GradingJun 12, 2024
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Charles & Colvard Faces Possible Nasdaq Delisting
The retailer said it will file the necessary paperwork to regain compliance as soon as it is able.
A 14-karat rose gold swirl bypass solitaire engagement ring set with a 1.10-carat “Forever One” cushion-cut moissanite by Charles & Colvard. The company is at risk of being delisted from the Nasdaq stock exchange after failing to file its annual report on time.
Research Triangle Park, N.C.—Charles & Colvard may be delisted from the Nasdaq due to noncompliance.
The North Carolina-based company announced Oct. 18 that it received a letter from the stock exchange stating it was not in compliance with the Nasdaq rule that requires the timely filing of all required periodic reports.
As of press time, the company has not filed its annual report via a Form 10-K for the fiscal year ending June 30, which was due to the exchange by Sept. 30.
Charles & Colvard filed a notification on Oct. 1 stating that it needed more time to complete the report due in part to the “pending outcome of confidential arbitration against the company.”
The company shared details of the dispute in its Q3 quarterly report, filed with the Securities and Exchange Commission on May 6.
Wolfspeed, a developer and manufacturer of wide-bandgap semiconductors (which allow devices to operate at much higher temperatures than conventional semiconductors), accused Charles & Colvard of breach of contract, claiming damages plus interest, cost, and attorney’s fees.
Charles & Colvard said it disputes the accusations.
While the Nasdaq notice doesn’t have an immediate effect on the company’s listing or trading of its common stock, it will have to regain compliance within 60 calendar days (by Dec. 17) or face delisting.
Alternatively, it can submit a plan to regain compliance to the Nasdaq by that day.
If the plan is accepted by the exchange, Charles & Colvard may be granted up to 180 calendar days, or until April 14, to regain compliance.
If the exchange does not accept the plan, the company can appeal the decision to a Nasdaq Hearings Panel.
“As stated in the company’s most recent press release, the company is working diligently to complete its Form 10-K and plans to file its Form 10-K as promptly as [is] practicable to regain compliance with the listing rule,” Charles & Colvard Chief Financial Officer Clint J. Pete said in a statement to National Jeweler.
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The North Carolina-based company announced Oct. 18 that it received a letter from the stock exchange stating it was not in compliance with the Nasdaq rule that requires the timely filing of all required periodic reports.
As of press time, the company has not filed its annual report via a Form 10-K for the fiscal year ending June 30, which was due to the exchange by Sept. 30.
Charles & Colvard filed a notification on Oct. 1 stating that it needed more time to complete the report due in part to the “pending outcome of confidential arbitration against the company.”
The company shared details of the dispute in its Q3 quarterly report, filed with the Securities and Exchange Commission on May 6.
Wolfspeed, a developer and manufacturer of wide-bandgap semiconductors (which allow devices to operate at much higher temperatures than conventional semiconductors), accused Charles & Colvard of breach of contract, claiming damages plus interest, cost, and attorney’s fees.
Charles & Colvard said it disputes the accusations.
While the Nasdaq notice doesn’t have an immediate effect on the company’s listing or trading of its common stock, it will have to regain compliance within 60 calendar days (by Dec. 17) or face delisting.
Alternatively, it can submit a plan to regain compliance to the Nasdaq by that day.
If the plan is accepted by the exchange, Charles & Colvard may be granted up to 180 calendar days, or until April 14, to regain compliance.
If the exchange does not accept the plan, the company can appeal the decision to a Nasdaq Hearings Panel.
“As stated in the company’s most recent press release, the company is working diligently to complete its Form 10-K and plans to file its Form 10-K as promptly as [is] practicable to regain compliance with the listing rule,” Charles & Colvard Chief Financial Officer Clint J. Pete said in a statement to National Jeweler.
In its notification of late filing form, Charles & Colvard said it expects to report net sales were down by 25 percent year-over-year to $22.5 million for the fiscal year ending June 30.
The company said it expects to report a net loss that is “a significant change” compared with the net loss of $19.6 million reported last year.
It attributed the anticipated change in net loss to no income tax expense this year versus $5.9 million last year and the impact of a $5.9 million inventory write-down last year due to “pricing pressures and constrained consumer demand" that it will not have this fiscal year.
Charles & Colvard is best known for its moissanite jewelry but branched out into lab-grown diamonds in 2020, and lab-grown diamond prices have fallen precipitously since then.
The company previously faced the risk of being delisted due to a low stock price.
On June 12, 2023, Nasdaq sent the company a letter alerting it to noncompliance with a listing rule because its share price had not met the minimum bid price requirement of $1.
It was given 180 days to regain compliance as well as an additional 180 days after that, bringing it to June 2024.
To boost its stock price, Charles & Colvard announced in May that it would do a 1:10 reverse stock split.
In a reverse stock split, the number of shares a person owns is reduced while the price of each share is increased in a comparable way.
In a 1:10 reverse stock split, someone who owned $1,000 shares trading at $5 would then own 100 shares at $50 each after the split.
Charles & Colvard announced it had regained compliance in June.
Editor's Note: This story was edited post-publication to correct the reason for a change in net loss this fiscal year.
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