Adamas One (JEWL) - 2024 Q4 - Annual Report

Cash and Cash Equivalents - Cash decreased from $26,088 to $16,102 compared to the previous quarter[3] - Cash and cash equivalents as of June 30, 2024, were $16,102, down from $26,088 at September 30, 2023[38] Accounts Receivable - Accounts receivable decreased significantly from $80,347 to $15,218[3] - The company established an allowance of $1.2 million for potentially uncollectible accounts receivable as of June 30, 2024, compared to $1.7 million as of September 30, 2023[10] Inventory - Inventory decreased from $1,555,222 to $1,333,936[3] - Inventory as of June 30, 2024 consisted of $0.9 million in finished products and $0.5 million in work in process[20] - Inventory as of September 30, 2023 consisted of $0.9 million in finished products and $0.7 million in work in process[20] Total Assets and Liabilities - Total current assets decreased from $1,661,657 to $1,365,257[3] - Property and equipment decreased slightly from $1,785,753 to $1,750,440[3] - Total liabilities increased from $9,771,020 to $13,021,605[3] - Total stockholders' equity turned negative, from $3,123,491 to $(1,658,730)[3] - Total equity position declined from $4,075,380 at March 31, 2023 to $(1,658,730) at June 30, 2024[5] Revenue and Gross Profit - Net revenues for the three months ended June 2024 were $179,774, a decrease of 38.2% compared to $290,938 in the same period in 2023[4] - Net revenues for the nine months ended June 2024 were $411,046, a decrease of 63.7% compared to $1,130,994 in the same period in 2023[4] - Gross loss for the nine months ended June 2024 was $(50,707), compared to a gross profit of $733,152 in the same period in 2023[4] - The company's net sales for the three and nine months ended June 30, 2024, were $179,774 and $411,046, respectively, compared to $290,938 and $1,130,994 for the same periods in 2023[32][33] - Gross profit (loss) for the three and nine months ended June 30, 2024, was $18,500 and $(50,707), respectively, with gross margins of 47% and (12.3)%[34] Operating Expenses and Losses - Total operating expenses for the nine months ended June 2024 were $7,459,385, a decrease of 55.8% compared to $16,861,634 in the same period in 2023[4] - Loss from operations for the nine months ended June 2024 was $(7,510,092), compared to $(16,128,482) in the same period in 2023[4] - The company's total operating expenses for the nine months ended June 30, 2024, were $7,459,385, compared to $16,861,634 for the same period in 2023[32] - Operating expenses for the three and nine months ended June 30, 2024, were $1.9 million and $7.5 million, respectively, compared to $4.5 million and $16.9 million in the prior period, primarily due to lower stock compensation expense[36] - The company expects operating expenses to increase in the future due to scaling headcount, building manufacturing facilities, and refining production processes[36] Net Loss and Accumulated Deficit - Net loss for the nine months ended June 2024 was $(10,125,611), compared to $(18,462,043) in the same period in 2023[4] - Accumulated deficit increased from $(63,604,267) to $(73,729,877)[3] - Accumulated deficit grew from $(41,060,328) at September 30, 2022 to $(73,729,877) at June 30, 2024, indicating continued net losses[5] - Net loss for the quarter ending June 30, 2024 was $(2,194,776), contributing to the overall deficit[5] - Net loss for the nine months ended June 30, 2024 was $10.1 million, compared to $18.5 million for the same period in 2023[6] - Net loss for the three and nine months ended June 30, 2024, was $2.2 million and $10.1 million, respectively, compared to $4.5 million and $18.5 million in the prior year[38] Interest and Other Expenses - Interest expense for the nine months ended June 2024 was $717,758, a decrease of 69.2% compared to $2,333,561 in the same period in 2023[4] - Warrant expense for the nine months ended June 2024 was $851,200, compared to $0 in the same period in 2023[4] - Interest and other expenses for the three and nine months ended June 30, 2024, were $0.3 million and $2.6 million, respectively, compared to $0.1 million and $2.3 million in the prior year, driven by higher costs associated with new financings[37] Share Issuance and Equity - Common stock shares outstanding increased from 27,215,966 to 37,892,478[3] - Common shares outstanding increased from 16,369,423 at September 30, 2022 to 37,892,478 at June 30, 2024, reflecting significant equity issuance activities[5] - Additional paid-in capital expanded from $36,511,950 at September 30, 2022 to $72,053,894 at June 30, 2024, primarily through stock issuances[5] - Common stock issued to employees totaled 2,450,000 shares in the quarter ending March 31, 2024, valued at $1,400,250[5] - Common stock issued for consulting services amounted to 2,540,000 shares in the quarter ending June 30, 2024, valued at $957,685[5] - Shares issued for conversion of notes and accrued interest totaled 130,000 in the quarter ending June 30, 2024, valued at $35,305[5] - Shares issued for inducement to lenders amounted to 150,000 in the quarter ending June 30, 2024, valued at $41,450[5] - 2,628,215 shares of common stock were granted to employees during the nine months ended June 30, 2024, valued at an aggregate of $1.5 million[17] - 1,145,000 shares of common stock were granted to employees, fully vested and recognized upon the date of grant[17] - The company issued 2,840,000 shares of common stock during the nine months ended June 30, 2024, including 2,540,000 shares for consulting services valued at $957,685[27] - The company's authorized capital consists of 100,000,000 shares of common stock and 10,000,000 shares of preferred stock, with 37,892,478 shares of common stock issued and outstanding as of June 30, 2024[27] - The company issued 2,540,000 shares for consulting services valued at $957,685 and 130,000 shares for conversion of notes and accrued interest valued at $35,505 during the quarter ended June 30, 2024[47] Notes Payable and Financing - Notes payable and convertible term notes increased from $2,195,708 to $4,265,875[3] - The company entered into a promissory note with a private lender on June 27, 2024 with an original balance of $50,000 and an interest rate of 10%[26] - On May 17, 2024, the company entered into a promissory note with a private lender with an original balance of $100,000 and an interest rate of 12%[26] - The company entered into an increasing OID promissory note on March 5, 2024 with an original principal balance of $700,000 and an interest rate of 10% annually[26] - On February 15, 2024, the company entered into a securities purchase agreement with a lender with an original principal balance of $272,500 and an interest rate of 8%[26] - The company entered into a note with a private lender on December 15, 2023 with an original balance of $750,000 plus a loan origination fee of $50,000[26] - On October 18, 2023, the company entered into a note with a private lender with an original balance of $150,000 and a fixed interest rate of 30,000 shares[26] - The company entered into a note with a private lender on July 31, 2023, with an original principal balance of $250,000 and an interest rate of 5,000 shares of common stock per week, extended until December 31, 2024[27] - On June 9, 2023, the company entered into a securities purchase agreement with a lender for $1,635,000, including an 8% interest rate and 200,000 shares of common stock issued as inducement[27] - The company estimated the fair value of the conversion feature derivatives embedded in the notes payable at $956,891 as of June 30, 2024[12] Fair Value and Derivative Liabilities - The company's common stock price used in the fair value estimation of derivative liabilities was $0.4365 as of June 30, 2024[12] - The company's expected volatility of common stock used in the fair value estimation of derivative liabilities was 118% as of June 30, 2024[12] - The company's risk-free interest rate used in the fair value estimation of derivative liabilities was 5.50% as of June 30, 2024[12] - The company's exercise price used in the fair value estimation of derivative liabilities was $0.2586 as of June 30, 2024[12] Goodwill and Impairment - Goodwill from the Scio business combination was independently valued at $5,413,000 as of August 7, 2019, with no impairment recognized as of September 30, 2023[14] - No impairment expense was recognized for long-lived assets for the nine months ended June 30, 2024 and 2023[15] Revenue Recognition - Revenue is recognized upon delivery of diamonds, with credit terms of payment due within 90 days[15] Leases - The company recognized a right-of-use asset of $1.4 million and a lease liability of $1.4 million for real estate operating leases effective October 1, 2022[18] - The company's operating lease cost for the nine months ended June 30, 2024 was approximately $230,000[23] - The weighted average remaining lease term and weighted average discount rate for operating leases were 1.5 years and 8% respectively[23] Depreciation and Equipment - Depreciation expense for the three and nine months ended June 30, 2024 totaled $18,000 and $35,314 respectively[21] - The company has a deposit on equipment on order amounting to $1.3 million, representing approximately 50% of the total purchase price[21] Legal and Regulatory Matters - The company's disclosure controls and procedures were deemed ineffective as of June 30, 2024, due to limited personnel and lack of segregation of duties[45] - The company was dismissed from a shareholder derivative lawsuit on June 28, 2024, after the plaintiff voluntarily dismissed all claims[46] Acquisitions and Agreements - The company recorded the fair value of assets purchased and liabilities assumed at $8.7 million in the acquisition of Scio Diamond Technology Corporation[7] - The company entered into a letter of intent with Akhan Semiconductor, Inc. on July 1, 2024, to purchase 100% of Akhan's assets for $750,000, with closing anticipated by October 30, 2024[29] Research and Development - The company's research and development expenses are expected to increase as it continues to invest in enhancing existing processes and developing new products[35] IPO and Capital Raising - The company raised $11.0 million in gross proceeds from its IPO on December 14, 2022, which is expected to meet operating needs along with potential additional capital[41] Accounting Standards - The company is evaluating the impact of ASU 2020-06 on its financial statements, effective for fiscal years beginning after December 15, 2023[19] - The company is evaluating the impact of ASU 2023-09 on its income tax disclosures, effective for fiscal years beginning after December 15, 2024[19] Treasury Stock - Treasury stock remained constant at $(1,200,000) from December 31, 2022 through June 30, 2024[5] Cash Flow - Net cash used in operating activities for the nine months ended June 30, 2024 was $2.1 million, compared to $6.1 million for the same period in 2023[6] - Cash from stock sale, net of costs, for the nine months ended June 30, 2024 was $25,000, compared to $9.1 million for the same period in 2023[6] - Net cash used in operating activities for the nine months ended June 30, 2024, was $2.1 million, compared to $6.1 million in the prior year, primarily due to a net loss of $10.1 million offset by non-cash expenses[38] Loss Per Share - Loss per share for the nine months ended June 2024 was $(0.35), compared to $(0.88) in the same period in 2023[4] - Weighted average number of shares outstanding for the nine months ended June 2024 was 29,276,159, an increase of 39.6% compared to 20,966,902 in the same period in 2023[4]