profit
Finished jewelry	$	13,701,517	$	2,078,013	$	15,779,530
Loose jewels		2,030,870		5,176,134		7,207,004
Total	$	15,732,387	$	7,254,147	$	22,986,534
Depreciation and amortization	$	235,643	$	243,665	$	479,308
Capital expenditures	$	305,586	$	1,190,885	$	1,496,471

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 consolidated financial statements is as follows:

	Year Ended June 30,
	2023		2022
Product line cost of goods sold	$	15,142,068	$	20,102,490
Non-capitalized manufacturing and production control expenses		2,210,494		1,661,207
Freight out		1,068,437		1,195,062
Inventory write-downs		6,004,000		195,000
Other inventory adjustments		787,384		(308,057	)
Cost of goods sold	$	25,212,383	$	22,845,702

A reconciliation of the Company’s consolidated product line gross profit to the Company’s consolidated net (loss) income before income taxes is as follows:

	Year Ended June 30,
	2023			2022
Product line gross profit	$	14,804,166		$	22,986,534
Non-allocated cost of goods sold		(10,070,315	)		(2,743,212	)
Sales and marketing		(13,686,049	)		(12,421,138	)
General and administrative		(5,023,822	)		(4,948,980	)
Total other income, net		297,262			19,243
(Loss) Income before income taxes	$	(13,678,758	)	$	2,892,447

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,  charlesandcolvarddirect.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.

All intangible assets, as well as property and equipment, as of June 30, 2023 and 2022, are held and located in the United States.

The following presents net sales data by geographic area for the periods presented:

	Year Ended June 30,
	2023		2022
Net sales
United States	$	29,056,696	$	41,138,538
International		889,538		1,950,486
Total	$	29,946,234	$	43,089,024