Gem-maker Charles & Colvard saw sales and net income plummet in the third quarter as retailers found it increasingly difficult to sell high levels of the Morrisville company's products.

Charles & Colvard also forecast 2007 revenue below analysts' expectations.

The company said net income in the quarter was $246,208, or 1 cent per diluted share. That is an 89 percent drop from a year ago, when income was $2.23 million, or 12 cents per share.

Revenue declined 46 percent to $6.6 million from $12.1 million.

Analysts polled by Thomson Financial had expected, on average, earnings of 7 cents per share on revenue of $10.4 million.

Charles & Colvard (Nasdaq: CTHR) manufactures and sells moissanite, a man-made product similar to a diamond.

The company has hoped to make inroads with professional women, whom Charles & Colvard thought would buy the product for themselves. But moissanite inventory levels remain high at retailers, even as the company continues to buy raw materials from suppliers with whom it has minimum purchase commitments.

In response, Charles & Colvard said in a statement, it's cutting inventory purchase commitments with suppliers.

The company said it expects revenue for 2007 to fall between $30 million and $33 million. That is below analysts' latest consensus of $36 million - a figure that's been revised downward all year.

Charles & Colvard issued original 2007 revenue guidance of $49 million to $51 million in February.

Shares of the company were down 15 percent in after-hours trading to $3.25 after closing Tuesday at $3.82. They have lost 52 percent of their value this year, excluding Tuesday's after-hours dip.