Charles & Colvard Enters Into $2 Million Note Agreement

By Rob Bates | June 30, 2025

On June 24, moissanite and lab-grown diamond company Charles & Colvard entered into a $2 million convertible secured note purchase agreement with Ethara Capital, according to a filing with the Securities and Exchange Commission.

The note, which is secured by Charles & Colvard’s collateral and accrues 5% annual interest, is due to be paid back three months after it is issued, though Ethara could extend that for three periods of one year each.

At its discretion—as long as it obtains shareholder approval—Ethara has the right to convert any portion of the loan into common shares. It also has the right to appoint two directors to board seats, per the agreement.

Charles & Colvard will receive the note in two tranches: an initial closing in the amount of $500,000, to be issued on or before July 8, and a subsequent $1.5 million, which will be given no later than July 23.

As part of the deal, Charles & Colvard CEO Don O’Connell and chief financial officer Clint Pete agreed to waive all severance benefits to which they would otherwise be entitled under their respective employment agreements.

Industry analyst Paul Zimnisky said the note seems like a “decent deal for both sides.

“It’s a convertible note, which means if the company recovers, [the lender] can exchange the debt for a substantial equity position,” he said. “On the other hand, if the company becomes insolvent, they will be entitled to certain assets of the company.”

In April, Charles & Colvard included a “going concern” warning in its annual report, but said it believed its access to the capital markets would help it gain the neccessary liquidity.

(Photo courtesy of Charles & Colvard)