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 Companys operating and reportable segments. The Company manages its business through two operating and reportable segments based on its distribution channels to sell its product lines  finished jewelry and loose jewels: its Online Channels segment, which consists of e-commerce outlets including charlesandcolvard.com, third-party online marketplaces, drop-ship, and other pure-play, exclusively e-commerce outlets; and its Traditional segment, which consists of wholesale and retail customers. The accounting policies of the Online Channels segment and Traditional segment 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 Companys product line cost of goods sold is defined as product cost of goods sold, excluding non-capitalized expenses from the Companys 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-downs. The Company allocates certain general and administrative expenses between its Online Channels segment and its Traditional segment based on net sales and number of employees to arrive at segment operating income (loss). Unallocated expenses remain in its Traditional segment. Summary financial information by reportable segment for the periods presented is as follows: Year Ended June 30, 2019 Online Channels Traditional Total Net sales Finished jewelry $ 12,641,687 $ 2,815,656 $ 15,457,343 Loose jewels 3,697,069 13,089,697 16,786,766 Total $ 16,338,756 $ 15,905,353 $ 32,244,109 Product line cost of goods sold Finished jewelry $ 5,220,551 $ 1,638,561 $ 6,859,112 Loose jewels 1,583,404 6,659,426 8,242,830 Total $ 6,803,955 $ 8,297,987 $ 15,101,942 Product line gross profit Finished jewelry $ 7,421,136 $ 1,177,095 $ 8,598,231 Loose jewels 2,113,665 6,430,271 8,543,936 Total $ 9,534,801 $ 7,607,366 $ 17,142,167 Operating income $ 1,643,552 $ 622,005 $ 2,265,557 Depreciation and amortization $ 172,819 $ 308,500 $ 481,319 Capital expenditures $ 69,975 $ 291,465 $ 361,440 Six Months Ended June 30, 2018 Online Channels Traditional Total Net sales Finished jewelry $ 4,490,984 $ 1,672,066 $ 6,163,050 Loose jewels 1,878,388 5,121,660 6,999,998 Total $ 6,369,322 $ 6,793,726 $ 13,163,048 Product line cost of goods sold Finished jewelry $ 1,972,862 $ 1,462,371 $ 3,435,233 Loose jewels 951,664 2,688,560 3,640,224 Total $ 2,924,526 $ 4,150,931 $ 7,075,457 Product line gross profit Finished jewelry $ 2,518,122 $ 209,695 $ 2,727,817 Loose jewels 926,674 2,433,100 3,359,774 Total $ 3,444,796 $ 2,642,795 $ 6,087,591 Operating loss $ (243,832 ) $ (1,349,756 ) $ (1,593,588 ) Depreciation and amortization $ 59,409 $ 170,584 $ 229,993 Capital expenditures $ 29,689 $ 100,960 $ 130,649 Year Ended December 31, 2017 Online Channels Traditional Total Net sales Finished jewelry $ 7,936,773 $ 2,515,443 $ 10,452,216 Loose jewels 3,149,972 13,430,776 16,580,748 Total $ 11,086,745 $ 15,946,219 $ 27,032,964 Product line cost of goods sold Finished jewelry $ 3,615,815 $ 1,610,845 $ 5,226,660 Loose jewels 1,526,358 6,998,485 8,524,843 Total $ 5,142,173 $ 8,609,330 $ 13,751,503 Product line gross profit Finished jewelry $ 4,320,958 $ 904,598 $ 5,225,556 Loose jewels 1,623,614 6,432,291 8,055,905 Total $ 5,944,572 $ 7,336,889 $ 13,281,461 Operating income (loss) $ 228,253 $ (836,797 ) $ (608,544 ) Depreciation and amortization $ 121,710 $ 300,308 $ 422,018 Capital expenditures $ 147,446 $ 123,944 $ 271,390 The Company does not allocate any assets to the reportable segments, and therefore, no asset information is reported to the chief operating decision-maker or disclosed in the financial information for each segment. The reconciliations of the Companys product line cost of goods sold to cost of goods sold, as reported in the consolidated financial statements for the periods presented, are as follows: Year Ended June 30, 2019 Six Months Ended June 30, 2018 Year Ended December 31, 2017 Product line cost of goods sold $ 15,101,942 $ 7,075,457 $ 13,751,503 Non-capitalized manufacturing and production control expenses 1,442,446 805,400 1,352,311 Freight out 578,772 272,790 417,074 Inventory valuation allowances 393,000 - 598,000 Other inventory adjustments (163,993 ) 144,639 (648,271 ) Cost of goods sold $ 17,352,167 $ 8,298,286 $ 15,470,617 The Company recognizes sales by geographic area based on the country in which the customer is based. Sales to international end consumers made through our transactional website, charlesandcolvard.com, are included in international sales for financial reporting purposes. During periods prior to the quarterly period ended December 31, 2018, sales to international end consumers made through charlesandcolvard.com were included in U.S. sales because products were shipped and invoiced to a U.S.-based intermediary party that assumed all international shipping and credit risks. A portion of the Companys Traditional segment sales made to international wholesale distributors represents products sold internationally that may be re-imported to U.S. retailers. All intangible assets and property and equipment as of June 30, 2019, June 30, 2018 and December 31, 2017 are held and located in the United States. The following presents net sales data by geographic area for the periods presented: Year Ended June 30, 2019 Six Months Ended June 30, 2018 Year Ended December 31, 2017 Net sales: United States $ 27,979,835 $ 12,121,003 $ 25,176,220 International 4,264,274 1,042,045 1,856,744 Total $ 32,244,109 $ 13,163,048 $ 27,032,964