Charles & Colvard Presents Moissanite

This week, Charles & Colvard, Ltd. (NASDAQ: CTHR - News), management delivered presentations at the Cowen & Company 5th Annual Consumer Conference and the Integrated Corporate Relations 9th Annual XChange Conference. CEO, Bob Thomas and CFO Jim Braun provided investors and potential investors an overview and in depth information about Charles & Colvard Created Moissanite, its qualities, and marketplace positioning.

Patent Protection

Management addressed Charles & Colvard patent protection. Moissanite has patents in 28 countries. The patents solidly protect Moissanite in the market place such that the only product a potential competitor can produce as Mr. Braun states “is a rock”. No other company can produce or market moissanite jewelry.

Product Information

The comparison chart below compares moissanite beauty and durability to the popular precious gemstones. Moissanite supersedes these precious gemstones in beauty and ranks only second in hardness to diamonds. Yet, moissanite is extremely tough and resistant to breaking that it is used as anvils by research institutions like the Massachusetts Institute of Technology (MIT).

Why is moissanite so captivating and creating such excitement? Moissanite has 2½ times the fire of a diamond (see below) and looks like what most people imagine a diamond to look like. This is why moissanite is often mischaracterized as a “diamond simulant” by those unfamiliar with the jewel.

Market Penetration

Since diamonds have traditionally been associated with gift giving, Charles & Colvard “initially” targeted the self purchasing woman segment to gain entry for moissanite into the jewelry market. During the 2006 holiday season, Charles & Colvard seemed to be broadening their marketing message.

Charles & Colvard Created Moissanite as of 2005 represents only 0.3% of the U.S Fine Jewelry market having 8% awareness. Clearly, Charles & Colvard has plenty room for growth in the $40 billion jewelry market. Mr. Thomas conveyed confidence that Charles & Colvard will eventually achieve 1% of the market totaling well over $300 million.

The demographics of the typical moissanite purchaser based on information complied from Charles & Colvard warranty cards is a woman over 35 purchasing a 1 to 2 caret stone costing between $500.00 to $1000.00.

Jewelry buyers purchase a single piece of moissanite jewelry for an average price of $800.00. Retailers are obtaining greater margins selling moissanite jewelry. In contrast, the average purchase of a piece of diamond jewelry at a major retailer like Zale is only $400.00 yielding much lower margins for retailers.

This means that once customers see moissanite and become aware of its overall value, they are willing to spend more for moissanite than they are for diamonds and become repeat buyers of moissanite jewelry.

Distribution

While Charles & Colvard have outstanding retailer partners, Charles & Colvard does not sell moissanite jewelry to retailers. Charles & Colvard is a suppler of finished moissanite jewels that they market to jewelry manufactures. The jewelry manufacturer fashions moissanite into various styles of jewelry that is then sold to retailers.

For the past three years, Charles & Colvard relied heavily on K&G Creations and Reeves Park for the majority of their business. In 2006, Charles & Colvard added Samuel Aaron International and Alarama Jewelry Inc to their roster of jewelry manufacturers.

Samuel Aaron and Alarama brings years of jewelry manufacturing experience to moissanite. Both are producers of diamond jewelry for major retailers that are now supplying their retail clients with moissanite jewelry. This is a significant penetration for Charles & Colvard Created Moissanite into established jewelers as Charles & Colvard’s other two primary jewelers, K&G Creations and Reeves Park, are exclusive manufacturers of moissanite jewelry.

In addition, management announced that Charles & Colvard Created Moissanite is currently testing at 22 locations of the 900 Sears store chain. This has huge potential for continuing the company's growth and moissanite's penetration.

Charles & Colvard expanded the availability of moissanite into several Zale branded stores. Moissanite is now offered in 3 locations of the 300 Gordon’s Jewelers, 41 locations of the 168 Peoples Jewelers in Canada, and 20 out of 105 Zale’s Outlet locations.

Charles & Colvard Created Moissanite added Kohl’s to the illustrious list of retailers during the 2006 holiday season via their partnership with Samuel Aaron and Alarama.

Moissanite can also be purchased via the home shopping channels. In 2006 Charles & Colvard added HSN to the list of TV shopping channels offering moissanite. Moissanite is also available on ShopNBC.

Finally during 2006, Charles & Colvard had enormous success expanding moissanite offerings internationally and moissanite is also available from over 4000 independent jewelers.

Recap

Mr. Braun reflected on the difficult year over year revenue comparatives Charles & Colvard faced in 2006 and attributed the decline in Charles & Colvard sales growth to reduction in orders from K&G Creations. Mr. Thomas remains confident in Charles & Colvard future growth prospects but cautions investors that the company’s growth will be gradual.

Finally management acknowledges that their biggest challenge is growing customer awareness about moissanite and hopes to address that throughout the year.