Material Agreement, Management Change/Compensation (Form 8-K)

Item 1.01 Entry into a Material Definitive Agreement.

Second and Final Closing of Convertible Secured Note Purchase Agreement

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, issued in two tranches: (i) an initial closing in the amount of $500,000 on July 3, 2025, and (ii) a subsequent and final closing of $1.5 million on July 21, 2025.

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

Director Resignation, Board Expansion and Appointment of New Chairman

On July 21, 2024, the Company's board of directors (the "Board") accepted the resignation of Ollin Sykes from the Board. Mr. Sykes's resignation was not due to any disagreement or matter relating to the Company's operations, financials, policies, or practices.

As previously disclosed on June 27, 2025, pursuant to the Note Purchase Agreement, the Company has agreed to (i) increase the size of Board from four members to five members (the "Board Expansion"), (ii) appoint Ruten Bhanderi and James Tu to fill the vacancies created by the Board Expansion and Mr. Sykes's resignation, and (iii) appoint Mr. Tu Chairman of the Board. Messrs. Bhanderi and Tu will each serve as a director until the Company's 2026 Annual Meeting of Stockholders or until his successor is duly elected and qualified. Messrs. Bhanderi and Tu are the two designees appointed by Ethara Capital LLC per its director appointment rights under the Note Purchase Agreement, and might be considered affiliates of Ethara.

Mr. Bhanderi, 22, is the Vice Chairman of Bhanderi Lab Grown Diamonds Inc., a leading Chemical Vapor Deposition (CVD) lab grown diamond manufacturer headquartered in New York City. Upon his appointment, Mr. Bhanderi will serve on the Company's Nominating and Governance Committee and Compensation Committee.

The Company believes Mr. Bhanderi's experience as an executive in the international lab grown diamond business qualifies him to serve on the Board and to provide management and operational advice to the Board. Mr. Bhanderi has agreed to delay and accrue his cash compensation payment for 12 months as the Company's executive director to which he is entitled in accordance with the Company's standard compensation policies and practices for non-employee directors of the Board, which is described in Item 8.01 below.

There are no related party transactions between Mr. Bhanderi and the Company (as defined in Item 404(a) of Regulation S-K), other than under the Note Purchase Agreement. The Board has determined that Mr. Bhanderi does not qualify as an independent director for purposes of Rule 5605(a)(2) of Rule 10A-3 under the Securities Exchange Act of 1934, as amended.

Mr. Tu, 56, a Chartered Financial Analyst (CFA), is the Founder and Managing Partner of Fusion Park LLC, an investment and strategic advisory company based in New York. Mr. Tu has been a professional investment manager, advisor, chief executive officer and board director of numerous public and private technology companies, including, most recently, Bhanderi Lab Grown Diamonds, Inc., Growlity, Inc., Infintium Fuel Cell Technologies, and Canyon Magnet Energy. From April 2019 to February 2022, Mr. Tu served as Chairman and Chief Executive Officer of Energy Focus, Inc. (Nasdaq: EFOI). Upon his appointment, Mr. Tu will serve on the Company's Audit Committee, Nominating and Governance Committee and Compensation Committee.

The Company believes Mr. Tu's experience as a financial, investment and business expert qualifies him to serve on the Board and to provide management and operational advice to the Board.