UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 
FORM 8-K
 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): August 15, 2016

 
SCIO DIAMOND TECHNOLOGY CORPORATION
(Exact name of registrant as specified in its charter)

 

Nevada	 	000-54529	 	45-3849662	
(State or other jurisdiction
of incorporation)	 	(Commission
File Number)	 	(IRS Employer
Identification No.)	
 	 	 	 	 	
411 University Ridge Suite D
Greenville, SC	 	29601	
(Address of principal executive offices)	 	(Zip Code)	
 
Registrant’s telephone number, including area code: (864) 751-4880
 
Not applicable
(Former name or former address, if changed since last report)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):
 
 	☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
 	☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
 	☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
 	☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 
 
Item 2.02 Results of Operations and Financial Condition.
 
On August 15, 2016, Scio Diamond Technology Corp. issued a press release announcing its financial results for the first fiscal quarter ended June 30, 2016. The press release is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
 
The information, including Exhibit 99.1, furnished in this report is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. Registration statements or other documents filed with the Securities and Exchange Commission shall not incorporate this information by reference, except as otherwise expressly stated in such filing.
 
Item 9.01 Financial Statements and Exhibits.
 
(d) Exhibits
 
Exhibit No.	 	Description	
 	 	
99.1	 	Press release issued August 15, 2016.	

 
 
SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, hereunto duly authorized.

 	SCIO DIAMOND TECHNOLOGY CORPORATION	
 	(Registrant)	
 	 	 	
Date:  August 15, 2016	By:	/s/ Gerald McGuire	
 	 	Gerald McGuire	
 	 	President and Chief Executive Officer	

 
Exhibit 99.1
 
Contact:	info@sciodiamond.com	FOR IMMEDIATE RELEASE	
 	(864) 751-4880	 	
 
Scio Diamond Reports First Quarter FY 2017 Results
Lab-grown diamond producer shows 7.5% revenue growth
 
GREENVILLE, SC, August 15, 2016 – Scio Diamond Technology Corp. (OTCPINK: SCIO), a leading lab-grown diamond producer, announced financial results for its fiscal 2017 first quarter ended June 30, 2016.
 
“We are pleased to report quarterly revenue growth as a result of the Company’s increased production capacity and renewed focus on growing near-colorless, white diamond gemstones,” said Gerald McGuire, Scio Diamond CEO.
 
After the Company returned to full production in April, following the previously reported December 2015 shutdown, it has experienced strong monthly revenue growth. This growth continued into July and Scio anticipates this trend will continue as production yields improve and overall diamond industry demand increases through the end of the calendar year.
 
Added McGuire, “Over the past two months, we’ve made significant progress. The carat weight of our diamonds continues to increase, our color and clarity capabilities continue to improve, our customer base is growing, and we are beginning to see the resulting improvements in our financials. While short-term cash requirements continue to challenge our efforts, we are optimistic about the market potential for our lab-grown diamonds, and are encouraged by the increasing demand we are seeing from our customers.”
 
First Quarter Results, 3 Months Ended June 30, 2016
 
Scio Diamond generated total revenue of $185,061 in Q1 FY 2017, an increase of 7.5%, or $12,886, from $172,175 in total revenue in Q1 FY 2016. The increase related primarily to increases in price of the products sold as the Company shifted its sales focus to white diamond gemstone material.
 
Cost of goods sold for Q1 FY 2017 was $547,149, an increase of 31.7%, or $131,782, from $415,367 for Q1 FY 2016. The increase in cost of goods sold was primarily due to increased manufacturing costs as the Company’s product focus shifted to white diamond gemstone material.
 
Salaries and benefits expense for Q1 FY 2017 was $312,589, an increase of $110,287, from $202,302 for Q1 FY 2016. The increase was primarily due to the Company recognizing $168,543 in non-cash stock based compensation expense in Q1 FY 2017 compared to $64,501 in the year-ago quarter.
 
Professional and consulting fees for Q1 FY 2017 were $141,088, an increase of $89,145 from $51,943 for Q1 FY 2016.  Q1 FY 2016 results were lower than usual due to $102,311 in payments by our insurance carrier and other reversals of past professional fees. Adjusting for these reductions, professional fees would have been $154,254 for Q1 FY 2016 compared to $141,088 for Q1 FY 2017.
 
Other operating expenses, consisting of rent and facilities, marketing, and general and administrative expenses, were $120,450 for Q1 FY 2017, a decrease of $32,293, from $152,743 for the year-ago quarter. The decrease in other operating expenses in Q1 FY 2017 was primarily due to reduced marketing, and general and administrative expenses during the quarter.
 
Depreciation and amortization expense was $245,460 for Q1 FY 2017, compared to $198,405 for Q1 FY 2016.

 
 
Loss from operations in Q1 FY 2017 was $(1,181,675), compared to $(848,585) for the year-ago quarter.
 
Cash and cash equivalents were $67,898 at June 30, 2016 versus $192,880 at March 31, 2016. This decrease in cash was due to the cash used in operations offset by proceeds from the sale of common stock.
 
About Scio Diamond
Scio Diamond employs a patent-protected chemical vapor deposition process to produce high-quality, single-crystal near colorless and fancy-colored diamonds for the jewelry market in a controlled laboratory setting. Lab-grown diamonds are chemically, physically and optically identical to “earth-mined” diamonds. Scio’s technology offers the flexibility to produce lab-grown diamonds in size, color and quality combinations that are rare in earth-mined diamonds. Scio also delivers diamond materials for advanced industrial, medical and semiconductor applications. www.sciodiamond.com .
 
Cautionary Note Regarding Forward-Looking Statements
This press release contains forward-looking statements that may involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Scio to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. Forward-looking statements, which involve assumptions and describe future plans, strategies and expectations of the Company, are generally identifiable by use of the words “may,” “will,” “should,” “could,” “would,” “forecast,” “potential,” “continue,” “contemplate,” “expect,” “anticipate,” “estimate,” “believe,” “intend,” or “project” or the negative of these words or other variations on these words or comparable terminology. These forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that these projections included in these forward-looking statements will come to pass. Actual results of the Company could differ materially from those expressed or implied by the forward-looking statements as a result of various factors. Except as required by applicable laws, the Company has no obligation to update publicly any forward-looking statements for any reason, even if new information becomes available or other events occur in the future.
 
The condensed statements of operations, balance sheets and statements of cash flows are unaudited.

 
 
SCIO DIAMOND TECHNOLOGY CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended June 30, 2016 and 2015
(Unaudited)
 
 	 	Three Months
Ended	 	 	Three Months
Ended	 	
 	 	June 30, 2016	 	 	June 30, 2015	 	
Revenue	 	 	 	 	 	 	 	 	
Revenue, net	 	$	185,061	 	 	$	172,175	 	
 	 	 	 	 	 	 	 	 	
Cost of goods sold	 	 	 	 	 	 	 	 	
Cost of goods sold	 	 	547,149	 	 	 	415,367	 	
 	 	 	 	 	 	 	 	 	
Gross margin (deficit)	 	 	(362,088	)	 	 	(243,192	)	
 	 	 	 	 	 	 	 	 	
General and administrative expenses	 	 	 	 	 	 	 	 	
Salaries and benefits	 	 	312,589	 	 	 	202,302	 	
Professional fees	 	 	141,088	 	 	 	51,943	 	
Rent and facilities expense	 	 	41,784	 	 	 	39,013	 	
Marketing costs	 	 	3,071	 	 	 	28,183	 	
Corporate general and administrative	 	 	75,595	 	 	 	85,547	 	
Depreciation and amortization	 	 	245,460	 	 	 	198,405	 	
 	 	 	 	 	 	 	 	 	
Total general and administrative expenses	 	 	819,587	 	 	 	605,393	 	
 	 	 	 	 	 	 	 	 	
Loss from operations	 	 	(1,181,675	)	 	 	(848,585	)	
 	 	 	 	 	 	 	 	 	
Other expense	 	 	 	 	 	 	 	 	
Income (loss) from joint venture – RCDC	 	 	(20,369	)	 	 	16,339	 	
Interest expense	 	 	(62,116	)	 	 	(44,849	)	
 	 	 	 	 	 	 	 	 	
Net loss	 	$	(1,264,160	)	 	$	(877,095	)	
 	 	 	 	 	 	 	 	 	
Loss per share	 	 	 	 	 	 	 	 	
Basic:	 	 	 	 	 	 	 	 	
Weighted average number of shares outstanding	 	 	62,446,500	 	 	 	56,534,466	 	
Loss per share	 	$	(0.02	)	 	$	(0.02	)	
Fully diluted:	 	 	 	 	 	 	 	 	
Weighted average number of shares outstanding	 	 	62,446,500	 	 	 	56,534,466	 	
Loss per share	 	$	(0.02	)	 	$	(0.02	)	

 
 
SCIO DIAMOND TECHNOLOGY CORPORATION
CONDENSED BALANCE SHEETS
As of June 30, 2016 and March 31, 2016
 
 	 	June 30,	 	 	March 31,	 	
 	 	2016	 	 	2016	 	
 	 	(Unaudited)	 	 	 	 	
ASSETS	 	 	 	 	 	 	 	 	
Current Assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	67,898	 	 	$	192,880	 	
Accounts receivable	 	 	178,651	 	 	 	175,448	 	
Deferred contract costs	 	 	142,471	 	 	 	142,471	 	
Inventory, net	 	 	160,171	 	 	 	189,527	 	
Prepaid expenses	 	 	34,893	 	 	 	52,150	 	
Prepaid rent	 	 	13,475	 	 	 	19,238	 	
 	 	 	 	 	 	 	 	 	
Total current assets	 	 	597,559	 	 	 	771,714	 	
 	 	 	 	 	 	 	 	 	
Property, plant and equipment	 	 	 	 	 	 	 	 	
Facility	 	 	886,630	 	 	 	886,630	 	
Manufacturing equipment	 	 	3,308,299	 	 	 	3,294,425	 	
Other equipment	 	 	73,543	 	 	 	73,543	 	
Construction in progress	 	 	11,107	 	 	 	24,981	 	
Total property, plant and equipment	 	 	4,279,579	 	 	 	4,279,579	 	
Less accumulated depreciation	 	 	(2,243,603	)	 	 	(2,085,508	)	
Net property, plant and equipment	 	 	2,035,976	 	 	 	2,194,071	 	
 	 	 	 	 	 	 	 	 	
Intangible assets, net	 	 	6,984,074	 	 	 	7,225,446	 	
Investment in joint venture – RCDC	 	 	27,902	 	 	 	48,271	 	
 	 	 	 	 	 	 	 	 	
TOTAL ASSETS	 	$	9,645,511	 	 	$	10,239,502	 	
 	 	 	 	 	 	 	 	 	
LIABILITIES AND SHAREHOLDERS’ EQUITY	 	 	 	 	 	 	 	 	
Current Liabilities:	 	 	 	 	 	 	 	 	
Accounts payable	 	$	577,633	 	 	$	438,466	 	
Customer deposits	 	 	4,784	 	 	 	46,096	 	
Deferred revenue	 	 	174,280	 	 	 	174,280	 	
Accrued expenses	 	 	529,916	 	 	 	353,921	 	
Current portion of notes payable	 	 	98,999	 	 	 	98,999	 	
Current portion of capital lease obligation	 	 	122,495	 	 	 	122,495	 	
 	 	 	 	 	 	 	 	 	
Total current liabilities	 	 	1,508,107	 	 	 	1,234,257	 	
 	 	 	 	 	 	 	 	 	
Notes payable, non-current	 	 	2,201,001	 	 	 	2,201,001	 	
Capital lease obligation, non-current	 	 	71,994	 	 	 	71,994	 	
Other liabilities	 	 	88,569	 	 	 	88,569	 	
 	 	 	 	 	 	 	 	 	
TOTAL LIABILITIES	 	 	3,869,671	 	 	 	3,595,821	 	
 	 	 	 	 	 	 	 	 	
Common stock $0.001 par value, 75,000,000 shares authorized; 65,098,291 and 63,919,291 shares issued and outstanding at June 30, 2016 and March 31, 2016, respectively	 	 	65,098	 	 	 	63,919	 	
Additional paid-in capital	 	 	29,337,200	 	 	 	28,942,060	 	
Accumulated deficit	 	 	(23,626,458	)	 	 	(22,362,298	)	
 	 	 	 	 	 	 	 	 	
Total shareholders’ equity	 	 	5,775,840	 	 	 	6,643,681	 	
 	 	 	 	 	 	 	 	 	
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	 	$	9,645,511	 	 	$	10,239,502	 	

 
 
SCIO DIAMOND TECHNOLOGY CORPORATION
CONDENSED STATEMENTS OF CASH FLOW
For the Three Months Ended June 30, 2016 and 2015
(Unaudited)
 
 	 	Three Months
Ended	 	 	Three Months
Ended	 	
 	 	June 30, 2016	 	 	June 30, 2015	 	
 	 	 	 	 	 	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	
Net loss	 	$	(1,264,160	)	 	$	(877,095	)	
Adjustments to reconcile net loss to net cash used in operating activities:	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	401,417	 	 	 	339,072	 	
Employee stock based compensation	 	 	168,543	 	 	 	64,501	 	
Loss/(income) from joint venture – RCDC	 	 	20,369	 	 	 	(16,339	)	
Changes in assets and liabilities:	 	 	 	 	 	 	 	 	
Decrease/(increase) in accounts receivable and deferred revenue	 	 	(3,203	)	 	 	28,421	 	
Decrease in prepaid expenses and rent	 	 	21,070	 	 	 	8,501	 	
Decrease/(increase) in inventory and deferred contract costs	 	 	29,356	 	 	 	(20,263	)	
Increase in accounts payable	 	 	139,167	 	 	 	44,447	 	
Decrease in customer deposits	 	 	(41,312	)	 	 	(2,796	)	
Increase/(decrease) in accrued expenses	 	 	175,995	 	 	 	(137,314	)	
Decrease in other liabilities	 	 	—	 	 	 	(7,381	)	
 	 	 	 	 	 	 	 	 	
Net cash used in operating activities	 	 	(352,758	)	 	 	(576,246	)	
 	 	 	 	 	 	 	 	 	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	
Purchase of property, plant and equipment	 	 	—	 	 	 	(19,916	)	
 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	 	 	—	 	 	 	(19,916	)	
 	 	 	 	 	 	 	 	 	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	
Proceeds from sale of common stock, net of fees	 	 	227,776	 	 	 	—	 	
Proceeds from exercise of stock options	 	 	—	 	 	 	5,738	 	
 	 	 	 	 	 	 	 	 	
Net cash provided by financing activities	 	 	227,776	 	 	 	5,738	 	
 	 	 	 	 	 	 	 	 	
Change in cash and cash equivalents	 	 	(124,982	)	 	 	(590,424	)	
Cash and cash equivalents, beginning of period	 	 	192,880	 	 	 	767,214	 	
 	 	 	 	 	 	 	 	 	
Cash and cash equivalents, end of period	 	$	67,898	 	 	$	176,790	 	
Supplemental cash flow disclosures:	 	 	 	 	 	 	
Cash paid for:	 	 	 	 	 	 	
Interest	 	$	—	 	 	$	23,764	 	
Income taxes	 	$	—	 	 	$	—	 	
 	 	 	 	 	 	 	 	 	
Non-cash investing and financing activities:	 	 	 	 	 	 	 	 	
Purchase of property, plant and equipment in accounts payable	 	$	—	 	 	$	(146,816	)	
Purchase of property, plant and equipment in accrued expenses	 	$	—	 	 	$	(92,000	)