Document and Entity Information (USD $)	12 Months Ended
Document and Entity Information (USD $)	Dec. 31, 2014	Mar. 09, 2015	Jun. 30, 2014
Document and Entity Information [Abstract]
Entity Registrant Name	CHARLES & COLVARD LTD
Entity Central Index Key	0001015155
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Public Float			$ 39,773,833
Entity Common Stock, Shares Outstanding		20,404,833
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2014

CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 4,007,341	$ 2,573,405
Accounts receivable, net	5,510,253	10,244,732
Inventory, net	13,320,639	13,074,428
Prepaid expenses and other assets	602,850	951,635
Deferred income taxes	0	1,197,832
Total current assets	23,441,083	28,042,032
Long-term assets:
Inventory, net	25,617,990	29,337,674
Property and equipment, net	1,859,355	1,717,692
Intangible assets, net	216,947	325,867
Deferred income taxes	0	2,841,891
Other assets	291,022	58,696
Total long-term assets	27,985,314	34,281,820
TOTAL ASSETS	51,426,397	62,323,852
Current liabilities:
Accounts payable	3,286,086	3,670,551
Accrued cooperative advertising	220,000	188,000
Accrued expenses and other liabilities	684,577	642,186
Total current liabilities	4,190,663	4,500,737
Long-term liabilities:
Accrued expenses and other liabilities	809,879	0
Accrued income taxes	407,682	395,442
Total liabilities	5,408,224	4,896,179
Commitments and contingencies
Shareholders' equity:
Common stock, no par value; 50,000,000 shares authorized; 20,382,333 and 20,197,301 shares issued and outstanding at December 31, 2014 and 2013, respectively	53,949,001	53,949,001
Additional paid-in capital - stock-based compensation	11,628,503	9,940,980
Accumulated deficit	(19,559,331)	(6,462,308)
Total shareholders' equity	46,018,173	57,427,673
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 51,426,397	$ 62,323,852

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Shareholders' equity
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, shares issued (in shares)	20,382,333	20,197,301
Common stock, shares outstanding (in shares)	20,382,333	20,197,301

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	Dec. 31, 2014	Dec. 31, 2013
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]
Net sales	$ 25,640,649	$ 28,487,187
Costs and expenses:
Cost of goods sold	18,013,335	14,600,177
Sales and marketing	9,853,671	9,867,425
General and administrative	6,789,274	5,476,939
Research and development	18,070	24,903
Loss on abandonment of assets	10,523	98,027
Total costs and expenses	34,684,873	30,067,471
Loss from operations	(9,044,224)	(1,580,284)
Other income (expense):
Interest income	65	22,007
Interest expense	(901)	(2,106)
Total other (expense) income	(836)	19,901
Loss before income taxes	(9,045,060)	(1,560,383)
Income tax net (expense) benefit	(4,051,963)	269,285
Net loss	$ (13,097,023)	$ (1,291,098)
Net loss per common share:
Basic (in dollars per share)	$ (0.65)	$ (0.06)
Diluted (in dollars per share)	$ (0.65)	$ (0.06)
Weighted average number of shares used in computing net (loss) income per common share:
Basic (in shares)	20,295,618	19,904,170
Diluted (in shares)	20,295,618	19,904,170

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)	Total	Common Stock [Member]	Additional Paid-in Capital - Stock-Based Compensation [Member]	Accumulated Deficit [Member]
Balance at Dec. 31, 2012	$ 56,605,854	$ 53,318,044	$ 8,459,020	$ (5,171,210)
Balance (in shares) at Dec. 31, 2012		19,654,050
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	1,678,107	0	1,678,107	0
Issuance of restricted stock	0	0	0	0
Issuance of restricted stock (in shares)		345,403
Stock option exercises	420,942	630,957	(210,015)	0
Stock option exercises (in shares)		197,848
Tax effect of stock based compensation	13,868	0	13,868	0
Net income (loss)	(1,291,098)	0	0	(1,291,098)
Balance at Dec. 31, 2013	57,427,673	53,949,001	9,940,980	(6,462,308)
Balance (in shares) at Dec. 31, 2013		20,197,301
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	1,687,523	0	1,687,523	0
Issuance of restricted stock	0	0	0	0
Issuance of restricted stock (in shares)		185,032
Net income (loss)	(13,097,023)	0	0	(13,097,023)
Balance at Dec. 31, 2014	$ 46,018,173	$ 53,949,001	$ 11,628,503	$ (19,559,331)
Balance (in shares) at Dec. 31, 2014		20,382,333

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	Dec. 31, 2014	Dec. 31, 2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ (13,097,023)	$ (1,291,098)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,107,955	862,683
Amortization of bond premium	0	5,068
Stock-based compensation	1,687,523	1,678,107
Provision for uncollectible accounts	734,243	3,690
Provision for sales returns	(276,000)	723,000
Provision for inventory reserves	295,000	264,000
Provision (benefit) for deferred income taxes	4,039,723	(307,133)
Loss on abandonment of assets	10,523	98,027
Changes in assets and liabilities:
Accounts receivable	4,276,236	(2,833,064)
Interest receivable	0	694
Inventory	3,178,473	(9,880,092)
Prepaid expenses and other assets, net	116,459	(260,726)
Accounts payable	(384,465)	1,557,966
Accrued cooperative advertising	32,000	(12,000)
Accrued income taxes	12,240	11,712
Accrued expenses and other liabilities	302,110	67,664
Net cash provided by (used in) operating activities	2,034,997	(9,311,502)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(545,543)	(800,367)
Proceeds from call of long-term investments	0	500,000
Patent, license rights, and trademark costs	(55,518)	(110,378)
Net cash used in investing activities	(601,061)	(410,745)
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock option exercises	0	420,942
Tax effect of stock based compensation	0	13,868
Net cash provided by financing activities	0	434,810
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	1,433,936	(9,287,437)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	2,573,405	11,860,842
CASH AND CASH EQUIVALENTS, END OF PERIOD	4,007,341	2,573,405
Supplemental disclosure of cash flow information:
Cash paid during the year for interest	901	2,106
Cash paid during the year for income taxes	0	5,570
Non-cash investing activities:
Tenant improvement allowance received under operating lease	$ 550,160	$ 0

DESCRIPTION OF BUSINESS

12 Months Ended

Dec. 31, 2014

DESCRIPTION OF BUSINESS [Abstract]

DESCRIPTION OF BUSINESS

1.	DESCRIPTION OF BUSINESS

Charles & Colvard, Ltd. (the “Company”), a North Carolina corporation founded in 1995, manufactures, markets, and distributes Charles & Colvard Created Moissanite^® jewels (hereinafter referred to as moissanite or moissanite jewels), finished jewelry featuring moissanite, and fashion finished jewelry for sale in the worldwide jewelry market. Moissanite, also known by its chemical name of silicon carbide (“SiC”), is a rare mineral first discovered in a meteor crater. Because naturally occurring SiC crystals are too small for commercial use, larger crystals must be grown in a laboratory. Leveraging its advantage of being the original and leading worldwide source of created moissanite jewels, the Company’s strategy is to establish itself with reputable, high-quality, and sophisticated brands and to position moissanite as an affordable, luxurious alternative to other gemstones, such as diamond. The Company believes this is possible due to moissanite’s exceptional brilliance, fire, durability, and rarity like no other jewel available on the market. The Company sells loose moissanite jewels and finished jewelry at wholesale to distributors, manufacturers, and retailers and at retail to end consumers through its wholly owned operating subsidiaries Moissanite.com, LLC and Charles & Colvard Direct, LLC.

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2014

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract]

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

2.	BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation - The accompanying consolidated financial statements as of and for the years ended December 31, 2014 and 2013 include the accounts of the Company and its wholly owned subsidiaries Moissanite.com, LLC, formed in 2011; Charles & Colvard Direct, LLC, formed in 2011; and Charles & Colvard (HK) Ltd., the Company’s Hong Kong subsidiary that became a dormant entity in the second quarter of 2009 and the operations of which ceased in 2008. All intercompany accounts have been eliminated.

Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates impacting the Company’s consolidated financial statements relate to valuation and classification of inventories, accounts receivable reserves, deferred tax assets, uncertain tax positions, stock compensation expense, and cooperative advertising. Actual results could differ materially from those estimates.

Reclassifications - Certain amounts in the prior year’s consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications primarily relate to segment reporting of revenues and costs of goods sold, with other product line revenues and costs allocated across both loose jewel and finished jewelry product lines. Previously, all amounts for other product lines were included in the loose jewel revenues and product cost of goods sold.

Cash and Cash Equivalents - All highly liquid investments with an original maturity of three months or less from the date of purchase are considered to be cash equivalents.

Concentration of Credit Risk - Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, and trade accounts receivable. The Company maintains cash and cash equivalents.. At times, cash balances may exceed the Federal Deposit Insurance Corporation (“FDIC”) insurable limits. The Company has never experienced any losses related to these balances. Non-interest-bearing amounts on deposit in excess of FDIC insurable limits at December 31, 2014 approximated $3.70 million.

Trade receivables potentially subject the Company to credit risk. The Company’s standard wholesale customer payment terms on trade receivables are generally between 30 and 90 days, though it may offer extended terms with specific customers and on significant orders from time to time. The Company believes its competitors and other vendors in the wholesale jewelry industry have also expanded their use of extended payment terms and, in aggregate, the Company believes that by expanding its use of extended payment terms, it has provided a competitive response in its market and that its net sales have been favorably impacted. The Company is unable to estimate the impact of this program on its net sales, but if it ceased providing extended payment terms in select instances, the Company believes it would not be competitive for some wholesale customers in the marketplace and that its net sales and profits would likely decrease. The Company extends credit to its customers based upon a number of factors, including an evaluation of the customer’s financial condition and credit history, the customer’s payment history with the Company, the customer’s reputation in the trade, and/or an evaluation of the Company’s opportunity to introduce its moissanite jewels or finished jewelry featuring moissanite to new or expanded markets. Collateral is not generally required from customers. The need for an allowance for doubtful accounts is determined based upon factors surrounding the credit risk of specific customers, historical trends, and other information. The Company has not experienced any significant accounts receivable write-offs related to revenue arrangements with extended payment terms. However, we have increased our reserves for uncollectible accounts primarily due to one customer with extended terms.

See Note 12, “Major Customers and Concentration of Credit Risk,” for further discussion of credit risk within trade accounts receivable.

Accounts Receivable Reserves - Estimates are used to determine the amount of two reserves against trade accounts receivable. The first reserve is an allowance for sales returns. At the time revenue is recognized, the Company estimates future returns using a historical return rate that is reviewed quarterly with consideration of any contractual return privileges granted to customers, and it reduces sales and trade accounts receivable by this estimated amount. The allowance for sales returns was $910,000 and $1.19 million at December 31, 2014 and 2013, respectively.

The second reserve is an allowance for doubtful accounts for estimated losses resulting from the failure of the Company’s customers to make required payments. This allowance reduces trade accounts receivable to an amount expected to be collected. Based on historical percentages of uncollectible accounts by aging category, changes in payment history, and facts and circumstances regarding specific accounts that become known to management when evaluating the adequacy of the allowance for doubtful accounts, the Company determines a percentage based on the age of the receivable that it deems uncollectible. The allowance is then calculated by applying the appropriate percentage to each of the Company’s accounts receivable aging categories, with consideration given to individual customer account activity subsequent to the current period, including cash receipts, in determining the appropriate allowance for doubtful accounts in the current period. Any increases or decreases to this allowance are charged or credited, respectively, as a bad debt expense to general and administrative expenses. The Company generally uses an internal collection effort, which may include its sales personnel as it deems appropriate. After all internal collection efforts have been exhausted, the Company generally writes off the account receivable.

Any accounts with significant balances are reviewed separately to determine an appropriate allowance based on the facts and circumstances of the specific account. During its review for 2014, the Company analyzed several of its slower-paying customers and determined that one customer required an additional reserve, which constitutes the majority of the reserve as of December 31, 2014. During its review for 2013, the Company determined no additional reserves were necessary. Based on these criteria, management determined that allowances for doubtful accounts receivable of $1.07 million and $522,000 at December 31, 2014 and 2013, respectively, were required.

The following is a reconciliation of the allowance for doubtful accounts:

	Year Ended December 31,
	2014			2013
Balance, beginning of period	$	522,000		$	549,000
Additions charged to operations		734,243			3,690
Write-offs, net of recoveries		(182,243	)		(30,690	)
Balance, end of period	$	1,074,000		$	522,000

Although the Company believes that its reserves are adequate, if the financial condition of its customers deteriorates, resulting in an impairment of their ability to make payments, or if it underestimates the allowances required, additional allowances may be necessary, which would result in increased expense in the period in which such determination is made.

Inventories - Inventories are stated at the lower of cost or market on an average cost basis. Inventory costs include direct material and labor, inbound freight, purchasing and receiving costs, inspection costs, and warehousing costs. Any inventory on hand at the measurement date in excess of the Company’s current requirements based on historical and anticipated levels of sales is classified as long-term on the Company’s consolidated balance sheets. The Company’s classification of long-term inventory requires it to estimate the portion of on-hand inventory that can be realized over the next 12 months and does not include precious metal, labor, and other inventory purchases expected to be both purchased and realized over the next 12 months.

The Company’s work-in-process inventories include raw SiC crystals on which processing costs, such as labor and sawing, have been incurred; and components, such as metal castings and finished good moissanite jewels, that have been issued to jobs in the manufacture of finished jewelry. The Company’s moissanite jewel manufacturing process involves the production of intermediary shapes, called “preforms,” that vary depending upon the size and shape of the finished jewel. To maximize manufacturing efficiencies, preforms may be made in advance of current finished inventory needs but remain in work-in-process inventories. As of December 31, 2014 and 2013, work-in-process inventories issued to active production jobs approximated $2.05 million and $4.09 million, respectively.

The Company has historically sold one grade of jewel that is classified as very good (“VG”) and consists of near-colorless jewels that meet certain standards. Previously, only VG jewels were valued in inventory. During the first quarter of 2010, the Company began a project of sorting its jewels into multiple grades and identified several customers for the sale of lower grades of loose jewels and finished jewelry containing these jewels. As a result, various costs associated with this loose jewel inventory incurred subsequent to the identification of this market have been capitalized. The Company currently sorts its loose jewels based on grade and costs are capitalized accordingly.

All inventories are carefully reviewed for quality standards before they are entered into finished goods. As conditions warrant, the Company’s grading standards change. The Company reviews the inventory on an ongoing basis to ensure its inventory meets current quality standards.

The Company’s jewels do not degrade in quality over time and inventory generally consists of the shapes and sizes most commonly used in the jewelry industry. In addition, the majority of jewel inventory is not mounted in finished jewelry settings and is therefore not subject to fashion trends nor is obsolescence a significant factor. The Company has very small market penetration in the worldwide jewelry market, and the Company has the exclusive right in the U.S. through mid-2015 and in many other countries through mid-2016 to produce and sell created SiC for use in jewelry applications. In view of the foregoing factors, management has concluded that no excess or obsolete loose jewel inventory reserve requirements existed as of December 31, 2014.

The Company manufactures finished jewelry featuring moissanite. Relative to loose moissanite jewels, finished jewelry is more fashion oriented and subject to styling trends that could render certain designs obsolete. The majority of the Company’s finished jewelry featuring moissanite is held in inventory for resale and consists of such basic designs as stud earrings, solitaire and three-stone rings, pendants, and bracelets that tend not to be subject to significant obsolescence risk due to their classic styling. In addition, the Company manufactures small individual quantities of designer-inspired moissanite fashion jewelry as part of its sample line that are used in the selling process to its wholesale customers.

In 2011, the Company began purchasing fashion finished jewelry comprised of base metals and non-precious gemstones for sale through Lulu Avenue^®, the direct-to-consumer home party division of its wholly owned operating subsidiary, Charles & Colvard Direct, LLC. This finished jewelry is fashion oriented and subject to styling trends that may change with each catalog season, of which there are several each year. Typically in the jewelry industry, slow-moving or discontinued lines are sold as closeouts or liquidated in alternative sales channels. The Company reviews the finished jewelry inventory on an ongoing basis for any lower of cost or market and obsolescence issues. As of December 31, 2014 and 2013, the Company identified certain fashion finished jewelry inventory that could not be sold due to damage or branding issues, and established an obsolescence reserve of $250,000 and $128,000, respectively, for the carrying costs in excess of any estimated scrap values. No reserve requirement relating to the Company’s finished jewelry featuring moissanite existed as of December 31, 2013. The Company identified $31,000 of finished jewelry featuring moissanite that required an obsolescence reserve as of December 31, 2014.

Jewelry inventories consist primarily of finished goods, a portion of which the Company acquired as part of a January 2009 settlement agreement with a former manufacturer customer to reduce the outstanding receivable to the Company. Due to the lack of a plan to market this inventory at that time, a jewelry inventory reserve was established to reduce the majority of the acquired jewelry inventory value to scrap value, or the amount the Company would expect to obtain by melting the gold in the jewelry and returning to loose-jewel finished goods inventory those jewels that meet grading standards. Because the finished jewelry the Company began manufacturing in 2010 after it entered that business was made pursuant to an operational plan to market and sell the inventory, it is not subject to this reserve.

The Company also maintains inventory reserves for shrinkage, recuts, and repairs. Shrinkage refers to loose jewels and finished jewelry on review with customers and vendors that may not be returned to the Company. The recuts reserve is for the projected material loss resulting from the re-cutting of damaged jewels into smaller loose jewels to remove the damage. The repairs reserve is for finished jewelry in need of repair before it can be returned to finished goods inventory and be available for sale.

The need for adjustments to inventory reserves is evaluated on a period-by-period basis.

Property and Equipment - Property and equipment are stated at cost and are depreciated over their estimated useful lives using the straight-line method as follows:

Machinery and equipment	5 to 12 years
Computer hardware	3 to 5 years
Computer software	3 years
Furniture and fixtures	5 to 10 years
Leasehold improvements	Shorter of the estimated useful life or the lease term

Intangible Assets - The Company capitalizes costs associated with obtaining or defending patents issued or pending for inventions and license rights related to the manufacture of moissanite jewels. Such costs are amortized over the life of the patent, generally 17 years. The Company also capitalizes licenses it obtains for the use of certain advertising images and external costs incurred for trademarks. Such costs are amortized over the period of the license or estimated useful life of the trademark, respectively.

Impairment of Long-Lived Assets - The Company evaluates the recoverability of its long-lived assets by reviewing them for possible impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of the asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment is measured as the amount by which the carrying amount exceeds the fair value and is recognized as an operating expense in the period in which the determination is made. Assets to be disposed are reported at the lower of the carrying amount or fair value less costs to sell. As of December 31, 2014, the Company did not identify any indicators of long-lived asset impairment.

In addition to the recoverability assessment, the Company routinely reviews the remaining estimated useful lives of its long-lived assets. Any reduction in the useful-life assumption will result in increased depreciation and amortization expense in the period when such determination is made, as well as in subsequent periods. During the year ended December 31, 2013, the useful lives of leasehold improvements associated with the Company’s then-current lease were adjusted to the length of the lease term through July 2014. The additional depreciation recognized for the years ended December 31, 2014 and 2013 as a result of the shortened lives was approximately $74,000 and $58,000, respectively.

Revenue Recognition - Revenue is recognized when title transfers at the time of shipment from the Company’s or a third-party fulfillment company’s facility, excluding consignment shipments as discussed below; evidence of an arrangement exists; pricing is fixed or determinable; and collectability is reasonably assured. At the time revenue is recognized, an allowance for estimated returns is established. Any change in the allowance for returns is charged against net sales. The Company’s return policy allows for the return of loose jewels and finished jewelry for credit generally within 30 days of shipment and must be returned for a valid reason, such as quality problems or an error in shipment. From time to time, some wholesale customers may have a contractual right to return a certain percentage of goods for any reason for specified periods of time. In these instances, the Company only recognizes revenue when the contractual right of return is exhausted. Periodically, the Company ships finished goods inventory to wholesale customers on consignment terms. Under these terms, the customer assumes the risk of loss and has an absolute right of return for a specified period that typically ranges from six months to one year. The Company’s wholesale customers are generally required to make payments on consignment shipments within 60 days upon the customer informing the Company that it will keep the inventory. Accordingly, the Company does not recognize revenue on these consignment transactions until the earlier of (1) the customer informing the Company that it will keep the inventory or (2) the expiration of the right of return period.

Cost of Goods Sold - Cost of goods sold is primarily composed of inventory sold during the period; inventory written off during the period due to ongoing quality reviews or through customer returns; salaries and payroll-related expenses for personnel involved in preparing and shipping product to customers; an allocation of shared expenses such as rent, utilities, communication expenses, and depreciation related to preparing and shipping product to customers; and outbound freight charges.

Advertising Costs - Advertising production costs are expensed as incurred. Media placement costs are expensed the first time the advertising appears.

The Company also offers a cooperative advertising program to certain of its wholesale customers that reimburses, via a credit towards future purchases, a portion of their marketing costs based on the customers’ net purchases from the Company and is subject to the customer providing documentation of all advertising performed that includes the Company’s products. For the years ended December 31, 2014 and 2013, these amounts were approximately $321,000 and $1.03 million, respectively, and are included as a component of sales and marketing expenses.

Advertising expenses, inclusive of the cooperative advertising program, for the years ended December 31, 2014 and 2013 were approximately $1.84 million and $2.74 million, respectively.

Sales and Marketing - Sales and marketing costs are expensed as incurred. These costs include all expenses of promoting and selling the Company’s products and include such items as the salaries, payroll-related expenses, and travel of sales and marketing personnel; advertising; trade shows; market research; sales commissions; and an allocation of overhead expenses attributable to these activities. Except for an allocation to general and administrative expenses, these costs also include the operating expenses of the Company’s two wholly owned operating subsidiaries Moissanite.com, LLC and Charles & Colvard Direct, LLC.

General and Administrative - General and administrative costs are expensed as incurred. These costs include the salaries and payroll-related expenses of executive, finance, information technology, and administrative personnel; legal, investor relations, and professional fees; general office and administrative expenses; Board of Directors fees; rent; bad debts; and insurance.

Research and Development - Research and development costs are expensed as incurred. These costs primarily comprise salary allocations and consultant fees associated with the study of product enhancement and manufacturing process efficiencies.

Stock-Based Compensation - The Company recognizes compensation expense for stock-based awards based on estimated fair values on the date of grant. The Company uses the Black-Scholes-Merton option pricing model to determine the fair value of stock options. The fair value of other stock-based compensation awards is determined by the market price of the Company’s common stock on the date of grant. The expense associated with stock-based compensation is recognized on a straight-line basis over the requisite service period of each award.

Fair value of stock options using the Black-Scholes-Merton option pricing model is estimated on the date of grant utilizing certain assumptions for dividend yield, expected volatility, risk-free interest rate, and expected lives of the awards, as follows:

Dividend yield - Although the Company issued dividends in prior years, a dividend yield of zero is used due to the uncertainty of future dividend payments.

Expected volatility - Volatility is a measure of the amount by which a financial variable such as share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company estimates expected volatility giving primary consideration to the historical volatility of its common stock.

Risk-free interest rate - The risk-free interest rate is based on the published yield available on U.S. Treasury issues with an equivalent term remaining equal to the expected life of the stock option.

Expected lives - The expected lives of the stock options issued in 2014 represent the estimated period of time until exercise or forfeiture and are based on the simplified method of using the mid-point between the vesting term and the original contractual term. Stock options issued prior to 2014 were expensed using expected lives that represented the time until exercise or forfeiture using historical information.

The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rates of stock-based awards and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rates, the Company analyzed its historical forfeiture rates, the remaining lives of unvested stock-based awards, and the amount of vested awards as a percentage of total awards outstanding. If the Company’s actual forfeiture rates are materially different from its estimates, or if the Company re-evaluates the forfeiture rates in the future, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.

Income Taxes - Deferred income taxes are recognized for the income tax consequences of “temporary” differences by applying enacted statutory income tax rates applicable to future years to differences between the financial statement carrying amounts and the income tax bases of existing assets and liabilities. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount that is more likely than not to be realized.

Other Comprehensive Income - For the years ended December 31, 2014 and 2013, the Company did not have any other comprehensive income.

Net Loss per Common Share - Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the periods. Diluted net loss per common share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the periods. Common equivalent shares consist of stock options that are computed using the treasury stock method.

The following table reconciles the differences between the basic and diluted net loss per share presentations:

	Year Ended December 31,
	2014			2013
Numerator:
Net loss	$	(13,097,023	)	$	(1,291,098	)

Denominator:
Weighted average common shares outstanding:
Basic		20,295,618			19,904,170
Stock options		-			-
Diluted		20,295,618			19,904,170

Net loss per common share:
Basic	$	(0.65	)	$	(0.06	)
Diluted	$	(0.65	)	$	(0.06	)

For the years ended December 31, 2014 and 2013 stock options to purchase approximately 1.67 million and 1.20 million shares, respectively, were excluded from the computation of diluted net loss per common share because the exercise price of the stock options was greater than the average market price of the common shares or the effect of inclusion of such amounts would be anti-dilutive to net loss per common share.

Recently Adopted/Issued Accounting Pronouncements - In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (ASU 2014-09), which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of the pending adoption of ASU 2014-09 on its consolidated financial statements and has not yet determined the method by which the Company will adopt the standard in 2017.

In August 2014, the FASB issued ASU 2014-15, Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15). The amendments in ASU 2014-15 are intended to define management’s responsibility to evaluate whether there is substantial doubt about an organization’s ability to continue as a going concern and to provide related footnote disclosures. Under U.S. GAAP, financial statements are prepared under the presumption that the reporting organization will continue to operate as a going concern, except in limited circumstances. The going concern basis of accounting is critical to financial reporting because it establishes the fundamental basis for measuring and classifying assets and liabilities. Currently, U.S. GAAP lacks guidance about management’s responsibility to evaluate whether there is substantial doubt about the organization’s ability to continue as a going concern or to provide related footnote disclosures. This ASU provides guidance to an organization’s management, with principles and definitions that are intended to reduce diversity in the timing and content of disclosures that are commonly provided by organizations today in the financial statement footnotes. This standard is effective for annual periods ending after December 15, 2016, and interim periods within annual periods beginning after December 15, 2016. Early application is permitted for annual or interim reporting periods for which the financial statements have not previously been issued. The Company does not expect this ASU will have a material impact on its consolidated financial statements.

All other new and recently issued, but not yet effective, accounting pronouncements have been deemed to be not relevant to the Company and therefore are not expected to have any impact once adopted.

SEGMENT INFORMATION AND GEOGRAPHIC DATA

12 Months Ended

Dec. 31, 2014

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.

During 2014, the Company began managing its business primarily through the three distribution channels that it uses to sell its product lines, loose jewels and finished jewelry. Accordingly, the Company determined its three operating and reportable segments to be wholesale distribution transacted through the parent entity, and the two direct-to-consumer distribution channels transacted through the Company’s wholly owned operating subsidiaries, Moissanite.com, LLC and Charles & Colvard Direct, LLC. The accounting policies of these three segments are the same as those described in Note 2, “Basis of Presentation and Significant Accounting Policies.”

Previously, the Company determined it managed its business through two distribution channels, wholesale distribution and direct-to-consumer. While the Company has always managed its businesses as three separate operating segments, it previously aggregated the Moissanite.com, LLC and Charles & Colvard Direct, LLC operating segments into a single operating segment for reporting purposes. The two wholly owned operating subsidiaries that previously were aggregated under the direct-to-consumer segment are now each being presented as a separate reportable segment. The Company believes aggregation of the two subsidiaries into one reportable segment for reporting purposes is no longer warranted due to changes in how it sources product and sells directly to consumers, including changes in the management structure, strategic initiatives and changes in sales models, made during the year ended December 31, 2014 for each of the two wholly owned subsidiaries. Certain amounts from 2013 have been reclassified to conform to the current year presentation as a result of this change in reportable segments.

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 (loss). Product line cost of goods sold is defined as product cost of goods sold in each of the Company’s wholesale distribution and two direct-to-consumer distribution operating segments excluding non-capitalized expenses from the Company’s manufacturing and production control departments, comprising personnel costs, depreciation, rent, utilities, and corporate overhead allocations; freight out; inventory valuation allowance adjustments; and other inventory adjustments, comprising costs of quality issues, damaged goods, and inventory write-offs.

The Company allocates certain general and administrative expenses from its parent entity to its two direct-to-consumer distribution segments primarily based on net sales and number of employees. Unallocated expenses, which also include interest and taxes, remain in the parent entity’s wholesale distribution segment.

Summary financial information by reportable segment is as follows:

	Year Ended December 31, 2014
	Wholesale			Moissanite.com			Charles & Colvard Direct			Total
Net sales
Loose jewels	$	12,324,045			600,505			1,820			12,926,370
Finished jewelry		8,452,800			2,812,158			1,449,321			12,714,279
Total	$	20,776,845			3,412,663			1,451,141			25,640,649

Product line cost of goods sold
Loose jewels	$	7,458,355			100,851			7,623			7,566,829
Finished jewelry		6,584,937			1,371,056			472,189			8,428,182
Total	$	14,043,292			1,471,907			479,812			15,995,011

Product line gross profit
Loose jewels	$	4,865,690			499,654			(5,803	)		5,359,541
Finished jewelry		1,867,863			1,441,102			977,132			4,286,097
Total	$	6,733,553			1,940,756			971,329			9,645,638

Operating loss	$	(4,802,435	)		(1,265,035	)		(2,976,754	)		(9,044,224	)

Depreciation and amortization	$	887,287			174,562			46,106			1,107,955

Total assets	$	51,183,888			128,049			114,460			51,426,397

Capital expenditures	$	1,093,055			1,386			1,262			1,095,703

	Year Ended December 31, 2013
	Wholesale		Moissanite.com			Charles & Colvard Direct			Total
Net sales
Loose jewels	$	18,136,062		347,933			-			18,483,995
Finished jewelry		7,438,340		2,152,018			412,834			10,003,192
Total	$	25,574,402		2,499,951			412,834			28,487,187

Product line cost of goods sold
Loose jewels	$	7,588,838		53,941			3,596			7,646,375
Finished jewelry		4,094,157		1,095,489			109,926			5,299,572
Total	$	11,682,995		1,149,430			113,522			12,945,947

Product line gross profit
Loose jewels	$	10,547,224		293,992			(3,596	)		10,837,620
Finished jewelry		3,344,183		1,056,529			302,908			4,703,620
Total	$	13,891,407		1,350,521			299,312			15,541,240

Operating income (loss)	$	3,652,153		(1,951,526	)		(3,280,911	)		(1,580,284	)

Depreciation and amortization	$	481,993		263,372			117,318			862,683

Total assets	$	61,702,449		469,217			152,186			62,323,852

Capital expenditures	$	744,679		47,801			7,887			800,367

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 December 31,
	2014		2013
Product line cost of goods sold	$	15,995,011	$	12,945,947
Non-capitalized manufacturing and production control expenses		949,385		532,928
Freight out		284,944		201,911
Inventory valuation allowances		295,000		264,000
Other inventory adjustments		488,995		655,391
Cost of goods sold	$	18,013,335	$	14,600,177

The Company’s net inventories by product line maintained in the parent entity’s wholesale distribution segment are as follows:

	December 31,
	2014		2013
Loose jewels
Raw materials	$	4,658,692	$	3,311,375
Work-in-process		5,752,103		9,526,769
Finished goods		21,495,873		20,002,881
Finished goods on consignment		46,284		32,948
Total	$	31,952,952	$	32,873,973

Finished jewelry
Raw materials	$	258,707	$	270,043
Work-in-process		540,576		764,355
Finished goods		5,557,417		8,117,035
Finished goods on consignment		578,200		299,514
Total	$	6,934,900	$	9,450,947

Supplies inventories of approximately $51,000 and $87,000 at December 31, 2014 and 2013, respectively, included in finished goods inventories in the consolidated financial statements are omitted from inventories by product line because they are used in both product lines and are not maintained separately. The Company’s two operating subsidiaries comprising the two direct-to-consumer distribution segments carry no net inventories, and inventory is transferred without intercompany markup from the parent entity’s wholesale distribution segment as product line cost of goods sold when sold to the end consumer.

The Company recognizes sales by geographic area based on the country in which the customer is based. A portion of the Company’s international wholesale distribution segment sales represents products sold internationally that may be re-imported to U.S. retailers. Sales to international end consumers made by the Company’s two direct-to-consumer distribution segments are included in U.S. sales because products are shipped and invoiced to a U.S.-based intermediary party that assumes all international shipping and credit risks. The following presents certain data by geographic area:

	Year Ended December 31,
	2014		2013
Net sales
United States	$	22,101,974	$	20,684,397
International		3,538,675		7,802,790
Total	$	25,640,649	$	28,487,187

	December 31,
	2014		2013
Property and equipment, net
United States	$	1,859,355	$	1,717,692
International		-		-
Total	$	1,859,355	$	1,717,692

	December 31,
	2014		2013
Intangible assets, net
United States	$	39,050	$	70,830
International		177,897		255,037
Total	$	216,947	$	325,867

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

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+ Details

FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2014

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

4.	FAIR VALUE MEASUREMENTS

Under U.S. GAAP, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. U.S. GAAP also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are obtained from independent sources and can be validated by a third party, whereas unobservable inputs reflect assumptions regarding what a third party would use in pricing an asset or liability. The fair value hierarchy consists of three levels based on the reliability of inputs, as follows:

Level 1 - quoted prices in active markets for identical assets and liabilities

Level 2 - inputs other than Level 1 quoted prices that are directly or indirectly observable

Level 3 - unobservable inputs that are not corroborated by market data

The Company evaluates assets and liabilities subject to fair value measurements on a recurring and non-recurring basis to determine the appropriate level to classify them for each reporting period. This determination requires significant judgments to be made by management of the Company. The instruments identified as subject to fair value measurements on a recurring basis are cash and cash equivalents, trade accounts receivable, trade accounts payable, and accrued expenses. All instruments are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments.

Assets that are measured at fair value on a non-recurring basis include property and equipment, leasehold improvements, and intangible assets, comprising patents, license rights, and trademarks. These items are recognized at fair value when they are considered to be impaired. As of December 31, 2014, no assets were identified for impairment. Level 3 inputs are primarily based on the estimated future cash flows of the asset determined by market inquiries to establish fair market value of used machinery or future revenue expected to be generated with the assistance of patents, license rights, and trademarks.

INVENTORIES

12 Months Ended

Dec. 31, 2014

INVENTORIES [Abstract]

INVENTORIES

5.	INVENTORIES

The Company’s total inventories, net of reserves, consisted of the following as of December 31, 2014 and 2013:

	December 31,
	2014			2013
Raw materials	$	4,917,399		$	3,581,418
Work-in-process		6,292,679			10,291,124
Finished goods		27,985,067			28,771,098
Finished goods on consignment		677,484			407,462
Less inventory reserves		(934,000	)		(639,000	)
Total	$	38,938,629		$	42,412,102

Short-term portion	$	13,320,639		$	13,074,428
Long-term portion		25,617,990			29,337,674
Total	$	38,938,629		$	42,412,102

Periodically, the Company ships finished goods inventory to wholesale customers on consignment terms. Under these terms, the customer assumes the risk of loss and has an absolute right of return for a specified period. Finished goods on consignment at December 31, 2014 and 2013 are net of shrinkage reserves of $53,000 and $75,000, respectively, to allow for certain loose jewels and finished jewelry on consignment with wholesale customers that may not be returned or may be returned in a condition that does not meet the Company’s current grading or quality standards.

Total net loose jewel inventories at December 31, 2014 and 2013, including inventory on consignment net of reserves, were $31.95 million and $32.87 million, respectively. The loose jewel inventories at December 31, 2014 and 2013 include shrinkage reserves of $17,000 and $2,000, respectively, which includes $17,000 and $0 of shrinkage reserves on inventory on consignment at December 31, 2014 and 2013, respectively. Loose jewel inventories at December 31, 2014 and 2013 also include recuts reserves of $216,000 and $172,000, respectively.

Total net jewelry inventories at December 31, 2014 and December 31, 2013, including inventory on consignment net of reserves, finished jewelry featuring moissanite manufactured by the Company since entering the finished jewelry business in 2010, and fashion finished jewelry purchased by the Company for sale through Lulu Avenue^®, were $6.93 million and $9.45 million, respectively. Jewelry inventories consist primarily of finished goods, a portion of which the Company acquired as part of a January 2009 settlement agreement with a former manufacturer customer to reduce the outstanding receivable to the Company. Due to the lack of a plan to market this inventory at that time, a jewelry inventory reserve was established to reduce the majority of the acquired jewelry inventory value to scrap value, or the amount the Company would expect to obtain by melting the gold in the jewelry and returning to loose-jewel finished goods inventory those jewels that meet grading standards. The scrap reserve established for this acquired inventory at the time of the agreement is adjusted at each reporting period for the market price of gold and has generally declined as the associated jewelry is sold down. At December 31, 2014, the balance decreased to $101,000 from $106,000 at December 31, 2013 as a result of sell down of the inventory during the year and scraping the finished jewelry. Because the finished jewelry the Company began manufacturing in 2010 after it entered that business was made pursuant to an operational plan to market and sell the inventory, it is not subject to this reserve. The finished jewelry inventories at December 31, 2014 and December 31, 2013 also include shrinkage reserves of $192,000 and $180,000, respectively, which includes shrinkage reserves of $36,000 and $75,000 on inventory on consignment, respectively; and a repairs reserve of $127,000 and $51,000, respectively. During the years ended December 31, 2014 and 2013, the Company identified certain fashion finished jewelry inventory that could not be sold due to damage or branding issues, and established an obsolescence reserve of $250,000 and $128,000, respectively, for the carrying costs in excess of any estimated scrap values. As of December 31, 2014, we identified certain finished jewelry featuring moissanite that was obsolete and established an obsolescence reserve of $31,000 for the carrying costs in excess of any estimated scrap values. No obsolescence reserve requirement relating to our finished jewelry featuring moissanite existed as of December 31, 2013.

- Definition

The entire disclosure for inventory. This may include, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the major classes of inventory, and the nature of the cost elements included in inventory. If inventory is stated above cost, accrued net losses on firm purchase commitments for inventory and losses resulting from valuing inventory at the lower-of-cost-or-market may also be included. For LIFO inventory, may disclose the amount and basis for determining the excess of replacement or current cost over stated LIFO value and the effects of a LIFO quantities liquidation that impacts net income.

+ References+ Details

PROPERTY AND EQUIPMENT

12 Months Ended

Dec. 31, 2014

PROPERTY AND EQUIPMENT [Abstract]

PROPERTY AND EQUIPMENT

6.	PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

	December 31,
	2014			2013
Computer software	$	1,622,806		$	1,739,734
Machinery and equipment		818,362			850,039
Computer hardware		750,776			820,535
Leasehold improvements		1,002,357			457,856
Furniture and fixtures		259,944			319,100
Total		4,454,245			4,187,264
Less accumulated depreciation		(2,594,890	)		(2,469,572	)
Property and equipment, net	$	1,859,355		$	1,717,692

Depreciation expense for the years ended December 31, 2014 and 2013 was approximately $946,000 and $731,000, respectively.

- Definition

The entire disclosure for long-lived, physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, accounting policies and methodology, roll forwards, depreciation, depletion and amortization expense, including composite depreciation, accumulated depreciation, depletion and amortization expense, useful lives and method used, income statement disclosures, assets held for sale and public utility disclosures.

+ References+ Details

INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2014

INTANGIBLE ASSETS [Abstract]

INTANGIBLE ASSETS

7.	INTANGIBLE ASSETS

Intangible assets consist of the following:

	December 31,						Weighted Average Amortization Period
	2014			2013			(in Years)
Patents	$	912,862		$	858,397			1.4
Trademarks		50,208			51,356			3.0
License rights		6,718			6,718			0.0
Total		969,788			916,471
Less accumulated amortization		(752,841	)		(590,604	)
Intangible assets, net	$	216,947		$	325,867

Amortization expense for the years ended December 31, 2014 and 2013 was approximately $162,000 and $131,000, respectively. Amortization expense on existing intangible assets is estimated to be $146,000 per year for 2015, $61,000 for 2016, and $8,000 for 2017.

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2014

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

8.	COMMITMENTS AND CONTINGENCIES

Lease Commitments

In March 2004, the Company entered into a seven-year lease, beginning in August 2004, for approximately 16,500 square feet of mixed-use space from an unaffiliated third party at a base cost with escalations throughout the lease term plus additional common-area expenses based on the Company’s proportionate share of the lessor’s operating costs. The lease provided for two rent holidays, during which no rent was payable, and a moving allowance. In January 2011, the Company amended the lease effective January 1, 2011 to extend the term through January 2017 in exchange for a reduced rental rate and 50% rent abatement in the first 12 months of the extended term. The amended lease included 3% annual rent escalations and a one-time option to terminate the lease effective as of July 31, 2014. The Company exercised this right to terminate the lease by giving notice to the lessor prior to October 31, 2013. The cost to terminate the lease effective July 31, 2014 was approximately $112,000, which the Company paid at the time notice was given to terminate the lease. This amount reflects all unamortized lease transaction costs, including, without limitation, all rent abated since January 1, 2011, plus two months’ rent at the then-current rental rate. On December 9, 2013, the Company entered into a Lease Agreement, as amended on December 23, 2013 and April 15, 2014 (the “Lease Agreement”), for a new corporate headquarters, which occupies approximately 36,350 square feet of office, storage, and light manufacturing space. The Company took possession of the leased property on May 23, 2014 once certain improvements to the leased space were completed, and did not have access to the property before this date. These improvements and other lease signing and moving incentives offered by the landlord totaled approximately $550,000 and $73,000, respectively, which will be amortized over the life of the lease until October 31, 2021. Included in the Lease Agreement is a seven-month rent abatement period effective June 2014 through December 2014.

The Company recognizes rent expense on a straight-line basis, giving consideration to the rent holidays and escalations, the lease signing and moving allowance to be paid to the Company, and the rent abatement.

As of December 31, 2014, the Company’s future minimum payments under the operating leases were as follows:

2015	$	553,905
2016		569,138
2017		584,789
2018		600,871
2019		617,395
Thereafter		1,176,330
Total	$	4,102,428

Rent expense for the years ended December 31, 2014 and 2013 was approximately $373,000 and $336,000, respectively.

Purchase Commitments

On June 6, 1997, the Company entered into an amended and restated exclusive supply agreement with Cree, Inc. (“Cree”). The exclusive supply agreement had an initial term of ten years that was extended in January 2005 to July 2015. In connection with the amended and restated exclusive supply agreement, the Company committed to purchase from Cree a minimum of 50%, by dollar volume, of its raw material SiC crystal requirements. If the Company’s orders required Cree to expand beyond specified production levels, the Company committed to purchase certain minimum quantities. Effective February 8, 2013, the Company entered into an amendment to a prior letter agreement with Cree, which provided a framework for the Company’s purchases of SiC crystals under the amended and restated exclusive supply agreement. Pursuant to this amendment, the Company agreed to purchase at least $4.00 million of SiC crystals in an initial new order. After the initial new order, the Company agreed to issue non-cancellable, quarterly orders that must equal or exceed a set minimum order quantity. The total purchase commitment under the amendment (as subsequently amended) until July 2015, including the initial new order, was dependent upon the grade of the material and ranged between approximately $7.64 million and approximately $18.56 million.

On December 12, 2014, the Company entered into a new exclusive supply agreement with Cree (the “New Supply Agreement”), which superseded and replaced (with respect to materials ordered subsequent to the effective date of the New Supply Agreement) the exclusive supply agreement that was set to expire in 2015. Under the New Supply Agreement, subject to certain terms and conditions, the Company agreed to exclusively purchase from Cree, and Cree agreed to exclusively supply, 100% of the Company’s required SiC materials in quarterly installments that must equal or exceed a set minimum order quantity. The initial term of the New Supply Agreement will expire on June 24, 2018, unless extended by the parties. The Company also has one option to unilaterally extend the term of the agreement for an additional two-year period, subject to certain conditions. The Company’s total purchase commitment under the New Supply Agreement until June 2018 is dependent upon the size of the SiC material and ranges between approximately $29.6 million and approximately $31.5 million.

During the year ended December 31, 2014 and 2013, the Company purchased approximately $5.84 million and $12.56 million, respectively, of SiC crystals from Cree.

- Definition

The entire disclosure for commitments and contingencies.

+ References+ Details

LINE OF CREDIT

12 Months Ended

Dec. 31, 2014

LINE OF CREDIT [Abstract]

LINE OF CREDIT

9.	LINE OF CREDIT

On September 20, 2013, the Company obtained a $10,000,000 revolving line of credit (the “Line of Credit”) from PNC Bank, National Association (“PNC Bank”) for general corporate and working capital purposes. The Line of Credit was evidenced by a Committed Line of Credit Note, dated September 20, 2013 (the “Note”), which was set to mature on June 15, 2015. The interest rate under the Note was the one-month LIBOR rate (adjusted daily) plus 1.50%, calculated on an actual/360 basis.

The Line of Credit was also governed by a loan agreement, dated September 20, 2013, and was guaranteed by Charles & Colvard Direct, LLC, and Moissanite.com, LLC. The Line of Credit was secured by a lien on substantially all assets of the Company and its subsidiaries.

Effective June 25, 2014, the Line of Credit was terminated concurrent with the Company entering into a new banking relationship with Wells Fargo Bank, National Association (“Wells Fargo”). The Company had not utilized the Line of Credit. The Company recognized the remaining $19,000 of deferred legal expenses associated with this Line of Credit upon termination.

On June 25, 2014, the Company and its wholly owned subsidiaries, Charles & Colvard Direct, LLC, and Moissanite.com, LLC (collectively, the “Borrowers”), obtained a $10,000,000 asset-based revolving credit facility (the “Credit Facility”) from Wells Fargo. The Credit Facility will be used for general corporate and working capital purposes, including transaction fees and expenses incurred in connection therewith and the issuance of letters of credit up to a $1,000,000 sublimit. The Credit Facility will mature on June 25, 2017.

The Credit Facility includes a $5,000,000 sublimit for advances that are supported by a 90% guaranty provided by the U.S. Export-Import Bank. Advances under the Credit Facility are limited to a borrowing base, which is computed by applying specified advance rates to the value of the Borrowers’ eligible accounts and inventory, less reserves. Advances against inventory are further subject to an initial $3,000,000 maximum. The Borrowers must maintain a minimum of $1,000,000 in excess availability at all times. There are no other financial covenants.

Each advance accrues interest at a rate equal to Wells Fargo’s 3-month LIBOR rate plus 2.50%, calculated on an actual/360 basis and payable monthly in arrears. Principal outstanding during an event of default accrues interest at a rate of 3% in excess of the above rate. Any advance may be prepaid in whole or in part at any time. In addition, the maximum line amount may be reduced by the Company in whole or part at any time, subject to a fee equal to 2% of any reduction in the first year after closing, 1% of any reduction in the second year after closing, and 0% thereafter. There are no mandatory prepayments or line reductions.

The Credit Facility is secured by a lien on substantially all assets of the Borrowers, each of which is jointly and severally liable for all obligations thereunder. Wells Fargo’s security interest in certain SiC materials is subordinate to Cree’s security interest in such materials pursuant to the New Supply Agreement and an Intercreditor Agreement with Wells Fargo.

The Credit Facility is evidenced by a credit and security agreement, dated as of June 25, 2014 and amended as of September 16, 2014 and December 12, 2014 (collectively, the “Credit Agreement”), and customary ancillary documents. The Credit Agreement contains customary covenants, representations and cash dominion provisions, including a financial reporting covenant and limitations on dividends, distributions, debt, contingent obligations, liens, loans, investments, mergers, acquisitions, divestitures, subsidiaries, affiliate transactions, and changes in control.

Events of default under the Credit Facility include, without limitation, (1) any impairment of the Export-Import Bank guaranty, unless the guaranteed advances are repaid within two business days, (2) an event of default under any other indebtedness of the Borrowers in excess of $200,000, and (3) a material adverse change in the ability of the Borrowers to perform their obligations under the Credit Agreement or in the Borrowers’ assets, liabilities, businesses or prospects, or other circumstances that Wells Fargo believes may impair the prospect of repayment. If an event of default occurs, Wells Fargo is entitled to take enforcement action, including acceleration of amounts due under the Credit Agreement and foreclosure upon collateral.

The Credit Agreement contains other customary terms, including indemnity, expense reimbursement, yield protection, and confidentiality provisions. Wells Fargo is permitted to assign the Credit Facility.

As of December 31, 2014, the Company had not borrowed against the Credit Facility.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details

SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2014

SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION [Abstract]

SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

10.	SHAREHOLDERS’ EQUITY AND STOCK-BASED COMPENSATION

Common Stock

The Company is authorized to issue 50,000,000 shares of common stock, no par value. As of December 31, 2014 and 2013, it had 20,382,333 and 20,197,301 shares of common stock outstanding, respectively. Holders of common stock are entitled to one vote for each share held.

In November 2009, the Board of Directors authorized a repurchase program for up to 1,000,000 shares of the Company’s common stock. On August 6, 2013, the Board authorized the extension of the Company’s share repurchase program for an additional 12 months. The program, which was originally authorized on November 13, 2009, authorized the Company to repurchase up to 1,000,000 shares of the Company’s common stock until August 12, 2014 in open market or in privately negotiated transactions. The Company expected to use available cash to finance these purchases and would determine the timing and amount of stock repurchases based on the Company’s evaluation of market conditions, the market price of the Company’s common stock, and management’s assessment of the Company’s liquidity and cash flow needs. The Company had no obligations to repurchase shares under the program and the program could be suspended or terminated at any time. As of December 31, 2013, the Company had repurchased an aggregate of 190,787 shares, and 809,213 shares of the Company’s common stock remained available for repurchase under the program. The Company did not repurchase any shares under this program during the years ended December 31, 2014 or 2013. The Company did not extend the plan past its expiration due to covenants within the Credit Facility described in Note 9, “Line of Credit.”

Preferred Stock

The Board of Directors is authorized, without further shareholder approval, to issue up to 10,000,000 shares of preferred stock, no par value. The preferred stock may be issued from time to time in one or more series. No shares of preferred stock had been issued as of December 31, 2014.

Equity Compensation Plans

1997 Omnibus Stock Plan

In 1997, the Company adopted the 1997 Omnibus Stock Plan of Charles & Colvard, Ltd. (the “1997 Omnibus Plan”). The 1997 Omnibus Plan authorized the Company to grant stock options, stock appreciation rights, and restricted stock awards (collectively, “awards”) to selected employees, independent contractors, and directors of the Company and related corporations in order to promote a closer identification of their interests with those of the Company and its shareholders. All stock options granted under the 1997 Omnibus Plan have an exercise price equal to the market price of the Company’s common stock on the date the stock option was granted. Stock options granted to employees under the 1997 Omnibus Plan generally vest over three years and have terms of up to 10 years, with the exception of stock options granted in 2005 under the Executive Compensation Plan (which is governed by and subject to the 1997 Omnibus Plan) that vested immediately and stock options granted in 2006 under the Executive Compensation Plan that vested at the end of three years. Stock options granted to the Board of Directors under the 1997 Omnibus Plan generally vested over one year and have terms of up to 10 years. The terms of stock options granted to independent contractors varied depending on the specific grant, but the terms are no longer than 10 years. Restricted stock awards granted to members of the Board of Directors vested at the end of one year. The 1997 Omnibus Plan expired (with respect to future grants) on September 30, 2007. As of December 31, 2014 and 2013, there were 11,776 and 20,051 stock options outstanding under the 1997 Omnibus Plan, respectively.

2008 Stock Incentive Plan

In May 2008, the shareholders of the Company approved the adoption of the Charles & Colvard, Ltd. 2008 Stock Incentive Plan (the “2008 Plan”), which replaced the 1997 Omnibus Plan. The 2008 Plan authorizes the Company to grant stock options, stock appreciation rights, restricted stock, and other equity awards to selected employees, directors, and independent contractors. The aggregate number of shares of the Company’s common stock that may be issued pursuant to awards granted under the 2008 Plan shall not exceed the sum of 3,000,000 plus any shares of common stock subject to an award granted under the 1997 Omnibus Plan or any other stock incentive plan maintained by the Company prior to the 2008 Plan (each, a “Prior Plan”) that is forfeited, cancelled, terminated, expires, or lapses for any reason without the issuance of shares pursuant to the award, or shares subject to an award granted under a Prior Plan which shares are forfeited to, or repurchased or reacquired by, the Company. Stock options granted to employees under the 2008 Plan generally vest over three years and have terms of up to 10 years. The vesting schedules and terms of stock options granted to independent contractors vary depending on the specific grant, but the terms are no longer than 10 years. Restricted stock awards granted to members of the Board of Directors vest at the end of one year on the date of the Annual Meeting of Shareholders. The vesting schedules of restricted stock awards granted to employees or independent contractors vary depending on the specific grant but are generally three years or less. Only stock options and restricted stock have been granted under the 2008 Plan. As of December 31, 2014 and 2013, there were 1,654,170 and 1,186,846 stock options outstanding under the 2008 Plan, respectively.

Stock-Based Compensation

The following table summarizes the components of the Company’s stock-based compensation included in net loss:

	Year Ended December 31,
	2014		2013
Employee stock options	$	840,568	$	791,833
Restricted stock awards		846,955		886,274
Income tax benefit		-		(309,607	)
Total	$	1,687,523	$	1,368,500

Due to the Company’s valuation allowance against deferred tax assets as discussed further in Note 11, “Income Taxes,” the income tax benefit for 2014 was fully reserved.

No stock-based compensation was capitalized as a cost of inventory during the years ended December 31, 2014 and 2013.

Stock Options

The following is a summary of the stock option activity for the years ended December 31, 2014 and 2013:

	Shares			Weighted Average Exercise Price
Outstanding, December 31, 2012		1,147,847		$	2.31
Granted		436,002		$	4.59
Exercised		(197,848	)	$	2.13
Forfeited		(101,831	)	$	2.47
Expired		(79,873	)	$	2.36
Outstanding, December 31, 2013		1,204,297		$	3.14
Granted		535,000		$	2.49
Exercised		-		$	-
Forfeited		(30,775	)	$	2.51
Expired		(42,576	)	$	3.64
Outstanding, December 31, 2014		1,665,946		$	2.93

The weighted average grant date fair value of stock options granted during the years ended December 31, 2014 and 2013 was $1.67 and $3.25, respectively. The total fair value of stock options that vested during the years ended December 31, 2014 and 2013 was approximately $805,000 and $691,000, respectively. The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted average assumptions for stock options granted during the years ended December 31, 2014 and 2013:

	Year Ended December 31,
	2014			2013
Dividend yield		0.0	%		0.0	%
Expected volatility		81.1	%		92.9	%
Risk-free interest rate		1.77	%		1.01	%
Expected lives (years)		5.8			5.0

The following table summarizes information about stock options outstanding at December 31, 2014:

Options Outstanding					Options Exercisable						Options Vested or Expected to Vest
Balance as of 12/31/2014	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 12/31/2014		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 12/31/2014		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
1,665,946		7.66	$	2.93		1,056,203		6.85	$	2.73		1,585,478		7.57	$	2.93

As of December 31, 2014, the unrecognized stock-based compensation expense related to unvested stock options was approximately $1.09 million, which is expected to be recognized over a weighted average period of approximately 23 months.

The aggregate intrinsic value of stock options outstanding, exercisable, and vested or expected to vest at December 31, 2014 was approximately $301,000, $288,000, and $298,000, respectively. These amounts are before applicable income taxes and represent the closing market price of the Company’s common stock at December 31, 2014 less the grant price, multiplied by the number of stock options that had a grant price that is less than the closing market price. This amount represents the amount that would have been received by the optionees had these stock options been exercised on that date. During the years ended December 31, 2014 and 2013, the aggregate intrinsic value of stock options exercised was approximately $0 and $819,000, respectively.

Restricted Stock

The following is a summary of the restricted stock activity for the years ended December 31, 2014 and 2013:

	Shares			Weighted Average Grant Date Fair Value
Unvested, December 31, 2012		191,843		$	3.38
Granted		345,403		$	4.48
Vested		(186,343	)	$	3.76
Canceled		-		$	-
Unvested, December 31, 2013		350,903		$	4.26
Granted		185,032		$	2.09
Vested		(248,929	)	$	3.77
Canceled		-		$	-
Unvested, December 31, 2014		287,006		$	3.29

As of December 31, 2014, the unrecognized stock-based compensation expense related to unvested restricted stock was approximately $570,000, which is expected to be recognized over a weighted average period of approximately 14 months.

Dividends

The Company has not paid any cash dividends during the years ended December 31, 2014 and 2013.

INCOME TAXES

12 Months Ended

Dec. 31, 2014

INCOME TAXES [Abstract]

INCOME TAXES

11.	INCOME TAXES

The Company accounts for income taxes under the liability method. Under the liability method, deferred income taxes are recognized for the income tax consequences of “temporary differences” by applying enacted statutory income tax rates applicable to future years to differences between the financial statement carrying amounts and the income tax bases of existing assets and liabilities.

Income tax net (expense) benefit comprises the following:

	Year Ended December 31,
	2014			2013
Current:
Federal	$	-		$	-
State		(7,749	)		(22,929	)
Total		(7,749	)		(22,929	)

Deferred:
Federal		(3,691,163	)		408,871
State		(353,051	)		(116,657	)
Total		(4,044,214	)		292,214
Income tax net (expense) benefit	$	(4,051,963	)	$	269,285

Significant components of the Company’s deferred income tax assets are as follows:

	December 31,
	2014			2013
Current:
Reserves and accruals	$	1,472,997		$	1,298,557
Prepaid expenses		(48,427	)		(42,801	)
Valuation allowance		(1,424,570	)		(57,924	)
Total	$	-		$	1,197,832

	December 31,
	2014			2013
Noncurrent:
Federal NOL carryforwards	$	4,185,179		$	1,884,118
State NOL carryforwards		616,655			460,652
Hong Kong NOL carryforwards		995,566			995,566
Federal benefit on state taxes under uncertain tax positions		128,026			123,865
Stock-based compensation		189,045			30,724
Investment loss		9,373			9,429
Research tax credit		434,637			434,637
Alternative minimum tax credit		348,264			348,264
Contributions carryforward		3,929			1,095
Depreciation		(418,154	)		(366,863	)
Accrued rent		297,362			-
Loss on impairment of long-lived assets		53,533			53,395
Valuation allowance		(6,843,415)			(1,132,991	)
Total		-			2,841,891
Total deferred income tax assets, net	$	-		$	4,039,723

A reconciliation between expected income taxes, computed at the statutory federal income tax rate of 34% applied to pretax accounting loss, and the income tax benefit (expense) included in the consolidated statements of operations for the years ended December 31, 2014 and 2013 is as follows:

	Year Ended December 31,
	2014			2013
Anticipated income tax benefit at statutory rate	$	3,075,321		$	530,529
State income tax benefit (expense), net of federal tax effect		215,109			(90,099	)
Capital loss carryforward expiration		-			(44,750	)
Income tax effect of uncertain tax positions		(8,080	)		(12,180	)
Return to provision adjustments		(2,751	)		(8,092	)
Stock-based compensation		(279,985	)		(81,564	)
Other changes in deferred income tax assets, net		25,493			(25,416	)
(Increase) decrease in valuation allowance		(7,077,070	)		857
Income tax net (expense) benefit	$	(4,051,963	)	$	269,285

As of each reporting date, the Company’s management considers new evidence, both positive and negative, that could impact its view with regard to future realization of deferred tax assets. The Company determined that sufficient positive evidence existed as of December 31, 2013 to conclude that it is more likely than not that certain deferred tax assets of $4.04 million were realizable and recorded approximately $281,000 of income tax benefit to adjust these deferred tax assets. A valuation allowance remained at December 31, 2013 against certain deferred tax assets relating to state net operating loss carryforwards from the Company’s e-commerce and home party operating subsidiaries due to the timing uncertainty of when the subsidiaries will generate cumulative positive taxable income to utilize the associated deferred tax assets. A valuation allowance also remained at December 31, 2013 against certain deferred tax assets relating to investment loss carryforwards because the Company did not anticipate it would generate sufficient investment income to utilize the carryforwards. The Company also previously considered various strategic alternatives, resulting in management determining that a valuation allowance was not necessary at that time. During the three months ended June 30, 2014, the Company’s management determined that such strategic alternatives were no longer in the best interest of the Company. Accordingly, the Company’s management concluded that the positive evidence was no longer sufficient to offset available negative evidence, primarily as a result of the pre-tax operating losses incurred during the six months ended June 30, 2014, and forecasted to continue through the remainder of 2014. As a result, the Company’s management concluded that it was uncertain that the Company would have sufficient future taxable income to utilize its deferred tax assets, and therefore, the Company established a valuation allowance against its deferred tax assets, resulting in a tax expense of $4.04 million for the year ended December 31, 2014. During the year ended December 31, 2014, the Company also recognized approximately $12,000 of income tax expense for interest associated with uncertain tax positions.

As of December 31, 2014, the Company had approximately $882,000 of remaining federal income tax credits, $533,000 of which expire between 2018 and 2021 and the balance without an expiration, which can be carried forward to offset future income taxes. As of December 31, 2014, the Company had federal tax net operating loss carryforwards under U.S. GAAP of approximately $12.44 million, expiring between 2020 and 2034, which can be used to offset against future federal taxable income, North Carolina tax net operating loss carryforwards across all of the entities of approximately $14.64 million expiring between 2023 and 2029, and various other state tax net operating loss carryforwards expiring between 2016 and 2034, which can be used to offset against future state taxable income.

As of December 31, 2014, there was approximately $6.03 million in net operating loss carryforwards in Hong Kong. In accordance with the Hong Kong tax code, these amounts can be carried forward indefinitely to offset future taxable income in Hong Kong. The Company’s deferred tax assets in Hong Kong were fully reserved with a valuation allowance of $996,000 as of December 31, 2014 and 2013 and had been fully reserved in all prior periods due to the uncertainty of future taxable income in this jurisdiction to utilize the deferred tax assets.

Uncertain Tax Positions

The gross liability for income taxes associated with uncertain tax positions at December 31, 2014 was approximately $506,000. This amount is shown net of approximately $98,000 recorded as a direct reduction to the associated deferred tax asset. The gross liability, if recognized, would favorably affect the Company’s effective tax rate.

The Company’s policy for recording interest and penalties associated with tax audits is to record such items as a component of the provision for income taxes. For each of the years ended December 31, 2014 and 2013, the Company accrued approximately $12,000 of interest and penalties associated with uncertain tax positions. Including the interest and penalties recorded for uncertain tax positions, there is a total of approximately $139,000 and $127,000 of interest and penalties included in the accrued income tax liability for uncertain tax positions at December 31, 2014 and 2013, respectively. To the extent interest and penalties are not ultimately incurred with respect to uncertain tax positions, amounts accrued will be reduced and reflected as a reduction of the overall income tax provision.

In all of the significant federal and state jurisdictions where it is required to file income tax returns, the Company has analyzed filing positions for all tax years in which the statute of limitations is open. The only periods subject to examination by the major tax jurisdictions where the Company does business are the 2011 through 2013 tax years. The Company does not believe that the outcome of any examination will have a material impact on its consolidated financial statements and does not expect settlement on any uncertain tax positions within the next 12 months.

The following summarizes the activity related to the Company’s gross liability for uncertain tax positions from January 1, 2013 through December 31, 2014:

Balance as of January 1, 2013	$	482,510
Increases related to prior year tax positions		11,712
Balance as of December 31, 2013		494,222
Increases related to prior year tax positions		12,241
Balance as of December 31, 2014	$	506,463

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References+ Details

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

12 Months Ended

Dec. 31, 2014

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK [Abstract]

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

12.	MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

As of December 31, 2014 and 2013, one customer accounted for 28% and 21%, respectively, of trade accounts receivable. One other customer accounted for 11% of trade accounts receivable as of December 31, 2014, but did not account for a significant amount in the prior year.

A significant portion of sales is derived from certain customer relationships. The following is a summary of customers that represent greater than or equal to 10% of total gross sales:

	Year Ended December 31,
	2014			2013
Customer A		28	%		19	%
Customer B		10	%		9	%

- Definition

The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date.

+ References+ Details

EMPLOYEE BENEFIT PLAN

12 Months Ended

Dec. 31, 2014

EMPLOYEE BENEFIT PLAN [Abstract]

EMPLOYEE BENEFIT PLAN

13.	EMPLOYEE BENEFIT PLAN

All full-time employees who meet certain age and length of service requirements are eligible to participate in the Company’s 401(k) Plan. The plan provides for matching contributions by the Company in such amounts as the Board of Directors may annually determine, as well as a 401(k) option under which eligible participants may defer a portion of their salaries. The Company contributed a total of $129,000 and $79,000 to the plan during the years ended December 31, 2014 and 2013, respectively.

- Definition

The entire disclosure for pension and other postretirement benefits.

+ References+ Details

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2014

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Basis of Presentation and Principles of Consolidation

Use of Estimates

Reclassifications

Cash and Cash Equivalents

Cash and Cash Equivalents - All highly liquid investments with an original maturity of three months or less from the date of purchase are considered to be cash equivalents.

Concentration of Credit Risk

See Note 12, “Major Customers and Concentration of Credit Risk,” for further discussion of credit risk within trade accounts receivable.

Accounts Receivable Reserves

The following is a reconciliation of the allowance for doubtful accounts:

	Year Ended December 31,
	2014			2013
Balance, beginning of period	$	522,000		$	549,000
Additions charged to operations		734,243			3,690
Write-offs, net of recoveries		(182,243	)		(30,690	)
Balance, end of period	$	1,074,000		$	522,000

Inventories

The need for adjustments to inventory reserves is evaluated on a period-by-period basis.

Property and Equipment

Property and Equipment - Property and equipment are stated at cost and are depreciated over their estimated useful lives using the straight-line method as follows:

Machinery and equipment	5 to 12 years
Computer hardware	3 to 5 years
Computer software	3 years
Furniture and fixtures	5 to 10 years
Leasehold improvements	Shorter of the estimated useful life or the lease term

Intangible Assets

Impairment of Long-Lived Assets

Revenue Recognition

Cost of Goods Sold

Advertising Costs

Advertising Costs - Advertising production costs are expensed as incurred. Media placement costs are expensed the first time the advertising appears.

Advertising expenses, inclusive of the cooperative advertising program, for the years ended December 31, 2014 and 2013 were approximately $1.84 million and $2.74 million, respectively.

Sales and Marketing

General and Administrative

Research and Development

Stock-Based Compensation

Dividend yield - Although the Company issued dividends in prior years, a dividend yield of zero is used due to the uncertainty of future dividend payments.

Income Taxes

Other Comprehensive Income

Other Comprehensive Income - For the years ended December 31, 2014 and 2013, the Company did not have any other comprehensive income.

Net Loss per Common Share

The following table reconciles the differences between the basic and diluted net loss per share presentations:

	Year Ended December 31,
	2014			2013
Numerator:
Net loss	$	(13,097,023	)	$	(1,291,098	)

Denominator:
Weighted average common shares outstanding:
Basic		20,295,618			19,904,170
Stock options		-			-
Diluted		20,295,618			19,904,170

Net loss per common share:
Basic	$	(0.65	)	$	(0.06	)
Diluted	$	(0.65	)	$	(0.06	)

Recently Adopted/Issued Accounting Pronouncements

All other new and recently issued, but not yet effective, accounting pronouncements have been deemed to be not relevant to the Company and therefore are not expected to have any impact once adopted.

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2014

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract]

Reconciliation of allowance for doubtful accounts

The following is a reconciliation of the allowance for doubtful accounts:

	Year Ended December 31,
	2014			2013
Balance, beginning of period	$	522,000		$	549,000
Additions charged to operations		734,243			3,690
Write-offs, net of recoveries		(182,243	)		(30,690	)
Balance, end of period	$	1,074,000		$	522,000

Schedule of estimated useful life of property, plant and equipment

Property and equipment are stated at cost and are depreciated over their estimated useful lives using the straight-line method as follows:

Machinery and equipment	5 to 12 years
Computer hardware	3 to 5 years
Computer software	3 years
Furniture and fixtures	5 to 10 years
Leasehold improvements	Shorter of the estimated useful life or the lease term

Reconciliation of basic and fully diluted earnings per share

The following table reconciles the differences between the basic and diluted net loss per share presentations:

	Year Ended December 31,
	2014			2013
Numerator:
Net loss	$	(13,097,023	)	$	(1,291,098	)

Denominator:
Weighted average common shares outstanding:
Basic		20,295,618			19,904,170
Stock options		-			-
Diluted		20,295,618			19,904,170

Net loss per common share:
Basic	$	(0.65	)	$	(0.06	)
Diluted	$	(0.65	)	$	(0.06	)

SEGMENT INFORMATION AND GEOGRAPHIC DATA (Tables)

12 Months Ended

Dec. 31, 2014

SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract]

Summary information by segment

Summary financial information by reportable segment is as follows:

	Year Ended December 31, 2014
	Wholesale			Moissanite.com			Charles & Colvard Direct			Total
Net sales
Loose jewels	$	12,324,045			600,505			1,820			12,926,370
Finished jewelry		8,452,800			2,812,158			1,449,321			12,714,279
Total	$	20,776,845			3,412,663			1,451,141			25,640,649

Product line cost of goods sold
Loose jewels	$	7,458,355			100,851			7,623			7,566,829
Finished jewelry		6,584,937			1,371,056			472,189			8,428,182
Total	$	14,043,292			1,471,907			479,812			15,995,011

Product line gross profit
Loose jewels	$	4,865,690			499,654			(5,803	)		5,359,541
Finished jewelry		1,867,863			1,441,102			977,132			4,286,097
Total	$	6,733,553			1,940,756			971,329			9,645,638

Operating loss	$	(4,802,435	)		(1,265,035	)		(2,976,754	)		(9,044,224	)

Depreciation and amortization	$	887,287			174,562			46,106			1,107,955

Total assets	$	51,183,888			128,049			114,460			51,426,397

Capital expenditures	$	1,093,055			1,386			1,262			1,095,703

	Year Ended December 31, 2013
	Wholesale		Moissanite.com			Charles & Colvard Direct			Total
Net sales
Loose jewels	$	18,136,062		347,933			-			18,483,995
Finished jewelry		7,438,340		2,152,018			412,834			10,003,192
Total	$	25,574,402		2,499,951			412,834			28,487,187

Product line cost of goods sold
Loose jewels	$	7,588,838		53,941			3,596			7,646,375
Finished jewelry		4,094,157		1,095,489			109,926			5,299,572
Total	$	11,682,995		1,149,430			113,522			12,945,947

Product line gross profit
Loose jewels	$	10,547,224		293,992			(3,596	)		10,837,620
Finished jewelry		3,344,183		1,056,529			302,908			4,703,620
Total	$	13,891,407		1,350,521			299,312			15,541,240

Operating income (loss)	$	3,652,153		(1,951,526	)		(3,280,911	)		(1,580,284	)

Depreciation and amortization	$	481,993		263,372			117,318			862,683

Total assets	$	61,702,449		469,217			152,186			62,323,852

Capital expenditures	$	744,679		47,801			7,887			800,367

Schedule of reconciliation of product line cost of goods sold to cost of goods sold as reported in consolidated financial statements

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 December 31,
	2014		2013
Product line cost of goods sold	$	15,995,011	$	12,945,947
Non-capitalized manufacturing and production control expenses		949,385		532,928
Freight out		284,944		201,911
Inventory valuation allowances		295,000		264,000
Other inventory adjustments		488,995		655,391
Cost of goods sold	$	18,013,335	$	14,600,177

Schedule of inventories by product line maintained in its wholesale distribution segment

The Company’s net inventories by product line maintained in the parent entity’s wholesale distribution segment are as follows:

	December 31,
	2014		2013
Loose jewels
Raw materials	$	4,658,692	$	3,311,375
Work-in-process		5,752,103		9,526,769
Finished goods		21,495,873		20,002,881
Finished goods on consignment		46,284		32,948
Total	$	31,952,952	$	32,873,973

Finished jewelry
Raw materials	$	258,707	$	270,043
Work-in-process		540,576		764,355
Finished goods		5,557,417		8,117,035
Finished goods on consignment		578,200		299,514
Total	$	6,934,900	$	9,450,947

Data by geographic area

The following presents certain data by geographic area:

	Year Ended December 31,
	2014		2013
Net sales
United States	$	22,101,974	$	20,684,397
International		3,538,675		7,802,790
Total	$	25,640,649	$	28,487,187

	December 31,
	2014		2013
Property and equipment, net
United States	$	1,859,355	$	1,717,692
International		-		-
Total	$	1,859,355	$	1,717,692

	December 31,
	2014		2013
Intangible assets, net
United States	$	39,050	$	70,830
International		177,897		255,037
Total	$	216,947	$	325,867

- Definition

Tabular disclosure of the profit or loss and total assets for each reportable segment. An entity discloses certain information on each reportable segment if the amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss.

+ References+ Details

PROPERTY AND EQUIPMENT (Tables)

12 Months Ended

Dec. 31, 2014

PROPERTY AND EQUIPMENT [Abstract]

Property and equipment

Property and equipment consists of the following:

	December 31,
	2014			2013
Computer software	$	1,622,806		$	1,739,734
Machinery and equipment		818,362			850,039
Computer hardware		750,776			820,535
Leasehold improvements		1,002,357			457,856
Furniture and fixtures		259,944			319,100
Total		4,454,245			4,187,264
Less accumulated depreciation		(2,594,890	)		(2,469,572	)
Property and equipment, net	$	1,859,355		$	1,717,692

SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2014

SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION [Abstract]

Schedule for components of stock based compensation

The following table summarizes the components of the Company’s stock-based compensation included in net loss:

	Year Ended December 31,
	2014		2013
Employee stock options	$	840,568	$	791,833
Restricted stock awards		846,955		886,274
Income tax benefit		-		(309,607	)
Total	$	1,687,523	$	1,368,500

Summary of the stock option activity

The following is a summary of the stock option activity for the years ended December 31, 2014 and 2013:

	Shares			Weighted Average Exercise Price
Outstanding, December 31, 2012		1,147,847		$	2.31
Granted		436,002		$	4.59
Exercised		(197,848	)	$	2.13
Forfeited		(101,831	)	$	2.47
Expired		(79,873	)	$	2.36
Outstanding, December 31, 2013		1,204,297		$	3.14
Granted		535,000		$	2.49
Exercised		-		$	-
Forfeited		(30,775	)	$	2.51
Expired		(42,576	)	$	3.64
Outstanding, December 31, 2014		1,665,946		$	2.93

Weighted average assumptions for stock options granted

The fair value of each stock option is estimated on the date of grant using the Black-Scholes-Merton option pricing model with the following weighted average assumptions for stock options granted during the years ended December 31, 2014 and 2013:

	Year Ended December 31,
	2014			2013
Dividend yield		0.0	%		0.0	%
Expected volatility		81.1	%		92.9	%
Risk-free interest rate		1.77	%		1.01	%
Expected lives (years)		5.8			5.0

Information about stock options outstanding

The following table summarizes information about stock options outstanding at December 31, 2014:

Options Outstanding					Options Exercisable						Options Vested or Expected to Vest
Balance as of 12/31/2014	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 12/31/2014		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 12/31/2014		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
1,665,946		7.66	$	2.93		1,056,203		6.85	$	2.73		1,585,478		7.57	$	2.93

Restricted stock activity

The following is a summary of the restricted stock activity for the years ended December 31, 2014 and 2013:

	Shares			Weighted Average Grant Date Fair Value
Unvested, December 31, 2012		191,843		$	3.38
Granted		345,403		$	4.48
Vested		(186,343	)	$	3.76
Canceled		-		$	-
Unvested, December 31, 2013		350,903		$	4.26
Granted		185,032		$	2.09
Vested		(248,929	)	$	3.77
Canceled		-		$	-
Unvested, December 31, 2014		287,006		$	3.29

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2014

INCOME TAXES [Abstract]

Income tax net (expense) benefit

Income tax net (expense) benefit comprises the following:

	Year Ended December 31,
	2014			2013
Current:
Federal	$	-		$	-
State		(7,749	)		(22,929	)
Total		(7,749	)		(22,929	)

Deferred:
Federal		(3,691,163	)		408,871
State		(353,051	)		(116,657	)
Total		(4,044,214	)		292,214
Income tax net (expense) benefit	$	(4,051,963	)	$	269,285

Significant components of deferred income tax assets

Significant components of the Company’s deferred income tax assets are as follows:

	December 31,
	2014			2013
Current:
Reserves and accruals	$	1,472,997		$	1,298,557
Prepaid expenses		(48,427	)		(42,801	)
Valuation allowance		(1,424,570	)		(57,924	)
Total	$	-		$	1,197,832

	December 31,
	2014			2013
Noncurrent:
Federal NOL carryforwards	$	4,185,179		$	1,884,118
State NOL carryforwards		616,655			460,652
Hong Kong NOL carryforwards		995,566			995,566
Federal benefit on state taxes under uncertain tax positions		128,026			123,865
Stock-based compensation		189,045			30,724
Investment loss		9,373			9,429
Research tax credit		434,637			434,637
Alternative minimum tax credit		348,264			348,264
Contributions carryforward		3,929			1,095
Depreciation		(418,154	)		(366,863	)
Accrued rent		297,362			-
Loss on impairment of long-lived assets		53,533			53,395
Valuation allowance		(6,843,415)			(1,132,991	)
Total		-			2,841,891
Total deferred income tax assets, net	$	-		$	4,039,723

Schedule of effective income tax rate reconciliation

	Year Ended December 31,
	2014			2013
Anticipated income tax benefit at statutory rate	$	3,075,321		$	530,529
State income tax benefit (expense), net of federal tax effect		215,109			(90,099	)
Capital loss carryforward expiration		-			(44,750	)
Income tax effect of uncertain tax positions		(8,080	)		(12,180	)
Return to provision adjustments		(2,751	)		(8,092	)
Stock-based compensation		(279,985	)		(81,564	)
Other changes in deferred income tax assets, net		25,493			(25,416	)
(Increase) decrease in valuation allowance		(7,077,070	)		857
Income tax net (expense) benefit	$	(4,051,963	)	$	269,285

Summary of gross liability for uncertain tax positions

The following summarizes the activity related to the Company’s gross liability for uncertain tax positions from January 1, 2013 through December 31, 2014:

Balance as of January 1, 2013	$	482,510
Increases related to prior year tax positions		11,712
Balance as of December 31, 2013		494,222
Increases related to prior year tax positions		12,241
Balance as of December 31, 2014	$	506,463

- Definition

Tabular disclosure of tax positions taken in the tax returns filed or to be filed for which it is more likely than not that the tax position will not be sustained upon examination by taxing authorities (i.e., uncertain tax positions) and other types of income tax contingencies, including: (1) the policy on classification of interest and penalties; (2) a tabular reconciliation of the total amounts of unrecognized tax benefits at the beginning and end of the period; the total amount(s) of: (3) unrecognized tax benefits that, if recognized, would affect the effective tax rate, and (4) interest and penalties recognized in each of the income statement and balance sheet; (5) for positions for which it is reasonably possible that the total amounts unrecognized will significantly change within 12 months of the reporting date the: (i) nature of the uncertainty, (ii) nature of the event that could occur that would cause the change, and (iii) an estimate of the range of the reasonably possible change or a statement that an estimate of the range cannot be made; and (6) a description of tax years that remain subject to examination by major tax jurisdictions.

+ References+ Details

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Tables)

12 Months Ended

Dec. 31, 2014

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK [Abstract]

Summary of customers that represent greater than or equal to 10% of total gross sales

The following is a summary of customers that represent greater than or equal to 10% of total gross sales:

	Year Ended December 31,
	2014			2013
Customer A		28	%		19	%
Customer B		10	%		9	%

- Definition

Tabular disclosure of the nature of a concentration, a benchmark to which it is compared, and the percentage that the risk is to the benchmark.

+ References+ Details

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Details) (USD $)	12 Months Ended
	Dec. 31, 2014 Subsidiary	Dec. 31, 2013
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Interest bearing amounts on deposit in excess of FDIC insurable limits	$ 3,700,000
Customer payment term for trade receivables, minimum	30 days
Customer payment term for trade receivables, maximum	90 days
Allowance for sales returns	910,000	1,190,000
Allowance for doubtful accounts receivable [Roll Forward]
Balance, beginning of period	522,000	549,000
Additions charged to operations	734,243	3,690
Write-offs, net of recoveries	(182,243)	(30,690)
Balance, end of period	1,074,000	522,000
Inventories issued to active production	2,050,000	4,090,000
Obsolescence reserve for certain fashion finished jewelry inventory	250,000	128,000
Carrying value of inventory reserve for obsolescence of moissanite	31,000
Property, Plant and Equipment [Line Items]
Amortized life of patent	17 years
Increase in depreciation expense	74,000	58,000
Maximum period for return of jewels and finished jewelry for credit	30 days
Customer payment period on consignment shipment	60 days
Other sales and marketing expenses	321,000	1,030,000
Advertising expense	1,840,000	2,740,000
Number of wholly owned operating subsidiaries	2
Dividend yield (in hundredths)	0.00%
Numerator [Abstract]
Net loss	$ (13,097,023)	$ (1,291,098)
Weighted average common shares outstanding [Abstract]
Basic (in shares)	20,295,618	19,904,170
Stock options (in shares)	0	0
Diluted (in shares)	20,295,618	19,904,170
Net loss per common share [Abstract]
Basic (in dollars per share)	$ (0.65)	$ (0.06)
Diluted (in dollars per share)	$ (0.65)	$ (0.06)
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options to purchase shares (in shares)	1,670,000	1,200,000
Computer Software [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	3 years
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Description of useful life, property, plant and equipment	Shorter of the estimated useful life or the lease term
Minimum [Member] \| Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	5 years
Minimum [Member] \| Computer Hardware [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	3 years
Minimum [Member] \| Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	5 years
Maximum [Member] \| Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	12 years
Maximum [Member] \| Computer Hardware [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	5 years
Maximum [Member] \| Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, estimated useful lives	10 years

SEGMENT INFORMATION AND GEOGRAPHIC DATA (Details) (USD $)

12 Months Ended

Dec. 31, 2014

Segment

Dec. 31, 2013

Segment

SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract]

Number of operating segments

Number of reportable segments

Summary information by segment [Abstract]

Net sales

$ 25,640,649

$ 28,487,187

Product line cost of goods sold

18,013,335

14,600,177

Product line gross profit

9,645,638

15,541,240

Operating loss

(9,044,224)

(1,580,284)

Depreciation and amortization

1,107,955

862,683

Total assets

51,426,397

62,323,852

Capital expenditures

1,095,703

800,367

Inventories, net [Abstract]

Raw materials

4,917,399

3,581,418

Work-in-process

6,292,679

10,291,124

Supplies inventories

51,000

87,000

Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

15,995,011

12,945,947

Non-Capitalized Manufacturing and Production Control Expenses [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

949,385

532,928

Freight Out [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

284,944

201,911

Inventory Valuation allowances [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

295,000

264,000

Other Inventory Adjustments [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

488,995

655,391

Loose Jewels [Member]

Summary information by segment [Abstract]

Net sales

12,926,370

18,483,995

Product line gross profit

5,359,541

10,837,620

Inventories, net [Abstract]

Raw materials

4,658,692

3,311,375

Work-in-process

5,752,103

9,526,769

Finished goods

21,495,873

20,002,881

Finished goods on consignment

46,284

32,948

Total

31,952,952

32,873,973

Loose Jewels [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

7,566,829

7,646,375

Finished Jewelry [Member]

Summary information by segment [Abstract]

Net sales

12,714,279

10,003,192

Product line gross profit

4,286,097

4,703,620

Inventories, net [Abstract]

Raw materials

258,707

270,043

Work-in-process

540,576

764,355

Finished goods

5,557,417

8,117,035

Finished goods on consignment

578,200

299,514

Total

6,934,900

9,450,947

Finished Jewelry [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

8,428,182

5,299,572

Operating and Reporting Segments [Member] | Wholesale [Member]

Summary information by segment [Abstract]

Net sales

20,776,845

25,574,402

Product line gross profit

6,733,553

13,891,407

Operating loss

(4,802,435)

3,652,153

Depreciation and amortization

887,287

481,993

Total assets

51,183,888

61,702,449

Capital expenditures

1,093,055

744,679

Operating and Reporting Segments [Member] | Wholesale [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

14,043,292

11,682,995

Operating and Reporting Segments [Member] | Wholesale [Member] | Loose Jewels [Member]

Summary information by segment [Abstract]

Net sales

12,324,045

18,136,062

Product line gross profit

4,865,690

10,547,224

Operating and Reporting Segments [Member] | Wholesale [Member] | Loose Jewels [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

7,458,355

7,588,838

Operating and Reporting Segments [Member] | Wholesale [Member] | Finished Jewelry [Member]

Summary information by segment [Abstract]

Net sales

8,452,800

7,438,340

Product line gross profit

1,867,863

3,344,183

Operating and Reporting Segments [Member] | Wholesale [Member] | Finished Jewelry [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

6,584,937

4,094,157

Operating and Reporting Segments [Member] | Moissanite.com [Member]

Summary information by segment [Abstract]

Net sales

3,412,663

2,499,951

^[1]

Product line gross profit

1,940,756

1,350,521

^[1]

Operating loss

(1,265,035)

(1,951,526)

^[1]

Depreciation and amortization

174,562

263,372

^[1]

Total assets

128,049

469,217

^[1]

Capital expenditures

1,386

47,801

^[1]

Operating and Reporting Segments [Member] | Moissanite.com [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

1,471,907

1,149,430

^[1]

Operating and Reporting Segments [Member] | Moissanite.com [Member] | Loose Jewels [Member]

Summary information by segment [Abstract]

Net sales

600,505

347,933

^[1]

Product line gross profit

499,654

293,992

^[1]

Operating and Reporting Segments [Member] | Moissanite.com [Member] | Loose Jewels [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

100,851

53,941

^[1]

Operating and Reporting Segments [Member] | Moissanite.com [Member] | Finished Jewelry [Member]

Summary information by segment [Abstract]

Net sales

2,812,158

2,152,018

^[1]

Product line gross profit

1,441,102

1,056,529

^[1]

Operating and Reporting Segments [Member] | Moissanite.com [Member] | Finished Jewelry [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

1,371,056

1,095,489

^[1]

Operating and Reporting Segments [Member] | Charles & Colvard Direct [Member]

Summary information by segment [Abstract]

Net sales

1,451,141

412,834

^[1]

Product line gross profit

971,329

299,312

^[1]

Operating loss

(2,976,754)

(3,280,911)

^[1]

Depreciation and amortization

46,106

117,318

^[1]

Total assets

114,460

152,186

^[1]

Capital expenditures

1,262

7,887

^[1]

Operating and Reporting Segments [Member] | Charles & Colvard Direct [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

479,812

113,522

^[1]

Operating and Reporting Segments [Member] | Charles & Colvard Direct [Member] | Loose Jewels [Member]

Summary information by segment [Abstract]

Net sales

1,820

^[1]

Product line gross profit

(5,803)

(3,596)

^[1]

Operating and Reporting Segments [Member] | Charles & Colvard Direct [Member] | Loose Jewels [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

7,623

3,596

^[1]

Operating and Reporting Segments [Member] | Charles & Colvard Direct [Member] | Finished Jewelry [Member]

Summary information by segment [Abstract]

Net sales

1,449,321

412,834

^[1]

Product line gross profit

977,132

302,908

^[1]

Operating and Reporting Segments [Member] | Charles & Colvard Direct [Member] | Finished Jewelry [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

$ 472,189

$ 109,926

^[1]

[1]	Direct-to-consumer operations commenced in August 2011.

SEGMENT INFORMATION AND GEOGRAPHIC DATA, Data by Geographic Area (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Net sales [Abstract]
Net sales	$ 25,640,649	$ 28,487,187
Property and Equipment, Net [Member]
Assets by geographical area [Abstract]
Total	1,859,355	1,717,692
Intangible Assets, Net [Member]
Assets by geographical area [Abstract]
Total	216,947	325,867
Reportable Geographical Components [Member] \| United States [Member]
Net sales [Abstract]
Net sales	22,101,974	20,684,397
Reportable Geographical Components [Member] \| United States [Member] \| Property and Equipment, Net [Member]
Assets by geographical area [Abstract]
Total	1,859,355	1,717,692
Reportable Geographical Components [Member] \| United States [Member] \| Intangible Assets, Net [Member]
Assets by geographical area [Abstract]
Total	39,050	70,830
Reportable Geographical Components [Member] \| International [Member]
Net sales [Abstract]
Net sales	3,538,675	7,802,790
Reportable Geographical Components [Member] \| International [Member] \| Property and Equipment, Net [Member]
Assets by geographical area [Abstract]
Total	0	0
Reportable Geographical Components [Member] \| International [Member] \| Intangible Assets, Net [Member]
Assets by geographical area [Abstract]
Total	$ 177,897	$ 255,037

INVENTORIES (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Total inventories, net of reserves [Abstract]
Raw materials	$ 4,917,399	$ 3,581,418
Work-in-process	6,292,679	10,291,124
Finished goods	27,985,067	28,771,098
Finished goods on consignment	677,484	407,462
Less inventory reserves	(934,000)	(639,000)
Total	38,938,629	42,412,102
Short-term portion	13,320,639	13,074,428
Long-term portion	25,617,990	29,337,674
Shrinkage reserve for finished goods on consignment	53,000	75,000
Inventory of net loose jewels	31,950,000	32,870,000
Inventory reserve for shrinkage of loose jewels	17,000	2,000
Inventory reserve for shrinkage of loose jewels on consignment	17,000	0
Inventory reserve for recuts	216,000	172,000
Inventory of net jewelry	6,930,000	9,450,000
Inventory reserve for shrinkage of finished jewelry	192,000	180,000
Inventory reserve for shrinkage of finished jewelry on consignment	36,000	75,000
Scrap reserve	101,000	106,000
Inventory reserve for jewelry in need of repair	127,000	51,000
Inventory reserve for obsolescence	250,000	128,000
Carrying value of inventory reserve for obsolescence of moissanite	$ 31,000

PROPERTY AND EQUIPMENT (Details) (USD $)	12 Months Ended
PROPERTY AND EQUIPMENT (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Total	$ 4,454,245	$ 4,187,264
Less accumulated depreciation	(2,594,890)	(2,469,572)
Property and equipment, net	1,859,355	1,717,692
Depreciation expense	946,000	731,000
Computer Software [Member]
Property, Plant and Equipment [Line Items]
Total	1,622,806	1,739,734
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total	818,362	850,039
Computer Hardware [Member]
Property, Plant and Equipment [Line Items]
Total	750,776	820,535
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Total	1,002,357	457,856
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Total	$ 259,944	$ 319,100

INTANGIBLE ASSETS (Details) (USD $)	12 Months Ended
INTANGIBLE ASSETS (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Intangible assets [Abstract]
Total	$ 969,788	$ 916,471
Less accumulated amortization	(752,841)	(590,604)
Intangible assets, net	216,947	325,867
Weighted Average Amortization Period (in Years)	17 years
Amortization expense	162,000	131,000
Estimated amortization expenses [Abstract]
2015	146,000
2016	61,000
2017	8,000
Patents [Member]
Intangible assets [Abstract]
Total	912,862	858,397
Weighted Average Amortization Period (in Years)	1 year 4 months 24 days
Trademarks [Member]
Intangible assets [Abstract]
Total	50,208	51,356
Weighted Average Amortization Period (in Years)	3 years
License Rights [Member]
Intangible assets [Abstract]
Total	$ 6,718	$ 6,718
Weighted Average Amortization Period (in Years)	0 years

COMMITMENTS AND CONTINGENCIES (Details) (USD $)	0 Months Ended		12 Months Ended
COMMITMENTS AND CONTINGENCIES (Details) (USD $)	Dec. 12, 2014	Dec. 09, 2013 sqft	Dec. 31, 2014 RentHoliday sqft	Dec. 31, 2013	Dec. 12, 2014	May 23, 2014	Oct. 31, 2013
Lease Commitments [Abstract]
Period of lease			7 years
Land subject to leases (in square feet)		36,350	16,500
Number of rent holidays			2
Percentage of rent abatement (in hundredths)			50.00%
Period for which rent is abated		7 months	12 months
Annual rent escalations (in hundredths)			3.00%
Cost to terminate lease							$ 112,000
Number of months included in costs to terminate lease			2 months
Leasehold improvements offered by landlord						550,000
Lease signing and moving incentives offered by landlord						73,000
Future minimum payments under operating lease [Abstract]
2015			553,905
2016			569,138
2017			584,789
2018			600,871
2019			617,395
Thereafter			1,176,330
Total			4,102,428
Rent expense			373,000	336,000
Purchase Commitments [Abstract]
Period of exclusive supply agreement	2 years		10 years
Percentage committed to be purchased (in hundredths)	100.00%		50.00%
Number of option to unilaterally extend the term	1 year
Minimum purchase commitment in initial new order			4,000,000		29,600,000
Maximum purchase commitment in initial new order					31,500,000
Minimum purchase commitment under the amendment			7,640,000
Maximum purchase commitment under amendment			18,560,000
Actual purchases under purchase amendment			$ 5,840,000	$ 12,560,000

LINE OF CREDIT (Details) (USD $)	0 Months Ended		0 Months Ended	12 Months Ended
LINE OF CREDIT (Details) (USD $)	Sep. 20, 2013 PNC Bank [Member] Line of Credit Note [Member]	Sep. 20, 2013 PNC Bank [Member] Line of Credit Note [Member]	Jun. 25, 2014 Wells Fargo [Member] Line of Credit [Member]	Dec. 31, 2014 Wells Fargo [Member] Line of Credit [Member]	Jun. 25, 2014 Wells Fargo [Member] Line of Credit [Member]
Line of Credit Facility [Line Items]
Revolving line of credit		$ 10,000,000			$ 10,000,000
Line of credit maturity date	Jun. 15, 2015		Jun. 25, 2017
Line of credit, description of variable rate basis	1-month LIBOR			Wells Fargo’s 3-month LIBOR rate
Line of credit, spread on variable rate (in hundredths)	1.50%			2.50%
Basis for calculation of LIBOR rate (adjusted daily)	actual / 360 basis			actual / 360
Legal fees			19,000
Line of credit facility, sublimit for letter of credit					1,000,000
Line of credit facility, sublimit for advances				5,000,000
Percentage of advances, guaranteed by bank (in hundredths)				90.00%
Maximum advances against inventory				3,000,000
Minimum excess availability of inventory at all times required for advances				1,000,000
Interest rate in event of default in excess of standard rate (in hundredths)				3.00%
Prepaid advance fee for reduction in first year after closing (in hundredths)				2.00%
Prepaid advance fee for reduction in second year after closing (in hundredths)				1.00%
Prepaid advance fee for reduction, thereafter (in hundredths)				0.00%
Number of business day within which guaranteed advances to be repaid				2 days
Maximum indebtedness to be maintained in the event of default to avoid triggering of default terms				200,000
Advances against line of credit				$ 0

SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION (Details) (USD $)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Common Stock [Abstract]
Common stock, shares authorized (in shares)	50,000,000	50,000,000
Common stock, par value (in dollars per share)	$ 0	$ 0
Common stock, shares outstanding (in shares)	20,382,333	20,197,301
Common stock voting rights	common stock are entitled to one vote for each share held
Number of shares authorized to repurchase (in shares)	1,000,000
Extension period authorized under stock repurchase program	12 months
Preferred Stock [Abstract]
Preferred stock, shares authorized (in shares)	10,000,000
Preferred stock, par value (in dollars per share)	$ 0
Preferred stock, shares issued (in shares)	0
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares repurchased (in shares)	0	0
Components of the Company's stock based compensation included in net income [Abstract]
Income tax benefit	$ 0	$ (309,607)
Total	1,687,523	1,368,500
Weighted average assumptions for stock options [Abstract]
Dividend yield (in hundredths)	0.00%
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares repurchased (in shares)		190,787
Remaining number of shares authorized to be repurchased (in shares)		809,213
Equity Compensation Plans [Abstract]
Stock options outstanding (in shares)	1,665,946	1,204,297
Components of the Company's stock based compensation included in net income [Abstract]
Allocated share-based compensation expense	840,568	791,833
Stock-based compensation capitalized as a cost of inventory	0	0
Shares [Roll Forward]
Outstanding, Beginning Balance (in shares)	1,204,297	1,147,847
Granted (in shares)	535,000	436,002
Exercised (in shares)	0	(197,848)
Forfeited (in shares)	(30,775)	(101,831)
Expired (in shares)	(42,576)	(79,873)
Outstanding, Ending Balance (in shares)	1,665,946	1,204,297
Weighted Average Exercise Price [Roll Forward]
Outstanding, Beginning Balance (in dollars per share)	$ 3.14	$ 2.31
Granted (in dollars per share)	$ 2.49	$ 4.59
Exercised (in dollars per share)	$ 0	$ 2.13
Forfeited (in dollars per share)	$ 2.51	$ 2.47
Expired (in dollars per share)	$ 3.64	$ 2.36
Outstanding, Ending Balance (in dollars per share)	$ 2.93	$ 3.14
Fair value of stock options (in dollars per share)	$ 1.67	$ 3.25
Fair value of stock options vested	805,000	691,000
Weighted average assumptions for stock options [Abstract]
Dividend yield (in hundredths)	0.00%	0.00%
Expected volatility (in hundredths)	81.10%	92.90%
Risk-free interest rate (in hundredths)	1.77%	1.01%
Expected lives (years)	5 years 9 months 18 days	5 years
Options Outstanding [Abstract]
Balance as of 12/31/2014 (in shares)	1,665,946	1,204,297
Weighted Average Remaining Contractual Life (Years)	7 years 7 months 28 days
Weighted Average Exercise Price (in dollars per share)	$ 2.93	$ 3.14
Options Exercisable [Abstract]
Balance as of 12/31/2014 (in shares)	1,056,203
Weighted Average Remaining Contractual Life (Years)	6 years 10 months 6 days
Weighted Average Exercise Price (in dollars per share)	$ 2.73
Options Vested or Expected to Vest [Abstract]
Balance as of 12/31/2014 (in shares)	1,585,478
Weighted Average Remaining Contractual Life (Years)	7 years 6 months 25 days
Weighted Average Exercise Price (in dollars per share)	$ 2.93
Unrecognized stock-based compensation expense related to unvested awards	1,090,000
Total compensation cost not yet recognized, period for recognition	23 months
Aggregate intrinsic value of stock options outstanding	301,000
Aggregate intrinsic value of stock options exercisable	288,000
Aggregate intrinsic value of stock options vested and expected to vest	298,000
Aggregate intrinsic value of stock options exercised	0	819,000
Restricted Stock [Member]
Components of the Company's stock based compensation included in net income [Abstract]
Allocated share-based compensation expense	846,955	886,274
Options Vested or Expected to Vest [Abstract]
Unrecognized stock-based compensation expense related to unvested awards	$ 570,000
Total compensation cost not yet recognized, period for recognition	14 months
Shares [Roll Forward]
Unvested, Beginning Balance (in shares)	350,903	191,843
Granted (in shares)	185,032	345,403
Vested (in shares)	(248,929)	(186,343)
Canceled (in shares)	0	0
Unvested, Ending Balance (in shares)	287,006	350,903
Weighted Average Grant Date Fair Value [Roll Forward]
Unvested, Beginning Balance (in dollars per share)	$ 4.26	$ 3.38
Granted (in dollars per share)	$ 2.09	$ 4.48
Vested (in dollars per share)	$ 3.77	$ 3.76
Canceled (in dollars per share)	$ 0	$ 0
Unvested, Ending Balance (in dollars per share)	$ 3.29	$ 4.26
Restricted Stock [Member] \| Maximum [Member]
Equity Compensation Plans [Abstract]
Vesting period	3 years
1997 Omnibus Stock Plan [Member]
Equity Compensation Plans [Abstract]
Vesting period	3 years
Share based payment award expiration term	10 years
Stock options outstanding (in shares)	11,776
Shares [Roll Forward]
Outstanding, Beginning Balance (in shares)	20,051
Outstanding, Ending Balance (in shares)	11,776
Options Outstanding [Abstract]
Balance as of 12/31/2014 (in shares)	11,776
1997 Omnibus Stock Plan [Member] \| Board of Directors [Member]
Equity Compensation Plans [Abstract]
Vesting period	1 year
1997 Omnibus Stock Plan [Member] \| Independent Contractors [Member] \| Maximum [Member]
Equity Compensation Plans [Abstract]
Share based payment award expiration term	10 years
2008 Stock Incentive Plan [Member]
Equity Compensation Plans [Abstract]
Share-based payment award, number of shares authorized (in shares)	3,000,000
Vesting period	3 years
Share based payment award expiration term	10 years
Stock options outstanding (in shares)	1,654,170
Shares [Roll Forward]
Outstanding, Beginning Balance (in shares)	1,186,846
Outstanding, Ending Balance (in shares)	1,654,170
Options Outstanding [Abstract]
Balance as of 12/31/2014 (in shares)	1,654,170
2008 Stock Incentive Plan [Member] \| Board of Directors [Member]
Equity Compensation Plans [Abstract]
Vesting period	1 year
2008 Stock Incentive Plan [Member] \| Independent Contractors [Member] \| Maximum [Member]
Equity Compensation Plans [Abstract]
Share based payment award expiration term	10 years
Executive Compensation Plan [Member]
Equity Compensation Plans [Abstract]
Vesting period	3 years

INCOME TAXES (Details) (USD $)	12 Months Ended
INCOME TAXES (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
Current [Abstract]
Federal	$ 0	$ 0
State	(7,749)	(22,929)
Total	(7,749)	(22,929)
Deferred [Abstract]
Federal	(3,691,163)	408,871
State	(353,051)	(116,657)
Total	(4,044,214)	292,214
Income tax net (expense) benefit	(4,051,963)	269,285
Current [Abstract]
Reserves and accruals	1,472,997	1,298,557
Prepaid expenses	(48,427)	(42,801)
Valuation allowance	(1,424,570)	(57,924)
Total	0	1,197,832
Noncurrent [Abstract]
Federal NOL carryforwards	4,185,179	1,884,118
State NOL carryforwards	616,655	460,652
Hong Kong NOL carryforwards	995,566	995,566
Federal benefit on state taxes under uncertain tax positions	128,026	123,865
Stock-based compensation	189,045	30,724
Investment loss	9,373	9,429
Research tax credit	434,637	434,637
Alternative minimum tax credit	348,264	348,264
Contributions carryforward	3,929	1,095
Depreciation	(418,154)	(366,863)
Accrued rent	297,362	0
Loss on impairment of long-lived assets	53,533	53,395
Valuation allowance	(6,843,415)	(1,132,991)
Total	0	2,841,891
Total deferred income tax assets, net	0	4,039,723
Federal statutory income tax rate (in hundredths)	34.00%
Effective income tax rate reconciliation [Abstract]
Anticipated income tax expense at statutory rate	3,075,321	530,529
State income tax benefit (expense), net of federal tax effect	215,109	(90,099)
Capital loss carryforward expiration	0	(44,750)
Income tax effect of uncertain tax positions	(8,080)	(12,180)
Return to provision adjustments	(2,751)	(8,092)
Stock-based compensation	(279,985)	(81,564)
Other changes in deferred income tax assets, net	25,493	(25,416)
(Increase) decrease in valuation allowance	(7,077,070)	857
Income tax net (expense) benefit	(4,051,963)	269,285
Federal income tax credits	882,000
Remaining balance of federal income tax expire between 2018 and 2021	533,000
Operating Loss Carryforwards [Line Items]
Gross liability for income taxes, uncertain tax positions	506,000
Direct reduction to associated deferred tax asset	98,000
Income tax benefit for state income taxes and timing differences		124,000
Income tax benefit on uncertain tax position		240,000
Unrecognized tax benefits, decreases resulting from settlements with taxing authorities		48,000
Uncertain tax positions with taxing authority recognized corresponding income tax benefit		326,000
Interest and penalties associated with uncertain tax positions	12,000	12,000
Income tax net (expenses) benefits adjusted to deferred tax assets		281,000
Accrued Income tax expense for estimated tax, penalties, and interest for other uncertain tax positions	139,000	127,000
Period for settlement of uncertain tax positions	12 months
Activities related to gross liability for uncertain tax positions [Roll Forward]
Beginning balance	494,222	482,510
Increases related to prior year tax positions	12,241	11,712
Ending balance	506,463	494,222
Federal [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	12,440,000
Federal [Member] \| Minimum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	Dec. 31, 2020
Federal [Member] \| Maximum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	Dec. 31, 2034
North Carolina [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	14,640,000
North Carolina [Member] \| Minimum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	Dec. 31, 2023
North Carolina [Member] \| Maximum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	Dec. 31, 2029
Other State [Member] \| Minimum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	Dec. 31, 2016
Other State [Member] \| Maximum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	Dec. 31, 2034
Hong Kong Tax Code [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	6,030,000
Valuation allowance	$ 996,000	$ 996,000

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK (Details)	12 Months Ended
	Dec. 31, 2014	Dec. 31, 2013
Concentration Risk [Line Items]
Number of Customers	1	1
Customer 2 [Member]
Concentration Risk [Line Items]
Number of Customers	1
Trade Accounts Receivable [Member] \| Customer Concentration Risk [Member] \| Customer 1 [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (in hundredths)	28.00%	21.00%
Trade Accounts Receivable [Member] \| Customer Concentration Risk [Member] \| Customer 2 [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (in hundredths)	11.00%
Total Gross Sales [Member]
Concentration Risk [Line Items]
Percentage of gross sales used as benchmark (in hundredths)	10.00%
Total Gross Sales [Member] \| Customer A [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (in hundredths)	28.00%	19.00%
Total Gross Sales [Member] \| Customer B [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (in hundredths)	10.00%	9.00%

EMPLOYEE BENEFIT PLAN (Details) (USD $)	12 Months Ended
EMPLOYEE BENEFIT PLAN (Details) (USD $)	Dec. 31, 2014	Dec. 31, 2013
EMPLOYEE BENEFIT PLAN [Abstract]
Company contribution, Cost Recognized	$ 129,000	$ 79,000