UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-KSB/A
(Amendment
No. 2)
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(Mark
One)
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ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
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For
the fiscal year ended December 31, 2007
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OR
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
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For
the transition period from ____________ to
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Commission
file number: 000-31585
DIAMOND
DISCOVERIES INTERNATIONAL CORP.
(Name
of
Small Business Issuer)
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Delaware
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06-1579927
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(State
or Other Jurisdiction
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(IRS
Employer Identification No.)
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of
Incorporation)
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45
Rockefeller Plaza, Suite 2000
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New
York, NY
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10111
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(Address
of Principal Executive Offices)
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(Zip
Code)
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(212)
332-8016
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(Issuer’s
Telephone Number, Including Area
Code)
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Securities
registered under Section 12(b) of the Exchange Act:
None
Securities
registered under Section 12(g) of the Exchange Act:
Common
Stock
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Title
of Each Class
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Name
of Each Exchange
on
Which Registered
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Common
Stock, par value $.001
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None
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Check
whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
o
Check
if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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- KSB or any amendment to this Form 10-KSB.
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Issuer’s
revenues for its most recent fiscal year were: $0.
The
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity
was
sold as of April 11, 2008 is $2,489,965.
The
number of shares outstanding of the Company’s common stock, as of April 11,
2008 is 358,216,830.
Transitional
Small Business Disclosure Format (check one): Yes
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No
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TABLE
OF CONTENTS
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DESCRIPTION
OF BUSINESS
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3
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DESCRIPTION
OF PROPERTY
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8
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LEGAL
PROCEEDINGS
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10
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SUBMISSION
OF MATTERS TO A VOTE OF SECURITY HOLDERS
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10
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MARKET
FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
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10
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MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
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13
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INDEX
TO FINANCIAL STATEMENTS
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17
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FINANCIAL
STATEMENTS
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17
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CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
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31
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CONTROLS
AND PROCEDURES
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31
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DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH
SECTION
16(A) OF THE EXCHANGE ACT
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32
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EXECUTIVE
COMPENSATION
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33
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SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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34
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CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
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36
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EXHIBITS
AND REPORTS ON FORM 8-K
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37
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PRINCIPAL
ACCOUNTANT FEES AND SERVICES
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37
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SIGNATURES
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38
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APPENDIX
A
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39
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Explanatory
Note
This
Annual Report on Form 10-KSB/A (“Amendment No. 2”) is filed as an
amendment to the Annual Report on Form 10-KSB for the year ended December
31,
2007 filed by Diamond Discoveries International Corp. (the “Company”) on April
14, 2008 as subsequently amended on August 13, 2008 (the “Original
10-KSB”). The Company is further amending Item 8A, Controls and Procedures, to
disclose the Company's revised conclusion on the effectiveness of its
disclosure controls and procedures, mainly that its disclosure controls and
procedures were not effective as of December 31, 2007.
This
Amendment No. 2 to the Annual Report on Form 10-KSB of the Company has not
been
updated or modified in any other way and speaks only as of the date of the
original filing, April 14, 2008.
PART
I
This
Annual Report on Form 10-KSB and the information incorporated by reference
includes “forward-looking statements” within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
and Exchange Act of 1934, as amended. Various statements, estimates,
predictions, and projections stated under “Risk Factors,” “Management’s
Discussion and Analysis or Plan of Operations” and “Business,” and elsewhere in
this Annual Report are “forward-looking statements” within the meaning of
Section 27A of the Securities Act and Section 21E of the Exchange Act.
These statements appear in a number of places in this Annual Report and include
statements regarding the intent, belief or current expectations of Diamond
Discoveries International or our officers with respect to, among other things,
the ability to successfully implement our acquisition and exploration
strategies, including trends affecting our business, financial condition and
results of operations. While these forward-looking statements and the related
assumptions are made in good faith and reflect our current judgment regarding
the direction of the related business, actual results will almost always vary,
sometimes materially, from any estimates, predictions, projections, assumptions,
or other future performance suggested herein. These statements are based upon
a
number of assumptions and estimates, which are inherently subject to significant
uncertainties and contingencies, many of which are beyond our control and
reflect future business decisions which are subject to change. Some of these
assumptions inevitably will not materialize, and unanticipated events will
occur
which will affect our results. Some important factors (but not necessarily
all
factors) that could affect our revenues, growth strategies, future profitability
and operating results, or that otherwise could cause actual results to differ
materially from those expressed in or implied by any forward-looking statement,
include the following:
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our
ability to successfully implement our acquisition and exploration
strategies;
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the
success or failure of our exploration activities and other opportunities
that we may pursue;
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changes
in the availability of debt or equity capital and increases in borrowing
costs or interest rates;
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changes
in regional and national business and economic conditions, including
the
rate of inflation;
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changes
in the laws and government regulations applicable to us; and
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Stockholders
and other users of this Annual Report on Form 10-KSB are urged to carefully
consider these factors in connection with the forward-looking statements. We
do
not intend to publicly release any revisions to any forward-looking statements
contained herein to reflect events or circumstances occurring after the date
hereof or to reflect the occurrence of unanticipated events.
Item
1. Description of Business
We
were
incorporated in the State of Delaware on April 24, 2000. We are an
exploration stage company that is engaged in the acquisition and exploration
of
mineral properties. Our initial focus is in the area of the Torngat fields
located in the province of Quebec, Canada. Other than contracting with third
parties to conduct exploration and gather data on our behalf, we have conducted
no operations to date and do not expect to receive any revenues for at least
the
next two years. During the next two years we plan to continue to concentrate
our
efforts on exploration and data gathering. During the next two years we will
be
solely dependent on the availability of external financing to fund our
operations. Our independent public accountants have expressed substantial doubt
about our ability to continue as a going concern because such continuance is
dependent upon our ability to raise capital. If we are unable to secure adequate
financing we will be unable to continue our exploration and data gathering
efforts. Because we are an
exploration
stage company, we do not know if a commercially viable mineral deposit exists
on
any of our properties. Further exploration will be required before the economic
and legal feasibility of developing the properties can be determined.
Acquisition
Agreement
On
September 12, 2000, we entered into an Acquisition Agreement with
Messrs. Peter Ferderber and Stanley G. Hawkins, and Tandem
Resources Ltd., a Canadian mineral exploration company of which
Mr. Hawkins is the President. Pursuant to such Agreement, we acquired
certain mineral exploration permits covering an area of approximately 469.05
square kilometers in the Torngat fields, which are located on the east coast
of
Ungava Bay, in the northwestern part of Quebec. The Torngat fields are one
of
four fields in Quebec that contain diamondiferous kimberlite formations. The
Torngat
fields
are composed of a central plateau about 400 meters above sea level, and are
broken by steep-sided gorges and fjords along the coast. The largest of these
features, Alluviaq Fjord, bisects the property covered by the permits. Several
dykes in the area are well exposed sub-vertical features in the Alluviaq Fjord,
and display horizontal and vertical continuity. These traits result from rock
being pushed up from below the surface, into a vertical position against other
horizontal rocks. Geologists usually identify these rock formations as strong
targets for the presence of diamonds.
The
consideration paid under the Acquisition Agreement was 1,000,000 shares of
our
common stock to each of Messrs. Ferderber and Hawkins, and the payment of
$35,000 Canadian to Mr. Hawkins and $25,000 Canadian to Mr. Ferderber.
We also assigned to Messrs. Ferderber and Hawkins a one per cent (1%)
interest in the “Net Smelter Returns” of the property, one half of which is
payable over the first $50 million Canadian in revenues from the property.
(Net Smelter Returns are determined by the net amount of money received from
the
sale of ore, or ore concentrates or other products from a property to a smelter
or other ore buyer.) Once Messrs. Ferderber and Hawkins have received
$10 million Canadian from these Net Smelter Returns, their interest
terminates. Tandem Resources Ltd. received an option to purchase 40% of the
mineral rights on the properties. This option is conditioned on a number of
events occurring, which are:
(1)
The
expenditure by us of $5 million Canadian on exploration of the property;
(2)
Tandem paying us $2 million Canadian; and
(3)
Tandem and us entering into a joint venture agreement to operate the property,
within 60 days of a demonstration by us of the expenditure of
$5 million Canadian on exploration of the property.
In
addition, we will have twenty-one (21) days from the date we notify Tandem
that we have made the $Cdn5 million exploration expenditure, to negotiate a
financing agreement with Tandem to provide Tandem with the $Cdn2 million
required to exercise the option. Should no agreement be reached in such 21-day
period, our right to provide this financing shall expire.
Based
upon an analysis of samples taken from these properties, we believe that the
properties for which we have exploration permits contain kimberlite. Kimberlite
is a type of igneous rock that occasionally contains tiny to extremely tiny
diamonds, and on very rare occasions contains gem quality diamonds. Certain
samples taken from our properties have contained both macro diamonds and micro
diamonds. Samples from most of the dykes contain diamond fragments as
well.
Prospecting
Geophysics Ltd., a Quebec-based firm of which Mr. Ferderber is
President, has provided us with a Progress Report, dated August 29, 2000,
which discusses these samples, which they had collected. Prospecting
Geophysics Ltd. has been contracted to conduct further surveys and
exploration on this property.
Mr. Ferderber
is the record owner of the property covered by the permits, which he has
transferred to us. He had originally executed an agreement, as of June 20,
2000, transferring the right to explore the properties covered by the permits
to
us. This June 20, 2000 agreement was subsequently
incorporated
into the Acquisition Agreement discussed above. We have received an opinion
of
Lavery, de Billy, a firm of barristers and solicitors of Montreal, Canada,
dated
July 10, 2000, that Mr. Ferderber is the record owners of the permits
under the Mining Act (Quebec), and that the permits are in good standing as
of
June 21, 2000. The opinion further states that at the date of examination,
there were no liens, charges or encumbrances registered against any of the
permits. The opinion disclaimed any physical verification of the location of
the
properties covered by the permits, and states that no survey of the area covered
by the permits was conducted.
The
permits, which were set to expire at dates ranging from October 17, 2004 to
March 30, 2005, were renewed by the Company for an additional five years at
an annual license fee of $75 Canadian per square kilometer.
Our
Exploration Program
Prior
to
any decision to develop the properties, a diamond deposit must be assessed
to
determine the total tonnage of diamond bearing material, the average grade
of
the rock, the estimated size distribution of the diamonds in the deposit, and
the average value, per carat, of the diamonds. Gathering this data usually
takes, as noted above, at least two years. At that time, we will decide whether,
and, if so, how, to proceed. We may seek either a joint venture partner or
a
senior partner that will undertake the exploration of the properties. It must
be
noted that there is a substantial risk that no commercially viable diamond
deposit will be found, and if that is the case, we are likely to have difficulty
finding any partners to undertake further exploration.
At
the
present time, we do not hold any interest in a mineral property that is in
production. Our viability and potential success lie in our ability to
successfully explore, exploit and generate revenue from our properties. There
can be no assurance that such revenues will be obtained. The exploration of
mineral deposits involves significant risks over a long period of time, which
a
combination of careful evaluations, experience and knowledge may not eliminate.
It is impossible to ensure that the current or proposed exploration programs
on
the exploration permits will be profitable or successful. Our inability to
locate a viable diamond deposit on our properties could result in a total loss
of our business. We believe that the typical cost to locate a diamond deposit
can range from $US 5-10 million.
We
intend
to continue to explore the properties through completion of the exploration
phase. We contract with third parties to perform all exploration activities.
Prior to the 2005 exploration season, the exploration activities were carried
out exclusively by Prospecting Geophysics Ltd. (“PGL”). In July 2005, the
Company engaged Watts, Griffis and McOuat (“WGM”), a geological and engineering
consulting firm. WGM was retained to oversee and direct the continuing
exploration of the Torngat property. During the 2005 exploration season, WGM
and
PGL commissioned crews of workers who gathered samples of rock from the
properties, and transported the samples to a facility where they are being
tested for properties which tend to indicate the presence of diamonds. Pursuant
to an agreement with PGL, we pay an hourly rate to Mr. Ferderber and his
staff for their services, as well as reimbursement for expenses, including
equipment, transportation, lodging and meals. We have established camp sites
for
the workers at the location of the properties, in order to decrease the costs
of
lodging. In addition, we use commercial supply boats, rather than commissioning
private boats, to transport the rock samples. Because the properties are only
accessible by air, we rent helicopters as well as fixed wing aircraft known
as
“beavers” to transport workers and samples to and from the properties.
Due
to
extremely cold temperatures and snow accumulation caused by the inclement
weather in the region during the period from, approximately, November to
March, there can be no exploration on the properties covered by the permits
during these months.
Our
exploration operations are subject to all of the hazards and risks normally
incident to exploration of this type, any of which could result to damage to
life or property, environmental damage, and possible legal liability for any
or
all damages. Our activities may be subject to prolonged disruptions due to
weather conditions surrounding the location of properties over which we have
permits. Difficulties, such as an unusual or unexpected rock formation
encountered by workers but not indicated on a map, or other conditions may
be
encountered in the gathering of samples and data, and could delay our
exploration program. While we may obtain insurance against certain risks in
such
amounts as we deem adequate, the nature of these risks are such that liabilities
could exceed policy limits or be excluded from coverage. We do not currently
carry insurance to protect against these risks and there is no assurance that
we
will obtain such insurance in the future. There are also risks against which
we
cannot, or may not elect to, insure. The potential costs which could be
associated with any liabilities not covered by insurance or in excess of
insurance coverage or compliance with applicable laws and regulations may cause
substantial delays and require significant capital outlays, adversely affecting
our final position, future earnings, and/or competitive position.
FY
2000 Activities
During
2000, we began early stage exploration activities, and gathered samples from
one
property for analysis. An exploration team of eight men gathered samples and
data at this property. The samples are taken from dykes or “pipes” containing
kimberlite. These samples were analyzed by Lakefield Research Limited, of
Ontario, an independent laboratory, which uses caustic dissolution to extract
the diamonds from the samples. This laboratory issued reports dated
September 26 and September 27, 2000, on two samples, one of which
indicates that out of a 24.65 kilogram sample, two diamonds were found weighing
0.015 carats in the aggregate. The second sample of 30.22 kilograms yielded
eight diamonds, with a total weight of 0.001 carats.
On
March 27, 2001, the Gem Trade Laboratory of the Gemological Institute of
America (“G.I.A.”), an independent laboratory, issued a report in which they
analyzed “random samples” of numerous transparent pink crystal fragments that
were obtained from the property covered by our permits known as D.D.I. #1 (See
map at Appendix A on page 38 of this Annual Report) in
October 2000, by our agent Prospecting Geophysics Ltd. These samples
were taken from property located in the original 469.05 square kilometers in
the
Torngat mountain region. The conclusion of the report was that the samples
that
ranged in size from approximately 0.40 to 0.70 MM consisted of natural corundum.
Corundum is the hardest mineral after diamond. The samples obtained from the
property covered by our permit were transparent pink suggesting that they
consist of the “ruby” gem. A ruby is a red variety of the mineral corundum.
FY
2001 Activities
During
April 2001, we began the second phase of our exploration, after the weather
in
northwestern Quebec allowed for exploration activities. We, through Prospecting
Geophysics Ltd., began to determine the extent of the kimberlite dykes that
were located in phase one, and gathered larger mini-bulk and bulk samples.
These
next samples are expected to be up to 7,000 pounds. This should enable the
Company to test for larger, and potentially more marketable diamonds which
may,
or may not, exist in the kimberlite dykes. There is, of course, a substantial
risk that we will not find such diamonds. Prospecting Geophysics Ltd. will,
at the same time, be attempting to locate additional kimberlite dykes and pipes,
and sample them as well.
FY
2002 Activities
In
2002,
we acquired permits for an additional 50,000 acres adjacent to the property
where we already have permits located in the Torngat mountain region of Quebec.
We acquired the permits by staking the property and paying the requisite fees
to
the Quebec Department of Natural Resources. In addition to paying the fees,
we
must perform a certain amount of assessment work on each claim to keep them
in
good standing. We have successfully completed all assessment work related to
this property.
We,
through Prospecting Geophysics Ltd., continued exploration during the 2002
season, taking large rock bulk samples from property included in the original
469.05 square kilometers and commenced exploration in the newly acquired 50,000
acres. We located four new kimberlite dyke systems that contain 27 new dykes,
most of which have been sampled. Reduced samples from the original field samples
were subject to micro-probed analysis and found to contain typical kimberlite
minerals, phologopite and olivine and the important indicator minerals chrome
diopside, pyrope garnet, picro-ilmenite and chromite. One 110 pound sample
containing an olivine xenolith was found to contain a large population of
indicator minerals including 243 G9 garnets, 65 chrome diopsides, and 143
spinels. This mineral assemblage is similar to the Arx Dyke which is located
on
our permit property that contained the nine micro and one macro diamonds.
FY
2003 Activities
The
2003
exploration program, managed by Prospecting Geophysics Ltd. of Val D'Or, Quebec
consisted of geological mapping, rock sampling, stream geochemistry, ground
magnetometer surveys and prospecting. Analytical results are still being
received. The program defined and evaluated four loosely bounded belts
containing more than 50 Kimberlite dykes, two kimberlite pipes and several
suspected dykes. Besides the two macro diamonds and 13 micro diamonds previously
discovered in the "A" dyke in 2000, and the rubies reported from the D, F and
K
dykes in 2001, SGS Lakefield Research discovered diamond fragments from
kimberlite/aillikite samples taken from the F, E, B, G, Yvon #2, Champagne
pipe,
Peter Lake, P, U, Bella, at eight locations on the St. Pierre N. dyke and at
five locations along the MJR kimberlite dyke in 2003. Subsequently in 2003,
diamond fragments have been verified at Mount Jacques Rousseau.
Geologist,
Robert Dillman, consultant to Diamond Discoveries, received results from C.F.
Mineral Research Limited of microprobe analysis of several picked mineral
samples from various dykes. The January 2004 results indicated forsterite
olivines and clinopyroxenes with diamond inclusion compositions, some of which
are associated with large diamonds were noted in the Yvon #2, K16 and St. Pierre
Southdykes. The February 2004 results determined the presence of chrome diopside
and forsterite olivine (Diamond Indicator Minerals) from seven dykes named:
St.
Pierre dyke, St. Pierre Extension, A Dyke, C Dyke Champagne, K dyke and K25
dyke. Five of the dykes have an aillikite composition and the St. Pierre and
St.
Pierre extension have a kimberlite composition. Using the C.F. Minerals
classification, 100% of the olivine grains analyzed from the St. Pierre, St.
Pierre Extension and the K dyke are classified as having diamond inclusion
compositions and there is potential for these dykes to host
diamonds.
FY
2004 Activities
During
the 2004 exploration program, the Company was able to complete one hole for
a
total of 100 feet of the total 10,000 foot program prior to the onset of severe
weather. The Company has received the caustic fusion analyses from the first
hole in the scheduled 10,000 foot drill program on Diamond Discoveries’ Torngat
Mountains diamond project in Northeastern Quebec. The 34.7 kilogram sample
from
22 feet of kimberlite core was sent to Saskatchewan Research Council Labs where
it was analyzed for diamond content. No macro or microdiamonds were found in
the
core.
The
Company purchased the drill and left it on the property and has the camp and
fuel in place to get an early start on the following exploration season. The
Company will resume the scheduled drill program in the spring of 2005 focusing
on its main targets, the Round Lake Structure and Champagne Pipe. Earlier
surface sampling located macrodiamonds and microdiamonds in dykes proximal
to
the Round Lake Structure.
The
Company’s geologists have noted rubies and pink corundums in several places
across the property. They also noted pink corundum in the broken core from
the
first drill hole. Along with the search for diamond bearing kimberlite pipes
the
geologists will begin evaluation the size and gem potential of the many ruby
occurrences.
FY
2005, FY 2006 and FY 2007 Activities
In
June,
2005, the Company engaged McPhar Geosurveys Ltd. (“McPhar”) to conduct an
airborne magnetic survey of the Torngat property.
In
July
2005, the Company engaged Watts, Griffis and McOuat (“WGM”), a geological and
engineering consulting firm. WGM was retained to oversee and direct the
continuing exploration of the Torngat property.
The firm
of Patterson, Grant and Watson Ltd. (“PGW”) reviewed the results of the airborne
magnetic survey conducted by McPhar. PWG identified 40 targets, 10 first
priority, 23 second priority targets and seven third priority targets. While
some of the targets correlate to previously identified kimberlitic dykes,
several targets are for new dykes not previously sampled. After their review
of
the report on the McPhar airborne magnetic survey, WGM outlined a program for
exploration during the 2005 season. The primary objectives of the field program
were:
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1.
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independent
replication of previously reported diamonds recovered from three
of the
known kimberlite dykes;
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2.
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independent
field sampling of drainages associated with airborne anomalies selected
by
PGW and sample sites selected by WGM to confirm prior
results;
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3.
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ground
magnetic confirmation of all potential targets that were readily
accessible;
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4.
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rock
chip sampling of newly discovered and previously untested dykes associated
with airborne anomalies; and
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5.
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to
the extent possible, test by drilling selected airborne anomalies
with the
diamond drill already available on the
property.
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In
August
2005, the field exploration commenced with a crew of 12. The crew completed
drilling of 2 of the targets identified by PGW. In addition, the crew collected
38 alluvial and rock chip samples from prospective dykes and drainages adjacent
to the airborne anomalies and completed ground magnetic surveys covering 20
of
the airborne anomalies. The alluvial and rock chip samples along with selected
core samples were sent to Saskatchewan Research Council Geoanalytical Laboratory
(“SRC”) for processing. The results of the sample processing will be available
in a few months. Exploration of the Torngat property has been suspended for
the
winter months due to inclement weather. WGM continues to analyze and compile
all
the available geophysical, geological and geochemical data. On October
18
th
,
the
Company was informed by WGM that all five objectives of the 2005 field program
were achieved. Further field exploration of the Torngat property did not resume
in 2007 while the Company evaluated a potential opportunity for a joint venture
on property located in Quebec.
We
estimate that it will require approximately $1,500,000 to conduct an exploration
program on the Torngat property through September 30, 2008. This amount will
be
used to pay for continued drilling of identified targets, prospecting and
geological mapping, helicopter and airplane support, lodging and food for
workers, pick-up truck rentals, assays, property taxes to the Quebec Department
of Natural Resources and supervision. If we continue with the exploration of
the
Torngat property, we plan to raise a minimum of $1,500,000 through one or more
private offerings pursuant to Rule 506 or Regulation D or through an offshore
offering pursuant to Regulation S; however, nothing in this annual report shall
constitute an offer of any securities for sale. Such shares when sold will
not
have been registered under the Act and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements. If we are unable to raise this amount, we will most likely cease
all activity related to our exploration program, or at the very least, proceed
on a reduced scale. We have to date relied on a small number of investors to
provide us with financing for the commencement of our exploration program,
including TVP Capital Corp., a principal stockholder. Amounts owed to these
individuals are payable upon demand.
Government
Regulation and Licensing
Our
operations require licenses and permits from various governmental authorities.
We believe that we presently hold all necessary licenses and permits required
for our intended activities under applicable laws and regulations, and we
believe that we are complying at the present time in all material respects
with
the terms of such licenses and permits. However, our licenses and permits are
subject to changes in regulations and in various operating circumstances. We
may
not be able to obtain all necessary licenses and permits required to carry
out
exploration activities.
We
are
currently subject to the environmental regulations set forth under the
Environmental Act (Quebec), the Mining Act (Quebec) and the Forest Act (Quebec).
We believe that we are in compliance with all of these acts, and moreover,
we
believe that the environmental impact of our exploration activities will be
minimal. To the extent that we remove large amounts of rock or soil from the
properties, we will likely have to remediate any environmental disruption caused
by our activities. It is impossible to assess with any certainty the cost of
such replacement or remediation activities, or the potential liability that
we
would face if we were to be found to have violated one, or more, of these Acts.
Employees
We
do not
have any full time employees at the present time. We have one part time
employee, Mr. Edward C. Williams, who is an executive officer. We use third
parties to oversee and conduct our exploration activities.
Competition
The
mineral exploration business is competitive in all of its phases. We expect
to
compete with numerous other exploration companies and individuals, including
competitors with greater financial, technical and other resources than us,
for
the resources required for exploration. The greater resources of other entities
will likely position these competitors to conduct exploration within a shorter
time frame than we can, giving them a market advantage.
Currency
Fluctuation
We
also
have exposure to currency fluctuations, since our properties are located in
Canada, and thus our transactions are largely in Canadian dollars. Such
fluctuations can materially affect our financial position and other results
of
operations. References to the “dollar” or “$US” in this Form 10KSB are to United
States Dollars, and “Canadian” or “$Cdn” refers to Canadian dollars. Unless
otherwise stated, the translations of $US to $Cdn and vice versa have been
made
at the average rate for the year indicated. The following table sets forth
the
high and low exchange rate of the Canadian dollar per US dollar as of the latest
practicable date and for each of the last six months:
|
Period
|
|
High
|
|
Low
|
|
|
April 4,
2008
|
|
|
1.0328
|
|
|
1.0020
|
(1)
|
|
March 2008
|
|
|
1.0295
|
|
|
0.9765
|
|
|
February,
2008
|
|
|
1.0199
|
|
|
0.9711
|
|
|
January 2008
|
|
|
1.0369
|
|
|
0.9851
|
|
|
December 2007
|
|
|
1.0250
|
|
|
0.9756
|
|
|
November 2007
|
|
|
1.0003
|
|
|
0.9066
|
|
|
October 2007
|
|
|
1.0012
|
|
|
0.9440
|
|
(1)
Represents the low rate on April 4, 2008.
Item
2. Description of Property
Please
refer to Appendix A to this Annual Report at page 39, which contains a map
of our permit locations.
We
do not
own real property, nor do we hold any other real property interest other than
the exploration permits which we discuss above under the caption “Description of
Business.” As noted above, we have engaged Prospecting Geophysics Ltd. as
our on-site project manager for our exploration activities.
In
compliance with Guide 7 of Industry Guides under the Securities Act of 1933
and
the Securities Exchange Act of 1934, the following information is provided,
since we are engaged or plan to be engaged in significant mining operations:
(1)
The
permits were acquired in the Acquisition Agreement cover 469.05 square
kilometers of properties in northwest Quebec, Canada, on the eastern shore
of
Ungava Bay and by staking an additional 50,000 acres adjacent to such properties
and paying the requisite fees to the Quebec Department of Natural Resources.
With the exception of the five (5) month period from November to
March in which there is inclement weather in the area surrounding the
properties, there is nothing preventing access to the properties. However,
hazardous weather conditions could prevent us from accessing the properties
in
other months as well. The properties are only accessible by air via a helicopter
or by boat. There are no roads that permit direct access to the properties.
(2)
Pursuant
to an agreement between us and Peter Ferderber, Peter Ferderber has transferred
to us six (6) permits for the properties. The properties covered by the
permits are indicated on the map presented in Appendix A by the areas
marked D.D.I. Further, pursuant to the Acquisition Agreement, in consideration
for the permits, we have issued 1,000,000 shares of our common stock to
Mr. Ferderber and have paid him $25,000 Canadian, and at
Mr. Ferderber’s request, $35,000 Canadian to Stanley G. Hawkins. We have
obtained the opinion of Lavery, de Billy, Barristers and Solicitors of Montreal,
Canada dated July 10, 2000, that Mr. Ferderber was the record owner of
the permits under the Mining Act of Quebec and that the permits were in good
standing as of June 21, 2000.
(3)
To
our
knowledge, Messrs. Ferderber and Hawkins staked the 469.05 square kilometer
property in the Torngat fields in northwest Quebec, Canada, on the eastern
shore
of Ungava Bay in 1999, and there were no previous owners, operators, or
operations on the property.
(4)
Although
there can be no assurance of successful diamond development, initial progress
reports of the property have indicated that there are micro diamonds on the
property. A 24.65 kilogram sample taken from the property, has yielded two
diamonds weighing 0.015 carats and a 30.22 kilogram sample has yielded eight
diamonds weighing 0.001 carats.
Geology
The
Torngat Property, where the properties for which we have mineral permits are
located, lies within the Torngat mountain province. The crust in the province
is
thickened because two continental plates were pushed, more than a billion years
ago, one on top of the other. The predominant rock type on the properties are
the Tasiuyak Gneiss, a northwest trending belt of gneissic rock. The gneisses
are considered to be altered sedimentary rocks.
The
rocks
of the Torngat mountain province strike northwest-southeast within the Torngat
property. Cross-cutting the gneisses, there are a number of kimberlite dykes.
The individual dykes are dark green and generally coarse grained across most
of
their width.
The
properties are in a location over an early Precambrian bedrock segment which
is
bedrock dating back to the earliest era of geological history, called an
“Archon.” An Archon is an immobile segment of the earth’s crust exceeding
1.5 billion years in age. Kimberlite, a form of igneous rock, is widely
regarded as the main source for diamonds, and is reported from postulated Archon
called the “Baltic Shield.” Only in the past decade have diamond explorers
recognized that these Baltic Shield rocks are potentially viable for diamonds.
The
Property is Without Known Reserves and our Proposed Program is Exploratory
in
Nature.
Exploration
for diamonds on the properties began because the formation and layout of the
rocks on the properties indicated that some of the rocks had been pushed up
through the earth’s crust. This is initially identified by geologists from the
age and shape of the rocks. When these different or unexpected rock formations
appear, geologist then consider the area surrounding these rocks as strong
targets for exploration for diamonds. This is because, geologists believe,
as
the rocks are pushing up through the earth’s surface from great depths, the
rocks travel through diamond fields located below the earth’s surface and
therefore rocks containing diamonds are forced to the surface.
Rocks
containing these characteristics were identified on the properties covered
by
our mineral permits. Once these rocks were identified, we then conducted a
magnetometer survey. The magnetometer is a small electronic device used by
geologists to survey the land for areas of high magnetism. This can be used
in
the air or on the ground. This test is conducted because, when the rocks are
being pushed through the earth’s surface (as described above), in addition to
bringing rocks containing diamonds, iron from below the Earth’s surface is also
forced to the surface. The magnetometer reads the surface of the Earth for
any
magnetism created by the iron upon the belief that if a particular property
contains a high concentration of iron that was forced up from below the earth’s
surface; the property may also contain diamonds that have been similarly forced
up to the surface.
An
airborne magnetometer survey was conducted over the properties for which we
have
mineral permits, and six (6) magnetic dykes were discovered. This indicated
to us that these properties were potentially a source for diamonds. In addition,
samples of rock taken from the properties have yielded small diamonds.
Prior
to
2005, we hired Prospecting Geophysics Ltd. to conduct these exploration
procedures. Mr. Peter Ferderber is the President of Prospecting
Geophysics Ltd. Mr. Ferderber has over forty years of experience in
mining exploration. In July 2005, the Company engaged Watts, Griffis and McOuat
(“WGM”), a geological and engineering consulting firm. WGM was retained to
oversee and direct the continuing exploration of the Torngat property. The
first
phase of exploration involved identifying areas on the property from which
to
take samples and gathering small samples from the properties for analysis.
This
analysis to date has demonstrated the presence of 10 micro diamonds in two
samples taken. The second phase involves determining the extent of any
kimberlite dykes that were located in phase one and to gather mini-bulk and
bulk
samples. This will enable us to determine if there are larger and more
marketable diamonds on the properties. Phase two of our exploration began in
April 2001 and was suspended in 2006 until further notice while the Company
evaluates a potential opportunity for a joint venture on property located in
Quebec. Operations are generally suspended from October to April because of
inclement weather.
The
following is a breakdown of the estimated budget for particular aspects of
our
exploration activities:
|
Helicopter
and airplane support
|
|
$
|
250,000
|
|
|
Crew,
lodging and food
|
|
|
200,000
|
|
|
Drill
program
|
|
|
800,000
|
|
|
Testing
samples for Diamonds
|
|
|
250,000
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,500,000
|
|
(5)
In
the
Quebec sector of the Torngat belt, roughly fifteen dykes have been mapped.
These
dykes occupy fractures oriented at an approximately right angle to the country
rocks, suggesting tensions opened up by later scale folding. Two of these dykes
on an adjacent property have been sampled, confirming the presence of diamonds.
However, to date, no proven reserves have been established and there can be
no
assurance that any such reserves will ever exist.
Item
3. Legal Proceedings
There
are
no legal proceedings pending or threatened against us.
Item
4. Submission of Matters to a Vote of Security Holders
None.
PART
II.
Item
5. Market for Common Equity and Related Stockholder Matters.
As
of
July 18, 2002 prices for the Common Stock were quoted on the Over the
Counter Bulletin Board operated by the National Association of Securities
Dealers, Inc. under the symbol DMDD. The following table sets forth the
high and low closing bid prices of the Company’s Common Stock for the periods
indicated as reported by the NASD. These quotations reflect inter-dealer prices
without retail markup, markdown or commissions and may not necessarily represent
actual transactions.
|
|
|
High
|
|
Low
|
|
|
Fiscal
Year 2006
|
|
|
|
|
|
|
First
Quarter
|
|
|
0.035
|
|
|
0.020
|
|
|
Second
Quarter
|
|
|
0.040
|
|
|
0.015
|
|
|
Third
Quarter
|
|
|
0.019
|
|
|
0.007
|
|
|
Fourth
Quarter
|
|
|
0.012
|
|
|
0.005
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year 2007
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
0.008
|
|
|
0.005
|
|
|
Second
Quarter
|
|
|
0.019
|
|
|
0.004
|
|
|
Third
Quarter
|
|
|
0.014
|
|
|
0.005
|
|
|
Fourth
Quarter
|
|
|
0.010
|
|
|
0.004
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal
Year 2008
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
0.015
|
|
|
0.004
|
|
Of
the
358,216,830 shares of our common stock issued and outstanding as of
April 11, 2008,
131,164,763
shares of our common stock are currently considered “restricted securities” and
in the future, may be sold only in compliance with Rule 144 or in an exempt
transaction under the Act unless registered under the Act.
As
of
April 11, 2008 the number of holders of record of our common stock was
approximately 126.
We
do not
anticipate paying any cash dividends on our common stock in the foreseeable
future because we intend to retain our earnings to finance the expansion of
our
business. Thereafter, the declaration of dividends will be determined by the
Board of Directors in light of conditions then existing, including, without
limitation, our financial condition, capital requirements and business
condition. We are prohibited from paying cash dividends on the common stock
until any issued and outstanding preferred stock is converted into common stock.
However, there were no shares of preferred stock outstanding as of December
31,
2007.
Equity
Compensation Plan Information:
|
|
|
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 available for future issuance under equity compensation
plans (excluding securities reflected in column
(a))
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
0
|
|
$
|
0.00
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
0
|
|
$
|
0.00
|
|
|
2,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
0
|
|
$
|
0.00
|
|
|
3,700,000
|
|
Stock
Option Plans
2005
Plan
On
November 14, 2005, the Company adopted the Diamond Discoveries International
Corp. 2005 Stock Incentive Plan (the “2005 Plan”). Under the 2005 Plan,
35,000,000 shares of common stock are reserved for issuance. The purpose of
the
2005 Plan is to provide incentives for officers, directors, consultants and
key
employees to promote the success of the Company, and to enhance the Company’s
ability to attract and retain the services of such persons. Options granted
under the 2005 Plan may be either: (i) options intended to qualify as “incentive
stock options” under Section 422 of the Internal Revenue Code of 1986; or (ii)
non-qualified stock options. Stock options may be granted under the 2005 Plan
for all employees and consultants of the Company, or employees of any present
or
future subsidiary or parent of the Company. The 2005 Plan is administered by
the
Board of Directors. The Compensation Committee is empowered to interpret the
2005 Plan and to prescribe, amend and rescind the rules and regulations
pertaining to the 2005 Plan. Options granted under the 2005 Plan generally
vest
over three years. No option is transferable by the optionee other than by will
or the laws of descent and distribution and each option is exercisable, during
the lifetime of the optionee, only by the optionee. The Compensation Committee
may not receive options.
Any
incentive stock option that is granted under the 2005 Plan may not be granted
at
a price less than the fair market value of the Company’s Common Stock on the
date of grant (or less than 110% of the fair market value in the case of holders
of 10% or more of the total combined voting power through all classes of stock
of the Company or a subsidiary or parent of the Company.) Non-qualified stock
options may be granted at the exercise price established by the Compensation
Committee, which may be less than the fair market value of the Company’s Common
Stock on the date of grant.
Each
option granted under the 2005 Plan is exercisable for a period not to exceed
ten
years from the date of grant (or five years in the case of a holder of more
than
10% of the total combined voting power of all classes of stock of the Company
or
a subsidiary or parent of the Company) and shall lapse upon expiration of such
period, or earlier upon termination of the recipient’s employment with the
Company, or as determined by the Compensation Committee.
2004
Plan
On
September 30, 2004, the Company adopted the Diamond Discoveries International
Corp. 2004 Stock Incentive Plan (the “2004 Plan”). Under the 2004 Plan,
35,000,000 shares of common stock are reserved for issuance. The purpose of
the
2004 Plan is to provide incentives for officers, directors, consultants and
key
employees to promote the success of the Company, and to enhance the Company’s
ability to attract and retain the services of such persons. Options granted
under the 2004 Plan may be either: (i) options intended to qualify as “incentive
stock options” under Section 422 of the Internal Revenue Code of 1986; or (ii)
non-qualified stock options. Stock options may be granted under the 2004 Plan
for all employees and consultants of the Company, or employees of any present
or
future subsidiary or parent of the Company. The 2004 Plan is administered by
the
Board of Directors. The Compensation Committee is empowered to interpret the
2004 Plan and to prescribe, amend and rescind the rules and regulations
pertaining to the 2004 Plan. Options granted under the 2004 Plan generally
vest
over three years. No option is transferable by the optionee other than by will
or the laws of descent and distribution and each option is exercisable, during
the lifetime of the optionee, only by the optionee. The Compensation Committee
may not receive options.
Any
incentive stock option that is granted under the 2004 Plan may not be granted
at
a price less than the fair market value of the Company’s Common Stock on the
date of grant (or less than 110% of the fair market value in the case of holders
of 10% or more of the total combined voting power through all classes of stock
of the Company or a subsidiary or parent of the Company.) Non-qualified stock
options may be granted at the exercise price established by the Compensation
Committee, which may be less than the fair market value of the Company’s Common
Stock on the date of grant.
Each
option granted under the 2004 Plan is exercisable for a period not to exceed
ten
years from the date of grant (or five years in the case of a holder of more
than
10% of the total combined voting power of all classes of stock of the Company
or
a subsidiary or parent of the Company) and shall lapse upon expiration of such
period, or earlier upon termination of the recipient’s employment with the
Company, or as determined by the Compensation Committee.
2003
Plan
On
May
30, 2003, the Company adopted the Diamond Discoveries International Corp. 2003
Stock Incentive Plan (the “Plan”). Under the Plan, 15,000,000 shares of common
stock are reserved for issuance. The purpose of the Plan is to provide
incentives for officers, directors, consultants and key employees to promote
the
success of the Company, and to enhance the Company’s ability to attract and
retain the services of such persons. The Plan orivudes for the grant of
incentive stock options and nonqualified stock options (“Options”) and
restricted stock awards (“Restricted Stock Awards”) and Stock Appreciation
Rights, Performance Shares, Dividend Equivalent Payments, and Other Stock Based
Awards (“Options,”“Restricted Stock Awards,” and “Stock Appreciation Rights,”
are collectively referred to herein as “Awards”). Options granted under the Plan
may be either: (i) options intended to qualify as “incentive stock options”
under Section 422 of the Internal Revenue Code of 1986; or (ii) non-qualified
stock options. Stock options may be granted under the Plan for all employees
and
consultants of the Company, or employees of any present or future subsidiary
or
parent of the Company. The Plan is administered by the Board of Directors.
The
Compensation Committee is empowered to interpret the Plan and to prescribe,
amend and rescind the rules and regulations pertaining to the Plan. Options
granted under the Plan generally vest over three years. The Compensation
Committee may not receive options.
Any
incentive stock option that is granted under the Plan may not be granted at
a
price less than the fair market value of the Company’s Common Stock on the date
of grant (or less than 110% of the fair market value in the case of holders
of
10% or more of the total combined voting power through all classes of stock
of
the Company or a subsidiary or parent of the Company.) Non-qualified stock
options may be granted at the exercise price established by the Compensation
Committee, which may be less than the fair market value of the Company’s Common
Stock on the date of grant, but in no event shall such exercise price be less
than 55% of such fair market value.
Each
option granted under the Plan is exercisable for a period not to exceed ten
years from the date of grant (or five years in the case of an incentive stock
option granted to a holder of more than 10% of the total combined voting power
of all classes of stock of the Company or a subsidiary or parent of the Company)
and shall lapse upon expiration of such period, or earlier upon termination
of
the recipient’s employment with the Company, or as determined by the
Compensation Committee.
Awards
are generally non-transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order.
The
Company’s Board of Directors may at any time, and from time to time, amend,
terminate, or suspend one or more of the Plan in any manner it deems
appropriate, provided that such amendment, termination or suspension cannot
adversely affect rights or obligations with respect to shares or options
previously granted, unless the Award recipient consents to such changes in
writing. The Board of Directors may not, without shareholder approval: make
any
amendment which would materially modify the participation eligibility
requirements for the 2005 Plan and 2004 Plan, to the extent they require
approval in order to satisfy the Internal Revenue Code requirements; make other
modifications requiring stockholder approval to satisfy the Internal Revenue
Code requirements, increase the total number of shares of common stock which
may
be issued pursuant to the 2005 Plan and 2004 Plan, except in the case of a
reclassification of the Company’s capital stock or a consolidation or merger of
the Company.
Recent
Sales of Unregistered Securities
In
January 2006, in connection with a private placement of its common stock, the
Company issued 100,000 shares of its common stock for $3,500.
The
sale
and issuance of the aforementioned shares were exempt transactions under Section
4(2) of the Securities Act of 1933 as a transaction by an issuer not involving
a
public offering. At the time of sale, the persons who acquired these securities
were all full, informed and advised about matters concerning us, including
our
business, financial affairs and other matters. The shareholders acquired the
securities for their own account or their designees.
Item
6. Management’s Discussion and Analysis or Plan of Operation
The
following discussion and analysis should be read in conjunction with the
financial statements and notes thereto included elsewhere in this Annual Report
on Form 10-KSB.
The
following discussion regarding us and our business and operations contains
forward-looking statements. Such statements consist of any statement other
than
a recitation of historical fact, and can be identified by the use of such
forward-looking terminology such as “may,” “expect,” “anticipate,” “estimate” or
“continue” or the negative thereof or other variations thereon, or comparable
terminology. The reader is cautioned that all forward-looking statements are
necessarily speculative, and there are certain risks and uncertainties that
could cause actual events or results to differ materially from those referred
to
in such forward-looking statements.
Operations
to Date
We
were
incorporated in the State of Delaware in April of 2000. We have not engaged
in commercial operations since inception, and therefore have not realized any
revenues from operations since inception. We do not expect to commence
operations in the foreseeable future and do not expect to generate revenue
in
calendar year 2008.
For
the
fiscal years ended December 31, 2007 and 2006 and the period from April 24,
2000 (date of inception) to December 31, 2007 we incurred $19,342, $61,746
and
$2,531,727 in exploration costs, net of reimbursements and $1,451,220,
$2,788,949 and $15,269,149 in general and administrative expenses, respectively.
General and administrative expenses consisted primarily of professional fees
related to our corporate filings and consulting and other expenses incurred
in
operating our business. We incurred a net loss of $1,470,562 or $(.00) per
share
based on 320,318,200 weighted average shares outstanding for the fiscal year
ended December 31, 2007 compared to a net loss of $3,053,173 or $(.01) per
share
based on 301,593,542 weighted average shares outstanding for the fiscal year
ended December 31, 2006.
Going
Concern
In
connection with their audit report on our financial statements as of December
31, 2007, Rodefer Moss & Co, our independent registered public accounting
firm, expressed substantial doubt about our ability to continue as a going
concern because such continuance is dependent upon our ability to raise
sufficient capital.
We
have
explored, and continue to explore, all avenues possible to raise the funds
required. Continuation of our exploration efforts is dependent upon our ability
to raise capital.
Ultimately,
we must achieve profitable operations if we are to be a viable entity. Although
we believe that there is a reasonable basis to believe that we will successfully
raise the needed funds to continue exploration, we cannot assure you that we
will be able to raise sufficient capital to continue exploration, or that if
such funds are raised, that exploration will result in a finding of commercially
exploitable reserves, or that if exploitable reserves exist on our properties,
that extraction activities can be conducted at a profit.
Cash
Flow and Capital Resources
Through
December 31, 2007 we have relied on advances of approximately $1,700,000 from
our principal stockholders, trade payables of approximately $196,000, notes
payable of approximately 1,194,000 and proceeds of approximately $5,015,000
from
the sale of common stock to support our limited operations. As of December
31,
2007, we had approximately $4,200 of cash.
We
plan
to seek additional equity or debt financing of up to $1,500,000 which we plan
to
use for the next phase of our exploration program to be conducted through
December 31, 2008, as well as working capital purposes. We currently have
limited sources of capital, including the public and private placement of equity
securities and the possibility of issuance of debt securities to our
stockholders. With virtually no assets, the availability of funds from
traditional sources of debt will be limited, and will almost certainly involve
pledges of assets or guarantees by officers, directors and stockholders.
Stockholders have advanced funds to us in the past, but we cannot assure you
that they will be a source of funds in the future. If we do not get sufficient
financing, we may not be able to continue as a going concern and we may have
to
curtail or terminate our operations and liquidate our business (see Note 1
to financial statements).
Plan
of Operation
Our
business plan for the next year will consist of further exploration on the
properties over which we hold the mineral exploration permits as well as
preliminary marketing efforts. In June, 2005, the Company engaged McPhar
Geosurveys Ltd. (“McPhar”) to conduct an airborne magnetic survey of the Torngat
property. In July 2005, the Company engaged Watts, Griffis and McOuat (“WGM”), a
geological and engineering consulting firm. WGM was retained to oversee and
direct the continuing exploration of the Torngat property. The firm of
Patterson, Grant and Watson Ltd. (“PGW”) reviewed the results of the airborne
magnetic survey conducted by McPhar. PWG identified 40 targets, 10 first
priority, 23 second priority targets and seven third priority targets. While
some of the targets correlate to previously identified kimberlitic dykes,
several targets are for new dykes not previously sampled. After their review
of
the report on the McPhar airborne magnetic survey, WGM outlined a program for
exploration during the 2005 season. The primary objectives of the field program
were:
|
|
1.
|
independent
replication of previously reported diamonds recovered from three
of the
known kimberlite dykes;
|
|
|
2.
|
independent
field sampling of drainages associated with airborne anomalies selected
by
PGW and sample sites selected by WGM to confirm prior
results;
|
|
|
3.
|
ground
magnetic confirmation of all potential targets that were readily
accessible;
|
|
|
4.
|
rock
chip sampling of newly discovered and previously untested dykes associated
with airborne anomalies; and
|
|
|
5.
|
to
the extent possible, test by drilling selected airborne anomalies
with the
diamond drill already available on the
property.
|
In
August
2005, the field exploration commenced with a crew of 12. The crew completed
drilling of 2 of the targets identified by PGW. In addition, the crew collected
38 alluvial and rock chip samples from prospective dykes and drainages adjacent
to the airborne anomalies and completed ground magnetic surveys covering 20
of
the airborne anomalies. The alluvial and rock chip samples along with selected
core samples were sent to Saskatchewan Research Council Geoanalytical Laboratory
(“SRC”) for processing. The results of the sample processing will be available
in a few months. Exploration of the Torngat property has been suspended for
the
winter months due to inclement weather. WGM continues to analyze and compile
all
the available geophysical, geological and geochemical data. On October
18
th
,
the
Company was informed by WGM that all five objectives of the 2005 field program
were achieved. Further field exploration of the Torngat property did not resume
in 2007 while the Company evaluated a potential opportunity for a joint venture
on property located in Quebec.
We
estimate that it will require approximately $1,500,000 to conduct an exploration
program on the Torngat property through September 30, 2008. This amount will
be
used to pay for continued drilling of identified targets, prospecting and
geological mapping, helicopter and airplane support, lodging and food for
workers, pick-up truck rentals, assays, property taxes to the Quebec Department
of Natural Resources and supervision. If we continue with the exploration of
the
Torngat property, we plan to raise a minimum of $1,500,000 through one or more
private offerings pursuant to Rule 506 or Regulation D or through an offshore
offering pursuant to Regulation S; however, nothing in this annual report shall
constitute an offer of any securities for sale. Such shares when sold will
not
have been registered under the Act and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements. If we are unable to raise this amount, we will most likely cease
all activity related to our exploration program, or at the very least, proceed
on a reduced scale. We have to date relied on a small number of investors to
provide us with financing for the commencement of our exploration program,
including TVP Capital Corp., a principal stockholder. Amounts owed to these
individuals are payable upon demand.
While
we
own drill equipment with a cost of approximately $236,000, we do not expect
to
make any other direct expenditure to purchase any equipment as all equipment
necessary will continue to be provided by Prospecting Geophysics Ltd. pursuant
to the Prospecting and Survey Agreement dated November 14, 2000. However, we
will reimburse Prospecting Geophysics, Ltd. for all of it’s out of pocket
expenses including equipment rental.
We
employ
one individual on a part time basis, who is an executive officer. We do not
expect any significant changes in the number of employees within the next twelve
months.
Risk
Factors
Operations—New
Entity/Startup Entity
We
have no history running our mineral exploration business.
We
are
engaged in the exploration stage of our business. We have not engaged in any
substantive business operations to date. More particularly, we have not engaged
in any mining operations. We have only engaged in exploratory activities,
feasibility studies and the establishment of initial exploration plans. Thus,
we
have no way to evaluate the likelihood that we will be able to operate our
business successfully. You should consider our business future based on the
risks associated with our early stage, and lack of experience.
We
expect to face many of the typical challenges of a startup business.
A
startup
business like ours faces a number of challenges. For example, engaging the
services of qualified support personnel and related consultants and other
experts is very important in the mineral exploration business, and there is
keen
competition for the services of these experts, consultants, and support
personnel. Equally important in the mineral exploration business is establishing
initial exploration plans for mining prospects, and analyzing relevant
information efficiently. Establishing and maintaining budgets and appropriate
financial controls is also very important to a startup business. We expect
to
incur substantial operating losses for the foreseeable future, as well. The
failure to address one or more of these activities, or curb operating losses,
may impair our ability to carry out our business plan.
Operations—Mineral
Exploration Activities
Mineral
exploration has many inherent risks of operations which may prevent ultimate
success.
Mineral
exploration has significant risks. Mineral exploration companies (like us)
are
dependent on locating mineral reserves on the properties over which it has
mineral permits, and are also dependent on the skillful management of minerals,
when and if found or located on these properties. These minerals, when found
in
deposits and mineralizations, can vary substantially in a prospect, rendering
what was initially believed to be a profitable deposit into one of little or
no
value. Unforeseen changes in regulations, the value of minerals, environmental
regulations, mining technology, site conditions, and/or labor conditions can
all
have a negative impact on our operations, and each may impair our ability to
carry out our business plan.
Our
business future is dependent on finding mineral deposits with sufficient
mineralization and grade.
Our
business model depends on locating prospects with a sufficient amount of
mineralization to justify surface and drilling sampling. No assurance can be
given that our specific exploration target areas will be valuable in locating
mineralizations. Even if initial mineralization reports are positive, subsequent
activities may determine that deposits are not commercially viable. Thus, at
any
stage in the exploration process, we may determine that there is no business
reason to continue and, at that time, our resources may not enable us to
continue exploratory operations and will cause us to terminate our business.
We
have no known mineral reserves, and if we cannot find any, we will have to
cease
operations.
We
have
no mineral reserves. If we do not find a mineral reserve containing diamonds,
or
if we cannot develop any diamond-bearing mineral reserve, either because we
do
not have the money to effect such a development, or because it will not be
economically feasible to do it, we will have to cease operations, and you may
lose your entire investment.
We
are relying on geological reports to locate potential mineral deposits, which
may be inaccurate.
We
rely
on geological reports to determine which of the properties, for which we have
mineral permits, to explore. There is no sure method of verifying the care
and
manner used to prepare these reports without further verification on our part,
or on our agents’ part. Verification of reports is expected to be costly, and
may take a considerable period of time. Verification could result in our
rejecting a potential mineral prospect; however, we will have borne the expense
of this verification with no likelihood of recovering the amounts expended.
Decisions made without adequately checking the mining prospects could result
in
significant unrecoverable expenses. Mineral deposits initially thought to be
valuable may, in fact, turn out to be of little value. Therefore, it is possible
that investment funds will have been used, with no value having been achieved
from the operations based on the reports.
Regulatory
compliance in the mineral exploration business is complex, and the failure
to
meet all of the various requirements could result in fines, or other limitations
on the proposed business.
Our
mineral exploration activities will be subject to regulation by numerous
governmental authorities. We are subject to environmental regulations under
the
Environmental Act (Quebec), the Mining Act (Quebec), and the Forest Act
(Quebec). The failure to comply fully with these or any other governmental
regulations will adversely affect our ability to explore for economic
mineralization, and our subsequent business stages. The failure to comply with
any regulations or licenses may result in fines or other penalties. We expect
compliance with these regulations to be substantial. Therefore, compliance
with
(or, conversely, the failure to so comply with) applicable regulations will
affect our ability to succeed in our business plans and to generate revenues
and
profits.
Mineral
exploration is a hazardous business, which entails risks for liability and/or
damages.
The
search for valuable minerals involves numerous hazards. As a result, we may
become subject to liability for such hazards, including pollution, cave-ins
and
other hazards against which we cannot insure against, or against which we may
not elect to insure. We do not currently carry any insurance to protect against
the potential liability of such hazards. The payment of any liabilities
attributed to us may have a material adverse effect on our financial position
and may cause us to cease operations.
We
face intense competition, and our competitors may have greater resources that
we
do and be better able to locate and explore mineral resources in a quicker
and
more cost efficient manner than we can.
It
is our
belief that there are a significant number of companies with greater resources
than those available to us, to locate and explore mineral resources. These
companies may be able to reach production stages sooner than we can, and obtain
a share of the market for mineral products before we can.
Because
our management has only limited experience in mineral exploration, we have
a
higher risk of failure.
Our
management has only limited experience in mineral exploration. As a result
of
this limited experience, there is a higher risk of our being unable to complete
our business plan in the exploration of our mineral property.
Capital
Issues
We
do not currently have sufficient capital to engage in exploration
activities.
The
cost
of our planned exploration activities is approximately $1,500,000. As of the
date of this filing, we do not have sufficient capital to engage in exploration
activities, and no sources for financing. The extent to which we will be able
to
implement our exploration for minerals will be determined by our ability to
engage in offerings of equity securities and/or debt securities. Without
additional capital, we will have to either curtail our business plan, or abandon
it altogether.
We
do not have any identified sources of additional capital, the absence of which
may prevent us from continuing our operations.
We
do
not, presently, have any arrangements with any investment banking firms or
institutional lenders. Because we will need additional capital, we will have
to
expend significant effort to raise operating funds. These efforts may not be
successful. If not, we will have to either curtail our business plan, or abandon
it altogether.
Corporate
Governance Risks
Our
officers and directors will devote approximately one-third of their time to
our
operations.
Our
officers and directors have other interests. Because of these other interests,
each will be devoting only one-third of their time to our operations, which
could have a negative impact on the efficiency of our operations.
Critical
Accounting Policies and Estimates
Our
financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires us to make estimates and judgments that affect
the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, we
evaluate our estimates. We base our estimates on historical experience and
on
other assumptions that are believed to be reasonable under the circumstances.
Accordingly, actual results could differ from these estimates under different
assumptions or conditions. This section summarizes the critical accounting
policies and the related judgments involved in their application.
Valuation
of Deferred Tax Assets
We
regularly evaluate our ability to recover the reported amount of our deferred
income taxes considering several factors, including our estimate of the
likelihood that we will generate sufficient taxable income in future years
in
which temporary differences reverse. Due to the uncertainties related to, among
other things, the extent and time of future taxable income and the potential
changes in the ownership of the Company, which could subject our net operating
loss carryforwards to substantial annual limitations, we offset our net deferred
tax assets by an equivalent valuation allowance as of December 31, 2007.
Valuation
of Long-Lived Assets
We
assess
the recoverability of long-lived assets, such as mining claims, whenever we
determine that events or changes in circumstances indicate that their carrying
amount may not be recoverable. Our assessment is primarily based upon our
estimate of future cash flows associated with these assets. If at some point
in
the future, we estimate that the undiscounted cash flows is less than the
carrying value of the assets, this determination could result in non-cash
charges to income that could materially affect our financial position or results
of operations for that period.
Item
7. Financial Statements
DIAMOND
DISCOVERIES INTERNATIONAL CORP.
(An
Exploration Stage Company)
INDEX
TO FINANCIAL STATEMENTS
|
Report
of Independent Registered Public Accounting Firm
|
|
18
|
|
|
|
|
|
Balance
Sheet December 31, 2007
|
|
19
|
|
|
|
|
|
Statements
of Operations Years Ended December 31, 2007 and 2006 and Period from
April 24, 2000 (Date of Inception) to December 31,
2007
|
|
20
|
|
|
|
|
|
Statements
of Changes in Stockholders’ Deficiency Years Ended December 31, 2007 and
2006 and Period from April 24, 2000 (Date of Inception) to December
31, 2007
|
|
21
|
|
|
|
|
|
Statements
of Cash Flows Years Ended December 31, 2007 and 2006 and Period from
April 24, 2000 (Date of Inception) to December 31,
2007
|
|
22
|
|
|
|
|
|
Notes
to Consolidated Financial Statements
|
|
23
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNT
ING
FIRM
To
the
Board of Directors and Stockholders
Diamond
Discoveries International Corp.:
We
have
audited the accompanying balance sheet of DIAMOND DISCOVERIES INTERNATIONAL
CORP. (An Exploration Stage Company) as of December 31, 2007, and the related
statements of operations, changes in stockholders’ deficiency and cash flows for
the two years then ended and from inception (April 24, 2000) through December
31, 2007. These financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We
conducted our audit in accordance with 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 audit 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 of the effectiveness of the Company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit 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 audit provides 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 Diamond Discoveries International
Corp. as of December 31, 2007, and the results of its operations and cash flows
for the two years then ended and from inception (April 24, 2000) through
December 31, 2007 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 further discussed in Note 1 to the
financial statements, the Company had not generated any revenues from its
operations and it had working capital and stockholders’ deficiencies as of
December 31, 2007. Such matters raise substantial doubt about the Company’s
ability to continue as a going concern. Management’s plans concerning these
matters are also described in Note 1. The accompanying financial statements
do not include any adjustments that might result from the outcome of these
uncertainties.
|
/s/
Rodefer Moss & Co, PLLC
|
|
|
|
Knoxville,
Tennessee
|
|
April
14, 2008
|
DIAMOND
DISCOVERIES INTERNATIONAL CORP.
(An
Exploration Stage Company)
BALANCE
SHEET
DECEMBER 31,
2007
|
ASSETS
|
|
|
|
|
Current
assets
|
|
|
|
|
Cash
|
|
$
|
4,213
|
|
|
Other
current assets
|
|
|
38,418
|
|
|
|
|
|
42,631
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
119,813
|
|
|
Other
assets
|
|
|
38,334
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
200,778
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ DEFICIENCY
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
Notes
payable
|
|
$
|
1,596,822
|
|
|
Accounts
payable
|
|
|
196,447
|
|
|
Advances
from stockholders
|
|
|
241,951
|
|
|
|
|
|
2,035,220
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
2,035,220
|
|
|
|
|
|
|
|
|
Commitments
and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
deficiency:
|
|
|
|
|
|
Preferred
stock, par value $.001 per share; 20,000,000 shares authorized; none
issued
|
|
|
—
|
|
|
Common
stock, par value $.001 per share; 480,000,000 shares authorized;
358,216,830 shares issued and outstanding
|
|
|
358,217
|
|
|
Additional
paid-in capital
|
|
|
16,684,041
|
|
|
Deficit
accumulated during the exploration stage
|
|
|
(17,501,989
|
)
|
|
Accumulated
other comprehensive income (loss)
|
|
|
(936,572
|
)
|
|
Unearned
compensation
|
|
|
(438,139
|
)
|
|
|
|
|
|
|
|
Total
stockholders’ deficiency
|
|
|
(1,834,442
|
)
|
|
|
|
|
|
|
|
Total
|
|
$
|
200,778
|
|
See
Notes
to Consolidated Financial Statements.
DIAMOND
DISCOVERIES INTERNATIONAL CORP.
(An
Exploration Stage Company)
STATEMENTS
OF OPERATIONS
YEARS
ENDED DECEMBER 31, 2007 AND 2006 AND PERIOD FROM
APRIL 24,
2000 (DATE OF INCEPTION) TO DECEMBER 31, 2007
|
|
|
2007
|
|
2006
|
|
April 24,
2000
to
December 31,
2007
|
|
|
Revenues
|
|
$
|
—
|
|
$
|
—
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
Exploration
costs
|
|
|
78,298
|
|
|
61,746
|
|
|
3,737,362
|
|
|
Reimbursements
of exploration costs
|
|
|
(58,956
|
)
|
|
—
|
|
|
(1,205,635
|
)
|
|
Exploration
costs, net of reimbursements
|
|
|
19,342
|
|
|
61,746
|
|
|
2,531,727
|
|
|
General
and administrative expenses
|
|
|
1,451,220
|
|
|
2,788,949
|
|
|
15,269,149
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
operating expenses
|
|
|
1,470,562
|
|
|
2,850,695
|
|
|
17,800,876
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
loss
|
|
|
(1,470,562
|
)
|
|
(2,850,695
|
)
|
|
(17,800,876
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
gain on modification of debt
|
|
|
—
|
|
|
(155,713
|
)
|
|
1,193,910
|
|
|
Interest
expense
|
|
|
—
|
|
|
(46,765
|
)
|
|
(895,023
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,470,562
|
)
|
$
|
(3,053,173
|
)
|
$
|
(17,501,989
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
net loss per common share
|
|
$
|
—
|
|
$
|
(.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
weighted average common shares outstanding
|
|
|
320,318,230
|
|
|
301,593,542
|
|
|
|
|
See
Notes
to Consolidated Financial Statements.
DIAMOND
DISCOVERIES INTERNATIONAL CORP.
(An
Exploration Stage Company)
STATEMENTS
OF CHANGES IN STOCKHOLDERS’ DEFICIENCY
YEARS
ENDED DECEMBER 31, 2007 AND 2006 AND PERIOD FROM APRIL 24,
2000
(DATE
OF INCEPTION) TO DECEMBER 31, 2007
|
|
|
Preferred
stock
|
|
Common
stock
|
|
Additional
paid-in
|
|
Deficit
Accumulated during the exploration
|
|
Accumulated
other comprehensive income
|
|
Subscriptions
receivable
|
|
Unearned
|
|
|
|
|
|
|
Shares
|
|
Amount
|
|
Shares
|
|
Amount
|
|
capital
|
|
stage
|
|
(loss)
|
|
Shares
|
|
Amount
|
|
compensation
|
|
Total
|
|
|
Issuance
of shares to founders effective as of April 24, 2000
|
|
|
—
|
|
$
|
—
|
|
|
4,850,000
|
|
$
|
4,850
|
|
$
|
—
|
|
$
|
—
|
|
|
—
|
|
|
—
|
|
$
|
—
|
|
$
|
—
|
|
$
|
4,850
|
|
|
Issuance
of shares as payment for legal services
|
|
|
—
|
|
|
—
|
|
|
150,000
|
|
|
150
|
|
|
3,600
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,750
|
|
|
Issuance
of shares in connection with acquisition of mineral
permits
|
|
|
—
|
|
|
—
|
|
|
2,000,000
|
|
|
2,000
|
|
|
48,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
|
Subscription
for purchase of 10,000,000 shares
|
|
|
—
|
|
|
—
|
|
|
10,000,000
|
|
|
10,000
|
|
|
240,000
|
|
|
—
|
|
|
—
|
|
|
10,000,000
|
|
|
(250,000
|
)
|
|
—
|
|
|
—
|
|
|
Proceeds
from issuance of common stock
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,000,000
|
)
|
|
25,000
|
|
|
—
|
|
|
25,000
|
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(713,616
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(713,616
|
)
|
|
Balance,
December 31, 2000
|
|
|
—
|
|
|
—
|
|
|
17,000,000
|
|
|
17,000
|
|
|
291,600
|
|
|
(713,616
|
)
|
|
9,000,000
|
|
|
(225,000
|
)
|
|
—
|
|
|
(630,016
|
)
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(9,000000
|
)
|
|
225,000
|
|
|
—
|
|
|
225,000
|
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,021,190
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,021,190
|
)
|
|
Balance,
December 31, 2001
|
|
|
—
|
|
|
—
|
|
|
17,000,000
|
|
|
17,000
|
|
|
291,600
|
|
|
(1,734,806
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,426,206
|
)
|
|
|
|
|
Proceeds
from private placements of units of common stock and
warrants
|
|
|
—
|
|
|
—
|
|
|
1,685,000
|
|
|
1,685
|
|
|
756,565
|
|
|
—
|
|
|
—
|
|
|
51,758
|
|
|
(23,291
|
)
|
|
—
|
|
|
734,959
|
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(877,738
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(877,738
|
)
|
|
Balance,
December 31, 2002
|
|
|
—
|
|
|
—
|
|
|
18,685,000
|
|
|
18,685
|
|
|
1,048,165
|
|
|
(2,612,544
|
)
|
|
51,758
|
|
|
(23,291
|
)
|
|
—
|
|
|
(1,568,985
|
)
|
|
|
|
|
Issuance
of shares as payment for accounts payable
|
|
|
—
|
|
|
—
|
|
|
3,000,000
|
|
|
3,000
|
|
|
295,423
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
298,423
|
|
|
Issuance
of shares as payment for services
|
|
|
—
|
|
|
—
|
|
|
6,715,000
|
|
|
6,715
|
|
|
1,368,235
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,374,950
|
|
|
Issuance
of stock options
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,437,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,437,000
|
)
|
|
—
|
|
|
Issuance
of shares as payment for advances from stockholders
|
|
|
—
|
|
|
—
|
|
|
7,500,000
|
|
|
7,500
|
|
|
767,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
775,000
|
|
|
Issuance
of shares as payment for notes payable
|
|
|
—
|
|
|
—
|
|
|
1,810,123
|
|
|
1,810
|
|
|
124,898
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
126,708
|
|
|
Proceeds
from issuance of common stock
|
|
|
—
|
|
|
—
|
|
|
6,000,000
|
|
|
6,000
|
|
|
444,000
|
|
|
—
|
|
|
—
|
|
|
4,000,000
|
|
|
(281,250
|
)
|
|
—
|
|
|
168,750
|
|
|
Proceeds
from issuance of common stock in connection with exercise of stock
options
|
|
|
—
|
|
|
—
|
|
|
10,050,000
|
|
|
10,050
|
|
|
292,450
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
302,500
|
|
|
Amortization
of unearned compensation
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
169,744
|
|
|
169,744
|
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,222,057
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,222,057
|
)
|
|
Foreign
currency translation adjustment
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(360,900
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(360,900
|
)
|
|
Total
comprehensive loss ($3,582,957)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance,
December 31, 2003
|
|
|
—
|
|
|
—
|
|
|
53,760,123
|
|
|
53,760
|
|
|
5,777,671
|
|
|
(5,834,601
|
)
|
|
(360,900
|
)
|
|
4,051,758
|
|
|
(304,541
|
)
|
|
(1,267,256
|
)
|
|
(1,935,867
|
)
|
|
Issuance
of shares as payment for services
|
|
|
—
|
|
|
—
|
|
|
16,842,000
|
|
|
16,842
|
|
|
1,614,858
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,631,700
|
|
|
Proceeds
from issuance of common stock
|
|
|
—
|
|
|
—
|
|
|
4,000,000
|
|
|
4,000
|
|
|
384,832
|
|
|
—
|
|
|
—
|
|
|
524,207
|
|
|
(56,754
|
)
|
|
—
|
|
|
332,078
|
|
|
Issuance
of shares as payment for accounts payable
|
|
|
—
|
|
|
—
|
|
|
1,400,000
|
|
|
1,400
|
|
|
138,600
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
140,000
|
|
|
Issuance
of stock options
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,139,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,139,000
|
)
|
|
—
|
|
|
Proceeds
from issuance of common stock in connection with exercise of stock
options
|
|
|
—
|
|
|
—
|
|
|
31,125,000
|
|
|
31,125
|
|
|
395,125
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
426,250
|
|
|
Forgiveness
of stock subscriptions
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,575,965
|
)
|
|
361,295
|
|
|
—
|
|
|
361,295
|
|
|
Amortization
of unearned compensation
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
529,423
|
|
|
529,423
|
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,724,106
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,724,106
|
)
|
|
Foreign
currency translation adjustment
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(131,269
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(131,269
|
)
|
|
Total
comprehensive loss ($3,855,375)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance,
December 31, 2004
|
|
|
—
|
|
|
—
|
|
|
107,127,123
|
|
|
107,127
|
|
|
9,450,086
|
|
|
(9,558,707
|
)
|
|
(492,169
|
)
|
|
—
|
|
|
—
|
|
|
(1,876,833
|
)
|
|
(2,370,496
|
)
|
|
Issuance
of shares as payment for services
|
|
|
—
|
|
|
—
|
|
|
6,000,000
|
|
|
6,000
|
|
|
204,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
210,000
|
|
|
Proceeds
from issuance of common stock
|
|
|
—
|
|
|
—
|
|
|
69,883,657
|
|
|
69,884
|
|
|
2,376,044
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,445,928
|
|
|
Issuance
of shares as payment for accounts payable
|
|
|
—
|
|
|
—
|
|
|
36,481,050
|
|
|
36,481
|
|
|
1,156,386
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,192,867
|
|
|
Issuance
of stock options
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,218,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,218,500
|
)
|
|
—
|
|
|
Proceeds
from issuance of common stock in connection with exercise of stock
options
|
|
|
—
|
|
|
—
|
|
|
28,125,000
|
|
|
28,125
|
|
|
253,125
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
281,250
|
|
|
Amortization
of unearned compensation
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
889,960
|
|
|
889,960
|
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,419,547
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,419,547
|
)
|
|
Foreign
currency translation adjustment
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(151,691
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(151,691
|
)
|
|
Total
comprehensive loss ($3,571,238)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance,
December 31, 2005
|
|
|
—
|
|
|
—
|
|
|
247,616,830
|
|
|
247,617
|
|
|
14,658,141
|
|
|
(12,978,254
|
)
|
|
(643,860
|
)
|
|
—
|
|
|
—
|
|
|
(2,205,373
|
)
|
|
(921,729
|
)
|
|
Issuance
of shares as payment for services
|
|
|
—
|
|
|
—
|
|
|
46,000,000
|
|
|
46,000
|
|
|
1,334,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,380,000
|
|
|
Proceeds
from issuance of common stock
|
|
|
—
|
|
|
—
|
|
|
100,000
|
|
|
100
|
|
|
3,400
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,500
|
|
|
Issuance
of stock options
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
150,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(150,000
|
)
|
|
—
|
|
|
Proceeds
from issuance of common stock in connection with exercise of stock
options
|
|
|
—
|
|
|
—
|
|
|
11,500,000
|
|
|
11,500
|
|
|
103,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
115,000
|
|
|
Amortization
of unearned compensation
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,142,674
|
|
|
1,142,674
|
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,053,173
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(3,053,173
|
)
|
|
Foreign
currency translation adjustment
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48,535
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(48,535
|
)
|
|
Total
comprehensive loss ($3,101,708)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance,
December 31, 2006
|
|
|
—
|
|
|
—
|
|
|
305,216,830
|
|
|
305,217
|
|
|
16,249,041
|
|
|
(16,031,427
|
)
|
|
(692,395
|
)
|
|
—
|
|
|
—
|
|
|
(1,212,699
|
)
|
|
(1,382,263
|
)
|
|
Issuance
of shares as payment for services
|
|
|
—
|
|
|
—
|
|
|
52,000,000
|
|
|
52,000
|
|
|
416,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
468,000
|
|
|
Issuance
of stock options
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(10,000
|
)
|
|
—
|
|
|
Proceeds
from issuance of common stock in connection with exercise of stock
options
|
|
|
—
|
|
|
—
|
|
|
1,000,000
|
|
|
1,000
|
|
|
9,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
10,000
|
|
|
Amortization
of unearned compensation
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
784,560
|
|
|
784,560
|
|
|
Net
loss
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,470,562
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,470,562
|
)
|
|
Foreign
currency translation adjustment
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(244,177
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(244,177
|
)
|
|
Total
comprehensive loss ($1,714,739)
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Balance,
December 31, 2007
|
|
|
—
|
|
$
|
—
|
|
|
358,216,830
|
|
$
|
358,217
|
|
$
|
16,684,041
|
|
$
|
(17,501,989
|
)
|
|
(936,572
|
)
|
|
—
|
|
$
|
—
|
|
$
|
(438,139
|
)
|
$
|
(1,834,442
|
)
|
See
Notes
to Consolidated Financial Statements.
DIAMOND
DISCOVERIES INTERNATIONAL CORP.
(An
Exploration Stage Company)
STATEMENTS
OF CASH FLOWS
YEARS
ENDED DECEMBER 31, 2007 AND 2006 AND PERIOD FROM
APRIL 24,
2000 (DATE OF INCEPTION) TO DECEMBER 31, 2007
|
|
|
2007
|
|
2006
|
|
April 24,
2000
to
December 31,
2007
|
|
|
Operating
activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
$
|
(1,470,562
|
)
|
$
|
(3,053,173
|
)
|
$
|
(17,501,989
|
)
|
|
Adjustments
to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of services paid through issuance of common stock
|
|
|
468,000
|
|
|
1,380,000
|
|
|
5,073,250
|
|
|
Amortization
of unearned compensation
|
|
|
784,560
|
|
|
1,142,674
|
|
|
3,516,361
|
|
|
Amortization
of discount on note payable
|
|
|
—
|
|
|
45,107
|
|
|
45,107
|
|
|
Forgiveness
of stock subscriptions
|
|
|
—
|
|
|
—
|
|
|
361,295
|
|
|
(Loss)
gain on modification of debt
|
|
|
—
|
|
|
155,713
|
|
|
(1,193,910
|
)
|
|
Cost
of mineral permits paid through the issuance of common
stock
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
|
Loss
on disposal of property and equipment
|
|
|
—
|
|
|
4,147
|
|
|
4,147
|
|
|
Depreciation
|
|
|
46,947
|
|
|
47,908
|
|
|
124,931
|
|
|
Changes
in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
Other
assets
|
|
|
—
|
|
|
(13,787
|
)
|
|
(54,795
|
)
|
|
Accounts
payable
|
|
|
4,410
|
|
|
47,606
|
|
|
2,860,393
|
|
|
Accrued
expenses
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
Net
cash used in operating activities
|
|
|
(166,645
|
)
|
|
(243,805
|
)
|
|
(6,715,210
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Purchases
of property and equipment
|
|
|
—
|
|
|
—
|
|
|
(252,733
|
)
|
|
Proceeds
from sale of property and equipment
|
|
|
—
|
|
|
10,000
|
|
|
10,000
|
|
|
Net
cash provided by (used in) investing
activities
|
|
|
—
|
|
|
10,000
|
|
|
(242,733
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
Advances
from stockholders, net
|
|
|
159,423
|
|
|
15,028
|
|
|
1,699,818
|
|
|
Proceeds
from issuance of notes payable, net
|
|
|
—
|
|
|
65,415
|
|
|
247,123
|
|
|
Proceeds
from issuance of common stock and warrants
|
|
|
10,000
|
|
|
118,500
|
|
|
5,015,215
|
|
|
Net
cash provided by financing activities
|
|
|
169,423
|
|
|
198,943
|
|
|
6,962,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase (decrease) in cash
|
|
|
2,778
|
|
|
(34,862
|
)
|
|
4,213
|
|
|
Cash,
beginning of period
|
|
|
1,435
|
|
|
36,297
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash,
end of period
|
|
$
|
4,213
|
|
$
|
1,435
|
|
$
|
4,213
|
|
See
Notes
to Consolidated Financial Statements.
DIAMOND
DISCOVERIES INTERNATIONAL CORP.
(An
Exploration Stage Company)
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—Business
and basis of presentation:
Diamond
Discoveries International Corp. (the “Company”) was incorporated in the State of
Delaware on April 24, 2000. The Company is engaged in activities related to
the exploration for mineral resources in Canada. It conducts exploration and
related activities through contracts with third parties.
As
further explained in Note 3, the Company acquired its mineral permits for
property in the “Torngat Fields” located in the Province of Quebec, Canada. The
Company intends to develop the permits from early stage exploration through
completion of the exploration phase. Prior to any further exploration decisions,
a mineral deposit must be appropriately assessed. Gathering this data usually
takes several years. Once the appropriate data has been gathered, management
will determine whether and how to proceed. The Company has discovered tiny
diamonds in samples taken from the property and is conducting surveys and
exploration at the property to begin to enable it to determine whether it can
extract and produce diamonds from this kimberlite (see Note 3).
Other
than contracting with third parties to conduct exploration and gather data
on
its behalf, the Company had not conducted any operations or generated any
revenues as of December 31, 2007. Accordingly, it is considered an “exploration
stage company” for accounting purposes. In addition to exploration costs, the
Company incurs general and administrative expense which consists primarily
of
professional fees relating to corporate filings and consulting and other
expenses incurred in operating our business.
The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern. However, in addition to not generating any
revenues, the Company had a working capital deficiency of approximately
$1,993,000 and a stockholders’ deficiency of approximately $1,834,000 as of
December 31, 2007. Management believes that the Company will not generate any
revenues during the twelve month period subsequent to December 31, 2007 in
which
it will be gathering and evaluating data related to the permits for the Torngat
Fields. Since its inception, the Company has received total consideration of
$6,962,156 as a result of proceeds of shareholder advances, the issuance of
notes payable and the sales of common stock, management believes that the
Company will still need total additional financing of approximately $1,500,000
to continue to operate as planned during the twelve month period subsequent
to
December 31, 2007. These conditions raise substantial doubt about the Company’s
ability to continue as a going concern.
Management
plans to obtain such financing through private offerings of debt and equity
securities. However management cannot assure that the Company will be able
to
obtain any or all of the additional financing it will need to continue to
operate through at least December 31, 2008 or that, ultimately, it will be
able to generate any profitable commercial mining operations. If the Company
is
unable to obtain the required financing, it may have to curtail or terminate
its
operations and liquidate its remaining assets and liabilities.
The
accompanying financial statements do not include any adjustments related to
the
recoverability and classifications of assets or the amounts and classification
of liabilities that might be necessary should the Company be unable to continue
its operations as a going concern.
Note 2—Summary
of significant accounting policies:
Use
of
estimates:
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Mining
costs:
Exploration
and evaluation costs are expensed as incurred. Management’s decision to develop
or mine a property will be based on an assessment of the viability of the
property and the availability of financing. The Company will capitalize mining
exploration and other related costs attributable to reserves in the event that
a
definitive feasibility study establishes proven and probable reserves.
Capitalized mining costs will be expensed using the unit of production method
and will also be subject to an impairment assessment.
Concentrations
of credit risk:
The
Company maintains its cash in bank deposit accounts, the balances of which,
at
times, may exceed Federal insurance limits. Exposure to credit risk is reduced
by placing such deposits with major financial institutions and monitoring their
credit ratings.
Impairment
of long-lived assets:
Impairment
losses on long-lived assets, such as mining claims, are recognized when events
or changes in circumstances indicate that the undiscounted cash flows estimated
to be generated by such assets are less than their carrying value and,
accordingly, all or a portion of such carrying value may not be recoverable.
Impairment losses are then measured by comparing the fair value of assets to
their carrying amounts.
Income
taxes:
The
Company accounts for income taxes pursuant to the asset and liability method
which requires deferred income tax assets and liabilities to be computed
annually for temporary differences between the financial statement and tax
bases
of assets and liabilities that will result in taxable or deductible amounts
in
the future based on enacted tax laws and rates applicable to the periods in
which the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax assets to
the
amount expected to be realized. The income tax provision or credit is the tax
payable or refundable for the period plus or minus the change during the period
in deferred tax assets and liabilities.
Net
earnings (loss) per share:
The
Company presents “basic” earnings (loss) per share and, if applicable, “diluted”
earnings per share pursuant to the provisions of Statement of Financial
Accounting Standards No. 128, “Earnings per Share”. Basic earnings (loss)
per share is calculated by dividing net income or loss by the weighted average
number of common shares outstanding during each period. The calculation of
diluted earnings per share is similar to that of basic earnings per share,
except that the denominator is increased to include the number of additional
common shares that would have been outstanding if all potentially dilutive
common shares, such as those issuable upon the exercise of stock options and
warrants, were issued during the period.
Since
the
Company had a net loss for the years ended December 31, 2007 and 2006, the
assumed effects of the exercise of the warrants to purchase 95,576,849 shares
of
common stock that were issued during 2005 and the application of the treasury
stock method would have been anti-dilutive. Therefore, there is no diluted
per
share amounts in the 2007 and 2006 statements of operations.
Foreign
currency translation and transactions:
The
functional currency of the Company’s operations is Canadian dollars. The assets
and liabilities arising from these operations are translated at current exchange
rates and related revenues and expenses at average exchange rates in effect
during the year. Resulting translation adjustments, if material, are recorded
in
the statement of changes in stockholders' deficiency while foreign currency
transaction gains and losses are included in operations.
The
Company recorded a loss of $1,470,562, $3,053,173 and $17,501,989 during the
years ended December 31, 2007 and 2006 and the period from April 24, 2000
(Date of Inception) to December 31, 2007, respectively. During the years ended
December 31, 2007 and 2006, the Company recorded a net foreign currency
translation adjustment of $244,177 and $48,535, respectively, in its interest
in
the Torngat Mountains operations reflecting a strengthening of the Canadian
dollar against the U. S. dollar which is included in accumulated other
comprehensive income (loss). Translation adjustments for prior periods have
been
immaterial.
Comprehensive
loss
Comprehensive
loss consists of net loss for the period, unrealized hedging transactions and
foreign currency translation adjustments.
Recent
accounting pronouncements:
In
June
2006, the Financial Accounting Standards Board
(“
FASB”)
issued Interpretation No. 48 (“FIN 48”), “Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109,” which clarifies the
accounting for uncertainty in income taxes in accordance with FASB Statement
No.
109, “Accounting for Income Taxes.” FIN 48 prescribes a recognition
threshold and measurement attribute for the measurement and financial statement
recognition of a tax position taken or expected to be taken in a tax
return. The interpretation also provides guidance on derecognition,
classification, interest and penalties, accounting in interim periods,
disclosure and transition. FIN 48 is effective for fiscal years beginning
after December 15, 2006. The adoption of FIN 48 did not have a material
impact on the Company’s consolidated results of operations, financial position
or liquidity.
In
September 2006, the FASB issued Statement of Financial Standards No. 157 (“SFAS
No. 157”), “Fair Value Measurements,” which clarifies the definition of fair
value, establishes a framework for measuring fair value, and expands the
disclosures of fair value measurements. SFAS No. 157 is effective for fiscal
years beginning after November 15, 2007. The adoption of SFAS 157 is not
expected to have a material impact on the Company’s consolidated financial
statements.
In
February 2007, the FASB issued Statement of Financial Standards No. 159 (“SFAS
No. 159”), “The Fair Value Option for Financial Assets and Financial
Liabilities,” which permits entities to choose to measure many financial
instruments and certain other items at fair value. SFAS No. 159 is effective
for
fiscal years beginning after November 15, 2007. The adoption of SFAS 159 is
not
expected to have a material impact on the Company’s consolidated financial
statements.
In
December 2007, the FASB issued Statement of Financial Standards No. 141(R)
(“SFAS No. 141(R)”), “Business Combinations,” which revises the previously
issued SFAS 141. SFAS No. 141(R) establishes principles and requirements
for how an acquirer recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, any noncontrolling
interest in the acquiree and the goodwill acquired. SFAS No. 141(R) also
establishes disclosure requirements to enable the evaluation of the nature
and
financial effects of the business combination. SFAS No. 141(R) is effective
for financial statements issued for fiscal years beginning after
December 15, 2008 and will be applied prospectively. The Company is
currently evaluating the potential impact on its consolidated financial
statements.
In
December 2007, the FASB issued Statement of Financial Standards No. 160 (“SFAS
No. 160”), “Noncontrolling Interests in Consolidated Financial Statements, an
amendment of ARB No. 51.” SFAS No. 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to
the
parent and to the noncontrolling interest, changes in a parent’s ownership
interest, and the valuation of retained noncontrolling equity investments when
a
subsidiary is deconsolidated. SFAS No. 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of
the
parent and the interests of the noncontrolling owners. SFAS No. 160 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008. FAS 160 will be applied prospectively, with a disclosure
requirement for existing minority interests to be applied retrospectively.
The
Company is currently evaluating the potential impact on its consolidated
financial statements.
Note 3—Permits:
Pursuant
to an agreement consummated on September 12, 2000, the Company acquired
certain permits in the Torngat Fields from Peter Ferderber and S. G. Hawkins,
who are key consultants and advisors to the Company, for total consideration
of
$90,540, of which $40,540 ($60,000 Canadian) represents the amount paid in
cash
and $50,000 represents the fair value of a total of 2,000,000 shares of the
Company’s common stock issued to Messrs. Ferderber and Hawkins. The
exchange of shares for the permits was a non-cash transaction that is not
reflected in the accompanying statement of cash flows for the period from
April 24, 2000 to December 31, 2007.
In
connection with the acquisition of these permits, the Company assigned to the
sellers a 1% interest in the “net smelter returns” of the property, one-half of
which is payable over the first $50,000,000 (Canadian) of revenues produced
from
the property. Such interest would terminate once the sellers receive a total
of
$10,000,000 (Canadian) based on such interest. Net smelter returns are
determined by the net amount received from the sale to a smelter or other buyer
of ore, ore concentrates or other products produced from the property.
Mr. Hawkins
owns Tandem Resources, Ltd. (“Tandem”). As part of the agreement for the
purchase of the permits, the Company granted Tandem an option to purchase a
40%
interest in a joint venture that would be formed between the Company and Tandem
to conduct operations related to the properties covered by the permits at such
time as the Company has incurred expenditures related to such operations
totaling $5,000,000 (Canadian). The exercise price for the option will be
$2,000,000 (Canadian). Mr. Ferderber also is the president of PGL (see
Note 1).
In
2002,
the Company acquired additional permits for 50,000 acres of adjacent property
in
the Torngat Fields by staking the property and paying the requisite fees to
the
Quebec Department of Natural Resources.
Note 4—Property
and equipment:
Property
and equipment is stated at cost. Depreciation is calculated using the
straight-line method over the estimated useful lives of such assets.
Expenditures for maintenance and repairs are charged to expense as
incurred.
At
December 31, 2007, major classes of property and equipment are as
follows:
|
|
|
2007
|
|
Estimated
Useful Lives
|
|
|
Drilling
equipment
|
|
$
|
239,626
|
|
|
5
years
|
|
|
Less
accumulated depreciation
|
|
|
(119,813
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
$
|
119,813
|
|
|
|
|
Depreciation
expense for the year ended December 31, 2007 and 2006 was $46,947 and $47,908,
respectively.
Note 5—Notes
payable:
In
November 2005, the Company and Prospecting Geophysics Ltd. (“PGL”) entered into
an agreement whereby the amount due to PGL was converted to a non-interest
bearing note payable totaling $1,500,000 (Canadian). The note is secured with
the permits identified in Note 3. In connection with the agreement, the Company
recorded a gain on the modification of debt of $1,349,623 during 2005. The
Company recorded the note using a 12% discount rate. The Company was unable
to make the scheduled payments ($600,000 Canadian) during 2006 under this
note payable and therefore the note is effectively in default. As such,
the entire balance of the note payable is shown as being currently due in the
accompanying consolidated balance sheet and the Company recorded a loss on
the
modification of debt of $155,713 during 2006.
The
Company recorded a charge of $46,765 to interest expense to amortize the
discount on the note payable for the year ended December 31, 2006.
Note 6—Stockholders’
equity:
Preferred
stock
As
of
December 31, 2007, the Company was authorized to issue up to 20,000,000 shares
of preferred stock with a par value of $.001 per share. The preferred stock
may
be issued in one or more series with dividend rates, conversion rights, voting
rights and other terms and preferences to be determined by the Company’s Board
of Directors, subject to certain limitations set forth in the Company’s Articles
of Incorporation. No shares of preferred stock had been issued by the Company
as
of December 31, 2007.
Common
stock
During
the period from April 24, 2000 to December 31, 2000, the Company
issued 150,000 shares of common stock as payment for legal services.
Accordingly, general and administrative expenses in the accompanying statement
of operations, and common stock and additional paid-in capital in the
accompanying statements of stockholders’ deficiency, for the period from
April 24, 2000 to December 31, 2004 was increased to reflect the estimated
fair value of the shares of $3,750.
On
May 20, 2000, the Company completed the sale of 10,000,000 shares of common
stock for $250,000, or $.025 per share, through a private placement intended
to
be exempt from registration under the Securities Act of 1933 (the “Act”).
Initially, the buyer paid $25,000 in cash and $225,000 through the issuance
of a
10% promissory note. The exchange of shares for a note receivable was a noncash
transaction that is not reflected in the accompanying statement of cash flows
for the period from April 24, 2000 to December 31, 2004. The 10% promissory
note was paid on various dates through May 20, 2001.
During
the year ended December 31, 2002, the Company received total cash
consideration of $734,959 as a result of the sale of 1,633,242 units of common
stock and warrants to purchase common stock at $.45 per unit through private
placements intended to be exempt from registration under the Act. Each unit
consisted of one share of common stock and one warrant to purchase one share
of
common stock exercisable at $.75 per share for a two year period from the date
of purchase. The Company had also received subscriptions through the private
placements for the purchase of 51,758 units at $.45 per unit or a total of
$23,291 as of December 31, 2002. The notes receivable from the subscribers
are noninterest bearing and were due six months from the respective dates of
sale, but remained outstanding at December 31, 2004. All the warrants remained
outstanding as of December 31, 2004.
In
2003,
the Company issued 6,715,000 shares of its common stock in exchange for services
performed by various consultants and recorded a charge to general and
administrative expenses of $1,374,950, or $0.20 per share, for the fair value
of
the shares.
In
May 2003, the Company issued 1,500,000 shares of its common stock in
payment of accounts payable to Prospecting Geophysics, Ltd. of $148,423, or
$0.10 per share, which approximated the fair value of the shares.
From
July 2003 to September 2003, the Company issued 1,810,123 shares of
its common stock in payment of 8% demand notes payable of $126,708, or $0.07
per
share, which approximated the fair value of the shares.
In
August 2003, in connection with a private placement of its common stock,
the Company issued 2,000,000 shares of its common stock for $150,000, or $0.08
per share. In addition, the Company issued 6,500,000 shares of its common stock
for $65,000, or $0.01 per share, in connection with the exercise of stock
options.
In
September 2003, the Company issued 5,000,000 shares of its common stock in
payment of advances from stockholders of $525,000, or $0.11 per share, which
approximated the fair value of the shares.
In
October 2003, the Company issued 2,500,000 shares of its common stock in
payment of advances from stockholders of $250,000, or $0.10 per share, which
approximated the fair value of the shares. In addition, in connection with
a
private placement of its common stock, the Company issued 4,000,000 shares
of
its common stock for $300,000, or $0.08 per share, $281,250 of which represents
a subscription receivable at December 31, 2004. Also, the Company issued 540,000
shares of its common stock in payment for accounts payable of $54,000, or $0.10
per share, which approximated the fair value of the shares. Further, the Company
issued 2,350,000 shares of its common stock for $225,500, or $0.10 per share,
in
connection with the exercise of stock options.
In
November 2003, the Company issued 1,200,000 shares of its common stock for
$12,000, or $0.01 per share, in connection with the exercise of stock
options.
In
December 2003, the Company issued 960,000 shares of its common stock in
payment for accounts payable of $96,000, or $0.10 per share, which approximated
the fair value of the shares.
In
2004,
the Company issued 15,467,000 shares of its common stock in exchange for
services performed by various consultants and recorded a charge to general
and
administrative expenses of $1,546,700 for the fair value of the
shares.
In
March
2004, in connection with a private placement of its common stock, the Company
issued 2,500,000 shares of its common stock for $238,832.
In
March
2004, the Company issued 450,000 shares of its common stock in payment of
$45,000 of accounts payable, which approximated the fair value of the
shares.
In
May
2004, in connection with a private placement of its common stock, the Company
issued 125,000 shares of its common stock valued at $12,500 as payment for
the
commission associated with the private placement.
In
May
2004, the Company issued 950,000 shares of its common stock in payment of
$95,000 of accounts payable, which approximated the fair value of the
shares.
In
July
2004, in connection with a private placement of its common stock, the Company
issued 1,500,000 shares of its common stock for $150,000. In addition, the
Company issued 1,250,000 shares of its common stock in exchange for services
performed by various consultants and recorded a charge to general and
administrative expenses of $99,750 for the fair value of the shares. Further,
the Company issued 1,250,000 shares of its common stock in connection with
the
exercise of stock options.
In
December 2004, the Company issued 29,875,000 shares of its common stock in
connection with the exercise of stock options.
In
January 2005, the Company issued 2,600,000 shares of its common stock in
connection with the exercise of stock options.
In
July
2005, in connection with a private placement of its common stock, the Company
issued 27,750,000 shares of its common stock for $971,250. In addition, the
Company issued 8,587,858 shares of its common stock in payment of $302,500
of
accounts payable, which approximated the fair value of the shares.
In
August
2005, the Company issued 1,100,000 shares of its common stock in connection
with
the exercise of stock options.
In
September 2005, in connection with a private placement of its common stock,
the
Company issued 2,300,000 shares of its common stock for $80,500.
In
October 2005, the Company issued 6,000,000 shares of its common stock in
exchange for services performed by various consultants and recorded a charge
to
general and administrative expenses of $210,000 for the fair value of the
shares.
In
December 2005, in connection with a private placement of its common stock,
the
Company issued 39,833,657 shares of its common stock for $1,394,178. In
addition, the Company issued 27,893,192 shares of its common stock in payment
of
$890,367 of accounts payable, which approximated the fair value of the shares.
Further, the Company issued 24,425,000 shares of its common stock in connection
with the exercise of stock options.
In
January 2006, the Company issued 11,500,000 shares of its common stock in
connection with the exercise of stock options. In addition, in connection with
a
private placement of its common stock, the Company issued 100,000 shares of
its
common stock for $3,500. Finally, the Company issued 46,000,000 shares of its
common stock in exchange for services performed by various consultants and
recorded a charge to general and administrative expenses of $1,380,000 which
approximated the fair value of the shares.
In
September 2007, the Company issued 52,000,000 shares of its common stock in
exchange for services performed by various consultants and recorded a charge
to
general and administrative expenses of $468,000 which approximated the fair
value of the shares. In October 2007, the Company issued 1,000,000 shares of
its
common stock in connection with the exercise of stock options.
The
issuances of common stock for services and in payment of accounts payable,
8%
demand notes payable and advances to stockholders were non-cash transactions
and, accordingly, they are not reflected in the accompanying statements of
cash
flows for the years ended December 31, 2007 and 2006 and the period from April
24, 2000 (Date of Inception) to December 31, 2007.
Stock
Option Plans
2005
Plan
On
November 14, 2005, the Company adopted the Diamond Discoveries International
Corp. 2005 Stock Incentive Plan (the “2005 Plan”). Under the 2005 Plan,
35,000,000 shares of common stock are reserved for issuance. The purpose of
the
2005 Plan is to provide incentives for officers, directors, consultants and
key
employees to promote the success of the Company, and to enhance the Company’s
ability to attract and retain the services of such persons. Options granted
under the 2005 Plan may be either: (i) options intended to qualify as “incentive
stock options” under Section 422 of the Internal Revenue Code of 1986; or (ii)
non-qualified stock options. Stock options may be granted under the 2005 Plan
for all employees and consultants of the Company, or employees of any present
or
future subsidiary or parent of the Company. The 2005 Plan is administered by
the
Board of Directors. The Compensation Committee is empowered to interpret the
2005 Plan and to prescribe, amend and rescind the rules and regulations
pertaining to the 2005 Plan. Options granted under the 2005 Plan generally
vest
over three years. No option is transferable by the optionee other than by will
or the laws of descent and distribution and each option is exercisable, during
the lifetime of the optionee, only by the optionee. The Compensation Committee
may not receive options.
Any
incentive stock option that is granted under the 2005 Plan may not be granted
at
a price less than the fair market value of the Company’s Common Stock on the
date of grant (or less than 110% of the fair market value in the case of holders
of 10% or more of the total combined voting power through all classes of stock
of the Company or a subsidiary or parent of the Company.) Non-qualified stock
options may be granted at the exercise price established by the Compensation
Committee, which may be less than the fair market value of the Company’s Common
Stock on the date of grant.
Each
option granted under the 2005 Plan is exercisable for a period not to exceed
ten
years from the date of grant (or five years in the case of a holder of more
than
10% of the total combined voting power of all classes of stock of the Company
or
a subsidiary or parent of the Company) and shall lapse upon expiration of such
period, or earlier upon termination of the recipient’s employment with the
Company, or as determined by the Compensation Committee.
2004
Plan
On
September 30, 2004, the Company adopted the Diamond Discoveries International
Corp. 2004 Stock Incentive Plan (the “2004 Plan”). Under the 2004 Plan,
35,000,000 shares of common stock are reserved for issuance. The purpose of
the
2004 Plan is to provide incentives for officers, directors, consultants and
key
employees to promote the success of the Company, and to enhance the Company’s
ability to attract and retain the services of such persons. Options granted
under the 2004 Plan may be either: (i) options intended to qualify as “incentive
stock options” under Section 422 of the Internal Revenue Code of 1986; or (ii)
non-qualified stock options. Stock options may be granted under the 2004 Plan
for all employees and consultants of the Company, or employees of any present
or
future subsidiary or parent of the Company. The 2004 Plan is administered by
the
Board of Directors. The Compensation Committee is empowered to interpret the
2004 Plan and to prescribe, amend and rescind the rules and regulations
pertaining to the 2004 Plan. Options granted under the 2004 Plan generally
vest
over three years. No option is transferable by the optionee other than by will
or the laws of descent and distribution and each option is exercisable, during
the lifetime of the optionee, only by the optionee. The Compensation Committee
may not receive options.
Any
incentive stock option that is granted under the 2004 Plan may not be granted
at
a price less than the fair market value of the Company’s Common Stock on the
date of grant (or less than 110% of the fair market value in the case of holders
of 10% or more of the total combined voting power through all classes of stock
of the Company or a subsidiary or parent of the Company.) Non-qualified stock
options may be granted at the exercise price established by the Compensation
Committee, which may be less than the fair market value of the Company’s Common
Stock on the date of grant.
Each
option granted under the 2004 Plan is exercisable for a period not to exceed
ten
years from the date of grant (or five years in the case of a holder of more
than
10% of the total combined voting power of all classes of stock of the Company
or
a subsidiary or parent of the Company) and shall lapse upon expiration of such
period, or earlier upon termination of the recipient’s employment with the
Company, or as determined by the Compensation Committee.
2003
Plan
On
May 30, 2003, the Company adopted the Diamond Discoveries International
Corp. 2003 Stock Incentive Plan (the “Plan”). Under the Plan, 15,000,000 shares
of common stock are reserved for issuance. The purpose of the Plan is to provide
incentives for officers, directors, consultants and key employees to promote
the
success of the Company, and to enhance the Company’s ability to attract and
retain the services of such persons. Options granted under the Plan may be
either: (i) options intended to qualify as “incentive stock options” under
Section 422 of the Internal Revenue Code of 1986; or (ii) non-qualified
stock options. Stock options may be granted under the Plan to all employees
and
consultants of the Company, or employees of any present or future subsidiary
or
parent of the Company. The Plan is administered by the Board of Directors.
The
Compensation Committee is empowered to interpret the Plan and to prescribe,
amend and rescind the rules and regulations pertaining to the Plan. Options
granted under the Plan generally vest over three years. No option is
transferable by the optionee other than by will or the laws of descent and
distribution and each option is exercisable, during the lifetime of the
optionee, only by the optionee. The Compensation Committee may not receive
options.
Any
incentive stock option that is granted under the Plan may not be granted at
a
price less than the fair market value of the Company’s Common Stock on the date
of grant (or less than 110% of the fair market value in the case of holders
of
10% or more of the total combined voting power through all classes of stock
of
the Company or a subsidiary or parent of the Company.) Non-qualified stock
options may be granted at the exercise price established by the Compensation
Committee, which may be less than the fair market value of the Company’s Common
Stock on the date of grant.
Each
option granted under the Plan is exercisable for a period not to exceed ten
years from the date of grant (or five years in the case of an incentive option
granted to a holder of more than 10% of the total combined voting power of
all
classes of stock of the Company or a subsidiary or parent of the Company) and
shall lapse upon expiration of such period, or earlier upon termination of
the
recipient’s employment with the Company, or as determined by the Compensation
Committee.
In
2003,
the Company issued options to acquire 13,875,000 shares of its common stock
at a
weighted average exercise price of $.04 per share to consultants and other
non-employees. The options had an aggregate fair market value of $1,437,000
at
the respective dates of issuance as determined based on the Black-Scholes
options-pricing model. Accordingly, the Company initially increased unearned
compensation and additional paid-in capital by $1,437,000 to record the fair
value of the options.
In
February 2004, the Company issued options to acquire 1,000,000 shares of its
common stock at an exercise price of $.10 per share to consultants and other
non-employees. The options had an aggregate fair market value of $90,000 at
the
date of issuance as determined based on the Black-Scholes options-pricing model.
Accordingly, the Company initially increased unearned compensation and
additional paid-in capital by $90,000 to record the fair value of the options.
In
December 2004, the Company issued options to acquire 33,975,000 shares of its
common stock at an exercise price of $.01 per share to consultants and other
non-employees. The options had an aggregate fair market value of $1,049,000
at
the date of issuance as determined based on the Black-Scholes options-pricing
model. Accordingly, the Company initially increased unearned compensation and
additional paid-in capital by $1,049,000 to record the fair value of the
options.
In
July
2005, the Company issued options to acquire 1,150,000 shares of its common
stock
at an exercise price of $.01 per share to consultants and other non-employees.
The options had an aggregate fair market value of $34,500 at the date of
issuance as determined based on the Black-Scholes options-pricing model.
Accordingly, the Company initially increased unearned compensation and
additional paid-in capital by $34,500 to record the fair value of the
options.
In
December 2005, the Company issued options to acquire 30,000,000 shares of its
common stock at an exercise price of $.01 per share to consultants and other
non-employees. The options had an aggregate fair market value of $1,184,000
at
the date of issuance as determined based on the Black-Scholes options-pricing
model. Accordingly, the Company initially increased unearned compensation and
additional paid-in capital by $1,184,000 to record the fair value of the
options.
In
January 2006, the Company issued options to acquire 5,000,000 shares of its
common stock at an exercise price of $.01 per share to consultants and other
non-employees. The options had an aggregate fair market value of $150,000 at
the
date of issuance as determined based on the Black-Scholes options-pricing model.
Accordingly, the Company initially increased unearned compensation and
additional paid-in capital by $150,000 to record the fair value of the
options.
In
October 2007, the Company issued options to acquire 1,000,000 shares of its
common stock at an exercise price of $.01 per share to consultants and other
non-employees. The options had an aggregate fair market value of $10,000 at
the
date of issuance as determined based on the Black-Scholes options-pricing model.
Accordingly, the Company initially increased unearned compensation and
additional paid-in capital by $10,000 to record the fair value of the
options.
The
Company recorded a charge of $784,560 and $1,142,674 to compensation expense
to
amortize unearned compensation for the years ended December 31, 2007 and 2006,
respectively.
The
following assumptions were used to price options granted during the years ended
December 31, 2007 and 2006, all of whose exercise price was less than market
at
the date of grant: Risk free rate of return, 4%; expected life, 3 years;
expected volatility, 300.59%; expected dividends, zero.
The
following table summarizes information with respect to options granted under
the
2005 Plan, 2004 Plan and the 2003 Plan as of and for the years ended December
31, 2007 and 2006.
|
|
|
2007
|
|
2006
|
|
|
|
|
Shares
|
|
Weighed
Average
Exercise
Price
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding beginning of year
|
|
|
1,500,000
|
|
$
|
0.01
|
|
|
11,200,000
|
|
$
|
0.04
|
|
|
Options
expired
|
|
|
(1,500,000
|
)
|
$
|
0.01
|
|
|
(3,200,000
|
)
|
$
|
0.11
|
|
|
Options
exercised
|
|
|
(1,000,000
|
)
|
$
|
0.01
|
|
|
(11,500,000
|
)
|
$
|
0.01
|
|
|
Options
granted
|
|
|
1,000,000
|
|
$
|
0.01
|
|
|
5,000,000
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
outstanding end year
|
|
|
—
|
|
$
|
—
|
|
|
1,500,000
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
exercisable end of year
|
|
|
—
|
|
$
|
—
|
|
|
1,500,000
|
|
$
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
price range, end of year
|
|
$
|
—
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
Options
price range for exercised shares
|
|
$
|
—
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
Options
available for grant at end of year
|
|
|
3,700,000
|
|
|
|
|
|
3,200,000
|
|
|
|
|
|
Weighted
average fair value of options granted during the year
|
|
$
|
0.01
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
Weighted
average exercise price of options granted during the year
|
|
$
|
0.01
|
|
|
|
|
$
|
0.01
|
|
|
|
|
Warrants
In
August
2003, in connection with its private placement of common stock, the Company
issued warrants to acquire 2,000,000 shares of its common stock at an exercise
price of $.075 per share. The warrants expired in August 2006.
In
January 2004, in connection with its private placement of common stock, the
Company issued warrants to acquire 2,500,000 shares of its common stock at
an
exercise price of $0.10 per share. The warrants expired in January
2007.
In
2005,
in connection with its private placement of common stock, the Company issued
warrants to acquire 95,576,849 shares of its common stock at an exercise price
of $.035 per share. The warrants expire on various dates during
2008.
Note 7—Income
taxes:
As
of
December 31, 2007, the Company had net operating loss carryforwards of
approximately $18,439,000 available to reduce future Federal taxable income
which will expire at various dates through 2022. The Company had no other
material temporary differences as of that date. Due to the uncertainties related
to, among other things, the changes in the ownership of the Company, which
could
subject those loss carryforwards to substantial annual limitations, and the
extent and timing of its future taxable income, if any, the Company offset
the
deferred tax assets of approximately $7,375,000 attributable to the potential
benefits from the utilization of those net operating loss carryforwards by
an
equivalent valuation allowance as of December 31, 2007.
The
Company had also offset the potential benefits from net operating loss
carryforwards of approximately $6,690,000 and $5,449,000 by equivalent valuation
allowances as of December 31, 2006 and 2005. As a result of the increases
in the valuation allowance of $685,000 for the year ended December 31, 2007,
$1,241,000 for the year ended December 31, 2006 and $7,375,000 for the
period from April 24, 2000 to December 31, 2007, the Company did not
recognize any credits for income taxes in the accompanying statements of
operations to offset its pre-tax losses in any of those periods.
Note 8—Guarantee:
On
March 14, 2003, the Company became a guarantor of a promissory note issued
by one of its stockholders with an outstanding balance of approximately $101,200
that was originally scheduled to mature on July 31, 2003. The maturity
dates of the promissory note and the guaranty have been extended to April 30,
2008.
* * *
Item
8. Changes In and Disagreements With Accountants on Accounting and Financial
Disclosure
None
Item
8 A. Controls and Procedures
(A)
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We
carried out an evaluation of the effectiveness of the design and operation
of
our disclosure controls and procedures (as defined in Exchange Act Rules
13a-15(e) and 15d-15(e)) as of December 31, 2007. This evaluation was carried
out under the supervision and with the participation of our Chief Executive
Officer, Mr. Antonio Sciacca and Chief Financial Officer, Mr. Edward Williams.
Based upon that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that, as of December 31, 2007, our disclosure controls
and
procedures were not effective. In making this evaluation, the Chief
Executive Officer and Chief Financial Officer considered, among other
things, the material weakness in our internal control over financial
reporting described below.
Disclosure
controls and procedures are controls and other procedures that are designed
to
ensure that information required to be disclosed in our reports filed or
submitted under the Exchange Act are recorded, processed, summarized and
reported, within the time periods specified in the SEC's rules and forms.
Disclosure controls and procedures include, without limitation, controls
and
procedures designed to ensure that information required to be disclosed in
our
reports filed under the Exchange Act is accumulated and communicated to
management, including our Chief Executive Officer and Chief Financial Officer,
to allow timely decisions regarding required disclosure.
(B)
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management
of the Company is responsible for establishing and maintaining effective
internal control over financial reporting as defined in Rule 13a-15(f) under
the
Exchange Act. The Company’s internal control over financial reporting is
designed to provide reasonable assurance to the Company’s management and Board
of Directors regarding the preparation and fair presentation of published
financial statements in accordance with United States’ generally accepted
accounting principles (US GAAP), including those policies and procedures
that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately
and fairly reflect the transactions and dispositions of the assets of the
Company, (ii) provide reasonable assurance that transactions are recorded
as
necessary to permit preparation of financial statements in accordance with
US
GAAP and that receipts and expenditures are being made only in accordance
with
authorizations of management and directors of the Company, and (iii) 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 the financial statements.
Management
conducted an evaluation of the effectiveness of internal control over financial
reporting based on the framework in Internal Control-Integrated Framework
issued
by the Committee of Sponsoring Organizations of the Treadway Commission.
Management’s assessment included an evaluation of the design of our internal
control over financial reporting and testing of the operational effectiveness
of
our internal control over financial reporting. Based on this evaluation,
management concluded that, as of December 31, 2007, the Company did not
maintain effective internal controls over financial reporting due to our
limited
number of employees which resulted in our inability to effectively
segregate all conflicting duties.
Currently
we employ one individual who is in charge of our accounting and financial
duties
on a day-to-day basis and we also use one consultant to assist in the
preparation of the financial statements and accompanying footnotes.
To
remedy
this material weakness, we will, to the extent possible, implement procedures
to
assure the initiation of transactions, the custody of assets and the recording
of transactions will be performed by separate individuals. Further, concurrent
with having sufficient resources we will engage additional individuals
to assist
us in remedying this material weakness.
Limitations
on the Effectiveness of Internal Controls
Our
management does not expect that our disclosure controls and procedures or
our
internal control over financial reporting will necessarily prevent all fraud
and
material error. Our disclosure controls and procedures are designed to provide
reasonable assurance of achieving our objectives and our Chief Executive
Officer
and Chief Financial Officer concluded that our disclosure controls and
procedures are effective at that reasonable assurance level. Further, the
design
of a control system must reflect the fact that there are resource constraints,
and the benefits of controls must be considered relative to their costs.
Because
of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud,
if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making can be faulty, and
that
breakdowns can occur because of simple error or mistake. Additionally, controls
can be circumvented by the individual acts of some persons, by collusion
of two
or more people, or by management override of the internal control. The design
of
any system of controls also is based in part upon certain assumptions about
the
likelihood of future events, and there can be no assurance that any design
will
succeed in achieving its stated goals under all potential future conditions.
Over time, control may become inadequate because of changes in conditions,
or
the degree of compliance with the policies or procedures may
deteriorate.
This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management’s report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit the Company to provide only management’s report in the
Annual Report.
(C)
CHANGES
IN INTERNAL CONTROL
There
have been no significant changes in our internal controls over financial
reporting during the quarter ended December 31, 2007 that have materially
affected or are reasonably likely to materially affect such
controls.
PART
III
Item
9
.
Directors, Executive Officers, Promoters and Control Persons; Compliance With
Section 16(A) Of The Exchange Act
The
following Table sets forth certain information regarding the executive officers
and directors of the Company as of April 11, 2008. All officers and
directors are elected for a term of one year and until their successors are
elected.
|
Name
|
|
Age
|
|
Company
Position
|
|
Edward
C. Williams
|
|
47
|
|
Chairman,
President, CEO, Secretary, Treasurer, Director and Principal Accounting
Officer
|
|
Antonio
Sciacca
|
|
49
|
|
Director
|
Edward
C. Williams
Mr. Williams
has been our chief executive officer, secretary, and a director since
March 2004. Mr. Williams has served as President and Chief Executive
Officer of Williams Financial Group, Inc., a financial and business consulting
firm from December 1996 to present. In addition, from May 1999 to
December 1999, he was a director of iCommerce Group, Inc. and was Chief
Financial Officer, Treasurer and Assistant Secretary. From September 1997
to February 1999, Mr. Williams was the Chief Financial Officer of Caribbean
Cigar Company. He also served as Interim President from June 1998 to
July 1998. He was a Director from November 1997 to February 1999.
Mr. Williams was Vice President - Finance of DenAmerica Corp. from
April 1996 to July 1996, and he was Chief Financial Officer of
American Family Restaurants, Inc. from February 1993 to March 1996,
when American Family Restaurants, Inc. merged with DenWest Restaurant Corp.
Both
of such corporations operated restaurants. From 1987 until January 1993,
Mr. Williams was employed by KPMG, most recently as a senior
manager.
Antonio
Sciacca
Mr.
Sciacca has been a director since March 2007. Since 1995 Mr. Sciacca has been
the Director of Programs/Operations of North American Controls Inc a
manufacturing company with facilities for the U.S. defense industry. Mr. Sciacca
currently sits on the board of Immaculate Conception schools in Warren,
Michigan.
Conflicts
of Interest
Our
management has other financial and business interests to which a significant
amount of time is devoted which may pose conflicts of interest with regard
to
allocation of their time and efforts. Teodosio Pangia, our former president,
director and CEO beneficially owns 1.3% of our common stock and is also the
sole
principal of Epwort Trading, Ltd., a holder of 20.7% of our common stock, and
beneficially owns and/or controls, either directly or indirectly, seven
companies, Altea Investments, Ltd., Gata Investments, Ltd., Baychester
Investments, Ltd., TVP Capital Corp., Bekeman Investments, Ltd.,
Aester Investment Holdings Limited and S D Investments, Ltd., which in the
aggregate hold 8,243,000 shares or 2.3% of our shares of common stock. There
can
be no assurance that management will resolve all conflicts of interest in favor
of Diamond Discoveries. Failure of management to conduct Diamond Discoveries’
business in its best interest may result in liability of the management to
Diamond Discoveries.
Committees
The
entire Board of Directors performs the functions of the audit committee and
compensation committee. The Company does not have an audit committee financial
expert serving on the audit committee. The Company intends to add such persons
to the Board of Directors and the Audit Committee at such time as the Company
has adequate funds to compensate such persons for their services.
Section 16(a)
Beneficial Ownership Reporting Compliance
Section
16(a) of the Security Exchange Act of 1934 requires directors, executive
officers and 10% or greater shareholders of the Company to file with the
Securities and Exchange Commission initial reports of ownership (Form 3) and
reports of changes in ownership of equity securities of the Company (Form 4
and
Form 5) and to provide copies of all such Forms as filed to the Company. Based
solely on our review of the copies of these forms received by us or
representations from certain reporting persons, we believe that SEC beneficial
ownership reporting requirements for fiscal 2007 were met with the following
exceptions:
Our
former CEO Teodosio V. Pangia failed to timely file Form 3 and a Form 4 to
report transactions in March 2003 and has not yet filed these reports.
Code
of Ethics
We
have a
code of ethics (the “Code”) that applies to members of our Board of Directors,
our officers including our president (being our principal executive officer),
and our chief financial officer (being our principal financial and accounting
officer). The Code sets forth written standards that are designed to deter
wrongdoing and to promote: honest and ethical conduct, full, fair, accurate,
timely, and understandable disclosure in reports and documents that we file
with, or submit to, the Securities and Exchange Commission and in other public
communications made by us; compliance with applicable governmental laws, rules
and regulations; prompt internal reporting of violations of the Code to an
appropriate person or persons identified in the Code; and accountability for
adherence to the Code.
A
copy of
the Code is attached as an exhibit to the Form 10-KSB filed on April 14,
2004.
Item
10
.
Executive Compensation
The
table
below shows the annual, long-term and other compensation for services in all
capacities to the Company and its subsidiaries paid during the years ended
December 31, 2007 and 2006, to the Chief Executive Officer and the other four
most highly compensated executive officers of the Company during the years
ended
December 31, 2007 and 2006 (our “named executive officers”):
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
Annual
Compensation
|
|
Long
Term Compensation
|
|
|
|
|
Name
and Position
|
|
Year
|
|
Salary
($)
|
|
Bonus
($)
|
|
Other
Annual Compen-sation ($)
|
|
Restricted
Stock Awards ($)
|
|
Securities
Under-lying Options/ SARS (#)
|
|
All
Other Compen-sation ($)
|
|
|
Edward
C. Williams(1)
|
|
|
2007
|
|
$
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief
Executive and Chief Financial Officer
|
|
|
2006
|
|
|
90,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
During
2007 and 2006, the salary for Mr. Williams was paid by the issuance of shares
of
common stock in the Company.
Grants
of Plan Based Awards
There
were no grants under plan based awards during fiscal 2007 or 2006.
Outstanding
Equity Awards at Fiscal Year-End
There
were no outstanding equity awards as of December 31, 2007 for the CEO.
Long
Term Incentive Plans - Awards in Last Fiscal Year
None.
Compensation
of Directors
Standard
Arrangements.
At
present, the Company does not pay its directors for attending meetings of the
Board of Directors, although the Company may adopt a director compensation
policy in the future. The Company has no standard arrangement pursuant to which
directors of the Company are compensated for any services provided as a director
or for committee participation or special assignments.
Other
Arrangements.
During
the years ended December 31, 2007 and 2006, and except as disclosed elsewhere
in
this report, no director of the Company received any form of compensation from
the Company.
Employment
Contracts and Termination of Employment, and Change-in-Control
Arrangements.
We
have
not entered into employment agreements with any of our officers or directors.
Item
11. Security Ownership of Certain Beneficial Owners and Management
The
following table sets forth the name and address of each officer and director
of
the Company and each person who owns beneficially more than five percent of
the
Common Stock of the Company, and the number of shares owned by each such person
and by all officers and directors as a group as of April 11, 2008:
|
Name
and Address of Beneficial Owner(1)
|
|
Amount
and Nature of Ownership
|
|
Approximate
%
of Class(2)
|
|
|
Edward
C. Williams
Chairman,
President, CEO, Secretary, CFO and Director
|
|
|
875,000
|
|
|
*
|
|
|
Antonio
Sciacca, Director
|
|
|
14,114,286
|
|
|
3.9
|
%
|
|
Directors
and Officers as a Group
|
|
|
14,989,286
|
|
|
4.2
|
%
|
|
Teodosio
V. Pangia
|
|
|
92,386,526
|
(3)(4)
|
|
24.1
|
%
|
|
Epwort
Trading Ltd.(5)
|
|
|
75,643,526
|
(4)
|
|
19.7
|
%
|
|
(1)
|
Unless
otherwise indicated, the beneficial owner’s address is the same as the
Company’s principal office.
|
|
(2)
|
Percentages
calculated on the basis of the amount of outstanding shares plus,
for each
person, any shares that person has the right to acquire within
60 days pursuant to options or other rights.
|
|
(3)
|
Includes
an aggregate of 8,243,000 shares held TVP Capital Corp., Altea
Investments, Ltd., Gata Investments, Ltd., Bekeman
Investments, Ltd., SD Investments, Ltd., Baychester
Investments Ltd., and Aester Investments Holdings Limited, companies
beneficially owned and/or controlled (directly or indirectly) by
Mr. Pangia, 4,500,000 shares held by Mr. Pangia and 53,821,763 shares
held by Epwort Trading, Ltd., see footnote (4) below.
|
|
(4)
|
Includes
25,821,763 shares of common stock that are issuable under
warrants.
|
|
(5)
|
Teodosio
V. Pangia is the sole officer, director and shareholder of Epwort
Trading,
Ltd.
|
Equity
Compensation Plan Information:
|
|
|
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 available for future issuance under equity compensation
plans (excluding securities reflected in column
(a))
|
|
|
|
|
(a)
|
|
(b)
|
|
(c)
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans approved by security holders
|
|
|
0
|
|
$
|
0.00
|
|
|
1,500,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
compensation plans not approved by security holders
|
|
|
0
|
|
$
|
0.00
|
|
|
2,200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
0
|
|
$
|
0.00
|
|
|
3,700,000
|
|
Stock
Option Plans
2005
Plan
On
November 14, 2005, the Company adopted the Diamond Discoveries International
Corp. 2005 Stock Incentive Plan (the “2005 Plan”). Under the 2005 Plan,
35,000,000 shares of common stock are reserved for issuance. The purpose of
the
2005 Plan is to provide incentives for officers, directors, consultants and
key
employees to promote the success of the Company, and to enhance the Company’s
ability to attract and retain the services of such persons. Options granted
under the 2005 Plan may be either: (i) options intended to qualify as “incentive
stock options” under Section 422 of the Internal Revenue Code of 1986; or (ii)
non-qualified stock options. Stock options may be granted under the 2005 Plan
for all employees and consultants of the Company, or employees of any present
or
future subsidiary or parent of the Company. The 2005 Plan is administered by
the
Board of Directors. The Compensation Committee is empowered to interpret the
2005 Plan and to prescribe, amend and rescind the rules and regulations
pertaining to the 2005 Plan. Options granted under the 2005 Plan generally
vest
over three years. No option is transferable by the optionee other than by will
or the laws of descent and distribution and each option is exercisable, during
the lifetime of the optionee, only by the optionee. The Compensation Committee
may not receive options.
Any
incentive stock option that is granted under the 2005 Plan may not be granted
at
a price less than the fair market value of the Company’s Common Stock on the
date of grant (or less than 110% of the fair market value in the case of holders
of 10% or more of the total combined voting power through all classes of stock
of the Company or a subsidiary or parent of the Company.) Non-qualified stock
options may be granted at the exercise price established by the Compensation
Committee, which may be less than the fair market value of the Company’s Common
Stock on the date of grant.
Each
option granted under the 2005 Plan is exercisable for a period not to exceed
ten
years from the date of grant (or five years in the case of a holder of more
than
10% of the total combined voting power of all classes of stock of the Company
or
a subsidiary or parent of the Company) and shall lapse upon expiration of such
period, or earlier upon termination of the recipient’s employment with the
Company, or as determined by the Compensation Committee.
2004
Plan
On
September 30, 2004, the Company adopted the Diamond Discoveries International
Corp. 2004 Stock Incentive Plan (the “2004 Plan”). Under the 2004 Plan,
35,000,000 shares of common stock are reserved for issuance. The purpose of
the
2004 Plan is to provide incentives for officers, directors, consultants and
key
employees to promote the success of the Company, and to enhance the Company’s
ability to attract and retain the services of such persons. Options granted
under the 2004 Plan may be either: (i) options intended to qualify as “incentive
stock options” under Section 422 of the Internal Revenue Code of 1986; or (ii)
non-qualified stock options. Stock options may be granted under the 2004 Plan
for all employees and consultants of the Company, or employees of any present
or
future subsidiary or parent of the Company. The 2004 Plan is administered by
the
Board of Directors. The Compensation Committee is empowered to interpret the
2004 Plan and to prescribe, amend and rescind the rules and regulations
pertaining to the 2004 Plan. Options granted under the 2004 Plan generally
vest
over three years. No option is transferable by the optionee other than by will
or the laws of descent and distribution and each option is exercisable, during
the lifetime of the optionee, only by the optionee. The Compensation Committee
may not receive options.
Any
incentive stock option that is granted under the 2004 Plan may not be granted
at
a price less than the fair market value of the Company’s Common Stock on the
date of grant (or less than 110% of the fair market value in the case of holders
of 10% or more of the total combined voting power through all classes of stock
of the Company or a subsidiary or parent of the Company.) Non-qualified stock
options may be granted at the exercise price established by the Compensation
Committee, which may be less than the fair market value of the Company’s Common
Stock on the date of grant.
Each
option granted under the 2004 Plan is exercisable for a period not to exceed
ten
years from the date of grant (or five years in the case of a holder of more
than
10% of the total combined voting power of all classes of stock of the Company
or
a subsidiary or parent of the Company) and shall lapse upon expiration of such
period, or earlier upon termination of the recipient’s employment with the
Company, or as determined by the Compensation Committee.
2003
Plan
On
May
30, 2003, the Company adopted the Diamond Discoveries International Corp. 2003
Stock Incentive Plan (the “Plan”). Under the Plan, 15,000,000 shares of common
stock are reserved for issuance. The purpose of the Plan is to provide
incentives for officers, directors, consultants and key employees to promote
the
success of the Company, and to enhance the Company’s ability to attract and
retain the services of such persons. The Plan orivudes for the grant of
incentive stock options and nonqualified stock options (“Options”) and
restricted stock awards (“Restricted Stock Awards”) and Stock Appreciation
Rights, Performance Shares, Dividend Equivalent Payments, and Other Stock Based
Awards (“Options,”“Restricted Stock Awards,” and “Stock Appreciation Rights,”
are collectively referred to herein as “Awards”). Options granted under the Plan
may be either: (i) options intended to qualify as “incentive stock options”
under Section 422 of the Internal Revenue Code of 1986; or (ii) non-qualified
stock options. Stock options may be granted under the Plan for all employees
and
consultants of the Company, or employees of any present or future subsidiary
or
parent of the Company. The Plan is administered by the Board of Directors.
The
Compensation Committee is empowered to interpret the Plan and to prescribe,
amend and rescind the rules and regulations pertaining to the Plan. Options
granted under the Plan generally vest over three years. The Compensation
Committee may not receive options.
Any
incentive stock option that is granted under the Plan may not be granted at
a
price less than the fair market value of the Company’s Common Stock on the date
of grant (or less than 110% of the fair market value in the case of holders
of
10% or more of the total combined voting power through all classes of stock
of
the Company or a subsidiary or parent of the Company.) Non-qualified stock
options may be granted at the exercise price established by the Compensation
Committee, which may be less than the fair market value of the Company’s Common
Stock on the date of grant, but in no event shall such exercise price be less
than 55% of such fair market value.
Each
option granted under the Plan is exercisable for a period not to exceed ten
years from the date of grant (or five years in the case of an incentive stock
option granted to a holder of more than 10% of the total combined voting power
of all classes of stock of the Company or a subsidiary or parent of the Company)
and shall lapse upon expiration of such period, or earlier upon termination
of
the recipient’s employment with the Company, or as determined by the
Compensation Committee.
Awards
are generally non-transferable other than by will or the laws of descent and
distribution or pursuant to a qualified domestic relations order.
The
Company’s Board of Directors may at any time, and from time to time, amend,
terminate, or suspend one or more of the Plan in any manner it deems
appropriate, provided that such amendment, termination or suspension cannot
adversely affect rights or obligations with respect to shares or options
previously granted, unless the Award recipient consents to such changes in
writing. The Board of Directors may not, without shareholder approval: make
any
amendment which would materially modify the participation eligibility
requirements for the 2005 Plan and 2004 Plan, to the extent they require
approval in order to satisfy the Internal Revenue Code requirements; make other
modifications requiring stockholder approval to satisfy the Internal Revenue
Code requirements, increase the total number of shares of common stock which
may
be issued pursuant to the 2005 Plan and 2004 Plan, except in the case of a
reclassification of the Company’s capital stock or a consolidation or merger of
the Company.
Item
12. Certain Relationships and Related Transactions
.
Teodosio
Pangia, our former president, director and CEO, beneficially owns 4,500,000
shares or 1.3% of our shares or common stock and is the sole principal of Epwort
Trading Ltd., which owns 79,643,526 shares, including 25,821,763 issuable upon
the exercise of warrants, or 20.7% of our shares of common stock and
beneficially owns and/or controls, either directly or indirectly, seven
companies, TVP Capital Corp., Altea Investments, Ltd., Gata
Investments, Ltd., Baychester Investments, Ltd., Bekeman
Investments, Ltd., Aester Investments Holdings Limited and S D
Investments, Ltd., which in the aggregate hold 8,243,000 shares or 2.3% of
our shares of common stock.
We
entered into an Acquisition Agreement dated September 12, 2000 with
Mr. Ferderber, Mr. Hawkins and Tandem Resources Ltd. The
Acquisition Agreement provides for us to purchase certain mineral exploration
permits from Messrs. Ferderber and Hawkins. Such permits cover 469.05
square kilometers in the Torngat fields in northwest Quebec, Canada, on the
eastern shore of Ungava Bay. As consideration for the acquisition of these
permits, we have issued 1,000,000 shares of our common stock to each of
Messrs. Ferderber and Hawkins and have paid $35,000 Canadian to
Mr. Hawkins and $25,000 Canadian to Mr. Ferderber.
In
addition, the Acquisition Agreement further provides for an option to Tandem
Resources Ltd., to purchase 40% of the properties covered by the permits
conditioned on (i) the Company expending $5,000,000 Canadian on exploration
of the properties; (ii) Tandem paying us $2,000,000 Canadian and
(iii) Tandem entering into a joint venture agreement with us to operate the
properties within 60 days of our demonstrating expenditure of $5,000,000
Canadian on exploration of the properties. In addition, we will have twenty-one
(21) days from the date we notify Tandem that we have expended $5,000,000
Canadian on exploration of the properties, to negotiate a financing agreement
with Tandem to provide Tandem with the $2,000,000 Canadian required to exercise
the option. Should no agreement be reached in the twenty-one (21) day
period, our right to provide this financing shall expire. Also, upon the closing
of the acquisition, we assigned to Messrs. Ferderber and Hawkins a one (1%)
percent interest in the Net Smelter Returns of the properties, half of which
is
payable over the first $50,000,000 Canadian in revenues from the properties.
This interest in the Net Smelter Returns terminates once Ferderber and Hawkins
have received, in the aggregate, $10,000,000 Canadian.
In
connection with the Acquisition Agreement, Mr. Ferderber has executed an
agreement with us as of June 20, 2000 which transfers mineral rights over
all of the properties to us.
We
entered into a Prospecting and Survey Agreement with Prospecting
Geophysics Ltd. dated November 20, 2000, whereby Prospecting
Geophysics Ltd. will act as the project manager for the Company’s mineral
exploration operations. Peter Ferderber is the President of Prospecting
Geophysics Ltd. Under the agreement, we are to pay for Mr. Ferderber’s
services at a rate of $500 per day, on days that he personally attends the
properties, in addition to reimbursing all expenses incurred by Prospecting
Geophysics on behalf of the Company. Mr. Ferderber anticipates attending
the properties approximately five to seven days every month. Prospecting
Geophysics is required under the agreement to conduct prospecting and surveying
activities on our behalf. The agreement has a term of eighteen (18) months
with automatic renewal unless either party gives 30 days’ notice of its
intent to terminate. During the years ended December 31, 2007 and 2006 and
the periods from April 24, 2000 (date of inception) to December 31, 2007,
we incurred exploration costs by Prospecting Geophysics Ltd. of $0
Canadian, $0 Canadian and $3,992,022 Canadian, respectively. In addition, the
Company owed Prospecting Geophysics Ltd. $1,500,000 Canadian at December
31, 2007.
Item
13. Exhibits and Reports on Form 8-K.
There
were no Current Reports on Form 8-K filed by the Registrant during the
fourth quarter of the calendar year ended December 31, 2007.
|
Exhibit
Number
|
|
Description
of Document
|
|
|
|
|
|
3.1
|
|
Articles
of Incorporation as filed on April 24, 2000(1)
|
|
|
|
|
|
3.2
|
|
Bylaws
of Diamond Discoveries International Corp.(1)
|
|
|
|
|
|
10.1
|
|
Acquisition
Agreement dated September 12, 2000 between the Company and Peter
Ferderber, Stanley Hawkins and Tandem Resources Ltd.(2)
|
|
|
|
|
|
10.2
|
|
Prospecting
and Survey Agreement between Prospecting Geophysics Ltd and the Company
dated August 14, 2000.(1)
|
|
|
|
|
|
10.3
|
|
Transfer
of Mining Rights between Peter Ferderber and the Company dated
June 20, 2000.(1)
|
|
|
|
|
|
10.4
|
|
Option
Agreement between Diamond Discoveries International Corp. and Tandem
Resources Ltd. dated September 12, 2000.(2)
|
|
|
|
|
|
10.5
|
|
Revised
Prospecting and Survey Agreement between Prospecting Geophysics Ltd.
and
the Company dated November 20, 2000.(2)
|
|
|
|
|
|
10.6
|
|
Investment
Agreement, dated as of May 10, 2007 by and between Diamond Discoveries
International Corp. and Dutchess Private Equities Fund,
Ltd.(4)
|
|
|
|
|
|
10.7
|
|
Registration
Rights Agreement, dated as of May 10, 2007, by and between Diamond
Discoveries International Corp. and Dutchess Private Equities Fund,
Ltd.(4)
|
|
|
|
|
|
14
|
|
Code
of Ethics for the Chief Executive Officer and Chief Financial
Officer(3)
|
|
|
|
|
|
31.1
|
|
Certification
by the Chief Executive Officer and Chief Financial Officer pursuant
to
Section 302 of the Sarbanes Oxley Act of 2002.
|
|
|
|
|
|
32.1
|
|
Certification
by the Chief Executive Officer and Chief Financial Officer pursuant
to 18
U.S.C. 1350, Section 906 of the Sarbanes Oxley Act of
2002.
|
|
|
|
|
|
99.1
|
|
Title
opinion of Lavery, de Billy on the Mining Exploration
Permits.(1)
|
|
(1)
|
Previously
filed on September 21, 2000 as part of the Company’s Registration
Statement on Form 10-SB, File No. 0-31585.
|
|
(2)
|
Previously
filed on December 1, 2000 as part of the Company’s Amended
Registration Statement on
Form 10-SB, File No. 0-31585.
|
|
(3)
|
Previously
filed on April 14, 2004 as an exhibit to Form
10-KSB.
|
|
(4)
|
Previously
filed on May 14, 2007 as an exhibit to Form
8-K.
|
Item
14. Principal Accountant Fees and Services
During
2007 and 2006, the Company incurred the following fees for professional services
rendered by the principal accountant:
|
|
|
2007
|
|
2006
|
|
|
Fees
for audit services
|
|
$
|
30,100
|
|
$
|
28,456
|
|
|
Fees
for audit-related services
|
|
$
|
0
|
|
$
|
0
|
|
|
Tax
fees
|
|
$
|
0
|
|
$
|
0
|
|
|
All
other fees
|
|
$
|
0
|
|
$
|
0
|
|
The
Audit
Committee pre-approves all audit and non-audit services to be performed by
the
Company’s independent auditors.
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly
authorized.
|
|
|
|
|
|
DIAMOND
DISCOVERIES INTERNATIONAL CORP.
|
|
|
|
|
|
By:
|
|
|
|
|
Antonio
Sciacca
|
|
|
|
Chief Executive
Officer and
Director
|
|
|
|
|
|
|
Dated:
September 30, 2008
|
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on
the
dates indicated.
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
Chief Executive
Officer and
Director
|
|
|
|
|
|
|
Dated:
September 30, 2008
|
|
|
|
|
|
|
By:
|
|
|
|
|
Chief
Financial Officer and Director
|
|
|
|
|
|
|
Dated:
September 30, 2008
|
APPENDIX
A
Diamond Discoveries (CE) (USOTC:DMDD)
Graphique Historique de l'Action
De Déc 2024 à Jan 2025
Diamond Discoveries (CE) (USOTC:DMDD)
Graphique Historique de l'Action
De Jan 2024 à Jan 2025
