SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM 10-Q
(Mark One)
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the quarterly period ended June 30, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 For the transition period from _______________to ___________________
Commission File Number: 000-23329
Charles & Colvard, Ltd. (formerly C3, Inc.)
-------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
North Carolina 56-1928817
------------------------------------ -----------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
</TABLE>
3800 Gateway Boulevard, Suite 311, Morrisville, N.C. 27560
-------------------------------------------------------------------------------
(Address of principal executive offices)
919-468-0399
---------------------------------------------------------------
(Registrant's telephone number, including area code)
---------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
-- --
As of August 10, 2000 there were 7,200,979 shares of the Registrant's Common
Stock, no par value per share, outstanding.
<PAGE>
Charles & Colvard, Ltd.
(formerly C3, Inc.)
Index
Part I. Financial Information
--------------------------------------------------------------------------------
Item 1. Financial Statements
Condensed Statements of Operations - Three Months and Six Months
Ended June 30, 2000 and 1999
Condensed Balance Sheets - June 30, 2000 and December 31, 1999
Condensed Statements of Cash Flows - Six Months Ended June 30, 2000
and 1999
Notes to Condensed Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Part II. Other Information
--------------------------------------------------------------------------------
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. Exhibits and Reports on Form 8-K
Signatures
2
<PAGE>
Part I. Financial Information
Item 1. Financial Statements
Charles & Colvard, Ltd.
(formerly C3, Inc.)
Condensed Statements Of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
----------------------------------- -----------------------------------
2000 1999 2000 1999
--------------- ---------------- ---------------- ---------------
<S> <C> <C> <C> <C>
Net sales $ 3,647,621 $ 3,533,612 $ 6,658,871 $ 6,763,076
Cost of goods 1,656,431 1,631,677 3,033,179 3,727,255
--------------- ---------------- ---------------- ---------------
Gross profit 1,991,190 1,901,935 3,625,692 3,035,821
Operating expenses:
Marketing and sales 1,559,753 1,172,334 4,015,930 1,775,638
General and administrative 1,126,993 641,876 2,116,322 1,440,810
Research and development 416,159 789,694 855,791 1,592,750
Other 252,577 -- 253,201 --
--------------- ---------------- ---------------- ---------------
Total operating expenses 3,355,482 2,603,904 7,241,244 4,809,198
--------------- ---------------- ---------------- ---------------
Operating loss (1,364,292) (701,969) (3,615,552) (1,773,377)
Interest income, net 113,782 321,364 254,880 686,341
--------------- ---------------- ---------------- ---------------
Net loss $ (1,250,510) $ (380,605) $ (3,360,672) $ (1,087,036)
=============== ================ ================ ===============
Basic and diluted net loss
per share $ (0.17) $ (0.05) $ (0.47) $ (0.16)
=============== ================ ================ ===============
Weighted-average common
shares, basic and diluted 7,157,671 7,011,284 7,133,487 7,004,543
=============== ================ ================ ===============
See Notes to Condensed Financial Statements.
</TABLE>
3
<PAGE>
Charles & Colvard, Ltd
(formerly C3, Inc.)
Condensed Balance Sheets
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, 2000 December 31, 1999
--------------------- ----------------------
Assets (Unaudited)
Current Assets:
Cash and equivalents $ 5,573,159 $ 13,161,665
Receivables:
Trade 1,439,397 1,331,528
Cree, Inc. 3,878,239 --
Interest 25,324 74,999
Inventories 19,836,102 14,767,888
Prepaid expenses and other assets 400,127 659,821
--------------------- ----------------------
Total current assets 31,152,348 29,995,901
Equipment, net 745,576 6,292,221
Patent and license rights, net 365,872 492,780
--------------------- ----------------------
Total assets $ 32,263,796 $ 36,780,902
===================== ======================
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable:
Cree, Inc. $ 817,114 $ 2,305,218
Other 423,501 627,704
Accrued expenses 463,770 235,107
Deferred revenue 32,910 118,730
--------------------- ----------------------
Total current liabilities 1,737,295 3,286,759
Commitments
Shareholders' Equity:
Common stock 49,213,709 48,757,702
Additional paid-in capital - stock options
Additional paid-in capital - stock options 1,888,588 1,951,566
Accumulated deficit (20,575,796) (17,215,125)
--------------------- ----------------------
Total shareholders' equity 30,526,501 33,494,143
--------------------- ----------------------
$ 32,263,796 $ 36,780,902
===================== ======================
</TABLE>
See Notes to Condensed Financial Statements
4
<PAGE>
Charles & Colvard, Ltd.
(formerly C3, Inc.)
Condensed Statements Of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
----------------------------------------
2000 1999
------------------ ------------------
<S> <C> <C>
Operating Activities:
Net loss $ (3,360,672) $ (1,087,036)
Adjustments:
Depreciation and amortization 462,005 262,013
Stock option compensation 111,211 151,831
Loss on disposal of long-term assets 266,963 --
Change in provision for uncollectible accounts 260,000 (32,000)
Changes in operating assets and liabilities:
Net change in assets (3,307,839) (3,561,665)
Net change in liabilities (2,246,578) 209,650
------------------ ------------------
Net cash used in operating activities (7,814,910) (4,057,207)
Investing Activities:
Purchase of equipment (14,971) (114,875)
Patent and license rights costs (40,444) (51,482)
------------------ ------------------
Net cash used in investing activities (55,415) (166,357)
Financing Activities:
Stock options exercised 281,819 61,195
------------------ ------------------
Net cash provided by financing activities 281,819 61,195
------------------ ------------------
Net change in cash and equivalents (7,588,506) (4,162,369)
Cash and equivalents, beginning of period 13,161,665 32,004,045
------------------ ------------------
Cash and equivalents, end of period $ 5,573,159 $27,841,676
================== ==================
</TABLE>
Supplemental non-cash investing activity:
In May 2000, the Company sold its crystal growth equipment to Cree, Inc.
(Cree) for $5,000,000. The $5 million receivable from this transaction will
be reduced by future purchases from Cree, with any remaining balance due in
full by June 30, 2001.
Supplemental non-cash operating activity:
During the six months ended June 30, 2000, there was $1,726,718 of
inventory purchases financed by the receivable from Cree.
See Notes to Condensed Financial Statements.
5
<PAGE>
Charles & Colvard, Ltd.
(formerly C3, Inc.)
Notes To Condensed Financial Statements
(Unaudited)
1. Basis Of Presentation
The accompanying unaudited financial statements have been prepared in conformity
with accounting principals generally accepted in the United States of America
for interim financial information. However, certain information or footnote
disclosures normally included in complete financial statements prepared in
accordance with accounting principals generally accepted in the United States of
America have been condensed, or omitted, pursuant to the rules and regulations
of the Securities and Exchange Commission. In the opinion of management, the
financial statements include all normal recurring adjustments which are
necessary for the fair presentation of the results of the interim periods
presented. Interim results are not necessarily indicative of results for the
year. Certain reclassifications have been made to prior year's financial
statements to conform to the classifications used in fiscal 2000. These
financial statements should be read in conjunction with the Company's audited
financial statements for the year ended December 31, 1999, as set forth in the
Company's Form 10-K, filed with the Securities and Exchange Commission on March
27, 2000.
In preparing financial statements that conform with accounting principals
generally accepted in the United States of America, management must 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 amounts of revenues and expenses reflected during the
reporting period. Actual results could differ from those estimates.
The ability of the Company to successfully develop, manufacture, and market its
products is dependent on many factors, including obtaining funds necessary to
sustain operations. The Company does not currently have committed capital
resources to fund its desired level of expenditures on its planned timetable. To
continue pursuing its planned strategy, the Company believes that it will be
required to seek additional capital resources during 2000. Management has
initiated actions to ensure that the necessary funds will be available on a
timely basis. During the first quarter of 2000, the Company implemented a new
domestic distribution strategy that, together with a continuation of its global
branding strategy which commenced in the fourth quarter of 1999, is designed to
substantially increase the sales volume of Charles & Colvard created moissanite
and to allow the Company to slow the growth of inventories. Also, the Company
has sold its crystal growth equipment to Cree for $5 million. In addition, the
Company has engaged an investment banking firm to assist the Company in its
capital raising efforts. If the Company is not able to secure capital resources
on terms acceptable to the Company, it will be necessary for the Company to
conserve cash by decreasing advertising expenditures, deferring or decreasing
other operating expenditures and attempting to renegotiate its agreements with
Cree. There can be no assurance that the Company will be able to secure the
required capital resources to execute its new domestic distribution strategy or
that its new domestic distribution strategy will be successful.
2. Inventories
Inventories are stated at the lower of cost or market determined on a first in,
first out basis. Test instruments are shown net of a reserve for excess
inventory of approximately $377,000 and $242,000 at June 30, 2000 and December
31, 1999, respectively.
June 30, December 31,
2000 1999
----------------- -----------------
Moissanite
Raw materials $ 2,539 $ 371,843
Work-in-process 3,833,633 5,779,326
Finished goods 15,738,930 8,127,119
----------------- -----------------
19,575,102 14,278,288
Test Instruments 261,000 489,600
----------------- -----------------
Total Inventory $ 19,836,102 $ 14,767,888
================= =================
6
<PAGE>
3. Stock Based Compensation
During the quarter and six months ended June 30, 2000, in accordance with
Accounting Principles Board Opinion No. 25, the Company recorded compensation
expense of $58,545 and $111,211, respectively, relating to stock options.
Compensation expense related to stock options for the quarter and six months
ended June 30, 1999 was $83,374 and $151,831, respectively. This compensation
expense is recorded in general and administrative expense in the statements of
operations.
4. Newly Issued Accounting Pronouncements
In June 1998, Statement of Financial Accounting Standards No. 133 ("FAS 133"),
Accounting for Derivative Instruments and Hedging Activities, was issued. This
statement establishes standards for valuing and reporting at fair value all
derivative instruments as either assets or liabilities. FAS 133, as amended by
FAS 137, is effective for all fiscal quarters of all fiscal years beginning
after June 15, 2000. The Company does not expect adoption of this Standard to
have a material impact on its financial statements.
On December 3, 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin (SAB) No. 101, Revenue Recognition in Financial Statements.
SAB No. 101 provides guidance on the recognition, presentation and disclosures
of revenue in financial statements filed with the Commission and is required to
be implemented no later than the fourth quarter of fiscal 2000. Management
believes the adoption of SAB No. 101 will not have a material effect on its
financial statements.
7
<PAGE>
Item 2. Management's Discussion And Analysis Of Financial Condition And Results
of Operations
This report contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent the
Company's judgment on future events. Because the Company is in the early stages
of the establishment, by Cree, Inc. ("Cree"), the Company's key supplier, of
manufacturing processes and of building the Company's own distribution channels
and has not yet engaged in significant revenue-producing activities, the Company
is subject to risks and uncertainties that could cause the Company's actual
performance and results to differ materially from those projected or discussed
herein. These and other risks and uncertainties are described under the heading
"Business Risks" in the Company's Form 10-K for the year ended December 31,
1999, which was filed with the Securities and Exchange Commission on March 27,
2000. These risks and uncertainties could cause actual results and developments
to be materially different from those expressed or implied by any of the
forward-looking statements included herein.
Overview
The Company manufactures, markets and distributes Charles & Colvard created
moissanite jewels (hereinafter referred to as moissanite or moissanite jewels)
for sale in the worldwide jewelry market. Moissanite, also known by its chemical
name, silicon carbide (SiC), is a rare, naturally occurring mineral found
primarily in meteorites. As the sole manufacturer of scientifically-made
moissanite jewels, the Company is creating a unique brand image which positions
moissanite as a jewel in its own right, distinct from all other jewels based on
its fire, brilliance, luster, durability and rarity.
From its inception in June 1995 through June 30, 1998, the Company was a
development stage enterprise that devoted its resources to fund research and
development of colorless, scientifically made moissanite jewels. At the same
time, the Company assembled a management team, conducted market research and
developed its strategic business plans. The Company began shipping moissanite to
authorized retail jewelers in Atlanta and Miami/Ft. Lauderdale during the second
quarter of 1998. At that time it launched limited consumer-focused advertising
and promotion activities in those areas. In addition, the Company entered into
exclusive distribution agreements with a number of international distributors.
Through the first half of 1999, the Company limited its efforts to expand the
distribution of moissanite jewels as a result of limited product availability
and the lack of confidence the Company had regarding the quality of the SiC
crystals it was receiving. Late in the second quarter, the Company began to
receive indications that the quality of the SiC crystals it was receiving was
improving rapidly. The rate of improvement in the quality of the SiC crystals
continued to accelerate through the end of 1999, far exceeding the Company's
expectations. At the same time, the Company experienced a decline in shipments
of moissanite jewels during the third quarter as a result of a slower than
expected rate of adding retailers domestically, lack of targeted retailer-driven
marketing programs abroad, and poor overall jewelry market performance in
certain international markets. The improved supply of SiC crystals along with
the decrease in sales led to a significant increase in inventories of moissanite
jewels. In December 1999, the Company and Cree agreed to reschedule
approximately 50% of the expected shipments of SiC crystals from Cree to the
second half of 2000 from the first half of 2000.
With the improvements in the supply of salable moissanite jewels, the Company
launched its strategic global marketing program in the fourth quarter of 1999 to
spur consumer awareness of this new category of jewel. In addition, in March
2000, the Company entered into distribution agreements with Stuller Settings,
Inc. ("Stuller") and Rio Grande, two of the largest suppliers of jewelry-related
products to the jewelry industry, for the North American distribution of
moissanite. The Company has also sought and has entered into several agreements
with domestic jewelry manufacturers. The Company's decision to enter into
agreements with Stuller, Rio Grande and jewelry manufacturers is intended to
rapidly increase the introduction of moissanite into the domestic jewelry
market.
As discussed below, the shift in the Company's domestic distribution strategy
may affect the Company's historical relationships between revenues and expenses
as well as the Company's liquidity and capital requirements.
8
<PAGE>
Results Of Operations
Three Months ended June 30, 2000 compared with Three Months ended June 30, 1999.
--------------------------------------------------------------------------------
Net sales were $3,647,621 for the three months ended June 30, 2000 compared to
$3,533,612 for the three months ended June 30, 1999, an increase of $114,009 or
3.2%. Increased shipments of moissanite jewels were offset by a reduction in the
average selling price of moissanite jewels as the Company began to experience
the effects of the volume purchase discounts offered to the Company's new
domestic distribution partners, Rio Grande and Stuller, and the Company's
jewelry manufacturing partners. Shipments of moissanite jewels increased in the
three months ended June 30, 2000 to approximately 19,000 carats from 16,000
carats in the three months ended June 30, 1999. The Company's new partners began
their distribution efforts of moissanite during the second quarter. Their
respective customer bases are beginning to be introduced to Charles & Colvard
created moissanite and the Company expects carat shipments to these partners to
increase significantly over time. At the same time, the Company expects average
selling prices to drop as sales to the domestic distributors become a larger
percentage of total sales.
The Company's gross profit margin was 55% for the three months ended June 30,
2000 compared to 54% for the three months ended June 30, 1999. Despite the
discounts offered to the Company's high volume purchasers, margins remained
constant due to improved yield of moissanite jewels from SiC crystals and a
greater percentage of larger carat sizes sold. Gross margins are expected to
vary over the next few quarters as the yield of salable jewels from each crystal
fluctuates and as the Company's average selling price per carat decrease due to
the volume discounts afforded to the Company's large distributors.
Marketing and sales expenses were $1,559,753 for the three months ended June 30,
2000 compared to $1,172,334 for the three months ended June 30, 1999, an
increase of $387,419 or 33.0%. The increase was due primarily to the
restructuring of staff and customer relationships consistent with the new
business model (primarily severance costs), as well as the continued execution
of the strategic global marketing program launched in the fourth quarter of
1999. The company anticipates an increased level of advertising in the second
half of 2000, primarily in the fourth quarter.
General and administrative expenses were $1,126,993 for the three months ended
June 30, 2000 compared to $641,876 for the three months ended June 30, 1999, an
increase of 485,117 or 75.6%. The increase resulted primarily from an increase
in the Company's allowance for uncollectible accounts, costs associated with the
restructuring of staff consistent with the new business model (primarily
severance costs), as well as increased rent on the Company's expanded facility
and increased insurance and taxes on the Company's increased fixed assets.
Research and development expenses were $416,159 for the three months ended June
30, 2000 compared to $789,694 for the three months ended June 30, 1999, a
decrease of $373,535 or 47.3%. The decrease resulted primarily from cost savings
related to the reduction of development efforts effective September 1, 1999,
from a funding level of $240,000 per month to $120,000 per month.
Other expenses for the three months ended June 30, 2000 amounted to $252,577,
which resulted from the loss on the sale of crystal growth equipment to Cree and
the disposition of certain other assets.
Net interest income was $113,782 for the three months ended June 30, 2000
compared to $321,364 for the three months ended June 30, 1999, a decrease of
$207,582 or 64.6%. This decrease resulted from lower interest income earned on
lower cash balances, due primarily to the use of the invested proceeds from the
Company's initial public offering in November 1997.
Six Months ended June 30, 2000 compared with Six Months ended June 30, 1999.
----------------------------------------------------------------------------
Net sales were $6,658,871 for the six months ended June 30, 2000 compared to
$6,763,076 for the six months ended June 30, 1999, a decrease of $104,205 or
1.5%. Increased shipments of moissanite jewels were offset by a reduction in the
average selling price of moissanite jewels as the Company began to experience
the effects of the volume purchase discounts offered to the Company's new
domestic distribution partners, Rio Grande and Stuller, and the Company's
jewelry manufacturing partners. Shipments of moissanite jewels increased in the
six months ended June 30, 2000 to approximately 35,000 carats from approximately
30,000 carats in the six months ended June 30, 1999.
9
<PAGE>
The Company's new partners began their distribution efforts of moissanite during
the second quarter. Their respective customer bases are beginning to be
introduced to Charles & Colvard created moissanite and the Company expects carat
shipments to these partners to increase significantly over time. At the same
time, the Company expects average selling prices to drop as sales to the
domestic distributors become a larger percentage of total sales.
The Company's gross profit margin was 54% for the six months ended June 30, 2000
compared to 45% for the six months ended June 30, 1999. The increased gross
margin rate relates to significantly improved yield of moissanite jewels from
SiC crystals and a higher percentage of sales of higher margin larger size
jewels, which effects were partially offset by a reduction in the per carat
average selling price of moissanite jewels in 2000. Gross margins are expected
to vary over the next few quarters as the yield of salable jewels from each
crystal fluctuates and as the Company's average selling price per carat decrease
due to the volume discounts afforded to the Company's large distributors.
Marketing and sales expenses were $4,015,930 for the six months ended June 30,
2000 compared to $1,775,638 for the six months ended June 30, 1999, an increase
of $2,240,292 or 126.2%. The increase was due primarily to the continued
execution of the strategic global marketing program launched in the fourth
quarter of 1999. The company anticipates an increased level of advertising in
the second half of 2000, primarily in the fourth quarter.
General and administrative expenses were $2,116,322 for the six months ended
June 30, 2000 compared to $1,440,810 for the six months ended June 30, 1999, an
increase of $675,512 or 46.9%. The increase resulted primarily from an increase
in the Company's allowance for uncollectible accounts, costs associated with
increased rent on the Company's expanded facility, increased insurance and taxes
on the Company's increased fixed assets, and restructuring of staff and
customer's relationship consistent with the new business model (primarily
severance costs).
Research and development expenses were $855,791 for the six months ended June
30, 2000 compared to $1,592,750 for the six months ended June 30, 1999, a
decrease of $736,959 or 46.3%. The decrease resulted primarily from cost savings
related to the reduction of development efforts effective September 1, 1999,
from a funding level of $240,000 per month to $120,000 per month.
Other expenses for the six months ended June 30, 2000 amounted to $253,201,
which resulted from the loss on the sale of crystal growth equipment to Cree and
the disposition of certain other assets.
Net interest income was $254,880 for the six months ended June 30, 2000 compared
to $686,341 for the six months ended June 30, 1999, a decrease of $431,461 or
62.9%. This decrease resulted from lower interest income earned on lower cash
balances, due primarily to the use of the invested proceeds from the Company's
initial public offering in November 1997.
Liquidity And Capital Resources
-------------------------------
The Company has financed its operations since inception primarily through the
net proceeds of its initial public offering of common stock in November 1997
and, prior to such offering, through private equity sales. Net proceeds from the
Company's initial public offering were $41,072,982. During the second quarter of
2000, the Company used $2,033,827 to fund operations and $27,519 to fund capital
expenditures and patent expenses. At June 30, 2000, the Company had $5,573,159
of cash and cash equivalents and $29,415,053 of working capital.
In May 2000, the Company agreed to sell its crystal growth equipment to Cree,
Inc. for $5 million. This transaction resulted in a loss on disposal of fixed
assets of approximately $177,000 in the second quarter of 2000. The $5 million
receivable from Cree will be reduced by future purchases from Cree, with any
remaining balance due in full by June 30, 2001. At June 30, 2000, the amount
receivable from Cree as a result of this transaction was $3,878,239.
The 4-year Development Agreement, as amended, between the Company and Cree
requires the Company to fund a development program at Cree for $1.44 million
annually through June 30, 2002. Either party may terminate the agreement if Cree
does not meet the annual performance milestone or if the Company and Cree do not
mutually agree on the performance milestones for the ensuing year.
10
<PAGE>
The Company's new domestic distribution strategy, together with a continuation
of its global branding strategy which commenced in the fourth quarter of 1999,
is designed to substantially increase the sales volume of Charles & Colvard
created moissanite and to allow the Company to slow the growth of inventories.
The Company does not currently have committed capital resources to fund its
desired level of expenditures. To continue pursuing this strategy, the Company
believes that it will be required to seek additional capital resources during
2000. Therefore, the Company has engaged Scott & Stringfellow, Inc., a
Virginia-based investment banking firm, to assist the Company in its capital
raising activities. If the Company is not able to secure capital, it will be
necessary for the Company to conserve cash by decreasing advertising
expenditures, deferring or decreasing other operating expenditures and
attempting to renegotiate its agreements with Cree. There can be no assurance
that the Company will be able to secure the required financing to execute its
new domestic distribution strategy, or, if available, that it will be available
on terms acceptable to the Company. Additionally, there can be no assurance that
if the Company does secure the desired capital resources that its new domestic
distribution strategy will be successful.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company believes that its exposure to market risk for changes in interest
rates is not significant because the Company's investments are limited to highly
liquid instruments with maturities of three months or less. At June 30, 2000 the
Company had approximately $5.2 million of short-term investments classified as
cash and equivalents. All of the Company's transactions with international
customers and suppliers are denominated in US dollars.
Part II - Other Information
Item 4. Submission Of Matters To A Vote Of Security Holders
The Annual Meeting of Shareholders of Charles & Colvard (formerly C3, Inc.) was
held on May 15, 2000. At the meeting, the shareholders voted on the election of
directors, to amend the Articles of Incorporation to change the Company name and
the ratification of the selection of independent auditors. The following two
nominees were each elected to the Board for a one-year term: Cecil D. Raynor and
Ollin B. Sykes. Also, the Articles of Incorporation were amended to change the
name of the Company from C3, Inc. to Charles & Colvard, Ltd. Additionally, the
appointment of Deloitte & Touche LLP as independent auditors for the Company for
the fiscal year ending December 31, 2000 was ratified. The number of votes cast
for, against or withheld, as well as the number of abstentions, for each
proposal are as follows:
<TABLE>
<CAPTION>
A. Election of Directors
<S> <C> <C>
------------------------------------------------------------ ------------------------ ------------------------
Director Nominee Votes For Votes Withheld
------------------------------------------------------------ ------------------------ ------------------------
Cecil D. Raynor 5,704,880 88,634
Ollin B. Sykes 5,699,851 93,634
B. Amend Articles of Incorporation to change the Company name from C3, Inc. to Charles & Colvard, Ltd.
Votes For Votes Against Abstentions
-------------------------------------------------------------------------------------------------------------------
Amend Articles of Incorporation
To change Company name 5,671,936 84,611 37,237
C. Ratification of Appointment of Deloitte & Touche LLP as auditors for fiscal year ending December 31, 2000.
Votes For Votes Against Abstentions
-------------------------------------------------------------------------------------------------------------------
Ratification of Appointment of
Deloitte & Touche LLP 5,771,982 17,030 4,472
</TABLE>
11
<PAGE>
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits
Exhibit No. Description
3.4 Articles of Amendment to the Company's Articles of
Incorporation, as filed May 17, 2000
27.1 Financial Data Schedule
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the quarter ended
June 30, 2000.
12
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Charles & Colvard, Inc. (formerly C3, Inc.)
Date: August 10, 2000 /s/ Robert S. Thomas
--------------------
Robert S. Thomas
President & Chief Executive Officer
(Principal Executive Officer)
Date: August 10, 2000 /s/ Mark W. Hahn
----------------
Mark W. Hahn
Chief Financial Officer
(Principal Financial and
Accounting Officer)
13
