ADAMAS ONE CORP. This document contains certain "forward-looking statements". All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements of the plans, strategies, goals and objectives of management for future operations; any statements concerning proposed new products and services or developments thereof; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.
Forward looking statements may include the words "may," "could," "estimate," "intend," "continue," "believe," "expect," or "anticipate," or other similar words, or the negative thereof. These forward-looking statements present our estimates and assumptions only as of the date of this report. Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made. We do not undertake to update forward-looking statements to reflect the impact of circumstances or events that arise after the dates they are made. You should, however, consult further disclosures and risk factors we included in the section titled Risk Factors contained herein.
Overview
We are a high-tech diamond company that uses our proprietary technology to produce high-quality, single crystal diamonds and diamond materials through a CVD process, which we refer to as our Diamond Technology. Lab-grown diamonds have the exact physical, chemical, and optical properties of the best mined diamonds. Lab-grown diamonds are composed of a pure carbon lattice, just like mined diamonds, and are not considered synthetic or simulant diamonds like cubic zirconia and moissanite. Simulants are other chemical compounds that resemble diamonds but do not possess the same hardness, thermal characteristics, band gap energy, and light reflectivity as diamond, whether mined or lab-grown.
14
We use our Diamond Technology to produce finished diamonds that we intend to sell wholesale and retail for jewelry and rough unfinished diamond materials that we intend to sell wholesale and retail for industrial uses. We are in the initial phases of commercializing diamonds and diamond materials, and our primary mission is the development of a profitable and sustainable commercial production model for the manufacture and sale of diamonds and diamond materials, which are suitable for known, emerging, and anticipated industrial, technology, and consumer applications.
Since acquiring the Scio assets over three years ago, we have focused our efforts on research and development of improvements to the fundamental CVD process. Like most high-tech manufacturers, the philosophy of continuous improvement is at our core. Our development efforts have focused on commercialization of the diamonds and diamond materials we produce, improvements in our white diamond process, improvements in our diamond seed processes, automation in our machine operation, expansion of our capacity with our existing machines, and improvements in our laser cutting procedures. The guiding principle of these efforts is to provide the highest quality diamonds and diamond materials in a consistent and high-yield manner.
We currently have limited available commercial products and have to date sold minimal diamonds or diamond materials to consumers or commercial buyers. Our current operations, until just recently, have been dedicated to the research and development of our Diamond Technology and the exploration of markets that we may exploit in the future. While we are unable to predict the timing of our entry into any market in the future, we will strive to produce on a large scale high-quality finished and raw diamond materials and to pursue related commercial opportunities.
Results of Operations
The following table presents summarized financial information taken from our
statements of operations for the three months ended
For the Three Months Ended
December 31,
(unaudited)
2022 2021
Net Sales $ 726,125 $ -
Cost of Goods Sold 134,846 -
Gross Margin 591,279 -
Total operating expenses 7,325,146 999,524
Loss from operations (6,733,867 ) (999,524 )
Other expenses
Interest expense (2,244,046 ) (104,637 )
Loss before income taxes $ (8,977,913 ) $ (1,104,161 )
15
Components of Results of Operations
Net Sales
During the three months ended
We anticipate deriving continuing future revenue from the following business
lines:
? Direct Sales of Diamonds: The sale of diamond gemstones direct to the
consumer through our website and the sale of industrial grade diamonds
direct to industrial manufacturing companies.
? Wholesale of Diamonds: The sale of diamonds to wholesalers,
distributors, and jewelers.
Cost of Goods Sold
Cost of goods sold includes direct costs (parts, material, and labor), indirect manufacturing costs (manufacturing overhead, depreciation, plant operating lease expense, and rent), shipping, lab services, and logistics costs.
Costs of goods sold for the three months ended
Gross margin for the three months ended
There were no costs of goods sold nor any related gross margin for the three
months ended
Research and Development Expense
We conduct research and development activities to enhance existing processes and
products and develop new processes and products at our facilities in
We expect our research and development expenses to increase for the foreseeable future as we continue to invest in research and development activities to achieve our operational and commercial goals.
Operating Expense
Operating expense includes selling, general and administrative expense, employee salaries and related expense and depreciation and amortization expense. Selling, general, and administrative expenses consist primarily of legal and professional, consulting services and all non-personnel-related expenses or depreciation and amortization. Personnel-related expenses consist of salaries, payroll taxes, benefits, and stock-based compensation. Depreciation and amortization expenses are related to the Company's fixed assets and intangible assets.
Operating expense for the three months ended
We expect our operating expense to increase for the foreseeable future as we scale headcount and expenses with the growth of our business, build out our manufacturing facilities, refine our production processes, drive for productivity improvements, acquire new and retain existing customers, and incur additional costs as a result of being a public company.
Other Expenses Interest Expense
Interest expense consists of interest paid and accrued on our notes payable, promissory notes and the amortization of debt issue costs.
Interest expense was
16
Net Loss
Primarily as a result of the above factors we had a net loss of
Liquidity and Capital Resources
As of
Changes in cash flows are summarized as follows:
Operating Activities
For the three months ended
For the three months ended
Investing Activities
During the three months ended
During the three months ended
Financing Activities
During the three months ended
During the three months ended
These conditions raise substantial doubt about our ability to continue as a
going concern for the ensuing year. Our independent auditors have added an
explanatory paragraph in their audit opinion in regard to this uncertainty and
can be found in the Company's Annual Form 10K filing with the
Satisfaction of our Cash Obligations for the Next 12 Months
Our recent IPO which closed on
Since inception, we have financed cash flow requirements through debt financing and the private issuance of common stock for cash and services along with advances from our CEO as well as our CEO and CFO deferring significant compensation and benefits that were earned under their respective employment contracts. If we continue to experience cash flow deficiencies, we would be required to obtain additional financing to fund operations through private common stock offerings and debt borrowings to the extent necessary to provide working capital. However, there is no assurance we would be able to obtain such financing on commercially reasonable terms, if at all.
17
We intend to implement and successfully execute our business and marketing strategy, continue to develop, and upgrade technology and products, respond to competitive developments, and attract, retain, and motivate qualified personnel. There can be no assurance that we will be successful in addressing such risks, and the failure to do so can have a material adverse effect on our business prospects, financial condition, and results of operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Critical Accounting Policies
The preparation of financial statements in conformity with GAAP requires us to
make estimates and assumptions that affected the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimates.
Significant estimates made in preparing the condensed consolidated financial
statements include the valuation of allowances for doubtful accounts, valuation
of deferred tax assets, inventories, useful lives of assets, goodwill,
intangible assets, and stock-based compensation. A summary of our critical
accounting policies is included in our Annual Report on Form 10-K for the year
ended
© Edgar Online, source
