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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington. DC 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Under Section 12(b) or 12(g)
of the Securities Exchange Act of 1934
Diamond Discoveries International Corp.
(Exact name of registrant as specified in its charter)
Delaware 06-1579927
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
119 West 23rd Street, Suite 508
New York, New York 10011
(Address of registrant's principal executive offices) (Zip Code)
(212)741-8934
(Registrant's Telephone Number, Including Area Code)
Securities to be registered under Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class to be so registered: on which each class is to be registered:
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<S> <C>
None None
</TABLE>
Securities to be registered under Section 12(g) of the Act:
Common Stock,
par value $.001
Copies to: Jeffrey A. Rinde, Esq.
Bondy & Schloss LLP
6 East 43rd Street
New York, New York 10017-4656
Telephone No. (212)-661-3535
Fax No. (212) 972-1677
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Index to Form 10-SB Registration Statement
PART I - INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 1. Description of Business ............................................. 1
Item 2. Management's Discussion and Analysis or Plan of Operation ........... 7
Item 3. Description of Property ............................................. 7
Item 4. Security Ownership of Certain Beneficial Owners and Management ...... 9
Item 5. Directors, Executive Officers, Promoters and Control Persons ........ 10
Item 6. Executive Compensation .............................................. 11
Item 7. Certain Relationships and Related Transactions ...................... 11
Item 8. Description of Securities ........................................... 12
PART II
Item 1. Market Price of and Dividends on the Registrant's Common
Equity and Other Shareholder Matters ................................ 14
Item 2. Legal Proceedings ................................................... 14
Item 3. Changes in and Disagreements With Accountants ....................... 14
Item 4. Recent Sales of Unregistered Securities ............................. 14
Item 5. Indemnification of Directors and Officers ........................... 15
PART F/S Financial Statements ...............................................F-1
PART III
Item 1. Index of Exhibits ................................................... 17
Item 2. Description of Exhibits ............................................. 18
ii
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PART I
Item 1. Description of Business
General Development of Business
The Company was incorporated on April 24, 2000. The Company has conducted
no operations to date. The Company signed an Acquisition Agreement on September
12, 2000 (the "Acquisition Agreement") with Messrs. Peter Ferderber and Stanley
G. Hawkins and Tandem Resources Ltd., a Canadian mining exploration company for
which Mr. Hawkins is the President, to acquire certain mining claims in the
Torngat fields on the east coast of Ungava Bay in Northern Quebec, Canada, which
the Company believes contains diamondiferous kimberlite, and plans to extract
and produce diamonds from this diamondiferous kimberlite.
Description of Business
The Company plans to engage in the exploration and development of mineral
resources properties whose initial focus will be in the Torngat fields in
Quebec, Canada.
The Company has entered into an Acquisition Agreement to purchase from
Messrs. Peter Ferderber and Stanley G. Hawkins 469.05 square kilometers of
mining claims in northwest Quebec, Canada, on the eastern shore of Ungava Bay
(collectively the "Claims"). The Company believes, based upon studies of
adjacent lands, that the Claims contain diamondiferous kimberlite, an igneous
rock that contains the only diamonds known to occur in the rock matrix where
they originally formed. The Company has obtained a progress report by Fenton
Scott, P.Eng of Don Mills, Ontario, Canada, which it feels supports these
beliefs.
As consideration for the acquisition of these Claims, the Company has
issued 1,000,000 shares of its common stock to each of Messrs. Ferderber and
Hawkins and has paid $35,000 Canadian to Mr. Hawkins and $25,000 Canadian to Mr.
Ferderber.
Tandem Resources Ltd., a Canadian domiciled company listed on the Montreal
stock exchange (TDM-ME), which is owned by Mr. Hawkins, has received an option
to purchase 40% of the Claims conditioned on (i) the Company expending
$5,000,000 Canadian on exploration of the Claims; (ii) Tandem paying the Company
$2,000,000 Canadian; and (iii) the Company and Tandem entering into a joint
venture agreement to operate the Claims within 60 days of the Company
demonstrating expenditure of $5,000,000 Canadian on exploration of these Claims.
In addition, the Company will have twenty-one (21) days from the date it
notifies Tandem that it has expended $5,000,000 Canadian on exploration, 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, the Company's right to provide this
financing shall expire. Also, upon the closing of the Acquisition Agreement, the
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Company assigned to Messrs. Ferderber and Hawkins a one (1%) percent interest in
the "Net Smelter Returns" of the Claims, one-half of which is payable over the
first $50,000,000 Canadian in revenues from the Claims. The interest in these
"Net Smelter Returns" terminates once Messrs. Ferderber and Hawkins have
received, in the aggregate, $10,000,000 Canadian. Net Smelter Returns is
determined by the net amount of money received from the sale of ore, or ore
concentrates or other products from the Claims to a smelter or other ore buyer.
Mr. Ferderber holds certain mining exploration permits over the Claims.
Such permits expire at dates ranging from October 17, 2004 to March 30, 2005.
These permits, once expired, may be renewed for an additional five years at an
annual licence fee of $75 Canadian per square kilometer. The Company has
obtained the opinion of Lavery, de Billy, Banisters and Solicitors of Montreal,
Canada, dated July 10, 2000, that Mr. Ferderber is the record owner of the
permits under the Mining Act of 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
Claims.
Mr. Ferderber has executed a Transfer of Mining Rights in favor of the
Company, as of June 20, 2000, which transfers mining rights over all of the
Claims to the Company. This Transfer of Mining Rights was incorporated into the
Acquisition Agreement.
The Company, in conjunction with Messrs. Ferderber and Hawkins, intends to
develop the Claims from early stage exploration through economic viability by
accumulating the appropriate data. Prior to any mining decisions, 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 at least two years. At that time, the Company
will evaluate whether, and if so how, to proceed.
At the present time, the Company does not hold any interest in a mining
property that is in production. The Company's viability and potential success
lie in its ability to develop, exploit and generate revenue from the Claims.
There can be no assurance that such revenues will be obtained. The exploration
and development of mineral deposits involve significant financial risks over a
significant period of time which even a combination of careful evaluations,
experience and knowledge may not eliminate. While discovery of a mine may result
in substantial rewards, few properties which are explored are ultimately
developed into producing mines. Major expenses may be required to establish
reserves and to construct mining and processing facilities at a site. It is
impossible to ensure that the current or proposed exploration programs on the
Claims or future claims which the Company plans to acquire will result in a
profitable commercial mining operation.
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The operations of the Company are subject to all of the hazards and risks
normally incident to exploration and development of mineral properties, any of
which could result in damage to life or property, environmental damage and
possible legal liability for any or all damages. The activities of the Company
may be subject to prolonged disruptions due to weather conditions surrounding
the location of Claims in which the Corporation has interests. Hazards, such as
unusual or unexpected rock formation, rocks bursts, pressures, cave-ins,
flooding or other conditions may be encountered in the digging and removal of
material. While the Company may obtain insurance against certain risks in such
amounts as it considers adequate, the nature of these risks are such that
liabilities could exceed policy limits or be excluded from coverage. There is no
assurance that the Company will obtain insurance. There are also risks against
which the Company cannot insure or against which it may elect not 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 the future earnings and competitive position of the
Company and, potentially, its financial position.
Whether a mineral deposit will be commercially viable depends on a number
of factors, some of which are the particular attributes of the deposit, such as
its size and grade, proximity to infrastructure, financing costs and
governmental regulations, including regulations relating to prices, taxes,
royalties, infrastructure, land use, importing and exporting and environmental
protection. The effect of these factors cannot be accurately predicted, but the
combination of these factors may result in the Company not receiving an adequate
return on invested capital.
Kimberlites and Diamonds in Northern Quebec
It has long been established that economic diamondiferuos kimberlites are
concentrated on the cratons of the Superior Province half of which is located in
Northern Quebec. Moorhead, et al Kimberlites and Diamonds in Northern Quebec.
Four separate kimberlite fields, the Temiscamingue, Desmaraisville, Otish and
Torngat fields, are located in Quebec.
Twin Mining (TWG-TSE) was the first to stake the Torngat fields in mid
1999. Their property currently covers 444 square kilometers in the eastern coast
of Unagava Bay in Northern Quebec. Shortly after this, also in mid 1999, Messr's
Ferderber and Hawkins staked 469.05 square kilometers in the Torngat fields. The
Torngat fields are composed of a central plateau about 400 meters above sea
level and is broken by steep-sided gorges and fjords along the coast. The
largest of these features, Alluviaq Fjord, bisects the Claims.
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These acquisitions were based on the discovery of a 1.5 mm. gem quality
diamond in 1997 by a graduate student completing a masters thesis on Kimberlite
dikes in the Ungava region. Several dikes including Twin Mining Corporation's
discovery at the Torngnat fields, are well exposed sub-vertical features in
Alluviaq Fjord and display excellent horizontal and vertical continuity.
Industry and Competition
Worldwide
DeBeers Consolidated Mines ("DeBeers") controls the marketing of about 70%
of the supply of rough diamonds through the Central Selling Organization (CSO).
DeBeers, the world's largest producer of rough diamonds, has marketing
agreements with a number of other producers and channels this production through
the CSO. Diamond producers can avoid the marketing fees charged by the CSO by
negotiating directly with rough dealers, a practice that is becoming more
prevalent throughout the industry. Management believes that the entire diamond
industry may begin to see vertical integration whereby manufacturers of diamond
jewelry will move to secure proprietary supplies by taking equity positions in
producers (e.g. Tiffany's purchase of a 14% interest in Aber Resources which has
a 40% interest in the developing Diavik deposit in northern Canada).
Additionally, management anticipates that the world market for diamonds
will potentially tighten due to a backlash against the so called "blood
diamonds" of Angola and Sierra Leone. "Blood diamonds" is a term used to
describe diamonds that are sold, the proceeds of which are used to fund
guerrilla warfare. In response to the backlash against "blood diamonds", the
Royal Canadian Mounted Police are developing a technology that would
"fingerprint" diamonds, identifying them by trace impurities that could be
tracked to known mines in Canada. The territorial government will provide
certificates that diamonds were mined and cut in the Northwest Territories. The
aim is to distinguish Canadian diamonds from those diamonds associated with the
images of war in West Africa. The effect of this procedure is expected to be an
increase in demand for the diamonds mined in Canada.
Canada
Currently in Canada, there is one mine in production, the Ekati Mine,
which produces about $2 million worth of diamonds a day, or five (5%) percent of
the world production. Two other mines are expected to start producing by 2005.
These mines are expected to help Canada join the ranks of the world's top
diamond producing countries which include Botswana, Russia, South Africa and
Angola.
Preliminary results indicate that Northern Quebec has strong diamond
mining potential. The Twin Mining Corporation has discovered an extensive
diamondiferous
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kimberlite dike system and has recovered a total of 475 micro and macrodiamonds
since mid 1999. Twin Mining has successfully completed a public offering in
Canada, raising about $8 million dollars Canadian.
The mineral exploration and mining business is competitive in all of its
phases. The Company expects to compete with numerous other companies and
individuals, including competitors with greater financial, technical and other
resources than the Company, in the search for and the acquisition of attractive
mineral claims. The ability of the Company to acquire claims in the future
will depend not only on its ability to develop its present Claims, but also on
its ability to select and acquire suitable claims or prospects for mineral
exploration. There is no assurance that the Company will continue to be able to
compete successfully with its competitors in acquiring such claims or prospects.
Government Regulation and Licensing
The operations of the Company require licenses and permits from various
governmental authorities. The Company believes that it presently holds all
necessary licenses and permits required to carry on with its intended activities
under applicable laws and regulations and the Company believes it is presently
complying in all material respects with the terms of such licenses and permits.
However, such licenses and permits are subject to change in regulations and in
various operating circumstances. The Company may not be able to obtain all
necessary licenses and permits required to carry out exploration, development
and mining operations for its intended projects.
The Company has 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 Mining Exploration Permits pertaining to the Claims under
the Mining Act of Quebec and that the permits were 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 Claims. However,
the opinion disclaims any physical verification of the location of the Claims
and states that no survey of the area covered by the permits was conducted.
Seasonality
Due to inclement weather in the Northwest Territories during the months of
January and February, there can be no exploration during these months.
Employees
The Company currently employs two individuals, Mr. Teodosio V. Pangia and
Mr. Thomas Franzone, both of whom are executive officers. On August 14, 2000,
the Company entered into a prospecting and survey agreement with Prospecting
Geophysics Ltd. to act as the on-site
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project manager. Peter Ferderber is the President of Prospecting Geophysics Ltd.
and will act as a consultant for the Company.
Currency Fluctuation
The Company's currency fluctuation exposure is primarily to the Canadian
dollar as the Claims are located in the Ungava Bay area in Northern Quebec. Such
fluctuations may materially affect the Company's financial position and results
of operations.
References to the dollar in this Form 10-SB are to US dollars, and
"Canadian" appears after references to Canadian dollars. Unless otherwise
stated, the translations of US dollars into Canadian dollars and vice versa have
been made at the average rate for the year indicated.
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Item 2. Management's Discussion and Analysis of Financial Condition and Plan of
Operation
The following discussion regarding Diamond Discoveries International Corp.
and its business and operations contains "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
consist of any statement other than a recitation of historical fact and can be
identified by the use of 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.
Plan of Operation
The Company was incorporated in April of 2000, and does not have any
operating history or financial results. As of July 31, 2000, the Company
currently has approximately $70,000 of cash which the Company believes is
sufficient to last for no more than three (3) months. The Company seeks
additional equity or debt financing of $500,000 to $1,500,000 for the next six
(6) to nine (9) months.
Prior to any mining decisions, 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 at
least two years. Once these factors are clearly established, the viability of
extracting diamonds can be estimated. At that time, the Company will evaluate
whether, and if so how, to proceed.
The Company does not expect to make any significant expenditures to
purchase any equipment as all equipment necessary for the mining explorations
will be provided by Prospecting Geophysics Ltd. pursuant to the Prospecting and
Survey Agreement dated August 14, 2000.
The Company now employs two individuals, both of whom are executive
officers of the Company. The Company does not expect any significant changes in
the number of employees within the next twelve months.
Item 3. Description of Property
The Company does not own real property nor does it hold any lease or other
real property interest except for the Claims it has acquired pursuant to the
Acquisition Agreement as described under the Description of Business.
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The Company has entered into a Prospecting and Survey Agreement with
Prospecting Geophysics Ltd. to act as on-site project manager for the Company's
mining activities. The following information is provided in compliance with
"Guide 7 of Industry Guides Under the Securities Act and the Exchange Act" for
issuers engaged or to be engaged in significant mining operations:
(1) The Claims acquired by the Company in the Acquisition Agreement is
469.05 square kilometers of mining claims in northwest Quebec, Canada, on the
eastern shore of Ungava Bay. With the exception of the months of January and
February in which there is inclement weather in the area surrounding the Claims,
there is nothing preventing access to the Claims. However, hazardous weather
conditions could prevent the Company from accessing the Claims in other months
as well.
(2) Pursuant to the Transfer of Mining Rigthts agreement between Peter
Ferderber and the Company, Peter Ferderber has transferred to the Company six
(6) Mining Exploration Permits for the Claims. Further, pursuant to the
Acquisition Agreement, in consideration for the Claims, the Company has issued
1,000,000 shares of its common stock to Mr. Ferderber and has paid him $25,000
Canadian, and at Mr. Ferderber's request, $35,000 Canadian to Stanley G.
Hawkins. The Company has obtained the opinion of Lavery, de Billy, Berristers
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 the knowledge of the Company, Messr's 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) (i) Although there can be no assurance of successful diamond
exploration, the Company believes, based upon studies performed on adjacent
lands and on an initial progress report of the Claims, that the
current condition of the Claims is comparable to land that has proven successful
for diamond exploration. The Claims are in a location over an early Precambrian
bedrock segment called an "Archon." An Archon is an immobile segment of the
earth's crust exceeding 1.5 billion years in age. Kimberlites, widely regarded
as the main source for diamond production, are 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 proposed program of the Company is exploratory in nature. There has
been an airborne magnetometer survey over the Claims that has identified
evidence of six magnetic dykes at the south end of the Claims covered by the
permits. The Company intends to survey, locate and sample the dykes on the
Claims. There can be no assurance that the Company will be able to engage in
these additional activities. Whether a mineral deposit will be commercially
viable depends on a number of factors such as the size and
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grade of the mineral deposits. Gathering the appropriate data can take up to two
years. Once the Company has established all the factors effecting the viability
of extracting diamonds the Company will evaluate whether, and if so how, to
proceed. The Company intends to engage in open-pit mining.
(ii) No plant or equipment will be utilized during the mining
process. The mining will be conducted through the use of hand tools such as a
hammer or pick-ax.
(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 which were originally reported by a
University of Montreal graduate student. However, to date, no proven reserves
have been established and there can be no assurance that any such reserves will
ever exist.
Item 4. 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:
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Name and Address of Beneficial Owner Amount and Nature of Ownership Approximate % of Class
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<S> <C> <C>
TVP Capital Corp.* 3,450,000 20.29%
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Peter Ferderber 1,000,000 5.88%
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Stanley G. Hawkins 1,000,000 5.88%
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Tom Franzone 275,000 1.62%
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Directors and Officers as a Group 3,725,000 21.91%
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</TABLE>
* Teodosio V. Pangia is the sole shareholder of TVP Capital Corp.
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Item 5. Directors, Executive Officers, Promoters and Control Persons
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<CAPTION>
Name Age Company Position
<S> <C> <C>
Teodosio V. Pangia 41 Chairman/CEO
Thomas Franzone 44 Treasurer/Controller
Peter Ferderber 73 Consultant
Stanley G. Hawkins 69 Advisor
</TABLE>
Teodosio V. Pangia
Among his many business affiliations, Mr. Teodosio V. Pangia has been an
Officer and Director of the Company since its formation in April 2000. He is
also the Chairman and founder of TVP Capital Corp., a U.S. based venture capital
company which has provided consulting services to the Company. Mr. Pangia is
also President of Tyler Dylan, an Ontario, Canada based investment company. In
addition, Mr. Pangia was a co-founder and consultant of Environmental Solutions
Worldwide, a company that has developed and patented a catalytic converter that
does not require precious metals. A recent venture of Mr. Pangia is Enviro
Industrial Technologies, Inc ("Enviro") of which he is Chairman and Chief
Executive Officer. Enviro is a company whose primary focus is on the processing
and marketing of industrial minerals. From 1992 through 1997, Mr. Pangia was
Director and Chief Executive Officer of Ecology Pure Air International, a
Canadian company engaged in developing an automobile fuel catalyst. In 1997, a
petition in bankruptcy was brought against Mr. Pangia in the Ontario Court of
Justice. That petition, and a related order, were dismissed.
Thomas Franzone
Mr. Franzone has been the President of Enviro Industrial Technologies,
Inc. since its formation in April 2000. From 1999 to when he joined Enviro
Industrial Technologies, Inc., he was the President of Franzone Consulting Corp.
located in New York City. From 1996 to 1999 Mr. Franzone held the position of
controller at Direct Approach Marketing. He came to Direct Approach Marketing
after spending a year at Patient Education Media where he held the position of
Accounting Manager. From November 1989 to 1995 he worked as Controller for
Empire Diamond Corp.
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Peter Ferderber
Mr. Ferderber, a consultant to the Company, has been involved in mining
exploration for over forty years. He has been the President of Prospecting
Geophysics Ltd., a mining exploration company located in Quebec, Canada, since
1955 and was awarded the "Prospector of the Year" PDA award for Canada and the
Province of Quebec in 1979.
Stanley G. Hawkins
Since l995, Mr. Hawkins, an advisor to the Company, has been the President
of Tandem Resources Ltd., a Canadian Company listed on the Montreal Stock
Exchange (TDM-ME), involved in managing mining explorations. Mr. Hawkins holds
a degree in Engineering: Mining from the University of Toronto.
Item 6. Executive Compensation
The executive officers, Mr. Pangia and Mr. Franzone, do not receive any
annual salary compensation for their services. However, there can be no
assurance that the executive officers will not receive an annual salary in the
future.
The Company has issued 3,450,000 shares of common stock to TVP Capital
Corp. of which Mr. Pangia is the sole shareholder. The Company has also issued
275,000 shares of common stock to Mr. Franzone. All the shares issued to TVP
Capital Corp. and Mr. Franzone are considered "restricted securities" and in the
future may be sold only in compliance with Rule 144 or in an exempt transaction
under the Securities Act of 1933, as amended, (the "Act") unless registered
under the Act.
Employment Agreements
The Company does not have employment agreements for any of the officers
and Directors of the Company.
Stock Option Agreements
None
Item 7. Certain Relationships and Related Transactions
The Company has entered into a Acquisition Agreement dated September 12,
2000 with Mr. Ferderber, Mr. Hawkins and Tandem Resources Ltd. The Acquisition
Agreement provides for the Company to purchase certain mining claims from
Messrs.
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Ferderber and Hawkins. Such Claims 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 Claims, the Company has issued
1,000,000 shares of its common stock to each of Messrs. Ferderber and Hawkins
and has 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 Claims conditioned on (i) the
Company expending $5,000,000 Canadian on exploration of the Claims; (ii) Tandem
paying the Company $2,000,000 Canadian and (iii) the Company and Tandem entering
into a joint venture agreement to operate the Claims within 60 days of the
Company demonstrating expenditure of $5,000,000 Canadian on exploration of the
Claims. In addition, the Company will have twenty-one (21) days from the date it
notifies Tandem that it has expended $5,000,000 Canadian on exploration of the
Claims, 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, the Company's right to provide this
financing shall expire. Also, upon the closing of the acquisition, the Company
assigned to Messrs. Ferderber and Hawkins a one (1%) percent interest in the Net
Smelter Returns of the Claims, half of which is payable over the first
$50,000,000 Canadian in revenues from the Claims. 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 a
Transfer of Mining Rights in favor of the Company, as of June 20, 2000 which
transfers mining rights over all of the Claims to the Company.
The Company has entered into a Prospecting and Survey Agreement with
Prospecting Geophysics Ltd. dated August 14, 2000, whereby Prospecting
Geophysics Ltd. will act as the project manager for the Company's mining
operations. Peter Ferderber is the President of Prospecting Geophysics Ltd.
The Company believes that the terms of the above transactions are on terms
at least as favorable to the Company as could have been obtained from
arms-length negotiations with unrelated third parties.
Item 8. Description of Securities
Common Stock
The authorized capital stock of Diamond Discoveries International Corp.
consists of 80,000,000 shares of Common Stock, par value $.001 of which
17,000,000 are issued and outstanding on July 31, 2000. All outstanding shares
of Common Stock are fully paid and non-assessable. Each holder of record of
Common Stock is entitled to one vote for each share held on all matters properly
submitted to the shareholders for their vote. Cumulative voting is not
authorized by the Articles of Incorporation.
Holders of Diamond Discoveries International Corp. Common Stock are
entitled
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to dividends in the discretion of the Board of Directors and payment thereof
will depend upon, among other things, the Company's earnings, its capital
requirements and its overall financial condition. Diamond Discoveries
International Corp. has not paid any cash dividends on its Common Stock since
inception and intends to follow a policy of retaining any earnings to finance
the development and growth of its business. Accordingly, it does not anticipate
the payment of cash dividends in the foreseeable future.
Preferred Stock
The Company is authorized to issue 20,000,000 shares of preferred stock,
par value $.00l per share, none of which has been issued as of July 31, 2000.
Shares Eligible for Future Sale
The Company has 17,000,000 shares of common stock outstanding, of which
7,000,000 shares are considered "restricted securities" and in the future, may
be sold only in compliance with Rule 144 or in an exempt transaction under the
Securities Act of 1933, as amended, (the "Act") unless registered under the Act
(the "Restricted Shares").
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain conditions, a person, including an affiliate of the
Company (or persons whose shares are aggregated), who has owned the Restricted
Shares of common stock beneficially for at least one year is entitled to sell,
within any three month period, a number of shares that does not exceed the
greater of 1% of the total number of outstanding shares of the same class or,
if the common stock is quoted on a national quotation system, the average weekly
trading volume during the four calendar weeks preceding the sale. A person who
has not been an affiliate of the Company for at least the three months preceding
the sale and who has beneficially owned shares of common stock for at least two
years is entitled to sell such shares under Rule 144 without regard to any of
the limitations described above.
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PART II
Item 1. Market for Common Equity and Related Stockholder Matters
The Company plans to list its securities for trading on the OTC Bulletin
Board and in the over-the-counter market "pink sheets". The Company's trading
symbol is expected to be "DDII". To date, there has been no trading market for
the Company's securities.
Of the Company's 17,000,000 issued and outstanding shares of common stock,
7,000,000 shares are 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.
Holders
As of August 2, 2000, the number of holders of record of common stock, was
twelve (12).
Dividend Policy
The Company does not anticipate paying any cash dividends on its common
stock in the foreseeable future because it intends to retain its earnings to
finance the expansion of its business. Thereafter, the declaration of dividends
will be determined by the Board of Directors in light of conditions then
existing, including, without limitation, the Company's financial condition,
capital requirements and business condition.
The Company is prohibited from paying cash dividends on the common stock
until any issued and outstanding preferred stock is converted into common stock.
Item 2. Legal Proceedings
The Company is not party to any material pending legal proceedings and has
no knowledge that any such proceedings are threatened.
Item 3. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
Item 4. Recent Sales of Unregistered Securities
The following paragraphs set forth certain information with respect to all
securities sold by the Company within the last three years without registration
under the Act. The information includes the names of the purchasers, the date of
issuance, the title and number of securities sold and the consideration received
by the Company for the issuance of these shares.
14
<PAGE> 17
On May 1, 2000, the Company issued 5,000,000 shares of its common stock in
the aggregate to the following persons in the amount indicated opposite each
person's name:
<TABLE>
<S> <C>
TVP Capital Corp. 3,450,000
Bondy & Schloss 150,000
Tom Franzone 275,000
Vasilik Kalantzkos 100,000
Tunku Mudzaffar Bin Tunku Mustapha 250,000
Romeo Dibatista Sr. 250,000
JJAB, LLC 500,000
Kelly Levandowski 20,000
Brian James Murray Loeb 5,000
</TABLE>
These shares were sold pursuant to Section 4(2) of the Act and were not
issued in connection with any public offering.
On May 20, 2000, the Company, pursuant to a private offering, issued
10,000,000 shares of its common stock to Mr. Louis Lilling for $250,000. Mr.
Lilling paid $25,000 of the purchase price of these shares in cash and the
remainder in the form of a promissory note. These shares were issued pursuant to
Rule 504 of Regulation D of the Securities Act and were not issued in connection
with any public offering.
Pursuant to the Acquisition Agreement dated September 12, 2000, the
Company issued 1,000,000 shares of its common stock to each of Messrs. Ferderber
and Hawkins in consideration for the acquisition of the Claims. These shares
were sold pursuant to Section 4(2) of the Act and were not issued in connection
with any public offering.
Item 5. Indemnification of Directors and Officers
The Delaware General Corporation Law "DGCL," in general, allows
corporations to indemnify their directors and officers against expenses actual
and reasonable in connection with a proceeding, if a person acted in good faith
and in a manner the person reasonably believed to be in, or not opposed to, the
best interests of the corporation. In the case of a criminal action or
proceeding, the director or officer must have no reasonable cause to believe
that the person's conduct was unlawful. The DGCL also provides that
indemnification is not exclusive, and a corporation may make any other or
further indemnification under any bylaw, agreement, vote of shareholders or
disinterested directors or otherwise, however no indemnification shall be made
in respect of any claim which such person shall have been adjudged to be liable
to the corporation unless and only to the extent that the Court of Chancery or
the court in which such action was brought shall determine that, despite the
adjudication of liability but in view of all the circumstances, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper. However, according to the certificate of incorporation a
director will be liable (i) for breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law (iii) for
liability under Section 174 of the DGCL, or (iv) for any transaction from which
the director derived any
15
<PAGE> 18
improper personal benefit.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Company pursuant to the foregoing provisions, the Company has been informed that
in the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
16
<PAGE> 19
DIAMOND DISCOVERIES INTERNATIONAL CORP.
INDEX TO FINANCIAL STATEMENTS
PAGE
----
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS F-2
BALANCE SHEET
JULY 31, 2000 F-3
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PERIOD FROM APRIL 24, 2000 (DATE OF INCEPTION)
TO JULY 31, 2000 F-4
STATEMENT OF CASH FLOWS
PERIOD FROM APRIL 24, 2000 (DATE OF INCEPTION)
TO JULY 31, 2000 F-5
NOTES TO FINANCIAL STATEMENTS F-6/8
* * *
F-1
<PAGE> 20
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders
Diamond Discoveries International Corp.
We have audited the accompanying balance sheet of DIAMOND DISCOVERIES
INTERNATIONAL CORP. as of July 31, 2000, and the related statements of changes
in stockholders' equity and cash flows for the period from April 24, 2000 (date
of inception) to July 31, 2000. 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 generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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 July 31, 2000, and its cash flows for the period from
April 24, 2000 (date of inception) to July 31, 2000, in conformity with
generally accepted accounting principles.
J.H. Cohn LLP
Roseland, New Jersey
September 13, 2000
F-2
<PAGE> 21
DIAMOND DISCOVERIES INTERNATIONAL CORP.
BALANCE SHEET
JULY 31, 2000
<TABLE>
<S> <C>
ASSETS
------
Current assets:
Cash $ 69,500
Prepaid expenses 71,047
--------
Total current assets 140,547
Mining Claims 90,540
--------
Total $231,087
========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Liabilities - advances from stockholders $152,337
--------
Stockholders' equity:
Preferred stock, par value $.001 per share; 20,000,000 shares
authorized; none issued -
Common stock, par value $.001 per share; 80,000,000 shares
authorized; 17,000,000 shares issued and outstanding 17,000
Additional paid-in capital 286,750
Stock subscription receivable (225,000)
--------
Total stockholders' equity 78,750
--------
Total $231,087
========
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE> 22
DIAMOND DISCOVERIES INTERNATIONAL CORP.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
PERIOD FROM APRIL 24, 2000 (DATE OF INCEPTION)
TO JULY 31, 2000
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Stock
------------------------ ---------------------- Paid-in Subscription
Shares Amount Shares Amount Capital Receivable Total
------------ ----------- ---------- -------- ---------- ------------ --------
<S> <C> <C> <C> <C> <C> <C> <C>
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
mining claims 2,000,000 2,000 48,000 50,000
Subscription for purchase
of 10,000,000 shares 10,000,000 10,000 240,000 $(225,000) 25,000
------------ ----------- ---------- -------- --------- --------- -------
Balance, July 31, 2000 - $ - 17,000,000 $17,000 $286,750 $(225,000) $78,750
============ =========== ========== ======= ======== ========= =======
</TABLE>
See Notes to Financial Statements.
F-4
<PAGE> 23
DIAMOND DISCOVERIES INTERNATIONAL CORP.
STATEMENT OF CASH FLOWS
PERIOD FROM APRIL 24, 2000 (DATE OF INCEPTION)
TO JULY 31, 2000
<TABLE>
<S> <C>
Operating activities - cash used for prepaid expenses $(67,297)
--------
Investing activities - cash used for purchase of mining claims (40,540)
--------
Financing activities:
Advances from stockholders 152,337
Proceeds from sale of common sock 25,000
--------
Net cash provided by financing activities 177,337
--------
Net increase in cash 69,500
Cash, beginning of period
-
--------
Cash, end of period $ 69,500
========
</TABLE>
See Notes to Financial Statements.
F-5
<PAGE> 24
DIAMOND DISCOVERIES INTERNATIONAL CORP.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Business:
Diamond Discoveries International Corp. (the "Company") was incorporated
in the State of Delaware on April 24, 2000. The Company plans to engage
in the exploration and development of mineral resources. As further
explained in Note 3, the Company acquired mining rights for 469.05 square
kilometers of mining claims for the "Torngat Fields" located in the
Province of Quebec, Canada. The Company believes, based upon studies of
adjacent lands, that the claims contain diamondiferous kimberlite and it
plans to attempt to extract and produce diamonds by exploiting such
claims. Management of the Company intends to focus initially on the
development of the claims from the earliest stages of exploration until
enough appropriate data is accumulated to estimate the economic viability
of mining potential diamond deposits, at which time management will
determine whether and how to proceed with mining operations. As of July
31, 2000, the Company had not conducted any operations of a commercial
nature, it did not hold any interest in a mining property that was in
production and its management could not predict if and when it would be
able to commence production based on the exploitation of its mining
claims.
The Company's viability and potential success lie in its ability to
develop, exploit and generate revenues from mineral deposits obtained
through the mining claims it has or may acquire. There can be no
assurance that any mineral deposits will be obtained or if obtained that
the Company will be able to exploit such deposits. The exploitation and
development of mineral deposits involve significant financial risks over
a significant period of time. The Company will need substantial
additional financial resources to explore and, ultimately, develop
producing mines. Management cannot assure that the exploration of the
claims the Company has or will acquire may result in any profitable
commercial mining operations.
Note 2 - Summary of significant accounting policies:
Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ
from those estimates.
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.
F-6
<PAGE> 25
DIAMOND DISCOVERIES INTERNATIONAL CORP.
NOTES TO FINANCIAL STATEMENTS
Note 2 - Summary of significant accounting policies (concluded):
Recent accounting pronouncements:
The Financial Accounting Standards Board and the Accounting
Standards Executive Committee of the American Institute of
Certified Public Accountants had issued certain accounting
pronouncements as of July 31, 2000 that will become effective in
subsequent periods; however, management of the Company does not
believe that any of those pronouncements would have significantly
affected the Company's financial accounting measurements or
disclosures had they been in effect during the period from April
24, 2000 to July 31, 2000, and it does not believe that any of
those pronouncements will have any significant impact on the
Company's financial statements at the time they become effective.
Note 3 - Mining Claims:
On May 21, 2000, the Company acquired the mining claims for the Torngat
Fields from Peter Ferderber and S. G. Hawkins, who are also key
consultants and advisors to the Company, for total consideration of
$90,540, of which $40,540 was paid in cash and $50,000 was 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 mining
claims was a noncash transaction that is not reflected in the
accompanying statement of cash flows.
In connection with the acquisition of the mining claims, 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 mining claims, 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 mining
operations related to the claims 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).
F-7
<PAGE> 26
DIAMOND DISCOVERIES INTERNATIONAL CORP.
NOTES TO FINANCIAL STATEMENTS
Note 4 - Advances from stockholders:
Advances from stockholders of $152,337 at July 31, 2000 were noninterest
bearing and due on demand.
Although management does not believe that there is a practical method
that can be used to specifically determine the fair value of the advances
from stockholders because of the relationship of the Company and its
stockholders, it believes that the advances will be repaid on a
short-term basis and, accordingly, the carrying value of the advances
approximated fair value as of July 31, 2000.
Note 5 - Preferred stock:
As of July 31, 2000, 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 July 31,
2000.
Note 6 - Common stock issued for services:
During the period from April 24, 2000 to July 31, 2000, the Company
issued 150,000 shares of common stock as payment for legal services to be
provided subsequent to July 31, 2000. Accordingly, the Company increased
prepaid expenses and stockholders' equity by the estimated fair value of
the shares which was $3,750. This was a noncash transaction that is not
reflected in the accompanying statement of cash flows.
Note 7 - Stock subscription receivable:
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 buyer paid $25,000 in cash and the balance through the
issuance of a 10% promissory note in the principal amount of $225,000.
Although the note has a stated due date of November 16, 2000, it is
subject to payment at any time prior thereto upon demand by the Company.
The exchange of shares for a note receivable was a noncash transaction
that is not reflected in the accompanying statement of cash flows. In
addition, the note receivable is reflected as a reduction of
stockholders' equity in the accompanying balance sheet.
* * *
F-8
<PAGE> 27
PART III
Item 1. Index to Exhibits
The Following list describes the exhibits filed as part of this Registration
Statement on Form 10-SB:
<TABLE>
<CAPTION>
Exhibit Number Description of Document
-------------- -----------------------
<S> <C>
2.1* Articles of Incorporation as filed on April 24, 2000
2.2* Bylaws of Diamond Discoveries International Corp.
6.1* Acquisition Agreement dated September 12, 2000 between the
Company and Peter Ferderber, Stanley Hawkins and Tandem
Resources Ltd.
6.2* Prospecting and Survey Agreement between Prospecting Geophysics
Ltd and the Company dated August 14, 2000.
6.3* Transfer of Mining Rights between Peter Ferderber and the
Company dated June 20, 2000.
10.1* Consent of Lavery, de Billy for the Title Opinion of the Mining
Exploration Permits.
15.1 Title opinion of Lavery, de Billy on the Mining Exploration
Permits.
27.1** Financial Data Schedule
</TABLE>
Item 2. Description of Exhibits
The required exhibits are attached hereto, as noted in Item 1 above.
17
<PAGE> 28
SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf the
undersigned thereto duly authorized.
Dated: September 20, 2000
Diamond Discoveries International Corp.
By: /s/ Teodosio V. Pangia
------------------------------------
Teodosio V. Pangia, CEO
18
