Borislav Tonev

Scio Diamond Technology Corp (OTCBB:SCIO) Shines Bright Again

by Borislav Tonev January 28, 2015

Scio Diamond Technology Corp (OTCBB:SCIO, SCIO message board) has been around for a while and it's been quoted by some as a “pioneer” in the business of producing lab-grown diamonds. Sadly, not everything has been going according to plan.

The company was primarily involved with manufacturing industrial-grade diamonds, but they had just one major client. When he decided that he'll search for another supplier in March 2013, SCIO found itself in trouble. The management team decided that salvation will be found in gemstones, but unfortunately, the latest 10-Q shows that this line of business is not doing particularly well, either. Here's what SCIO recorded on September 30, 2014:

  • cash: $5 thousand
  • current assets: $260 thousand
  • current liabilities: $2.9 million
  • quarterly revenues: $104 thousand
  • quarterly net loss: $748 thousand

As you can see, four months ago, SCIO was in a truly horrific financial state. The cash reserves were pitiful, the debt was huge, and the massive drops in revenue (both on a quarter-over-quarter and on a year-over-year basis) suggested that the company is sinking nose-first. Predictably, interest in the stock was dismal.

Yet, in December, just a month after the publishing of the disappointing 10-Q, the ticker's behavior was transformed. In a matter of just three sessions, SCIO ran from under $0.40 all the way to $0.90. Then, in a move that we rarely see in Pennyland, it managed to remain relatively calm under the pressure. Over the last month or so, it has been bouncing up and down a bit, but although it's meeting heavy resistance at the $1 per share mark, it's managing to avoid serious drops. During yesterday's session, the ticker gained 5% and it's currently sitting at $0.97 per share. There are a couple of reasons for the sudden appreciation.

For one, SCIO managed to patch up the balance sheet a little bit. A $2.5 million financing was closed a couple of weeks ago and the management team said that they will use some of the cash to satisfy old indebtedness while the rest will be invested into day-to-day operations. In December, they also announced a partnership with a company called Renaissance Diamonds, Inc and apparently, investors think that this will finally help SCIO climb out of the hole.

Time will tell if this will happen or not, but if you're convinced that it will all end well, you might want to gather as much patience as you can. Back in September 2013, SCIO announced that it's taking part in a joint venture which will produce lab-grown diamonds in China. The JV is present in the SEC filings, but the company is keeping quiet on whether it has begun operations.

In any case, partnerships like this can't transform a company overnight which, in turn, leads us to another interesting point. While the people jumping in right now appear to be ready to sit tight for the long haul, others might be a bit more impatient. Quite a lot of stock was sold at $0.30 per share during the second half of last year and if the accredited investors who bought it decide to let it loose on the open market, the effects on SCIO could be quite painful. Keeping this in mind before putting any money on the line is absolutely essential.

Comments 1

1. Guest
January 28, 2015, 08:18PM

Quotes That is a pretty simplified version of events, but accurate. What you don't state, is that the company started as Apollo Diamond, and was originally projected to open its IPO at about 14.00 per share.

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