The problems keep piling up for lab-grown diamond producer Scio: It is in default on a loan, and it faces a possible probe by the Securities and Exchange Commission.
The Greenville, S.C.–based company, which has installed a new CEO and board after a bitter series of lawsuits and proxy battles, admitted in its latest 10-Q that it’s technically in default for a $1 million loan from Platinum Capital Partners that matured on June 20.
“We are having discussions with Platinum on extending the term of the debt agreements, and currently, Platinum has indicated they will not take any action related to this default as we pursue additional funding for our operations,” the filing read.
Still, the lender does have the option of raising the interest rate, foreclosing on the loan, and taking possession of collateral, including Scio’s assets and intellectual property, it said.
The company also confirmed a previously reported “fact-finding” subpoena from the Securities and Exchange Commission, ordering it to produce documents regarding transactions between Scio and its predecessor company. Scio said it is cooperating with the inquiry.
As far as the company’s widely watched joint venture in China, so far it is still in the development stage, and it has spent more than $600,000 getting set up.
In positive news, the company has seen revenue increase. For the quarter ended June 30, Scio recorded net revenue of $454,338—which includes $375,000 in development fees from the joint venture—compared to $258,980 the prior year.
But it still recorded a $1 million net loss for the quarter, an improvement over the $1.5 million loss the prior year.
Scio’s new CEO has predicted the company will break even within the next year.