CHARLES & COLVARD REPORTS FOURTH QUARTER AND FISCAL YEAR 2009 FINANCIAL RESULTS

• 10% increase in fourth quarter net sales over third quarter 2009
• $7.4 million cash and no debt
• Positive cash flow from operations: $563,000 in fourth quarter, $1.9 million in 2009

FOR IMMEDIATE RELEASE

MORRISVILLE, N.C., February 25, 2010 - Charles & Colvard, Ltd. (NASDAQ: CTHR), the sole manufacturer of moissanite jewels, The Most Brilliant Jewel in the WorldTM, announced today its financial results for the fourth quarter and fiscal year ended December 31, 2009.

Net sales for the quarter were $2.4 million, down 33% from $3.5 million in the fourth quarter of 2008. Net sales for fiscal year 2009 were $8.3 million, down 44% from $14.7 million in the same period of 2008. Sales continued to be 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. However, net sales for the quarter were up 10% over net sales of $2.1 million in the third quarter of 2009.

The net loss for the quarter was $440,000, or $0.02 per diluted share, as compared to a net loss of $1.3 million, or $0.07 per diluted share, in the fourth quarter of 2008. The fourth quarter 2009 results included a reserve on a note receivable of $170,000 and an impairment loss on long-lived assets of $146,000, both of which are expected to be non-recurring. The fourth quarter 2008 results included a reversal of a bad debt expense of $1.9 million related to a receivable settlement with a wholesale customer. The net loss for fiscal year 2009 was $3.4 million, or $0.18 per diluted share, representing a $2.8 million, or 45%, improvement over the net loss of $6.2 million, or $0.34 per diluted share, in the same period of 2008. Offsetting sales declines during fiscal year 2009 was a 46% reduction in costs and expenses when compared with fiscal year 2008, due to lower sales and cost control measures, including a reduction in headcount and decreased expenses for sales and marketing programs.

Randy N. McCullough, Chief Executive Officer of Charles & Colvard, commented, "With our new management team in place, we experienced a renewed interest in moissanite and confidence in the Company with our existing customer base, who responded with increased orders during the quarter. This, coupled with our cost savings initiatives, resulted in the lowest quarterly net loss this year along with positive cash flow from operations. This momentum, along with a strong cash position, will carry us into 2010 as our management team works closely with select major jewelry manufacturers to establish new exclusive supply relationships. These exclusive sales and distribution rights target appropriate retailers, affording Charles & Colvard new opportunities to establish our jewel in the marketplace as we continue repositioning for the future."

Financial Position

The Company had $7.4 million in cash at the end of the quarter and generated $1.9 million of cash from operations during fiscal year 2009, $563,000 of which was generated in the fourth quarter. A $1.5 million decrease in accounts receivable, receipt of a $2.1 million income tax receivable during the second quarter, and a $3.0 million decrease in inventory were the primary drivers for positive cash flow in fiscal year 2009, which more than offset the net loss of $3.4 million and a $1.4 million decrease in accounts payable.

Total inventory, including long-term and consignment inventory, was $41.4 million at the end of fiscal year 2009, down from $43.0 million and $42.2 million at the end of fiscal year 2008 and the end of third quarter 2009, respectively. No purchases of raw material were made in fiscal year 2009. Trade accounts receivable were $1.0 million at the end of fiscal year 2009, down from $3.8 million at the end of fiscal year 2008 and up slightly from $918,000 at the end of third quarter 2009. Cash collections and a settlement agreement with a former customer positively impacted accounts receivable during fiscal year 2009.

Fourth Quarter and Fiscal Year 2009 Financial Results Webcast

Charles and Colvard will host a webcast to present fourth quarter and fiscal year 2009 results on Thursday, February 25, 2010 at 11:00 a.m. Eastern Time. The webcast can be accessed live and will be available for replay at www.charlesandcolvard.com.

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 Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E 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. as the current supplier of the raw material, ability to develop a material second source of supply, dependence on a limited number of customers, risks of conducting operations in foreign countries, dependence on third parties for the sales and marketing of our products to end consumers, and the impact of significant changes in our management on our ability to execute our business strategy in the near-term, in addition to the other risks and uncertainties described in more detail in our filings with the Securities and Exchange Commission, or the SEC, including our Annual Report on Form 10-K for the fiscal year ended December 31, 2008 and subsequent reports filed with the SEC. Forward-looking statements speak only as of the date they are made. We undertake no obligation to update or revise such statements to reflect new circumstances or unanticipated events as they occur except as required by the federal securities laws, and you are urged to review and consider disclosures that we make in the reports that we file with the SEC that discuss other factors relevant to our business.

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