SimoneN/iStock via Getty Images

SimoneN/iStock via Getty Images

Adamas One (JEWL) has filed to raise $26 million in an IPO of its common stock, according to an S-1 registration statement.

The firm acquires and develops technology for lab-grown production of diamonds.

When management provides more details about the IPO, I'll provide an opinion.

Scottsdale, Arizona-based Adamas One was founded to acquire the assets of Scio Diamond Technology Corporation, including machines, patents and related intellectual property related to chemical vapor deposition technologies and HPHT technologies.

Management is headed by founder, President, Chairman, and CEO, John "Jay" G. Grdina, who has been with the firm since inception in September 2018 and was previously founder of AMMO (POWW), a publicly-traded ammunition company and CEO of NOHO, a lifestyle beverage company.

The company's primary offerings include:

Adamas One has booked fair market value investment of $27.7 million as of March 31, 2022, from investors, including Diamond Technologies, LLC, Pubco, LLC and others.

The company is still in development stage and has produced minimal revenue, commencing commercial sales of its products only during the quarter ending March 31, 2022.

Management says it is 'unable to predict the timing of our entry into any market in the future.'

According to a 2021 market research report by Allied Market Research, the global market for synthetic diamonds was an estimated $19.3 billion in 2020 and is forecast to reach nearly $50 billion by 2030.

This represents a forecast CAGR of 9.4% from 2021 to 2030.

The main drivers for this expected growth are a demand for more environmentally friendly diamond products, more responsible sourcing of diamond supplies and the need for advanced technologies for the applications of optics, electronics and lasers.

Also, the market for synthetic diamonds is segmented into sizes: below 2 carat, 2 - 4 carat and above 4 carat. It is also segmented as to colored or colorless.

Major competitive or other industry participants include:

Below are relevant financial results derived from the firm's registration statement:

As of March 31, 2022, Adamas One had $90,246 in cash and $15.3 million in total liabilities.

Free cash flow during the twelve months ended March 31, 2022, was negative ($3.4 million).

Adamas One intends to raise $26 million in gross proceeds from an IPO of its common stock, although the final figure may differ.

Existing shareholders may sell some or all of their holdings in the IPO.

Management says it will use the net proceeds from the IPO as follows:

for construction management and operating expenditures, including preparation and leasehold improvements at a 23,485 square foot manufacturing and production facility already under lease in Greenville, South Carolina near our current facility; purchase, commission, and phase into operations of a larger number of growers; purchase, commission, and installation of additional lasers used in the diamond refinement and seed cutting processes; and purchase, commission, and installation of HPHT technology and equipment for color enhancement and seed independence;

for continued research and development related to both developing new products and maintaining and seeking improvements to existing products, including hiring key personnel and purchasing equipment and material for research activities;

to upgrade sales and marketing capabilities, including public relations, advertising, software, and additional sales and marketing staff, along with the necessary personnel in administrative, finance, accounting, and legal to support our company being a public entity; and

the remainder for working capital and other general corporate purposes, which may include paying off all or part of our third-party promissory notes, accounts payable, and accrued liabilities in the normal course of business.

Management's presentation of the company roadshow is not available.

Regarding outstanding legal proceedings, management says 'there is currently no outstanding litigation.'

The sole listed bookrunner of the IPO is Alexander Capital, L.P.

JEWL is seeking public capital to fund its development and commercialization plans across all aspects of its operations.

The firm's financials show little revenue, significant operating losses and growing cash used in operations.

Free cash flow for the twelve months ended March 31, 2022, was negative ($3.4 million).

The firm currently plans to pay no dividends on its shares and anticipates that it will use future earnings to reinvest back into its growth initiatives.

The market opportunity for synthetic diamonds is large and expected to grow at 9.4% CAGR through 2030, but the market is characterized by several major players from established diamond firms.

Alexander Capital is the sole underwriter, and IPOs led by the firm over the last 12-month period have generated an average return of negative (64.6%) since their IPO. This is a bottom-tier performance for all major underwriters during the period.

The primary risk to the company's outlook is its small size in an industry with significant competition among large market participants.

Another risk is that its technology has not been commercially proven.

When we learn more information about the IPO, I'll provide an update.

Expected IPO Pricing Date: To be announced.

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