Net sales for the quarter were $1.3 million, down 64% from $3.6 million in the second quarter of 2008. Net sales for the first six months of 2009 were $3.8 million, down 46% from $7.0 million for the same period of 2008. Sales were impacted by the economic recession, which has measurably affected the retail and jewelry industries, combined with reduced demand from major retailers who curbed purchases due to current levels of moissanite inventory.

Loss from operations for the quarter was $1.2 million, a $0.4 million, or 25%, improvement over the loss from operations of $1.6 million in the second quarter of 2008. Loss from operations for the first six months of 2009 was $2.4 million, a $0.3 million, or 11%, improvement over the loss from operations of $2.7 million for the same period of 2008. Offsetting sales declines was a reduction in operating expenses in the three and six months ended June 30, 2009 of $1.8 million and $2.5 million, respectively, when compared with the corresponding periods in 2008, due to cost control measures, including a reduction in headcount and decreased expenses for sales and marketing programs.

George R. Cattermole, Chairman of the Board and Interim Chief Executive Officer of Charles & Colvard, commented, "We have measurably reduced our cost structure and are much more focused on how we apply our sales and marketing spend. We believe we are in a solid financial position despite the sales decline we are experiencing, and to maintain this position, our current priority is to generate positive cash flow through cost-cutting initiatives and selling down our inventory. More importantly, we are working closely with our customers and advisors to position moissanite within the marketplace as a means of creating new and revived demand for our exceptional product."

CEO Search Update

Mr. Cattermole further commented on the recent senior management changes. "We are currently engaged in an active search for a new CEO with applicable industry experience to lead us in executing sales and marketing strategies that we can effectively implement in this environment and to define the best positioning for our product to capture a larger share of the jewelry market. The newest member of our Board of Directors, Dr. Charles D. Lein, who has more than 27 years of experience in the jewelry, wholesale, and retail industries, has led the search and has added significant industry knowledge to our efforts. We believe that, with the right leadership team, we can define a strategic roadmap that can improve our business significantly."

Financial Position

The Company had $7.0 million in cash at the end of the quarter and generated $1.6 million of cash from operations during the six months ended June 30, 2009. A $2.1 million decrease in accounts receivable, receipt of a $2.1 million income tax receivable, and a $1.3 million decrease in inventory were the primary drivers for positive cash flow, which more than offset the net loss of $2.5 million and a $1.2 million decrease in accounts payable.

Total inventory, including long-term and consignment inventory, was $43.0 million at the end of the quarter, flat from year-end 2008 but down slightly from the $43.3 million at the end of the first quarter of 2009. No purchases of raw material were made in the six months ended June 30, 2009. Trade accounts receivable were $0.4 million, down from $0.8 million and $3.8 million at the end of the first quarter of 2008 and year-end 2008, respectively. Cash collections and a settlement agreement with a former customer positively impacted accounts receivable.

NASDAQ Listing Status

In August 2008, the Company was notified by the Listing Qualifications Department of The NASDAQ Stock Market LLC ("NASDAQ") that its common stock is subject to potential delisting from the NASDAQ Global Select Market because, for the preceding 30 consecutive business days, the price of the Company's common stock had closed below the minimum $1.00 closing bid price requirement. In response to extraordinary market conditions, NASDAQ suspended enforcement of the minimum $1.00 closing bid requirement until July 31, 2009. As a result of the temporary suspension, the Company currently has until December 2, 2009 to regain compliance with the minimum $1.00 closing bid price requirement for continued listing on the NASDAQ Global Select Market.

Teleconference & Webcast

The Company has postponed its customary quarterly teleconference and webcast to review the financial and operating results for the period and to discuss its corporate strategy and outlook until the CEO position has been filled. At that time, the Company intends to provide an opportunity for formal introduction of the new CEO who can engage the audience in a question-and-answer session.

About Charles & Colvard, Ltd.

Charles& Colvard, Ltd. (NASDAQ: CTHR), based in the Research Triangle Park area of North Carolina, is the global sole source of lab-created moissanite, a unique, near-colorless jewel that is distinct from other gemstones and jewels based on its exceptional fire, brilliance, luster, durability, and rarity. Charles& Colvard Created Moissanite is currently used in fine jewelry sold primarily through domestic and international retailers. For more information, please access www.moissanite.com or www.charlesandcolvard.com.

Charles & Colvard and Charles & Colvard Created Moissanite are registered trademarks of Charles & Colvard, Ltd.

This press release contains forward-looking statements within the meaning of Section27A of the Securities Act of 1933, as amended, or the Securities Act, and Section21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Statements expressing expectations regarding our future and projections relating to products, sales, revenues, and earnings are typical of such statements and are made under the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements about our plans, objectives, representations, and contentions and are not historical facts and typically are identified by use of terms such as "may," "will," "should," "could," "expect," "plan," "anticipate," "believe," "estimate," "predict," "continue," and similar words, although some forward-looking statements are expressed differently.

All forward-looking statements are subject to the risks and uncertainties inherent in predicting the future. You should be aware that although the forward-looking statements included herein represent management's current judgment and expectations, our actual results may differ materially from those projected, stated, or implied in these forward-looking statements as a result of many factors including, but not limited to, the recent downturn in the worldwide economy and its ongoing impact on our business and the business of our customers and suppliers, any continued trends in the general economy that would adversely affect consumer spending, a further decline in our sales, dependence on consumer acceptance of our products, dependence on Cree, Inc.