Document and Entity Information (USD $)	12 Months Ended
Document and Entity Information (USD $)	Dec. 31, 2013	Mar. 24, 2014	Jun. 28, 2013
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			$ 72,803,614
Entity Common Stock, Shares Outstanding		20,197,301
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013

CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 2,573,405	$ 11,860,842
Accounts receivable, net	10,244,732	8,138,358
Interest receivable	0	694
Held-to-maturity investments	0	505,068
Inventory, net	13,074,428	8,442,430
Prepaid expenses and other assets	951,635	737,406
Deferred income taxes	1,197,832	1,211,772
Total current assets	28,042,032	30,896,570
Long-term assets:
Inventory, net	29,337,674	24,353,580
Property and equipment, net	1,717,692	1,746,792
Intangible assets, net	325,867	346,732
Deferred income taxes	2,841,891	2,520,818
Other assets	58,696	12,199
Total long-term assets	34,281,820	28,980,121
TOTAL ASSETS	62,323,852	59,876,691
Current liabilities:
Accounts payable	3,670,551	2,112,585
Accrued cooperative advertising	188,000	200,000
Accrued expenses and other liabilities	642,186	574,522
Total current liabilities	4,500,737	2,887,107
Long-term liabilities:
Accrued income taxes	395,442	383,730
Total liabilities	4,896,179	3,270,837
Commitments and contingencies
Shareholders' equity:
Common stock, no par value; 50,000,000 shares authorized; 20,197,301 and 19,654,050 shares issued and outstanding at December 31, 2013 and 2012, respectively	53,949,001	53,318,044
Additional paid-in capital - stock-based compensation	9,940,980	8,459,020
Accumulated deficit	(6,462,308)	(5,171,210)
Total shareholders' equity	57,427,673	56,605,854
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 62,323,852	$ 59,876,691

CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012
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)	20,197,301	19,654,050
Common stock, shares outstanding (in shares)	20,197,301	19,654,050

Number of shares of common stock outstanding. Common stock represent the ownership interest in a corporation.

+ References+ Details

CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	12 Months Ended
CONSOLIDATED STATEMENTS OF OPERATIONS (USD $)	Dec. 31, 2013	Dec. 31, 2012
CONSOLIDATED STATEMENTS OF OPERATIONS [Abstract]
Net sales	$ 28,487,187	$ 22,450,498
Costs and expenses:
Cost of goods sold	14,600,177	9,971,663
Sales and marketing	9,867,425	7,443,784
General and administrative	5,476,939	4,756,432
Research and development	24,903	17,013
Loss on abandonment of assets	98,027	2,016
Total costs and expenses	30,067,471	22,190,908
(Loss) income from operations	(1,580,284)	259,590
Other income (expense):
Interest income	22,007	69,520
Interest expense	(2,106)	(1,260)
Total other income	19,901	68,260
(Loss ) income before income taxes	(1,560,383)	327,850
Income tax net benefit	269,285	4,049,804
Net (loss) income	$ (1,291,098)	$ 4,377,654
Net (loss) income per common share:
Basic (in dollars per share)	$ (0.06)	$ 0.22
Diluted (in dollars per share)	$ (0.06)	$ 0.22
Weighted average number of shares used in computing net (loss) income per common share:
Basic (in shares)	19,904,170	19,581,670
Diluted (in shares)	19,904,170	19,967,271

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)	Common Stock [Member]	Additional Paid-in Capital - Stock-Based Compensation [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2011	$ 52,833,716	$ 7,767,877	$ (9,548,864)	$ 51,052,729
Balance (in shares) at Dec. 31, 2011	19,454,689
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	0	1,017,078	0	1,017,078
Issuance of restricted stock	0	0	0	0
Issuance of restricted stock (in shares)	113,593
Stock option exercises	484,328	(325,935)	0	158,393
Stock option exercises (in shares)	85,768
Net income (loss)	0	0	4,377,654	4,377,654
Balance at Dec. 31, 2012	53,318,044	8,459,020	(5,171,210)	56,605,854
Balance (in shares) at Dec. 31, 2012	19,654,050
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	0	1,678,107	0	1,678,107
Issuance of restricted stock	0	0	0	0
Issuance of restricted stock (in shares)	345,403
Stock option exercises	630,957	(210,015)	0	420,942
Stock option exercises (in shares)	197,848
Tax effect of stock based compensation		13,868	0	13,868
Net income (loss)	0	0	(1,291,098)	(1,291,098)
Balance at Dec. 31, 2013	$ 53,949,001	$ 9,940,980	$ (6,462,308)	$ 57,427,673
Balance (in shares) at Dec. 31, 2013	20,197,301

CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	Dec. 31, 2013	Dec. 31, 2012
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income	$ (1,291,098)	$ 4,377,654
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	862,683	608,165
Amortization of bond premium	5,068	5,331
Stock-based compensation	1,678,107	1,017,078
Provision for uncollectible accounts	3,690	245,582
Provision for sales returns	723,000	307,000
Provision for inventory reserves	264,000	102,000
Benefit for deferred income taxes	(307,133)	(3,732,590)
Loss on abandonment of assets	98,027	2,016
Changes in assets and liabilities:
Accounts receivable	(2,833,064)	(2,626,176)
Interest receivable	694	11,415
Income tax receivable	(9,880,092)	2,109,079
Prepaid expenses and other assets, net	(260,726)	(316,130)
Accounts payable	1,557,966	1,051,648
Accrued cooperative advertising	(12,000)	(13,000)
Accrued income taxes	11,712	(357,915)
Other accrued liabilities	67,664	(6,487)
Net cash (used in) provided by operating activities	(9,311,502)	2,784,670
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	(800,367)	(868,986)
Proceeds from call of long-term investments	500,000	3,250,000
Patent, license rights, and trademark costs	(110,378)	(164,936)
Net cash (used in) provided by investing activities	(410,745)	2,216,078
CASH FLOWS FROM FINANCING ACTIVITIES:
Stock option exercises	420,942	158,393
Tax effect of stock based compensation	13,868	0
Net cash provided by financing activities	434,810	158,393
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS	(9,287,437)	5,159,141
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	11,860,842	6,701,701
CASH AND CASH EQUIVALENTS, END OF PERIOD	2,573,405	11,860,842
Supplemental disclosure of cash flow information:
Cash paid during the year for interest	2,106	1,260
Cash paid during the year for income taxes	$ 5,570	$ 52,523

DESCRIPTION OF BUSINESS

12 Months Ended

Dec. 31, 2013

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 sole source worldwide 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, luster, 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, 2013

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, 2013 and 2012 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, investments, and trade accounts receivable. The Company maintains cash, cash equivalents, and investments with high-quality financial institutions and invests in low-risk securities, primarily money market funds or long-term United States (“U.S.”) government agency obligations. 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. All of the Company’s non-interest bearing cash balances were fully insured at December 31, 2013. Interest-bearing amounts on deposit in excess of FDIC insurable limits at December 31, 2013 approximated $270,000.

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.

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 $1.19 million and $463,000 at December 31, 2013 and 2012, 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 reviews for 2013 and 2012, the Company analyzed several of its slower-paying customers and determined that no additional reserves were necessary. Based on these criteria, management determined that allowances for doubtful accounts receivable of $522,000 and $549,000 at December 31, 2013 and 2012, respectively, were required.

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

	Year Ended December 31,
	2013			2012
Balance, beginning of period	$	549,000		$	380,000
Additions charged to operations		3,690			245,582
Write-offs, net of recoveries		(30,690	)		(76,582	)
Balance, end of period	$	522,000		$	549,000

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.

Investments - Investments in certain securities may be classified into three categories:

Held-to-maturity - Debt securities that the Company has the positive intent and ability to hold to maturity are reported at amortized cost.

Trading securities - Debt and equity securities that are bought and held principally for the purpose of selling in the near term are reported at fair value with unrealized gains and losses included in earnings.

Available-for-sale - Debt and equity securities not classified as either securities held-to-maturity or trading securities are reported at fair value with unrealized gains or losses excluded from earnings and reported as a separate component of shareholders’ equity.

The Company reassesses the appropriateness of the classification of its investments at the end of each reporting period. The Company determined that its debt securities should be classified as held-to-maturity as of December 31, 2012. This classification was based upon management’s determination that it has the positive intention and ability to hold the securities to maturity, as the underlying cash invested in these securities is not required for current operations. The Company did not have debt securities as of December 31, 2013 and did not have any gains or losses on their disposal in 2013.

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, 2013 and 2012, work-in-process inventories issued to active production jobs approximated $4.09 million and $1.12 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, 2013.

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 and has concluded that no such finished jewelry inventory reserve requirements relating to the Company’s new line of finished jewelry featuring moissanite and fashion finished jewelry products existed as of December 31, 2012. As of December 31, 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 $128,000 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.

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 recutting 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, 2013, 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 current lease were adjusted to the length of the lease term through July 2014. The additional depreciation recognized in 2013 as a result of the shortened lives is approximately $58,000.

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 and 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, 2013 and 2012, these amounts were approximately $1.03 million and $626,000, 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, 2013 and 2012 were approximately $2.74 million and $2.16 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 represent the estimated period of time until exercise or forfeiture and are based on historical experience of similar awards.

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, 2013 and 2012, the Company did not have any other comprehensive income.

Net (Loss) Income per Common Share - Basic net (loss) income per common share is computed by dividing net (loss) income by the weighted average number of common shares outstanding during the periods. Diluted net (loss) income 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) income per share presentations:

	Year Ended December 31,
	2013			2012
Numerator:
Net (loss) income	$	(1,291,098	)	$	4,377,654

Denominator:
Weighted average common shares outstanding:
Basic		19,904,170			19,581,670
Stock options		-			385,601
Diluted		19,904,170			19,967,271

Net (loss) income per common share:
Basic	$	(0.06	)	$	0.22
Diluted	$	(0.06	)	$	0.22

For the years ended December 31, 2013 and 2012 stock options to purchase approximately 1.20 million and 354,000 shares, respectively, were excluded from the computation of diluted net (loss) income 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) income per common share.

Recently Adopted/Issued Accounting Pronouncements - All 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, 2013

SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract]

SEGMENT INFORMATION AND GEOGRAPHIC DATA

3.	SEGMENT INFORMATION AND GEOGRAPHIC DATA

The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by management for making operating decisions and assessing performance as the source of the Company’s operating and reportable segments.

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

The Company evaluates the financial performance of its segments based on net sales; product line gross profit, or the excess of product line sales over product line cost of goods sold; and operating income (loss). The Company’s inventories are maintained in the parent entity’s wholesale distribution segment and are transferred without intercompany markup to the operating subsidiaries as product line cost of goods sold when sold to the end consumer. Product line cost of goods sold is defined as product cost of goods sold in each of the Company’s wholesale distribution and 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 operating subsidiaries primarily based on net sales. Unallocated expenses, which also include interest and taxes, remain in the parent entity’s wholesale distribution segment.

Summary financial information by reporting segment is as follows:

	Year Ended December 31, 2013
	Wholesale		Direct-to- Consumer			Total
Net sales
Loose jewels	$	18,136,062		347,933			18,483,995
Finished jewelry		7,438,340		2,564,852			10,003,192
Total	$	25,574,402		2,912,785			28,487,187

Product line cost of goods sold
Loose jewels	$	7,588,838		57,537			7,646,375
Finished jewelry		4,094,157		1,205,415			5,299,572
Total	$	11,682,995		1,262,952			12,945,947

Product line gross profit
Loose jewels	$	10,547,224		290,396			10,837,620
Finished jewelry		3,344,183		1,359,437			4,703,620
Total	$	13,891,407		1,649,833			15,541,240

Operating income (loss)	$	3,652,153		(5,232,437	)		(1,580,284	)

Depreciation and amortization	$	481,993		380,690			862,683

Total assets	$	61,702,449		621,403			62,323,852

Capital expenditures	$	744,679		55,688			800,367

	Year Ended December 31, 2012
	Wholesale		Direct-to- Consumer			Total
Net sales
Loose jewels	$	14,770,191	$	221,207		$	14,991,398
Finished jewelry		6,044,727		1,414,373			7,459,100
Total	$	20,814,918	$	1,635,580		$	22,450,498

Product line cost of goods sold
Loose jewels	$	4,551,052	$	135,474		$	4,686,526
Finished jewelry		2,884,728		702,730			3,587,458
Total	$	7,435,780	$	838,204		$	8,273,984

Product line gross profit
Loose jewels	$	10,219,139	$	85,733		$	10,304,872
Finished jewelry		3,159,999		711,643			3,871,642
Total	$	13,379,138	$	797,376		$	14,176,514

Operating income (loss)	$	4,370,028	$	(4,110,438	)	$	259,590

Depreciation and amortization	$	390,044	$	218,121		$	608,165

Total assets	$	58,823,642	$	1,053,049		$	59,876,691

Capital expenditures	$	425,736	$	443,250		$	868,986

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,
	2013		2012
Product line cost of goods sold	$	12,945,947	$	8,273,984
Non-capitalized manufacturing and production control expenses		532,928		1,348,029
Freight out		201,911		111,639
Inventory valuation allowances		264,000		93,000
Other inventory adjustments		655,391		145,011
Cost of goods sold	$	14,600,177	$	9,971,663

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

	December 31,
	2013		2012
Loose jewels
Raw materials	$	3,311,375	$	3,189,320
Work-in-process		9,526,769		3,650,322
Finished goods		20,002,881		19,074,526
Finished goods on consignment		32,948		75,131
Total	$	32,873,973	$	25,989,299

Finished jewelry
Raw materials	$	270,043	$	259,366
Work-in-process		764,355		250,628
Finished goods		8,117,035		5,451,178
Finished goods on consignment		299,514		748,022
Total	$	9,450,947	$	6,709,194

Supplies inventories of approximately $87,000 and $98,000 at December 31, 2013 and 2012, 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 operating subsidiaries comprising the direct-to-consumer distribution segment 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 direct-to-consumer distribution segment 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,
	2013		2012
Net sales
United States	$	20,684,397	$	16,869,397
International		7,802,790		5,581,101
Total	$	28,487,187	$	22,450,498

	December 31,
	2013		2012
Property and equipment, net
United States	$	1,717,692	$	1,746,792
International		-		-
Total	$	1,717,692	$	1,746,792

	December 31,
	2013		2012
Intangible assets, net
United States	$	70,830	$	152,038
International		255,037		194,694
Total	$	325,867	$	346,732

- 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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 131

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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+ Details

INVESTMENTS

12 Months Ended

Dec. 31, 2013

INVESTMENTS [Abstract]

INVESTMENTS

4.	INVESTMENTS

Investments consist of long-term U.S. government agency securities carried at amortized cost using the effective interest method. The Company classifies its marketable securities as held-to-maturity based upon management’s positive intention and ability to hold these securities until their maturity dates. As of December 31, 2013, the Company did not hold any investments in marketable securities as they had matured and been converted to cash with no gain or loss.

As of December 31, 2012, the estimated fair value of the investments was greater than the amortized cost. Because management intended to hold the investments until their maturity dates, this unrealized gain was not recorded in the consolidated financial statements.

The maturities of held-to-maturity investments at December 31, 2012 were as follows:

	Less than 1 Year				Total
U.S. government agency securities		$	505,068			$	505,068

- Definition

The entire disclosure for investments in certain debt and equity securities.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 115

-Paragraph 3, 19, 20, 21, 22, 137

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-Name Accounting Standards Codification

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-Glossary Debt Security

-URI http://asc.fasb.org/extlink&oid=6509901

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-Glossary Equity Security

-URI http://asc.fasb.org/extlink&oid=6511694

+ Details

FAIR VALUE MEASUREMENTS

12 Months Ended

Dec. 31, 2013

FAIR VALUE MEASUREMENTS [Abstract]

FAIR VALUE MEASUREMENTS

5.	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, held-to-maturity investments, trade accounts payable, and accrued expenses. All instruments other than held-to-maturity investments are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments. The estimated fair value of the Company’s held-to-maturity investments as of December 31, 2012 utilized Level 2 inputs of similar investments traded on active securities exchanges.

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. 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.

- Definition

The entire disclosure of the fair value measurement of assets and liabilities, which includes financial instruments measured at fair value that are classified in shareholders' equity, which may be measured on a recurring or nonrecurring basis.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 157

-Paragraph 33

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

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+ Details

INVENTORIES

12 Months Ended

Dec. 31, 2013

INVENTORIES [Abstract]

INVENTORIES

6.	INVENTORIES

The Company’s total inventories, net of reserves, consisted of the following as of December 31, 2013 and 2012:

	December 31,
	2013			2012
Raw materials	$	3,581,418		$	3,448,686
Work-in-process		10,291,124			3,900,950
Finished goods		28,771,098			24,978,221
Finished goods on consignment		407,462			843,153
Less inventory reserves		(639,000	)		(375,000	)
Total	$	42,412,102		$	32,796,010

Short-term portion	$	13,074,428		$	8,442,430
Long-term portion		29,337,674			24,353,580
Total	$	42,412,102		$	32,796,010

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, 2013 and 2012 are net of shrinkage reserves of $75,000 and $20,000, 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, 2013 and 2012, including inventory on consignment net of reserves, were $32.87 million and $25.99 million, respectively. The loose jewel inventories at December 31, 2013 and 2012 include a shrinkage reserve of $2,000 and $36,000, respectively, including shrinkage reserves of $0 and $17,000, respectively, on inventory on consignment. Loose jewel inventories at December 31, 2013 and 2012 also include a recuts reserve of $172,000 and $109,000, respectively.

Total net jewelry inventories at December 31, 2013 and 2012, 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 $9.45 million and $6.71 million, respectively. Jewelry inventories consist primarily of finished goods, a portion of which includes the finished jewelry acquired by the Company as part of a January 2009 settlement agreement with a former manufacturer customer to reduce the outstanding receivable to the Company. 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, with a balance of $106,000 and $132,000 at December 31, 2013 and 2012, respectively. The finished jewelry inventories at December 31, 2013 and 2012 also include a shrinkage reserve of $180,000 and $53,000, respectively, including a shrinkage reserve of $75,000 and $3,000, respectively, on inventory on consignment; and finished jewelry inventories at December 31, 2013 and 2012 include a repairs reserve of $51,000 and $45,000, respectively. During the year ended December 31, 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 $128,000 for the carrying costs in excess of any estimated scrap values.

During the year ended December 31, 2012, the Company entered into an asset purchase agreement (the “Purchase Agreement”) with a direct sales jewelry company. Pursuant to the Purchase Agreement, the Company acquired certain assets in exchange for consideration consisting of $645,645 in cash and $32,170 of associated direct expenses, which was allocated among certain jewelry inventory, a direct selling software platform, and certain trademark and license rights.

Related to the Purchase Agreement, net jewelry inventories at December 31, 2012 included approximately $563,000 in fashion finished jewelry. Management estimated the fair value to be approximately $628,000 with the difference allocated to other assets under the Purchase Agreement based on their relative fair values.

- 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, 2013

PROPERTY AND EQUIPMENT [Abstract]

PROPERTY AND EQUIPMENT

7.	PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

	December 31,
	2013			2012
Computer software	$	1,739,734		$	1,626,618
Machinery and equipment		850,039			791,634
Computer hardware		820,535			468,615
Leasehold improvements		457,856			432,759
Furniture and fixtures		319,100			303,232
Total		4,187,264			3,622,858
Less accumulated depreciation		(2,469,572	)		(1,876,066	)
Property and equipment, net	$	1,717,692		$	1,746,792

Approximately $72,000 of computer software at December 31, 2012 related to the Purchase Agreement discussed in Note 6, “Inventories.” Management estimated the fair value to be approximately $81,000 with the difference allocated to other assets under the Purchase Agreement based on their relative fair values.

Depreciation expense for the years ended December 31, 2013 and 2012 was approximately $731,000 and $541,000, respectively.

- Definition

The entire disclosure for long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software. This disclosure may include property plant and equipment accounting policies and methodology, a schedule of property, plant and equipment gross, additions, deletions, transfers and other changes, depreciation, depletion and amortization expense, net, accumulated depreciation, depletion and amortization expense and useful lives, income statement disclosures, assets held for sale and public utility disclosures.

+ References+ Details

INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2013

INTANGIBLE ASSETS [Abstract]

INTANGIBLE ASSETS

8.	INTANGIBLE ASSETS

Intangible assets consist of the following:

	December 31,						Weighted Average Amortization Period
	2013			2012			(in Years)
Patents	$	858,397		$	748,939			2.4
Trademarks		51,356			50,437			3.6
License rights		6,718			6,718			0.8
Total		916,471			806,094
Less accumulated amortization		(590,604	)		(459,362	)
Intangible assets, net	$	325,867		$	346,732

Amortization expense for the years ended December 31, 2013 and 2012 was approximately $131,000 and $67,000, respectively. Amortization expense on existing intangible assets is estimated to be $147,000 per year for 2014, $121,000 for 2015, $49,000 for 2016, $8,000 for 2017, and $1,000 for 2018.

Approximately $36,000 and $7,000 of trademarks and license rights, respectively, at December 31, 2012 related to the Purchase Agreement discussed in Note 6, “Inventories.” Management estimated the fair values to be approximately $40,000 and $8,000, respectively, with the differences allocated to other assets under the Purchase Agreement based on their relative fair values.

- Definition

The entire disclosure for all or part of the information related to intangible assets.

+ References+ Details

COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

COMMITMENTS AND CONTINGENCIES [Abstract]

COMMITMENTS AND CONTINGENCIES

9.	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 includes 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 current rental rate. On December 9, 2013, the Company entered into a Lease Agreement (the “Lease Agreement”) for a new corporate headquarters, which will occupy approximately 36,350 square feet of office, storage, and light manufacturing space. The Company intends to move its corporate headquarters to the leased property once certain improvements to the leased space are completed, which is currently expected to occur in April 2014 or later. Included in the Lease Agreement is a 7-month rent abatement period expected to begin April 2014 or later through October 2014 or later.

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

As of December 31, 2013, the Company’s future minimum payments under operating leases were as follows:

2014		174,560
2015		556,404
2016		571,705
2017		587,427
2018		603,581
Thereafter		1,692,451
Total	$	4,186,128

Rent expense for the years ended December 31, 2013 and 2012 was approximately $336,000 and $196,000, 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 has committed to purchase from Cree a minimum of 50%, by dollar volume, of its raw material SiC crystal requirements. If the Company’s orders require Cree to expand beyond specified production levels, the Company must commit to purchase certain minimum quantities. In February 2013, the Company entered into an amendment to a prior letter agreement with Cree, which provides 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 has 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, is dependent upon the grade of the material and ranges between approximately $7.64 million and approximately $18.56 million. During the year ended December 31, 2013, the Company purchased $12.56 million of raw material SiC crystals from Cree.

- Definition

The entire disclosure for commitments and contingencies.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name FASB Interpretation (FIN)

-Number 14

-Paragraph 3

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef

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-Name Accounting Standards Codification

-Topic 210

-SubTopic 10

-Section S99

-Paragraph 1

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-Section 50

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-URI http://asc.fasb.org/extlink&oid=6394976&loc=d3e25287-109308

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 5

-Paragraph 9, 10, 11, 12

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

LINE OF CREDIT

12 Months Ended

Dec. 31, 2013

LINE OF CREDIT [Abstract]

LINE OF CREDIT

10.	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 is evidenced by a Committed Line of Credit Note, dated September 20, 2013 (the “Note”), which matures on June 15, 2015. Amounts outstanding under the Note accrue interest at the 1-month LIBOR rate (adjusted daily) plus 1.50%, calculated on an actual / 360 basis and payable monthly in arrears. Amounts outstanding during an event of default accrue interest at a rate 3.00% in excess of the standard rate, and late payments are subject to a 5.00% late charge. The Note may be repaid in whole or in part at any time, without penalty or premium.

The Line of Credit is also governed by a loan agreement, dated September 20, 2013 (the “Loan Agreement”) and is guaranteed by Charles & Colvard Direct, LLC, and Moissanite.com, LLC. The Line of Credit is secured by a lien on substantially all assets of the Company and its subsidiaries. Under the Loan Agreement, the Company is required to comply with the following financial covenants, each tested on a quarterly basis: (1) interest coverage ratio, (2) funded debt to EBITDA ratio, and (3) ratio of current assets to funded debt. The Loan Agreement contains other customary covenants and representations, including a financial reporting covenant and limitations on dividends, debt, contingent obligations, liens, loans, investments, mergers, acquisitions, divestitures, subsidiaries, and change in control.

The events of default under the Line of Credit include, without limitation, (1) a material casualty or material adverse change in the collateral value or business and (2) an event of default under any other indebtedness. If an event of default occurs, PNC Bank is entitled to take various enforcement actions, including acceleration of amounts due under the Note. The Loan Agreement also contains other customary provisions, such as yield protection, expense reimbursement, and confidentiality. PNC Bank has indemnification rights and the right to assign the Line of Credit.

As of December 31, 2013, the Company has not taken any advances against the Line of Credit.

- 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, 2013

SHAREHOLDERS' EQUITY AND STOCK BASED COMPENSATION [Abstract]

SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION

11.	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, 2013 and 2012, it had 20,197,301 and 19,654,050 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, authorizes 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 expects to use available cash to finance these purchases and will 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 has no obligations to repurchase shares under the program and the program may be suspended or terminated at any time. As of December 31, 2013, the Company has repurchased an aggregate of 190,787 shares, and 809,213 shares of the Company’s common stock remain available for repurchase under the program. The Company did not repurchase any shares under this program during the years ended December 31, 2013 and 2012.

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, 2013.

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, 2013 and 2012, there were 20,051 and 25,685 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, 2013 and 2012, there were 1,186,846 and 1,122,162 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 income:

	Year Ended December 31,
	2013			2012
Employee stock options	$	791,833		$	483,534
Restricted stock awards		886,274			533,544
Income tax benefit		(309,607	)		(193,442	)
Total	$	1,368,500		$	823,636

No stock-based compensation was capitalized as a cost of inventory during the years ended December 31, 2013 and 2012.

Stock Options

The following is a summary of the stock option activity for the years ended December 31, 2013 and 2012:

	Shares			Weighted Average Exercise Price
Outstanding, December 31, 2011		1,157,579		$	2.16
Granted		146,136		$	4.02
Exercised		(85,768	)	$	1.85
Forfeited		(44,098	)	$	2.71
Expired		(26,002	)	$	6.28
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

The weighted average grant date fair value of stock options granted during the years ended December 31, 2013 and 2012 was $3.25 and $2.84, respectively. The total fair value of stock options that vested during the years ended December 31, 2013 and 2012 was approximately $691,000 and $439,000, 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, 2013 and 2012:

	Year Ended December 31,
	2013			2012
Dividend yield		0.0	%		0.0	%
Expected volatility		92.9	%		92.8	%
Risk-free interest rate		1.01	%		0.82	%
Expected lives (years)		5.0			5.0

The following table summarizes information about stock options outstanding at December 31, 2013:

Options Outstanding						Options Exercisable						Options Vested or Expected to Vest
Balance as of 12/31/2013		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 12/31/2013		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 12/31/2013		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
	1,204,297		7.77	$	3.14		750,743		7.04	$	2.49		1,154,613		7.70	$	3.08

As of December 31, 2013, the unrecognized stock-based compensation expense related to unvested stock options was approximately $1.08 million, which is expected to be recognized over a weighted average period of approximately 26 months.

The aggregate intrinsic value of stock options outstanding, exercisable, and vested or expected to vest at December 31, 2013 was approximately $2.49 million, $2.02 million, and $2.45 million, respectively. This amount is before applicable income taxes and represents the closing market price of the Company’s common stock at December 31, 2013 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, 2013 and 2012, the aggregate intrinsic value of stock options exercised was approximately $819,000 and $188,000, respectively.

Restricted Stock

The following is a summary of the restricted stock activity for the years ended December 31, 2013 and 2012:

	Shares			Weighted Average Grant Date Fair Value
Unvested, December 31, 2011		239,389		$	2.92
Granted		114,843		$	3.68
Vested		(162,389	)	$	2.91
Canceled		-		$	-
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

As of December 31, 2013, the unrecognized stock-based compensation expense related to unvested restricted stock was approximately $957,000, which is expected to be recognized over a weighted average period of approximately 24 months.

Dividends

The Company has not paid any cash dividends during the years ended December 31, 2013 and 2012.

INCOME TAXES

12 Months Ended

Dec. 31, 2013

INCOME TAXES [Abstract]

INCOME TAXES

12.	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 benefit comprises the following:

	Year Ended December 31,
	2013			2012
Current:
Federal	$	-		$	(5,186	)
State		(22,929	)		322,400
Total		(22,929	)		317,214

Deferred:
Federal		408,871			3,263,177
State		(116,657	)		469,413
Total		292,214			3,732,590
Income tax net benefit	$	269,285		$	4,049,804

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

	December 31,
	2013			2012
Current:
Reserves and accruals	$	1,298,557		$	880,542
Prepaid expenses		(42,801	)		(94,110	)
Federal net operating loss (“NOL”) carryforwards		-			375,624
State NOL carryforwards		-			113,414
Valuation allowance		(57,924	)		(63,698	)
Total	$	1,197,832		$	1,211,772

	December 31,
	2013			2012
Noncurrent:
Federal NOL carryforwards	$	1,884,118		$	1,530,636
State NOL carryforwards		460,652			462,155
Hong Kong NOL carryforwards		995,566			995,566
Federal benefit on state taxes under uncertain tax positions		123,865			124,333
Stock-based compensation		30,724			108,770
Investment loss		9,429			53,737
Research tax credit		434,637			434,637
Alternative minimum tax credit		348,264			347,213
Contributions carryforward		1,095			-
Depreciation		(366,863	)		(461,875	)
Loss on impairment of long-lived assets		53,395			53,720
Valuation allowance		(1,132,991	)		(1,128,074	)
Total		2,841,891			2,520,818
Total deferred income tax assets, net	$	4,039,723		$	3,732,590

A reconciliation between expected income taxes, computed at the statutory federal income tax rate of 34% applied to pretax accounting income, and the income tax expense included in the consolidated statements of operations for the years ended December 31, 2013 and 2012 is as follows:

	Year Ended December 31,
	2013			2012
Anticipated income tax expense at statutory rate	$	530,529		$	(87,012	)
State income tax benefit, net of federal tax effect		(90,099	)		919
Capital loss carryforward expiration		(44,750	)
Research and development credits expiration		-			(131,764	)
Income tax effect of uncertain tax positions		(12,180	)		239,745
Return to provision adjustments		(8,092	)		(100,417	)
Stock-based compensation		(81,564	)		(87,723	)
Other changes in deferred income tax assets, net		(25,416	)		(17,489	)
Decrease in valuation allowance		857			4,233,545
Income tax net benefit	$	269,285		$	4,049,804

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. For the years ended December 31, 2013 and 2012, cumulative positive taxable income over the last three tax years had been generated, offsetting the negative evidence of cumulative losses in previous years. The Company also determined that its expectations of future taxable income in upcoming tax years would be sufficient to result in full utilization of these net operating loss carryforwards and deferred tax assets prior to any statutory expiration. As a result, the Company’s management determined that sufficient positive evidence existed as of December 31, 2013 and 2012 to conclude that it is more likely than not deferred tax assets of $4.04 million and $3.73 million, respectively, are realizable, and it adjusted its valuation allowance accordingly to reflect the estimated net realizable value. The reduction of the valuation allowances against these deferred tax assets resulted in an income tax benefit during the years ended December 31, 2013 and 2012 of approximately $1,000 and $3.73 million, respectively. A valuation allowance remained at December 31, 2013 and 2012 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 and 2012 against certain deferred tax assets relating to investment loss carryforwards because the Company’s current investments were classified as held-to-maturity as of December 31, 2012, indicating they would be redeemed at par value, and they did not generate gains sufficient to utilize the associated deferred tax assets when they matured in 2013.

As of December 31, 2013, 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, 2013, the Company had federal tax net operating loss carryforwards under U.S. GAAP of approximately $5.66 million, expiring between 2020 and 2033, 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 $11.28 million expiring between 2023 and 2028, and various other state tax net operating loss carryforwards expiring between 2016 and 2033, which can be used to offset against future state taxable income.

As of December 31, 2013, 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, 2013 and 2012 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, 2012 was $483,000. This amount is shown net of approximately $99,000 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 recorded a federal income tax benefit of approximately $124,000 for state income taxes and timing differences resulting from the uncertain tax positions. For the year ended December 31, 2012, the total income tax benefit attributable to uncertain tax positions was approximately $240,000. During the year ended December 31, 2012, the Company entered into a voluntary disclosure agreement with a taxing authority for which the Company had previously recorded a liability for an uncertain tax position. As a result of the agreement, the Company reduced its total recorded liabilities relating to uncertain tax positions by approximately $374,000, paid approximately $48,000 to the taxing authority, and recognized a corresponding income tax benefit of $326,000. This benefit was offset by approximately $16,000 of net income tax expense for the year ended December 31, 2012 for estimated tax, penalties, and interest accrued under U.S. GAAP for other uncertain tax positions. The Company also reduced its net liability for uncertain tax positions by approximately $24,000 and recognized a corresponding income tax benefit due to the expiration of a portion of research and development tax credits included in its deferred tax assets.

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. During 2013 and 2012, the Company accrued interest and penalties associated with uncertain tax positions of approximately $12,000 and $16,000, respectively. Including the interest and penalties recorded for uncertain tax positions, there is a total of approximately $127,000 and $115,000 of interest and penalties included in the accrued income tax liability for uncertain tax positions at December 31, 2013 and 2012, 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 2010 through 2012 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, 2012 through December 31, 2013:

Balance as of January 1, 2012	$	864,826
Increases related to prior year tax positions		18,184
Decreases related to current year tax filings		(1,693	)
Decreases related to expired tax credits		(24,401	)
Decreases related to reversal of prior year tax positions by amendment of returns		(374,406	)
Balance as of December 31, 2012		482,510
Increases related to prior year tax positions		11,712
Balance as of December 31, 2013	$	494,222

- 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

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 740

-SubTopic 10

-Section 50

-Paragraph 15

-URI http://asc.fasb.org/extlink&oid=6907707&loc=d3e32718-109319

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-Name Accounting Standards Codification

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-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 136, 172

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 109

-Paragraph 43, 44, 45, 46, 47, 48, 49

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

+ Details

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

12 Months Ended

Dec. 31, 2013

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK [Abstract]

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

13.	MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK

As of December 31, 2013 and 2012, one customer accounted for 21% and 30%, respectively, of trade accounts receivable.

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,
	2013			2012
Customer A		19	%		27	%
Customer B		9	%		11	%

- 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

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 107

-Paragraph 15A

-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 275

-SubTopic 10

-Section 50

-Paragraph 20

-URI http://asc.fasb.org/extlink&oid=6927468&loc=d3e6404-108592

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 275

-SubTopic 10

-Section 50

-Paragraph 16

-URI http://asc.fasb.org/extlink&oid=6927468&loc=d3e6327-108592

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-Publisher AICPA

-Name Statement of Position (SOP)

-Number 94-6

-Paragraph 21, 22, 24

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 20

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13531-108611

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 275

-SubTopic 10

-Section 50

-Paragraph 18

-URI http://asc.fasb.org/extlink&oid=6927468&loc=d3e6351-108592

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 825

-SubTopic 10

-Section 50

-Paragraph 21

-URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13537-108611

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-Publisher FASB

-Name Accounting Standards Codification

-Topic 275

-SubTopic 10

-Section 50

-Paragraph 21

-URI http://asc.fasb.org/extlink&oid=6927468&loc=d3e6442-108592

+ Details

EMPLOYEE BENEFIT PLAN

12 Months Ended

Dec. 31, 2013

EMPLOYEE BENEFIT PLAN [Abstract]

EMPLOYEE BENEFIT PLAN

14.	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 $79,000 and $54,000 to the plan during the years ended December 31, 2013 and 2012, respectively.

- Definition

The entire disclosure for pension and other postretirement benefits.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

-Publisher FASB

-Name Accounting Standards Codification

-Topic 715

-URI http://asc.fasb.org/topic&trid=2235017

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-Publisher FASB

-Name Implementation Guide (Q and A)

-Number FAS88

-Paragraph 63

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5, 6, 7, 8

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-Publisher FASB

-Name Emerging Issues Task Force (EITF)

-Number 03-2

-Paragraph 8

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 158

-Paragraph 7, 21, 22

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 87

-Paragraph 264

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 106

-Paragraph 518

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph b

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph a

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph h

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 5

-Subparagraph q

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-Publisher FASB

-Name FASB Staff Position (FSP)

-Number FAS106-2

-Paragraph 20, 21, 22

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-Publisher AICPA

-Name Accounting Principles Board Opinion (APB)

-Number 30

-Paragraph 26

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-Publisher FASB

-Name Statement of Financial Accounting Standard (FAS)

-Number 132R

-Paragraph 8

-Subparagraph m

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+ Details

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2013

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,
	2013			2012
Balance, beginning of period	$	549,000		$	380,000
Additions charged to operations		3,690			245,582
Write-offs, net of recoveries		(30,690	)		(76,582	)
Balance, end of period	$	522,000		$	549,000

Investments

Investments - Investments in certain securities may be classified into three categories:

Held-to-maturity - Debt securities that the Company has the positive intent and ability to hold to maturity are reported at amortized cost.

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, 2013 and 2012 were approximately $2.74 million and $2.16 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.

Expected lives - The expected lives of the stock options represent the estimated period of time until exercise or forfeiture and are based on historical experience of similar awards.

Income Taxes

Other Comprehensive Income

Other Comprehensive Income - For the years ended December 31, 2013 and 2012, the Company did not have any other comprehensive income.

Net (Loss) Income per Common Share

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

	Year Ended December 31,
	2013			2012
Numerator:
Net (loss) income	$	(1,291,098	)	$	4,377,654

Denominator:
Weighted average common shares outstanding:
Basic		19,904,170			19,581,670
Stock options		-			385,601
Diluted		19,904,170			19,967,271

Net (loss) income per common share:
Basic	$	(0.06	)	$	0.22
Diluted	$	(0.06	)	$	0.22

Recently Adopted/Issued Accounting Pronouncements

BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

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,
	2013			2012
Balance, beginning of period	$	549,000		$	380,000
Additions charged to operations		3,690			245,582
Write-offs, net of recoveries		(30,690	)		(76,582	)
Balance, end of period	$	522,000		$	549,000

Schedule of estimated useful life of property, plant 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

Reconciliation of basic and fully diluted earnings per share

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

	Year Ended December 31,
	2013			2012
Numerator:
Net (loss) income	$	(1,291,098	)	$	4,377,654

Denominator:
Weighted average common shares outstanding:
Basic		19,904,170			19,581,670
Stock options		-			385,601
Diluted		19,904,170			19,967,271

Net (loss) income per common share:
Basic	$	(0.06	)	$	0.22
Diluted	$	(0.06	)	$	0.22

SEGMENT INFORMATION AND GEOGRAPHIC DATA (Tables)

12 Months Ended

Dec. 31, 2013

SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract]

Summary information by segment

Summary financial information by reporting segment is as follows:

	Year Ended December 31, 2013
	Wholesale		Direct-to- Consumer			Total
Net sales
Loose jewels	$	18,136,062		347,933			18,483,995
Finished jewelry		7,438,340		2,564,852			10,003,192
Total	$	25,574,402		2,912,785			28,487,187

Product line cost of goods sold
Loose jewels	$	7,588,838		57,537			7,646,375
Finished jewelry		4,094,157		1,205,415			5,299,572
Total	$	11,682,995		1,262,952			12,945,947

Product line gross profit
Loose jewels	$	10,547,224		290,396			10,837,620
Finished jewelry		3,344,183		1,359,437			4,703,620
Total	$	13,891,407		1,649,833			15,541,240

Operating income (loss)	$	3,652,153		(5,232,437	)		(1,580,284	)

Depreciation and amortization	$	481,993		380,690			862,683

Total assets	$	61,702,449		621,403			62,323,852

Capital expenditures	$	744,679		55,688			800,367

	Year Ended December 31, 2012
	Wholesale		Direct-to- Consumer			Total
Net sales
Loose jewels	$	14,770,191	$	221,207		$	14,991,398
Finished jewelry		6,044,727		1,414,373			7,459,100
Total	$	20,814,918	$	1,635,580		$	22,450,498

Product line cost of goods sold
Loose jewels	$	4,551,052	$	135,474		$	4,686,526
Finished jewelry		2,884,728		702,730			3,587,458
Total	$	7,435,780	$	838,204		$	8,273,984

Product line gross profit
Loose jewels	$	10,219,139	$	85,733		$	10,304,872
Finished jewelry		3,159,999		711,643			3,871,642
Total	$	13,379,138	$	797,376		$	14,176,514

Operating income (loss)	$	4,370,028	$	(4,110,438	)	$	259,590

Depreciation and amortization	$	390,044	$	218,121		$	608,165

Total assets	$	58,823,642	$	1,053,049		$	59,876,691

Capital expenditures	$	425,736	$	443,250		$	868,986

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,
	2013		2012
Product line cost of goods sold	$	12,945,947	$	8,273,984
Non-capitalized manufacturing and production control expenses		532,928		1,348,029
Freight out		201,911		111,639
Inventory valuation allowances		264,000		93,000
Other inventory adjustments		655,391		145,011
Cost of goods sold	$	14,600,177	$	9,971,663

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,
	2013		2012
Loose jewels
Raw materials	$	3,311,375	$	3,189,320
Work-in-process		9,526,769		3,650,322
Finished goods		20,002,881		19,074,526
Finished goods on consignment		32,948		75,131
Total	$	32,873,973	$	25,989,299

Finished jewelry
Raw materials	$	270,043	$	259,366
Work-in-process		764,355		250,628
Finished goods		8,117,035		5,451,178
Finished goods on consignment		299,514		748,022
Total	$	9,450,947	$	6,709,194

Data by geographic area

	Year Ended December 31,
	2013		2012
Net sales
United States	$	20,684,397	$	16,869,397
International		7,802,790		5,581,101
Total	$	28,487,187	$	22,450,498

	December 31,
	2013		2012
Property and equipment, net
United States	$	1,717,692	$	1,746,792
International		-		-
Total	$	1,717,692	$	1,746,792

	December 31,
	2013		2012
Intangible assets, net
United States	$	70,830	$	152,038
International		255,037		194,694
Total	$	325,867	$	346,732

- Definition

Tabular disclosure of the names of foreign countries from which revenue is material and the amount of revenue from external customers attributed to those countries. An entity may also provide subtotals of geographic information about groups of countries.

+ References+ Details

- 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, 2013

PROPERTY AND EQUIPMENT [Abstract]

Property and equipment

Property and equipment consists of the following:

	December 31,
	2013			2012
Computer software	$	1,739,734		$	1,626,618
Machinery and equipment		850,039			791,634
Computer hardware		820,535			468,615
Leasehold improvements		457,856			432,759
Furniture and fixtures		319,100			303,232
Total		4,187,264			3,622,858
Less accumulated depreciation		(2,469,572	)		(1,876,066	)
Property and equipment, net	$	1,717,692		$	1,746,792

- Definition

Tabular disclosure of the useful life and salvage value of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale. Examples include land, buildings, machinery and equipment, and other types of furniture and equipment including, but not limited to, office equipment, furniture and fixtures, and computer equipment and software.

+ References+ Details

SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2013

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 income:

	Year Ended December 31,
	2013			2012
Employee stock options	$	791,833		$	483,534
Restricted stock awards		886,274			533,544
Income tax benefit		(309,607	)		(193,442	)
Total	$	1,368,500		$	823,636

Summary of the stock option activity

The following is a summary of the stock option activity for the years ended December 31, 2013 and 2012:

	Shares			Weighted Average Exercise Price
Outstanding, December 31, 2011		1,157,579		$	2.16
Granted		146,136		$	4.02
Exercised		(85,768	)	$	1.85
Forfeited		(44,098	)	$	2.71
Expired		(26,002	)	$	6.28
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

Weighted average assumptions for stock options granted

	Year Ended December 31,
	2013			2012
Dividend yield		0.0	%		0.0	%
Expected volatility		92.9	%		92.8	%
Risk-free interest rate		1.01	%		0.82	%
Expected lives (years)		5.0			5.0

Information about stock options outstanding

The following table summarizes information about stock options outstanding at December 31, 2013:

Options Outstanding						Options Exercisable						Options Vested or Expected to Vest
Balance as of 12/31/2013		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 12/31/2013		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Balance as of 12/31/2013		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
	1,204,297		7.77	$	3.14		750,743		7.04	$	2.49		1,154,613		7.70	$	3.08

Restricted stock activity

The following is a summary of the restricted stock activity for the years ended December 31, 2013 and 2012:

	Shares			Weighted Average Grant Date Fair Value
Unvested, December 31, 2011		239,389		$	2.92
Granted		114,843		$	3.68
Vested		(162,389	)	$	2.91
Canceled		-		$	-
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

- Definition

Tabular disclosure of the allocation of equity-based compensation costs to a given line item on the balance sheet and income statement for the period. This may include the reporting line for the costs and the amount capitalized and expensed.

+ References+ Details

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

INCOME TAXES [Abstract]

Income tax net benefit

Income tax net benefit comprises the following:

	Year Ended December 31,
	2013			2012
Current:
Federal	$	-		$	(5,186	)
State		(22,929	)		322,400
Total		(22,929	)		317,214

Deferred:
Federal		408,871			3,263,177
State		(116,657	)		469,413
Total		292,214			3,732,590
Income tax net benefit	$	269,285		$	4,049,804

Significant components of deferred income tax assets

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

	December 31,
	2013			2012
Current:
Reserves and accruals	$	1,298,557		$	880,542
Prepaid expenses		(42,801	)		(94,110	)
Federal net operating loss (“NOL”) carryforwards		-			375,624
State NOL carryforwards		-			113,414
Valuation allowance		(57,924	)		(63,698	)
Total	$	1,197,832		$	1,211,772

	December 31,
	2013			2012
Noncurrent:
Federal NOL carryforwards	$	1,884,118		$	1,530,636
State NOL carryforwards		460,652			462,155
Hong Kong NOL carryforwards		995,566			995,566
Federal benefit on state taxes under uncertain tax positions		123,865			124,333
Stock-based compensation		30,724			108,770
Investment loss		9,429			53,737
Research tax credit		434,637			434,637
Alternative minimum tax credit		348,264			347,213
Contributions carryforward		1,095			-
Depreciation		(366,863	)		(461,875	)
Loss on impairment of long-lived assets		53,395			53,720
Valuation allowance		(1,132,991	)		(1,128,074	)
Total		2,841,891			2,520,818
Total deferred income tax assets, net	$	4,039,723		$	3,732,590

Schedule of effective income tax rate reconciliation

	Year Ended December 31,
	2013			2012
Anticipated income tax expense at statutory rate	$	530,529		$	(87,012	)
State income tax benefit, net of federal tax effect		(90,099	)		919
Capital loss carryforward expiration		(44,750	)
Research and development credits expiration		-			(131,764	)
Income tax effect of uncertain tax positions		(12,180	)		239,745
Return to provision adjustments		(8,092	)		(100,417	)
Stock-based compensation		(81,564	)		(87,723	)
Other changes in deferred income tax assets, net		(25,416	)		(17,489	)
Decrease in valuation allowance		857			4,233,545
Income tax net benefit	$	269,285		$	4,049,804

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, 2012 through December 31, 2013:

Balance as of January 1, 2012	$	864,826
Increases related to prior year tax positions		18,184
Decreases related to current year tax filings		(1,693	)
Decreases related to expired tax credits		(24,401	)
Decreases related to reversal of prior year tax positions by amendment of returns		(374,406	)
Balance as of December 31, 2012		482,510
Increases related to prior year tax positions		11,712
Balance as of December 31, 2013	$	494,222

- 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, 2013

MAJOR CUSTOMERS AND CONCENTRATION OF CREDIT RISK [Abstract]

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

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,
	2013			2012
Customer A		19	%		27	%
Customer B		9	%		11	%

- 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, 2013 Subsidiary	Dec. 31, 2012
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES [Abstract]
Interest bearing amounts on deposit in excess of FDIC insurable limits	$ 270,000
Customer payment term for trade receivables, minimum	30 days
Customer payment term for trade receivables, maximum	90 days
Allowance for sales returns	1,190,000	463,000
Allowance for doubtful accounts receivable [Roll Forward]
Balance, beginning of period	549,000	380,000
Additions charged to operations	3,690	245,582
Write-offs, net of recoveries	(30,690)	(76,582)
Balance, end of period	522,000	549,000
Obsolescence reserve for certain fashion finished jewelry inventory	128,000
Inventories issued to active production	4,090,000	1,120,000
Property, Plant and Equipment [Line Items]
Amortized life of patent	17 years
Increase in depreciation expense	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	1,030,000	626,000
Advertising expense	2,740,000	2,160,000
Number of wholly owned operating subsidiaries	2
Dividend yield (in hundredths)	0.00%
Numerator [Abstract]
Net (loss) income	$ (1,291,098)	$ 4,377,654
Weighted average common shares outstanding [Abstract]
Basic (in shares)	19,904,170	19,581,670
Stock options (in shares)	0	385,601
Diluted (in shares)	19,904,170	19,967,271
Net (loss) income per common share [Abstract]
Basic (in dollars per share)	$ (0.06)	$ 0.22
Diluted (in dollars per share)	$ (0.06)	$ 0.22
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Stock options to purchase shares (in shares)	1,200,000	354,000
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, 2013

Segment

Dec. 31, 2012

SEGMENT INFORMATION AND GEOGRAPHIC DATA [Abstract]

Number of operating segments

Number of reportable segments

Summary information by segment [Abstract]

Net sales

$ 28,487,187

$ 22,450,498

Product line cost of goods sold

14,600,177

9,971,663

Product line gross profit

15,541,240

14,176,514

Operating income (loss)

(1,580,284)

259,590

Depreciation and amortization

862,683

608,165

Capital expenditures

800,367

868,986

Total assets

62,323,852

59,876,691

Inventories, net [Abstract]

Raw materials

3,581,418

3,448,686

Work-in-process

10,291,124

3,900,950

Supplies inventories

87,000

98,000

Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

12,945,947

8,273,984

Non-Capitalized Manufacturing and Production Control Expenses [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

532,928

1,348,029

Freight Out [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

201,911

111,639

Inventory Valuation allowances [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

264,000

93,000

Other Inventory Adjustments [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

655,391

145,011

Loose Jewels [Member]

Summary information by segment [Abstract]

Net sales

18,483,995

14,991,398

Product line gross profit

10,837,620

10,304,872

Inventories, net [Abstract]

Raw materials

3,311,375

3,189,320

Work-in-process

9,526,769

3,650,322

Finished goods

20,002,881

19,074,526

Finished goods on consignment

32,948

75,131

Total

32,873,973

25,989,299

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

Summary information by segment [Abstract]

Product line cost of goods sold

7,646,375

4,686,526

Finished Jewelry [Member]

Summary information by segment [Abstract]

Net sales

10,003,192

7,459,100

Product line gross profit

4,703,620

3,871,642

Inventories, net [Abstract]

Raw materials

270,043

259,366

Work-in-process

764,355

250,628

Finished goods

8,117,035

5,451,178

Finished goods on consignment

299,514

748,022

Total

9,450,947

6,709,194

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

Summary information by segment [Abstract]

Product line cost of goods sold

5,299,572

3,587,458

Wholesale [Member]

Summary information by segment [Abstract]

Net sales

25,574,402

20,814,918

Product line gross profit

13,891,407

13,379,138

Operating income (loss)

3,652,153

4,370,028

Depreciation and amortization

481,993

390,044

Capital expenditures

744,679

425,736

Total assets

61,702,449

58,823,642

Wholesale [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

11,682,995

7,435,780

Wholesale [Member] | Loose Jewels [Member]

Summary information by segment [Abstract]

Net sales

18,136,062

14,770,191

Product line gross profit

10,547,224

10,219,139

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

Summary information by segment [Abstract]

Product line cost of goods sold

7,588,838

4,551,052

Wholesale [Member] | Finished Jewelry [Member]

Summary information by segment [Abstract]

Net sales

7,438,340

6,044,727

Product line gross profit

3,344,183

3,159,999

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

Summary information by segment [Abstract]

Product line cost of goods sold

4,094,157

2,884,728

Direct-to-Consumer [Member]

Summary information by segment [Abstract]

Net sales

2,912,785

1,635,580

^[1]

Product line gross profit

1,649,833

797,376

^[1]

Operating income (loss)

(5,232,437)

(4,110,438)

^[1]

Depreciation and amortization

380,690

218,121

^[1]

Capital expenditures

55,688

443,250

^[1]

Total assets

621,403

1,053,049

^[1]

Direct-to-Consumer [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

1,262,952

838,204

^[1]

Direct-to-Consumer [Member] | Loose Jewels [Member]

Summary information by segment [Abstract]

Net sales

347,933

221,207

^[1]

Product line gross profit

290,396

85,733

^[1]

Direct-to-Consumer [Member] | Loose Jewels [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

57,537

135,474

^[1]

Direct-to-Consumer [Member] | Finished Jewelry [Member]

Summary information by segment [Abstract]

Net sales

2,564,852

1,414,373

^[1]

Product line gross profit

1,359,437

711,643

^[1]

Direct-to-Consumer [Member] | Finished Jewelry [Member] | Product Line Cost of Goods Sold [Member]

Summary information by segment [Abstract]

Product line cost of goods sold

$ 1,205,415

$ 702,730

^[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, 2013	Dec. 31, 2012
Net sales [Abstract]
United States	$ 20,684,397	$ 16,869,397
International	7,802,790	5,581,101
Net sales	28,487,187	22,450,498
Property and Equipment, Net [Member]
Assets by geographical area [Abstract]
United States	1,717,692	1,746,792
International	0	0
Total	1,717,692	1,746,792
Intangible Assets, Net [Member]
Assets by geographical area [Abstract]
United States	70,830	152,038
International	255,037	194,694
Total	$ 325,867	$ 346,732

INVESTMENTS (Details) (U.S. Government Agency Securities [Member], USD $)	Dec. 31, 2012
U.S. Government Agency Securities [Member]
Maturities of held-to-maturity investments [Abstract]
Less than 1 Year	$ 505,068
Total	$ 505,068

- Definition

Carrying amount of debt securities accounted for as held-to-maturity, net of adjustments including, but not limited to, accretion, amortization, collection of cash, previous other-than-temporary impairments (OTTI) recognized, and fair value hedge accounting adjustments, maturing in the next fiscal year following the latest fiscal year.

+ References+ Details

INVENTORIES (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Total inventories, net of reserves [Abstract]
Raw materials	$ 3,581,418	$ 3,448,686
Work-in-process	10,291,124	3,900,950
Finished goods	28,771,098	24,978,221
Finished goods on consignment	407,462	843,153
Less inventory reserves	(639,000)	(375,000)
Total	42,412,102	32,796,010
Short-term portion	13,074,428	8,442,430
Long-term portion	29,337,674	24,353,580
Shrinkage reserve for finished goods on consignment	75,000	20,000
Inventory of net loose jewels	32,870,000	25,990,000
Inventory reserve for shrinkage of loose jewels	2,000	36,000
Inventory reserve for shrinkage of loose jewels on consignment	0	17,000
Inventory reserve for recuts	172,000	109,000
Inventory of net jewelry	9,450,000	6,710,000
Inventory reserve for shrinkage of finished jewelry	180,000	53,000
Inventory reserve for shrinkage of finished jewelry on consignment	75,000	3,000
Scrap reserve	106,000	132,000
Inventory reserve for jewelry in need of repair	51,000	45,000
Inventory reserve for obsolescence	128,000
Consideration acquired in purchase agreement		645,645
Consideration for associated direct expenses related to the purchase agreement		32,170
Net fashion finished jewelry inventories related to the purchase agreement		563,000
Fair value of net fashion finished jewelry inventories related to the purchase agreement		$ 628,000

PROPERTY AND EQUIPMENT (Details) (USD $)	12 Months Ended
PROPERTY AND EQUIPMENT (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Total	$ 4,187,264	$ 3,622,858
Less accumulated depreciation	(2,469,572)	(1,876,066)
Property and equipment, net	1,717,692	1,746,792
Depreciation expense	731,000	541,000
Computer Software [Member]
Property, Plant and Equipment [Line Items]
Total	1,739,734	1,626,618
Machinery and Equipment [Member]
Property, Plant and Equipment [Line Items]
Total	850,039	791,634
Computer Hardware [Member]
Property, Plant and Equipment [Line Items]
Total	820,535	468,615
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Total	457,856	432,759
Furniture and Fixtures [Member]
Property, Plant and Equipment [Line Items]
Total	319,100	303,232
Computer Software Related to Purchase Agreement [Member]
Property, Plant and Equipment [Line Items]
Total	72,000
Fair value	$ 81,000

- Definition

The cumulative amount of depreciation, depletion and amortization (related to property, plant and equipment, but not including land) that has been recognized in the income statement.

+ References+ Details

- Definition

The amount of expense recognized in the current period that reflects the allocation of the cost of tangible assets over the assets' useful lives. Includes production and non-production related depreciation.

+ References+ Details

- Definition

Gross amount of long-lived physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, furniture and fixtures, and computer equipment.

+ References+ Details

- Definition

Amount, net of accumulated depreciation, depletion and amortization, of long-lived physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, furniture and fixtures, and computer equipment.

+ References+ Details

INTANGIBLE ASSETS (Details) (USD $)	12 Months Ended
INTANGIBLE ASSETS (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Intangible assets [Abstract]
Total	$ 916,471	$ 806,094
Less accumulated amortization	(590,604)	(459,362)
Intangible assets, net	325,867	346,732
Weighted Average Amortization Period (in Years)	17 years
Amortization expense	131,000	67,000
Estimated amortization expenses [Abstract]
2013	147,000
2014	121,000
2015	49,000
2016	8,000
2017	1,000
Patents [Member]
Intangible assets [Abstract]
Total	8,583,997	748,939
Weighted Average Amortization Period (in Years)	2 years 4 months 24 days
License Rights [Member]
Intangible assets [Abstract]
Total	6,718	6,718
Weighted Average Amortization Period (in Years)	0 years 9 months 18 days
Trademarks [Member]
Intangible assets [Abstract]
Total	51,356	50,437
Weighted Average Amortization Period (in Years)	3 years 7 months 6 days
Trademarks related to the purchase agreement [Member]
Intangible assets [Abstract]
Total	36,000
Fair value	40,000
License rights related to the purchase agreement [Member]
Intangible assets [Abstract]
Total	7,000
Fair value	$ 8,000

COMMITMENTS AND CONTINGENCIES (Details) (USD $)	0 Months Ended	12 Months Ended
COMMITMENTS AND CONTINGENCIES (Details) (USD $)	Dec. 09, 2013 sqft	Dec. 31, 2013 RentHoliday sqft	Dec. 31, 2012	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
Future minimum payments under operating lease [Abstract]
2014		174,560
2015		556,404
2016		571,705
2017		587,427
2018		603,581
Thereafter		1,692,451
Total		4,186,128
Rent expense		336,000	196,000
Purchase Commitments [Abstract]
Period of exclusive supply agreement		10 years
Percentage committed to be purchased (in hundredths)		50.00%
Minimum purchase commitment in initial new order		4,000,000
Minimum purchase commitment under the amendment		7,640,000
Maximum purchase commitment under amendment		18,560,000
Actual purchases under purchase amendment		$ 12,560,000

LINE OF CREDIT (Details) (USD $)	12 Months Ended
LINE OF CREDIT (Details) (USD $)	Dec. 31, 2013
LINE OF CREDIT [Abstract]
Revolving line of credit	$ 10,000,000
Line of credit maturity date	Jun. 15, 2015
Line of credit, description of variable rate basis	1-month LIBOR
Line of credit, spread on variable rate (in hundredths)	1.50%
Basis for calculation of LIBOR rate (adjusted daily)	actual / 360 basis
Interest rate in event of default in excess of standard rate (in hundredths)	3.00%
Late payment charge (in hundredths)	5.00%
Advances against line of credit	$ 0

SHAREHOLDERS' EQUITY AND STOCK-BASED COMPENSATION (Details) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
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)	20,197,301	19,654,050
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
Components of the Company's stock based compensation included in net income [Abstract]
Income tax benefit	$ (309,607)	$ (193,442)
Total	1,368,500	823,636
Weighted average assumptions for stock options [Abstract]
Dividend yield (in hundredths)	0.00%
Employee Stock Options [Member]
Components of the Company's stock based compensation included in net income [Abstract]
Allocated share-based compensation expense	791,833	483,534
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)	1,204,297	1,147,847
Components of the Company's stock based compensation included in net income [Abstract]
Stock-based compensation capitalized as a cost of inventory	0	0
Shares [Roll Forward]
Outstanding, Beginning Balance (in shares)	1,147,847	1,157,579
Granted (in shares)	436,002	146,136
Exercised (in shares)	(197,848)	(85,768)
Forfeited (in shares)	(101,831)	(44,098)
Expired (in shares)	(79,873)	(26,002)
Outstanding, Ending Balance (in shares)	1,204,297	1,147,847
Weighted Average Exercise Price [Roll Forward]
Outstanding, Beginning Balance (in dollars per share)	$ 2.31	$ 2.16
Granted (in dollars per share)	$ 4.59	$ 4.02
Exercised (in dollars per share)	$ 2.13	$ 1.85
Forfeited (in dollars per share)	$ 2.47	$ 2.71
Expired (in dollars per share)	$ 2.36	$ 6.28
Outstanding, Ending Balance (in dollars per share)	$ 3.14	$ 2.31
Fair value of stock options (in dollars per share)	$ 3.25	$ 2.84
Fair value of stock options vested	691,000	439,000
Weighted average assumptions for stock options [Abstract]
Dividend yield (in hundredths)	0.00%	0.00%
Expected volatility (in hundredths)	92.90%	92.80%
Risk-free interest rate (in hundredths)	1.01%	0.82%
Expected lives (years)	5 years	5 years
Options Outstanding [Abstract]
Balance as of 12/31/2012 (in shares)	1,204,297	1,147,847
Weighted Average Remaining Contractual Life (Years)	7 years 9 months 7 days
Weighted Average Exercise Price (in dollars per share)	$ 3.14	$ 2.31
Options Exercisable [Abstract]
Balance as of 12/31/2012 (in shares)	750,743
Weighted Average Remaining Contractual Life (Years)	7 years 0 months 14 days
Weighted Average Exercise Price (in dollars per share)	$ 2.49
Options Vested or Expected to Vest [Abstract]
Balance as of 12/31/2012 (in shares)	1,154,613
Weighted Average Remaining Contractual Life (Years)	7 years 8 months 12 days
Weighted Average Exercise Price (in dollars per share)	$ 3.08
Unrecognized stock-based compensation expense related to unvested awards	1,080,000
Total compensation cost not yet recognized, period for recognition	26 months
Aggregate intrinsic value of stock options outstanding	2,490,000
Aggregate intrinsic value of stock options exercisable	2,020,000
Aggregate intrinsic value of stock options vested and expected to vest	2,450,000
Aggregate intrinsic value of stock options exercised	819,000	188,000
Restricted Stock [Member]
Components of the Company's stock based compensation included in net income [Abstract]
Allocated share-based compensation expense	886,274	533,544
Options Vested or Expected to Vest [Abstract]
Unrecognized stock-based compensation expense related to unvested awards	$ 957,000
Total compensation cost not yet recognized, period for recognition	24 months
Shares [Roll Forward]
Unvested, Beginning Balance (in shares)	191,843	239,389
Granted (in shares)	345,403	114,843
Vested (in shares)	(186,343)	(162,389)
Canceled (in shares)	0	0
Unvested, Ending Balance (in shares)	350,903	191,843
Weighted Average Grant Date Fair Value [Roll Forward]
Unvested, Beginning Balance (in dollars per share)	$ 3.38	$ 2.92
Granted (in dollars per share)	$ 4.48	$ 3.68
Vested (in dollars per share)	$ 3.76	$ 2.91
Canceled (in dollars per share)	$ 0	$ 0
Unvested, Ending Balance (in dollars per share)	$ 4.26	$ 3.38
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)	20,051
Shares [Roll Forward]
Outstanding, Beginning Balance (in shares)	25,685
Outstanding, Ending Balance (in shares)	20,051
Options Outstanding [Abstract]
Balance as of 12/31/2012 (in shares)	20,051
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)	1,186,846
Shares [Roll Forward]
Outstanding, Beginning Balance (in shares)	1,122,162
Outstanding, Ending Balance (in shares)	1,186,846
Options Outstanding [Abstract]
Balance as of 12/31/2012 (in shares)	1,186,846
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, 2013	Dec. 31, 2012
Current [Abstract]
Federal	$ 0	$ (5,186)
State	(22,929)	322,400
Total	(22,929)	317,214
Deferred [Abstract]
Federal	408,871	3,263,177
State	(116,657)	469,413
Total	292,214	3,732,590
Income tax net benefit	269,285	4,049,804
Current [Abstract]
Reserves and accruals	1,298,557	880,542
Prepaid expenses	(42,801)	(94,110)
Federal net operating loss ("NOL") carryforwards	0	375,624
State NOL carryforwards	0	113,414
Valuation allowance	(57,924)	(63,698)
Total	1,197,832	1,211,772
Noncurrent [Abstract]
Federal net operating loss ("NOL") carryforwards	1,884,118	1,530,636
State NOL carryforwards	460,652	462,155
Hong Kong and China NOL carryforwards	995,566	995,566
Federal benefit on state taxes under uncertain tax positions	123,865	124,333
Stock-based compensation	30,724	108,770
Investment loss	9,429	53,737
Research tax credit	434,637	434,637
Alternative minimum tax credit	348,264	347,213
Contributions carryforward	1,095	0
Depreciation	(366,863)	(461,875)
Loss on impairment of long-lived assets	53,395	53,720
Valuation allowance	(1,132,991)	(1,128,074)
Total	2,841,891	2,520,818
Total deferred income tax assets, net	4,039,723	3,732,590
Federal statutory income tax rate (in hundredths)	34.00%
Income tax benefit due to reduction in valuation allowance	1,000	3,730,000
Effective income tax rate reconciliation [Abstract]
Anticipated income tax expense at statutory rate	530,529	(87,012)
State income tax benefit (expense), net of federal tax effect	(90,099)	919
Capital loss carryforward expiration	(44,750)	0
Research and development credits expiration	0	(131,764)
Income tax effect of uncertain tax positions	(12,180)	239,745
Return to provision adjustments	(8,092)	(100,417)
Stock-based compensation	(81,564)	(87,723)
Other changes in deferred income tax assets, net	(25,416)	(17,489)
Decrease (increase) in valuation allowance	857	4,233,545
Income tax net benefit	269,285	4,049,804
Federal income tax credits	882,000
Remaining balance of federal income tax expire between 2018 and 2021	533,000
Operating Loss Carryforwards [Line Items]
Direct reduction to associated deferred tax asset		99,000
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	16,000
Accrued Income tax expense for estimated tax, penalties, and interest for other uncertain tax positions	127,000	115,000
Period for settlement of uncertain tax positions	12 months
Activities related to gross liability for uncertain tax positions [Roll Forward]
Beginning balance	482,510	864,826
Increases related to prior year tax positions	11,712	18,184
Increases related to current year tax positions		(1,693)
Decreases related to reversal of prior year tax positions by amendment of returns		(374,406)
Decreases related to expired tax credits		(24,401)
Ending balance	494,222	482,510
Federal [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	5,660,000
Federal [Member] \| Minimum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	2020
Federal [Member] \| Maximum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	2033
North Carolina [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	11,280,000
North Carolina [Member] \| Minimum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	2023
North Carolina [Member] \| Maximum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	2028
Other State [Member] \| Minimum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	2016
Other State [Member] \| Maximum [Member]
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards, expiration dates	2033
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, 2013	Dec. 31, 2012
Concentration Risk [Line Items]
Number of Customers	1	1
Trade Accounts Receivable [Member] \| Customer Concentration Risk [Member] \| Customer 1 [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (in hundredths)	21.00%	30.00%
Total Gross Sales [Member] \| Customer A [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (in hundredths)	19.00%	27.00%
Total Gross Sales [Member] \| Customer B [Member]
Concentration Risk [Line Items]
Concentration risk, percentage (in hundredths)	9.00%	11.00%

EMPLOYEE BENEFIT PLAN (Details) (USD $)	12 Months Ended
EMPLOYEE BENEFIT PLAN (Details) (USD $)	Dec. 31, 2013	Dec. 31, 2012
EMPLOYEE BENEFIT PLAN [Abstract]
Company contribution, Cost Recognized	$ 79,000	$ 54,000