UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington, D.C.
20549










FORM 10-K/A



(Mark One)



|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
    THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the fiscal year ended March 31,
2015



Or



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | --------------------------------------------------------------------------------------------



For the transition period from          to



Commission file number: 000-54529



SCIO DIAMOND
TECHNOLOGY CORPORATION

(Exact name of registrant as specified
in its charter)



|Nevada                                                            |  | 45-3849662                
|----------------------------------------------------------------- |  | --------------------------
|(state or other jurisdiction of incorporation
    ororganization) |  | (I.R.S. Employer I.D. No.)



411 University Ridge Suite DGreenville, SC 29601
(Address of principal executive offices, including zip code)



(864) 751-4880
(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of
the Act:

None



Securities registered pursuant to Section 12(g) of
the Act:

Common Stock,
par value $0.001










Indicate by check mark if the registrant
is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ̈No x



Indicate by check mark if the registrant
is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes  ̈No x



Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes x No  ̈



Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§ 332.405 of this chapter) during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such files). Yes xNo  ̈



Indicate by check mark if disclosure of
delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained,
to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K.  ̈



Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2
of the Exchange Act (Check one):



|Large accelerated filer  ̈                     |  | Accelerated filer  ̈        
|--------------------------------------------- |  | ---------------------------
|                                              |  |                            
|Non-accelerated filer  ̈                       |  | Smaller reporting company x
|(Do not check if a smaller reporting company) |  |                            



Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Act). Yes  ̈ No x



The aggregate market value of voting common
stock held by non-affiliates of the registrant as of September 30, 2014, the last business day of the registrant’s
most recently completed second fiscal quarter, computed by reference to the closing sale price of the registrant’s common
stock on that date, was approximately $20,002,182.



The number of shares of common stock outstanding
as of July 24, 2015 $0.001 par value, was 58,077,624.


















INDEX





|PART I                                                                                                   | 4 
|-------------------------------------------------------------------------------------------------------- | --
|                                                                                                         |   
|ITEM 1. BUSINESS                                                                                         | 4 
|                                                                                                         |   
|ITEM 1A. RISK FACTORS                                                                                    | 10
|                                                                                                         |   
|ITEM 1B. UNRESOLVED STAFF COMMENTS                                                                       | 21
|                                                                                                         |   
|ITEM 2. PROPERTIES                                                                                       | 21
|                                                                                                         |   
|ITEM 3. LEGAL PROCEEDINGS                                                                                | 21
|                                                                                                         |   
|ITEM 4. MINE SAFETY DISCLOSURES                                                                          | 21
|                                                                                                         |   
|PART II                                                                                                  | 22
|                                                                                                         |   
|ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES | 22
|                                                                                                         |   
|ITEM 6. SELECTED FINANCIAL DATA                                                                          | 23
|                                                                                                         |   
|ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS            | 23
|                                                                                                         |   
|ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                      | 29
|                                                                                                         |   
|ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                      | 30
|                                                                                                         |   
|ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND FINANCIAL DISCLOSURE                           | 48
|                                                                                                         |   
|ITEM 9A. CONTROLS AND PROCEDURES                                                                         | 48
|                                                                                                         |   
|ITEM 9B. OTHER INFORMATION                                                                               | 49
|                                                                                                         |   
|PART III                                                                                                 | 50
|                                                                                                         |   
|ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE                                         | 50
|                                                                                                         |   
|ITEM 11. EXECUTIVE COMPENSATION                                                                          | 52
|                                                                                                         |   
|ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS  | 57
|                                                                                                         |   
|ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE                        | 58
|                                                                                                         |   
|ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES                                                          | 59
|                                                                                                         |   
|PART IV                                                                                                  | 60
|                                                                                                         |   
|ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES                                                         | 60





2







CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS



This Report, including information included or incorporated
by reference in this document, contains statements which constitute forward-looking statements. Forward looking statements made
by penny stock issuers such as the Company are excluded from the safe harbor in Section 21E of the Securities Exchange Act
of 1934. Forward-looking statements may relate to our financial condition, results of operation, plans, objectives, or future
performance. These statements are based on many assumptions and estimates and are not guarantees of future performance. Our actual
results may differ materially from those anticipated in any forward-looking statements, as they will depend on many factors about
which we are unsure, including many factors which are beyond our control. The words “may,” “would,” “could,”
“should,” “will,” “expect,” “anticipate,” “predict,” “project,”
“potential,” “believe,” “continue,” “assume,” “intend,” “plan,”
and “estimate,” as well as similar expressions, are meant to identify such forward-looking statements.



Forward-looking statements are subject to certain risks and
uncertainties which could cause actual results to differ materially from those anticipated. Such risk and uncertainties include,
without limitation, those described below under Item 1A - Risk Factors and the following: (1) the Company has limited cash
resources and if it is not able to obtain further financing required for continuing operations, marketing, product development,
and research its business operations will fail, (2) the Company has not generated substantial revenues or cash flow from
operations, and as a result, faces a high risk of business failure, (3) the Company’s lack of diversification and dependence
on material customers increases the risks associated with the Company’s business and an investment in the Company, and the
Company’s financial condition may deteriorate rapidly if it fails to succeed in developing the Company’s business
and expanding our customer base, (4) the Company may not effectively execute the Company’s business plan or manage
the Company’s potential future business development, (5) ) the Company may expend a substantial amount of time
and resources in connection with the Securities and Exchange Commission’s (“SEC”) recent subpoena, potential
inquiries or legal actions in connection with its filings with the SEC or otherwise, which may impair the Company’s ability
to raise capital and to operate its business, (6) the Company’s business could be impaired if it fails to comply with applicable
regulations, (7) the Company has had significant turnover in management and may not be able to retain key management personnel
to manage the Company or laboratory scientists to carry out the Company’s business operations, which could have a material
adverse effect on the Company’s business, (8) the market for lab-grown diamond may not develop as anticipated, and
(9) competition may adversely affect our business. You are cautioned not to place undue reliance on forward-looking statements,
which speak only as of the date hereof. The Company undertakes no obligation to publish revised forward-looking statements to
reflect events or circumstances after the date hereof or to reflect the occurrences of unanticipated events. You are also urged
to review and consider carefully the various disclosures made hereafter by the Company from time to time with its SEC filings.



3







PART I



ITEM 1. BUSINESS



Corporate History



We were incorporated on September 17,
2009 in the State of Nevada under the name Krossbow Holdings Corporation (“Krossbow”). Krossbow did not implement
its original business plan and decided to acquire existing technology to seek to efficiently and effectively produce man-made
diamond. In connection with this change in business purpose, Krossbow changed its name to Scio Diamond Technology Corporation
to reflect its new business direction.



On August 5, 2011, Edward S. Adams
and Michael R. Monahan acquired control of the Company through the purchase of shares of the Company’s issued and outstanding
common stock from Jason Kropp, Krossbow’s sole director and executive officer at that time. Messrs. Monahan and Adams
served on the Company’s Board of Directors until their resignations form the Board on June 30, 2013, and June 23, 2014,
respectively. Additionally, on August 5, 2011, the Company executed an Asset Purchase Agreement with another privately-held
Nevada corporation that also had the name “Scio Diamond Technology Corporation” (“Private Scio”). Under
the terms of the Asset Purchase Agreement, the Company purchased the name “Scio Diamond Technology Corporation” and
acquired other rights from Private Scio for 13,000,000 newly issued shares of common stock of the Company.



On August 31, 2011, the Company acquired
certain assets of Apollo Diamond, Inc. (“ADI”) (the “ADI Asset Purchase”), consisting primarily of
diamond growing machines and intellectual property related thereto, for which the Company paid ADI an aggregate of $2,000,000.
In connection with the ADI Asset Purchase, the Company also agreed to provide certain current and former stockholders of ADI qualifying
as accredited investors the opportunity to acquire up to approximately 16 million shares of common stock of the Company for $0.01
per share (the “ADI Offering”).



On June 5, 2012, the Company acquired
substantially all of the assets of Apollo Diamond Gemstone Corporation (“ADGC”) (the “ADGC Asset Purchase”),
consisting primarily of lab-grown diamond gemstone-related know-how, inventory, and various intellectual property, in exchange
for $100,000 in cash and the opportunity for certain current and former stockholders of ADGC qualifying as accredited investors
to acquire up to approximately 1 million shares of common stock of the Company for $0.01 per share (the “ADGC Offering”)
with the intent that ADI Offering be conducted substantially concurrently with the ADGC Offering (collectively, the “ADI/ADGC
Offering”).



In December, 2011, the Company began a
build-out of its Greenville, South Carolina production facility. Construction was largely completed in March 2012 and equipment
was moved from ADI’s former facility in Massachusetts to South Carolina over the first calendar quarter of 2012. The Company
began initial production with ten diamond growing machines in July 2012.



Since July 2012, the Company has been operational
with ten diamond growing machines in our Greenville facility. Through March of 2013, the Company’s production was focused
on industrial cutting tool products supplied to a single customer. Subsequent to March 2013, the Company has expanded its product
focus to include diamond gemstone material as well as industrial materials.



On September 16, 2013, the Company
entered into a series of agreements with SAAMABA, LLC and S21 Research Holdings (the “Grace Rich Agreements”) to form
a joint venture (“Grace Rich LTD”) with operations in the People’s Republic of China (“PRC”) to
deploy over 100 Company designed diamond growing machines. 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 received licensing and development revenue and a 30% ownership position 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 Company does not control the joint venture and is not
required to make any on-going funding contributions to the joint venture and our ownership stake cannot be reduced from 30%.



On December 16, 2014, the Company entered
into an agreement for the Sale and Lease of Growers (the “Grower Sale-Lease Agreement”) with Heritage Gemstone Investors,
LLC (“HGI”). 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 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. The Company will also have the right to repurchase the leased growers upon the occurrence
of certain events.



4







On December 18, 2014 entered into an arrangement
with Renaissance Diamonds, Inc. (“Renaissance”) creating Renaissance Created Diamond Company, LLC (“RCDC”).
The Company and Renaissance are each 50% members of RCDC. 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. RCDC will purchase rough diamond material
from the Company and process and finish the material into finished gemstones for sale 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.



Our Business



General



The Company is first and foremost a materials
company that has developed proprietary technology through which high quality single crystal diamond materials are produced through
a chemical vapor deposition (“CVD”) process (the “Diamond Technology”). The Company’s primary mission
is the development of profitable and sustainable commercial production of its diamond materials, which are suitable for known,
emerging and anticipated industrial, technology and consumer applications. The Company intends to pursue progressive development
of its core diamond materials technologies and related intellectual property that the Company hopes will evolve into product opportunities
across various applications. We believe these opportunities may be monetized though a combination of end product sales, joint
ventures and licensing arrangements with third parties, and through continued development of intellectual property. Anticipated
application opportunities for the Company’s diamond materials include the following: precision cutting devices, diamond
gemstone jewelry, power switches, semiconductor processors, optoelectronics, geosciences, water purification, and MRI and other
medical science technology.



Prior to October 1, 2011, the Company
was a development stage company. Developmental activities ceased and the Company commenced producing diamond materials in July 2012.
Less than three years into production, the Company is already in the initial phases of commercializing the Diamond Technology
and its goal is to become a preferred manufacturer of single crystal diamond and a leading global supplier of diamond materials
for multiple applications. The Company hopes to further shape the evolution of various markets for its product and to leverage
the technical foundation of the Diamond Technology by expanding into strategic partnerships with select industry leaders with
distribution channels already in place to capture high value application opportunities.



As of March 31, 2015, nearly all of the
Company’s production capacity is being sold for use in the gemstone market. As of March 31, 2015 we had generated $3,026,282
in cumulative net revenue. Through March 31, 2015, over 50% of our product has been sold overseas and 100% of these sales have
been to external customers and to our joint venture partners as discussed in Item 8, NOTES 10 and 11.



The Diamond Technology



We acquired our Diamond Technology primarily
from ADI. ADI was originally founded in 1990 with the goal of developing and perfecting two advanced semiconductor materials,
gallium nitride (now used in light emitting diodes) and diamond. From 2000 onward, ADI focused solely on diamond and developing
a process by which large, single-crystal diamond could be grown in a controlled laboratory environment.



The core Diamond Technology that was acquired
by the Company is based on a CVD diamond growth system. Diamond wafers produced through the Diamond Technology CVD process have
been shown to be exceptionally pure (nitrogen content < 10 ppb), and possess low levels of structural defects. Advances in
this technology have dramatically improved the quality, and lowered the cost of high-quality diamond, resulting in new applications
of diamond in electronics, optics, high power devices and quantum computing.



The Diamond Technology provides a materials
production platform and is supported by intellectual property, including trade secrets, 36 issued patents (27 in the United States
and 9 in foreign jurisdictions).



Our Diamond Technology utilizes CVD growth
technology to produce diamond crystals. This technology utilizes a highly scalable manufacturing process for producing large size,
high-quality diamond crystals at a low cost. Unlike the high-pressure, high-temperature (“HPHT”) process, the Diamond
Technology process allows for concurrent production of multiple diamond crystals.



The Company’s diamond crystals are
grown on small slices of diamond called “seeds” that the Company either grows internally or acquires from third parties.
Over time, the Company has been able to transition to larger seeds than previously used. This transition allows the Company to
see a substantial increase in the size of the material it is producing and allows for the Company to better match its production
to specific customer needs.



5







In addition to utilizing larger “seeds,”
our process can also be scaled through larger capacity diamond growing machines. The Company has successfully developed 4-inch
growing technology that allows for up to a 100% increase in production capacity from the current 3-inch growing technology. The
Company is implementing this new technology across its production platform and anticipates being substantially complete with the
upgrade during the first fiscal quarter of 2016.



Finally, we expect that as we increase
our production levels, our production costs per carat will actually decrease due to economies of scale.



Facilities



The Company’s production facility
is located in Greenville, South Carolina. This facility, covering 9,470 square feet of leased space including both our headquarters
and our production facility, was substantially completed and ready for production as of June 30, 2012. Ten of the production
reactors purchased from ADI were installed in the facility and are currently operating. The Company is the process of adding two
additional reactors to the Greenville facility which we believe is the maximum capacity of this facility.



The Grace Rich LTD joint venture’s
production facility is under development in the PRC and is not operational as of March 31, 2015.



Products and Markets



The current market for laboratory-grown
diamond remains largely unknown and uncertain. Sales of laboratory-grown diamond into the gemstone market are thought to be very
small currently. The industrial market for these products is more developed, but it is diffused globally and the Company is unable
to reliably estimate its size or breadth.



In addition to the precision cutting market
and opportunities for the Company in the diamond gemstone market, we will continue to explore other opportunities for our diamond
materials through applications where the unique properties of diamond may be desirable and advantageous, including: alternative
energy, optoelectronics, communications, biotechnology, water treatment, quantum computing and the diamond device arenas.



Competitive factors that will influence
the market for our products include product quality, consistency of supply and price. We believe that we will be able to compete
on the basis of these factors. We believe that we will be able to reliably and efficiently produce lab-grown diamond possessing
substantially the same qualities and characteristics of their mined diamond counterparts.



Gemstones



Within the gemstone industry, our single-crystal
diamond can be used in jewelry products requiring the highest quality gemstones and can be regularly grown in matched color sets
ranging in polished sizes from 5-points (0.05 carats) to over 1.50 carats. Our diamond may be well suited for jewelry featuring
matching diamond of various sizes, clarities and colors, diamond engagement rings, and fashion jewelry. The potential consistency
and other potential characteristics of lab-grown diamond gemstones grown using the Diamond Technology may provide advantages over
their mined counterparts in areas that matter to jewelers, jewelry manufacturers and consumers, with potential characteristics
such as:



| | · | Equal quality
                                         and brilliance of diamond product;
| | - | -----------------------------------------------------------------------------------------

| | · | Matched sizes,
                                         colors and clarities (particularly in goods ranging in sizes from 0.05 - 0.50 carats);
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------

| | · | Consistency
                                         of diamond finish due to high quality;
| | - | -------------------------------------------------------------------------------------------

| | · | Opportunity
                                         for color palette of diamond gemstones; and
| | - | ------------------------------------------------------------------------------------------------

| | · | Lack of negative
                                         issues related to environmental and social concerns.
| | - | --------------------------------------------------------------------------------------------------------------



We will seek to establish and maintain
market acceptance through consumer education and industry cooperation. We intend to require laser marking of lab-grown diamond
grown using the Diamond Technology (without compromising aesthetics) in order to brand and instill confidence in the consumer
and the market as well as to differentiate our lab-grown diamond from earth-mined diamond. We intend to educate retailers and
consumers on the physical properties of the Company’s lab-grown diamond as compared to mined diamond and quality of the
Company’s lab-grown diamond.



6







Commercial, Industrial and Technological Applications



Diamond has exceptional qualities for use
in advanced electronics and optics applications, but to date, development progress has been slow because of, among other things,
diamond’s relative scarcity and high cost. Diamond’s unique hardness, clarity and thermal characteristics have made
it highly desirable for scientific use for decades. However, material consistency issues and economics have created barriers to
mass application adoption of diamond. We believe that our patented technology and production approach give us the ability to improve
the quality and lower the cost of producing diamond materials, creating the opportunity for usage in a wider range of applications.



The demand for computing and communications
products has increased significantly. As devices become more intelligent and ubiquitous, the need for connectivity at very high
speeds, data intensive storage needs and ever-faster computer processors are pushing the limits of conventional silicon-based
devices. Diamond enables these technologies to move past their current limitations and may be able to facilitate the development
of next-generation devices in key areas such as wireless networking, optical storage, and high speed computing.



The Company anticipates several opportunities
to monetize our patented technology and production approach in various technological applications. Pursuit of these opportunities
is expected to be directed in part in concert with strategic partners.



Several of diamond’s properties provide
significant advantages over other materials used in devices/systems, such as high power switches, radiation detectors, and microwave
windows suitable for use in plasma fields or other nuclear reactor high-electromagnetic interference (“EMI”) environments.



Industrial diamonds already comprise what
we estimate is a $1 billion-plus market per year, but consist of low-quality diamonds that have primarily been utilized in rudimentary
cutting and polishing devices. These diamond materials are largely in the form of diamond grit and diamond dust. Through the introduction
of higher-quality relatively large diamond materials, substantial growth is anticipated for the industrial diamond market. As
previously noted, we have initially experienced this in precision cutting devices.



The diamond and diamond-like materials
historically used in the development of these non-gem applications have various limitations that have formerly impeded progress
in optoelectronics and other technology applications. As our production volume increases and manufacturing costs continue to decrease
due to our capacity expansion, we anticipate that our diamond materials will provide a viable and potentially economically preferred
alternative for many of these highly-valued electronic, optical and industrial applications.



In order to more fully explore the opportunities
discussed above, we intend to continue current production of our high quality diamond materials and to pursue related commercial
opportunities. Currently, we intend to continue to explore opportunities in the precision cutting devices market while concurrently
seeking opportunities for our lab-grown diamond gemstones.



The Industry and Competition



Our lab-grown diamond gemstones and diamond
materials for use in industrial applications face competition from established producers and sellers of mined diamond, including
companies such as De Beers, and other known and current and potential future manufacturers of lab-grown diamond. Our competitors
include large multi-national gemstone diamond companies as well as start-up and development-stage gemstone diamond and technology
companies, some of whom we may not be aware. Many of our competitors have significantly greater financial, technical, manufacturing
and marketing resources and greater access to distribution channels than the Company. Many of our competitors may be able to devote
substantially greater resources to promotion and systems development than we can. Barriers to developing competitive technology
in our market may not be sufficient to prevent competitors from entering the industry, and current and new competitors may be
able to develop competing diamond at a relatively low cost. We believe that our success will depend heavily upon whether we can
achieve significant market acceptance before our potential competitors are able to introduce broadly accepted competitive products.



Companies that produce lab-grown diamond
and who may compete with the Company in one or more of its markets include Element Six (South Africa), a privately held subsidiary
of De Beers, AOTC Group NV (Netherlands), Pure Grown Diamond/IIa Technologies (USA, Singapore & Malaysia), Washington
Diamond/Carnegie Institute, Sumitomo Electric Industries, Ltd. and Cornes Technologies (Japan). Other companies could seek
to introduce lab-grown diamond or other competing diamond or to develop competing processes for production of lab-grown diamond
and diamond materials. We believe that competition will increase as demand for diamond materials increases for use in industrial
and technology applications and as lab-grown diamonds continue to gain market acceptance.



7







Raw Materials



The principal raw materials used in the
manufacture of our products are diamond seeds and certified high purity bottled gases. Certain diamond seeds are purchased from
other diamond material producers, but the Company maintains its primary seed inventory through its self-sustaining seed production.
Seeds are re-used through multiple production runs.



Our manufacturing process is dependent
upon large amounts of electrical power delivered on an uninterrupted basis. The Company has worked with the local electric utility,
a Fortune 200 company, to build and operate equipment at its manufacturing site that meets its needs. This equipment is provided
to the Company on a long-term operating lease, which includes warranty, maintenance, and the delivery of electrical power at attractive
per kilowatt/hour rates.



Customers



In July 2012 the Company began to
produce diamond material and entered into a purchase order with an international supplier of precision diamond cutting tools pursuant
to which the Company has been providing CVD single crystal diamond in specified wafer sizes. At March 31, 2013, the Company had
largely fulfilled its initial purchase order with this customer. Since then, the Company has aggressively expanded its customer
base with a focus on the gemstone marketplace. During the year ended March 31, 2015, the Company had 31 customers purchasing various
materials for industrial and gemstone applications.



If we continue to reliably manufacture
diamond products and are successful in expanding our manufacturing capacity, we anticipate that we will experience increased demand
for our products both domestically and internationally, given the potential demand for diamond, the variety of potential uses
for these products in gemstone, high tech applications, alternative energy technologies, and defense technologies.



Patents, Trademarks, Licenses, Franchises, Concessions,
Royalty Agreements or Labor Contracts



At March 31, 2015, we held the following
number of patents:



|Jurisdiction  |  | No. of Patents |   
|------------- |  | -------------- | --
|United States |  |                | 27
|Foreign       |  |                | 9 
|Total         |  |                | 36



During the fiscal year ended March 31,
2015, the Company had one new patent granted in the United States. This patent expanded our intellectual property rights related
to our Diamond Technology.



All of the Company’s patents have
various lives based on the date of issue. Expiration of individual patents is expected to occur between 2019 and 2032.



Our research and development staff will
continue efforts to develop proprietary manufacturing processes and equipment designed to enhance our manufacturing facilities
and reduce costs.



We also own various trademarks and trade
secrets that we developed within the Company or acquired from ADI and ADGC.



Distribution



Through March 31, 2015 the Company
has had a limited number of customers. The Company has distributed its products directly to these customers without using intermediaries
or distributors.



Joint Ventures



On September 16, 2013, the Company
entered into the Grace Rich Agreements to form a joint venture with operations in the PRC. This joint venture is to initially
deploy 100 Scio-designed diamond growing machines. The Company has licensed its proprietary technology for the manufacture of
diamond gemstones to the joint venture to produce material of agreed upon specifications. In exchange for the license, the Company
has received licensing and development revenue and a 30% non-dilutable ownership position 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 Company is assisting the joint venture with
the initial deployment of the licensed technology and the development of its production facility. The Company does not control
the joint venture and is not required to make any on-going funding contributions.



8







On December 18, 2014, the Company entered
into an arrangement with Renaissance Diamonds, Inc. (“Renaissance”) creating Renaissance Created Diamond Company,
LLC (“RCDC”). The Company and Renaissance are each 50% members of RCDC. 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. RCDC will
purchase rough diamond material from the Company and process and finish the material into finished gemstones for sale 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.



Government Regulations



Laboratory technology activities are subject
to various federal, state, foreign and local laws and regulations, which govern research, lab development, taxes, labor standards,
occupational health, and waste disposal, protection of the environment, mine safety, hazardous substances and several other matters.
We believe that we are in compliance in all material respects with applicable technology, health, safety and environmental statutes
and the regulations promulgated by the relevant jurisdictions. Currently, there are no costs associated with our compliance with
such regulations and laws. Certain federal and state laws and regulations govern the testing, creation and sale of the types of
diamond we intend to produce. The United States Federal Trade Commission (“FTC”) and other comparable regulatory authorities
in the United States and in foreign countries may extensively and rigorously regulate our lab-grown diamond, product development
activities and manufacturing processes. In the United States, the FTC regulates the introduction and labeling of gemstone diamond.
We may be required to:



| | · | Obtain clearance
                                         before we can market and sell our lab-grown diamond;
| | - | --------------------------------------------------------------------------------------------------------------

| | · | Satisfy content
                                         requirements applicable to our labeling, sales and promotional materials;
| | - | ----------------------------------------------------------------------------------------------------------------------------------

| | · | Comply with
                                         manufacturing and reporting requirements; and
| | - | --------------------------------------------------------------------------------------------------

| | · | Undergo rigorous
                                         inspections.
| | - | ----------------------------------------------------------------------



The process of obtaining marketing clearance
for new gemstone diamond from the FTC may prove costly and time consuming. The FTC has neither approved nor prohibited the use
of the term “cultured” to describe the diamond the Company intends to sell as gemstones. However, in December 2006,
the Jewelers’ Vigilance Committee submitted a petition (the “Petition”) to the FTC seeking amendment to the
Guides for the Jewelry, Precious Metals, and Pewter Industries, 16 C.F.R. Part 23 (“Guides”) to include the term
“cultured” as a proscribed term to describe laboratory-created diamond. By opinion, dated July 21, 2008, the
FTC denied the Petition, finding it did not demonstrate that the use of the term “cultured” to describe laboratory-created
diamond, when qualified by one of the terms provided in the Guides, is deceptive or unfair and declined to amend the Guides as
requested by the Petition. The Company has not procured FTC clearance, and the FTC has not precluded the Company from selling
diamond produced using the Diamond Technology. FTC has the power to restrict the offer and sale of diamond that could deceive
or have the tendency or effect of misleading or deceiving purchasers or prospective purchasers with regard to the type, kind,
quality, character, value, origin or other characteristics of a diamond gemstone. Under current guidelines issued by the FTC,
the Company is permitted to market its diamond gemstones as “Scio-created,” “lab-created diamond”, “laboratory
created diamond,” “laboratory grown diamond” or “cultured” so long as that term is accompanied by
any of the foregoing and such designations may inhibit marketing descriptions that are more favorable to creating consumer demand.
We may come under close scrutiny by governmental agencies and industry testing organizations and also by competitors in the gemstone
industry, any of which may challenge our promotion and marketing of our lab-grown diamond. If our production or marketing is challenged
by governmental agencies or competitors, or if regulations are issued that restrict our ability to produce and market our lab-grown
diamond as “cultured diamond”, “lab-created diamond”, or otherwise as a mined diamond alternative, our
business, operating results and financial condition could be materially adversely affected.



Our lab-grown diamond must also comply
with similar laws and regulations of foreign countries in which we market such diamond. In general, the extent and complexity
of gemstone diamond regulation is increasing worldwide. This trend may continue, and the cost and time required to obtain marketing
clearance in any given country may increase as a result. Should it prove necessary, there can be no assurances that our lab-grown
diamond will obtain any necessary foreign clearances on a timely basis, or at all.



Federal, state, local and foreign laws
and regulations (especially those regarding approval of gemstone diamond) are always subject to change, and could have a material
adverse effect on the testing and sale of our lab-grown diamond and, therefore, our business.



Research and Development



Our research and development activities
have been limited to date as we have focused first on establishment of our production facility and immediately thereafter on production
of diamond materials for commercial purposes. We expect to invest in new technology and intellectual property development to further
improve production efficiencies and develop new products in the future.



9







Environmental Regulations



Our operations are subject to local, state
and federal laws and regulations governing environmental quality and pollution control. To date, our compliance with these regulations
has had no material effect on our operations, capital, earnings, or competitive position, and the cost of such compliance has
not been material. We are unable to assess or predict at this time what effect additional regulations or legislation could have
on our activities.



Employees



We had eight full-time employees as of
March 31, 2015.



Securities Exchange Act of 1934 Reports



We maintain an Internet website at the
following address: http://www.sciodiamond.com. The contents of the website are not incorporated either directly or by reference
into this Form 10-K or into our other filings with the SEC. The Company makes available on or through our Internet website
certain reports and amendments to those reports that are filed or furnished to the SEC pursuant to Section 13(a) or
15(d) of the Exchange Act. These include annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports
on Form 8-K and beneficial ownership reports on Forms 3, 4 and 5. This information is available on our website free of charge
as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.



ITEM 1A. RISK FACTORS.



Our business, financial condition, and
results of operations could be harmed by any of the following risks, or other risks that have not been identified or which we
currently believe are immaterial or unlikely. Shareholders should carefully consider the risks described below in conjunction
with the other information in this Form 10-K and the information incorporated by reference in this Form 10-K, including
our financial statements and related notes.



Risks Related to Our Business



We have a very limited operating
history, and have incurred losses to date. We have generated limited revenues to date, and therefore, it is difficult to evaluate
our business and prospects.



Our Company is in the preliminary stages
of operation. While our Company has recently engaged in revenue-producing business activities, it is not yet a profitable enterprise
and may incur substantial losses for the foreseeable future. In addition, the Company’s revenues are presently derived from
a limited number of customers. The Company has not finalized the scope of products it anticipates it will bring to market. As
a company in the early stages of operation, our business is subject to all the risks inherent in a new business enterprise. We
have no substantial operating history for investors to consider in evaluating our business and prospects. When making an investment
decision, investors should consider the risks, expenses and difficulties that we may encounter as a young company in a new market.
These risks include, but are not limited to, the following:



| | · | Our need to
                                         fund and manage our rapidly developing and changing operations;
| | - | --------------------------------------------------------------------------------------------------------------------

| | · | Our need to
                                         expand our sales and marketing activities;
| | - | -----------------------------------------------------------------------------------------------

| | · | Our need to
                                         quickly hire and integrate new personnel, including various levels of senior management
                                         who have been hired relatively recently;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Our ability
                                         to develop additional applications and markets for our diamond materials, including the
                                         diamond gemstone industry;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Our ability
                                         to produce diamond materials sufficient to meet the specifications and needs of various
                                         industrial and technology applications;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Our ability
                                         to produce diamond materials and lab-grown diamond sufficient to meet anticipated demand
                                         in the gemstone marketplace;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Acceptance of
                                         our lab-grown diamond in the gemstone marketplace; and
| | - | -------------------------------------------------------------------------------------------------------------

| | · | The need to
                                         further refine and improve our technology with respect to man-made diamond development/growing
                                         and commercialization — including the need to make the diamond growing process
                                         commercially viable, acceptable (by our own and third party measures) and economical
                                         — and our intellectual property and product offerings, and the need to respond
                                         to changing technologies and consumer preferences.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



10







Likewise the diamond materials and lab-grown
diamond gemstones produced using the Diamond Technology (collectively “Scio Diamond Materials”) are in a relatively
early stage of development and are subject to the risks inherent in the development and marketing of Scio Diamond Materials, including
unforeseen design, manufacturing or other problems or failure to develop market acceptance. Our business is subject to the risks
inherent in the transition of technology from research and development and prototype proof-of-concept to commercial production
and market acceptance.



Failure by the Company to complete and
integrate commercial development of the Scio Diamond Materials it will market and distribute in sufficient quantities to meet
market demand would have a material adverse effect on the Company’s business, operating results and financial condition.
Accordingly, the Company’s prospects must be considered in light of the risks, expenses and difficulties frequently encountered
by companies in their early stage of development, particularly technology-based companies operating with developing and unproven
manufacturing processes.



To address these risks, the Company must,
among other things, respond to competitive developments, attract and motivate qualified personnel, develop market acceptance for
its diamond, establish effective distribution channels, effectively manage any growth that may occur and continue to upgrade and
successfully commercialize the Diamond Technology and Scio Diamond Materials incorporating such technology.



The Company purchased its Diamond Technology
from ADI and ADGC (together, the “Apollo Companies”). Neither of the Apollo Companies was able to successfully (profitably)
develop and commercialize their man-made diamond development/growing process.



We will require additional funding.



We currently have limited cash and working
capital to support our operations. Our future continuing operations will require additional funding, and we may not be able to
obtain such funding on acceptable terms or at all. We likely will require additional capital to be able to fund continued development
and improvement of the process for growing Scio Diamond Materials and to fund our expansion of manufacturing capacity to meet
projected growth of the market for our diamond. There can be no assurance that such efforts for raising capital will not involve
substantial dilution with respect to existing or future stockholders of the Company.



Our future capital requirements will depend
on many factors, including the speed at which our production process can be scaled-up for high yield production, market acceptance
of and demand for our diamond, and the timing of our expansion into new diamond markets. Our future capital requirements depend
upon many factors, including, but not limited to:



| | · | The rate at
                                         which we increase our production capacity;
| | - | -----------------------------------------------------------------------------------------------

| | · | The rate at
                                         which we expand our sales and marketing operations;
| | - | --------------------------------------------------------------------------------------------------------

| | · | The rate at
                                         which we attract consumers, distributors and strategic relationships;
| | - | --------------------------------------------------------------------------------------------------------------------------

| | · | The extent to
                                         which we are able to develop and upgrade the technology and infrastructure; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------

| | · | The response
                                         of competitors to our Scio Diamond product offerings.
| | - | -----------------------------------------------------------------------------------------------------------



We expect additional financing to be required
and there can be no assurance that additional equity or debt financing, if required, will be available on acceptable terms or
at all. If we raise additional funds by selling stock, the percentage ownership of our then current stockholders will be reduced,
and we may raise these funds with securities that have rights, preferences, or privileges equal or superior to the rights of investors
owning our common shares. If we cannot raise adequate funds to satisfy our capital requirements, we may have to limit our operations
significantly, or the Company could terminate operations entirely, resulting in a complete loss of investment for our stockholders.
Our inability to obtain financing on acceptable terms when needed would have a material adverse effect on the Company’s
business, operating results and financial condition.



We have had significant turnover in key management personnel.



We have had significant turnover in our
executive officers. Our success depends in part upon our ability to retain the services of certain executive officers and other
key employees and on the skills, experience and performance of senior management and certain other key personnel, most of whom
have either never worked together or who have worked together for only a short period of time. The loss of the services of our
executive officers or other key employees would have a material adverse effect on our business, operating results and financial
condition. Because we are in the early stages of commercialization, we are also dependent on our ability to recruit, retain and
motivate personnel with technical, manufacturing and chemical vapor deposition process skills. There are a limited number of personnel
with these qualifications and competition for such personnel may be intense. Our inability to attract, integrate and retain additional
qualified key personnel would materially adversely affect our business, operating results and financial condition.



11







We may expend a substantial amount of time and resources
in connection with SEC, other regulatory or stockholder-related inquiries or legal actions related to our filed financial statements
and other disclosures and the transactions related thereto or other matters.



We have recently 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 is fully cooperating with this inquiry. We may expend a
substantial amount of time and resources in connection with the SEC subpoena, other regulatory or stockholder-related inquiries
or legal actions related to our previously filed financial statements and other disclosures and the transactions related thereto
or other matters. Such actions could have a material adverse effect on the Company’s liquidity and financial condition and
could also affect our ability to file periodic reports on a timely basis and investor confidence in the accuracy and completeness
of our financial statements, which in turn could harm our business and have an adverse effect on our stock price and our ability
to raise additional funds.



We expect future losses.



In order to achieve a commercially viable
operation, we have made and expect to make further significant investments in technology, infrastructure, research and development.
We expect to expend substantial financial and other resources on expanding our operations, in particular our diamond growth technology
infrastructure, diamond fabrication, and sales/marketing activities. As a result, we must generate significant revenues to achieve
and maintain profitability. We expect that our sales and marketing expenses, general and administrative expenses, as well as the
continued development expenses will continue to increase.



Our business model is unproven.



Our initial business model was focused
on selling lab-grown diamond for various precision cutting applications. We are concurrently seeking to produce other lab-grown
diamond for retail gemstone consumption and other commercial applications. Although other companies have sold some minimal amounts
of lab-grown diamond gemstones to date, the full extent of the market for such lab-grown diamond is not fully known. Our business
model is relatively new, is unproven and is likely to continue to evolve. Accordingly, our business model may not be successful,
and we may need to make substantial changes thereto. Our ability to generate significant revenues will depend, in large part,
on our ability to successfully market our product to consumers, distributors and commercial customers. We intend to continue to
develop our business model as the market for our products evolves.



We are wholly dependent on the Diamond Technology.



Our diamond supply depends entirely on
our ability to manufacture diamond using the Diamond Technology acquired via the August 31, 2011 purchase of assets by the
Company from ADI and the June 5, 2012 purchase of assets by the Company from ADGC (together, the “Asset Purchase”).



Although the ability to produce limited
quantities of high quality lab-grown diamond gemstones has been demonstrated, it has yet to be proven that such success can be
transferred into a mass production process that will yield high-quality gemstones and material suitable for retail gemstone distribution
and commercial/industrial applications. The inability or difficulty to transfer the Diamond Technology into a high-yield production
facility would have a material adverse effect on our business, operating results and financial condition. Any disruption in our
ability to produce high quality lab-grown diamond would have a significant material effect on our business.



Our future revenues are unpredictable, and we expect
our operating results to fluctuate from period to period.



Our lack of operating history and the emerging
nature of the markets in which we expect to compete make it difficult for us to accurately forecast revenues in any given period.
As such, revenues could fall short of our expectations if we experience production delays or difficulties. Likewise, revenues
could fall short of expectations should our product not be met with the demand we anticipate from the marketplace. We have limited
experience in financial planning for our business on which to base our planned operating expenses.



Our operating results are likely to fluctuate
substantially from period to period as a result of a number of factors, many of which are beyond our control. These factors include,
but are not limited to, the following:



| | · | Outside market
                                         influences beyond our control, including extended periods of decreased demand for Scio
                                         diamond;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Our ability
                                         to enter into successful strategic relationships;
| | - | ------------------------------------------------------------------------------------------------------

| | · | Our ability
                                         to attract purchasers and/or distributors;
| | - | -----------------------------------------------------------------------------------------------

| | · | The amount and
                                         timing of operating costs and capital expenditures relating to expansion of production
                                         operations;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



12







| | · | The rate at
                                         which individuals and organizations accept our diamond;
| | - | ------------------------------------------------------------------------------------------------------------

| | · | An announcement
                                         or introduction of new or enhanced diamonds or services by our competitors;
| | - | ------------------------------------------------------------------------------------------------------------------------------------

| | · | Our ability
                                         to attract and retain qualified personnel; and
| | - | ---------------------------------------------------------------------------------------------------

| | · | Pricing policies
                                         instituted by our current and possible future competitors.
| | - | --------------------------------------------------------------------------------------------------------------------



The Company has generated limited revenue
to date and consequently its operations are subject to all risks inherent in the establishment of a new business enterprise. For
the period from inception, September 17, 2009, through March 31, 2015, the Company has an accumulated deficit of ($18,738,915).
We are currently generating limited revenues and expect to continue to generate revenue in the future, but there can be no assurances
that we will ever generate sufficient revenues to achieve profitability. If we do achieve profitability, there can be no assurances
that we can sustain or increase profitability.



Our ability to develop our core technologies is subject
to uncertainties.



The process by which we plan to manufacture
diamond is highly complex. We anticipate that customers will have highly specific quality standards that our diamond will be required
to meet. The diamond we intend to sell is in the early stages of development and there can be no assurances that it will meet
high customer standards. Product failure or the inability to meet customer requirements would have a material adverse effect on
our business, operating results and financial condition. The process by which we plan to produce our diamond requires the integration
of several complex components, some of which will be provided by third-party suppliers. The successful integration of the Diamond
Technology with third-party products will determine the performance and scalability of our production process. We will be dependent
upon our employees and vendors to maintain an adequate testing and technical support infrastructure to ensure the successful adoption
and rollout of our diamond to customers. We currently have limited experience in these areas. Failing in any of these areas could
materially adversely affect our business.



We may not be able to establish effective distribution
channels.



We initially intend to sell our diamond
in selected markets in the United States and internationally. We expect that we will be required to enter into distribution agreements
with, and will be dependent upon, a number of third parties for distribution and sales of our diamond. We are currently selling
diamond directly to customers and have not yet entered into distribution agreements with any distributors. There can be no assurance
that we will be able to enter into distribution agreements with distributors or that our distribution strategy will prove to be
successful. Additionally, there can be no assurance that distributors will devote the efforts needed for successful distribution
of our diamond. The inability of the Company to enter into favorable arrangements with distributors or to achieve desired distribution
of our diamond would have a material adverse effect on our business, operating results and financial condition.



Our sales of diamond for commercial applications
are dependent upon our ability to enter into profitable relationships with businesses best able to reap rewards from the unique
characteristics of diamond. There is no assurance that we will be able to initiate and maintain these relationships.



The Diamond Technology may be vulnerable to failure.



Our success depends, in part, on the performance,
reliability and availability of the Diamond Technology and the diamond we ultimately produce. The Diamond Technology and diamond
produced thereby may be vulnerable to failure. The failure of the Diamond Technology or diamond produced thereby could adversely
affect our business. The process for manufacturing diamond using the Diamond Technology is vulnerable to disruptions due to a
variety of factors, which may lead to interruptions, delays, and losses of opportunities or inability to consistently market and
sell our lab-grown diamond. The occurrence of any of the foregoing could have a material adverse effect on our business.



We may need to effectively manage rapid growth of our
operations.



Our ability to successfully offer diamond
and to implement our business plan in new markets requires an effective planning and management process. We are in the process
of increasing our operations and anticipate having to increase our headcount as well. Increasing our operations and potentially
experiencing rapid growth would place a significant strain on our management systems, infrastructure and resources. We will need
to continue to improve our financial and managerial controls and reporting systems and procedures, and will need to continue to
expand, train and manage our workforce.



Furthermore, we may be required to manage
an increasing number of relationships with various users, customers and other third parties. Any failure to expand any of the
foregoing areas efficiently and effectively could cause our business to suffer. We could experience a period of rapid and significant
growth, which could continue over several years. We believe rapid growth would place a significant strain on our resources. Our
ability to manage growth effectively will require us to implement and improve operational and financial systems and to expand,
train and manage our employee base. We also may be required to manage multiple relationships with various suppliers, customers
and other third parties. Our future operating results will also depend on our ability to expand sales and marketing, research
and development and administrative support organizations. If the Company were unable to manage growth effectively, our business,
financial condition and results of operations would be materially adversely affected.



13







We will need to hire additional personnel.



Our future success depends on our ability
to identify, attract, hire, train, retain and motivate highly skilled executive, technical, managerial, sales and marketing and
business development personnel. We intend to hire a number of executive, technical, sales, and marketing, business development
and administrative personnel during the next one or two years. Competition for qualified personnel may prove intense, particularly
in the technology markets. If we fail to successfully attract, assimilate and retain a sufficient number of qualified executives,
technical, managerial, sales and marketing, business development and administrative personnel, our business could suffer.



Our success depends upon achieving a critical mass of
customers and strategic relationships.



Our success is largely dependent upon achieving
significant market acceptance for our diamond. The market for our diamond is at an early stage of development. Although we believe
that our diamond will ultimately achieve broad market acceptance, our existing and potential competitors may offer diamond that
could negatively affect the market acceptance of our product and damage our business prospects.



Our success is also dependent upon attracting
significant numbers of distributors and strategic relationships in order to market our diamond. In particular, our ability to
enter into beneficial distribution partnerships will depend in large part upon our success in convincing diamond gemstone consumers
that our lab-grown diamond gemstone is of a desired quality. Failure to achieve and maintain a critical mass of market acceptance
will seriously harm our business in the diamond gemstone industry.



The current and future state of the global economy may
curtail our operations and our anticipated revenues.



Our business may be adversely affected
by changes in domestic and international economic conditions, including inflation, changes in consumer preferences and changes
in consumer spending rates, personal bankruptcy and the ability to collect our accounts receivable. Changes in global economic
conditions may adversely affect the demand for our products and make it more difficult to collect accounts receivable, thereby
negatively affecting our business, operating results and financial condition. The recent disruptions in credit and other financial
markets and deterioration of national and global economic conditions could, among other things, impair the financial condition
of some of our customers and suppliers, thereby increasing customer bad debts or non-performance by suppliers.



Acts of war, terrorism or other unknown and unexpected
events could disrupt our business and we could be required to cease our operations.



Involvement in a war or other military
action or acts of terrorism may cause significant disruption to commerce throughout the world. To the extent that such disruptions
result in (i) delays or cancellations of customer orders, (ii) a general decrease in consumer spending, (iii) our
inability to effectively market and distribute our products or (iv) our inability to access capital markets, our business
and results of operations could be materially and adversely affected. We are unable to predict whether the involvement in a war
or other military action will result in any long-term commercial disruptions or if such involvement or responses will have any
long-term material adverse effect on our business, results of operations or financial condition.



The Company continues to receive a “going concern”
qualification in our financial statements that might create additional doubt about our ability to stay in business, which could
result in a total loss of investment by our stockholders.



We have not generated material revenues
and have negative operating cash flows. These issues, among others, raise substantial doubt about our ability to continue as a
“going concern.”



14







Risks Related to Our Industry



The potential market for our lab-grown diamond is unproven
and may not materialize.



There currently is no widely-developed
market for lab-grown diamond gemstones, and we believe that companies operating in the gemstone field may not be fully aware of
the existence and attributes of our lab-grown diamond. As is the case with any new or potential product, market acceptance and
demand are subject to a significant amount of uncertainty. Our future financial performance will depend upon consumer acceptance
of lab-grown diamond as a realistic and comparable alternative to mined diamond and other gemstones. Because no widely-developed
markets now exist for lab-grown diamond gemstones, it is difficult to predict the future growth rate, if any, and the size of
the market for our lab-grown diamond gemstones. We may spend significant amounts of capital to acquire diamond production systems
at a time when demand for our lab-grown diamond is not at a level to fund those expenditures. The market for our lab-grown diamond
gemstones may never develop or may develop at a slower pace than expected due to a general lack of consumer acceptance of lab-grown
diamond gemstones. If the market fails to develop or develops more slowly than expected, or if our lab-grown diamond gemstones
do not achieve significant market acceptance, our business, operating results and financial condition would be materially adversely
affected.



We face significant competition.



Our lab-grown gemstone diamond will face
competition from established producers and sellers of earth-mined diamond and other known and potential manufacturers of lab-grown
gemstones. Other companies could seek to introduce lab-grown diamond or other competing diamonds or to develop competing processes
for production of lab-grown diamond gemstones. We believe that the more successful the Company is in creating market acceptance
for Scio diamond which included lab-grown gemstone diamond, the more competition can be expected to increase. Increased competition
could result in a decrease in the price charged by the Company for our diamond or reduce demand for our diamond, which would have
a material adverse effect on our business, operating results and financial condition. Further, our current and potential competitors
may have significantly greater financial, technical, manufacturing and marketing resources and greater access to distribution
channels than the Company. There can be no assurance that we will be able to compete successfully with existing or potential competitors.



Widespread consumer acceptance of lab-grown
diamond gemstones is still developing. At this time, the Company is aware that it may be competing with companies that produce
lab-grown diamond for industrial and gemstone markets, including Pure Grown Diamond/IIa Technologies, Washington Group, D’Nea,
Element Six, and Sumitomo. We believe that as lab-grown diamond continues to gain widespread commercial and consumer acceptance,
the more competition can be expected to increase. Increased competition could result in a decrease in the price expected to be
charged by the Company for our diamond or reduce demand for our diamond, which would have a material adverse effect on our business,
operating results and financial condition.



Our potential competitors in the gemstone
diamond industry may have significantly greater financial, technical, manufacturing and marketing resources and greater access
to distribution channels than the Company. Our competitors will likely include large multi-national gemstone diamond companies
as well as numerous start-up and development-stage gemstone diamond and technology companies, some of whom we may not be aware.
We expect intense competition as we execute our business plan. It is believed that some of our existing and potential competitors,
as well as potential entrants into our market, have longer operating histories, larger user bases, greater brand recognition and
significantly greater financial, marketing and other resources than the Company. Many of these potential competitors may be able
to devote substantially greater resources to promotion and systems development than we can. Barriers to developing competitive
technology in our market may not be sufficient and current and competitors may be able to develop competing diamonds at a relatively
low cost. Accordingly, we believe that our success will depend heavily upon achieving significant market acceptance before our
potential competitors introduce competing products. There can be no assurance that we will be able to compete successfully with
potential competitors.



Rapid technological change will affect our business.



Rapidly changing technology, industry standards,
evolving consumer demands and frequent new product introductions are expected to define our market. Our market’s early stage
of development may exacerbate these characteristics. Our future success will depend in significant part on our ability to continuously
improve the quality of lab-grown diamond and our production capabilities in response to both the evolving demands of the market
and competitive product offerings. Efforts in these areas may not be successful.



We expect to have limited protection of our intellectual
property and proprietary rights.



We regard the patents, trade secrets and
similar intellectual property acquired via the Asset Purchase as critical to our success. We must rely on patent law, trade secret
protection and confidentiality agreements with our employees, customers, strategic partners, advisors and others to protect those
proprietary rights. Such measures, however, afford only limited protection, and we may not be able to maintain the propriety and/or
confidentiality of the Diamond Technology. Despite these precautions, unauthorized third parties might use information that we
regard as proprietary to compete or help others to compete with us. There is no assurance that any of the existing patent applications
or future patent applications, if made, will be granted, or, if granted, will not be invalidated or circumvented, or that the
rights granted there under will provide us with a competitive advantage. Any misappropriation of our proprietary information by
third parties could materially adversely affect our business. There can be no assurance that any other patents issued will provide
any significant commercial protection to the Company, that the Company will have sufficient resources to prosecute its patents
or that any patents will be upheld by a court should the Company seek to enforce its respective rights against an infringer.



15







There can be no assurances that:



| | · | The scope of
                                         any patent protection will be effective to exclude competitors or provide competitive
                                         advantages to us;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | We will be able
                                         to commercially exploit any issued patents before they expire;
| | - | -----------------------------------------------------------------------------------------------------------------------

| | · | Any of the patents
                                         held will be held valid if subsequently challenged;
| | - | ---------------------------------------------------------------------------------------------------------------

| | · | Others will
                                         not claim rights in or ownership of, the patents and other proprietary rights acquired
                                         or produced by the Company;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Our diamond
                                         will not infringe, or be alleged to infringe, the proprietary rights of others; or
| | - | ---------------------------------------------------------------------------------------------------------------------------------------

| | · | We will be able
                                         to protect meaningful rights in proprietary technology over which the party does not
                                         hold patents.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Furthermore, there can be no assurances
that others have not developed or will not develop diamond which may duplicate any of the diamond produced using the Diamond Technology
or our expected manufacturing processes, or those others will not design around any of the Company’s patents. The existence
of valid patents does not provide absolute prevention from other companies independently developing competing technologies. Existing
producers of laboratory-created diamond may refine existing processes for growing diamond or develop new technologies for growing
diamond in a manner that does not infringe any intellectual property rights of the Company.



Other parties may independently develop
or otherwise acquire substantially equivalent techniques, gain access to our acquired proprietary technology or disclose such
technology. In addition, whether or not we obtain additional patents, others may hold or receive patents covering components of
diamond we independently develop in the future. There can be no assurances that third parties will not claim infringement by us,
and seek substantial damages, with respect to current or future diamond-related activities. If we were to become involved in a
dispute regarding intellectual property, whether ours or that of another company, we may become involved in material legal proceedings.
Any such claims, with or without merit, could be time-consuming, result in costly litigation, cause product shipment delays and
require us to:



| | · | Cease manufacturing
                                         and selling the product in question, which could seriously harm us;
| | - | --------------------------------------------------------------------------------------------------------------------------------

| | · | Enter into royalty
                                         or licensing agreements; or
| | - | ---------------------------------------------------------------------------------------

| | · | Design commercially
                                         acceptable non-infringing alternative diamond.
| | - | -----------------------------------------------------------------------------------------------------------



There can be no assurances that we would
be able to obtain royalty or licensing agreements, if required, on terms acceptable to us or at all, or that we would be able
to develop commercially acceptable non-infringing alternative diamond. The failure to do so could have a material adverse effect
upon our business, financial condition, operating results and cash flows. We cannot be absolutely certain that the Diamond Technology
does not infringe issued patents or other intellectual property rights of others. In addition, because patent applications in
the United States are not publicly disclosed until the patent is issued, applications may have been filed which relate to the
Diamond Technology.



There can be no assurance that our business
and ability to produce diamond will not be impaired by claims that we are infringing upon the intellectual property of others.
We may be subject to future legal proceedings and claims from time to time in the ordinary course of our business, including claims
of alleged infringement of the trademarks and other intellectual property rights of third parties. Intellectual property litigation
is expensive and time-consuming and could divert the Company’s management’s attention from diamond production and
operating our business. As a result of the foregoing, the limited protection of our acquired intellectual property rights and
proprietary information could have a material adverse effect on the Company’s business, operating results and financial
condition.



Substantial governmental regulation may restrict our
ability to sell our lab-grown diamond.



Certain federal and state laws and regulations
govern the testing, creation and sale of the types of diamond we intend to produce. The United States Federal Trade Commission
(“FTC”) and other comparable regulatory authorities here and in foreign countries may extensively and rigorously regulate
our Scio Diamond Materials, product development activities and manufacturing processes. In the United States, the FTC regulates
the introduction and labeling of gemstone diamond. We may be required to:



| | · | Obtain clearance
                                         before we can market and sell our lab-grown diamond gemstones;
| | - | ------------------------------------------------------------------------------------------------------------------------

| | · | Satisfy content
                                         requirements applicable to our labeling, sales and promotional materials;
| | - | ----------------------------------------------------------------------------------------------------------------------------------

| | · | Comply with
                                         manufacturing and reporting requirements; and
| | - | --------------------------------------------------------------------------------------------------

| | · | Undergo rigorous
                                         inspections.
| | - | ----------------------------------------------------------------------



16







The process of obtaining marketing clearance
for new gemstone diamond from the FTC may prove costly and time consuming. The FTC has neither approved nor prohibited the use
of the term “cultured” to describe the diamond the Company intends to sell as gemstones. However, in December 2006,
the Jewelers’ Vigilance Committee submitted the Petition a petition (the “Petition”) to the FTC seeking amendment
to the Guides for the Jewelry, Precious Metals, and Pewter Industries, 16 C.F.R. Part 23 (“Guides”) to include
the term “cultured” as a proscribed term to describe laboratory-created diamond. By opinion, dated July 21, 2008,
the FTC denied the Petition finding it did not demonstrate that the use of the term “cultured” to describe laboratory-created
diamonds, when qualified by one of the terms provided in the Guides, is deceptive or unfair and declined to amend the Guides as
requested by the Petition. The Company has not procured FTC clearance, and the FTC has not precluded the Company from selling
diamond produced using the Diamond Technology. Despite its knowledge of the existing limited sales of lab-grown diamond gemstones
and however unlikely, there can be no assurances that the FTC will not preclude the Company, or others similarly situated from
marketing and selling lab-grown diamond gemstones.



The FTC has the power to restrict the offer
and sale of diamond that could deceive or have the tendency or effect of misleading or deceiving purchasers or prospective purchasers
with regard to the type, kind, quality, character, value, origin or other characteristics of a diamond gemstone. Under current
guidelines issued by the FTC, the Company is permitted to market its diamond gemstones as “Scio-created,” “lab-created
diamond”, “laboratory created diamond,” “laboratory grown diamond” or “cultured” so
long as that term is accompanied by any of the foregoing and such designations may inhibit marketing descriptions that are more
favorable to creating consumer demand. We may come under close scrutiny by governmental agencies and industry testing organizations
and also by competitors in the gemstone industry, any of which may challenge our promotion and marketing of our lab-grown diamond.
If our production or marketing is challenged by governmental agencies or competitors, or if regulations are issued that restrict
our ability to produce and market our lab-grown diamond as “lab-grown diamond”, “lab-created diamond”,
or otherwise as a mined diamond alternative, our business, operating results and financial condition could be materially adversely
affected.



It is likely that our Scio Diamond Materials
must also comply with similar laws and regulations of foreign countries in which we market such diamond. In general, the extent
and complexity of diamond disclosure regulation is increasing worldwide. This trend may continue, and the cost and time required
to obtain marketing clearance in any given country may increase as a result. Should it prove necessary, there can be no assurances
that our Scio Diamond Materials will obtain any necessary foreign clearances on a timely basis, or at all. Our inability to satisfy
specific requirements for approval by domestic and/or foreign regulatory agencies could materially adversely affect our ability
to bring diamond to market and generate revenue.



Federal, state, local and foreign laws
and regulations (especially those regarding approval of gemstone diamond) are always subject to change and could have a material
adverse effect on the testing and sale of our diamond and, therefore, our business.



Regulatory authorities may limit our business in the
future.



We will be subject to extensive regulatory
requirements. Government authorities can withdraw marketing clearance due to our failure to comply with regulatory standards or
due to the occurrence of unforeseen problems following initial clearance. Ongoing regulatory requirements are wide-ranging and
govern, among other things:



| | · | Product manufacturing;
| | - | ----------------------

| | · | Annual inspections
                                         related to ISO certification of our quality system;
| | - | ---------------------------------------------------------------------------------------------------------------

| | · | Supplier substitution;
| | - | ----------------------

| | · | Product changes;
| | - | ----------------

| | · | Process modifications;
| | - | ----------------------

| | · | The process
                                         of assuring origin of mine and/or production of diamond;
| | - | -------------------------------------------------------------------------------------------------------------

| | · | Lab-grown diamond
                                         gemstone reporting and disclosure; and
| | - | -------------------------------------------------------------------------------------------------

| | · | Product sales
                                         and distribution.
| | - | ------------------------------------------------------------------------



We expect that various government agencies
may inspect our facilities from time to time to determine whether we are in compliance with applicable laws and regulations. Additionally,
if we fail to comply or maintain compliance with laws and regulations pertaining to diamond gemstones, regulatory authorities
may fine us and bar us from selling our lab-grown diamond gemstones. If a regulatory agency believes we are not in compliance
with such laws or regulations, it may be able to:



| | · | Seize our lab-grown
                                         diamond gemstones;
| | - | -------------------------------------------------------------------------------

| | · | Require a recall;
| | - | -----------------

| | · | Withdraw previously
                                         granted market clearances;
| | - | ---------------------------------------------------------------------------------------

| | · | Implement procedures
                                         to stop future violations; and/or
| | - | -----------------------------------------------------------------------------------------------

| | · | Seek civil and
                                         criminal penalties against us.
| | - | --------------------------------------------------------------------------------------



17









Risks Related to an Investment in our Common Stock



An investment in the Company involves a high degree of
risk.



An investment in the Company is speculative
and involves a high degree of risk, including the loss of an investor’s entire investment in the Company. There is no guaranteed
rate of return on an investor’s investment in the Company, and there is no assurance that investors will be able to resell
their shares for the amount they paid for such shares or for any other amount. Investors should not invest in the Company unless
such investors can afford to lose their entire investment.



Recent settlement agreement resulted in restructured
Board of Directors and shareholder voting agreement that results in our directors and officers controlling a large percentage
of the Company’s stock.



On June 23, 2014, the Company entered into
a settlement agreement (the “Settlement Agreement”) by and among Edward S. Adams, Michael R. Monahan, Gerald McGuire,
James Korn, Bruce Likly, Theodorus Strous, and Robert C. Linares, their present and past affiliates, such as Apollo Diamond, Inc.,
Apollo Diamond Gemstone Corporation, Adams Monahan LLP, Focus Capital Group, Inc. and Oak Ridge Financial Services Group, Inc.,
family members and spouses (the “Adams Group”), and Thomas P. Hartness, Kristoffer Mack, Paul Rapello, Glen R. Bailey,
Marsha C. Bailey, Kenneth L. Smith, Bernard M. McPheely, James Carroll, Robert M. Daisley, Ben Wolkowitz, Craig Brown, Ronnie
Kobrovsky, Lewis Smoak, Brian McPheely, Mark P. Sennott, the Sennott Family Charitable Trust, and their affiliates (the “Save
Scio Group”), pursuant to which the Company and the Save Scio Group settled the previously pending consent contest for the
election of directors. Pursuant to the Settlement Agreement, on June 23, 2014, Messrs. Adams, Strous, Linares and McGuire resigned
as directors effective immediately; the Board expanded the size of the Board to 7 directors and appointed Messrs. McPheely, Wolkowitz,
Smoak and Leaverton (the “Save Scio Nominees”) to fill all but one of the resulting vacancies. In addition, the Company
agreed to nominate each of Messrs. Korn and Likly (the “Adams Group Nominees”) and the Save Scio Nominees for election
to the Board at the Company’s 2014 annual meeting of stockholders. Pursuant to the Settlement Agreement, the Adams Group
and the Save Scio Group must vote their shares of Common Stock for the other’s nominees for the next three years, and will
also have replacement rights in the event these nominees are unable to serve as directors.



As of June 23, 2015, the Company had 57,516,499
shares of common stock outstanding. As of the date of the Settlement Agreement, the total number of shares subject to the voting
agreements related to the settlement agreement is 17,492,928 or approximately 30% of the outstanding shares. Therefore, the Save
Scio Group and the Adams Group collectively have considerable influence to:



| | · | Elect or defeat
                                         the election of our directors;
| | - | ---------------------------------------------------------------------------------------

| | · | Amend or prevent
                                         amendment of our Articles of Incorporation or Bylaws;
| | - | ---------------------------------------------------------------------------------------------------------------

| | · | Effect or prevent
                                         a merger, sale of assets or other corporate transaction; and
| | - | -----------------------------------------------------------------------------------------------------------------------

| | · | Determine the
                                         outcome of any other matter submitted to the stockholders for vote.
| | - | --------------------------------------------------------------------------------------------------------------------------



The limited ability of other stockholders
to exercise control over the Company may adversely affect the future market price for our securities and the rights of our stockholders.



Provisions in our Articles of Incorporation and bylaws
or Nevada law might discourage, delay or prevent a change of control of us or changes in our management and, therefore, depress
the trading price of the common stock.



Nevada corporate law and our Articles of
Incorporation and Bylaws contain other provisions that could discourage, delay or prevent a change in control of our Company or
changes in its management that our stockholders may deem advantageous. These include provisions that:



| | · | Deny holders
                                         of our common stock cumulative voting rights in the election of directors, meaning that
                                         stockholders owning a majority of our outstanding shares of common stock will be able
                                         to elect all of our directors;
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Require any
                                         stockholder wishing to properly bring a matter before a meeting of stockholders to comply
                                         with specified procedural and advance notice requirements; and
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | Allow any vacancy
                                         on the Board of Directors, however the vacancy occurs, to be filled by the directors.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------



18







There is a limited active public market for any of our
securities, which are not listed on any stock exchange, and transfer of our securities is restricted.



There is presently a limited active public
market for our securities, and there can be no assurance that a trading market will continue to develop or, if developed, that
it will be maintained. Our common stock is not listed on any stock exchange and it is currently quoted on the OTC Bulletin Board
and OTC PINK marketplace under the ticker “SCIO”. We believe that we currently may not have enough stockholders or
outstanding shares to support an active trading market, even if our common stock were listed on a recognized trading exchange.
There can be no assurance that our investors will be able to resell any of our securities at any price. The Company makes no representation
to investors regarding the value of its securities, and, particularly in light of the thin trading in the Company’s securities;
trading prices may or may not reasonably reflect the intrinsic value, if any, of the Company’s securities.



We have been deemed to be a former shell
company in accordance with the Securities Act. As a result, our shares of common stock may not be resold under Rule 144 of
the Securities Act except pursuant to Rule 144(i). Resales under Rule 144(i) generally require, that, in addition
to the normal Rule 144 requirements and limitations: (1) we are subject to the reporting requirements of the Securities
Exchange Act of 1934 (the “Exchange Act”); (2) we have filed all Exchange Act reports required for the past 12
months; and (3) a minimum of one year has elapsed since we filed current Form 10 information on Form 8-K changing
our status from a shell company to a non-shell company. An investment in the Company should be considered a long-term, illiquid
investment, and investors should be able to withstand a complete loss of their investment.



Our Bylaws specifically provide that we
shall not be required to effectuate the transfer of any shares of our common stock without first receiving from the transferring
stockholder (i) an opinion of counsel satisfactory to the Company that a proposed transfer may be made lawfully without the
registration of such shares pursuant to the Securities Act of 1933, as amended (the “Securities Act”), and applicable
state securities laws, or (ii) evidence that the shares proposed to be transferred have been registered under the Securities
Act. The existence of the foregoing restrictions may, therefore, adversely affect the future market price for our securities and
the rights of our stockholders.



Future stock issuances could severely dilute
our current shareholders’ interests.



The future issuance of common stock may
result in dilution in the percentage of our common stock held by our existing shareholders. Also, any stock we sell in the future
may be valued on an arbitrary basis by us and the issuance of shares of common stock or preferred stock for future services, acquisitions
or other corporate actions may have the effect of diluting the value of the shares held by our existing shareholders.



In addition, it is the Company’s
current intention (depending on the development of the business plan and other factors) to raise substantial additional capital
during the fiscal year ending March 31, 2015, which we expect to result in substantial dilution in the percentage of our common
stock held by our existing shareholders.



Any additional funding we arrange through the sale of
our common stock will result in dilution to existing stockholders’ voting power and may result in dilution to the book value
per share held by existing stockholders.



We must raise additional capital in order
for our business plan to succeed. A likely source of additional capital will be through the sale of additional shares of common
stock. Such stock issuances would cause stockholders’ voting interests in our Company to be diluted and may cause the book
value per share held by existing stockholders to be diluted. Such dilution could negatively affect the value of investors’
shares.



We do not expect to pay cash dividends in the foreseeable
future.



We are not obligated to pay dividends with
respect to our capital stock, and we do not anticipate the payment of cash dividends on our capital stock in the foreseeable future.
Any decision to pay dividends will depend upon our profitability at the time, cash available, and other factors; however, it is
currently anticipated that any future profits received from operations will be retained for operations. Therefore, no assurance
can be given that there will ever be any such cash dividend or distribution in the future. Accordingly, investors must rely on
sales of their capital stock after price appreciation, which may never occur, or a sale of our Company or other similar transaction
as the only way to realize a gain on their investment.



If we do not obtain additional financing, our business
may fail.



We anticipate that additional funding will
be needed for general administrative expenses, operating costs and marketing costs. There is no guarantee that we will be able
to raise the required cash and because of this our business may fail. We have generated limited revenues from operations to date.
The specific cost requirements needed to maintain operations depends upon the production we are able to generate. If we are not
able to raise the capital necessary to fund our business objectives, we may have to delay the implementation of our business plan.
Obtaining additional funding will be subject to a number of factors, including general market conditions, investor acceptance
of our business plan and initial results from our business operations. These factors may impact the timing, amount, terms or conditions
of additional financing available to us. The most likely source of future funds available to us is through the sale of additional
shares of common stock. There is no guarantee that we will be able to raise the funds required by the Company and, if we are not
able to raise such funds, then our business may fail.



19







Because our continuation as a going concern is in doubt,
we may be forced to cease business operations unless we can generate profitable operations in the future.



We will be incurring losses until we build
a break-even level of revenue. Further losses are anticipated in the development of our business. As a result, there is substantial
doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability
to generate profitable operations in the future and/or to obtain the necessary financing to meet our obligations and repay our
liabilities arising from normal business operations when they come due. We will require additional funds in order to provide proper
service to our potential clients. At this time, we cannot assure investors that we will be able to obtain financing. If we are
unable to raise needed financing, we may have to delay or abandon further operations. If we cannot raise financing to meet our
obligations, we will be insolvent and may be forced to cease our business operations.



If an active trading market for our common stock does
not sufficiently develop, stockholders may be unable to sell their shares.



There is currently a limited trading market
for our common stock and we can provide no assurance that a significant market will develop. Our common stock currently trades
on the OTC Bulletin Board and the OTC PINK marketplace. We may decide to apply for listing of our common stock on a U.S. and/or
foreign exchange. However, we can provide no assurances that we will apply or that our common stock would be accepted for listing
on any stock exchange. Accordingly, we can provide investors with no assurance that our shares will be traded on a U.S. and/or
foreign exchange or, if traded, that a significant active public trading market will materialize. If no active trading market
is ever developed for our shares, it will be difficult for stockholders to sell their shares.



Our shares of common stock are subject to the “penny
stock” rules of the SEC and the trading market in our securities will be limited, which will make transactions in our
stock cumbersome and may reduce the value of an investment in our stock.



The SEC has adopted rules that regulate
broker-dealer practices in connection with transactions in “penny stocks.” Penny stocks generally are equity securities
with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the NASDAQ
system, provided that current price and volume information with respect to transactions in such securities is provided by the
exchange or system). Penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt
from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which specifies information about penny
stocks and the nature and significance of risks of the penny stock market. A broker-dealer must also provide the customer with
bid and offer quotations for the penny stock, the compensation of the broker-dealer, and sales person in the transaction, and
monthly account statements indicating the market value of each penny stock held in the customer’s account. In addition,
the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer
must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s
written agreement to the transaction. These disclosure requirements may have the effect of reducing the trading activity in the
secondary market for stock that becomes subject to those penny stock rules. If a trading market for our common stock develops,
our common stock will probably become subject to the penny stock rules, and stockholders may have difficulty in selling their
shares.



Significant deficiencies in our disclosure controls and
procedures or our failure to remediate such deficiencies could result in a material misstatement in our financial statements not
being prevented or detected and could affect investor confidence in the accuracy and completeness of our financial statements,
as well as our common stock price.



We have identified significant deficiencies
in our disclosure controls and procedures, including a lack of sufficient internal accounting resources, necessary to ensure that
adequate review of our financial statements and notes thereto is performed, and have concluded that our internal control over
financial reporting was not effective as of March 31, 2015. These significant deficiencies and our remediation plans are
described further in Item 9A. Deficiencies in our disclosure controls and procedures could result in material misstatements in
our financial statements not being prevented or detected. We may experience difficulties or delays in completing remediation or
may not be able to successfully remediate significant deficiencies all. Any material deficiency or unsuccessful remediation could
affect our ability to file periodic reports on a timely basis and investor confidence in the accuracy and completeness of our
financial statements, which in turn could harm our business and have an adverse effect on our stock price and our ability to raise
additional funds.



20







ITEM 1B. UNRESOLVED STAFF COMMENTS.



Disclosure under this item is not applicable
because the Company is a smaller reporting company.



ITEM 2. PROPERTIES.



Our corporate headquarters and production
facility are located at 411 University Ridge, Greenville, South Carolina. The production facility includes approximately 3,200
square feet adjoining our headquarters office, and the facility overall has 9,470 square feet of space. We have five years remaining
on the lease for this facility.



Annual rental payments for the next five
fiscal years for these facilities are as follows:



|2016                |  | $ | 224,410 | 
|------------------- |  | - | ------- | 
|2017                |  |   | 224,410 | 
|2018                |  |   | 224,410 | 
|2019                |  |   | 224,410 | 
|2020                |  |   | —       | 
|2021 and thereafter |  | $ | —       | 



ITEM 3. LEGAL PROCEEDINGS.



We are subject, from time to time, to various
claims, lawsuits or actions that arise in the ordinary course of business. As of March 31, 2015 there were no material outstanding
claims by the Company or against the Company.



In May 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 is fully cooperating with this ongoing inquiry.



ITEM 4. MINE SAFETY DISCLOSURES.



Not applicable.



21







PART II



ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES



Market Information



Our common stock is currently quoted on
the OTC Bulletin Board and OTC PINK marketplace under the ticker “SCIO”. Because we are quoted on the OTC Bulletin
Board, our common stock is less liquid, may receive less coverage by security analysts and news media, and generate lower prices
than might otherwise be obtained if it were listed on a national securities exchange. The OTC Bulletin Board prices are quotations,
which reflect inter-dealer prices without retail mark-up, mark-down, or commissions and may not represent actual transactions.



The following table sets forth the quarterly
high and low bid prices for our common stock for the fiscal years ending March 31, 2014 and 2015, as reported by the OTC Bulletin
Board. These quotations reflect inter-dealer prices, without retail mark-up, markdown, or commission, and may not represent actual
transactions.



|Fiscal Year Ended March 31, 2014 |  | High |      |  | Low |  
|-------------------------------- |  | ---- | ---- |  | --- | -
|First Fiscal Quarter             |  | $    | 1.00 |  |     | $
|Second Fiscal Quarter            |  |      | 0.54 |  |     |  
|Third Fiscal Quarter             |  |      | 0.51 |  |     |  
|Fourth Fiscal Quarter            |  |      | 0.40 |  |     |  



|Fiscal Year Ended March 31, 2015 |  | High |      |  | Low |  
|-------------------------------- |  | ---- | ---- |  | --- | -
|First Fiscal Quarter             |  | $    | 0.75 |  |     | $
|Second Fiscal Quarter            |  |      | 0.55 |  |     |  
|Third Fiscal Quarter             |  |      | 0.97 |  |     |  
|Fourth Fiscal Quarter            |  |      | 1.42 |  |     |  



As of June 23, 2015, there were 57,516,499
shares of common stock outstanding held by approximately 790 stockholders of record.



Dividends



We have not declared or paid any cash dividends
on our common stock since our inception, and we do not intend to declare cash dividends for the foreseeable future. Any decision
to pay dividends will depend upon our profitability at the time, cash available, and other factors; however, it is currently anticipated
that any future profits received from operations will be retained for operations.



Recent Sales of Unregistered Securities



Unless otherwise indicated, the issuances
of our securities listed below were made in reliance on an exemption from registration under Section 4(a)(2) of the
Securities Act, as we reasonably believed that the investors were sophisticated, that no general solicitations were involved and
the transactions did not otherwise involve a public offering.



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.
While the Company did not recognize expense for this restricted stock grant since it was in exchange for expenses previously accrued
by the Company, the shares provided Mr. Laub were valued at $0.24 per share.



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. 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.



22







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 $28,657
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 Neil Koppel to settle $100,000 of liabilities for inventory provided to the Company.
The shares issued in this transaction were valued at $0.30 per share, the closing price of our stock on the date the inventory
was acquired.



ITEM 6. SELECTED FINANCIAL DATA.



Not applicable.



ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.



You should read the following discussion
in conjunction with the financial statements of the Company, and the notes to those statements, included elsewhere in this Form 10-K,
as well as the rest of this Annual Report on Form 10-K. The statements in this discussion regarding outlook, our expectations
regarding our future performance, liquidity and capital resources and other non-historical statements in this discussion are forward-looking
statements. These forward-looking statements are subject to numerous risks and uncertainties, including, but not limited to, the
risks and uncertainties described in the “Risk Factors” and “Cautionary Notice Regarding Forward Looking Statements”
sections of this Annual Report on Form 10-K. Our actual results may differ materially from those contained in or implied
by any forward- looking statements.



GENERAL



Corporate History



We were incorporated on September 17,
2009 in the State of Nevada under the name Krossbow Holdings Corporation (“Krossbow”). Krossbow did not implement
its original business plan and decided to acquire existing technology to seek to efficiently and effectively produce man-made
diamond. In connection with this change in business purpose, Krossbow changed its name to Scio Diamond Technology Corporation
to reflect its new business direction.



On August 5, 2011, Edward S. Adams
and Michael R. Monahan acquired control of the Company through the purchase of shares of the Company’s issued and outstanding
common stock from Jason Kropp, Krossbow’s sole director and executive officer at that time. Messrs. Monahan and Adams
served on the Company’s Board of Directors until their resignations form the Board on June 30, 2013, and June 23, 2014,
respectively. Additionally, on August 5, 2011, the Company executed an Asset Purchase Agreement with another privately-held
Nevada corporation that also had the name “Scio Diamond Technology Corporation” (“Private Scio”). Under
the terms of the Asset Purchase Agreement, the Company purchased the name “Scio Diamond Technology Corporation” and
acquired other rights from Private Scio for 13,000,000 newly issued shares of common stock of the Company.



On August 31, 2011, the Company acquired
certain assets of ADI, consisting primarily of diamond growing machines and intellectual property related thereto, for which the
Company paid ADI an aggregate of $2,000,000. In connection with the ADI Asset Purchase, the Company also agreed to provide certain
current and former stockholders of ADI qualifying as accredited investors the opportunity to acquire up to approximately 16 million
shares of common stock of the Company for $0.01 per share.



On June 5, 2012, the Company acquired
substantially all of the assets of ADGC, consisting primarily of lab-grown diamond gemstone-related know-how, inventory, and various
intellectual property, in exchange for $100,000 in cash and the opportunity for certain current and former stockholders of ADGC
qualifying as accredited investors to acquire up to approximately 1 million shares of common stock of the Company for $0.01 per
share.



In December 2011, the Company began a build-out
of its Greenville, South Carolina production facility. Construction was largely completed in March 2012 and equipment was
moved from ADI’s former facility in Massachusetts to South Carolina over the first calendar quarter of 2012. The Company
began initial production with ten diamond growing machines in July 2012. Our initial production was focused on industrial
cutting tool products supplied to a single customer. Since March 2013, the Company has expanded its product focus to include gemstone
diamond material.



23







On September 16, 2013, the Company
entered into the Grace Rich Agreements to form a joint venture with operations in the People’s Republic of China to deploy
at least 100 Scio designed diamond growing machines. 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 and development revenue and a 30% ownership position 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 Company is not required to make any on-going funding contributions
to the joint venture and its ownership stake cannot be reduced from 30%.



On December 16, 2014, the Company entered
into the Grower Sale-Lease Agreement with HGI. 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 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. The Company will also have the right to repurchase the
leased growers upon the occurrence of certain events.



On December 18, 2014 entered into an arrangement
with Renaissance creating RCDC. The Company and Renaissance are each 50% members of RCDC. 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. RCDC
will purchase rough diamond material from the Company and process and finish the material into finished gemstones for sale 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.



Business Overview



The Company’s primary mission is
the development of profitable and sustainable commercial production of its diamond materials, which are suitable for known, emerging
and anticipated industrial, technology and consumer applications. The Company intends to pursue progressive development of its
core diamond materials technologies and related intellectual property that the Company hopes will evolve into product opportunities
across various applications. We believe these opportunities may be monetized though a combination of end product sales, joint
ventures and licensing arrangements with third parties, and through continued development of intellectual property. Anticipated
application opportunities for the Company’s diamond materials include the following: precision cutting devices, diamond
gemstone jewelry, power switches, semiconductor processors, optoelectronics, geosciences, water purification, and MRI and other
medical science technology.



While the Company product offering continues
to include industrial products, as of March 31, 2015 nearly all of the Company’s production capacity is being sold as gemstone
materials. As of March 31, 2015, we had generated $3,026,282 in net revenue since inception from sales of our diamond materials
and licensing of our technology. To date, over 50% of our product has been sold overseas and 100% of these sales have been to
external customers and to our joint venture partners as discussed in Item 8, NOTES 10 and 11. We expect continued development
of an international market for our diamond materials.



See Part I, Item 1. (Business)
for additional information regarding our business.



Significant Partner Agreements



On September 16, 2013, the Company
entered into the Grace Rich Agreements to form a joint venture with operations in the People’s Republic of China to deploy
at least 100 Scio designed diamond growing machines. 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 and development revenue and a 30% ownership position 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 Company is not required to make any on-going funding contributions
to the joint venture and its ownership stake cannot be reduced from 30%.



On December 16, 2014, the Company entered
into the Grower Sale-Lease Agreement with HGI. 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 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. The Company will also have the right to repurchase the
leased growers upon the occurrence of certain events.



24







On December 18, 2014 entered into an arrangement
with Renaissance creating RCDC. The Company and Renaissance are each 50% members of RCDC. 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. RCDC
will purchase rough diamond material from the Company and process and finish the material into finished gemstones for sale 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.



Critical Accounting Policies



We have adopted various accounting policies
that govern the application of accounting principles generally accepted in the United States (“GAAP”). We describe
our significant accounting policies in the notes to our audited financial statements as of March 31, 2015.



Some of the accounting policies involve
significant judgments and assumptions by us that have a material impact on the carrying value of our assets and liabilities. We
consider these accounting policies to be critical accounting policies. The judgment and assumptions we use are based on historical
experience and other factors that we believe to be reasonable under the circumstances. Because of the nature of the judgments
and assumptions we make, actual results could differ from these judgments and estimates and could materially affect the carrying
values of our assets and liabilities and our results of operations.



The following is a summary of the more
significant judgmental estimates and complex accounting principles, which represent our critical accounting policies.



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.



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 include raw materials and supplies, work in process and finished good.



The Company has periodically experienced
selling prices that were lower than cost and as a result has recorded a lower of cost or market write down to the value of our
inventory. 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 



25







Leasehold improvements are depreciated
at 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.



Intangible Assets



Intangible assets, such as acquired in-process
research and development (“IPRD”) 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’s estimate of useful life of any patents when placed in service is a critical judgment. 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.



A substantial portion of the Company’s
patent portfolio is considered in service due to the inherent value of the patents to our on-going manufacturing operations. Through
March 31, 2015, the Company has allocated $8,135,063 to patents that are being amortized over a period ranging from 6.75 years
to 19.46 years corresponding to their remaining life.



The Company continues to classify the remaining
patent portfolio as IPRD and believes that the IPRD has alternative future use and value. Applicable accounting guidance requires
an indefinite life for IPRD assets until such time as the commercialization can be reasonably estimated, at which time the assets
will be available for their intended use. At such time as those requirements are met, we believe that consideration of the legal
life of the intellectual property protection should be of considerable importance in determining the useful life. Upon commercialization
and determination of the useful life of the intellectual property assets, consideration will be given to the eventual expiration
of the intellectual property rights underlying certain critical aspects of our manufacturing process.



RESULTS OF OPERATIONS



Fiscal Year Ended March 31, 2015 Compared to the Fiscal
Year Ended March 31, 2014



During the fiscal year ended March 31,
2015, we recorded net revenue of $726,193, compared to $1,418,341 in net revenue during the fiscal year ended March 31, 2014.
A portion of this decrease is due to the Company receiving $375,000 in licensing fees from the Grace Rich joint venture during
the fiscal year ended March 31, 2015, while we received $625,000 in the prior period. The Company does not anticipate receiving
any additional licensing revenues from the Grace Rich joint venture until it is expected to be operational during calendar year
2016. Product revenues for the fiscal year ended March 31, 2015 were $351,193 versus $793,341 in the prior period. The Company
deferred $215,375 in product revenues for sales to the RCDC joint venture during the fiscal year ended March 31, 2015. The remaining
reduction in revenue is due to reduced product sales and lower product prices during the fiscal year ended March 31, 2015.



Cost of goods sold was $1,497,465 for the
fiscal year ended March 31, 2015 versus $2,321,534 for the fiscal year ended March 31, 2014. The Company deferred costs related
to deferred revenue from sales to the RCDC joint venture of $179,969 during the fiscal year ended March 31, 2015. Cost of goods
sold includes direct and indirect labor costs of $397,767 during the fiscal year ended March 31, 2015 and $577,200 during the
fiscal year ended March 31, 2014. Depreciation expense of $603,604 and $683,572 was recorded in cost of goods sold during the
fiscal years ended March 31, 2015 and 2014, respectively. The overall decrease in cost of goods sold was due to reduced product
sales, increased deferred costs, reduced depreciation, and lower labor expenses included in cost of goods sold during the fiscal
year ended March 31, 2015 versus the year ended March 31, 2014.



We incurred a net amount of $566,154 in
professional and consulting fees during the fiscal year ended March 31, 2015. This amount includes reductions of $343,556 related
to the reversal of expenses from the Settlement Agreement, and a reduction of $168,015 for payments made for legal fees from the
prior fiscal year by our insurance carrier. Without these adjustments, professional and consulting fees were $1,077,725 compared
to $1,272,212 for the fiscal year ended March 31, 2014. This reduction of $194,487 is largely due to reduced legal fees. Salary
and benefit expenses recognized as general and administrative expenses were $821,272 and $723,805 during the fiscal years ended
March 31, 2015 and 2014, respectively. This increase of $97,467 is the result of the Company recognizing $305,077 in executive
severance offset by reductions in compensation expense during the fiscal year ended March 31, 2015 versus the fiscal year ended
March 31, 2014.



26







The other components of our general and
administrative expenses were relatively consistent between the fiscal year ended March 31, 2015 and 2014. Rent, equipment lease
and facilities expenses were $145,252 and $150,502, respectively; marketing costs were $59,727 and $49,216, respectively; depreciation
and amortization expenses were $798,477 and $799,928, respectively; and corporate general and administrative expenses were $345,263
and $379,552, respectively.



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 ended March 31, 2015.



During the fiscal year ended March 31,
2015, management evaluated intangible 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 recognized during the period. There were no impairment
charges during the fiscal year ended March 31, 2014.



During the fiscal year ended March 31,
2015, the Company evaluated fixed assets acquired from ADI and disposed of obsolete equipment with a book value of $162,609 and
assets held for sales of $20,000. The Company made a similar evaluation in the fiscal year ending March 31, 2014 that resulted
in a loss on disposal of fixed assets of $129,308 and an impairment of fixed assets charge of $381,798 during that fiscal year.



We have continued to generate limited revenue
to offset our expenses, and so we have incurred net losses. Our net loss for fiscal year ended March 31, 2015 was $4,141,653,
compared to a net loss of $4,950,953 during the fiscal year ended March 31, 2014. Our net loss per share for the fiscal year ended
March 31, 2015 was $(0.08) per share, compared to a net loss per share of $(0.10) for the fiscal year ended March 31, 2014. The
weighted average number of shares outstanding was 53,025,462 and 49,548,045, for the fiscal years ended March 31, 2015 and 2014,
respectively.



FINANCIAL CONDITION



At March 31, 2015, we had total assets
of $12,231,394 compared to total assets of $12,850,139 at March 31, 2014. This decrease in assets was primarily related to write
downs and depreciation of fixed assets and impairment charges and amortization of intangibles, more than offsetting increases
in current assets. We had cash of $767,214 at March 31, 2015 compared to $47,987 at March 31, 2014. This increase is due
to the Company increasing its borrowings on its notes payable and proceeds from common stock sales. At March 31, 2015 the Company’s
accounts receivables had increased by $201,844 from March 31, 2014. This increase is due to outstanding receivables from RCDC.
At March 31, 2015, the Company had deferred $179,969 of contract costs related to deferred revenues from sales to the RCDC joint
venture. There we no deferred contract costs at March 31, 2014. The increase in inventory of $142,943 was primarily due to higher
finished goods inventory including gemstone materials of $70,664 and higher diamond seed material included in raw material and
supplies of $22,847.



Total liabilities at March 31, 2015
were $4,098,772 compared to total liabilities of $2,920,722 at March 31, 2014. This increase is largely the result of the Company’s
borrowings under our notes payable and deferred revenue from sales to RCDC during the year ended March 31, 2015.



The Company had positive working capital
(defined as current assets less current liabilities) of $86,254 at March 31, 2015 versus $(2,402,369) at March 31, 2014. The most
substantial change in working capital was due to the Company’s refinancing of short-term notes payable into long-term notes
payable. This refinancing improved the working capital of the Company by $1,412,060. Beyond this refinancing, the major reason
for the improvement in working capital was the increase in borrowing on our long-term notes payable and our sale of common stock
that provided the Company additional cash resources.



Total shareholders’ equity was $8,132,622
at March 31, 2015, compared to $9,929,417 at March 31, 2014. Shareholders’ equity decreased during the year primarily
due to continuing net losses increasing the Company’s accumulated deficit more than offsetting increase in additional paid
in capital from our common stock offerings.



CASH FLOWS



Operating Activities



The Company has not generated positive
cash flows from operating activities. For the year ended March 31, 2015, net cash flows used in operating activities were
$(2,131,217) compared to $(1,364,820) for the year ended March 31, 2014. The net cash flow used in operating activities for the
year ended March 31, 2015 consists primarily of a net loss of $(4,141,653) offset by depreciation and amortization of $1,476,916,
loss on disposal of equipment of $182,609, loss on impairment of in-process research and development of $418,065, expenses for
stock issued in exchange for services of $77,858, employee stock based compensation of $155,000, income of $(29,041) from joint
venture, an increase in current assets of $(157,706) and a decrease in current and other liabilities of $(113,265).



27







Investing Activities



For the year ended March 31, 2015,
net cash flows used in investing activities were $(237,496), consisting primarily of the purchases of property, plant, and equipment.
Net cash flows used in investing activities were $(71,889) for the year ended March 31, 2014. This increase is due to the Company’s
purchases of fixed assets for the expansion of its production facility during the year ended March 31, 2015.



Financing Activities



We have financed our operations primarily
through advancements or the issuance of equity and debt instruments. For the years ended March 31, 2015 and March 31, 2014,
we generated $3,087,940 and $1,261,439 from financing activities, respectively. The cash generated during the year ended March
31, 2015 was primarily from the sale of common stock and the net additional borrowings on the Company’s note payable facility.



LIQUIDITY AND CAPITAL RESOURCES



We expect that working capital requirements
will continue to be funded through a combination of our existing funds, further issuances of securities, and future credit facilities
or corporate borrowings. Our working capital requirements are expected to increase in line with the growth of our business.



As of March 31, 2015, our cash balance
was $767,214. This amount is not expected to be adequate to fund our operations over the next fiscal year ending March 31,
2016. As of March 31, 2015, we had no additional lines of credit or other bank financing arrangements other than as described
in Item 8, NOTE 3. Generally, we have financed operations through March 31, 2015 through the proceeds of sales of our common
stock and borrowings under our existing credit facilities. The Company is pursuing additional issuances of equity capital to meet
operating cash requirements.



Additional issuances of equity or convertible
debt securities will result in dilution to our current stockholders. Such securities might have rights, preferences or privileges
senior to our common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are
not available or are not available on acceptable terms, we may not be able to take advantage of prospective new business endeavors
or opportunities, which could significantly and materially restrict our business operations and could result in the shutdown of
operations.



MATERIAL COMMITMENTS AND ARRANGEMENTS



On September 16, 2013, the Company
entered into the Grace Rich Agreements with SAAMABA, LLC and S21 Research Holdings to form a joint venture with operations in
the People’s Republic of China to deploy Scio designed diamond growing machines. 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 received licensing and development revenue and a minority ownership position 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.



On December 16, 2014, the Company entered
into an agreement for the sale and lease of growers with HGI. 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 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. The Company will also have the right to repurchase
the leased growers upon the occurrence of certain events.



On December 18, 2014 entered into an arrangement
with Renaissance creating RCDD. The Company and Renaissance are each 50% members of RCDC. 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. RCDC
will purchase rough Diamond material from the Company and process and finish the material into finished gemstones for sale 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.



28







OFF BALANCE SHEET ARRANGEMENTS



As of the date of this Annual Report, we
do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources that are material to investors.



ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK.



Not required because the Company is a smaller
reporting company.



29







ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and



Shareholders of Scio Diamond Technology Corporation



We have audited the accompanying balance sheets of Scio Diamond
Technology Corporation (the “Company”) as of March 31, 2015 and 2014, and the related statements of operations,
shareholders’ equity, and cash flows for the years then ended. The Company’s management is responsible for these financial
statements. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to
have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.



In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Scio Diamond Technology Corporation as of March 31, 2015
and 2014, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.



The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has generated
limited revenue, incurred net losses and incurred negative operating cash flows since inception and will require additional financing
to fund the continued development of products. The availability of such financing cannot be assured. These conditions raise substantial
doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in
Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.



/s/ Cherry Bekaert LLP



Greenville, South Carolina



June 29, 2015



30







SCIO DIAMOND TECHNOLOGY CORPORATION

BALANCE SHEETS

As of March 31, 2015 and 2014



|                                                                                                                                                                   |  | March 31, |             |   | March 31, |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | --------- | ----------- | - | --------- | -
|                                                                                                                                                                   |  | 2015      |             |   | 2014      |  
|                                                                                                                                                                   |  |           |             |   |           |  
|ASSETS                                                                                                                                                             |  |           |             |   |           |  
|Current Assets:                                                                                                                                                    |  |           |             |   |           |  
|Cash and cash equivalents                                                                                                                                          |  | $         | 767,214     |   |           | $
|Accounts receivable                                                                                                                                                |  |           | 243,929     |   |           |  
|Other receivables                                                                                                                                                  |  |           | —           |   |           |  
|Deferred contract costs                                                                                                                                            |  |           | 179,969     |   |           |  
|Inventory                                                                                                                                                          |  |           | 295,760     |   |           |  
|Prepaid expenses                                                                                                                                                   |  |           | 57,012      |   |           |  
|Prepaid rent                                                                                                                                                       |  |           | 23,050      |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|Total current assets                                                                                                                                               |  |           | 1,566,934   |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|Property, plant and equipment                                                                                                                                      |  |           |             |   |           |  
|Facility                                                                                                                                                           |  |           | 904,813     |   |           |  
|Manufacturing equipment                                                                                                                                            |  |           | 2,927,761   |   |           |  
|Other equipment                                                                                                                                                    |  |           | 71,059      |   |           |  
|Construction in progress                                                                                                                                           |  |           | 207,252     |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|Total property, plant and equipment                                                                                                                                |  |           | 4,110,885   |   |           |  
|Less accumulated depreciation                                                                                                                                      |  |           | (1,543,652  | ) |           |  
|Net property, plant and equipment                                                                                                                                  |  |           | 2,567,233   |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|Intangible assets, net                                                                                                                                             |  |           | 8,047,948   |   |           |  
|Prepaid rent, noncurrent                                                                                                                                           |  |           | 19,238      |   |           |  
|Investment in joint venture – RCDC                                                                                                                                 |  |           | 30,041      |   |           |  
|Other assets                                                                                                                                                       |  |           | —           |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|TOTAL ASSETS                                                                                                                                                       |  | $         | 12,231,394  |   |           | $
|                                                                                                                                                                   |  |           |             |   |           |  
|LIABILITIES AND SHAREHOLDERS’
    EQUITY                                                                                                                           |  |           |             |   |           |  
|Current Liabilities:                                                                                                                                               |  |           |             |   |           |  
|Notes payable                                                                                                                                                      |  | $         | —           |   |           | $
|Accounts payable                                                                                                                                                   |  |           | 708,760     |   |           |  
|Customer deposits                                                                                                                                                  |  |           | 38,603      |   |           |  
|Deferred revenue                                                                                                                                                   |  |           | 215,375     |   |           |  
|Accrued expenses                                                                                                                                                   |  |           | 517,942     |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|Total current liabilities                                                                                                                                          |  |           | 1,480,680   |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|Notes payable, non-current                                                                                                                                         |  |           | 2,500,000   |   |           |  
|Other liabilities                                                                                                                                                  |  |           | 118,092     |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|TOTAL LIABILITIES                                                                                                                                                  |  |           | 4,098,772   |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|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      |   |           |  
|Additional paid-in capital                                                                                                                                         |  |           | 26,815,005  |   |           |  
|Accumulated deficit                                                                                                                                                |  |           | (18,738,915 | ) |           |  
|Treasury stock, no and 1,000,000
    shares at March 31, 2015 and 2014, respectively                                                                               |  |           | —           |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|Total stockholders’ equity                                                                                                                                         |  |           | 8,132,622   |   |           |  
|                                                                                                                                                                   |  |           |             |   |           |  
|TOTAL LIABILITIES
    AND SHAREHOLDERS’ EQUITY                                                                                                                     |  | $         | 12,231,394  |   |           | $



The accompanying notes are an integral
part of these financial statements.



31







SCIO DIAMOND TECHNOLOGY CORPORATION

STATEMENTS OF OPERATIONSFor the years ended March 31, 2015 and 2014



|                                                          |  | Year Ended     |            |   | Year Ended     |  
|--------------------------------------------------------- |  | -------------- | ---------- | - | -------------- | -
|                                                          |  | March 31, 2015 |            |   | March 31, 2014 |  
|Revenue                                                   |  |                |            |   |                |  
|Product revenue, net                                      |  | $              | 351,193    |   |                | $
|Licensing revenue                                         |  |                | 375,000    |   |                |  
|                                                          |  |                |            |   |                |  
|Revenues, net                                             |  |                | 726,193    |   |                |  
|                                                          |  |                |            |   |                |  
|Cost of goods sold                                        |  |                |            |   |                |  
|Cost of goods sold                                        |  |                | 1,497,465  |   |                |  
|                                                          |  |                |            |   |                |  
|Gross margin
    (deficit)                                |  |                | (771,272   | ) |                |  
|                                                          |  |                |            |   |                |  
|General and administrative expenses                       |  |                |            |   |                |  
|Professional and consulting fees                          |  |                | 566,154    |   |                |  
|Salaries and benefits                                     |  |                | 821,272    |   |                |  
|Rent, equipment lease and facilities expense              |  |                | 145,252    |   |                |  
|Marketing costs                                           |  |                | 59,727     |   |                |  
|Depreciation and amortization                             |  |                | 798,477    |   |                |  
|Corporate general and administrative                      |  |                | 345,263    |   |                |  
|Forgiveness of legal accounts payable                     |  |                | (165,453   | ) |                |  
|Loss on impairment of in-process research and development |  |                | 418,065    |   |                |  
|Loss on disposal of equipment                             |  |                | 182,609    |   |                |  
|Loss on impairment of fixed assets                        |  |                | —          |   |                |  
|                                                          |  |                |            |   |                |  
|Total general and administrative expenses                 |  |                | 3,171,366  |   |                |  
|                                                          |  |                |            |   |                |  
|Loss from operations                                      |  |                | (3,942,638 | ) |                |  
|                                                          |  |                |            |   |                |  
|Other income (expense)                                    |  |                |            |   |                |  
|Income from joint venture – RCDC                          |  |                | 29,041     |   |                |  
|Interest expense                                          |  |                | (228,056   | ) |                |  
|                                                          |  |                |            |   |                |  
|Net loss                                                  |  | $              | (4,141,653 | ) |                | $
|                                                          |  |                |            |   |                |  
|Loss per share                                            |  |                |            |   |                |  
|Basic:                                                    |  |                |            |   |                |  
|Weighted average number of shares outstanding             |  |                | 53,025,462 |   |                |  
|Loss per share                                            |  | $              | (0.08      | ) |                | $
|Fully diluted:                                            |  |                |            |   |                |  
|Weighted average number of shares outstanding             |  |                | 53,025,462 |   |                |  
|Loss per share                                            |  | $              | (0.08      | ) |                | $



The accompanying notes are an integral
part of these financial statements.



32







SCIO DIAMOND TECHNOLOGY CORPORATION

STATEMENTS OF CASH FLOWFor the years ended March 31, 2015 and 2014



|                                                                                |  | Year Ended     |            |   | Year Ended     |  
|------------------------------------------------------------------------------- |  | -------------- | ---------- | - | -------------- | -
|                                                                                |  | March 31, 2015 |            |   | March 31, 2014 |  
|                                                                                |  |                |            |   |                |  
|Cash flows from operating activities:                                           |  |                |            |   |                |  
|Net loss                                                                        |  | $              | (4,141,653 | ) |                | $
|Adjustments to reconcile net loss to net cash used in
    operating activities: |  |                |            |   |                |  
|Depreciation and amortization                                                   |  |                | 1,476,916  |   |                |  
|Loss on disposal of equipment                                                   |  |                | 182,609    |   |                |  
|Loss on impairment of fixed assets                                              |  |                | —          |   |                |  
|Loss on impairment of in-process research and development                       |  |                | 418,065    |   |                |  
|Expense for stock and inventory issued in exchange for
    operating expenses   |  |                | 77,858     |   |                |  
|Income from joint venture – RCDC                                                |  |                | (29,041    | ) |                |  
|Employee stock based compensation                                               |  |                | 155,000    |   |                |  
|Inventory write down                                                            |  |                | 68,722     |   |                |  
|Changes in assets and liabilities:                                              |  |                |            |   |                |  
|Decrease in accounts receivable                                                 |  |                | 13,531     |   |                |  
|Decrease/(increase) in other receivables                                        |  |                | 89,192     |   |                |  
|Decrease/(increase) in prepaid expenses, rent and other
    assets              |  |                | (37,517    | ) |                |  
|Decrease/(increase) in inventory                                                |  |                | (291,634   | ) |                |  
|Increase in accounts payable                                                    |  |                | 36,978     |   |                |  
|(Decrease)/increase in customer deposits                                        |  |                | (141,007   | ) |                |  
|Decrease in accrued expenses                                                    |  |                | (43,184    | ) |                |  
|Increase in other liabilities                                                   |  |                | 33,948     |   |                |  
|                                                                                |  |                |            |   |                |  
|Net cash used in operating activities                                           |  |                | (2,131,217 | ) |                |  
|                                                                                |  |                |            |   |                |  
|Cash flows from investing activities:                                           |  |                |            |   |                |  
|Purchase of property, plant and equipment                                       |  |                | (236,496   | ) |                |  
|Investment
    in joint venture – RCDC                                          |  |                | (1,000     | ) |                |  
|                                                                                |  |                |            |   |                |  
|Net cash used in investing activities                                           |  |                | (237,496   | ) |                |  
|                                                                                |  |                |            |   |                |  
|Cash flows from financing activities:                                           |  |                |            |   |                |  
|Proceeds from sale of common stock - net of fees                                |  |                | 2,000,000  |   |                |  
|Proceeds from notes payable                                                     |  |                | 2,653,615  |   |                |  
|Finance charges paid on note payable                                            |  |                | —          |   |                |  
|Payments on notes payable                                                       |  |                | (1,565,675 | ) |                |  
|                                                                                |  |                |            |   |                |  
|Net cash provided by financing
    activities                                   |  |                | 3,087,940  |   |                |  
|                                                                                |  |                |            |   |                |  
|Change in cash and cash equivalents                                             |  |                | 719,227    |   |                |  
|Cash and cash equivalents, beginning
    of period                              |  |                | 47,987     |   |                |  
|                                                                                |  |                |            |   |                |  
|Cash and
    cash equivalents, end of period                                    |  | $              | 767,214    |   |                | $



The accompanying notes are an integral
part of these financial statements.



(continued)



33







SCIO DIAMOND TECHNOLOGY CORPORATION

STATEMENTS OF CASH FLOWFor the years ended March 31, 2015 and 2014(Continued)



|                                                                       |  | Year Ended     |         |  | Year Ended     |  
|---------------------------------------------------------------------- |  | -------------- | ------- |  | -------------- | -
|                                                                       |  | March 31, 2015 |         |  | March 31, 2014 |  
|                                                                       |  |                |         |  |                |  
|Supplemental cash flow disclosures:                                    |  |                |         |  |                |  
|Cash paid during the year for:                                         |  |                |         |  |                |  
|Interest                                                               |  | $              | 84,165  |  |                | $
|Income taxes                                                           |  | $              | —       |  |                | $
|                                                                       |  |                |         |  |                |  
|Non-cash investing
    and financing activities:                       |  |                |         |  |                |  
|Payment of accounts payable and
    accrued expenses with common stock |  | $              | 112,000 |  |                | $
|Manufacturing equipment transferred
    to assets held for sale        |  | $              | —       |  |                | $



The accompanying notes are an integral
part of these financial statements.



34







SCIO DIAMOND TECHNOLOGY CORPORATION

STATEMENTS OF SHAREHOLDERS’ EQUITYFor the years ended March 31, 2015 and 2014



|                                                                         |  |              |            |   |         |   |        | Additional     |  |   |             |   |  |        |            |   |         |   |        |       | 
|------------------------------------------------------------------------ |  | ------------ | ---------- | - | ------- | - | ------ | -------------- |  | - | ----------- | - |  | ------ | ---------- | - | ------- | - | ------ | ----- | 
|                                                                         |  | Common Stock |            |   | Paid in |   |        | Treasury Stock |  |   | Accumulated |   |  |        |           
|                                                                         |  | Shares       |            |   | Amount  |   |        | Capital        |  |   | Shares      |   |  | Amount |            |   | Deficit |   |        | Total | 
|                                                                         |  |              |            |   |         |   |        |                |  |   |             |   |  |        |            |   |         |   |        |       | 
|Balance, April
    1, 2013                                               |  |              | 47,736,812 |   |         | $ | 47,737 |                |  | $ | 23,789,478  |   |  |        | (1,000,000 | ) |         | $ | (1,000 | )     | 
|                                                                         |  |              |            |   |         |   |        |                |  |   |             |   |  |        |            |   |         |   |        |       | 
|Common stock issued in
    exchange for consulting services              |  |              | 1,002,500  |   |         |   | 1,002  |                |  |   | 318,198     |   |  |        | —          |   |         |   | —      |       | 
|Common stock issued in
    exchange for past legal services              |  |              | 1,000,000  |   |         |   | 1,000  |                |  |   | 163,000     |   |  |        | —          |   |         |   | —      |       | 
|Administrative fee received
    for previous stock issuance              |  |              | —          |   |         |   | —      |                |  |   | 129         |   |  |        | —          |   |         |   | —      |       | 
|Common stock issued for
    indemnification of legal settlement          |  |              | 1,000,000  |   |         |   | 1,000  |                |  |   | (1,000      | ) |  |        | —          |   |         |   | —      |       | 
|Employee stock based compensation                                        |  |              | —          |   |         |   | —      |                |  |   | 193,150     |   |  |        | —          |   |         |   | —      |       | 
|Warrants issued in exchange
    for consulting services                  |  |              | —          |   |         |   | —      |                |  |   | 13,985      |   |  |        | —          |   |         |   | —      |       | 
|Net
    loss for the fiscal year ended March 31, 2014                    |  |              | —          |   |         |   | —      |                |  |   | —           |   |  |        | —          |   |         |   | —      |       | 
|Balance, March 31, 2014                                                  |  |              | 50,739,312 |   |         |   | 50,739 |                |  |   | 24,476,940  |   |  |        | (1,000,000 | ) |         |   | (1,000 | )     | 
|                                                                         |  |              |            |   |         |   |        |                |  |   |             |   |  |        |            |   |         |   |        |       | 
|Common stock issued in exchange
    for operating expenses and inventory |  |              | 558,856    |   |         |   | 559    |                |  |   | 177,299     |   |  |        | —          |   |         |   | —      |       | 
|Common stock issued in exchange
    for past consulting services         |  |              | 50,000     |   |         |   | 50     |                |  |   | 11,950      |   |  |        | —          |   |         |   | —      |       | 
|Retirement of treasury stock                                             |  |              | (1,000,000 | ) |         |   | (1,000 | )              |  |   | —           |   |  |        | 1,000,000  |   |         |   | 1,000  |       | 
|Common stock issued for
    cash @ $0.30 per share                       |  |              | 6,666,664  |   |         |   | 6,667  |                |  |   | 1,993,333   |   |  |        | —          |   |         |   | —      |       | 
|Common stock returned to
    Company and cancelled                       |  |              | (1,000,000 | ) |         |   | (1,000 | )              |  |   | 1,000       |   |  |        | —          |   |         |   | —      |       | 
|Employee stock based compensation                                        |  |              | 516,667    |   |         |   | 517    |                |  |   | 154,483     |   |  |        | —          |   |         |   | —      |       | 
|Net
    loss for the fiscal year ended March 31, 2015                    |  |              | —          |   |         |   | —      |                |  |   | —           |   |  |        | —          |   |         |   | —      |       | 
|Balance,
    March 31, 2015                                              |  |              | 56,531,499 |   |         | $ | 56,532 |                |  | $ | 26,815,005  |   |  |        | —          |   |         | $ | —      |       | 



The accompanying notes are an integral
part of these financial statements.



35







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 Mach 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.



36







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      |          
|Common stock options and warrants |  |           | 5,799,295



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, 2015 |         |  | March 31, 2014 |  
|-------------------------- |  | -------------- | ------- |  | -------------- | -
|Raw materials and supplies |  | $              | 58,390  |  |                | $
|Work in process            |  |                | 31,371  |  |                |  
|Finished goods             |  |                | 205,999 |  |                |  
|                           |  | $              | 295,760 |  |                | $



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 goods sold. During the fiscal
year ended March 31, 2015, 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.



37







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.



38







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.



39







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.



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  |   |           | $
|In-process research and development |  | Indefinite   |  |           | 1,832,370  |   |           |  
|                                    |  |              |  |           | 9,967,433  |   |           |  
|Accumulated amortization            |  |              |  |           | (1,919,485 | ) |           |  
|Net intangible assets               |  |              |  | $         | 8,047,948  |   |           | $



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



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.



40







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.



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.



41







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.



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 benefits
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:



|Options                            |  | Shares |            |   | Weighted- Average
    Exercise Price |   |      | Weighted-Average
    Remaining Contractual Term | 
|---------------------------------- |  | ------ | ---------- | - | ------------------------------------ | - | ---- | ----------------------------------------------- | 
|Options Outstanding April 1, 2013  |  |        | 4,092,500  |   |                                      | $ | 0.87 |                                                 | 
|Granted                            |  |        | 706,250    |   |                                      |   | 0.36 |                                                 | 
|Exercised                          |  |        | —          |   |                                      |   | —    |                                                 | 
|Expired/Cancelled                  |  |        | (456,250   | ) |                                      |   | 0.73 |                                                 | 
|Options Outstanding March 31, 2014 |  |        | 4,342,500  |   |                                      | $ | 0.77 |                                                 | 
|Granted                            |  |        | —          |   |                                      |   | —    |                                                 | 
|Exercised                          |  |        | —          |   |                                      |   | —    |                                                 | 
|Expired/cancelled                  |  |        | (4,110,000 | ) |                                      |   | 0.79 |                                                 | 
|Options Outstanding March 31, 2015 |  |        | 232,500    |   |                                      | $ | 0.35 |                                                 | 
|Exercisable at March 31, 2015      |  |        | 23,125     |   |                                      | $ | 0.44 |                                                 | 



42







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  |   |                  | $
|Granted                       |  |        | 706,250    |   |                  |  
|Vested                        |  |        | (575,625   | ) |                  |  
|Expired/cancelled: non-vested |  |        | (182,000   | ) |                  |  
|Non-vested at March 31, 2014  |  |        | 2,414,792  |   |                  |  
|Granted                       |  |        | —          |   |                  |  
|Vested                        |  |        | (122,000   | ) |                  |  
|Expired/cancelled: non-vested |  |        | (2,083,417 | ) |                  |  
|Non-vested at March 31, 2015  |  |        | 209,375    |   |                  | $



The following table summarizes information about stock options
outstanding by price range as of March 31, 2015:





|                   |      |  | Options
    Outstanding |  |         | Options
    Exercisable                              | 
|------------------ | ---- |  | ----------------------- |  | ------- | ---------------------------------------------------- | 
|Exercise
    Price |      |  | NumberOutstanding       |  |         | Weighted
    AverageRemainingContractual Life(years) | 
|$                  | 0.80 |  |                         |  | 7,500   |                                                      | 
|$                  | 0.33 |  |                         |  | 225,000 |                                                      | 
|                   |      |  |                         |  | 232,500 |                                                      | 



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
attained over the weighted average remaining life of the options of 1.48 years.



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.



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 |  | $ | —       | 



43







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.



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, 2015 |            |   | At March 31, 2014 |  
|-------------------------------------------------- |  | ----------------- | ---------- | - | ----------------- | -
|Accrued expenses                                   |  | $                 | 194,165    |   |                   | $
|Property and equipment                             |  |                   | (185,992   | ) |                   |  
|Impairment of fixed assets                         |  |                   | 299,537    |   |                   |  
|Capitalized startup/acquisition costs              |  |                   | 461,636    |   |                   |  
|Federal and state net operating loss carry-forward |  |                   | 5,344,982  |   |                   |  
|Intangible assets                                  |  |                   | 59,849     |   |                   |  
|                                                   |  | $                 | 6,174,177  |   |                   | $
|                                                   |  |                   |            |   |                   |  
|Valuation allowance                                |  |                   | (6,174,177 | ) |                   |  
|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.



44







|                                         |  | At March 31, 2015 |            |   | At March 31, 2014 | 
|---------------------------------------- |  | ----------------- | ---------- | - | ----------------- | 
|                                         |  | Amount            |            |   | %                 | 
|Tax at statutory federal income tax rate |  | $                 | (1,408,162 | ) |                   | 
|Increase (decrease) resulting from:      |  |                   |            |   |                   | 
|State income tax expense                 |  |                   | —          |   |                   | 
|Change in valuation allowance            |  |                   | 1,406,400  |   |                   | 
|Incentive stock options                  |  |                   | —          |   |                   | 
|Other, net                               |  |                   | 1,762      |   |                   | 
|                                         |  |                   |            |   |                   | 
|Total                                    |  | $                 | —          |   |                   | 



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.



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 or payables due Grace Rich LTD at March31, 2015.



45







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  | 



46







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.



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.



END NOTES TO FINANCIALS



47







ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS AND
FINANCIAL DISCLOSURE.



None.



ITEM 9A. CONTROLS AND PROCEDURES.



Evaluation of Disclosure Controls and Procedures



Disclosure controls and procedures refer
to controls and other procedures designed to ensure that information required to be disclosed by the Company in the reports that
it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
the SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including
its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
As of March 31, 2015, we carried out an evaluation, under the supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls
and procedures as defined in Exchange Act Rule 13a-15. We applied our judgment in the process of reviewing these controls and
procedures, which, by their nature, can provide only reasonable assurance regarding our control objectives. Based upon that evaluation,
our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective
as of March 31, 2015 due to the significant deficiency discussed below.



Management’s Annual Report on Internal Control
over Financial Reporting



Management of the Company is responsible
for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f)
promulgated under the Exchange Act. The Company’s internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. The Company’s internal control over financial reporting
includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and
fairly reflect the transactions and the dispositions of the assets of the Company; (2) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the Company are being made only in accordance with authorizations of the management and
directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the Company’s assets that could have a material effect on its financial statements.



Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.



Management including our Chief Executive
Officer and Chief Financial Officer conducted an assessment of the effectiveness of our internal control over financial reporting
as of March 31, 2015. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations
of the Treadway Commission, or COSO, in Internal Control—Integrated Framework (2013). During this assessment, management
identified the following significant deficiencies in our internal control over financial reporting, which is common in small companies.
This deficiency identified by our Chief Executive Officer and Chief Financial Officer following the end of the fiscal year covered
by this report:



| | · | Due to our small
                                         size, we have limited segregation of duties in certain areas of our financial reporting
                                         and other accounting processes and procedures.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



A material weakness (within the meaning
of PCAOB Auditing Standard No. 5) is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not
be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal
control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those
responsible for oversight of our financial reporting.



48







When management conducted this assessment
at March 31, 2014, management determined that material weaknesses in internal control over financial reporting were in place.
During the fiscal year the following steps were taken to remediate these weaknesses:



| | · | The establishment
                                         of a board of directors on June 23, 2014 that includes a majority of outside and independent
                                         directors;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | On July 11,
                                         2014, our Chief Executive Officer was named a director of the Company. This addition
                                         of management to the board of directors has substantially enhanced timely communication
                                         between the board and management of the Company related to issues affecting financial
                                         reporting;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | The board of
                                         directors established a functioning audit committee compliant with NASDAQ listing requirements
                                         to oversee the financial reporting and control structure of the Company; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | · | We have improved
                                         our documentation of critical financial processes and controls.
| | - | -------------------------------------------------------------------------------------------------------------------------



During the period covered by this annual
report on Form 10-K, we have been able to remediate the material weaknesses identified above but due to the continued limited
segregation of duties in the finance and accounting functions of the Company a significant deficiency continues to exist as of
March 31, 2015:



To remediate this deficiency, we expect
to implement the following changes during our fiscal year ending March 31, 2016:



| | · | Management
                                         is working with our outsourced accounting vendor to provide enhanced separation of duties
                                         amongst the personnel participating in our accounting function.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



This annual report does not include an
attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s
report was not subject to attestation by our independent registered public accounting firm pursuant to an exemption for non-accelerated
filers set forth in Section 989G of the Dodd-Frank Wall Street Reform and Consumer Protection Act.



Changes in Internal Controls



Other than described above, there were
no significant changes in our internal controls over financial reporting that occurred during our fiscal year ended March 31,
2015, that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.



ITEM 9B. OTHER INFORMATION.



NONE



49







PART III



ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.



Directors and Executive Officers



The following table sets forth the names
and ages of our directors and executive officers as of July 24, 2015



|Name                            |  | Age |  | Position with the
    Company |  | Since        
|------------------------------- |  | --- |  | ----------------------------- |  | -------------
|Directors                       |  |     |  |                               |  |              
|Bernard McPheely                |  | 63  |  | Chairman                      |  | June 23, 2014
|Bruce Likly                     |  | 52  |  | Vice-Chairman                 |  | June 23, 2014
|James Korn                      |  | 58  |  | Director                      |  | June 23, 2014
|Karl Leaverton                  |  | 59  |  | Director                      |  | June 23, 2014
|Gerald McGuire                  |  | 54  |  | CEO, President & Director     |  | July 11, 2014
|Lewis Smoak                     |  | 71  |  | Director                      |  | June 23, 2014
|Ben Wolkowitz                   |  | 70  |  | Director                      |  | June 23, 2014
|                                |  |     |  |                               |  |              
|Non-Director Executive Officers |  |     |  |                               |  |              
|Jonathan Pfohl                  |  | 48  |  | Chief Financial Officer       |  | March 4, 2013



Our bylaws provide that each director is
to be elected at our annual meeting by the stockholders and serve until his or her successor is elected and qualified at the next
annual meeting, unless he or she resigns or is removed earlier. All directors were elected at our annual meeting on October 29,
2014. Directors serve until his or her successor is duly elected and qualified, or until he or she is earlier removed from office
or resigns.



Set forth below is certain information
about our directors and executive officers, including information regarding their business experience for at least the past five
years, the names of other publicly-held companies where they currently serve as a director or served as a director during the
past five years, and additional information about the specific experience, qualifications, attributes, or skills that led to the
Board’s conclusion that such person should serve as a director for the Company.



BERNARD McPHEELY.
Bern McPheely serves as non-executive chairman of the Board. Mr. McPheely recently retired in December 2012 as President of Hartness
International after more than 35 years of service.  A leader in total solutions to the packaging industry, Hartness
provides equipment globally to more than 100 countries.  From startup and under Bern’s guidance, Hartness was
profitable every quarter since 1982. He spearheaded short and long term strategic planning, including four major company-wide
transformations to reposition the Hartness value proposition, product portfolio and go-to-market strategy. Bern negotiated and
executed the sale of Hartness to ITW (Illinois Tool Works) and was responsible for shepherding the transition from a family owned
business to a public company. He has also been responsible for successful synergistic acquisitions. From 2000-2002 Bern was chairman
of the PMMI ($6 billion member packaging association) and currently is on the Board of Directors of Dorner Manufacturing Corp.
in Hartland Wisconsin. Bern was honored by Start Magazine as one of the top ten “CEO Visionaries Who Ignite Technology”
and has briefed President Clinton and cabinet members on the state of US business. Bern previously worked with the US Department
of Commerce. A graduate of The Thunderbird Graduate School of International Management, Bern also received his undergraduate degree
from Albion College in Albion, Michigan. Mr. McPheely was a member of the Board from August 13, 2012 until Mr. McPheely resigned
from the Board on May 13, 2013. Mr. McPheely’s business experience qualifies him to serve as a director.



BRUCE LIKLY. Bruce
Likly serves as non-executive vice-chairman of the Board. Mr. Likly brings more than 25 years of technology, communications and
management experience to Scio. Having begun his career at IBM and worked to help grow Sun Microsystems from $1 Billion in sales
to more than $10 Billion, Mr. Likly has spent the last decade as Principal at Kovak-Likly Communications where his team helps
companies develop and implement strategic sales, marketing and communications plans. This work previously included assisting Apollo
Diamond, the company whose assets Scio Diamond Technology Corporation acquired in 2011. Mr. Likly’s marketing and business
experience qualifies him to serve as a director.



JAMES KORN. James
Korn is a non-executive director of the Company. Mr. Korn currently serves as the Chief Executive Officer of Temp-Air, Inc.,
a leading manufacturer of temporary industrial and commercial HVAC equipment. Prior to Temp-Air, Mr. Korn was the Chief Legal
Officer of Deephaven Capital Management, a $4 billion dollar multi-strategy hedge fund in Minneapolis, Minnesota. As an attorney
in private practice at Fredrikson & Byron, a 260-attorney law firm based in Minneapolis, Mr. Korn developed extensive experience
in both mergers and acquisitions and in corporate finance. Mr. Korn received his B.A. in economics, magna cum laude, from Providence
College and his J.D., cum laude, from the University of Minnesota Law School. Mr. Korn has served as CEO of Temp-Air, Inc. since
2007. Mr. Korn’s business and legal experience qualifies him to serve as a director.



50







KARL LEAVERTON.
Karl Leaverton is a non-executive director of the Company. Most recently, from April 2012 to July 12, 2013 when it was sold, Mr.
Leaverton was the President/Chief Executive Officer and a director of Seattle Northwest Securities Corporation, a broker-dealer
specializing in public finance investment banking, sales and trading of fixed income and asset management (acquired by Piper Jaffray
in July, 2013). Karl has been the Chairman of SNW Asset Management Corporation since July 2012, a fixed income portfolio manager
with about $2.5 billion in assets under management. He has also been the principal of Blakely Management Company LLC from 1993
to present, providing business and management consulting for various companies and disciplines. Mr. Leaverton is the former President
of the Private Client Group of RBC Wealth Management (January 2006 to April 2009), with management responsibility for more than
2,300 advisors and assets under administration in excess of $200 billion in assets. Mr. Leaverton has more than 30 years of financial
services experience. He earned a BS in Chemical Environmental Science from the University of Puget Sound and completed the course
work for a BA in Economics. He earned a Master of Science degree in Infrastructure Management from Stanford University. Mr. Leaverton’s
business acumen and experience in finance led us to the conclusion that he should serve as a director of the Company.



GERALD McGUIRE.
Gerald McGuire is the President, Chief Executive Officer and a director of the Company. Mr. McGuire
brings over 25 years of semiconductor industry experience to Scio. The semi-conductor industry is expected to be a strong growth
area for Scio in the years ahead. Mr. McGuire was most recently a Senior Vice President and General Manager of the Low-Voltage
and Mid Power Analog Business at Fairchild Semiconductor. Prior to Fairchild Semiconductor, Mr. McGuire was the VP/GM of the Digital
Signal Processing business at Analog Devices. He spent 23 years at Analog Devices in various technical, marketing and business
roles. His specialties include: product marketing and branding, product development and strategy. Mr. McGuire has spent his career
determining what global customers want and how to deliver it. From 2007 to 2010, Mr. McGuire served as Vice President of the Digital
Signal Processing Division of Analog Devices, a global DSP and embedded processor business From 2010 to 2013, Mr. McGuire was
Senior VP of the Low Voltage and Mid Power Analog Business Unit of Fairchild Semiconductor, a global power semiconductor business.



LEWIS SMOAK.  Lewis
Smoak is a non-executive director of the Company.  Mr. Smoak is a founding partner of Ogletree, Deakins, Nash,
Smoak & Stewart, which he helped establish in 1977. He has served on the law firm’s Board and Compensation and Pension
Committees for more than 45 years during which time the firm grew from 16 to more than 700 attorneys and two offices to 46.  
 He has extensive experience in the development and implementation of positive labor relations programs for clients in all
regions of the country, including compliance with employment, labor, safety, and environmental laws.  He is among the one
percent of U.S. lawyers listed in The Best Lawyers in America, and has also been selected by his peers for inclusion in the ABA’s
College of Labor and Employment Lawyers, and Chambers USA Leading Lawyers in America. Mr. Smoak is the author of three comprehensive
nationwide labor relations studies in the construction industry.  He has served on the Greenville (president) and South Carolina
State Chambers of Commerce Board of Directors.  He has served since 2002 as a member of South Carolina BIPEC’s Board
and its Executive Committee since 2004.  He served as Chairman of the Board of Supermarket Radio Network and negotiated its
sale to Pop Radio and Heritage Media. He currently serves as chairman of the board of Zumur, LLC, a start-up internet search engine
for consumer products  He focuses community efforts on early childhood education issues, including service on United Way’s
Success by Six Board, and chairing both Greenville County (2001-2003) and the State of South Carolina’s First Steps for
School Readiness Board of Trustees (2003-2014).  For his work in early childhood education, he was recognized and received
the 2006 Ellis Island Medal of Honor.  Mr. Smoak’s legal expertise as a practicing attorney qualifies him to serve
as a director.



BENJAMIN WOLKOWITZ.
Ben Wolkowitz is a non-executive director of the Company. Mr. Wolkowitz has had an extensive career in finance and economics.
Most recently he headed Madison Financial Technology Partners, a consulting firm that advised technology companies on how to position
their products for the financial services industry. Previously he was a Managing Director at Morgan Stanley where he had several
assignments in the Fixed Income Division over a sixteen-year career including running their financial futures brokerage operation,
and a significant portion of the Fixed Income sales force. He also was the head of Fixed Income Research and prior to retiring,
he managed a portfolio of Morgan Stanley invested technology companies. Before the New York phase of his career Mr. Wolkowitz
was with the Board of Governors of the Federal Reserve System where he was in charge of Financial Studies, a department in the
Division of Research and Statistics responsible for analyzing and advising Governors of the Board on financial markets and financial
institutions. Mr. Wolkowitz had previously taught at Tulane University in the economics department and he was also a consultant
to the Urban Institute in Washington, D.C. He has written and lectured extensively on both theoretical and applied topics in economics
and finance in addition to co-authoring a book, Bank Capital. Mr. Wolkowitz has a BA cum laude from Queens College and a PhD in
economics from Brown University. Currently he is a Town Council Member, Madison N.J. and a member of the Advisory Board of the
Great Swamp Watershed Association.Mr. Wolkowitz’s financial experience qualifies him
to serve as a director.



51







JONATHAN PFOHL. Jonathan Pfohl served as Chief Financial
Officer from March 4, 2013 to June 12, 2014 when he was terminated without cause by the then Board of Directors. Mr. Pfohl returned
to the Company as Chief Financial Officer on June 25, 2014. Mr. Pfohl served as Interim Chief Financial Officer of the Company
from January 16, 2013 to March 3, 2013 and before then he served since December 19, 2012 as an independent contractor providing
accounting, finance and related services to the Company through his consulting company Rose Creek Associates LLC. Mr. Pfohl has
more than 25 years of financial and management experience with start-up and fast growing organizations. Before joining the Company,
he served as CEO of Wireless Express LLC, one of Sprint’s largest independent distribution partners, from December 2009
to October 2013. Prior to Wireless Express, Mr. Pfohl was CFO of Main Street Broadband LLC, a privately held wireless broadband
service provider, from June 2009 to December 2009; CFO of Movida Cellular LLC, a mobile virtual network provider, from April 2007
to March 2008; and a Vice President with AirGate PCS, Inc., a publicly-traded regional provider of wireless communications services,
from 1999 to 2005. Mr. Pfohl has a BS-Management and an MBA-Finance from the State University of New York at Buffalo.



Family Relationships. There
are no familial relationships amongst our directors and officers.



Compliance with Section 16(a) of the Securities
Exchange Act of 1934



The rules of the SEC require our directors,
executive officers and holders of more than 10 percent of our common stock to file reports of stock ownership and changes in ownership
with the SEC. Based on the Section 16 reports filed by our directors, executive officers and greater than 10 percent beneficial
owners, and written representations of our directors and executive officers, we believe there were no late or inaccurate filings
for transactions occurring during the fiscal year ended March 31, 2015 except as follows:



|Name               |  | Number ofLate Reports |  | Number of LateTransactions |  | Number of MissedReports |  | Number of MissedTransactions
|------------------ |  | --------------------- |  | -------------------------- |  | ----------------------- |  | ----------------------------
|Edward S. Adams    |  | 0                     |  | 0                          |  | 1                       |  | 1                           
|Thomas P. Hartness |  | 3                     |  | 3                          |  | 0                       |  | 0                           
|James Korn         |  | 1                     |  | 1                          |  | 0                       |  | 0                           
|Karl Leaverton     |  | 0                     |  | 0                          |  | 0                       |  | 0                           
|Bruce Likly        |  | 1                     |  | 1                          |  | 0                       |  | 0                           
|Robert Linares     |  | 0                     |  | 0                          |  | 1                       |  | 1                           
|Michael McMahon    |  | 0                     |  | 0                          |  | 0                       |  | 0                           
|Bernard McPheely   |  | 1                     |  | 1                          |  | 0                       |  | 0                           
|Michael Monahan    |  | 0                     |  | 0                          |  | 0                       |  | 0                           
|Jonathan Pfohl     |  | 1                     |  | 1                          |  | 0                       |  | 0                           
|Lewis Smoak        |  | 3                     |  | 3                          |  | 0                       |  | 0                           
|Theodorus Strous   |  | 1                     |  | 1                          |  | 1                       |  | 1                           
|Ben Wolkowitz      |  | 0                     |  | 0                          |  | 0                       |  | 0                           



Code of Ethics and Business Conduct



We have adopted a Code of Ethics and Business
Conduct that is applicable to our executive officers, including our principal executive officer and our principal financial officer.
A copy of this Code of Ethics and Business Conduct is available without charge to shareholders upon request to the Company at
411 University Ridge, Suite D, Greenville, SC 29601. We will disclose any future amendments to, or waivers from, provisions of
Code of Ethics on our website as promptly as practicable, as and to the extent required under and applicable stock market standards
and applicable SEC rules.



Audit Committee and Audit Committee Financial Expert



The Company established an Audit Committee
during the fiscal year. The members of the Audit Committee are Ben Wolkowitz, James Korn and Bruce Likly. Mr. Wolkowitz serves
as chair of the committee. The Company believes Mr. Wolkowitz qualifies as an audit committee financial expert (as defined in
Item 407 of Regulation S-K).



ITEM 11. EXECUTIVE COMPENSATION.



The following table shows the compensation
awarded to, earned by or paid to each individual who served as our chief executive officer during the fiscal year ended March
31, 2015. We had no executive officers serving as of March 31, 2015 other than our Chief Executive Officer and our Chief Financial
Officer.



52







Summary Compensation Table



|Name and Principal Position    |  |  | Fiscal Year Ended March 31, |  |  | Salary |         |  | Bonus |   |   | Option Awards |  |   | All Other Compensation |  |  | Total |        
|------------------------------ |  |  | --------------------------- |  |  | ------ | ------- |  | ----- | - | - | ------------- |  | - | ---------------------- |  |  | ----- | -------
|                               |  |  |                             |  |  |        |         |  |       |   |   |               |  |   |                        |  |  |      
|Gerald McGuire (1)             |  |  | 2015                        |  |  | $      | 130,769 |  |       | $ | — |               |  | $ | —                      |  |  | $     | 56,540 
|Chief Executive Officer        |  |  | 2014                        |  |  |        | —       |  |       |   | — |               |  |   | —                      |  |  |       | —      
|                               |  |  |                             |  |  |        |         |  |       |   |   |               |  |   |                        |  |  |       |        
|Michael McMahon(2)             |  |  | 2015                        |  |  | $      | 60,577  |  |       | $ | — |               |  | $ | —                      |  |  | $     | 319,308
|Former Chief Executive Officer |  |  | 2014                        |  |  |        | 250,000 |  |       |   | — |               |  |   | —                      |  |  |       | —      
|                               |  |  |                             |  |  |        |         |  |       |   |   |               |  |   |                        |  |  |       |        
|Jonathan Pfohl                 |  |  | 2015                        |  |  | $      | 200,000 |  |       | $ | — |               |  | $ | —                      |  |  | $     | 36,000 
|Chief Financial Officer        |  |  | 2014                        |  |  |        | 200,000 |  |       |   | — |               |  |   | —                      |  |  |       | 36,000 










| | (1) | Mr. McGuire was appointed President and Chief Executive Officer
                                         on July 11, 2015.
| | --- | --------------------------------------------------------------------------------------------------------------------------

| | (2) | Mr. McMahon was terminated by the then Board of Directors without
                                         cause on June 12, 2014. The Company executed a severance agreement with Mr. McMahon on
                                         September 25, 2014.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | Mr. McGuire was paid $20,000 for consulting services to the Company
                                         prior to his hiring on July 11, 2014. He was also provided $36,540 in temporary living
                                         expenses during the fiscal year ended March 31, 2015.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | Includes cash and stock based compensation due Mr. McMahon under
                                         the severance agreement between the Company and Mr. McMahon dated September 25, 2014.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Includes $36,000 paid for temporary living expenses paid to Mr.
                                         Pfohl.
| | --- | ---------------------------------------------------------------------------------------------------------------



Narrative Disclosure to Summary Compensation Table



Current Executive Officers



Gerald McGuire. Gerald McGuire
was appointed President, Chief Executive Officer and a director of the Company on July 11, 2014.  Mr. McGuire also serves
as a director of the Company.



On March 31, 2015, the Company entered
into an employment agreement with Mr. McGuire (the " McGuire Employment Agreement "). The terms of the McGuire Employment
Agreement are summarized below.



The McGuire Employment Agreement provides
that, subject to earlier termination as provided in the agreements, Mr. McGuire's employment as President and Chief Executive
Officer will be for a term of three years, expiring on March 31, 2018.  Upon expiration of the initial term, and subject
to earlier termination as provided in the agreement, the McGuire Employment Agreement will be automatically extended for successive
one year renewal periods.



The McGuire Employment Agreement provides
that Mr. McGuire will receive an annual base salary of $200,000, subject to periodic review and increase by the Compensation Committee
of the Company's Board of Directors, in its discretion.  In addition, Mr. McGuire will receive a performance-based cash bonus
under the Company's then-existing incentive bonus plan, the performance and other criteria applicable to which will be established
and determined in accordance with such plan.  In order to receive his bonus, Mr. McGuire must be employed at the time the
bonus is paid.



The McGuire Employment Agreement also provides
Mr. McGuire with certain other compensation and benefits, including eligibility to participate in all employee benefit plans and
programs made available from time to time to the Company's executive and management employees, paid time off, and reimbursement
of reasonable and necessary out-of-pocket business, travel and entertainment expenses.



Under the McGuire Employment Agreement,
Mr. McGuire is entitled to receive severance benefits if his employment is terminated under certain circumstances.  In this
regard, if Mr. McGuire's employment is terminated by the Company without "Cause" (as defined in the McGuire Employment
Agreement), by Mr. McGuire for "Good Reason" (as defined in the McGuire Employment Agreement), other than for Cause
in the 12 months following a "Change in Control" (as defined in the McGuire Employment Agreement), he will be entitled
to the following severance benefits: (i) a cash payment equal to 1.0x base salary if Mr. McGuire has been employed for 24 months,
but only .5x base salary if employed for less than 24 months, payable in a lump sum or ratably on a monthly basis over the 12-month
period following termination; (ii) a pro rata portion, in cash, of the annual performance bonus Mr. McGuire would have earned
for the fiscal year in which termination occurs if his employment had not ceased; and (iii) payment of accrued vacation time pursuant
to Company policy and reimbursement for expenses incurred through the date of termination, and accrued benefits through the Company's
benefit plans and programs.



53







If Mr. McGuire's employment is terminated
by the Company for Cause or if Mr. McGuire voluntarily terminates his employment, he will be entitled to continue to participate
in the Company's medical benefit plans to the extent required by law, and the Company will promptly pay Mr. McGuire his accrued
salary and vacation pay, reimbursement for expenses incurred through the date of termination, and accrued benefits through the
Company's benefit plans and programs.



If Mr. McGuire's employment is terminated
by reason of death or disability, he or his estate will be entitled to continue to participate in the Company's medical benefit
plans to the extent required by law, and the Company will promptly pay Mr. McGuire or his estate his accrued salary and vacation
pay, reimbursement for expenses incurred through the date of termination, and accrued benefits through the Company's benefit plans
and programs. In the case of disability, Mr. McGuire will also be entitled to a pro rata portion, in cash, of the annual performance
bonus he would have earned for the fiscal year in which termination occurs if his employment had not ceased.



Mr. McGuire is bound by noncompetition
provisions that restrict him from competing with the Company (with certain exceptions) for 12 months following the termination
of his employment with the Company.  Mr. McGuire is also subject to non-solicitation restrictions with respect to Company
customers and employees for a 24-month period.  Finally, Mr. McGuire is subject to confidentiality provisions protecting
the Company's confidential business information from unauthorized disclosure.



The McGuire Employment Agreement did not include any stock
based compensation for Mr. McGuire.



Jonathan Pfohl.
Mr. Pfohl was appointed as our Chief Financial Officer on March 4, 2013.  On June 12, 2014, Mr. Pfohl
was terminated without cause by the then Board.  Mr. Pfohl returned to the Company on June 25, 2014 as Chief Financial
Officer.



On March 31, 2015, the Company entered
into an employment agreement with Mr. Pfohl (the "Pfohl Employment Agreement"). The terms of the Pfohl Employment Agreement
are summarized below.



The Pfohl Employment Agreement provides
that, subject to earlier termination as provided in the agreements, Mr. Pfohl's employment as President and Chief Executive Officer
will be for a term of three years, expiring on March 31, 2018.  Upon expiration of the initial term, and subject to earlier
termination as provided in the agreement, the Pfohl Employment Agreement will be automatically extended for successive one year
renewal periods.



The Pfohl Employment Agreement provides
that Mr. Pfohl will receive an annual base salary of $200,000, subject to periodic review and increase by the Compensation Committee
of the Company's Board of Directors, in its discretion.  In addition, Mr. Pfohl will receive a performance-based cash bonus
under the Company's then-existing incentive bonus plan, the performance and other criteria applicable to which will be established
and determined in accordance with such plan.  In order to receive his bonus, Mr. Pfohl must be employed at the time the bonus
is paid.



The Pfohl Employment Agreement also provides
Mr. Pfohl with certain other compensation and benefits, including eligibility to participate in all employee benefit plans and
programs made available from time to time to the Company's executive and management employees, paid time off, and reimbursement
of reasonable and necessary out-of-pocket business, travel and entertainment expenses.



Under the Pfohl Employment Agreement, Mr.
Pfohl is entitled to receive severance benefits if his employment is terminated under certain circumstances.  In this regard,
if Mr. Pfohl's employment is terminated by the Company without "Cause" (as defined in the Pfohl Employment Agreement),
by Mr. Pfohl for "Good Reason" (as defined in the Pfohl Employment Agreement), other than for Cause in the 12 months
following a "Change in Control" (as defined in the Pfohl Employment Agreement), he will be entitled to the following
severance benefits: (i) a cash payment equal to 1.0x base salary if Mr. Pfohl has been employed for 24 months, but only .5x base
salary if employed for less than 24 months, payable in a lump sum or ratably on a monthly basis over the 12-month period following
termination; (ii) a pro rata portion, in cash, of the annual performance bonus Mr. Pfohl would have earned for the fiscal year
in which termination occurs if his employment had not ceased; and (iii) payment of accrued vacation time pursuant to Company policy
and reimbursement for expenses incurred through the date of termination, and accrued benefits through the Company's benefit plans
and programs.



If Mr. Pfohl's employment is terminated
by the Company for Cause or if Mr. Pfohl voluntarily terminates his employment, he will be entitled to continue to participate
in the Company's medical benefit plans to the extent required by law, and the Company will promptly pay Mr. Pfohl his accrued
salary and vacation pay, reimbursement for expenses incurred through the date of termination, and accrued benefits through the
Company's benefit plans and programs.



54







If Mr. Pfohl's employment is terminated
by reason of death or disability, he or his estate will be entitled to continue to participate in the Company's medical benefit
plans to the extent required by law, and the Company will promptly pay Mr. Pfohl or his estate his accrued salary and vacation
pay, reimbursement for expenses incurred through the date of termination, and accrued benefits through the Company's benefit plans
and programs. In the case of disability, Mr. Pfohl will also be entitled to a pro rata portion, in cash, of the annual performance
bonus he would have earned for the fiscal year in which termination occurs if his employment had not ceased.



Mr. Pfohl is bound by noncompetition provisions
that restrict him from competing with the Company (with certain exceptions) for 12 months following the termination of his employment
with the Company.  Mr. Pfohl is also subject to non-solicitation restrictions with respect to Company customers and employees
for a 24-month period.  Finally, Mr. Pfohl is subject to confidentiality provisions protecting the Company's confidential
business information from unauthorized disclosure.



The Pfohl Employment Agreement did not
include any stock based compensation for Mr. Pfohl.



Former Executive Officer



Michael W. McMahonIn connection
with his appointment as our Chief Executive Officer effective on February 1, 2013, Michael W. McMahon entered into an employment
letter with us (the “McMahon Employment Letter”) that superseded the employment letter and change of control agreement
he had previously entered into in connection with his employment as our Chief Operating Officer.  Under the McMahon Employment
Letter, Mr. McMahon was paid a base annual salary of $249,999, subject to potential increases in connection with an annual
salary review by the Board.



On June 11, 2014, Mr. McMahon
was terminated without cause by the then Board.  Effective September 25, 2014 we entered into a Severance Agreement and General
Release (the “Severance Agreement”) with Mr. McMahon pursuant to which we agreed to (i) pay Mr. McMahon a severance
salary of $4,167 per month for 30 months starting from the date of his termination, (ii) grant Mr. McMahon Common Stock valued
at 50% of Mr. McMahon’s base annual salary ($125,000), based on a stock price of $0.30, (iii) pay Mr. McMahon $2,000 per
month for reimbursement of medical, dental, vision and Company-paid deductible insurance coverage for 13 months starting from
the date of his termination, and (iv) award Mr. McMahon 100,000 restricted shares of Common Stock as a replacement for his vested
options. These payments and benefits under the Severance Agreement are in final settlement of all wages and other payments owed
to him, and any and all claims under the McMahon Employment Letter and in consideration of a release from Mr. McMahon of any claims
against us arising in connection with the McMahon Employment Letter. Mr. McMahon received regular salary payments pursuant to
the McMahon Employment Letter through his last day of employment with the Company.



Under the McMahon Employment Letter, Mr. McMahon
was entitled during his term of employment to participate in all employee benefit plans and programs available to similarly situated
employees (subject to eligibility) that we have in force from time to time, and was entitled to 20 days paid vacation each calendar
year. Mr. McMahon was also entitled to options, granted on February 2, 2013 pursuant to the 2012 Share Incentive Plan,
to purchase a total of 1,500,000 shares of Common Stock at $0.93 per share (the closing price of our Common Stock on the date
of grant), which vested as follows: options to purchase 271,250 shares vested immediately upon commencement of employment;
and options to purchase 234,375 shares vested upon the six-month anniversary of his start date.



Mr. McMahon’s
Employment Letter provided that if Mr. McMahon’s employment was terminated for any reason other than for “Cause”
(as defined in the McMahon Employment Letter) or his voluntary resignation, in exchange for a general release by Mr. McMahon
of us and our officers, directors, employees, Stockholders, and agents from liability, as well as one-year non-solicitation and
non-competition covenants from Mr. McMahon, Mr. McMahon would have been entitled to receive, for 12 months following
his date of termination, (i) his base salary plus (ii) $2,000 per month to offset his potential medical, dental and
life insurance expenses and any premiums required under COBRA comparable state law, each paid in accordance with our payroll and
benefit policies.  In addition, we would also have (also in exchange for a general release by Mr. McMahon of us and
our officers, directors, employees, Stockholders, and agents from liability) (1) extended the period during which Mr. McMahon
may exercise his option with respect to any portion or all of his vested options to purchase shares to within 12 months following
his date of separation, and (2) agreed not to exercise any right of repurchase. The McMahon Employment Letter provided that
the options would have been exercisable for five years from the vesting date, subject to approval of the Board, provided that
no options could have been exercised after 10 years following the date of grant.  Mr. McMahon would have also remained
subject to the terms of our proprietary information and inventions agreement.



55







Outstanding Equity Awards at Fiscal Year-End



The following table summarizes the outstanding
equity award holdings held by our named executive officers at March 31, 2015. At March 31, 2015, there were no outstanding
equity awards to any either of our named executive officers.



Outstanding Equity Awards at 2015 Fiscal
Year-End





|                  |  | Option awards |                                                                
|----------------- |  | ------------- | ---------------------------------------------------------------
|Name              |  |               | Number of SecuritiesUnderlyingUnexercisedOptions (#)Exercisable
|Gerald McGuire    |  |               | —                                                              
|                  |  |               |                                                                
|Jonathan M. Pfohl |  |               | —                                                              





Director Compensation



The following table shows the compensation
paid to individuals who served on our Board of Directors, none of whom are named executive officers, during the fiscal year ended
March 31, 2015.



|Name                |  | Fees Earned or
    Paid in Cash ($)(1) |       |  | Option Awards
    ($)(2) |   |   | All Other Compensation
    ($) |  |   | Total ($) | 
|------------------- |  | -------------------------------------- | ----- |  | ------------------------ | - | - | ------------------------------ |  | - | --------- | 
|Edward S. Adams     |  | $                                      | 1,250 |  |                          | $ | — |                                |  | $ | —         | 
|James Korn          |  |                                        | —     |  |                          |   | — |                                |  |   | —         | 
|Karl Leaverton      |  |                                        | —     |  |                          |   | — |                                |  |   | —         | 
|Bruce Likly         |  |                                        | —     |  |                          |   | — |                                |  |   | —         | 
|Robert C. Linares   |  |                                        | 1,250 |  |                          |   | — |                                |  |   | —         | 
|Bernard M. McPheely |  |                                        | —     |  |                          |   | — |                                |  |   | —         | 
|Lewis Smoak         |  |                                        | —     |  |                          |   | — |                                |  |   | —         | 
|Theodorus Strous    |  |                                        | 1,250 |  |                          |   | — |                                |  |   | —         | 
|Ben Wolkowitz       |  |                                        | —     |  |                          |   | — |                                |  |   | —         | 



| | (1) | Includes board meeting and executive committee fees.
| | --- | ----------------------------------------------------

| | (2) | There were no option awards outstanding to any of directors
                                         at March 31, 2015.
| | --- | -----------------------------------------------------------------------------------------------------------------------



After the change in our Board of Directors
on June 23, 2014, our directors did not receive any compensation for serving on the board during the fiscal year ended March 31,
2015.



Compensation Committee



The Company established a Compensation
Committee during the fiscal year to provide oversight and direction with respect to compensation of management. The members of
the Compensation Committee are Lewis Smoak, Karl Leaverton and James Korn. Mr. Smoak serves as the Chair of the Compensation Committee.



Compensation Committee Interlocks and Insider Participation



During the fiscal year ended March 31,
2015, the following individuals served on our Board of Directors:  Edward S. Adams, Bruce Likly, James Korn, Karl Leaverton,
Robert C. Linares, Gerald McGuire, Bernard M. McPheely, Lewis Smoak, Theodorus Strous and Ben Wolkowitz.  Messrs. Adams,
Linares and Strous resigned from the Board on June 23, 2014.



Mr. McPheely joined the Board on June 23,
2014 and previously served on the Board from August 13, 2012 until he resigned on May 13, 2013. In addition to serving on the
Board of Directors, Mr. McGuire serves as the President and Chief Executive officer of the Company. No other director who served
on our Board during the fiscal year ended March 31, 2015 is a former or current officer of the Company, or has other interlocking
relationships, as defined by the SEC.



56







ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.



Security Ownership of Certain Beneficial Owners and Management



The following table sets forth, as of March 31,
2015, the beneficial ownership of the outstanding common stock by: (i) the persons or groups known to us to be the beneficial
owners of more than five (5%) percent of the shares of our outstanding common stock; (ii) each of our named executive officers
and current directors; and (iii) our directors and executive officers as a group. Unless otherwise indicated, each of the
stockholders named in the table below has sole voting and dispositive power with respect to such shares of common stock.



|Name and Address of Beneficial Owner                                                                                                         |  | Amount and Nature of
    Beneficial Ownership(1)(2) |           |     | Percentage of
    Beneficial Ownership | 
|-------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------- | --------- | --- | -------------------------------------- | 
|Directors and
    Named Executive Officers                                                                                                   |  |                                                     |           |     |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|James Korn                                                                                                                                   |  |                                                     |           |     |                                        | 
|411 University Ridge, Suite D,
    Greenville, SC 29601                                                                                      |  |                                                     | —         |     |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|Karl Leaverton                                                                                                                               |  |                                                     |           |     |                                        | 
|411 University Ridge,
    Suite D, Greenville, SC 29601                                                                                      |  |                                                     | 333,333   |     |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|Bruce Likely                                                                                                                                 |  |                                                     |           |     |                                        | 
|411 University Ridge, Suite D,
    Greenville, SC 29601                                                                                      |  |                                                     | 800,500   |     |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|Gerald McGuire                                                                                                                               |  |                                                     |           |     |                                        | 
|411 University Ridge, Suite D,
    Greenville, SC 29601                                                                                      |  |                                                     | —         |     |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|Bernard McPheely                                                                                                                             |  |                                                     |           |     |                                        | 
|411 University Ridge, Suite D,
    Greenville, SC 29601                                                                                      |  |                                                     | 1,130,435 | (3) |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|Jonathan
                                 Pfohl 411
                                         University Ridge, Suite D, Greenville, SC 29601 |  |                                                     | —         |     |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|Lewis Smoak                                                                                                                                  |  |                                                     |           |     |                                        | 
|411 University Ridge, Suite D,
    Greenville, SC 29601                                                                                      |  |                                                     | 1,026,666 |     |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|Ben
                                 Wolkowitz 411
                                         University Ridge, Suite D, Greenville, SC 29601  |  |                                                     | 158,333   |     |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|All directors and named executive
    officers as a group (8 persons)                                                                        |  |                                                     | 3,449,269 |     |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|Other 5% Stockholders                                                                                                                        |  |                                                     |           |     |                                        | 
|Thomas P. Hartness Revocable Trust dated July 30,
    2010                                                                                   |  |                                                     |           |     |                                        | 
|1200 Garlington Road, Greenville,
    SC 29615                                                                                               |  |                                                     | 5,223,325 | (4) |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|Edwards
                                 S. Adams 287
                                         E. 6th Street, Suite 140, St. Paul, MN 55101  |  |                                                     | 3,790,000 | (5) |                                        | 
|                                                                                                                                             |  |                                                     |           |     |                                        | 
|Michael
                                 R. Monahan 4824
                                         Thomas Avenue S, Minneapolis, MN 55410     |  |                                                     | 3,756,188 | (5) |                                        | 










| | (1) | Includes shares for which the named person has sole voting and
                                         investment power, has shared voting and investment power, or holds in an IRA or other
                                         retirement plan and shares held by the named person’s spouse.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | For purposes of this table, a person or group of persons is deemed
                                         to have “beneficial ownership” of any shares of common stock which that person
                                         has the right to acquire within 60 days following March 31, 2015. For purposes of
                                         computing the percentage of outstanding shares of common stock held by each person or
                                         group of persons named above, any shares which that person or persons has or have the
                                         right to acquire within 60 days following March 31, 2015, is deemed to be outstanding,
                                         but is not deemed to be outstanding for the purpose of computing the percentage ownership
                                         of any other person.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



57







| | (3) | Mr. McPheely owns 817,935 common shares issued through the Bernard
                                         M. McPheely Revocable Trust u/a DTD May 25, 2011.  The number reported includes
                                         312,500 warrants issued in connection with the purchase of units from the company consisting
                                         of one share of common stock and one warrant for the purchase of a share of common stock.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | The number reported includes 2,500,000 Warrants issued to the
                                         Trust in connection with its purchase from the Company of units consisting of one share
                                         of common stock and one warrant for the purchase of a share of common stock. All shares
                                         reported are held by Thomas P. Hartness as trustee of the Trust, and in that capacity
                                         Mr. Hartness has sold voting and dispositive power with respect to such shares.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | Based on information contained in Schedule 13D filed with the
                                         SEC on February 13, 2015.
| | --- | --------------------------------------------------------------------------------------------------------------------------------



Securities Authorized for Issuance under Equity Compensation
Plans



The following table summarizes the sole
equity compensation plan under which shares of the Company’s common stock may be issued as of March 31, 2015.



|Plan Category                                               |  | Number of securities
    to be issued upon exercise of outstanding options, warrants and rights |         |  | Weighted- average
    exercise price of outstanding options, warrants and rights |   |      | Number of securities
    remaining available for future issuance under equity compensation plans (excluding securities
    reflected in Column (a)) | 
|----------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- | ------- |  | -------------------------------------------------------------------------------- | - | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------- | 
|Equity compensation plans approved by security holders      |  |                                                                                                 | —       |  |                                                                                  |   | —    |                                                                                                                                                     | 
|Equity compensation plans not approved by security holders: |  |                                                                                                 |         |  |                                                                                  |   |      |                                                                                                                                                     | 
|2012 Share Incentive Plan                                   |  |                                                                                                 | 232,500 |  |                                                                                  | $ | 0.35 |                                                                                                                                                     | 
|                                                            |  |                                                                                                 |         |  |                                                                                  |   |      |                                                                                                                                                     | 
|Total                                                       |  |                                                                                                 | 232,500 |  |                                                                                  | $ | 0.35 |                                                                                                                                                     | 










| | (1) | The 2012 Share Incentive Plan provides for the issuance of
                                         any shares available under the plan in the form of restricted or unrestricted stock awards,
                                         phantom stock, performance awards and other types of stock-based awards, in addition
                                         to the granting of options or stock appreciation rights.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Scio Diamond Technology Corp. 2012
Share Incentive Plan (the “2012 Share Incentive Plan”) was adopted by the Company’s Board of Directors on May 7,
2012. The 2012 Share Incentive 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. Up to 5,000,000
shares of the Company’s common stock are authorized for issuance pursuant to awards granted under the 2012 Share Incentive
Plan to the Company’s directors, officers, employees and consultants providing bona fide services to or for the Company.



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AND DIRECTOR INDEPENDENCE.



Related Party Transactions



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.



Director Independence



Our Board has determined
that Messrs. McPheely, Korn, Leaverton, Likly, Smoak and Wolkowitz are “independent” directors, based upon the independence
criteria set forth in the corporate governance listing standards of The NASDAQ Stock Market, the exchange that the Board selected
in order to determine whether our directors and committee members meet the independence criteria of a national securities exchange,
as required by Item 407(a) of Regulation S-K. Our Board has determined that Mr. McGuire is not independent based on these criteria.



58







ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.



On March 22, 2012, the Board of Directors
engaged Cherry Bekaert LLP to serve as the Company’s independent auditor for the fiscal year ended March 31, 2012.
Cherry Bekaert LLP has been out auditor for all subsequent fiscal years.



The following table shows the expenses
that we incurred for services performed in fiscal years ended March 31, 2015 and 2014:



|                   |  | Fiscal Year Ended March 31, |        
|------------------ |  | --------------------------- | -------
|                   |  | 2015                        |        
|Audit Fees         |  | $                           | 112,204
|Audit-Related Fees |  |                             | —      
|Tax Fees           |  |                             | 8,575  
|All Other Fees     |  |                             | —      
|Total              |  | $                           | 120,779



Audit Fees



This category includes the aggregate fees billed for professional
services rendered by the independent auditors during the Company’s 2015 and 2014 fiscal years for the audit of the Company’s
annual financial statements, quarterly reports on Form 10-Q, and SEC registration statement.



Audit Related Fees



This category includes the aggregate fees billed
for professional services rendered by the independent auditors during the Company’s 2015 and 2014 fiscal years for
other audit related services.



Tax Fees



This category includes aggregate fees billed
for professional services rendered by the independent auditors during the Company’s 2015 and 2014 fiscal years for preparation
of tax returns and related advisory services.

`

All Other Fees



This category includes the aggregate fees
billed for professional services rendered by the independent auditors during the Company’s 2015 and 2014 fiscal years for
employee compensation related advisory services and other advisory services.



Oversight of Accountants; Approval of Accounting Fees



The Company’s Audit Committee approved
the accounting services and fees reflected in the table for the fiscal year ended March 31, 2015. For the prior fiscal year, the
fees were approved by the whole Board of Directors, and none of the services were performed by individuals who were not employees.



59







PART IV



ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES



|(a) | (1) | Financial
                                         Statements
|--- | --- | -------------------------------------------------------------



The following financial statements are
located in Item 8 of this Report:

Report of Independent Registered Public
Accounting Firm

Balance Sheets as of March 31, 2015 and
2014

Statements of Operations for the years
ended March 31, 2015 and 2014

Statements of Cash Flow for the years ended
March 31, 2015 and 2014

Statements of Shareholders’ Equity
for the year ended March 31, 2015

Notes to the Financial Statements



| | (3) | Exhibits
| | --- | --------



The following exhibits are filed with this
Report on Form 10-K as required by Item 601 of Regulation S-K:



| | 3.1 | Articles of Incorporation (incorporated by reference to Exhibit
                                         3.1 to the Form S-1/A filed with the SEC on May 13, 2010).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.2 | Certificate of Amendment to Articles of Incorporation (incorporated
                                         by reference to Exhibit 3.1(a) to the Form 8-K filed with the SEC on August 11,
                                         2011).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.3 | Amended and Restated bylaws (incorporated by reference to Exhibit
                                         3.1 to the Form 8-K filed with the SEC Commission on June 26, 2014).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 3.4 | Second Amended and Restated Bylaws (incorporated by reference
                                         to Exhibit 3.1 to the Form 8-K filed with the SEC on November 4, 2014).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.1 | Loan Agreement dated as of June 21, 2013 between Scio Diamond
                                         Technology Corporation and Platinum Capital Partners, LP (incorporated by reference to
                                         Exhibit 4.1 to the Form 8-K filed with the SEC on September 20, 2013).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.2 | Security Agreement dated as of June 21, 2013 between Scio Diamond
                                         Technology Corporation and Platinum Capital Partners, LP (incorporated by reference to
                                         Exhibit 4.2 to the Form 8-K filed with the SEC on September 20, 2013).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.3 | Promissory Note dated as of June 21, 2013 made by Scio Diamond
                                         Technology Corporation in favor of Platinum Capital Partners, LP (incorporated by reference
                                         to Exhibit 4.3 to the Form 8-K filed with the SEC on September 20, 2013).
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.4 | First Amendment to Loan Agreement dated October 11, 2013 between
                                         Scio Diamond Technology Corporation and Platinum Capital Partners, LP (incorporated by
                                         reference to Exhibit 4.1 to the Form 8-K filed with the SEC on October 18, 2013).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.5 | Promissory Note dated October 11, 2013 made by Scio Diamond
                                         Technology Corporation in favor of Platinum Capital Partners, LP (incorporated by reference
                                         to Exhibit 4.2 to the Form 8-K filed with the SEC on October 18, 2013).
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.6 | Second Amendment to Loan Agreement, dated as of October 16,
                                         2014, by and between the Company and Platinum Capital Partners, LP (incorporated by reference
                                         to Exhibit 10.1 to the Form 8-K filed with the SEC on October 22, 2014).
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.7 | Loan Agreement dated as of December 16, 2014, between the Company
                                         and Heritage Gemstone Investors, LLC (incorporated by reference to Exhibit 10.1 to the
                                         Form 8-K filed with the SEC on December 22, 2014).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 4.8 | Security Agreement dated as of December 16, 2014, between the
                                         Company and Heritage Gemstone Investors, LLC (incorporated by reference to Exhibit 10.2
                                         to the Form 8-K filed with the SEC on December 22, 2014).
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.1 | Asset Purchase Agreement by and among Krossbow Holding Corporation
                                         and Scio Diamond Technology Corporation (incorporated by reference to Exhibit 10.1
                                         to the Form 8-K/A filed with the SEC on August 15, 2011).
| | ---- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.2 | Schedule 1.1(a) “Acquired Assets” of the
                                         Asset Purchase Agreement by and among Krossbow Holding Corporation and Scio Diamond Technology
                                         Corporation (incorporated by reference to Exhibit 10.1 to the Form 8-K/A filed
                                         with the SEC on August 15, 2011).
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



60







| | 10.3 | Asset Purchase Agreement by and among Scio Diamond Technology
                                         Corporation and Apollo Diamond, Inc. (incorporated by reference to Exhibit 10.3
                                         to the Form 10-Q/A for the fiscal quarter ended September 30, 2011 filed with
                                         the SEC on August 16, 2012).
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.4 | Asset Purchase Agreement by and among Scio Diamond Technology
                                         Corporation and Apollo Diamond Gemstone Corporation (incorporated by reference to Exhibit 10.3
                                         to the Form 10-K for the fiscal year ended March 31, 2012 filed with the SEC
                                         on August 16, 2012).
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.5 | Amended and Restated Employment Agreement by and between Scio
                                         Diamond Technology Corporation and Joseph D. Lancia (incorporated by reference to Exhibit
                                         10.1 to the Form 8-K filed with the SEC on August 8, 2012). (1)
| | ---- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.5A | Change in Control Agreement by and between Scio Diamond Technology
                                         Corporation and Joseph D. Lancia (incorporated by reference to the Exhibit 10.4 to Form 8-K
                                         filed with the SEC on August 8, 2012). (1)
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.5B | Agreement of Separation, Waiver, and Release of Joseph D.
                                         Lancia (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with
                                         the SEC on December 7, 2012). (1)
| | ----- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.6 | Amended and Restated Employment Agreement by and between Scio
                                         Diamond Technology Corporation and Charles G. Nichols (incorporated by reference to Exhibit
                                         10.3 to the Form 8-K filed with the SEC on August 8, 2012). (1)
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.6A | Change in Control Agreement by and between Scio Diamond Technology
                                         Corporation and Charles G. Nichols (incorporated by reference to Exhibit 10.6 to the
                                         Form 8-K filed with the SEC on August 8, 2012). (1)
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.6B | Agreement of Separation, Waiver, and Mutual Release of Charles
                                         G. Nichols (incorporated by reference to Exhibit 10.2 to the Form 8-K filed
                                         with the SEC on December 7, 2012). (1)
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.7 | Amended and Restated Employment Agreement by and between Scio
                                         Diamond Technology Corporation and Michael W. McMahon (incorporated by reference to Exhibit
                                         10.2 to the Form 8-K filed with the SEC on August 8, 2012). (1)
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.7A | Employment Letter with Michael McMahon (incorporated by reference
                                         to Exhibit 10.1 to the Form 8-K filed with the SEC on February 4,
                                         2012). (1)
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.7B | Change in Control Agreement by and between Scio Diamond Technology
                                         Corporation and Michael W. McMahon (incorporated by reference to Exhibit 10.5 to the
                                         Form 8-K filed with the SEC on August 8, 2012). (1)
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.7C | Severance Agreement and General Release, effective September
                                         25, 2014, between the Company and Michael W. McMahon (incorporated by reference to Exhibit
                                         10.1 to the Form 8-K filed with the SEC on October 1, 2014).(1)
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.8 | Subscription Agreement dated May 4, 2012 (incorporated
                                         by reference to Exhibit 10.11 to the Form 10-K for the fiscal year ended March 31,
                                         2012 filed with the SEC on August 16, 2012).
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.9 | Form of Warrant by and between Scio Diamond Technology
                                         Corporation and certain Investors (incorporated by reference to Exhibit 10.1 to the Form 8-K
                                         filed with the SEC on May 10, 2012).
| | ---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.10 | Scio Diamond Technology Corp. 2012 Share Incentive Plan (incorporated
                                         by reference to Exhibit 10.2 to the Form 8-K filed with the SEC on February 4,
                                         2012). (1)
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.10A | Scio Diamond Technology Corp. Amended and Restated 2012
                                         Share Incentive Plan (incorporated by reference to Exhibit 10.10A to the Form 10-K
                                         for the fiscal year ended March 31, 2015 filed with the SEC on June 29, 2015). (1)
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.10B | Form of Qualified Stock Option Grant Agreement by and
                                         between Scio Diamond Technology Corporation and certain Executive Officers (incorporated
                                         by reference to Exhibit 10.7 to the Form 8-K filed with the SEC on August 8,
                                         2012). (1)
| | ------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.10C | Form of Stock Option Grant Agreement (Non-Qualified
                                         Stock Option) for Non-Employee Directors (incorporated by reference to Exhibit 10.6
                                         to the Form 10-Q filed with the SEC on February 14, 2013). (1)
| | ------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.10D | Form of Restricted Stock Agreement (incorporated by reference
                                         to Exhibit 10.10D to the Form 10-K for the fiscal year ended March 31,
                                         2015 filed with the SEC on June 29, 2015). (1)
| | ------ | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.11 | Lease with Innovation Center (incorporated by reference to
                                         Exhibit 10.01 to the Form 10-Q for the fiscal quarter year ended March 31,
                                         2012 filed with the SEC on August 16, 2012).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.11A | Supplemental Notice to Lease dated October 14, 2011,
                                         by and between Scio Diamond Technology Corporation and Innovation Center, LLC (incorporated
                                         by reference to Exhibit 10.14 to the Form 10-K for the fiscal year ended March 31,
                                         2012 filed with the SEC on August 16, 2012).
| | ------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



61







| | 10.12 | Employment Letter Agreement of Stephen D. Kelley (incorporated
                                         by reference to Exhibit 10.3 to the Form 8-K filed with the SEC on December 7,
                                         2012). (1)
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.13 | Employment Letter Agreement dated March 4, 2013 between
                                         Scio Diamond Technology Corporation and Jonathan Pfohl (incorporated by reference to
                                         Exhibit 10.1 to the Form 8-K filed with the SEC on March 7, 2013). (1)
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.13B | Employment Agreement dated March 31, 2015 between Scio Diamond
                                         Technology Corporation and Jonathan Pfohl (incorporated by reference to Exhibit 99.2
                                         to Form 8-K filed with the SEC on April 6, 2015).(1)
| | ------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.14 | Code of Ethics and Business Conduct (incorporated by reference
                                         to Exhibit 10.8 to the Form 8-K filed with the SEC on August 8, 2012).
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.14A | Code of Conduct (incorporated by reference to Exhibit 10.14A
                                         to the Form 10-K for the fiscal year ended March 31, 2015 filed with the SEC
                                         on June 29, 2015).
| | ------ | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.14B | Corporate Governance Guidelines (incorporated by reference
                                         to Exhibit 10.14B to the Form 10-K for the fiscal year ended March 31,
                                         2015 filed with the SEC on June 29, 2015).
| | ------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.15 | Warrant dated March 25, 2013 by and between Scio Diamond
                                         Technology Corporation and Theodorus Strous (incorporated by reference to Exhibit 10.15
                                         to the Form 10-K for the fiscal year ended March 31, 2014 filed with the SEC on
                                         June 27, 2013). (1)
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.16 | Warrant dated March 25, 2013 by and between Scio Diamond
                                         Technology Corporation and Filip De Weerdt (incorporated by reference to Exhibit 10.16
                                         to the Form 10-K for the fiscal year ended March 31, 2014 filed with the SEC on
                                         June 27, 2013).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.17 | Consulting Agreement dated March 6, 2013 by and between
                                         Scio Diamond Technology Corporation and Theodorus Strous (incorporated by reference to
                                         Exhibit 10.17 to the Form 10-K for the fiscal year ended March 31, 2014 filed
                                         with the SEC on June 27, 2013). (1)
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.18 | Consulting Agreement dated March 6, 2013 by and between
                                         Scio Diamond Technology Corporation and Michael R. Monahan (incorporated by reference
                                         to Exhibit 10.18 to the Form 10-K for the fiscal year ended March 31, 2014
                                         filed with the SEC on June 27, 2013). (1)
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.19 | Joint Venture Agreement, by and between Scio Diamond Technology
                                         Corporation, SAAMABA, LLC and S21 Research Holdings, dated September 16, 2013 (incorporated
                                         by reference to Exhibit 10.1 to the Form 10-Q filed with the SEC on November
                                         14, 2013).
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.20 | Shareholders Agreement, by and between Scio Diamond Technology
                                         Corporation, SAAMABA, LLC and S21 Research Holdings, dated September 16, 2013 (incorporated
                                         by reference to Exhibit 10.2 to the Form 10-Q filed with the SEC on November
                                         14, 2013).
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.21 | License Agreement, by and between Scio Diamond Technology
                                         Corporation and Grace Rich Limited, dated September 16, 2013 (incorporated by reference
                                         to Exhibit 10.3 to the Form 10-Q filed with the SEC on November 14, 2013).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.22 | Development Agreement, by and between Scio Diamond Technology
                                         Corporation and Grace Rich Limited, dated September 16, 2013 (incorporated by reference
                                         to Exhibit 10.5 to the Form 10-Q filed with the SEC on November 14, 2013).
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.23 | Consulting Services Agreement, by and between Scio Diamond
                                         Technology Corporation and Grace Rich Limited, dated September 16, 2013 (incorporated
                                         by reference to Exhibit 10.4 to the Form 10-Q filed with the SEC on November
                                         14, 2013).
| | ----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.24 | Rights Agreement, dated as of April 15, 2014, between Scio
                                         Diamond Technology Corporation and Empire Stock Transfer Inc. which includes the Form
                                         of Rights Certificate as Exhibit A and Summary of Rights to purchase Common Stock as
                                         Exhibit B (incorporated by reference to Exhibit 4.1 to the Form 8-K filed with the SEC
                                         on April 16, 2014).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.25 | Amendment No. 1, dated June 22, 2014 to Rights Agreement,
                                         dated as of April 15, 2014, by and between Scio Diamond Technology Corporation and Empire
                                         Stock Transfer Inc. (incorporated by reference to Exhibit 4.1 to the Form 8-K filed with
                                         the SEC on June 26, 2014).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.26 | Settlement Agreement, dated as of June 23, 2014, by and among
                                         the Company, the Adams Group and the Save Scio Group (incorporated by reference to Exhibit
                                         99.1 to the Form 8-K filed with the SEC on June 26, 2014).
| | ----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



62







| | 10.27 | Agreement for the Sale and Lease of Growers dated as of December
                                         16, 2014, between the Company and Heritage Gemstone Investors, LLC (incorporated by reference
                                         to Exhibit 10.3 to the Form 8-K filed with the SEC on December 22, 2014).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.28 | Renaissance Created Diamond Company, LLC Limited Liability
                                         Company Agreement, dated as of December 18, 2014, between the Company and Renaissance
                                         Diamond Inc. (incorporated by reference to Exhibit 10.1 to the Form 8-K filed with the
                                         SEC on December 23, 2014).
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 10.29 | Employment Agreement dated March 31, 2015 between Scio Diamond
                                         Technology Corporation and Gerald McGuire (incorporated by reference to Exhibit 99.1
                                         to Form 8-K filed with the SEC on April 6, 2015).(1)
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | 23 | Consent of Cherry Bekaert LLP. (incorporated by reference to Exhibit 23 to Form 10-K filed with the SEC on June 29, 2015).
| | -- | --------------------------------------------------------------------------------------------------------------------------



| | 24 | Power of Attorney (contained herein as part of the signature
                                         pages).*
| | -- | --------------------------------------------------------------------------------------------------------------



| | 31.1 | Rule 13a-14(a) Certification of the Chief Executive
                                         Officer.*
| | ---- | ------------------------------------------------------------------------------------------------------



| | 31.2 | Rule 13a-14(a) Certification of the Chief Financial
                                         Officer.*
| | ---- | ------------------------------------------------------------------------------------------------------



| | 32 | Section 1350 Certifications of the Chief Executive Officer
                                         and Chief Financial Officer.*
| | -- | ---------------------------------------------------------------------------------------------------------------------------------



| | 101 | The following materials from the Company’s Annual Report
                                         on Form 10-K for the fiscal year ended March 31, 2015, formatted in eXtensible
                                         Business Reporting Language (XBRL); (i) Balance Sheets as of March 31, 2015 and
                                         2014; (ii) Statements of Operations for the years ended March 31, 2015 and 2014;
                                         (iii) Statements of Shareholders’ Equity for the years ended March 31, 2015
                                         and 2014; (iv) Statements of Cash Flow for the years ended March 31, 2015 and 2014;
                                         and (v) Notes to the Financial Statements (incorporated by reference to Exhibit 101 to Form 10-K filed with the SEC on June 29, 2015).
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | * | Filed herewith.
| | - | ---------------



| | (1) | Management contract or compensatory plan or arrangement required
                                         to be filed as an Exhibit to this Annual Report on Form 10-K.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



63







SIGNATURES



Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.



|Date: July 29, 2015 | SCIO DIAMOND TECHNOLOGY CORPORATION
|------------------- | -----------------------------------
|                    | /s/ Gerald McGuire                 
|                    | Chief Executive Officer            



POWER OF ATTORNEY



KNOW ALL MEN BY THESE PRESENTS, that each
person whose signature appears below constitutes and appoints Gerald McGuire, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign
any and all amendments to this Annual Report on Form 10-K, and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Securities and Exchange Commission, granting unto attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully
to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that attorney-in-fact and agent,
or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.



Pursuant to the requirements of the Securities
Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.





|Date: June 29, 2015 | /s/ GERALD McGUIRE                              
|------------------- | ------------------------------------------------
|                    | Gerald McGUIRE                                  
|                    | Chief Executive Officer                         
|                    | (Principal Executive
    Officer)               
|                    |                                                 
|Date: June 29, 2015 | /s/ JONATHAN PFOHL                              
|                    | Jonathan Pfohl                                  
|                    | Chief Financial Officer                         
|                    | (Principal Accounting
    and Financial Officer)
|                    |                                                 
|Date: June 29, 2015 | /s/ BERNARD McPHEELY                            
|                    | Bernard McPheely                                
|                    | Chairman and Director                           
|                    |                                                 
|Date: June 29, 2015 | /s/ BRUCE LIKLY                                 
|                    | Bruce Likly                                     
|                    | Vice-Chairman and Director                      
|                    |                                                 
|Date: June 29, 2015 | /s/ JAMES KORN                                  
|                    | James Korn                                      
|                    | Director                                        
|                    |                                                 
|Date: June 29, 2015 | /s/ KARL LEAVERTON                              
|                    | Karl Leaverton                                  
|                    | Director                                        
|                    |                                                 
|Date: June 29, 2015 | /s/ LEWIS SMOAK                                 
|                    | Lewis Smoak                                     
|                    | Director                                        
|                    |                                                 
|Date: June 29, 2015 | /s/ BEN WOLKOWITZ                               
|                    | Ben Wolkowitz                                   
|                    | Director                                        



64







EXHIBIT INDEX



| | 24 | Power of Attorney
                                         (contained herein as part of the signature pages).
| | -- | -------------------------------------------------------------------------------------------------------------



| | 31.1 | Rule 13a-14(a) Certification
                                         of the Chief Executive Officer.
| | ---- | -----------------------------------------------------------------------------------------------------



| | 31.2 | Rule 13a-14(a) Certification
                                         of the Chief Financial Officer.
| | ---- | -----------------------------------------------------------------------------------------------------



| | 32 | Section 1350
                                         Certifications of the Chief Executive Officer and Chief Financial Officer.
| | -- | --------------------------------------------------------------------------------------------------------------------------------



65