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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
June 24, 2025
Charles &
Colvard, Ltd.
(Exact name of registrant as specified in
its charter)
| North Carolina |
000-23329 |
56-1928817 |
|
(State or other jurisdiction of
incorporation) |
(Commission File
Number) |
(I.R.S. Employer
Identification No.) |
| 170 Southport Drive |
|
| Morrisville, North Carolina |
27560 |
| (Address of principal executive offices) |
(Zip Code) |
(919) 468-0399
(Registrant’s telephone number, including
area code)
N/A
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K filing
is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| |
|
| ¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| |
|
| ¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| |
|
| ¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of
the Act: None.
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this
chapter).
Emerging
growth company ¨
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ¨
Item 1.01 Entry into a Material Definitive Agreement.
Convertible Secured Note Purchase Agreement
On June 24, 2025, Charles & Colvard, Ltd. (the
“Company”) entered into a Convertible Secured Note Purchase Agreement (the “Note Purchase Agreement”) with Ethara
Capital LLC (the “Holder”), a Delaware limited liability company. In connection with the Note Purchase Agreement, the Company
agreed to issue a convertible secured note (the “Note”) to the Holder for an aggregate total purchase price of $2.0 million,
to be issued in two tranches: (i) an initial closing in the amount of $500,000 (the “Original Principal Amount”) on
or before July 8, 2025 (the “First Closing”), and (ii) a subsequent and final closing of $1.5 million (the “Additional
Principal Amount”) on such date as the Company and the Holder thereafter agree, but no later than July 23, 2025 (the “Second
Closing,” and together with the First Closing, the “Closings”).
The principal amount on which interest will accrue is equal to the
Original Principal Amount as such amount may be (i) increased by payment of PIK Interest (as defined below), (ii) increased
by the Additional Principal Amount, and (iii) reduced pursuant to any conversion or redemption effected in accordance with the terms
of the Note (such balance from time to time being the “Accreted Principal Amount”). Interest will accrue on the Accreted Principal
Amount at an annual rate equal to 5%, payable monthly at the Holder’s discretion in either (i) cash or (ii) an increase
in the Accreted Principal Amount by the amount of interest payable (the “PIK Interest”). Subject to obtaining Company shareholder
approval first, the Holder may, in its sole discretion, convert all or any portion of the Accreted Principal Amount (plus accrued and
unpaid interest) into shares of the Company’s common stock (the “Conversion Shares”) at any time after the issuance
of the Note pursuant to its terms. The Accreted Principal Amount, together with any accrued and unpaid interest, shall be due and payable
three months following the date the Note is issued (the “Maturity Date”). The Holder may irrevocably elect to extend the Maturity
Date for three periods of up to one year each, provided that the Maturity Date cannot be extended later than thirty-nine months following
the date the Note is issued. The Second Closing is conditioned on the absence of both an Event of Default and Fundamental Change (each
as defined in the Note). The Note is secured by the Company’s Collateral, as defined in the Security Agreement discussed below,
but subordinated to the Company’s debt to Wolfspeed, Inc.
The Company agreed to enter into a registration rights agreement relating
to the registration for resale of the Conversion Shares within 30 days after the date of the Second Closing. The Note also contains Company
restrictive affirmative and negative covenants regarding the operation of its business.
The issuance of the Note was made in reliance upon the exemption provided
by Section (4)(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), for the offer and sale of
securities not involving a public offering, and Regulation D promulgated under the Securities Act.
Security Agreement
On the date of the First Closing, the Company and the Holder will enter
into a security agreement (the “Security Agreement”), granting in favor of the Holder a security interest in all tangible
and intangible personal property of the Company. On the date of the Second Closing, the Security Agreement will reflect the Additional
Principal Amount.
Director Appointment Rights
In connection with the Note Purchase Agreement, the Holder received
the right to appoint two directors to the Company’s board of directors (the “Board”) prior to the date of the First
Closing. Upon the Second Closing, the Holder has the right to appoint two observers to the Board.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant.
The information included in Item 1.01 of this Current Report on Form 8-K
is incorporated by reference into this Item 2.03 of this Current Report on Form 8-K.
Item 3.02 Unregistered Sales of Equity Securities.
The information included in Item 1.01 of this Current Report on Form 8-K
is incorporated by reference into this Item 3.02 of this Current Report on Form 8-K.
Item 5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
As a condition to the Company’s entry into the Note Purchase
Agreement, each of Don O’Connell, the Company’s Chief Executive Officer, and Clint J. Pete, the Company’s Chief Financial
Officer, agreed to waive all severance benefits to which they would otherwise be entitled under their respective employment agreements.
Prior to the date of the Closings, Mr. Don O’Connell and Mr. Pete will execute waivers regarding their rights to severance
benefits.
The foregoing descriptions of the Note Purchase Agreement, and the
forms of Note and Security Agreement, do not purport to be complete and are qualified in their entirety by the full text of the Note and
the Subsidiary Guaranty, copies of which are filed as exhibits to this Current Report on Form 8-K and incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.
|
Exhibit
Number |
|
Description |
| |
|
|
| 10.1 |
|
Convertible
Secured Note Purchase Agreement, dated June 24, 2025, by and between the Company and the Holder. |
| |
|
|
| 10.2 |
|
Form of
Secured Convertible Note. |
| |
|
|
| 10.3 |
|
Form of
Security Agreement. |
| |
|
|
| 104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| |
Charles & Colvard, Ltd. |
| |
|
|
| June 27, 2025 |
By |
/s/ Clint J. Pete |
| |
|
Clint J. Pete |
| |
|
Chief Financial Officer |
