Scio Diamond Technology Corp. Reports Third Quarter Results
February 14, 2015
GREENVILLE, SC – Scio Diamond Technology Corp. (OTCBB: SCIO), a leading lab-grown diamond producer, announced financial results for the fiscal 2015 third quarter ended December 31, 2014.
“This was a very important quarter for Scio Diamond, strategically and operationally,” said Gerald McGuire, president and CEO. “This quarter’s successful go-to-market activities, $4.5 million in new funding and operational and product quality improvements are positioning the Company for future growth.”
In December, Scio Diamond closed $2.5 million in growth funding from Heritage Gemstone Investors (HGI). A portion of the HGI funding was used to significantly reduce its borrowing costs by obtaining a new interest rate of 7.25% to replace the original loan rate of 18%. The rest of the funds from HGI were earmarked to double production capacity.
In December, the Company formally launched a joint venture with Renaissance Diamonds Inc. to develop and deliver high-quality, lab-grown, fancy-colored diamonds to the gem and jewelry market. Scio Diamond produces the diamonds and Renaissance finishes and distributes them to national retailers, wholesalers and more than 500 independent retailers.
Operational advances included an increase in the average size of the Company’s rough diamonds by 45% and higher production yield by 7%. The Company also increased factory reliability, as measured by uptime, by more than 8%.
Third Quarter Results
Scio Diamond generated product revenue of $109,358 in Q3 FY 2015, an increase of 16.4%, or $15,443, from $93,915 in product revenue in the year-ago quarter. The increase related primarily to an increase in the price of units sold.
Total revenue was $109,358 in Q3 FY 2015, a decrease of $234,557 from $343,915 of total revenue in the year-ago quarter. The decrease is due to the company recognizing no licensing revenue during Q3 FY 2015, while it recognized $250,000 of licensing revenue during the same quarter the previous year.
Cost of goods sold for Q3 FY 2015 was $495,410, a decrease of 3.5%, or $17,735, from $513,145 for Q3 FY 2014. The decrease in cost of goods sold was primarily due to cost efficiencies from reduced headcount and lower depreciation offset by higher property taxes on manufacturing equipment.
Combined operating expenses, consisting of professional and consulting, salaries and benefits, rent and facilities, marketing, and general and administrative expenses, were $420,671 for Q3 FY 2015, a decrease of 4.4%, or $19,560, from $440,231 for the year-ago quarter. The decrease in combined operating expenses in Q3 FY 2015 was primarily due to reduced executive compensation included in salaries and benefits during the quarter.
Depreciation and amortization expense was $199,931 for Q3 FY 2015, compared to $200,018 for Q3 FY 2014.
The third quarter of FY 2015 included a one-time forgiveness of legal accounts payable of $(165,453) due to a settlement with a former Company vendor, and a non-cash loss on impairment of in-process research and development of $418,065 related to the Company determining that certain projects will no longer be pursued for commercial development. There were no one-time items for Q3 FY 2014.
Loss from operations in Q3 FY 2015 was $(1,259,266), compared to $(809,479) for the year-ago quarter.
Cash and cash equivalents were $1,090,858 at December 31, 2014 versus $47,987 at March 31, 2014. This increase in cash was due to the Company’s successful debt refinancing that provided for increased borrowing and lower interest rates and the completion of a recent equity offering.
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.
