SCIO DIAMOND TECHNOLOGY CORP, 10-K filed on 6/29/2015
Annual Report
Document And Entity Information (USD $)
12 Months Ended
Mar. 31, 2015
Jun. 23, 2015
Sep. 30, 2014
Document Information [Line Items]
 
 
 
Entity Registrant Name
Scio Diamond Technology Corp 
 
 
Entity Central Index Key
0001488934 
 
 
Current Fiscal Year End Date
--03-31 
 
 
Entity Filer Category
Smaller Reporting Company 
 
 
Trading Symbol
SCIO 
 
 
Entity Common Stock, Shares Outstanding
 
57,516,499 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Mar. 31, 2015 
 
 
Document Fiscal Period Focus
FY 
 
 
Document Fiscal Year Focus
2015 
 
 
Entity Well-known Seasoned Issuer
No 
 
 
Entity Voluntary Filers
No 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Public Float
 
 
$ 20,002,182 
BALANCE SHEETS (USD $)
Mar. 31, 2015
Mar. 31, 2014
Current Assets:
 
 
Cash and cash equivalents
$ 767,214 
$ 47,987 
Accounts receivable
243,929 
42,085 
Other receivables
0 
89,192 
Deferred contract costs
179,969 
0 
Inventory
295,760 
152,817 
Prepaid expenses
57,012 
79,078 
Prepaid rent
23,050 
23,050 
Total current assets
1,566,934 
434,209 
Property, plant and equipment
 
 
Facility
904,813 
899,499 
Manufacturing equipment
2,927,761 
3,171,656 
Other equipment
71,059 
71,059 
Construction in progress
207,252 
0 
Total property, plant and equipment
4,110,885 
4,142,214 
Less accumulated depreciation
(1,543,652)
(1,029,212)
Net property, plant and equipment
2,567,233 
3,113,002 
Intangible assets, net
8,047,948 
9,240,640 
Prepaid rent, noncurrent
19,238 
42,288 
Investment in joint venture - RCDC
30,041 
0 
Other assets
0 
20,000 
TOTAL ASSETS
12,231,394 
12,850,139 
Current Liabilities:
 
 
Notes payable
0 
1,412,060 
Accounts payable
708,760 
671,782 
Customer deposits
38,603 
179,610 
Deferred revenue
215,375 
0 
Accrued expenses
517,942 
573,126 
Total current liabilities
1,480,680 
2,836,578 
Notes payable, non-current
2,500,000 
0 
Other liabilities
118,092 
84,144 
TOTAL LIABILITIES
4,098,772 
2,920,722 
Common stock, $0.001 par value, 75,000,000 shares authorized; 56,531,499 and 50,739,312 shares issued and outstanding at March 31, 2015 and 2014, respectively
56,532 
50,739 
Additional paid-in capital
26,815,005 
24,476,940 
Accumulated deficit
(18,738,915)
(14,597,262)
Treasury stock, no and 1,000,000 shares at March 31, 2015 and 2014, respectively
0 
(1,000)
Total stockholders’ equity
8,132,622 
9,929,417 
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$ 12,231,394 
$ 12,850,139 
BALANCE SHEETS (Parenthetical) (USD $)
Mar. 31, 2015
Mar. 31, 2014
Common stock, par value (in dollars per share)
$ 0.001 
$ 0.001 
Common stock, shares authorized
75,000,000 
75,000,000 
Common stock, shares issued
56,531,499 
50,739,312 
Common Stock, Shares, Outstanding
56,531,499 
50,739,312 
Treasury stock, shares
0 
1,000,000 
STATEMENTS OF OPERATIONS (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Revenue
 
 
Product revenue, net
$ 351,193 
$ 793,341 
Licensing revenue
375,000 
625,000 
Revenues, net
726,193 
1,418,341 
Cost of goods sold
 
 
Cost of goods sold
1,497,465 
2,321,534 
Gross margin (deficit)
(771,272)
(903,193)
General and administrative expenses
 
 
Professional and consulting fees
566,154 
1,272,212 
Salaries and benefits
821,272 
723,805 
Rent, equipment lease and facilities expense
145,252 
150,502 
Marketing costs
59,727 
49,216 
Depreciation and amortization
798,477 
799,928 
Corporate general and administrative
345,263 
379,552 
Forgiveness of legal accounts payable
(165,453)
0 
Loss on impairment of in-process research and development
418,065 
0 
Loss on disposal of equipment
182,609 
129,308 
Loss on impairment of fixed assets
0 
381,798 
Total general and administrative expenses
3,171,366 
3,886,321 
Loss from operations
(3,942,638)
(4,789,514)
Other income (expense)
 
 
Income from joint venture - RCDC
29,041 
0 
Interest expense
(228,056)
(161,439)
Net loss
$ (4,141,653)
$ (4,950,953)
Basic:
 
 
Weighted average number of shares outstanding (in shares)
53,025,462 
49,548,045 
Loss per share (in dollars per share)
$ (0.08)
$ (0.10)
Fully diluted:
 
 
Weighted average number of shares outstanding (in shares)
53,025,462 
49,548,045 
Loss per share (in dollars per share)
$ (0.08)
$ (0.10)
STATEMENTS OF CASH FLOW (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Cash flows from operating activities:
 
 
Net loss
$ (4,141,653)
$ (4,950,953)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
Depreciation and amortization
1,476,916 
1,574,418 
Loss on disposal of equipment
182,609 
129,308 
Loss on impairment of fixed assets
0 
381,798 
Loss on impairment of in-process research and development
418,065 
0 
Expense for stock and inventory issued in exchange for operating expenses
77,858 
421,496 
Income from joint venture - RCDC
(29,041)
0 
Employee stock based compensation
155,000 
193,150 
Inventory write down
68,722 
100,557 
Changes in assets and liabilities:
 
 
Decrease in accounts receivable
13,531 
26,957 
Decrease/(increase) in other receivables
89,192 
(89,192)
Decrease/(increase) in prepaid expenses, rent and other assets
(37,517)
44,260 
Decrease/(increase) in inventory
(291,634)
258,127 
Increase in accounts payable
36,978 
386,131 
(Decrease)/increase in customer deposits
(141,007)
179,610 
Decrease in accrued expenses
(43,184)
(54,436)
Increase in other liabilities
33,948 
33,949 
Net cash used in operating activities
(2,131,217)
(1,364,820)
Cash flows from investing activities:
 
 
Purchase of property, plant and equipment
(236,496)
(71,889)
Investment in joint venture - RCDC
(1,000)
0 
Net cash used in investing activities
(237,496)
(71,889)
Cash flows from financing activities:
 
 
Proceeds from sale of common stock - net of fees
2,000,000 
129 
Proceeds from notes payable
2,653,615 
1,412,060 
Finance charges paid on note payable
0 
(150,750)
Payments on notes payable
(1,565,675)
0 
Net cash provided by financing activities
3,087,940 
1,261,439 
Change in cash and cash equivalents
719,227 
(175,270)
Cash and cash equivalents, beginning of period
47,987 
223,257 
Cash and cash equivalents, end of period
767,214 
47,987 
Cash paid during the year for:
 
 
Interest
84,165 
18,874 
Income taxes
0 
0 
Non-cash investing and financing activities:
 
 
Payment of accounts payable and accrued expenses with common stock
112,000 
81,761 
Manufacturing equipment transferred to assets held for sale
$ 0 
$ 20,000 
STATEMENT OF SHAREHOLDERS' EQUITY (USD $)
Total
Common Stock
Additional Paid in Capital
Treasury Stock
Accumulated Deficit
Balance at Mar. 31, 2013
$ 14,189,906 
$ 47,737 
$ 23,789,478 
$ (1,000)
$ (9,646,309)
Balance (in Shares) at Mar. 31, 2013
 
47,736,812 
 
(1,000,000)
 
Common stock issued in exchange for consulting services
319,200 
1,002 
318,198 
0 
0 
Common stock issued in exchange for consulting services (in shares)
 
1,002,500 
 
0 
 
Common stock issued in exchange for past legal services
164,000 
1,000 
163,000 
0 
0 
Common stock issued in exchange for past legal services (in shares)
 
1,000,000 
 
0 
 
Administrative fee received for previous stock issuance
129 
0 
129 
0 
0 
Common stock issued for indemnification of legal settlement
0 
1,000 
(1,000)
0 
0 
Common stock issued for indemnification of legal settlement (in shares)
 
1,000,000 
 
0 
 
Employee stock based compensation
193,150 
0 
193,150 
0 
0 
Employee stock based compensation (in shares)
 
0 
 
0 
 
Warrants issued in exchange for consulting services
13,985 
0 
13,985 
0 
0 
Net loss
(4,950,953)
0 
0 
0 
(4,950,953)
Ending Balance at Mar. 31, 2014
9,929,417 
50,739 
24,476,940 
(1,000)
(14,597,262)
Ending Balance (in Shares) at Mar. 31, 2014
 
50,739,312 
 
(1,000,000)
 
Common stock issued in exchange for operating expenses and inventory
177,858 
559 
177,299 
0 
0 
Common stock issued in exchange for operating expenses and inventory (in shares)
 
558,856 
 
0 
 
Common stock issued in exchange for past consulting services
12,000 
50 
11,950 
0 
0 
Common stock issued in exchange for past consulting services (in shares)
 
50,000 
 
0 
 
Retirement of treasury stock
0 
(1,000)
0 
1,000 
0 
Retirement of treasury stock (in shares)
 
(1,000,000)
 
1,000,000 
 
Common stock issued for cash @ $0.30 per share
2,000,000 
6,667 
1,993,333 
0 
0 
Common stock issued for cash @ $0.30 per share (in shares)
 
6,666,664 
 
0 
 
Common stock returned to Company and cancelled
0 
(1,000)
1,000 
0 
0 
Common stock returned to Company and cancelled (in shares)
 
(1,000,000)
 
0 
 
Employee stock based compensation
155,000 
517 
154,483 
0 
0 
Employee stock based compensation (in shares)
 
516,667 
 
0 
 
Net loss
(4,141,653)
0 
0 
0 
(4,141,653)
Ending Balance at Mar. 31, 2015
$ 8,132,622 
$ 56,532 
$ 26,815,005 
$ 0 
$ (18,738,915)
Ending Balance (in Shares) at Mar. 31, 2015
 
56,531,499 
 
0 
 
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NOTE 1 — ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
Organization and Business
 
Scio Diamond Technology Corporation (referred to herein as the “Company”, “we”, “us” or “our”) was incorporated under the laws of the State of Nevada as Krossbow Holding Corp. on September 17, 2009. The Company’s focus is on man-made diamond technology development and commercialization.
 
Going Concern
 
The Company has generated little revenue to date and consequently its operations are subject to all risks inherent in the establishment and commercial launch of a new business enterprise.
 
These factors raise substantial doubt about the Company’s ability to continue as a going concern. During the year ended March 31, 2015, management has responded to these circumstances by taking the following actions:
 
⋅
Raised $2 million in equity investment in the Company in the form of private placements of common shares to accredited investors.  Funds have been used to fund current operations;
⋅
Raised $2.5 million in investment in the Company in the form of secured debt.  Funds have been used to re-finance higher interest rate secured debt, the expansion of our operations and to fund current operations;
⋅
Established a joint venture with Renaissance Diamonds, Inc. focused on the creation of recipes and procedures to develop, market, and sell lab-grown fancy-colored diamonds; and
⋅
Enhanced efforts on expanding and optimizing production of existing manufacturing capabilities.
 
Accounting Basis
 
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, provision for doubtful accounts, sales returns, provision for inventory obsolescence, fair value of acquired intangible assets, useful lives of intangible assets and property and equipment, employee stock options, and contingencies and litigation, among others. The Company generally bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts recorded could differ materially from those estimates
 
                In accordance with Accounting Standards Codification (“ASC”) 323, Investments—Equity Method and Joint Ventures, the Company uses the equity method of accounting for investments in corporate joint ventures for which the Company has the ability to exercise significant influence but does not control and is not the primary beneficiary. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the venture unless predominant evidence to the contrary exists. Under this method of accounting, the Company records its proportionate share of the net earnings or losses of equity method investees and a corresponding increase or decrease to the investment balances. Cash payments to equity method investees such as additional investments, loans and advances and expenses incurred on behalf of investees, as well as payments from equity method investees such as dividends, distributions and repayments of loans and advances are recorded as adjustments to investment balances. When the Company’s carrying value in an equity method investee is reduced to zero, no further losses are recorded in the Company’s financial statements unless the Company guaranteed obligations of the equity method investee or has committed additional funding.   When the equity method investee subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.  The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.
 
Fair Value of Financial Instruments
 
The  carrying  value  of  cash and cash equivalents,  accounts receivable, accounts  payable  and  notes  payable  approximate  their  fair  value  due  to  the  short-term nature of  these instruments
 
Cash and Cash Equivalents
 
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with an original maturity of three months or less when purchased to be cash equivalents.  At March 31, 2015 and 2014, the Company held no cash equivalents.
 
Basic and Diluted Net Loss per Share
 
Net loss per share is presented under two formats: basic net loss per common share, which is computed using the weighted average number of common shares outstanding during the period, and diluted net loss per common share, which is computed using the weighted average number of common shares outstanding, and the weighted average dilutive potential common shares outstanding, computed using the treasury stock method. Currently, for all periods presented, diluted net loss per share is the same as basic net loss per share as the inclusion of weighted average shares of common stock issuable upon the exercise of options and warrants would be anti-dilutive.
 
The following table summarizes the number of securities outstanding at each of the periods presented, which were not included in the calculation of diluted net loss per share as their inclusion would be anti-dilutive:
 
 
 
March 31,
 
 
 
2015
 
2014
 
Common stock options and warrants
 
5,799,295
 
9,609,295
 
 
Allowance for Doubtful Accounts
 
An allowance for uncollectible accounts receivable is maintained for estimated losses from customers’ failure to make payment on accounts receivable due to the Company. Management determines the estimate of the allowance for uncollectible accounts receivable by considering a number of factors, including: (1) historical experience, (2) aging of accounts receivable and (3) specific information obtained by the Company on the financial condition and the current credit worthiness of its customers. The Company also maintains a provision for estimated returns and allowances based upon historical experience.  The Company has determined that an allowance was not necessary at March 31, 2015 or 2014.
 
Other Receivables
 
As of March 31, 2014, the Company considered a pending insurance settlement over the actions of a Company supplier of $89,192 as an other receivable.  This settlement was paid during the fiscal year ended March 31, 2015.
 
Inventories
 
Inventories are stated at the lower of average cost or market. The carrying value of inventory is reviewed and adjusted based upon slow moving and obsolete items. Inventory costs include material, labor, and manufacturing overhead and are determined by the “first-in, first-out” (FIFO) method.  The components of inventories are as follows:
 
 
 
March 31,
 
March 31,
 
 
 
2015
 
2014
 
Raw materials and supplies
 
$
58,390
 
$
35,543
 
Work in process
 
 
31,371
 
 
25,611
 
Finished goods
 
 
205,999
 
 
91,663
 
 
 
$
295,760
 
$
152,817
 
 
During the first fiscal quarter of the fiscal year ended March 31, 2015, we experienced selling prices that were lower than cost and as a result recorded a lower of cost or market write down of $68,722 to the value of our inventory which is included in cost of good sold.  During the fiscal year ended March 31, 2014, the Company recorded a lower of cost or market write down to inventory of $100,557 which is included in cost of goods sold.   The estimation of the total write-down to inventory involves management judgments and assumptions, including assumptions regarding future selling price forecasts, the estimated costs to complete and disposal costs.
  
Property, Plant and Equipment
 
Depreciation of property, plant and equipment is on a straight line basis beginning at the time it is placed in service, based on the following estimated useful lives:
 
 
 
Years
 
Machinery and equipment
 
3–15
 
Furniture and fixtures
 
3–10
 
Engineering equipment
 
5–12
 
 
Leasehold improvements which are included in facility fixed assets on the balance sheet are depreciated over the lesser of the remaining term of the lease or the life of the asset (generally three to seven years).
 
Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Manufacturing equipment was placed into service beginning July 1, 2012.  The Company incurred total depreciation expense of $619,656 and $700,690 for the years ended March 31, 2015 and 2014, respectively.
 
During the fiscal year ended March 31, 2015, the Company disposed of assets held for sale of $20,000 and of fixed assets that were no longer necessary for the Company’s operations with a net book value of $162,609.  During the fiscal year ended March 31, 2014, the Company closed its operations in Hudson, Massachusetts and recognized a loss of $129,308 for the disposal of certain fixed assets at the location.  Concurrent with the closing of the Hudson facility, the Company re-evaluated the useful life of certain fixed assets acquired from ADI in 2012 and decided that an impairment charge related to these assets of $381,798 was appropriate.
 
Intangible Assets
 
Intangible assets, such as acquired in-process research and development costs, are considered to have an indefinite useful life until such time as they are put into service at which time they will be amortized on a straight-line basis over the shorter of their economic or legal useful life. Management evaluates indefinite life intangible assets for impairment on an annual basis and on an interim basis if events or changes in circumstances between annual impairment tests indicate that the asset might be impaired. The ongoing evaluation for impairment of its indefinite life intangible assets requires significant management estimates and judgment. Management reviews definite life intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the fiscal year ended March 31, 2015, management evaluated assets included in IPRD and determined that certain projects will no longer be pursued for further development resulting in an impairment charge of $418,065 being recognized during the fiscal year.  There were no impairment charges during the fiscal year ended March 31, 2014.
 
Income Taxes
 
Income taxes are accounted for under the asset and liability method. Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. Valuation allowances are provided against deferred tax assets when it is more likely than not that an asset will not be realized in accordance with ASC 740, Accounting for Income Taxes.
 
Management has evaluated the potential impact in accounting for uncertainties in income taxes and has determined that it has no significant uncertain income tax positions as of March 31, 2015 or 2014.  Income tax returns subject to review by taxing authorities include March 31, 2010 through March 31, 2015.
 
Stock-based Compensation
 
Stock-based compensation for the value of stock options is estimated on the date of the grant using the Black-Scholes option-pricing model. The Black-Scholes model takes into account implied volatility in the price of the Company’s stock, the risk-free interest rate, the estimated life of the equity-based award, the closing market price of the Company’s stock on the grant date and the exercise price. The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment.
 
Concentration of Credit Risk
 
During the year ended March 31, 2015 the Company had 31 different customers and one customer accounted for more than 10% of our total revenues.  This customer was Grace Rich LTD, our joint venture partner that accounted for $385,801 of total revenue.  At the end of the fiscal year ended March 31, 2015, the Company was selling substantially all of its production to the RCDC joint venture and had a receivable from RCDC at March 31, 2015 of $241,950.  The Company expects this concentration of sales to RCDC to continue in the future. 
 
Revenue Recognition
 
We recognize product revenue when persuasive evidence of an arrangement exists, delivery of products has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. For our Company, this generally means that we recognize revenue when we or our fabrication vendor has shipped finished product to the customer. Our sales terms do not allow for a right of return except for matters related to any manufacturing defects on our part. 
 
For product sales to our joint venture partners for further processing and finishing, we currently defer all revenues when products are shipped.  We currently recognize revenue when the joint venture partner sells the finished goods manufactured from our materials.  Licensing and development revenues are recognized in the month as detailed in appropriate licensing and development contracts. In the event that licensing funds are received prior to the contractual commitment, the Company will recognize deferred revenue (liability) for the amount received.
 
Recent Accounting Pronouncements
 
In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (the revised standard). Under the amendments in this updates, a company has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that the it is more likely than not that the indefinite-lived intangible assert is impaired as a basis for determining whether it is necessary to perform the qualitative impairment test in accordance with Topic 350.  The more likely than not threshold is defined as having a likely-hood of more than fifty percent.  If after assessing the qualitative factors, a company determines it does not meet the more likely than not threshold, a company is required to perform the quantitative impairment test by calculating the fair value of an indefinite-lived intangible asset and comparing the fair value with the carrying amount of the asset.  The Amendments in this update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted this new standard in the fiscal year ended March 31, 2014 and the adoption did not have a significant impact on its financial statements.
 
In July 2013, the FASB issued ASU 2013-11, Income Taxes – Presentation of an Unrecognized Tax benefit When a Net Operation Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”) which is part of ASC 740, Income Taxes.  The new guidance requires and entity to present an unrecognized tax benefit and an NOL carryforward, a similar tax loss or a tax credit carryforward on a net basis as part of a deferred tax asset, unless the unrecognized tax benefit is not available to reduce the deferred tax asset component or would not be utilized for that purpose, then a liability would be recognized.  ASU 2013-11 is effective for annual and interim periods for fiscal years beginning after December 15, 2013.  The Company is currently evaluating the impact of the April 1, 2014 adoption of this guidance on its financial statements.
 
In May 2014, the FASB issued ASU 2014-9, Revenue from Contracts with Customers (Topic 606). This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company will adopt this standard in fiscal year 2018. The Company has not yet determined the effect, if any, that the adoption of this standard will have on the Company’s financial position or results of operations.
   
On May 28, 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," which affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The guidance supersedes the revenue recognition guidance in Topic 605, "Revenue Recognition", and most industry-specific guidance throughout the Industry Topics of the Codification. The guidance also supersedes some cost guidance included in Subtopic 605-35, "Revenue Recognition- Contract-Type and Production-Type Contracts". On April 1, 2015, the FASB voted to propose to defer the effective date of the pronouncement by one year. ASU 2014-9, as amended, is effective for annual periods, and interim periods within those years, beginning after December 15, 2016, or December 31, 2017, if deferred. An entity is required to apply the amendments using one of the following two methods:  i) retrospectively to each prior period presented with three possible expedients: a) for completed contracts that begin and end in the same reporting period no restatement is required,  b) for completed contract with variable consideration an entity may use the transaction price at completion  rather than restating estimated variable consideration amounts in comparable reporting periods and c) for comparable reporting periods before date of initial application reduced disclosure  requirements  related to transaction price; ii) retrospectively  with the cumulative effect of initially applying the amendment  recognized at the date of initial application with additional disclosures for the differences of the prior guidance to the reporting periods compared to the new guidance and an explanation of the reasons for significant changes. We are required to adopt ASU 2014-09 in the first quarter of fiscal 2018, or in the first quarter of fiscal 2019, if deferred, and we are currently assessing the impact of this pronouncement on our financial statements.
 
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to assess, at each annual and interim reporting period, the entity's ability to continue as a going concern within one year after the date that the financial statements are issued and provide related disclosures. The ASU is effective for the year ended March 31, 2017, with early adoption permitted. The Company has assessed the impact of this standard and does not believe that it will have a material impact on the Company’s financial statements or disclosures. 
 
There are currently no other accounting standards that have been issued but not yet adopted by the Company that will have a significant impact on the Company’s financial position, results of operations or cash flows upon adoption.
INTANGIBLE ASSETS
INTANGIBLE ASSETS
NOTE 2 — INTANGIBLE ASSETS
   
The assigned values of all patents considered in service by the Company are being amortized on a straight-line basis over the remaining effective lives of the patents. 
 
Intangible assets, such as acquired in-process research and development costs, are considered to have an indefinite useful life until such time as they are put into service at which time they will be amortized on a straight-line basis over the shorter of their economic or legal useful life.
 
Intangible assets consist of the following:
 
 
 
 
 
March 31,
 
March 31,
 
 
 
Life
 
2015
 
2014
 
Patents, gross
 
6.75 – 19.46
 
$
8,135,063
 
$
8,135,063
 
In-process research and development
 
Indefinite
 
 
1,832,370
 
 
2,250,435
 
 
 
 
 
 
9,967,433
 
 
10,385,498
 
Accumulated amortization
 
 
 
 
(1,919,485)
 
 
(1,144,858)
 
Net intangible assets
 
 
 
$
8,047,948
 
$
9,240,640
 
 
During the fiscal year ended March 31, 2015, management evaluated assets included in IPRD and determined that certain projects will no longer be pursued for further development resulting in an impairment charge of $418,065. 
 
Total amortization expense during the years ended March 31, 2015 and 2014 was $774,627 and $775,011, respectively.
 
Total annual amortization expense of finite lived intangible assets is estimated to be as follows:
 
Fiscal Year Ending
 
 
 
 
March 31, 2016
 
$
774,840
 
March 31, 2017
 
 
774,840
 
March 31, 2018
 
 
774,840
 
March 31, 2019
 
 
774,840
 
March 31, 2020
 
 
595,159
 
Thereafter
 
$
2,521,059
 
NOTES PAYABLE
NOTES PAYABLE
NOTE 3 — NOTES PAYABLE
 
                On October 16, 2014, the Company entered into a Second Amendment to Loan Agreement (“Amendment No. 2”) with Platinum Capital Partners, LP (“Platinum”) to its existing loan agreement dated as of June 21, 2013 with Platinum, as modified by the First Amendment to Loan Agreement dated as of October 11, 2013.  Under the terms of Amendment No. 2, Platinum, among other things, consolidated the Company’s credit facilities into one $1,500,000 note and deferred $63,619 of interest that was due and payable on September 30, 2014 under the Loan Agreement until December 19, 2014.  The Company also executed two new promissory notes concurrently with Amendment No. 2: (i) a Revolving Promissory Note dated as of October 17, 2014 in the principal amount of $1,500,000 in favor of Platinum (the “New Revolving Promissory Note”), which replaced the Company’s Promissory Note dated as of June 21, 2013, in the principal amount of $1,000,000 in favor of Platinum, and the Company’s Promissory Note dated as of October 11, 2013, in the principal amount of $500,000 in favor of Platinum; and (ii) a Deferred Interest Promissory Note dated as of September 30, 2014, in the principal amount of $63,619 in favor of Platinum (the “Deferred Interest Promissory Note”).  The New Revolving Promissory Note had a maturity date of June 30, 2015 and interest on the outstanding principal accrued at a rate of 18% per annum, compounded annually.  The Deferred Interest Promissory Note had a maturity date of December 19, 2014 and interest on the outstanding principal accrued at a rate of 18% per annum, compounded annually.  The loan agreement contained a number of restrictions on the Company’s business, including restrictions on its ability to merge, sell assets, create or incur liens on assets, make distributions to its shareholders and sell, purchase or lease real or personal property or other assets or equipment.  The loan agreement also contains affirmative covenants and events of default.
 
On December 16, 2014 the Company entered into a Loan Agreement (the “HGI Loan Agreement”) and a Security Agreement (the “HGI Security Agreement”) with Heritage Gemstone Investors, LLC (“HGI”) providing for a $2,000,000 secured non-revolving line of credit (the “HGI Loan”).  The HGI Loan, which is represented by a Promissory Note dated as of December 15, 2014 (the “HGI Note”), matures on December 15, 2017.  Borrowings accrue interest at the rate of 7.25% per annum and the Company intends to make monthly interest payments.  On December 18, 2014, $2,000,000 was drawn on the HGI Loan.  The Company utilized funds drawn on the HGI Loan to repay its existing indebtedness to Platinum and to continue to fund its ongoing operations.  The HGI Loan Agreement contains a number of restrictions on the Company’s business, including restrictions on its ability to merge, sell assets, create or incur liens on assets, make distributions to its stockholders and sell, purchase or lease real or personal property or other assets or equipment.   The HGI Loan Agreement contains standard provisions relating to a default and acceleration of the Company’s payment obligations thereunder upon the occurrence of an event of default, which includes, among other things, the failure to pay principal, interest, fees or other amounts payable under the agreement when due; failure to comply with specified agreements, covenants or obligations; cross-default with other indebtedness; the making of any material false representation or warranty; commencement of bankruptcy or other insolvency proceedings by or against the Company; and failure by the Company to maintain a book net worth of at least $4.0 million at all times.  The Company’s obligations under the HGI Loan Agreement are not guaranteed by any other party.  The Company may prepay borrowings without premium or penalty upon notice to HGI as provided in the HGI Loan Agreement.  The HGI Loan Agreement requires the Company to enter into the HGI Security Agreement.   Under the HGI Security Agreement, the Company grants HGI a first priority security interest in the Company’s inventory, equipment, accounts and other rights to payments and intangibles as security for the HGI Loan.
 
Also on December 16, 2014, the Company entered into an agreement for the Sale and Lease of Growers (the “Grower Sale-Lease Agreement”) with HGI to allow for the expansion of current growers and the purchase of  new growers. Pursuant to the Grower Sale-Lease Agreement, the Company agreed to a sale-leaseback arrangement for certain diamond growers produced by the Company during the term of the Grower Sale-Leaseback Agreement by which the Company will sell diamond growers to HGI and then lease the growers back from HGI.  The term of the Grower Sale-Leaseback Agreement is ten years. For  the new and upgraded growers, the direct profit margin generated from the growers will be split between the Company and HGI in accordance with the Grower Sale-Lease Agreement.  The Grower Sale-Lease Agreement requires the Company to operate and service the growers, and requires HGI to up-fit certain existing growers and to make capital improvements to the new growers under certain circumstances.  At the end of the Grower Sale-Leaseback Agreement the Company takes ownership of the leased equipment. The Company will also have the right to repurchase the leased growers upon the occurrence of certain events prior to the expiration of the Grower Sale-Leaseback Agreement.
 
As of March 31, 2015, HGI has advanced the Company $300,000 to fund improvements to our current growers that will expand manufacturing capacity in our production facility. In addition, HGI has advanced the Company $200,000 for the purchase of new grower equipment under the Sale-Leaseback Agreement.  As of March 31, 2015, the Company considers both of these advances totaling $500,000 as notes payable.  The Company anticipates completing the grower expansion and new equipment purchases during the first half of the fiscal year ending March 31, 2016.
CAPITAL STOCK
CAPITAL STOCK
NOTE 4 — CAPITAL STOCK
 
The authorized capital of the Company is 75,000,000 common shares with a par value of $  0.001 per share.
 
At the request of the then Board of Directors, the Company entered into an agreement, effective April 12, 2014, with Mr. Joseph Cunningham to provide consulting services to the Company.  Under this agreement, the Company agreed to provide Mr. Cunningham $4,000 and 20,000 shares of common stock per month in exchange for his professional services to the Company.  This contract expired in August 2014.  During the fiscal year ended March 31, 2015, the Company issued 80,000 shares to Mr. Cunningham.  These shares were valued at an average of $0.43 per share based on the closing prices of the shares on the dates of grant and the Company recognized $34,200 in professional and consulting fee expense for these shares during the fiscal year ended March 31, 2015.
 
On June 20, 2014, the then Board of Directors granted restricted stock grants to Mr. Michael Laub of 50,000 shares for previously performed services rendered to the Company.  The Company did not recognize expense for this restricted stock grant since it was in exchange for expenses previously accrued by the Company.
  
On June 23, 2014, the Company, members of its Board of Directors and various plaintiffs (See NOTE 12 – LITIGATION) reached a settlement agreement that resulted in the return and cancellation of 1,000,000 share of common stock to the Company.
 
On July 15, 2014, the Board of Directors approved the issuance and sale of up to 2,000,000 shares of common stock to accredited investors at a price of $0.30 per share. On September 25, 2014, the Board agreed to increase the size of the offering up to 6,666,667 shares to raise up to $2,000,000.  The Company completed the offering on December 23, 2014 and issued 6,666,664 shares of common stock, at a price of $0.30 per share, for total cash proceeds of $2,000,000.
 
On October 30, 2014, the Board of Directors approved the issuance of 50,000 shares to Bradley Robb to settle $15,000 of liabilities for services rendered to the Company.  Also on this date, the Board approved the issuance of 95,522 shares of stock to an affiliate of our landlord to settle $28,658 of outstanding rent liabilities.  The shares issued in each of these transactions were valued at $0.30 per share.
 
On March 12, 2015, the Board of Directors approved the issuance of 333,333 shares to an affiliate of Renaissance Diamond, Inc. to settle $100,000 of liabilities for diamond seed inventory purchased by the Company.  The shares issued in this transaction were valued at $0.30 per share, which was the market price of our stock when the inventory was purchased.
 
In addition, on March 12, 2015, the Board of Directors approved the retirement of all 1,000,000 shares held in treasury by the Company. 
 
The Company had 56,531,499 shares of common stock issued and outstanding as of March 31, 2015.
 
The Company had 5,566,795 warrants outstanding with a weighted average exercise price of $1.53 per share as of March 31, 2015.  No warrants were issued or exercised during the fiscal year ended March 31, 2015. 4,891,250 warrants with an exercise price of $1.60 will expire if not exercised during our next fiscal year ending March 31, 2016.   
SHARE-BASED COMPENSATION
SHARE-BASED COMPENSATION
NOTE 5 — SHARE-BASED COMPENSATION
 
The Company currently has one equity-based compensation plan under which stock-based compensation awards can be granted to directors, officers, employees and consultants providing bona fide services to or for the Company.   The Company’s 2012 Share Incentive Plan was adopted on May 7, 2012 (the “2012 Share Incentive Plan” or “Plan”) and allows the Company to issue up to 5,000,000 shares of its common stock pursuant to awards granted under the 2012 Share Incentive Plan.  The Plan permits the granting of stock options, stock appreciation rights, restricted or unrestricted stock awards, phantom stock, performance awards, other stock-based awards, or any combination of the foregoing.  The only awards that have been issued under the Plan are stock options.   Because the Plan has not been approved by our shareholders, all such stock option awards are non-qualified stock options. 
 
On September 25, 2014, the Company entered into a severance agreement with our former Chief Executive Officer, Mr. Michael McMahon, whereby the Company granted him 416,667 shares of fully vested restricted common stock valued at $0.30 per share for a total value of $125,000.  In addition, the Company agreed to provide Mr. McMahon 100,000 shares of restricted stock as compensation for the vested options that expired due to his termination.  The Company valued these shares at $0.30 per share and recognized $30,000 in stock based compensation expense during the fiscal year ended March 31, 2015. In total the Company recognized $305,077 in severance expense in our salaries and benefit expenses during the year ended March 31, 2015.
 
The following sets forth the options to purchase shares of the Company’s stock issued and outstanding as of March 31, 2015:
 
 
 
 
 
Weighted-
 
Weighted-Average
 
 
 
 
 
Average Exercise
 
Remaining
 
Options
 
Shares
 
Price
 
Contractual Term
 
Options Outstanding April 1, 2013
 
4,092,500
 
$
0.87
 
2.29
 
Granted
 
706,250
 
 
0.36
 
—
 
Exercised
 
—
 
 
—
 
—
 
Expired/Cancelled
 
(456,250)
 
 
0.73
 
—
 
Options Outstanding March 31, 2014
 
4,342,500
 
$
0.77
 
1.75
 
Granted
 
—
 
 
—
 
—
 
Exercised
 
—
 
 
—
 
—
 
Expired/cancelled
 
(4,110,000)
 
 
0.79
 
—
 
Options Outstanding March 31, 2015
 
232,500
 
$
0.35
 
1.45
 
Exercisable at March 31, 2015
 
23,125
 
$
0.44
 
1.20
 
 
The intrinsic value of options outstanding and exercisable at March 31, 2015 and 2014 was $17,071 and $0, respectively.
 
The Company did not issue any options during the fiscal year ended March 31, 2015. 
 
A summary of the status of non-vested shares as of March 31, 2015 and changes during the year ended March 31, 2015 is presented below.
 
 
 
 
 
Weighted Average
 
 
 
 
 
Grant-Date
 
Non-vested Shares
 
Shares
 
Fair Value
 
Non-vested at April 1, 2013
 
2,466,167
 
$
0.65
 
Granted
 
706,250
 
 
0.22
 
Vested
 
(575,625)
 
 
0.45
 
Expired/cancelled: non-vested
 
(182,000)
 
 
0.38
 
Non-vested at March 31, 2014
 
2,414,792
 
 
0.49
 
Granted
 
—
 
 
—
 
Vested
 
(122,000)
 
 
0.43
 
Expired/cancelled: non-vested
 
(2,083,417)
 
 
0.52
 
Non-vested at March 31, 2015
 
209,375
 
$
0.21
 
 
The following table summarizes information about stock options outstanding by price range as of March 31, 2015:
 
 
 
 
Options Outstanding
 
Options Exercisable
 
Exercise Price
 
Number
Outstanding
 
Weighted Average
Remaining
Contractual Life
(years)
 
Weighted Average 
Exercise Price
 
Number of
Shares
 
Weighted Average 
Exercise Price
 
$
0.80
 
7,500
 
0.27
 
$
0.80
 
5,500
 
$
0.80
 
$
0.33
 
225,000
 
1.49
 
 
0.33
 
17,625
 
 
0.33
 
 
 
 
232,500
 
1.45
 
$
0.35
 
23,125
 
$
0.44
 
 
For the years ended March 31, 2015 and 2014, the Company recognized $0 and $193,150, respectively, as compensation cost for options issued, and recorded related deferred tax asset of $0 for all periods.
 
At March 31, 2015, unrecognized compensation expense related to non-vested awards was $44,529.  This cost is only expected to be recognized if certain performance metrics are attainded over the weighted average remaining life of the options of 1.48 years. 
OTHER INCOME AND EXPENSE
OTHER INCOME AND EXPENSE
NOTE 6 — OTHER INCOME AND EXPENSE
 
For the fiscal year ended March 31, 2015, the Company recognized $29,041 as its proportional share of income from its joint venture with RCDC.  In addition, the Company recognized $228,056 in interest expense related to its notes payable that were outstanding during the fiscal year.
OPERATING LEASES
OPERATING LEASES
NOTE 7 — OPERATING LEASES
 
During the fiscal year ended March 31, 2015, the Company leased office space at a location in Greenville, South Carolina. Under the terms of the lease, the Company is obligated to pay escalation rentals for certain operating expenses and real estate taxes. The Company’s lease in Greenville, South Carolina expires in March 2019.  The Company leases electrical equipment in its production facility in South Carolina with these leases expiring during the 2017 fiscal year.
 
The Company recognizes lease expense on a straight-line basis and recognized $398,590 and $421,038 in lease expense for the fiscal years ending March 31, 2015 and 2014, respectively.  The Company has other liabilities consisting of deferred rent payable of $118,092 and $84,144 at March 31, 2015 and 2014, respectively.  Minimum future rental payments under the leases are summarized as follows:
 
 
2016
 
$
407,410
 
2017
 
 
361,660
 
2018
 
 
224,410
 
2019
 
 
224,410
 
2020
 
 
—
 
2021 and thereafter
 
$
—
 
RELATED PARTIES
RELATED PARTIES
NOTE 8 — RELATED PARTIES
 
The Company incurred expenses of $19,658 for professional and consulting services provided by Adams Monahan, LLP, a firm in which our former board member, Edward S. Adams and Michael R. Monahan were partners, for the fiscal year ended March 31, 2014.  The Company and Adams Monahan LLP terminated their professional relationship on June 30, 2013 and the Company did not incur any expenses with Adams Monahan LLP during the fiscal year ended March 31, 2015.
 
On March 6, 2013, the then Board of Directors retained two then directors, Mr. Michael Monahan and Mr. Theo Strous, to provide consulting services for the Company.  The Company recognized $45,000 in consulting expense for these services during the fiscal year ended March 31, 2014. These consulting service agreements with both Messrs. Monahan and Strous were terminated effective June 30, 2013 and the Company did not incur any consulting expenses related to these agreements during the fiscal year ended March 31, 2015.
 
On January 6, 2014, the then Board of Directors created a Special Litigation Committee (“SLC”) to consider the merits of shareholder allegations made in ongoing litigation.  The Board appointed the current board member Mr. Theo Strous and Mr. Laurence Zipkin, an unaffiliated third party, to the SLC.  During the fiscal year ended March 31, 2014, the Company recognized $93,750 in consulting expense for the shares issued to Mr. Strous and $168,750 in total consulting expenses for the SLC.
 
On May 27, 2014, the Board of Directors appointed Mr. James Korn and Mr. Gerald McGuire as independent members to the Board.  Each of Messrs. Korn and McGuire were provided 250,000 shares of restricted stock upon their appointment to the Board.  On June 16, 2014, the Board of Directors appointed Bruce Likly as a member of Board and further appointed Mr. Likly to serve as the Co-Chairman of the Board.  Mr. Likly was provided with a restricted share grant of 4,000,000 shares upon his appointment to the Board.
 
On June 22, 2014, the equity granted to Messrs. Korn, Likly, and McGuire for their service on the Board of Directors consisting of 250,000, 4,000,000 and 250,000 restricted shares, respectively was returned to the Company.  The Company did not recognize any expense for the restricted shares granted and returned to the Company since none of the grants had vested at the time of their return to the Company.
 
During the fiscal year ended March 31, 2015, five directors of the Company participated in the Company’s private placement stock offering.  Karl Leaverton purchased 333,333 shares for $100,000, Bruce Likly purchased 375,000 shares for $112,500, Lewis Smoak purchased 666,666 shares for $200,000, Bern McPheely purchased 133,333 shares for $40,000, and Ben Wolkowitz purchased 158,333 shares for $47,500.
 
See Item 8, NOTES 10 and 11 for discussion of revenues recognized from our joint venture partners.
INCOME TAXES
INCOME TAXES
NOTE 9 — INCOME TAXES
 
There was no current or deferred tax expense (benefit) for the years ended March 31, 2015 and 2014.
 
The deferred tax asset (liability) at March 31, 2015 and 2014 consists of the following types of temporary differences and their related tax effects:
 
 
 
At March 31,
 
At March 31,
 
 
 
2015
 
2014
 
Accrued expenses
 
$
194,165
 
$
235,998
 
Property and equipment
 
 
(185,992)
 
 
(150,810)
 
Impairment of fixed assets
 
 
299,537
 
 
142,767
 
Capitalized startup/acquisition costs
 
 
461,636
 
 
499,288
 
Federal and state net operating loss carry-forward
 
 
5,344,982
 
 
3,857,269
 
Intangible assets
 
 
59,849
 
 
14,537
 
 
 
$
6,174,177
 
$
4,599,049
 
 
 
 
 
 
 
 
 
Valuation allowance
 
 
(6,174,177)
 
 
(4,599,049)
 
Total
 
$
—
 
$
—
 
 
The Company recorded a valuation allowance against its net deferred tax asset at March 31, 2015 and March 31, 2014, as the Company believes that it is more likely than not that this asset will not be realized.
 
 
 
At March 31, 2015
 
 
At March 31, 2014
 
 
 
Amount
 
%
 
 
Amount
 
%
 
Tax at statutory federal income tax rate
 
$
(1,408,162)
 
(34.0)
%
 
$
(1,683,324)
 
(34.0)
%
Increase (decrease) resulting from:
 
 
 
 
 
 
 
 
 
 
 
 
State income tax expense
 
 
—
 
0.0
%
 
 
—
 
0.0
%
Change in valuation allowance
 
 
1,406,400
 
34.0
%
 
 
1,671,941
 
33.8
%
Incentive stock options
 
 
—
 
0.0
%
 
 
—
 
0.0
%
Other, net
 
 
1,762
 
0.0
%
 
 
11,383
 
0.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
—
 
0.0
%
 
$
—
 
0.0
%
 
The Company had federal and state net operating loss carry-forwards (“carry-forward”) of $16,447,935 and $10,231,000 at March 31, 2015 and 2014 respectively.  These carry-forwards start to expire in the year 2031.
INVESTMENT IN GRACE RICH JOINT VENTURE (Grace Rich LTD [Member])
INVESTMENT IN GRACE RICH JOINT VENTURE
NOTE 10 — INVESTMENT IN GRACE RICH JOINT VENTURE
 
On September 16, 2013, the Company entered into a series of agreements with SAAMABA, LLC (“SAAMABA”) and S21 Research Holdings (the “Grace Rich Agreements”) to form a joint venture with operations in the People’s Republic of China (“PRC”) to deploy a minimum of 100 Company designed diamond growing machines.  Through the Grace Rich Agreements, the Company owns 30% of Grace Rich LTD, a corporation duly established pursuant to the laws of the Hong Kong Special Administrative Region of the PRC that is an investment and holding company for the factory and distribution center to be formed pursuant to the laws of the PRC as a wholly foreign owned enterprise. 
 
Under the Grace Rich Agreements, the Company has agreed to license its proprietary technology for the manufacture of diamond gemstones of agreed upon specifications.  In exchange for the license, the Company will receive licensing revenue and 30% ownership in the joint venture.  In addition to the licensed technology, the Grace Rich Agreements include obligations for the Company to provide and be compensated for technology consulting services to the joint venture to support the start-up of operations. 
 
The initial ownership interests in Grace Rich LTD are as follows:  SAAMABA LLC- 60%; Scio Diamond Technology Corporation – 30% and S21 Holdings- 10%.  The capital contributions required to finance Grace Rich LTD are requirements of SAAMABA, and the Company is not required to make any on-going funding contributions to the joint venture and its ownership stake cannot be reduced from 30%.
 
The Company is licensing a portion of its patented technology to Grace Rich LTD and is not directly contributing any of its intellectual property.  Under the license agreement, the Company received $250,000 in licensing fees and $750,000 in development fees.  The Company believes the joint venture will be operational during calendar year 2016 and  once operations of Grace Rich LTD have commenced, the Company will receive $250 per machine per month in licensing fees with a minimum monthly payment of $25,000 until the joint venture starts to distribute cash to its partners.
 
The Company has determined the fair value of the license agreement does not exceed the value of the expected returns from the joint venture and accordingly established an initial investment value of $0 for its interests in the joint venture and has not recorded any gains related to its contribution to the joint venture.  Grace Rich LTD was in its development stage through March 31, 2015 and did not have any revenues.  Expenses incurred by the joint venture were for planning and startup expenses.  
 
As of March 31, 2015, the Company has not guaranteed obligations of the joint venture nor has it committed to provide additional funding. Therefore, the Company’s share of the joint venture’s net loss for the years ended March 31, 2015 or 2014 were not recognized because the initial carrying value of the Company’s ownership interest in the joint venture was zero.
 
The Company recognized $375,000 and $625,000 in licensing revenues from Grace Rich during the fiscal years ended March 31, 2015 and 2014, respectively. The Company recognized $10,801 of product revenue from Grace Rich during the fiscal year ended March 31, 2015. The Company incurred $96,776 and $151,359 of joint venture related expenses during the fiscal years ended March 31, 2015 and 2014, respectively that were reimbursed by the Grace Rich LTD.  These reimbursements were offset against the Company’s related operating expense.  The Company had no outstanding receivables from of payables due Grace Rich LTD at March 31, 2015.  
INVESTMENT IN RCDC JOINT VENTURE (Renaissance Created Diamond Company, LLC [Member])
INVESTMENT IN RCDC JOINT VENTURE
NOTE 11 — INVESTMENT IN RCDC JOINT VENTURE
 
On December 18, 2014 the Company entered into an arrangement with Renaissance Diamonds, Inc. (“Renaissance”) through the execution of a limited liability company agreement (the “LLC Agreement”) of Renaissance Created Diamond Company, LLC, a Florida limited liability company (“RCDC”), pursuant to which the Company and Renaissance are each 50% members of RCDC.
 
The LLC Agreement provides that RCDC is a manager-managed limited liability company, and each of the Company and Renaissance will appoint one manager, with both such managers appointing a third manager.  The managers will manage the day-to-day operations of RCDC, subject to certain customary limitations on managerial actions that require the consent of the Company and Renaissance, including but not limited to making or guaranteeing loans, distributing cash or other property to the members of RCDC, entering into affiliate transactions, amending or modifying limited liability company organizational documents, and entering into major corporate events, such as a merger, acquisition or asset sale.
 
The arrangement was entered into in order to facilitate the development of procedures and recipes for, and to market and sell, lab-grown fancy-colored diamonds.  Pursuant to the LLC Agreement, the arrangement will last three years, unless terminated earlier, with the option to automatically renew for additional two-year periods.
 
The Company made an initial $1,000 investment in RCDC and was granted a 50% equity stake.  RCDC has the right of first refusal to purchase diamond gemstones from the Company, including rough diamond preforms or processed stones.  Renaissance may sell seed stock to RCDC for production by the Company.  RCDC purchase rough diamond material produced by the Company, finishes the rough gemstones and, in turn, sells the finished stones to various retailers and other participants in the market for gemstones.  Profits generated by RCDC’s operations will be distributed between the Company and Renaissance according to the terms of the LLC Agreement.
 
Through March 31, 2015 the operations of RCDC have been focused on the development and processing of diamond material into finished Gemstone material and establishing sales and distribution channels for the finished goods.  Through March 31, 2014, the Company has sold product to RCDC valued at $241,950.  The Company defers recognition of revenues and expenses on these sales to RCDC until finished goods are sold by RCDC.  Through March 31, 2015, the Company recognized $26,575 in revenue for product sold to RCDC and has deferred $215,375 of revenue and $179,969 of expenses related to our sales to RCDC. The Company anticipates recognizing this deferred revenue and expense as RCDC sells through its inventory. 
 
The Company utilizes the equity method of accounting for its investment in RCDC.  As such, the Company recognized $29,041 as its proportional shares of RCDC’s net income during the fiscal year ended March 31, 2015 as other income.
 
Rollforward of the Company’s ownership interest in the joint venture for the year ended March 31, 2015:

 

Balance of ownership interest in joint venture at December 18, 2014
 
$
1,000
 
Aggregate fiscal 2014 equity gain – share of joint venture income
 
 
29,041
 
Balance of ownership interest in joint venture at March 31, 2015
 
$
30,041
 
 
 
 
 
 
Cumulative recognized income on ownership interest in joint venture at March 31, 2015
 
$
29,041
 
 
Selected financial results for RCDC from inception through March 31, 2015 are as follows:
 
Revenues
 
$
124,908
 
Expenses
 
 
66,825
 
Net Income
 
$
58,083
 
 
 
 
 
 
Total Assets
 
$
551,405
 
 
 
 
 
 
Total Liabilities
 
$
491,322
 
Total Partners Capital
 
 
60,083
 
Total Liabilities and Partner Capital
 
$
551,405
 
LITIGATION
LITIGATION
NOTE 12 — LITIGATION
 
On October 15, 2013, plaintiff Mark P. Sennott, as Trustee of the Sennott Family Charitable Trust, (“Sennott”) filed a complaint derivatively, on behalf of ADI, in the United Stated District Court for the District of South Carolina (“District Court”), against Edward S. Adams (our then Chairman), Michael R. Monahan (a former member of the Company’s Board of Directors), the law firm of Adams Monahan, LLP, Loblolly, Inc., which was formerly known as Scio Diamond Technology Corporation, and the Company (collectively, “Sennott Defendants”).  This derivative complaint on ADI’s behalf (the “ADI Derivative Complaint”) alleges claims for breach of fiduciary duty, constructive fraud and unjust enrichment.  The ADI Derivative Complaint was effectively settled on June 23, 2014.  The settlement included all claims previously asserted against the Company by the parties named in the Settlement Agreement.  As part of the settlement Agreement, 1,000,000 shares of common stock were returned to the Company and cancelled. On February 13, 2015, the District Court entered an order approving the Stipulation of Dismissal of the Derivative Action with Prejudice.
 
On May 16, 2014 the Company received a subpoena issued by the SEC ordering the provision of documents and related information concerning various corporate transactions between the Company and its predecessors and other persons and entities.  The Company continues to cooperate with this inquiry.
 
The Company recognizes legal fees for litigation as they are incurred as professional and consulting fees.  The Company then submits the expenses to our insurance carrier for reimbursement under our insurance policy.  During the fiscal year ended March 31, 2015, our insurance carrier paid $168,015 for past legal fees from the prior fiscal year.   This payment is recorded as a reduction to professional fees during the fiscal year ending March 31, 2015.
 
During the fiscal year ended March 31, 2015, the Company reached an agreement with a former legal services provider that allowed the Company to settle outstanding past legal fees from prior fiscal years.  This settlement of $165,453 was recorded as forgiveness of legal accounts payable during the fiscal year.
SUBSEQUENT EVENTS
SUBSEQUENT EVENTS
NOTE 13 – SUBSEQUENT EVENTS
 
On May 7, 2015, the Board of Directors of the Company approved restricted stock awards for Mr. Gerald McGuire, the Company President and Chief Executive Officer and Mr. Jonathan Pfohl, the Company Chief Financial Officer.  Mssrs. McGuire and Pfohl were granted 400,000 and 385,000 restricted shares of stock, respectively that will vest on July 1, 2018.  The restricted shares are valued at $1.03, the closing price of the Company’s stock on May 7, 2015. The Company anticipates recognizing compensation expense for these restricted stock awards on a straight line basis over the vesting period.
 
In addition, on May 7, 2015, the Board of Directors granted Renaissance Diamond Inc. a restricted stock award of 200,000 shares and a grant of 333,333 non-qualified stock options that only vest based on the attainment of specific performance criteria.  The Company does not anticipate recognizing any financial impact for these restricted stock and option awards unless the performance criteria are met.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)
Going Concern 
Going Concern
 
The Company has generated little revenue to date and consequently its operations are subject to all risks inherent in the establishment and commercial launch of a new business enterprise.
 
These factors raise substantial doubt about the Company’s ability to continue as a going concern. During the year ended March 31, 2015, management has responded to these circumstances by taking the following actions:
 
⋅
Raised $2 million in equity investment in the Company in the form of private placements of common shares to accredited investors.  Funds have been used to fund current operations;
⋅
Raised $2.5 million in investment in the Company in the form of secured debt.  Funds have been used to re-finance higher interest rate secured debt, the expansion of our operations and to fund current operations;
⋅
Established a joint venture with Renaissance Diamonds, Inc. focused on the creation of recipes and procedures to develop, market, and sell lab-grown fancy-colored diamonds; and
⋅
Enhanced efforts on expanding and optimizing production of existing manufacturing capabilities.
Accounting Basis 
Accounting Basis
 
The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
 
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, provision for doubtful accounts, sales returns, provision for inventory obsolescence, fair value of acquired intangible assets, useful lives of intangible assets and property and equipment, employee stock options, and contingencies and litigation, among others. The Company generally bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual amounts recorded could differ materially from those estimates
 
                In accordance with Accounting Standards Codification (“ASC”) 323, Investments—Equity Method and Joint Ventures, the Company uses the equity method of accounting for investments in corporate joint ventures for which the Company has the ability to exercise significant influence but does not control and is not the primary beneficiary. Significant influence typically exists if the Company has a 20% to 50% ownership interest in the venture unless predominant evidence to the contrary exists. Under this method of accounting, the Company records its proportionate share of the net earnings or losses of equity method investees and a corresponding increase or decrease to the investment balances. Cash payments to equity method investees such as additional investments, loans and advances and expenses incurred on behalf of investees, as well as payments from equity method investees such as dividends, distributions and repayments of loans and advances are recorded as adjustments to investment balances. When the Company’s carrying value in an equity method investee is reduced to zero, no further losses are recorded in the Company’s financial statements unless the Company guaranteed obligations of the equity method investee or has committed additional funding.   When the equity method investee subsequently reports income, the Company will not record its share of such income until it equals the amount of its share of losses not previously recognized.  The Company evaluates its equity method investments for impairment whenever events or changes in circumstances indicate that the carrying amounts of such investments may not be recoverable.
 
Fair Value of Financial Instruments 
Fair Value of Financial Instruments
 
The  carrying  value  of  cash and cash equivalents,  accounts receivable, accounts  payable  and  notes  payable  approximate  their  fair  value  due  to  the  short-term nature of  these instruments.
Cash and Cash Equivalents 
Cash and Cash Equivalents
 
For purposes of the statement of cash flows, the Company considers highly liquid financial instruments purchased with an original maturity of three months or less when purchased to be cash equivalents.  At March 31, 2015 and 2014, the Company held no cash equivalents.
Basic and Diluted Net Loss per Share 
Basic and Diluted Net Loss per Share
 
Net loss per share is presented under two formats: basic net loss per common share, which is computed using the weighted average number of common shares outstanding during the period, and diluted net loss per common share, which is computed using the weighted average number of common shares outstanding, and the weighted average dilutive potential common shares outstanding, computed using the treasury stock method. Currently, for all periods presented, diluted net loss per share is the same as basic net loss per share as the inclusion of weighted average shares of common stock issuable upon the exercise of options and warrants would be anti-dilutive.
 
The following table summarizes the number of securities outstanding at each of the periods presented, which were not included in the calculation of diluted net loss per share as their inclusion would be anti-dilutive:
 
 
 
March 31,
 
 
 
2015
 
2014
 
Common stock options and warrants
 
5,799,295
 
9,609,295
 
Allowance for Doubtful Accounts 
Allowance for Doubtful Accounts
 
An allowance for uncollectible accounts receivable is maintained for estimated losses from customers’ failure to make payment on accounts receivable due to the Company. Management determines the estimate of the allowance for uncollectible accounts receivable by considering a number of factors, including: (1) historical experience, (2) aging of accounts receivable and (3) specific information obtained by the Company on the financial condition and the current credit worthiness of its customers. The Company also maintains a provision for estimated returns and allowances based upon historical experience.  The Company has determined that an allowance was not necessary at March 31, 2015 or 2014.
Other Receivables 
Other Receivables
 
As of March 31, 2014, the Company considered a pending insurance settlement over the actions of a Company supplier of $89,192 as an other receivable.  This settlement was paid during the fiscal year ended March 31, 2015.
Inventories 
Inventories
 
Inventories are stated at the lower of average cost or market. The carrying value of inventory is reviewed and adjusted based upon slow moving and obsolete items. Inventory costs include material, labor, and manufacturing overhead and are determined by the “first-in, first-out” (FIFO) method.  The components of inventories are as follows:
 
 
 
March 31,
 
March 31,
 
 
 
2015
 
2014
 
Raw materials and supplies
 
$
58,390
 
$
35,543
 
Work in process
 
 
31,371
 
 
25,611
 
Finished goods
 
 
205,999
 
 
91,663
 
 
 
$
295,760
 
$
152,817
 
 
During the first fiscal quarter of the fiscal year ended March 31, 2015, we experienced selling prices that were lower than cost and as a result recorded a lower of cost or market write down of $68,722 to the value of our inventory which is included in cost of good sold.  During the fiscal year ended March 31, 2014, the Company recorded a lower of cost or market write down to inventory of $100,557 which is included in cost of goods sold.   The estimation of the total write-down to inventory involves management judgments and assumptions, including assumptions regarding future selling price forecasts, the estimated costs to complete and disposal costs.
Property, Plant and Equipment 
Property, Plant and Equipment
 
Depreciation of property, plant and equipment is on a straight line basis beginning at the time it is placed in service, based on the following estimated useful lives:
 
 
 
Years
 
Machinery and equipment
 
3–15
 
Furniture and fixtures
 
3–10
 
Engineering equipment
 
5–12
 
 
Leasehold improvements which are included in facility fixed assets on the balance sheet are depreciated over the lesser of the remaining term of the lease or the life of the asset (generally three to seven years).
 
Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. Manufacturing equipment was placed into service beginning July 1, 2012.  The Company incurred total depreciation expense of $619,656 and $700,690 for the years ended March 31, 2015 and 2014, respectively.
 
During the fiscal year ended March 31, 2015, the Company disposed of assets held for sale of $20,000 and of fixed assets that were no longer necessary for the Company’s operations with a net book value of $162,609.  During the fiscal year ended March 31, 2014, the Company closed its operations in Hudson, Massachusetts and recognized a loss of $129,308 for the disposal of certain fixed assets at the location.  Concurrent with the closing of the Hudson facility, the Company re-evaluated the useful life of certain fixed assets acquired from ADI in 2012 and decided that an impairment charge related to these assets of $381,798 was appropriate.
Intangible Assets 
Intangible Assets
 
Intangible assets, such as acquired in-process research and development costs, are considered to have an indefinite useful life until such time as they are put into service at which time they will be amortized on a straight-line basis over the shorter of their economic or legal useful life. Management evaluates indefinite life intangible assets for impairment on an annual basis and on an interim basis if events or changes in circumstances between annual impairment tests indicate that the asset might be impaired. The ongoing evaluation for impairment of its indefinite life intangible assets requires significant management estimates and judgment. Management reviews definite life intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the fiscal year ended March 31, 2015, management evaluated assets included in IPRD and determined that certain projects will no longer be pursued for further development resulting in an impairment charge of $418,065 being recognized during the fiscal year.  There were no impairment charges during the fiscal year ended March 31, 2014.
Income Taxes 
Income Taxes
 
Income taxes are accounted for under the asset and liability method. Deferred income taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. Valuation allowances are provided against deferred tax assets when it is more likely than not that an asset will not be realized in accordance with ASC 740, Accounting for Income Taxes.
 
Management has evaluated the potential impact in accounting for uncertainties in income taxes and has determined that it has no significant uncertain income tax positions as of March 31, 2015 or 2014.  Income tax returns subject to review by taxing authorities include March 31, 2010 through March 31, 2015.
Stock-based Compensation 
Stock-based Compensation
 
Stock-based compensation for the value of stock options is estimated on the date of the grant using the Black-Scholes option-pricing model. The Black-Scholes model takes into account implied volatility in the price of the Company’s stock, the risk-free interest rate, the estimated life of the equity-based award, the closing market price of the Company’s stock on the grant date and the exercise price. The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management judgment.
Concentration of Credit Risk 
Concentration of Credit Risk
 
During the year ended March 31, 2015 the Company had 31 different customers and one customer accounted for more than 10% of our total revenues.  This customer was Grace Rich LTD, our joint venture partner that accounted for $385,801 of total revenue.  At the end of the fiscal year ended March 31, 2015, the Company was selling substantially all of its production to the RCDC joint venture and had a receivable from RCDC at March 31, 2015 of $241,950.  The Company expects this concentration of sales to RCDC to continue in the future. 
Revenue Recognition 
Revenue Recognition
 
We recognize product revenue when persuasive evidence of an arrangement exists, delivery of products has occurred, the sales price is fixed or determinable, and collectability is reasonably assured. For our Company, this generally means that we recognize revenue when we or our fabrication vendor has shipped finished product to the customer. Our sales terms do not allow for a right of return except for matters related to any manufacturing defects on our part. 
 
For product sales to our joint venture partners for further processing and finishing, we currently defer all revenues when products are shipped.  We currently recognize revenue when the joint venture partner sells the finished goods manufactured from our materials.  Licensing and development revenues are recognized in the month as detailed in appropriate licensing and development contracts. In the event that licensing funds are received prior to the contractual commitment, the Company will recognize deferred revenue (liability) for the amount received.
Recent Accounting Pronouncements 
Recent Accounting Pronouncements
 
In July 2012, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment (the revised standard). Under the amendments in this updates, a company has the option first to assess qualitative factors to determine whether the existence of events and circumstances indicates that the it is more likely than not that the indefinite-lived intangible assert is impaired as a basis for determining whether it is necessary to perform the qualitative impairment test in accordance with Topic 350.  The more likely than not threshold is defined as having a likely-hood of more than fifty percent.  If after assessing the qualitative factors, a company determines it does not meet the more likely than not threshold, a company is required to perform the quantitative impairment test by calculating the fair value of an indefinite-lived intangible asset and comparing the fair value with the carrying amount of the asset.  The Amendments in this update are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. The Company adopted this new standard in the fiscal year ended March 31, 2014 and the adoption did not have a significant impact on its financial statements.
 
In July 2013, the FASB issued ASU 2013-11, Income Taxes – Presentation of an Unrecognized Tax benefit When a Net Operation Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (“ASU 2013-11”) which is part of ASC 740, Income Taxes.  The new guidance requires and entity to present an unrecognized tax benefit and an NOL carryforward, a similar tax loss or a tax credit carryforward on a net basis as part of a deferred tax asset, unless the unrecognized tax benefit is not available to reduce the deferred tax asset component or would not be utilized for that purpose, then a liability would be recognized.  ASU 2013-11 is effective for annual and interim periods for fiscal years beginning after December 15, 2013.  The Company is currently evaluating the impact of the April 1, 2014 adoption of this guidance on its financial statements.
 
In May 2014, the FASB issued ASU 2014-9, Revenue from Contracts with Customers (Topic 606). This guidance requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for annual reporting periods beginning after December 15, 2016 and early adoption is not permitted. The Company will adopt this standard in fiscal year 2018. The Company has not yet determined the effect, if any, that the adoption of this standard will have on the Company’s financial position or results of operations.
   
On May 28, 2014, the FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)," which affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The guidance supersedes the revenue recognition guidance in Topic 605, "Revenue Recognition", and most industry-specific guidance throughout the Industry Topics of the Codification. The guidance also supersedes some cost guidance included in Subtopic 605-35, "Revenue Recognition- Contract-Type and Production-Type Contracts". On April 1, 2015, the FASB voted to propose to defer the effective date of the pronouncement by one year. ASU 2014-9, as amended, is effective for annual periods, and interim periods within those years, beginning after December 15, 2016, or December 31, 2017, if deferred. An entity is required to apply the amendments using one of the following two methods:  i) retrospectively to each prior period presented with three possible expedients: a) for completed contracts that begin and end in the same reporting period no restatement is required,  b) for completed contract with variable consideration an entity may use the transaction price at completion  rather than restating estimated variable consideration amounts in comparable reporting periods and c) for comparable reporting periods before date of initial application reduced disclosure  requirements  related to transaction price; ii) retrospectively  with the cumulative effect of initially applying the amendment  recognized at the date of initial application with additional disclosures for the differences of the prior guidance to the reporting periods compared to the new guidance and an explanation of the reasons for significant changes. We are required to adopt ASU 2014-09 in the first quarter of fiscal 2018, or in the first quarter of fiscal 2019, if deferred, and we are currently assessing the impact of this pronouncement on our financial statements.
 
In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern, which requires management to assess, at each annual and interim reporting period, the entity's ability to continue as a going concern within one year after the date that the financial statements are issued and provide related disclosures. The ASU is effective for the year ended March 31, 2017, with early adoption permitted. The Company has assessed the impact of this standard and does not believe that it will have a material impact on the Company’s financial statements or disclosures. 
 
There are currently no other accounting standards that have been issued but not yet adopted by the Company that will have a significant impact on the Company’s financial position, results of operations or cash flows upon adoption.
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)
Summary of anti-dilutive securities excluded from the calculation of diluted net loss per share 
The following table summarizes the number of securities outstanding at each of the periods presented, which were not included in the calculation of diluted net loss per share as their inclusion would be anti-dilutive:
 
 
 
March 31,
 
 
 
2015
 
2014
 
Common stock options and warrants
 
5,799,295
 
9,609,295
 
Schedule of components of inventories 
The components of inventories are as follows:
 
 
 
March 31,
 
March 31,
 
 
 
2015
 
2014
 
Raw materials and supplies
 
$
58,390
 
$
35,543
 
Work in process
 
 
31,371
 
 
25,611
 
Finished goods
 
 
205,999
 
 
91,663
 
 
 
$
295,760
 
$
152,817
 
Schedule of estimated useful lives of property, plant and equipment 
Depreciation of property, plant and equipment is on a straight line basis beginning at the time it is placed in service, based on the following estimated useful lives:
 
 
 
Years
 
Machinery and equipment
 
3–15
 
Furniture and fixtures
 
3–10
 
Engineering equipment
 
5–12
 
INTANGIBLE ASSETS (Tables)
Schedule of intangible assets 
Intangible assets consist of the following:
 
 
 
 
 
March 31,
 
March 31,
 
 
 
Life
 
2015
 
2014
 
Patents, gross
 
6.75 – 19.46
 
$
8,135,063
 
$
8,135,063
 
In-process research and development
 
Indefinite
 
 
1,832,370
 
 
2,250,435
 
 
 
 
 
 
9,967,433
 
 
10,385,498
 
Accumulated amortization
 
 
 
 
(1,919,485)
 
 
(1,144,858)
 
Net intangible assets
 
 
 
$
8,047,948
 
$
9,240,640
 
Schedule of estimated annual amortization expense of intangible assets 
Total annual amortization expense of finite lived intangible assets is estimated to be as follows:
 
Fiscal Year Ending
 
 
 
 
March 31, 2016
 
$
774,840
 
March 31, 2017
 
 
774,840
 
March 31, 2018
 
 
774,840
 
March 31, 2019
 
 
774,840
 
March 31, 2020
 
 
595,159
 
Thereafter
 
$
2,521,059
 
SHARE-BASED COMPENSATION (Tables)
Schedule of options to purchase shares of the Company's stock issued and outstanding 
The following sets forth the options to purchase shares of the Company’s stock issued and outstanding as of March 31, 2015:
 
 
 
 
 
Weighted-
 
Weighted-Average
 
 
 
 
 
Average Exercise
 
Remaining
 
Options
 
Shares
 
Price
 
Contractual Term
 
Options Outstanding April 1, 2013
 
4,092,500
 
$
0.87
 
2.29
 
Granted
 
706,250
 
 
0.36
 
—
 
Exercised
 
—
 
 
—
 
—
 
Expired/Cancelled
 
(456,250)
 
 
0.73
 
—
 
Options Outstanding March 31, 2014
 
4,342,500
 
$
0.77
 
1.75
 
Granted
 
—
 
 
—
 
—
 
Exercised
 
—
 
 
—
 
—
 
Expired/cancelled
 
(4,110,000)
 
 
0.79
 
—
 
Options Outstanding March 31, 2015
 
232,500
 
$
0.35
 
1.45
 
Exercisable at March 31, 2015
 
23,125
 
$
0.44
 
1.20
 
Summary of the status of non-vested shares 
A summary of the status of non-vested shares as of March 31, 2015 and changes during the year ended March 31, 2015 is presented below.
 
 
 
 
 
Weighted Average
 
 
 
 
 
Grant-Date
 
Non-vested Shares
 
Shares
 
Fair Value
 
Non-vested at April 1, 2013
 
2,466,167
 
$
0.65
 
Granted
 
706,250
 
 
0.22
 
Vested
 
(575,625)
 
 
0.45
 
Expired/cancelled: non-vested
 
(182,000)
 
 
0.38
 
Non-vested at March 31, 2014
 
2,414,792
 
 
0.49
 
Granted
 
—
 
 
—
 
Vested
 
(122,000)
 
 
0.43
 
Expired/cancelled: non-vested
 
(2,083,417)
 
 
0.52
 
Non-vested at March 31, 2015
 
209,375
 
$
0.21
 
Summary of information about stock options outstanding by price range 
The following table summarizes information about stock options outstanding by price range as of March 31, 2015:
 
 
 
 
Options Outstanding
 
Options Exercisable
 
Exercise Price
 
Number
Outstanding
 
Weighted Average
Remaining
Contractual Life
(years)
 
Weighted Average 
Exercise Price
 
Number of
Shares
 
Weighted Average 
Exercise Price
 
$
0.80
 
7,500
 
0.27
 
$
0.80
 
5,500
 
$
0.80
 
$
0.33
 
225,000
 
1.49
 
 
0.33
 
17,625
 
 
0.33
 
 
 
 
232,500
 
1.45
 
$
0.35
 
23,125
 
$
0.44
 
OPERATING LEASES (Tables)
Summary of the minimum future rental payments under the leases
Minimum future rental payments under the leases are summarized as follows:
 
 
2016
 
$
407,410
 
2017
 
 
361,660
 
2018
 
 
224,410
 
2019
 
 
224,410
 
2020
 
 
—
 
2021 and thereafter
 
$
—
 
INCOME TAXES (Tables)
Schedule of Deferred Tax Assets and Liabilities 
The deferred tax asset (liability) at March 31, 2015 and 2014 consists of the following types of temporary differences and their related tax effects:
 
 
 
At March 31,
 
At March 31,
 
 
 
2015
 
2014
 
Accrued expenses
 
$
194,165
 
$
235,998
 
Property and equipment
 
 
(185,992)
 
 
(150,810)
 
Impairment of fixed assets
 
 
299,537
 
 
142,767
 
Capitalized startup/acquisition costs
 
 
461,636
 
 
499,288
 
Federal and state net operating loss carry-forward
 
 
5,344,982
 
 
3,857,269
 
Intangible assets
 
 
59,849
 
 
14,537
 
 
 
$
6,174,177
 
$
4,599,049
 
 
 
 
 
 
 
 
 
Valuation allowance
 
 
(6,174,177)
 
 
(4,599,049)
 
Total
 
$
—
 
$
—
 
Schedule of Effective Income Tax Rate Reconciliation 
 
 
At March 31, 2015
 
 
At March 31, 2014
 
 
 
Amount
 
%
 
 
Amount
 
%
 
Tax at statutory federal income tax rate
 
$
(1,408,162)
 
(34.0)
%
 
$
(1,683,324)
 
(34.0)
%
Increase (decrease) resulting from:
 
 
 
 
 
 
 
 
 
 
 
 
State income tax expense
 
 
—
 
0.0
%
 
 
—
 
0.0
%
Change in valuation allowance
 
 
1,406,400
 
34.0
%
 
 
1,671,941
 
33.8
%
Incentive stock options
 
 
—
 
0.0
%
 
 
—
 
0.0
%
Other, net
 
 
1,762
 
0.0
%
 
 
11,383
 
0.2
%
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
$
—
 
0.0
%
 
$
—
 
0.0
%
INVESTMENT IN RCDC JOINT VENTURE (Tables)
Schedule Of Rollforward Of Ownership Interest In Joint Venture 
Rollforward of the Company’s ownership interest in the joint venture for the year ended March 31, 2015:

 

Balance of ownership interest in joint venture at December 18, 2014
 
$
1,000
 
Aggregate fiscal 2014 equity gain – share of joint venture income
 
 
29,041
 
Balance of ownership interest in joint venture at March 31, 2015
 
$
30,041
 
 
 
 
 
 
Cumulative recognized income on ownership interest in joint venture at March 31, 2015
 
$
29,041
 
Schedule Of Selected Financial Results Of Joint Venture 
Selected financial results for RCDC from inception through March 31, 2015 are as follows:
 
Revenues
 
$
124,908
 
Expenses
 
 
66,825
 
Net Income
 
$
58,083
 
 
 
 
 
 
Total Assets
 
$
551,405
 
 
 
 
 
 
Total Liabilities
 
$
491,322
 
Total Partners Capital
 
 
60,083
 
Total Liabilities and Partner Capital
 
$
551,405
 
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Class of Stock [Line Items]
 
 
Common stock options and warrants (in shares)
5,799,295 
9,609,295 
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) (USD $)
Mar. 31, 2015
Mar. 31, 2014
Inventories
 
 
Raw materials and supplies
$ 58,390 
$ 35,543 
Work in process
31,371 
25,611 
Finished goods
205,999 
91,663 
Inventory Net
$ 295,760 
$ 152,817 
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2)
12 Months Ended
Mar. 31, 2015
Machinery and Equipment [Member] |
Maximum [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
15 years 
Machinery and Equipment [Member] |
Minimum [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
3 years 
Furniture and Fixtures [Member] |
Maximum [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
10 years 
Furniture and Fixtures [Member] |
Minimum [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
3 years 
Engineering equipment [Member] |
Maximum [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
12 years 
Engineering equipment [Member] |
Minimum [Member]
 
Property, Plant and Equipment [Line Items]
 
Estimated useful lives
5 years 
ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
Other Receivables
 
$ 89,192 
Proceeds from Issuance of Private Placement
2,000,000 
 
Impairment Charge
418,065 
0 
Secured Debt
2,500,000 
 
Gain (Loss) on Disposition of Assets
162,609 
129,308 
Disposal Group, Including Discontinued Operation, Property, Plant and Equipment
381,798 
 
Concentration Risk, Customer
31 
 
Inventory Write-down
68,722 
100,557 
Assets held for sale
20,000 
 
Sales Revenue, Net [Member]
 
 
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
Concentration Risk, Benchmark Description
10% 
 
Sales Revenue, Net [Member] |
Grace Rich LTD [Member]
 
 
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
Concentration Risk, Net Assets Amount, Geographic Area
385,801 
 
Sales Revenue, Net [Member] |
Diamond Company, LLC [Member]
 
 
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
Concentration Risk, Net Assets Amount, Geographic Area
241,950 
 
Equipment [Member]
 
 
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
Depreciation
619,656 
700,690 
In Process Research and Development [Member]
 
 
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
Impairment Charge
$ 418,065 
 
Maximum [Member]
 
 
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
Equity Method Investment, Ownership Percentage
50.00% 
 
Minimum [Member]
 
 
Organization And Summary Of Significant Accounting Policies [Line Items]
 
 
Equity Method Investment, Ownership Percentage
20.00% 
 
INTANGIBLE ASSETS (Details) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Mar. 31, 2015
Patents [Member]
Mar. 31, 2014
Patents [Member]
Mar. 31, 2015
Patents [Member]
Minimum [Member]
Mar. 31, 2015
Patents [Member]
Maximum [Member]
Mar. 31, 2015
In Process Research and Development [Member]
Mar. 31, 2014
In Process Research and Development [Member]
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
Finite-Lived Intangible Assets, Gross
$ 9,967,433 
$ 10,385,498 
$ 8,135,063 
$ 8,135,063 
 
 
$ 1,832,370 
$ 2,250,435 
Accumulated amortization
(1,919,485)
(1,144,858)
 
 
 
 
 
 
Net intangible assets
$ 8,047,948 
$ 9,240,640 
 
 
 
 
 
 
Amortization period
 
 
 
 
6 years 9 months 
19 years 5 months 16 days 
 
 
INTANGIBLE ASSETS (Details 1) (USD $)
Mar. 31, 2015
Estimated annual amortization expense of intangible assets
 
March 31, 2016
$ 774,840 
March 31, 2017
774,840 
March 31, 2018
774,840 
March 31, 2019
774,840 
March 31, 2020
595,159 
Thereafter
$ 2,521,059 
INTANGIBLE ASSETS (Details Textual) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Finite-Lived Intangible Assets [Line Items]
 
 
Intangible Assets
$ 774,627 
$ 775,011 
Impairment charge
418,065 
0 
In Process Research and Development [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Impairment charge
$ 418,065 
 
NOTES PAYABLE (Details Textual) (USD $)
0 Months Ended 0 Months Ended 1 Months Ended 1 Months Ended
Dec. 16, 2016
Dec. 16, 2014
Mar. 31, 2015
Heritage Gemstone Investors, LLC [Member]
Mar. 31, 2015
Heritage Gemstone Investors, LLC [Member]
Manufacturing Facility [Member]
Mar. 31, 2015
Heritage Gemstone Investors, LLC [Member]
Machinery and Equipment [Member]
Oct. 16, 2014
Revolving Promissory Note [Member]
Oct. 16, 2014
Deferred Interest Promissory Note [Member]
Dec. 15, 2014
HGI Loan Agreement [Member]
Dec. 18, 2014
HGI Loan Agreement [Member]
Dec. 16, 2014
HGI Loan Agreement [Member]
Oct. 17, 2014
New Revolving Promissory Note [Member]
Oct. 16, 2014
New Revolving Promissory Note [Member]
Oct. 11, 2013
Promissory Note [Member]
Jun. 21, 2013
Promissory Note [Member]
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Maximum borrowing capacity
 
 
 
 
 
 
 
 
 
$ 2,000,000 
 
 
 
 
Annual interest rate (as a percent)
 
 
 
 
 
 
 
 
 
7.25% 
 
 
 
 
Loan draw
 
 
 
 
 
 
 
 
2,000,000 
 
 
 
 
 
Line of Credit Facility, Amount Outstanding
 
 
 
 
 
1,500,000 
63,619 
 
 
 
 
 
 
 
Line of Credit Facility, Interest Rate at Period End
 
 
 
 
 
 
18.00% 
 
 
 
 
18.00% 
 
 
Minimum Amount Of Maintain Book Net Worth
 
4,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term Debt, Gross
 
 
 
 
 
 
 
 
 
 
1,500,000 
 
500,000 
1,000,000 
Debt Instrument, Maturity Date
 
 
 
 
 
 
Dec. 19, 2014 
Oct. 11, 2013 
 
 
Jun. 30, 2015 
 
 
 
Notes Payable, Related Parties
 
 
500,000 
 
 
 
 
 
 
 
 
 
 
 
Other Borrowings
 
 
 
$ 300,000 
$ 200,000 
 
 
 
 
 
 
 
 
 
Sale Leaseback Transaction, Lease Terms
ten years 
 
 
 
 
 
 
 
 
 
 
 
 
 
CAPITAL STOCK (Details Textual) (USD $)
12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended 1 Months Ended 0 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Jun. 23, 2014
Mar. 31, 2016
Scenario, Forecast [Member]
Sep. 25, 2014
Accredited Investors [Member]
Jul. 15, 2014
Accredited Investors [Member]
Oct. 30, 2014
Bradley Robb [Member]
Dec. 23, 2014
Common Stock [Member]
Mar. 31, 2015
Common Stock [Member]
Mar. 31, 2014
Common Stock [Member]
Dec. 23, 2014
Common Stock [Member]
Accredited Investors [Member]
Mar. 31, 2015
Mr Joseph Cunningham [Member]
Jun. 20, 2014
Mr Michael Laub [Member]
Restricted Stock [Member]
Oct. 30, 2014
Affiliated Entity [Member]
Mar. 12, 2015
Renaissance Diamond [Member]
Class of Stock [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, shares authorized (in shares)
75,000,000 
75,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common stock, par value (in dollars per share)
$ 0.001 
$ 0.001 
 
 
 
 
 
 
 
 
 
 
 
 
 
Consulting Expenses
 
 
 
 
 
 
 
 
 
 
 
$ 4,000 
 
 
 
Common stock issued in exchange for consulting services per month (in shares)
 
 
 
 
 
 
 
 
 
 
 
20,000 
 
 
 
Common stock issued in exchange for consulting services (in shares)
 
 
 
 
 
 
 
 
 
1,002,500 
 
80,000 
 
 
 
Common stock price in exchange for consulting services (in dollars per shares)
 
 
 
 
 
$ 0.30 
 
 
 
 
 
$ 0.43 
 
 
 
Common stock issued in exchange for consulting services
 
319,200 
 
 
 
 
15,000 
 
 
1,002 
 
34,200 
 
 
 
Common stock, issued (in shares)
56,531,499 
50,739,312 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrants outstanding
5,566,795 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Class of Warrant or Right, Exercise Price of Warrants or Rights
$ 1.53 
 
 
$ 1.60 
 
 
 
 
 
 
 
 
 
 
 
Common Stock, Capital Shares Reserved for Future Issuance
 
 
 
 
6,666,667 
2,000,000 
50,000 
 
 
 
 
 
 
95,522 
 
Development Stage Entities, Stock Issued, Shares, Issued for Cash
 
 
 
 
 
 
 
 
6,666,664 
 
6,666,664 
 
 
 
 
Development Stage Entities, Equity Issuance, Per Share Amount
 
 
 
 
 
 
$ 0.30 
$ 0.30 
 
 
 
 
 
 
 
Development Stage Entities, Stock Issued, Value, Issued for Cash
2,000,000 
 
 
 
 
 
 
 
6,667 
 
2,000,000 
 
 
 
 
Common Stock, Potential Value, Future Issuance
 
 
 
 
2,000,000 
 
 
 
 
 
 
 
 
 
 
Accrued Rent
 
 
 
 
 
 
 
 
 
 
 
 
 
28,658 
 
Liabilities Related to Seed Inventory Purchased
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 100,000 
Share-based Goods and Nonemployee Services Transaction, Shares Approved for Issuance
 
 
 
 
 
 
 
 
 
 
 
 
 
 
333,333 
Share Based Goods And Nonemployee Services Transaction Shares Approved For Issuance Per Share Price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
$ 0.30 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross
0 
706,250 
 
 
 
 
 
 
 
 
 
 
50,000 
 
 
Stock Repurchased and Retired During Period, Shares
 
 
 
 
 
 
 
 
1,000,000 
 
 
 
 
 
 
Stock Cancelled During Period Shares
 
 
1,000,000 
 
 
 
 
 
 
 
 
 
 
 
 
SHARE-BASED COMPENSATION (Details) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Mar. 31, 2013
Options
 
 
 
Options outstanding at beginning of period (in shares)
4,342,500 
4,092,500 
 
Granted (in shares)
0 
706,250 
 
Exercised (in shares)
0 
0 
 
Expired/Cancelled (in shares)
(4,110,000)
(456,250)
 
Options outstanding at the end of the period (in shares)
232,500 
4,342,500 
4,092,500 
Exercisable at March 31, 2015 (in shares)
23,125 
 
 
Weighted Average Exercise Price
 
 
 
Options outstanding at the beginning of the period (in dollars per share)
$ 0.77 
$ 0.87 
 
Granted (in dollars per share)
$ 0 
$ 0.36 
 
Exercised (in dollars per share)
$ 0 
$ 0 
 
Expired/cancelled (in dollars per share)
$ 0.79 
$ 0.73 
 
Options outstanding at the end of the period (in dollars per share)
$ 0.35 
$ 0.77 
$ 0.87 
Exercisable at March 31, 2015 (in dollars per share)
$ 0.44 
 
 
Weighted-Average Remaining Contractual Term
 
 
 
Options outstanding (in years)
1 year 5 months 12 days 
1 year 9 months 
2 years 3 months 14 days 
Exercisable at March 31, 2015 (in years)
1 year 2 months 12 days 
 
 
SHARE-BASED COMPENSATION (Details 1) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Non-vested Shares
 
 
Non-vested at the beginning of the period (in shares)
2,414,792 
2,466,167 
Granted (in shares)
0 
706,250 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested, Number of Shares
(122,000)
(575,625)
Expired/cancelled: non-vested (in shares)
(2,083,417)
(182,000)
Non-vested at the end of the period
209,375 
2,414,792 
Weighted Average Grant-Date Fair Value
 
 
Non-vested at the beginning of the period (in dollars per share)
$ 0.49 
$ 0.65 
Granted (in dollars per share)
$ 0 
$ 0.22 
Vested (in dollars per share)
$ 0.43 
$ 0.45 
Expired/cancelled: non-vested (in dollars per share)
$ 0.52 
$ 0.38 
Non-vested at the end of the period (in dollars per share)
$ 0.21 
$ 0.49 
SHARE-BASED COMPENSATION (Details 2) (USD $)
12 Months Ended
Mar. 31, 2015
Options Outstanding
 
Number Outstanding
232,500 
Weighted Average Remaining Contractual Life
1 year 5 months 12 days 
Weighted Average Exercise Price (in dollars per share)
$ 0.35 
Options Exercisable
 
Number of Shares
23,125 
Weighted Average Exercise Price (in dollars per share)
$ 0.44 
Exercise Price One [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range
 
Exercise Price
$ 0.80 
Options Outstanding
 
Number Outstanding
7,500 
Weighted Average Remaining Contractual Life
3 months 7 days 
Weighted Average Exercise Price (in dollars per share)
$ 0.80 
Options Exercisable
 
Number of Shares
5,500 
Weighted Average Exercise Price (in dollars per share)
$ 0.80 
Exercise Price Two [Member]
 
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range
 
Exercise Price
$ 0.33 
Options Outstanding
 
Number Outstanding
225,000 
Weighted Average Remaining Contractual Life
1 year 5 months 26 days 
Weighted Average Exercise Price (in dollars per share)
$ 0.33 
Options Exercisable
 
Number of Shares
17,625 
Weighted Average Exercise Price (in dollars per share)
$ 0.33 
SHARE-BASED COMPENSATION (Details Textual) (USD $)
12 Months Ended 12 Months Ended 1 Months Ended
Mar. 31, 2015
Mar. 31, 2014
May 7, 2012
2012 Share Incentive Plan [Member]
Mar. 31, 2015
Restricted Stock [Member]
Sep. 25, 2014
Restricted Stock [Member]
Mr. Michael McMahon [Member]
Mar. 31, 2015
Restricted Stock [Member]
Mr. Michael McMahon [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
 
 
Number of shares of common stock authorized
 
 
5,000,000 
 
 
100,000 
Unrecognized compensation cost related to nonvested awards
$ 44,529 
 
 
 
 
 
Weighted average period to recognize unrecognized compensation expense related to nonvested awards
1 year 5 months 23 days 
 
 
 
 
 
Intrinsic value of options outstanding
17,071 
0 
 
 
 
 
Allocated Share-based Compensation Expense
0 
193,150 
 
30,000 
 
 
Deferred tax asset recorded, relating to recognized compensation cost
0 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross
0 
706,250 
 
 
416,667 
 
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price
$ 0 
$ 0.36 
 
 
$ 0.30 
 
Stock Granted, Value, Share-based Compensation, Gross
 
 
 
 
125,000 
 
Share Price
 
 
 
 
 
$ 0.30 
Severance Costs
 
 
 
$ 305,077 
 
 
OTHER INCOME AND EXPENSE (Details Textual) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Interest expense related to its outstanding note payable
$ 228,056 
$ 161,439 
Income (Loss) from Equity Method Investments
$ 29,041 
$ 0 
OPERATING LEASES (Details) (USD $)
Mar. 31, 2015
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
 
2016
$ 407,410 
2017
361,660 
2018
224,410 
2019
224,410 
2020
0 
2021 and thereafter
$ 0 
OPERATING LEASES (Details Textual) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Operating Leased Assets [Line Items]
 
 
Lease expense
$ 398,590 
$ 421,038 
Deferred rent payable
$ 118,092 
$ 84,144 
RELATED PARTIES (Details Textual) (USD $)
12 Months Ended 1 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Mar. 31, 2015
Karl Leaverton [Member]
Mar. 31, 2015
Bruce Likly [Member]
Mar. 31, 2015
Lewis Smoak [Member]
Mar. 31, 2015
Bern McPheely [Member]
Mar. 31, 2015
Ben Wolkowitz [Member]
Mar. 31, 2014
Adams Monahan LLP [Member]
Mar. 31, 2014
Michael Monahan And Theo Strous [Member]
Mar. 31, 2014
Strous [Member]
Mar. 31, 2014
Special Litigation Committee [Member]
Jun. 22, 2014
Likely [Member]
Restricted Stock [Member]
Jun. 16, 2014
Likely [Member]
Restricted Stock [Member]
Jun. 16, 2014
Messrs Korn And McGuire [Member]
Restricted Stock [Member]
Jun. 22, 2014
Messrs [Member]
Restricted Stock [Member]
Jun. 22, 2014
McGuire [Member]
Restricted Stock [Member]
Related Party Transaction [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Stock Issued During Period, Shares, New Issues
 
 
333,333 
375,000 
666,666 
133,333 
158,333 
 
 
 
 
 
 
 
 
 
Stock Issued During Period, Value, New Issues
 
 
$ 100,000 
$ 112,500 
$ 200,000 
$ 40,000 
$ 47,500 
 
 
 
 
 
 
 
 
 
Stock Issued During Period, Value, Issued for Services
 
$ 319,200 
 
 
 
 
 
$ 19,658 
$ 45,000 
$ 93,750 
$ 168,750 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross
0 
706,250 
 
 
 
 
 
 
 
 
 
4,000,000 
250,000 
4,000,000 
250,000 
250,000 
INCOME TAXES (Details) (USD $)
Mar. 31, 2015
Mar. 31, 2014
Income Taxes [Line Items]
 
 
Accrued expenses
$ 194,165 
$ 235,998 
Property and equipment
(185,992)
(150,810)
Impairment of fixed assets
299,537 
142,767 
Capitalized startup/acquisition costs
461,636 
499,288 
Federal and state net operating loss carry-forward
5,344,982 
3,857,269 
Intangible assets
59,849 
14,537 
Deferred Tax Assets, Gross
6,174,177 
4,599,049 
Valuation allowance
(6,174,177)
(4,599,049)
Total
$ 0 
$ 0 
INCOME TAXES (Details 1) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Income Taxes [Line Items]
 
 
Tax at statutory federal income tax rate, Amount
$ (1,408,162)
$ (1,683,324)
Tax at statutory federal income tax rate, Percentage
(34.00%)
(34.00%)
State income tax expense, Amount
0 
0 
State income tax expense, Percent
0.00% 
0.00% 
Change in valuation allowance, Amount
1,406,400 
1,671,941 
Change in valuation allowance, Percent
34.00% 
33.80% 
Incentive stock options, Amount
0 
0 
Incentive stock options, Percent
0.00% 
0.00% 
Other, net, Amount
1,762 
11,383 
Other, net, Percent
0.00% 
0.20% 
Total, Amount
$ 0 
$ 0 
Total, Percent
0.00% 
0.00% 
INCOME TAXES (Details Textual) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Operating Loss Carryforwards [Line Items]
 
 
Operating Loss Carryforwards
$ 16,447,935 
$ 10,231,000 
Operating Loss Carryforwards, Limitations on Use
2031 
 
INVESTMENT IN GRACE RICH JOINT VENTURE (Details Textual) (USD $)
0 Months Ended 12 Months Ended
Sep. 16, 2013
Mar. 31, 2015
Mar. 31, 2014
Schedule of Equity Method Investments [Line Items]
 
 
 
Balance of ownership interest in joint venture, beginning balance
 
$ 30,041 
$ 1,000 
Licensing revenue
 
375,000 
625,000 
Sales Revenue, Goods, Net
 
351,193 
793,341 
Minimum [Member]
 
 
 
Schedule of Equity Method Investments [Line Items]
 
 
 
Ownership percentage in joint venture
 
20.00% 
 
Grace Rich Agreements [Member]
 
 
 
Schedule of Equity Method Investments [Line Items]
 
 
 
Ownership percentage in joint venture
30.00% 
 
 
Grace Rich LTD [Member]
 
 
 
Schedule of Equity Method Investments [Line Items]
 
 
 
Ownership percentage in joint venture
30.00% 
 
 
Minimum number of Company designed diamond growing machines to be deployed in joint venture
100 
 
 
Development fees under license agreement
750,000 
 
 
Licensing fees per machine per month upon commencement of operation
250 
 
 
Minimum licensing fees upon commencement of operation
25,000 
 
 
Balance of ownership interest in joint venture, beginning balance
 
0 
 
Licensing revenue
250,000 
375,000 
625,000 
Reimbursable joint venture related expense
 
96,776 
151,359 
Sales Revenue, Goods, Net
 
$ 10,801 
 
Grace Rich LTD [Member] |
SAAMABA, LLC [Member]
 
 
 
Schedule of Equity Method Investments [Line Items]
 
 
 
Ownership percentage in joint venture
60.00% 
 
 
Grace Rich LTD [Member] |
S21 Holdings [Member]
 
 
 
Schedule of Equity Method Investments [Line Items]
 
 
 
Ownership percentage in joint venture
10.00% 
 
 
Scio Diamond Technology Corporation [Member]
 
 
 
Schedule of Equity Method Investments [Line Items]
 
 
 
Ownership percentage in joint venture
30.00% 
 
 
INVESTMENT IN RCDC JOINT VENTURE (Details) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Schedule of Equity Method Investments [Line Items]
 
 
Balance of ownership interest in joint venture at December 18, 2014
$ 1,000 
 
Income from joint venture - RCDC
29,041 
0 
Balance of ownership interest in joint venture at March 31, 2015
30,041 
1,000 
Cumulative recognized income on ownership interest in joint venture at March 31, 2015
$ 29,041 
 
INVESTMENT IN RCDC JOINT VENTURE (Details 1) (USD $)
12 Months Ended
Mar. 31, 2015
Schedule of Equity Method Investments [Line Items]
 
Revenues
$ 124,908 
Expenses
66,825 
Net Income
58,083 
Total Assets
551,405 
Total Liabilities
491,322 
Total Partners Capital
60,083 
Total Liabilities and Partner Capital
$ 551,405 
INVESTMENT IN RCDC JOINT VENTURE (Details Textual) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Mar. 31, 2015
Renaissance Created Diamond Company, LLC [Member]
Dec. 18, 2014
Renaissance Created Diamond Company, LLC [Member]
Schedule of Equity Method Investments [Line Items]
 
 
 
 
Equity Method Investment, Aggregate Cost
$ 30,041 
$ 1,000 
$ 1,000 
 
Equity Method Investment, Ownership Percentage
 
 
50.00% 
50.00% 
Equity Method Investment, Amount Sold
 
 
241,950 
 
Equity Method Investment, Summarized Financial Information, Revenue
124,908 
 
215,375 
 
Equity Method Investment Related Expenses
66,825 
 
179,969 
 
Sales Revenue, Goods, Net
351,193 
793,341 
26,575 
 
Income (Loss) from Equity Method Investments
$ 29,041 
$ 0 
 
 
LITIGATION (Details Textual) (USD $)
12 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Loss Contingencies [Line Items]
 
 
Malpractice Loss Contingency, Insurance Recoveries
$ 168,015 
 
Litigation Settlement, Amount
$ 165,453 
$ 0 
Common Stock [Member]
 
 
Loss Contingencies [Line Items]
 
 
Stock Repurchased and Retired During Period, Shares
1,000,000 
 
SUBSEQUENT EVENTS (Details Textual) (USD $)
12 Months Ended 0 Months Ended
Mar. 31, 2015
Mar. 31, 2014
Mar. 31, 2013
May 7, 2015
Subsequent events
Restricted Stock [Member]
May 7, 2015
Subsequent events
Restricted Stock [Member]
Renaissance Diamond [Member]
May 7, 2015
Subsequent events
Gerald McGuire [Member]
Restricted Stock [Member]
May 7, 2015
Subsequent events
Jonathan Pfohl [Member]
Restricted Stock [Member]
Subsequent events
 
 
 
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross
0 
706,250 
 
 
200,000 
400,000 
385,000 
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price
$ 0.35 
$ 0.77 
$ 0.87 
$ 1.03 
 
 
 
Stock Issued During Period, Shares, Issued for Services
 
 
 
 
333,333