Charles & Colvard (NASDAQ: CTHR) hit by $2.0M note dispute and post-election board changes

Rhea-AI Filing Summary

Charles & Colvard, Ltd. reports a dispute over a $2.0 million convertible secured note and recent board and governance developments. The company received a notice from Ethara Capital LLC claiming an event of default after the company did not pay the accreted principal and accrued interest at the note’s October 3, 2025 maturity. The holder asserts that, following this event, the note’s interest rate rose from 5% to 9% annually and that it may accelerate all obligations and pursue remedies against collateral.

The company is contesting the validity of the alleged default, which is part of ongoing litigation in the North Carolina Business Court, and is in discussions with the holder. Separately, director Neal Goldman resigned from the board, with the company stating his resignation was not due to disagreements on operations or financial matters. A court-ordered certification of the October 13, 2025 annual meeting results, excluding certain converted shares, led to the election of four directors and a tie between two candidates, leaving one board seat vacant to be filled later.

Positive

• None.

Negative

• Contested event of default on $2.0M secured note after non-payment at maturity, with the holder asserting rights to accelerate obligations and pursue collateral.
• Interest rate step-up to 9% is claimed by the note holder following the alleged default, potentially raising CTHR’s financing costs until the dispute is resolved.
• Ongoing litigation and governance complexity, including Business Court proceedings, a court-ordered vote certification, and a board vacancy created by a tie vote.

Insights

Credit and governance analyst

CTHR faces a contested $2.0M note default, higher interest, litigation, and a board vacancy.

The company discloses that Ethara Capital LLC has issued a notice asserting an event of default on a $2.0 million convertible secured note after non-payment at the October 3, 2025 maturity. The holder claims this triggered a contractual step-up in the interest rate from 5% to 9% per year and the right to demand immediate repayment and act against collateral under a security agreement. For a smaller issuer, this combination of potential acceleration and a higher interest rate could meaningfully affect liquidity and financing flexibility.

Management states it is questioning the validity of the alleged default, which is already before the North Carolina Business Court, and has opened discussions with the holder. Outcomes could range from enforcement of the note on the holder’s terms to amendments or waivers, but the text does not indicate any resolution yet. Until the dispute is clarified, there is uncertainty around the timing and terms of repayment and the status of the pledged collateral.

On the governance side, Neal Goldman resigned from the board, with the company saying his departure was not related to disagreements over operations or financial reporting. A preliminary injunction required certification of annual meeting voting results, excluding shares tied to an earlier note conversion, resulting in four directors being elected and a tie for one seat. This tie leaves a board vacancy, and the timing and choice of the eventual appointee may influence board dynamics once the position is filled.

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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): November 25, 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 2.04 Triggering Events That Accelerate or Increase a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement.

As previously disclosed, 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 issued a convertible secured note to the Holder for an aggregate total purchase price of $2.0 million, dated July 3, 2025 and due and payable on October 3, 2025. On November 25, 2025, the Company received a notice of default from the Holder asserting that an event of default by the Company had occurred due to the Company’s failure to pay the accreted principal amount and the accrued and unpaid interest on the maturity date of the Note (the “Event of Default”).

As a result of the Event of Default, the Holder contends that the interest rate of the Note increased from an annual rate equal to 5% to 9%, effective October 3, 2025. In addition, the Holder contends that it may, among other remedies, demand immediate full payment of all obligations owing under the Note, and the right to repossess and take other action with respect to any or all collateral, including the liquidation thereof pursuant to the security interest granted under the related Security Agreement. The Company has taken the matter under advisement with legal counsel.

The Company is considering the validity of the Event of Default, which is currently the subject of litigation in the North Carolina Business Court, and has opened discussions with the Holder of the Note. There can be no assurance that the Holder will agree to amend the Note or waive the Event of Default, or that the Note will otherwise be determined to be invalid or unenforceable.

Item 5.01 Changes in Control of Registrant.

The applicable information set forth in Item 5.07 of this Current Report on Form 8-K is incorporated by reference in this Item 5.01.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(b)           On November 26, 2025, the Company’s board of directors (the “Board”) accepted the resignation of Neal Goldman from the Board and purported withdrawal from consideration for re-election as a member of the Board, effective immediately. Mr. Goldman’s resignation was not due to any disagreement or matter relating to the Company’s operations, financials, policies, or practices.

Item 5.07 Submission of Matters to a Vote of Security Holders.

As previously disclosed, the Company held its Annual Meeting of Shareholders on October 13, 2025 (the “Annual Meeting”). The shareholders considered one proposal, to elect five nominees to the Board, as described in more detail in the Notice of Annual Meeting of Shareholders filed with the Securities and Exchange Commission on September 12, 2025. Due to the pending litigation filed against the Company and the members of the Board by Company shareholder Riverstyx Fund L.P. (“Riverstyx”) related to the Annual Meeting, the Company had been unable to present the results following the Annual Meeting.

On November 18, 2025, the North Carolina Business Court (the “Court”) issued a preliminary injunction ordering the certification of the results of the Annual Meeting, excluding the shares issued pursuant to the previously disclosed Note Conversion Agreement dated August 29, 2025, between the Company and Ethara Capital LLC. The results of the election were certified on November 26, 2025. The votes were cast as follows:

		For				Withheld
Ruten Bhanderi			520,135				1,096,007
Anne M. Butler			529,138				1,087,004
Benjamin Franklin			1,087,005				529,137
Neal I. Goldman			529,671				1,086,471
Michael R. Levin			1,086,471				529,671
Don O’Connell			529,671				1,086,471
Duc Pham			1,087,005				529,137
Lloyd M. Sems			1,086,471				529,671
James Tu			529,137				1,087,005

Based on the votes cast, Benjamin Franklin, Michael R. Levin, Duc Pham and Lloyd M. Sems were elected to the Board. The tie between Don O’Connell and Neal I. Goldman for the fifth seat on the Board created a vacancy on the Board, which the Board will fill at a future date.

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.
December 5, 2025	By	/s/ Clint J. Pete
		Clint J. Pete
		Chief Financial Officer

FAQ

What debt issue did Charles & Colvard (CTHR) disclose in this 8-K?

Charles & Colvard disclosed that Ethara Capital LLC sent a notice asserting an event of default on a $2.0 million convertible secured note after the company did not pay the accreted principal and accrued interest on the October 3, 2025 maturity date.

How did the interest rate on the Charles & Colvard note allegedly change after default?

The holder contends that, due to the alleged event of default, the note’s annual interest rate increased from 5% to 9%, effective October 3, 2025.

What remedies does the note holder claim in the Charles & Colvard (CTHR) dispute?

Ethara Capital LLC contends it may demand immediate full payment of all obligations under the note and may repossess or liquidate collateral pursuant to the security interest granted under the related Security Agreement.

How is Charles & Colvard responding to the alleged event of default?

The company has consulted legal counsel, is considering the validity of the alleged event of default, notes that the matter is before the North Carolina Business Court, and has opened discussions with the note holder.

What board change did Charles & Colvard (CTHR) announce?

On November 26, 2025, the board accepted the resignation of director Neal Goldman, effective immediately, and stated that his resignation was not due to any disagreement over the company’s operations, financials, policies, or practices.

What were the results of Charles & Colvard’s 2025 annual shareholder meeting?

After a preliminary injunction ordered certification of the October 13, 2025 annual meeting results excluding certain converted shares, Benjamin Franklin, Michael R. Levin, Duc Pham, and Lloyd M. Sems were elected, while a tie between Don O’Connell and Neal I. Goldman left one board seat vacant.

Why is there a board vacancy at Charles & Colvard after the 2025 annual meeting?

The election for the fifth board seat ended in a tie between Don O’Connell and Neal I. Goldman, creating a vacancy that the board plans to fill at a future date.