UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1/A
(Amendment
No. 4)
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
DIAMOND
INFORMATION INSTITUTE, INC.
(Exact
name of registrant as specified in its charter)
(State
or other jurisdiction of incorporation or organization)
(Primary
Standard Industrial Classification Code Number)
(I.R.S.
Employer Identification Number)
12
Daniel Road East
Fairfield,
New Jersey 07004
(Address,
including zip code, and telephone number,
Including
area code, of registrant’s principal executive offices)
Berge
Abajian, President
DIAMOND
INFORMATION INSTITUTE, INC.
12
Daniel Road East
Fairfield,
New Jersey 07004
(Name,
address, including zip code, and telephone number,
including
area code, of agent for service)
Copies
of Communications to
:
Stoecklein
Law Group
4695
MacArthur Court
11
th
Floor
Newport
Beach, CA 92660
(949)
798-5541
Fax
(949) 258-5112
Approximate date of commencement of
proposed sale to the public:
As soon as practicable after the
registration statement becomes effective.
If
any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 check the following box:
x
If
this Form is filed to register additional securities for an offering pursuant to
Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering.
¨
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
¨
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier effective registration statement for the same
offering.
¨
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large accelerated
filer
¨
Accelerated
filer
¨
Non-accelerated
filer
¨
Smaller
reporting company
x
Calculation
of Registration Fee
Title
of Each Class of Securities to be Registered
|
Amount
to be Registered
|
Proposed
Offering Price Per Share (1)
|
Proposed
Maximum Aggregate Offering Price (1)
|
Amount
of Registration Fee
|
Common
Stock, $0.001 par value
|
1,818,100
|
$1.00
|
$1,818,100
|
$55.82
|
|
|
|
|
|
TOTAL
|
1,818,100
|
|
$1,818,100
|
$55.82
|
(1)
|
The
proposed maximum offering price is estimated solely for the purpose of
determining the registration fee and calculated pursuant to Rule
457(c).
|
The
Registrant hereby amends this Registration Statement on such date or dates as
may be necessary to delay its effective date until the registrant shall file a
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
The
information in this prospectus is not complete and may be
changed. The selling security holders may not sell these securities
until the registration statement filed with the Securities and Exchange
Commission is effective. This prospectus is not an offer to sell
these Securities and it is not soliciting an offer to buy these securities in
any state where the offer or sale is not permitted.
Prospectus
(Subject to Completion)
Dated
_________, 2008
PROSPECTUS
DIAMOND
INFORMAITON INSTITUTE, INC.
1,243,100
Shares of Common Stock
575,000
Shares issuable upon exercise of warrants
We
have prepared this prospectus to allow certain of our current shareholders to
sell up to 1,243,100 shares of our common stock of Diamond Information
Institute, Inc. We are not selling any shares of common stock under
this prospectus. This prospectus relates to the disposition by the
selling security holders or their transferees, of up to 1,243,100 shares of our
common stock outstanding and 575,000 shares of our common stock issuable upon
the exercise of warrants held by the selling security holders. We
will not receive proceeds from any sales of the shares by the current
shareholders; however, we may receive proceeds of up to $862,500 from the
exercise of the warrants. All costs associated with the registration
statement of which this prospectus is a part, will be borne by the
Company.
The selling security holders may sell
these shares from time to time after this Registration Statement is declared
effective by the Securities and Exchange Commission. The prices at
which the selling security holders may sell the shares has arbitrarily been
determined to be at $1.00 per share or until a market price for the shares is
determined upon quotation on the OTC Bulletin Board or listed on a securities
exchange.
For
a description of the plan of distribution of the shares, please see page 14 of
this prospectus.
Our common stock is not listed on any
national securities exchange or the NASDAQ stock market. Currently no
public market exists for the common stock of Diamond. We can provide
no assurance that a public market for our securities will develop and ownership
of our securities is likely to be an illiquid investment for the foreseeable
future.
THESE SECURITIES ARE SPECULATIVE AND
INVOLVE A HIGH DEGREE OF RISK.
We urge you to read carefully the “Risk
Factors” section beginning on page 4 where we describe specific risks associated
with an investment in Diamond Information Institute, Inc. and these securities
before you make your investment decision.
________________________
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved these securities, or determined if this prospectus is
truthful or complete. Any representation to the contrary is a
criminal offense.
________________________
THE
DATE OF THIS PROSPECTUS IS __________, 2008.
TABLE
OF CONTENTS
|
PAGE
|
Prospectus
Summary
|
1
|
Summary
of the Offering
|
2
|
Summary
Financial Information
|
3
|
Risk
Factors
|
4
|
About
This Prospectus
|
9
|
Available
Information
|
9
|
Special
Note Regarding Forward-Looking Information
|
10
|
Use
of Proceeds
|
11
|
Selling
Security Holders
|
11
|
Plan
of Distribution
|
14
|
Description
of Securities
|
18
|
Interest
of Named Experts and Counsel
|
20
|
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities
|
20
|
Description
of Business
|
21
|
Description
of Property
|
25
|
Legal
Proceedings
|
25
|
Market
for Common Equity and Related Stockholder Matters
|
25
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
27
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosure
|
37
|
Directors,
Executive Officers, Promoters and Control Persons
|
37
|
Executive
Compensation
|
39
|
Security
Ownership of Beneficial Owners and Management
|
40
|
Certain
Relationships and Related Transactions
|
41
|
|
|
Diamond
Information Institute, Inc. Audited Financial Statements
|
|
Report
of Independent Registered Public Accounting Firm
|
F-1
|
Balance
Sheets at December 31, 2007 and June 30, 2008
|
F-2
|
Statement
of Operations for the Years Ended December 31, 2007 and 2006 and the Six
Months Ended June 30, 2008 and 2007
|
F-4
|
Statement
of Stockholders’ Equity for the Years Ended December 31, 2007 and 2006 and
the Six Months Ended June 30, 2008
|
F-5
|
Statement
of Cash Flows for the Year Ended December 31, 2007 and 2006 and the Six
Months Ended June 30, 2008 and 2007
|
F-7
|
Notes
to Financial Statements
|
F-9
|
|
|
You should read the following summary
together with the entire prospectus, including the more detailed information in
our financial statements and related notes appearing elsewhere in this
prospectus. You should carefully consider the matters discussed in “Risk
Factors” beginning on page 4.
The
selling security holders may sell these shares from time to time after this
Registration Statement is declared effective by the Securities and Exchange
Commission. The prices at which the selling security holders may sell
the shares has arbitrarily been determined to be at $1.00 per share or until a
market price for the shares is determined upon quotation on the OTC Bulletin
Board or listed on a securities exchange.
Diamond
Information Institute, Inc.
Diamond Information Institute, Inc. is
a New Jersey corporation organized in October of 1988 that has been engaged in
the design and manufacture of upscale jewelry since 1995 through its tradename
of its “Bergio” line. Additionally, in 2002, Diamond launched the
“Bergio Bridal Collection”.
Diamond sells its jewelry to approximately 150 independent jewelry stores across
the United States.
We
are a design and manufacturing company of upscale jewelry.
Our primary business
objective is to create value in the company through our existing jewelry lines
and in the future to expand the business by acquiring independent design
manufactures located in the United States and foreign countries.
Diamond
considers itself to be a trendsetter in the jewelry manufacturing
business. As a result, Diamond comes out with a variety of products
throughout the year that it believes have commercial potential to meet what it
feels are new trends within the industry. The “Bergio” designs
consist of upscale jewelry that includes white diamonds, yellow diamonds,
pearls, colored stones, in 18K gold, platinum, and palladium. Prices
range from $400 to $200,000.
Our
principal executive office address and phone number is:
DIAMOND
INFORMATION INSTITUTE, INC.
12 Daniel Road East
Fairfield, New Jersey
07004
(973) 227-3230
Summary
of the Offering
Shares
offered by the selling security holders…
|
1,818,100
shares of common stock, $0.001 par value per share, which
include:
|
|
-
1,243,100 shares of common stock owned by selling security
holders;
|
|
-
575,000 shares of common stock that may be issued upon exercise of
warrants.
|
|
|
Offering
price…
|
Determined
at the time of sale by the selling security holders.
|
|
|
Total
shares of common stock outstanding as of May 13, 2008…
|
11,443,100
|
|
|
Number
of shares of common stock outstanding after offering assuming the issuance
of 575,000 shares of common stock that may be issued upon exercise of
warrants held by the selling security holders
(1)
|
12,018,100
|
|
|
Total
proceeds raised by us from the disposition of the common stock by the
selling security holders or their transferees…
|
We
will not receive proceeds from the disposition of already outstanding
shares of our common stock by selling security holders or their
transferees. The prices at which the selling security holders
may sell the shares has arbitrarily been determined to be at $1.00 per
share or until a market price for the shares is determined upon quotation
on the OTC Bulletin Board or listed on a securities exchange.
We
may receive proceeds of up to $862,500 upon the exercise of the warrant
registered herein. We intend to use the proceeds, if any for
working capital purposes.
|
|
|
Trading
market. . .
|
None
presently, although following an effective registration we anticipate
submitting an application to a market maker for inclusion of our common
stock on the OTC Bulletin Board.
|
|
|
Risk
Factors
|
The
ownership of our common stock involves a high degree of
risk. We urge you to review carefully and consider all
information contained in this prospectus, particularly the items set forth
under “Risk Factors” beginning on page
4.
|
|
(1)
We cannot assure you that the warrants will be exercised by the selling
security holders.
|
SUMMARY
FINANCIAL INFORMATION
The
following table sets forth summary financial data derived from our financial
statements. The data should be read in conjunction with the financial
statements, related notes and other financial information included in this
prospectus.
|
|
Six
Months Ended June 30,
(Unaudited)
|
|
|
Year
Ended December 31,
(Audited)
|
|
|
|
2008
|
|
|
2007
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
[Restated]
|
|
|
|
|
|
[Restated]
|
|
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
642,883
|
|
|
$
|
508,211
|
|
|
$
|
1,296,585
|
|
|
$
|
1,974,008
|
|
Cost
of Sales
|
|
|
302,129
|
|
|
|
585,967
|
|
|
|
1,226,561
|
|
|
|
1,063,641
|
|
Gross
Profit [Loss]
|
|
|
340,754
|
|
|
|
(77,756
|
)
|
|
|
70,024
|
|
|
|
910,367
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling
expenses
|
|
|
143,765
|
|
|
|
233,803
|
|
|
|
392,793
|
|
|
|
442,061
|
|
General
and Administrative expenses
|
|
|
796,071
|
|
|
|
564,569
|
|
|
|
1,095,549
|
|
|
|
316,493
|
|
Total
operating expenses
|
|
|
939,836
|
|
|
|
798,372
|
|
|
|
1,488,342
|
|
|
|
758,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss)
Income from operations
|
|
|
(599,082
|
)
|
|
|
(876,128
|
)
|
|
|
(1,418,318
|
)
|
|
|
151,813
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
(expense) – net:
|
|
|
(54,880
|
)
|
|
|
(59,870
|
)
|
|
|
(85,304
|
)
|
|
|
(54,619
|
)
|
(Loss) Income
before income tax (benefit) provision
|
|
|
(653,962
|
)
|
|
|
(935,998
|
)
|
|
|
(1,503,622
|
)
|
|
|
97,194
|
|
Income
tax provision (benefit)
|
|
|
(168,446
|
)
|
|
|
(148,221
|
)
|
|
|
(331,642
|
)
|
|
|
34,953
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(485,516
|
)
|
|
$
|
(787,777
|
)
|
|
$
|
(1,171,980
|
)
|
|
$
|
62,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) per share – basic and diluted
|
|
$
|
(0.04
|
)
|
|
$
|
(0.05
|
)
|
|
$
|
(0.07
|
)
|
|
$
|
--
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
|
|
13,249,460
|
|
|
|
17,502,072
|
|
|
|
17,790,890
|
|
|
|
17,250,000
|
|
Balance
Sheet Data:
|
|
As
of June 30, 2008
(unaudited)
|
|
|
As
of December 31,
(audited)
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
[Restated]
|
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
2,288,677
|
|
|
$
|
2,302,704
|
|
|
$
|
2,749,524
|
|
Total
Liabilities
|
|
$
|
1,805,783
|
|
|
$
|
1,866,301
|
|
|
$
|
1,951,834
|
|
Stockholders’
Equity
|
|
$
|
482,894
|
|
|
$
|
436,403
|
|
|
$
|
797,690
|
|
An
investment in our common stock is highly speculative and involves a high degree
of risk. You should consider carefully the following risks, together
with all other information included in this prospectus. Please keep
these risks in mind when reading this prospectus, including any forward-looking
statements appearing herein. If any of the following risks actually
occurs, our business, financial condition or results of operations would likely
suffer materially. As a result, the trading price of our stock, if a
trading market develops, may decline and you could lose all or part of your
investment. As of the date of this prospectus, our management is
aware of the following material risks.
Risk Factors Associated with
Diamond Information Institute’s Business
and
Marketplace
Diamond
will need additional capital in the future to finance its operations or any
future acquisitions, which it may not be able to raise or it may only be
available on terms unfavorable to current non-affiliate
shareholders. This may result in Diamond’s inability to fund its
working capital requirements and ultimately harm its operational
results.
Diamond
has and expects to continue to have substantial capital expenditure and working
capital needs. As of December 31, 2007 and 2006, Diamond had sales of
$1,296,585 and $1,974,008, respectively and net loss of $1,171,980 and net
income $62,241, respectively. While management believes that its
financial policies have been prudent, the Company is reliant on future potential
equity raises to expand its current business and assist in any future
acquisitions, if and when those opportunities occur.
There
can be no assurance that Diamond will be successful in continuing to meet its
cash requirements from existing operations, or in raising a sufficient amount of
additional capital in future finance offerings. Additional financing
might not be available on terms favorable to Diamond, or at all. If adequate
funds were not available or were not available on acceptable terms, Diamond’s
ability to fund its operations, take advantage of unanticipated opportunities,
develop or enhance its business or otherwise respond to competitive pressures
would be significantly limited.
Diamond
is highly dependent on its key executive officers for the success of its
business plan and may be dependent on the efforts and relationships of the
principals of future acquisitions and mergers. If any of these
individuals become unable to continue in their role, the company’s business
could be adversely affected.
Diamond believes its success will
depend, to a significant extent, on the efforts and abilities of Berge Abajian,
its CEO. If Diamond lost Mr. Abajian, it would be forced to expend
significant time and money in the pursuit of a replacement, which would result
in both a delay in the implementation of its business plan and the diversion of
limited working capital. Diamond can give you no assurance that it could find a
satisfactory replacement for Mr. Abajian at all, or on terms that are not unduly
expensive or burdensome.
If
Diamond grows and implements its business plan, it will need to add managerial
talent to support its business plan. There is no guarantee that
Diamond will be successful in adding such managerial talent. These
professionals are regularly recruited by other companies and may choose to
change companies. Given Diamond’s relatively small size compared to
some of its competitors, the performance of its business may be more adversely
affected than its competitors would be if Diamond loses well-performing
employees and are unable to attract new ones.
Diamond
has minimal operating profits and lack of operating history, which raises
substantial doubt as to its ability to successfully develop profitable business
operations.
Diamond has had only minimal operating
profits since its inception in October 1988. For the year ended
December 31, 2007, Diamond had a gross profit of $70,024, which included an
inventory write-down of $284,000. Its primary asset consists of
jewelry inventory, which serves as collateral for Company loans. As a
result, Diamond’s operations will likely incur losses in the
future. There is no assurance that Diamond’s operations will be
successful or that it will be profitable in the future. The Company
has expended substantial resources to develop and implement its business
strategy but there can be no assurance that it will be successful in generating
and sustaining revenues with any profitability in the near future.
We
may acquire assets or other businesses in the future.
We
may consider acquisitions of assets or other business. Any acquisition involves
a number of risks that could fail to meet our expectations and adversely affect
our profitability. For example:
·
|
The
acquired assets or business may not achieve expected
results;
|
·
|
We
may incur substantial, unanticipated costs, delays or other operational or
financial problems when integrating the acquired
assets;
|
·
|
We
may not be able to retain key personnel of an acquired
business;
|
·
|
Our
management’s attention may be diverted;
or
|
·
|
Our
management may not be able to manage the acquired assets or combined
entity effectively or to make acquisitions and grow our business
internally at the same time.
|
If
these problems arise we may not realize the expected benefits of an
acquisition.
Diamond
may be unable to compete successfully in the highly competitive jewelry and
design manufacturing industry.
There are approximately 4,000 jewelry
design manufacturers in the United States alone and the jewelry industry is a
$50 billion a year industry largely comprised of primarily privately held
companies. Diamond faces intense competition from various independent
jewelry design manufacturers, some of which are more established and well known
in the marketplace. Each of Diamond’s competitors will likely
continue to maintain a position in offering their services in the overall market
and Diamond may experience difficulties in expanding its market
share. Additionally, most of Diamond’s competitors have substantially
greater financial and managerial resources than it does.
Not only is Diamond operating in a
highly competitive industry but it also lacks long-term contracts with
clients. There can be no assurance that it will successfully
establish or maintain any long-term contracts to provide its services in the
future.
A
decline in discretionary consumer spending may adversely affect Diamond’s
industry, its operations, and ultimately its profitability.
Luxury products, such as fine jewelry,
are discretionary purchases for consumers. Any reduction in consumer
discretionary spending or disposable income may affect the jewelry industry more
significantly than other industries. Many economic factors outside of
Diamond’s control could affect consumer discretionary spending, including the
financial markets, consumer credit availability, prevailing interest rates,
energy costs, employment levels, salary levels, and tax rates. Any
reduction in
discretionary
consumer spending could materially adversely affect Diamond’s business and
financial condition.
The
jewelry industry in general is affected by fluctuations in the prices of
precious metals and precious and semi-precious stones.
The availability and prices of gold,
diamonds, and other precious metals and precious and semi-precious stones may be
influenced by cartels, political instability in exporting countries and
inflation. Shortages of these materials or sharp changes in their
prices could have a material adverse effect on Diamond’s results of operations
or financial condition. A significant change in prices of key
commodities, including gold, could adversely affect its business or reduce
operating margins and impact consumer demand if retail prices increased
significantly, even though Diamond historically incorporates any increases in
the purchase of raw materials to its consumers. Additionally, a
significant disruption in our supply of gold or other commodities could decrease
the production and shipping levels of our products, which may materially
increase our operating costs and ultimately affect our profit
margins.
Diamond
depends on its ability to identify and respond to fashion trends.
The jewelry industry is subject to
rapidly changing fashion trends and shifting consumer
demands. Accordingly, Diamond’s success may depend on the priority
that its target customers place on fashion and its ability to anticipate,
identify, and capitalize upon emerging fashion trends. If Diamond
misjudges fashion trends or are unable to adjust its products in a timely
manner, its net sales may decline or fail to meet expectations and any excess
inventory may be sold at lower prices.
Diamond’s
ability to maintain or increase its revenues could be harmed if Diamond is
unable to strengthen and maintain its brand image.
Diamond has spent significant amounts
in branding its Bergio and Bergio Bridal lines. Diamond believes that
primary factors in determining customer buying decisions, especially in the
jewelry industry, are determined by price, confidence in the merchandise and
quality associated with a brand. The ability to differentiate
products from competitors of Diamond has been a factor in attracting
consumers. However, if Diamond’s ability to promote its brand fails
to garner brand recognition, its ability to generate revenues may
suffer. If Diamond fails to differentiate its products, its ability
to sell its products wholesale will be adversely affected. These
factors could result in lower selling prices and sales volumes, which could
adversely affect its financial condition and results of operations.
Diamond
maintains a relatively large inventory of its raw materials and if this
inventory is lost due to theft, its results of operations would be negatively
impacted.
We purchase large volumes of precious
metals and store significant quantities of raw materials and jewelry products at
our facility in New Jersey. Although we have an insurance policy with
Lloyd’s of London, if we were to encounter significant inventory losses due to
third party or employee theft from our facility which required us to implement
additional security measures, this would increase our operating
costs. Also such losses of inventory could exceed the limits of, or
be subject to an exclusion from, coverage under our current insurance
policy. Claims filed by us under our insurance policies could lead to
increases in the insurance premiums payable by us or possible termination of
coverage under the relevant policy.
If
Diamond were to experience substantial defaults by its customers on accounts
receivable, this could have a material adverse affect on Diamond’s liquidity and
results of operations.
A significant portion of our working
capital consists of accounts receivable from customers. If customers
responsible for a large amount of accounts receivable were to become insolvent
or otherwise unable to pay for our products, or to make payments in a timely
manner, Diamond’s liquidity and results of operations could be materially
adversely affected. An economic or industry downturn could materially
affect the ability to collect these accounts receivable, which could then result
in longer payment cycles, increased collections costs and defaults in excess of
management’s expectations. A significant deterioration in the ability
to collect on accounts receivable could affect the cash flow and working capital
position of Diamond.
Diamond
may not have the proper controls in place to protect is Intellectual Property
Rights.
Diamond
has not undertaken and does not plan to undertake any evaluation of its
trademarks, proprietary manufacturing techniques or any intellectual property
rights. In the event that its trademarks, proprietary manufacturing
techniques or intellectual property rights are subsequently challenged, Diamond
may face costly litigation and diversion of technical and management
personnel. Further, if efforts to enforce intellectual property
rights are unsuccessful or if claims by third parties are successful, Diamond
may be required to pay financial damages or alter its business
practices.
Diamond’s
liability insurance may not be sufficient.
Diamond has liability insurance
coverage. It has maintained liability insurance in the past and
intends to continue to do so in the future. However, there is no
guarantee that Diamond’s coverage would be sufficient or any other insurance
coverage would protect it from any damages or loss claims filed against
it.
Diamond’s
internal controls may be inadequate, which could cause its financial reporting
to be unreliable and lead to misinformation being disseminated to the
public.
Diamond’s
management will be responsible for establishing and maintaining adequate
internal control over financial reporting upon it becoming a reporting company.
As defined in Exchange Act Rule 13a-15(f), internal control over financial
reporting is a process designed by, or under the supervision of, the principal
executive and principal financial officer and effected by the board of
directors, management and other personnel, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles and includes 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 Diamond; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of Diamond are being
made only in accordance with authorizations of management and directors of
Diamond, and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of Diamond’s assets
that could have a material effect on the financial statements.
Diamond
has a limited number of personnel that are required to perform various roles and
duties as well as be responsible for monitoring and ensuring compliance with its
internal control procedures. As a result, its internal controls may be
inadequate or ineffective, which could cause its financial reporting to be
unreliable and lead to misinformation being disseminated to the
public. Investors relying upon this misinformation may make an
uninformed investment decision.
Risk Factors Associated with
Our Common Stock
No
market exists for our common stock
We
anticipate that following an effective registration statement of our shares, we
will submit an application to a market maker to apply for inclusion of our
common stock on the OTC Bulletin Board. However, there is currently
no market for our shares and there can be no assurance that any such market will
ever develop or be maintained. Any trading market that may develop in
the future will most likely be very volatile, and numerous factors beyond our
control may have a significant effect on the market. Only companies
that report their current financial information to the SEC may have their
securities included on the OTC Bulletin Board. Therefore, only upon
the effective date of this registration statement and after the necessary
reports are filed may we submit an application to a market maker to have our
securities quoted on the OTC Bulletin Board.
Our
common stock could be deemed a low-priced “Penny” stock which could make it
cumbersome for brokers and dealers to trade in our common stock, making the
market for our common stock less liquid and negatively affect the price of our
stock.
In
the event our anticipated spin-out of shares is successful and we are ultimately
accepted for trading in the over-the-counter market, trading of our common stock
may be subject to certain provisions of the Securities Exchange act of 1934,
commonly referred to as the “penny stock” as defined in Rule
3a51-1. A penny stock is generally defined to be any equity security
that has a market price less than $5.00 per share, subject to certain
exceptions. If our stock is deemed to be a penny stock, trading will
be subject to additional sales practice requirements on
broker-dealers. These require a broker-dealer to:
·
Deliver
to the customer, and obtain a written receipt for, a disclosure
document;
·
Disclose
certain price information about the stock;
·
|
Disclose
the amount of compensation received by the broker-dealer or any associated
person of the broker-dealer;
|
·
|
Send
monthly statements to customers with market and price information about
the penny stock; and
|
·
|
In
some circumstances, approve the purchaser’s account under certain
standards and deliver written statements to the customer with information
specified in the rules.
|
Consequently,
penny stock rules may restrict the ability or willingness of broker-dealers to
trade and/or maintain a market in our common stock. Also, prospective
investors may not want to get involved with the additional administrative
requirements, which may have a material adverse effect on the trading of our
shares.
FINRA
sales practice requirements may also limit a shareholder's ability to buy and
sell our stock, if and when we are quoted on the OTC Bulletin
Board.
In addition to the “penny stock” rules
described above, the Financial Industry Regulatory Authority (FINRA) has adopted
rules that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low
priced securities to their non-institutional customers, broker-dealers must make
reasonable efforts to obtain information about the customer's financial status,
tax status, investment objectives and other information. Under interpretations
of these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for at least some customers. FINRA
requirements make it more difficult for broker-dealers to recommend
that
their
customers buy our common stock, which may limit your ability to buy and sell our
stock and have an adverse effect on the market for our shares.
Our
current chief executive officer and sole director, Mr. Berge Abajian, owns a
significant percentage of our company and will be able to exercise significant
influence over our company.
Berge Abajian, our chief executive
officer and sole director, beneficially owns over 88% of our common
stock. Accordingly, Mr. Abajian will be able to determine the
composition of our board of directors, will retain the effective voting power to
approve all matters requiring shareholder approval, will prevail in matters
requiring shareholder approval, including, in particular the election and
removal of directors, and will continue to have significant influence over our
business. As a result of his ownership and position in the Company,
Mr. Abajian is able to influence all matters requiring shareholder action,
including significant corporate transactions. In addition, sales of
significant amount of shares held by Mr. Abajian, or the prospect of these
sales, could adversely affect the market price of our common
stock. Please see the section entitled “Security Ownership of Certain
Beneficial Owners and Management” for information about the ownership of common
stock held by our current executive officers, directors, and principal
shareholders.
We
do not expect to pay dividends for the foreseeable future and therefore, it is
unlikely our stockholders will receive any cash dividends as a result of their
investment.
For
the foreseeable future, it is anticipated that earnings, if any, that may be
generated from our operations will be used to finance our operations and that
cash dividends will not be paid to holders of our common stock.
ABOUT
THIS PROSPECTUS
You
should only rely on the information contained in this prospectus. We
have not, and the selling security holders have not, authorized anyone to
provide information different from that contained in this
prospectus. The selling security holders are offering to sell, and
seeking offers to buy, shares of our common stock only in jurisdictions where
offers and sales are permitted. You should not assume that the information in
this prospectus is accurate as of any date other than the date on the front of
the document.
In
this prospectus, references are made only to Diamond Information Institute,
Inc., (unless indicated otherwise), and not to any of the shareholders. You
should read carefully this entire prospectus, including the financial
information and related notes.
Available
Information
We
are not subject to the informational requirements of the Securities Exchange Act
of 1934, as amended. Once our securities are registered under the Securities Act
of 1933, we will file reports and other information with the Securities and
Exchange Commission. Once our registration statement becomes effective we shall
file supplementary and periodic information, documents and reports that are
required under section 13(a) and Section 15(d) of the Exchange Act, as
amended.
All
of our reports will be able to be reviewed through the SEC’s Electronic Data
Gathering Analysis and Retrieval System (EDGAR) which is publicly available
through the SEC’s website (http://www.sec.gov).
We
intend to furnish to our stockholders annual reports containing financial
statements audited by
our
independent registered public accounting firm and quarterly reports containing
reviewed unaudited interim financial statements for each of the first three
quarterly reporting periods during a fiscal year. You may contact the Securities
and Exchange Commission at 1-(800) SEC-0330 or you may read and copy any
reports, statements or other information that Diamond’s files with the
Securities and Exchange Commission at the Securities and Exchange Commission’s
public reference room at the following location:
Public
Reference Room
100
F. Street, N.W.
Washington,
D.C. 20549-0405
Telephone
1(800)-SEC-0330
We
have filed with the Commission a registration statement on Form S-1, including
exhibits and schedules, under the Securities Act of 1933, as amended with
respect to the securities offered in this prospectus by the selling stockholders
identified in this prospectus. This prospectus, which constitutes part of the
registration statement, does not include all the information set forth in the
registration statement and its exhibits, certain parts, such as Part II of the
registration statement, are omitted in accordance with the rules and regulations
of the SEC. For further information with respect to us and the common stock
offered in this prospectus, one should refer to such registration statement,
exhibits and schedules. A copy of the registration statement,
including the exhibits and schedules can may be reviewed and copied at the SEC’s
public reference facilities or through the SEC’s EDGAR website.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some
of the statements under “Prospectus Summary”, “Risk Factors”, “Plan of
Operation”, “Description of Business”, and elsewhere in this prospectus
constitute forward-looking statements. All statements other than
statements of historical fact are “forward-looking statements” for purposes of
federal and state securities laws, including, but not limited to, any
projections of earnings, revenue or other financial items; any statements of the
plans, strategies and objections of management for future operations; any
statements concerning proposed new services or developments; any statements
regarding future economic conditions or performance; any statements or belief;
and any statements of assumptions underlying any of the foregoing.
In
some cases, you can identify forward-looking statements by terminology such as
“may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect”,
“predicts”, “potential”, “anticipate” or the negative of such terms or other
comparable terminology. These forward-looking statements present our estimates
and assumptions only as of the date of this report.
Information
we provide in this prospectus or statements made by our directors, officers or
employees may constitute “forward-looking” statements and may be subject to
numerous risks and uncertainties. These statements are only
predictions and involve known and unknown risks, uncertainties, and other
factors that may cause our actual results, levels of activity, performance, or
achievements to be materially different from any future results, levels of
activity, performance, or achievements expressed or implied by such
forward-looking statements. Further, certain forward-looking statements are
based upon assumptions about future events, which may not prove to be
accurate.
Although
we believe that the expectations reflected in any of our forward-looking
statements are reasonable, actual results could differ materially from those
projected or assumed in any of our forward-looking statements. Our future
financial condition and results of operations, as well as any forward-looking
statements, are subject to change and inherent risks and uncertainties. The
factors impacting these risks and uncertainties include, but are not limited
to:
·
|
our
current lack of working capital;
|
·
|
increased
competitive pressures from existing competitors and new
entrants;
|
·
|
increases
in interest rates or our cost of borrowing or default under any material
debt agreements;
|
·
|
inability
to raise additional financing;
|
·
|
deterioration
in general or regional economic
conditions;
|
·
|
adverse
state or federal legislation or regulation that increases the costs of
compliance, or adverse findings by a regulator with respect to existing
operations;
|
·
|
inability
to efficiently manage our
operations;
|
·
|
inability
to achieve future sales levels or other operating
results;
|
·
|
the
unavailability of funds for capital expenditures;
and
|
·
|
operational
inefficiencies in distribution or other
systems.
|
The
forward-looking information set forth in this prospectus is of August 25, 2008,
and we undertake no duty to update this information, except as otherwise
required by the Federal securities laws. More information about potential
factors that could affect our business and financial results is included in the
section entitled “Risk Factors” beginning on page 4 of this
prospectus.
We will not receive any proceeds from
the disposition of the shares of common stock by the selling security holders or
their transferees, nor will such proceeds be available for our use or
benefit. We may receive proceeds up to $862,500 upon the execution of
all the warrants. As we cannot predict when or if we will receive
such proceeds, we expect to use those proceeds, if received, for working capital
purposes, which shall be allocated to projects or manufacturing needs of Diamond
at such time.
The shares to be offered by the selling
security holders are “restricted” securities under applicable federal and state
laws and are being registered under the Securities Act of 1933, as amended (the
“Securities Act”) to give the selling security holders the opportunity to
publicly sell these shares. The registration of these shares does not
require that any of the shares be offered or sold by the selling security
holders. The selling security holders may from time to time offer and
sell all or a portion of their shares in the over-the-counter market, in
negotiated transactions, or otherwise, at prices then prevailing or related to
the then current market price or at negotiated prices.
Each of the selling security holders
(i) purchased the securities covered by this prospectus in the ordinary course
of business, and (ii) at the time of purchase of such securities, the selling
security holder had no agreement or understanding, directly or indirectly, with
any person to distribute such securities.
Other than the costs of preparing this
prospectus and a registration fee to the SEC, we are not paying any costs
relating to the sales by the selling security holders.
Selling
Security Holder Information
The following is a list of selling
security holders who own or have the right to acquire an aggregate of 1,818,100
shares of our common stock covered in this prospectus.
|
|
|
|
|
|
|
Name
|
Number
of Shares of Common Stock Owned
|
Number
of Share Acquirable upon Exercise of Warrants
|
Total
Number of Shares Beneficially Owned (1)
|
Percentage
of Shares Owned (1)
|
Number
of Shares Offered (2)
|
Shares
Owned after Offering (3)
|
Abajian,
Arpi (4)
10
Avon Court
Hillsdale,
NJ 07605
|
25,000
|
0
|
25,000
|
0.2%
|
25,000
|
0
|
Abajian,
Shant (4)
10
Avon Court
Hillsdale,
NJ 07605
|
25,000
|
0
|
25,000
|
0.2%
|
25,000
|
0
|
Advanced
Integrated Solutions, Inc. (5)
15
Garden Court
Washington
Township, NJ 07676
|
100,000
|
0
|
100,000
|
0.8%
|
100,000
|
0
|
Amato,
Ralph (6)
5782
Caminito Empressa
La
Jolla, CA 92037
|
50,000
|
0
|
50,000
|
0.4%
|
50,000
|
0
|
Anastasio,
Dena (7)
7
Pironi Court
Woodbury,
NY 11797
|
25,000
|
25,000
|
50,000
|
0.4%
|
50,000
|
0
|
Anastasio,
Saverio (7)
7
Pironi Court
Woodbury,
NY 11797
|
25,000
|
25,000
|
50,000
|
0.4%
|
50,000
|
0
|
Artinian
Co., Ltd (8)
41/`8-20
Silom Soi Road
Bankok
|
150,000
|
150,000
|
300,000
|
2.5%
|
300,000
|
0
|
Baghdadlian,
Hagop (9)
420
Hazlit Avenue
Leonia,
NJ 07605
|
100,000
|
0
|
100,000
|
0.8%
|
100,000
|
0
|
Baghdadlian,
Hagop and Silva (7)
420
Hazlit Avenue
Leonia,
NJ 07605
|
150,000
|
150,000
|
300,000
|
2.5%
|
300,000
|
0
|
Belekdanian,
Hagop (7)
15
Garden Court
Washington
Township, NJ 07676
|
25,000
|
25,000
|
50,000
|
0.4%
|
50,000
|
0
|
Belekdanian,
Serda (7)
15
Garden Court
Washington
Township, NJ 07676
|
25,000
|
25,000
|
50,000
|
0.4%
|
50,000
|
0
|
Beylerian,
Nvair (10)
586
Mazur Avenue
Paramus,
NJ 07652
|
50,000
|
0
|
50,000
|
0.4%
|
50,000
|
0
|
Beylerian,
Zareh (10)
586
Mazur Avenue
Paramus,
NJ 07652
|
50,000
|
0
|
50,000
|
0.4%
|
50,000
|
0
|
Bezjian,
Christopher (4)
74
Park Avenue
Emerson,
NJ 07630
|
2,500
|
0
|
2,500
|
*
|
2,500
|
0
|
Bezjian,
John (4)
74
Park Avenue
Emerson,
NJ 07630
|
12,500
|
0
|
12,500
|
0.1%
|
12,500
|
0
|
Funicelli,
Suzanne (4)
42
Centennial Court
Totowa,
NJ 07512
|
12,500
|
0
|
12,500
|
0.1%
|
12,500
|
0
|
Gabbay,
Moshe (7)
124
Circle Drive
Roslyn
Heights, NY 11577
|
25,000
|
25,000
|
50,000
|
0.4%
|
50,000
|
0
|
Goneconti,
Ellen and Anthony (7)
12
Carlton Court
New
City, NY 10956
|
50,000
|
50,000
|
100,000
|
0.8%
|
100,000
|
0
|
Hatoum,
Joyce (4)
640
Totowa Road
Totowa,
NJ 07512
|
5,000
|
0
|
5,000
|
*
|
5,000
|
0
|
Karolweski,
Mark (4)
89C
Marion Pepe Drive
Lodi,
NJ 07644
|
5,000
|
0
|
5,000
|
*
|
5,000
|
0
|
Kuropatkin,
Stuart (7)
14
Carlton Court
New
City, NY 10956
|
50,000
|
50,000
|
100,000
|
0.8%
|
100,000
|
0
|
Marchese,
Rosa (4)
219
Betsy Ross Drive
Orangeburg,
NY 10962
|
25,000
|
0
|
25,000
|
0.2%
|
25,000
|
0
|
Mezzina,
Amanda (11)
51
Beverly Road
Hillsdale,
NJ 07642
|
100
|
0
|
100
|
*
|
100
|
0
|
Mezzina,
Andrew (11)
51
Beverly Road
Hillsdale,
NJ 07642
|
100
|
0
|
100
|
*
|
100
|
0
|
Mezzina,
Joseph (11)
51
Beverly Road
Hillsdale,
NJ 07642
|
100
|
0
|
100
|
*
|
100
|
0
|
Mezzina,
Rosalba (11)
51
Beverly Road
Hillsdale,
NJ 07642
|
100
|
0
|
100
|
*
|
100
|
0
|
Runmark,
Frances (11)
2717
Westmoreland Drive
Plano,
TX 75093
|
200
|
0
|
200
|
*
|
200
|
*
|
Sirica,
Alfred (7)
7524
175
th
Street
Fresh
Meadows, NY 11366
|
16,667
|
16,667
|
33,334
|
0.3%
|
33,334
|
0
|
Sirica,
Evirdiki (7)
7524
175
th
Street
Fresh
Meadows, NY 11366
|
16,667
|
16,667
|
33,334
|
0.3%
|
33,334
|
0
|
Sirica,
Katherine (7)
7524
175
th
Street
Fresh
Meadows, NY 11366
|
16,666
|
16,666
|
33,332
|
0.3%
|
33,332
|
0
|
Stoecklein
Law Group (12)
402
West Broadway, Suite 400
San
Diego, CA 92101
|
150,000
|
0
|
150,000
|
1.3%
|
150,000
|
0
|
Valenti,
Amy (4)
103
Lenox Road
Wayne,
NJ 07470
|
5,000
|
0
|
5,000
|
*
|
5,000
|
0
|
Wanstrath,
Scott (13)
138
Vista Ridge Drive
South
Lebanon, OH
|
50,000
|
0
|
50,000
|
0.4%
|
50,000
|
0
|
|
|
|
|
|
|
|
*
Denotes less than 0.0%.
(1)
|
All
shares owned in this column and all percentages are based on 11,443,100
shares of common stock issued and outstanding on May 13, 2008; plus
575,000
shares of common
stock issuable upon exercise of warrants held by selling security
holders.
|
(2)
|
This
table assumes that each security holder will sell all of its shares
available for sale during the effectiveness of the registration statement
that includes this prospectus. Selling security holders are not
required to sell their shares. See “Plan of Distribution”
beginning on page 14.
|
(3)
|
Assumes
that all shares registered for resale by this prospectus have been issued
and sold.
|
(4)
|
Diamond
authorized the issuance of a total of 117,500 shares of its common stock
as bonus compensation to its employees on January 20, 2008. The
shares are to be issued on a quarterly basis during the first two quarters
of the 2008 fiscal year.
|
(5)
|
Advanced
Integrated Solutions, Inc. received 100,000 shares pursuant to a Debt
Conversion Agreement. Diamond agreed to issue 1 share of common
stock for each $1 of debt outstanding to Advanced Integrated Solutions,
Inc. Mr. Hagop
Beledankian
has the authority to exercise dispositive and voting power over the shares
of common stock owned by Advanced Integrated
Solutions.
|
(6)
|
Mr.
Ralph Amato served on Diamond’s Advisory Panel during 2007 and provided
consulting work through his company Ventana Capital
Partners. Subsequent to the year ended December 31, 2007, Mr.
Amato resigned from the Advisory Panel and no longer provides consulting
services to Diamond. Mr. Amato was granted 50,000 shares of
common stock for his services on the Advisory
Panel.
|
(7)
|
Diamond
conducted a private placement of its stock in April of 2007 whereby units
of 25,000 shares and 25,000 warrants were offered to accredited
investors.
|
(8)
|
Artinian
Co, Ltd. received 150,000 shares and 150,000 warrants exercisable at $1.50
per share pursuant to a Debt Conversion Agreement. Mr. Arto
Artinian has the authority to exercise dispositive and voting power over
the shares of common stock and warrants owned by Artinian Co.,
Ltd.
|
(9)
|
Hagop
Baghdadlian serves on the Advisory Panel for Diamond and was granted
50,000 shares of common stock for each year of his services on the
panel.
|
(10)
|
During
the first quarter of 2008, Mr. Zareh Beylerian was appointed to Diamond’s
Advisory Panel and 50,000 shares of common stock were granted for his
services to be conducted during the 2008 year. Mr. Beylerian
elected to grant half of his shares to his wife, Nvair
Beylerian.
|
(11)
|
Diamond
conducted a private placement of its common stock in January 2008 whereby
Diamond sold common stock at a price of $1.00 for one share to accredited
investors.
|
(12)
|
Stoecklein
Law Group was issued 150,000 shares pursuant to its retainer and in
connection with legal services relating to the preparation of the S-1
registration. Mr. Donald J. Stoecklein has the authority to
exercise dispositive and voting power over the shares of common stock and
warrants owned by Stoecklein Law
Group.
|
(13)
|
Scott
Wanstrath served as Diamond’s President during 2007 but subsequent to the
year ended December 31, 2007, he resigned. Mr. Wanstrath was
originally issued 250,000 shares held by Diamond’s CEO in connection with
his employment agreement; however, upon Mr. Wanstrath’s resignation
200,000 shares were cancelled as a result of the agreement not being
completed to its full term.
|
Unless
footnoted above, based on information provided to us, none of the selling
security holders are affiliated or have been affiliated with any broker-dealer
in the United States. Except as otherwise provided in this
prospectus, none of the selling security holders are affiliated or have been
affiliated with us, any of our predecessors or affiliates during the past three
years.
This
offering shall begin upon the date of this prospectus and will expire 12 months
after the date of this prospectus. We have not authorized any person
to give any information or to make any representations in connection with
this offering other than those contained in this prospectus and if given or
made, that information or representation must not be relied on as having
been authorized by us. This prospectus is not an offer to sell or a
solicitation of an offer to buy any of the securities to any person in any
jurisdiction in which that offer or solicitation is unlawful. Neither
the delivery of this prospectus nor any sale hereunder shall under
any circumstances, create any implication that the information in this
prospectus is correct as of any date later than the date of this
prospectus. Any purchases made by officers, directors, and their affiliates
shall be for investment purposes and not for resale. In addition, no
proceeds from this offering will be used to finance any such
purchases. Purchasers of share either in this offering or in any subsequent
trading market that may develop must be residents of states in which the
securities are registered or exempt from registration. Some of the
exemptions are self-executing, that is to say that there are no notice or
filing requirements, and compliance with the conditions of the exemption
renders the exemption applicable.
Shares
Offered by Selling Security Holders
As
of the date of this prospectus, we have not been advised by the selling security
holders as to any plan of distribution. The prices at which the
selling security holders may sell the shares has arbitrarily been determined to
be at $1.00 per share or until a market price for the shares is determined upon
quotation on the OTC Bulletin Board or listed on a securities
exchange. Distributions of the shares by the selling security
holders, or by their partners, pledgees, donees (including charitable
organizations), transferees or other successors in interest, may from time to
time be offered for sale either directly by such individual, or through
underwriters, dealers or agents or on any exchange on which the shares may from
time to time be traded, in the over-the-counter market, or in independently
negotiated transactions or otherwise. The selling stockholders have
the sole and absolute discretion not to accept any purchase offer or make any
sale of shares if they deem the purchase price to be unsatisfactory at any
particular time. The methods by which the shares may be sold
include:
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a
block trade (which may involve crosses) in which the broker or dealer so
engaged will attempt to sell the securities as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
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purchases
by a broker or dealer as principal and resale by such broker or dealer for
its own account pursuant to this
prospectus;
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exchange
distributions and/or secondary
distributions;
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sales
in the over-the-counter market;
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underwritten
transactions;
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ordinary
brokerage transactions and transactions in which the broker solicits
purchasers; and
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privately
negotiated transactions.
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If
a trading market for our common stock develops, the selling security holders may
also sell the shares directly to market makers acting as principals and/or
broker-dealers acting as agents for themselves or their customers. Such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling security holders and/or the purchasers of shares
for whom such broker-dealers may act as agents or to whom they sell as
principal, or both, which compensation as to a particular broker-dealer might be
in excess of customary commissions. Market makers and block purchasers
purchasing the shares will do so for their own account and at their own
risk. It is possible that a selling security holder will attempt to sell
shares of common stock in block transactions to market makers or other
purchasers at a price per share which may be below the then market
price. We cannot assure you that all or any of the shares offered by this
prospectus will be issued to, or sold by, the selling security
holders. The selling security holders and any brokers, dealers or
agents, upon affecting the sale of any of the shares offered by this prospectus,
may be deemed "underwriters" as that term is defined under the Securities Act or
the Securities Exchange Act of 1934, or the rules and regulations
thereunder.
The
selling security holders, alternatively, may sell all or any part of the shares
offered by this prospectus through an underwriter. No selling security holder
has entered into an agreement with a prospective underwriter. If a selling
security holder enters into such an agreement or agreements, the relevant
details will be set forth in a supplement or revision to this
prospectus.
The
selling security holders and any other persons participating in the sale or
distribution of the shares will be subject to applicable provisions of the
Securities Exchange Act of 1934 and the rules and regulations thereunder,
including, without limitation, Regulation M, which may restrict certain
activities of, and limit the timing of purchases and sales of any of the shares
by the selling stockholders or any other such person. Furthermore,
under Regulation M, persons engaged in a distribution of securities are
prohibited from simultaneously engaging in market making and certain other
activities with respect to
such
securities for a specified period of time prior to the commencement of such
distributions, subject to specified exceptions or exemptions. All of these
limitations may affect the marketability of the shares.
Under
the regulations of the Securities Exchange Act of 1934, any person engaged in a
distribution of the shares offered by this prospectus may not simultaneously
engage in market making activities with respect to our common stock during the
applicable "cooling off" periods prior to the commencement of such
distribution. In addition, and without limiting the foregoing, the
selling security holders will be subject to applicable provisions, rules and
regulations of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, which provisions may limit the timing of purchases and
sales of common stock by the selling security holders.
We
have advised the selling stockholders that, during such time as they may be
engaged in a distribution of any of the shares we are registering on their
behalf in this registration statement, they are required to comply with
Regulation M as promulgated under the Securities Exchange Act of
1934. In general, Regulation M precludes any selling security holder,
any affiliated purchasers and any broker-dealer or other person who participates
in such distribution from bidding for or purchasing, or attempting to induce any
person to bid for or purchase, any security which is the subject of the
distribution until the entire distribution is complete. Regulation M
defines a "distribution" as an offering of securities that is distinguished from
ordinary trading activities by the magnitude of the offering and the presence of
special selling efforts and selling methods. Regulation M also
defines a "distribution participant" as an underwriter, prospective underwriter,
broker, dealer, or other person who has agreed to participate or who is
participating in a distribution. Our officers and directors, along
with affiliates, will not engage in any hedging, short, or any other type of
transaction covered by Regulation M. Regulation M prohibits any bids
or purchases made in order to stabilize the price of a security in connection
with the distribution of that security, except as specifically permitted by Rule
104 of Regulation M. These stabilizing transactions may cause the
price of the common stock to be higher than it would otherwise be in the absence
of those transactions. We have advised the selling security holders
that stabilizing transactions permitted by Regulation M allow bids to purchase
our common stock so long as the stabilizing bids do not exceed a specified
maximum, and that Regulation M specifically prohibits stabilizing that is the
result of fraudulent, manipulative, or deceptive practices. Selling
security holders and distribution participants will be required to consult with
their own legal counsel to ensure compliance with Regulation M.
Listing
and Trading of the Diamond Shares
There is currently no public market for
Diamond shares. Upon completion of this registration, our shares will
not initially qualify for trading on any national or regional stock exchange or
on the NASDAQ Stock Market. Following an effective registration, we
intend to apply through a market maker to have our shares included on the OTC
Bulletin Board. We will also attempt to have one or more
broker-dealers agree to serve as market makers and quote our shares, if our
application for trading is successful. However, we have no present
arrangement or agreement with any broker-dealer to serve as a market maker for
our common shares, and we can offer no assurances that any market for our common
shares will develop. Even if a market develops for our shares, we can
offer no assurances that the market will be active, or that it will afford our
stockholders an avenue for selling their shares. Many factors will
influence the market price for our common shares, including the depth and
liquidity of the market which develops, investor perception of our business,
general market conditions, and our growth prospects.
Although currently there is no public
trading market for Diamond shares, we believe a market could develop if our
request for inclusion by a market maker on the OTC Bulletin Board is
successful. Diamond shares after an effective registration will be
freely transferable, except for shares received by persons who may be deemed to
be affiliates of Diamond under the Securities Act of 1933.
Persons
who may be deemed to be affiliates of Diamond after the registration generally
include individuals or entities that control, are controlled by, or are under
common control with Diamond and may include certain directors, officers, and
significant stockholders of Diamond. Persons who are affiliates of
Diamond will be permitted to sell their shares only pursuant to an effective
registration statement under the Securities Act or an exemption from the
registration requirements of the Securities Act, such as the exemptions afforded
by Section 4(1) of the Securities Act and the provisions of Rule 144
thereunder.
There can be no assurance as to whether
the Diamond shares will be actively traded or as to the price at which the
shares will trade. Some shareholders who receive Diamond shares may
decide that they do not want shares in a company involved in the jewelry
industry and may sell their Diamond shares following an effective
registration. This may delay the development of an orderly trading
market in Diamond shares for a period. Until an orderly market
develops, the prices at which Diamond shares trade may fluctuate significantly
and may be lower than the price that would be expected for a fully distributed
issue. Prices for our shares will be determined in the marketplace
and may be influenced by many factors, including the depth and liquidity of the
market for our shares, our results of operations, what investors think of our
business, and changes in general economic market conditions.
Penny
Stock Regulations
Our
common stock will be considered a "penny stock" as defined by Section 3(a)(51)
and Rule 3a51-1 under the Securities Exchange Act of 1934. A penny stock is any
stock that:
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sells
for less than $5 a share,
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is
not listed on an exchange, and
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is
not a stock of a "substantial
issuer."
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Currently,
we are not a "substantial issuer" and cannot become one until we have net
tangible assets of at least $5 million, which we do not now have.
Statutes
and SEC regulations impose strict requirements on brokers that recommend penny
stocks. Before a broker-dealer can recommend and sell a penny stock to a new
customer who is not an institutional accredited investor, the broker-dealer must
obtain from the customer information concerning the person's financial
situation, investment experience and investment objectives. Then, the
broker-dealer must "reasonably determine"
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that
transactions in penny stocks are suitable for the person
and
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the
person, or his/her advisor, is capable of evaluating the risks in penny
stocks.
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After
making this determination, the broker-dealer must furnish the customer with a
written statement describing the basis for this suitability determination. The
customer must sign and date a copy of the written statement and return it to the
broker-dealer. Finally the broker-dealer must also obtain from the
customer a written agreement to purchase the penny stock, identifying the stock
and the number of shares to be purchased. Compliance with these
requirements can often delay a proposed transaction and can result in many
broker-dealer firms adopting a policy of not allowing their representatives to
recommend penny stocks to their customers.
Another
SEC rule requires a broker-dealer that recommends the sale of a penny stock to a
customer to furnish the customer with a "risk disclosure document." This
document includes a description of the penny stock market and how it functions,
its inadequacies and shortcomings, and the risks
associated
with investments in the penny stock market. The broker-dealer must
also disclose the stock's bid and ask price information and the dealer's and
salesperson's compensation for the proposed transaction. Finally, the
broker-dealer must furnish the customer with a monthly statement including
specific information relating to market and price information about the penny
stocks held in the customer's account.
The
above penny stock regulatory scheme is a response by the Congress and the SEC to
abuses in the marketing of low-priced securities by "boiler room"
operators. The scheme imposes market impediments on the sale and
trading of penny stocks. It limits a stockholder's ability to resell
a penny stock.
Our
management believes that the market for penny stocks has suffered from patterns
of fraud and abuse. Such patterns include:
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Control
of the market for the security by one or a few broker-dealers that are
often related to the promoter or
issuer;
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Manipulation
of prices through prearranged matching of purchases and sales and false
and misleading press releases;
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"Boiler
room" practices involving high pressure sales tactics and unrealistic
price projections by inexperienced sales
persons;
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Excessive
and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
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Wholesale
dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the inevitable
collapse of those prices with consequent investor
losses.
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State
Securities – Blue Sky Laws
There
is no established public market for our common stock, and there can be no
assurance that any market will develop in the foreseeable future. Transfer of
our common stock may also be restricted under the securities laws or securities
regulations promulgated by various states and foreign jurisdictions,
commonly referred to as "Blue Sky" laws. Absent compliance with such individual
state laws, our common stock may not be traded in such jurisdictions. Because
the securities registered hereunder have not been registered for resale under
the blue sky laws of any state, the holders of such shares and persons who
desire to purchase them in any trading market that might develop in the future,
should be aware that there may be significant state blue-sky law restrictions
upon the ability of investors to sell the securities and of purchasers to
purchase the securities. Accordingly, investors may not be able to liquidate
their investments and should be prepared to hold the common stock for an
indefinite period of time.
DESCRIPTION
OF SECURITIES
Common
Stock
Our certificate of incorporation
authorizes the
issuance of 25,000,000
shares of common stock, $0.001 par value per share, of which 11,443,100 shares
were outstanding as of May 13, 2008. Holders of common stock have no cumulative
voting rights. Holders of shares of common stock are entitled to
share
ratably
in dividends, if any, as may be declared, from time to time by the board of
directors in its discretion, from funds legally available to be
distributed. In the event of a liquidation, dissolution or winding up
of Diamond, the holders of shares of common stock are entitled to share pro rata
all assets remaining after payment in full of all liabilities. Holders of common
stock have no preemptive rights to purchase our common stock. There
are no conversion rights or redemption or sinking fund provisions with respect
to the common stock. Our counsel, Stoecklein Law Group, has opined
that all of the outstanding shares of common stock are presently authorized,
validly issued, fully paid and non-assessable. Furthermore, the
entire legal opinion given by Stoecklein Law Group can be viewed in its entirety
as Exhibit 5 to this prospectus.
Preferred
Stock
Our board of directors is authorized
(by resolution and by filing an amendment to our certificate of incorporation
and subject to limitations prescribed by the New Jersey Business Corporation
Act) to issue from time to time, shares of Preferred stock in one or more
series, to establish from time to time the number of shares to be included in
each series and to fix the designation, powers, preferences and other rights of
the shares of each such series and to fix the qualifications, limitations and
restrictions thereon, including, but without limiting the generality of the
foregoing, the following:
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the
number of shares constituting that series and the distinctive designation
of that series;
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the
dividend rate on the shares of a series, whether dividends are cumulative,
and if so, from which date or dates, and the relative rights of priority,
if any, of payment of dividends on shares of that
series;
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whether
a series has voting rights, in addition to voting rights provided by law,
and if so, the terms of those voting
rights;
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whether
that series has conversion privileges, and if so, the terms and conditions
of conversion, including provisions for adjusting the conversion rate in
such events as our board of directors
determines;
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whether
or not the shares of a series are redeemable, and if so, the terms and
conditions of redemption, including the date upon or after which they are
redeemable, and the amount per share payable in case of redemption, which
may vary under different conditions and at different redemption
dates;
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whether
a series has a sinking fund for the redemption or purchase of shares of a
series , and if so, the terms and amount relating to that sinking
fund;
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the
rights of the shares of a series that in event of voluntary or involuntary
liquidation, dissolution or winding up of the Company, and the relative
rights of priority, if any, of payment of shares of that series;
and
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any
other relative powers, preferences and rights of a series and
qualifications, limitations or restrictions of a
series.
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One of the effects of undesignated
preferred stock may be to enable the board of directors to render more difficult
or to discourage an attempt to obtain control of us by means of a tender offer,
proxy contest, merger or otherwise, and thereby to protect the continuity of our
management. The issuance of shares of preferred stock pursuant to the board of
director’s authority described above may adversely affect the rights of holders
of common stock. For example, preferred stock issued by us may rank prior to the
common stock as to dividend rights, liquidation preference or both, may have
full or limited voting rights and may be convertible into shares of common
stock. Accordingly, the issuance of shares of preferred stock may discourage
bids for the common stock at a premium or may otherwise adversely affect the
market price of the common stock.
Transfer
Agent
The Company has engaged Pacific Stock
Transfer Company, to act as their transfer agent.
INTEREST
OF NAMED EXPERTS AND COUNSEL
The financial statements of Diamond as
of December 31, 2007 and December 31, 2006 are included in this prospectus and
have been audited by Moore Stephens, P.C., an independent registered public
accounting firm, as set forth in their report appearing elsewhere in this
prospectus and are included in reliance upon such reports given upon the
authority of such firm as an expert in accounting and auditing.
The legality of the shares offered
hereby will be passed upon for us by Stoecklein Law Group, 402 West Broadway,
Suite 690, San Diego, California 92101.
Neither of Moore Stephens nor
Stoecklein Law Group has been hired on a contingent basis, will receive a direct
or indirect interest in Diamond, other than the issuance to Stoecklein Law Group
of 250,000 shares pursuant to its retainer agreement, or have been a promoter,
underwriter, voting trustee, director, officer, or employee of
Diamond.
POSITION
ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
No
director of Diamond will have personal liability to us or any of our
shareholders for monetary damages for breach of fiduciary duty as a director
involving any act or omission of any director since provisions have been made in
our certificate of incorporation limiting liability. The foregoing provisions
shall not eliminate or limit the liability of a director for:
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any
breach of the director’s duty of loyalty to us or our shareholders
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acts
or omissions not in good faith or, which involve intentional misconduct or
a knowing violation of law
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for
any transaction from which the director derived an improper personal
benefit.
Our
Bylaws provide for indemnification of our directors, officers, and employees to
the fullest extent possible from and against any and all claims of any type
arising from or related to future acts or omissions as a director, officer, and
employees if they were not engaged in willful misfeasance or malfeasance in the
performance of their duties; provided that in the event of a settlement the
indemnification will apply only when the board of directors approves settlement
and reimbursement as being for our best interests.
Our
officers and directors are accountable to us as fiduciaries, which means they
are required to exercise good faith and fairness in all dealings affecting
Diamond. In the event that a shareholder believes the officers and/or directors
have violated their fiduciary duties, the shareholder may, subject to applicable
rules of civil procedure, be able to bring a class action or derivative suit to
enforce the shareholder’s rights, including rights under federal and state
securities laws and regulations to recover damages from and require an
accounting by management. Shareholders, who have suffered losses in connection
with the purchase or sale of their interest in Diamond in connection with a sale
or purchase, including the misapplication by any officer or director of the
proceeds from the sale of these securities, may be able to recover losses from
us.
We undertake the
following
:
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the
“Act”) may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission this type of
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable.
Business
Development
Diamond Information Institute, Inc. was
incorporated in the State of New Jersey in October of 1988 and had minimal
activity until 1995 when it began in the business of jewelry
manufacturing. Diamond has been engaged in the design and manufacture
of upscale jewelry since 1995 through its tradename of the “Bergio”
line. In 2002, Diamond launched its “Bergio Bridal
Collection”.
Business
of Issuer
Diamond is entering into its 19
th
year of
operations and concentrates on boutique, upscale jewelry
stores. Diamond currently sells its jewelry to approximately 150
independent jewelry retailers across the United States and has spent over $3
million in branding the Bergio name through tradeshows, trade advertising,
national advertising and billboard advertising since launching the line in
1995. Diamond has manufacturing control over its line as a result of
having a manufacturing facility in New Jersey as well as subcontracts with
facilities in Italy and Bangkok.
Diamond has historically sold its
products directly to distributors, retailers and other wholesalers, who then in
turn sell their products to consumers through retail
stores. Independent retail jewelers that offer the Bergio line are
not under formal contracts and most sell competing products. Diamond
acquires all raw gemstones, precious metals and other raw materials used for
manufacturing its products on the open market. Diamond is not
constrained in its purchasing by any contracts with any suppliers and acquires
raw material based upon, among other things, availability and price on the open
wholesale market.
Industry
Background
The
manufacturing and retail jewelry business is fragmented and subject to
increasingly intense competition. Jewelry manufacturing consists of
buying raw materials, designing samples, arranging for jewelry to be made from
these materials, and finally marketing of finished products to wholesalers and
retailers. Diamond’s management estimates that the jewelry
manufacturing industry is largely comprised of privately held companies, much of
which are believed to be family owned and operated. Design
manufacturers wholesale to retail jewelry stores and large
retailers. Common industry practice is for design manufacturers to
provide 90 day financing and allow exchanges for slow moving merchandise with
the retailers, thereby causing a constant negative cash flow position for most
design manufacturers. As a result of this scenario, most design
manufacturers establish bank lines of credit to facilitate the manufacture and
production of their jewelry lines.
The success of the jewelry industry is
affected by trends in the general economy because jewelry purchases are
considered discretionary. Adverse trends in the general economy such
as the economic condition and perceptions of such conditions by consumers,
employment rates, the level of consumers’
disposable
income, business conditions, interest rates, consumer debt levels, availability
of credit and levels of taxation all may affect the jewelry industry and its
consumers.
Principal
Products
Diamond’s
products consist of a wide range of unique styles and designs made from precious
metals such as gold, platinum and Karat gold, as well as diamonds and other
precious stones. We continuously innovate and change our designs
based upon consumer trends and as a result of new designs being created we
believe we are able to differentiate ourselves and strengthen our
brands. We sell our products to our customers at price points that
reflect the market price of the base material plus a mark up reflecting our
design fee and processing fees.
Each
year, most jewelry manufacturers bring new products to market. Diamond considers
itself to be a trendsetter in the jewelry manufacturing. As a result,
Diamond comes out with a variety of products throughout the year that it
believes have commercial potential to meet what it feels are new trends within
the industry. The “Bergio” designs consist of upscale jewelry that
includes white diamonds, yellow diamonds, pearls, and colored stones, in 18K
gold, platinum, and palladium. We currently design and produce
approximately 50 to 75 product styles. Prices for our products range
from $400 to $200,000.
Diamond’s
product range is divided into three fashion lines: (i) 18K gold line, (ii) a
bridal line, and (iii) a couture and/or one of kind pieces. Mr. Abajian consults
regularly with the design teams of his Italian manufacturers, which usually
results in a constant continuation of new products and sometimes entire lines
being developed. Typically, new products come on line approximately
every 3 months and most recently, Diamond introduced its latest collection
“Power in Pink”, which launched in April of this year and consists of
approximately 35 pieces made with pink gold and diamonds. Depending
on the timing and styling at any point in time, Diamond’s products and
collections would fall in one the various categories shown below:
1.
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Whimsical.
The whimsical line includes charms, crosses and other “add-on”
pieces.
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2.
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Middle.
The proposed middle line will consist of fashion jewelry utilizing colored
stones, diamonds and pearls applied to a variety of applications such as
necklaces, pendants, earrings, bracelets and rings. The metals that
Diamond intends to use for the Middle line include platinum, 18K white
& yellow gold.
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3.
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Couture.
The Couture line is Diamond’s most luxurious line, and consists of one of
a kind pieces, new showcase products each year, and predominantly utilizes
diamonds, platinum and other precious metals and stones of the highest
grade and quality available.
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4.
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Bridal.
The Bridal line is Diamond’s core business. Diamond attempts to stay on
the forefront of trends and designs in the bridal market with the latest
in wedding sets, engagement rings and wedding bands for both men and
women.
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Each
year, Diamond attempts to expand and/or enhance these lines, while constantly
seeking to identify trends that it believes exist in the market for new styles
or types of merchandise. Design and innovation are the primary focus
of Diamond’s manufacturing and it is less concerned with the supply and capacity
of raw materials. Over the last 19 years, Mr. Abajian has been the
primary influencer over the Bergio collections. Mr. Abajian with his
contacts, which are located mostly overseas, regularly meet to discuss,
conceptualize and develop Bergio’s various products and
collections. When necessary, additional suppliers and design teams
can be brought in as the market needs dictate. Management intends
to
maintain a diverse line of jewelry to mitigate concentration of sales and
continuously expand its market reach.
Most of the inventory and raw materials
purchased by Diamond occur through its manufacturers located in
Europe. The inventory that is directly maintained by the company is
loosely based on recent sales and revenues of Diamond’s products but ultimately
is at the discretion of Mr. Abajian and his experience in the
industry. The entire inventories kept on hand by Diamond are
commodities that can be incorporated into future products or can be sold on the
open market. Additionally, Diamond performs physical inventory
inspections on a quarterly basis to assess upcoming styling needs and consider
the current pricing in metals and stones needed for its products.
Typically,
the age and standing of our accounts receivable is from 30 to 120
days. However, during the year ended December 31, 2007, Diamond did
experience an increase in accounts receivable going past 120 days most likely
attributable to the current economic climate, as retailers and dealers have
needed to take longer periods of time to settle their
accounts. Diamond also experienced an inventory write-down in 2007,
which was prompted by the refinement of cost and quantity on hand data
attributed to the conversion of the Company’s books and records to new
accounting software in early 2007. It is believed the new software is
a more versatile system and Diamond does not anticipate similar inventory
write-downs in the future.
During the year ended December 31,
2007, Diamond had unusually high administrative costs as a result of a failed
merger. As a result Diamond authorized the conversion of its debt
into the Company’s common stock with two of its vendors. This is
considered an unusual method of payment for Diamond but management felt it
prudent to use alternative financial tools to preserve some of its cash flow
during this time period.
Distribution
Methods and Marketing
Diamond continues to devote its efforts
towards brand development and utilizes marketing concepts in an attempt to
enhance the marketability of its products. During the past several
years, Diamond has carried out its brand development strategy based on its
product quality and design excellence, which is highlighted through the
company’s sales personnel. Diamond has established significant
networks and relationships with retailers which allow our products to be
promoted and sold nationwide. Diamond maintains a broad base of
customers and concentrates on retailers that sell fashionable and high end
jewelry. Diamond also works with its customers to adjust product
strategies based on the customer’s feedback to try and decrease the likelihood
of overstocked or undesired products.
Diamond
intends to further promote its products and brand by participating in trade
shows and various exhibitions, consumer and trade advertisements, billboard
advertisements, as well as make specialty appearances in retail stores carrying
the company’s products.
Sources
and Availability of Raw Materials and Principal Suppliers
Approximately 80% of Diamond’s product
line is contracted to manufacturing suppliers in Italy, who then procure the raw
materials in accordance with the specifications and designs submitted by
Diamond. However, the general supply of precious metals and stones
used by Diamond can be reasonably forecast even though the prices will fluctuate
often. Any price differentials in the precious metals and stones will
typically be passed on to the customer.
For the raw materials not procured by
contracted manufacturers, Diamond has approximately 5 suppliers that compete for
their business, with the Company’s largest gold suppliers being ASD Casting,
Century Casting and Metro Gold. Most of the Company’s precious stones
are purchased from C. Mahandra & Sons and EFD. We do not have any
formal agreements with any of our suppliers but have established an ongoing
relationship with each of our suppliers.
Customers
Diamond had one customer, Western
Stones and Metals, during the year ended December 31, 2007, that accounted for
approximately 9% of its annual sales. However, Diamond did not have
any other single customer that represented 5% or more of its annual sales and
therefore is not dependent on any specific customers. Additionally,
Diamond anticipates that Western Stones and Metals, may account for more than 5%
(expected to account for approximately 7%) of our annual sales for the year
ended December 31, 2008 based on recent orders placed and our current
projections.
Intellectual
Property
Bergio is a federally registered
trademarked name owned by Diamond. Since the first trademark of
“Bergio” was filed all advertising, marketing, trade shows and overall
presentation of the Company’s product to the public has prominently displayed
this trademark. As additional lines are designed and added to the
Company’s products, the Company may trademark new names to distinguish the
particular products and jewelry lines.
Personnel
At
December 31, 2007, Diamond had 8 full-time employees and 1 part-time
employee. Of Diamond’s current employees, 2 are sales and marketing
personnel, 5 are manufacturing and 2 hold administrative and executive
positions. No personnel are covered by a collective bargaining
agreement. Diamond, Inc.'s relationship with its employees is
believed to be good. We intend to use the services of independent
consultants and contractors when possible or until we are able to hire personnel
in house.
Competition
The
jewelry design and manufacturer’s industry is extremely competitive and has low
barriers to entry. Diamond competes with other jewelry design and
manufacturers of upscale jewelry to the retail jewelry stores. There
are over 4,000 jewelry design and manufacturer’s companies, several of which
have greater experience, brand name recognition and financial resources than
Diamond. You are urged to review the risk factor addressing
competition.
Environmental
Regulation and Compliance
The United States environmental laws do
not materially impact Diamond’s manufacturing operations as a result of having a
large majority of the its jewelry manufacturing being conducted
overseas. In fact, approximately 80% of Diamond’s manufacturing is
contracted to quality suppliers in the vicinity of Valenza, Italy with the
remaining 20% of setting and finishing work being conducted in Diamond’s New
Jersey facility. The setting and finishing work done in its New
Jersey facility involves the use of precision lasers, which use soap and water
rather than soldering. Also a standard polishing compound is used for
the finishing work but it does not have a material impact on Diamond’s cost and
effect of compliance with environmental laws.
Government
Regulation
Currently,
Diamond is subject to all of the government regulations that regulate businesses
generally such as compliance with regulatory requirements of federal, state, and
local agencies and authorities, including regulations concerning workplace
safety, labor relations, and disadvantaged businesses. In
addition, the Company’s operations are affected by federal and state laws
relating to marketing practices in the retail jewelry industry. Diamond is
subject to the jurisdiction of federal, various state and other taxing
authorities. From time to time, these taxing authorities review or audit
the Company.
Currently,
Diamond has a 2,700 square feet design and manufacturing facility located in
Fairfield, New Jersey, which is currently being leased until August 31,
2010. Diamond also rents office space at this
facility. Diamond pays approximately $2,145 per
month. During 2006, our CEO, Mr. Abajian also operated a small office
out of his home whereby we paid $7,000 in rent to him. Mr. Abajian no
longer maintains this office. Since a majority of the manufacturing
is conducted by sub-contractors in Italy, the current space is presently
adequate for the performance of all company functions, which includes minimal
manufacturing, design and administrative needs.
Additionally,
Diamond anticipates opening additional offices and/or design facilities in other
locations as it continues to implement its business plan throughout the United
States, with the most likely areas being Las Vegas and New York
City. At the current time, the Company’s expansion plans are in the
preliminary stages with no formal negotiations being conducted. Most
likely no expansions will take place until additional revenues can be achieved
or additional capital can be raised to help offset the costs associated with any
expansion.
Diamond
is and may become involved in various routine legal proceedings incidental to
its business. However, to Diamond’s knowledge as of the date of this prospectus,
there are no material pending legal proceedings to which Diamond is a party or
to which any of its property is subject.
MARKET
FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
(a)
Market Information
There is not presently, nor has there
ever been, a public trading market for our common stock. It is
anticipated that following an effective registration, we will submit an
application to a market maker to have our shares quoted on the OTC Bulletin
Board. Our market maker’s application to FINRA will consist of
current corporate information, financial statements and other documents required
by Rule 15c2-11 of the Securities Exchange Act of 1934
Inclusion on the OTC Bulletin Board
permits price quotations for our shares to be published by that
service. Although we intend to submit an application to a market
maker for the OTC Bulletin Board subsequent to the filing of this registration
statement, we do not anticipate our shares to immediately be traded in the
public market. Also, secondary trading of our shares may be subject to certain
state imposed restrictions. Except for the application submitted to a market
maker for the OTC Bulletin Board, there are no plans, proposals, arrangements or
understandings with any person concerning the development of a
trading
market in any of our securities. There can be no assurance that our
shares will be accepted for trading on the OTC Bulletin Board or any other
recognized trading market. Also, there can be no assurance that a
public trading market will develop following the registration or at any other
time in the future or, if such a market does develop, that it can be
sustained.
Without an active public trading market, a shareholder may not be able to
liquidate their shares. If a market does develop, the price for our securities
may be highly volatile and may bear no relationship to our actual financial
condition or results of operations. Factors we discuss in this
prospectus, including the many risks associated with an investment in our
securities, may have a significant impact on the market price of our common
stock.
The ability of individual shareholders to trade their shares in a particular
state may be subject to various rules and regulations of that
state. A number of states require that an issuer's securities be
registered in their state or appropriately exempted from registration before the
securities are permitted to trade in that state. Presently, we have
no plans to register our securities in any particular state.
Initially it is unlikely that our
securities will qualify for any national or regional exchange or on The NASDAQ
Stock Market. Therefore, our shares most likely will be subject to
the provisions of Section 15(g) and Rule 15g-9 of the Exchange Act, commonly
referred to as the “penny stock” rule. Section 15(g) sets forth certain
requirements for broker-dealer transactions in penny stocks and Rule 15g-9(d)(1)
incorporates the definition of penny stock as used in Rule 3a51-1 of the
Exchange Act.
The SEC generally defines a penny stock to be any equity security that has a
market price less than $5.00 per share, subject to certain
exceptions. Rule 3a51-1 provides that any equity security is
considered to be a penny stock unless that security is: registered and traded on
a national securities exchange meeting specified criteria set by the SEC;
authorized for quotation on The NASDAQ Stock Market; issued by a registered
investment company; excluded from the definition on the basis of price (at least
$5.00 per share) or the issuer's net tangible assets; or exempted from the
definition by the SEC. Broker-dealers who sell penny stocks to
persons other than established customers and accredited investors (generally
persons with assets in excess of $1,000,000 or annual income exceeding $200,000,
or $300,000 together with their spouse) are subject to additional sales practice
requirements.
For transactions
covered by these rules, broker-dealers must make a special suitability
determination for the purchase of such securities and must have received the
purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock,
unless exempt, the rules require the delivery, prior to the first transaction,
of a risk disclosure document relating to the penny stock market. A
broker-dealer also must disclose the commissions payable to both the
broker-dealer and the registered representative, and current quotations for the
securities. Finally, monthly statements must be sent to clients
disclosing recent price information for the penny stocks held in the account and
information on the limited market in penny stocks. Consequently,
these rules may restrict the ability of broker-dealers to trade and/or maintain
a market in our common stock and may affect the ability of stockholders to sell
their shares. These requirements may be considered cumbersome by
broker-dealers and could impact the willingness of a particular broker-dealer to
make a market in our shares, or they could affect the value at which our shares
trade. Classification of the shares as penny stocks increases the
risk of an investment in our shares.
(b)
Holders of Common Stock
As of May 13, 2008, we had
approximately 31 shareholders of record of the 11,443,100 shares
outstanding.
(c)
Dividends
The
payment of dividends is subject to the discretion of our Board of Directors and
will depend, among other things, upon our earnings, our capital requirements,
our financial condition, and other relevant factors. In the future we
intend to follow a policy of retaining earnings, if any, to finance the growth
of the business and do not anticipate paying any cash dividends in the
foreseeable future. The declaration and payment of future dividends on the
Common Stock will be the sole discretion of board of directors and will depend
on our profitability and financial condition, capital requirements, statutory
and contractual restrictions, future prospects and other factors deemed
relevant.
(d)
Securities authorized for issuance under equity compensation plans.
We currently do not maintain any equity
compensation plans
.
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
The
following discussion and analysis should be read in conjunction with the Diamond
financial statements and notes thereto included elsewhere in this
prospectus. This discussion contains certain forward-looking
statements that involve risks and uncertainties. Diamond’s actual
results and the timing of certain events could differ materially from those
discussed in these forward-looking statements as a result of certain factors,
including, but not limited to, those set forth herein and elsewhere in this
prospectus
OVERVIEW
AND OUTLOOK
Diamond
Information Institute, Inc. was incorporated in the State of New Jersey in
October 1988 and had minimal activity until 1995 when it began in the business
of jewelry manufacturing under the name Diamond Information Institute (d/b/a
“Bergio”). Since 1995 Diamond has been engaged in the design and
manufacture of upscale jewelry. The Company sells to approximately
150 independent jewelry stores across the United States and has incurred a
significant amount of capital resources in creating brand recognition in the
jewelry industry.
Diamond’s
management believes that the jewelry industry competes in the global marketplace
and therefore must be adaptable to ensure a competitive
measure. Recently the U.S. economy has encountered a slowdown and
Diamond anticipates the U.S. economy will most likely remain weak at least
through the first half of 2008. Consumer spending for discretionary
goods such as jewelry is sensitive to changes in consumer confidence and
ultimately consumer confidence is affected by general business considerations in
the U.S. economy. Consumer spending for discretionary spending
generally decline during times of falling consumer confidence, which may affect
Diamond’s retail sale of its products. U.S. consumer confidence
reflected these slowing conditions during the last quarter of 2007 and has been
carried forward throughout the first quarter of
2008. Therefore, Diamond has made strong efforts to maintain
its brand in the industry through its focus on the innovation and design of its
products as well as being able to consolidate and increase cost efficiency when
possible. Diamond believes that in becoming a public company, it will
provide the Company increased flexibility in being able to acquire smaller
jewelry manufacturers while also being able to consolidate overlapping
expenses.
Upon Diamond’s registration becoming
effective, the Company plans to change its name to Bergio International, Inc.
and intends to act as a holding company for the purpose of acquiring
established
jewelry
design and manufacturing firms who possess branded product
lines. Branded products lines are products and/or collections whereby
the jewelry manufacturers have established their products within the industry
through advertising in consumer and trade magazines as well as possibly
obtaining federally registered trademarks of their products and
collections. This is in line with the Company’s strategy and belief
that a brand name can create an association with innovation, design and quality
which helps add value to the individual products as well as facilitate the
introduction of new products.
The
Company intends to acquire design and manufacturing firms throughout the United
States and Europe. If and when the Company pursues any potential
acquisition candidates, it intends to target the top 10% of the world’s jewelry
manufactures that have already created an identity and brand in the jewelry
industry. Diamond intends to locate potential candidates through its
relationships in the industry and expects to structure the acquisition through
the payment of cash, which will most likely be provided from third party
financing and not cash generated from the Company’s operations, as well as the
Company’s common stock. In the event, the Company obtains financing
from third parties for any potential acquisitions; the Company may agree to
issue the Company’s common stock in exchange for the capital
received. However, as of the date of this prospectus the Company does
not have any agreements or understandings with any potential acquisition
candidates or arrangements with any third parties for financing.
Results
of Operations for the Six Months Ended June, 2008 and 2007
The
following table summarizes selected items from the statement of operations for
the six months ended June 30, 2008 compared to the six months ended June 30,
2007.
INCOME:
|
|
Six
Month Ended
June
30,
|
|
|
Increase
/ (Decrease)
|
|
|
|
2008
|
|
|
2007
|
|
|
$
|
|
|
|
%
|
|
|
|
|
|
|
[Restated]
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
642,883
|
|
|
$
|
508,211
|
|
|
$
|
136,672
|
|
|
|
26
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
302,129
|
|
|
|
585,967
|
|
|
|
(283,838
|
)
|
|
|
(48
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit [Loss]
|
|
|
340,754
|
|
|
|
(77,756
|
)
|
|
|
418,510
|
|
|
|
538
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
(Loss) Profit Percentage of Revenue
|
|
|
53
|
%
|
|
|
(15
|
%)
|
|
|
--
|
|
|
|
17
|
%
|
Sales
Sales
for the six months ended June 30, 2008 were $642,883 compared to $508,211
for the six months ended
June 30, 2007. This resulted in an increase of $136,672 or 26% from
the comparable period of 2008 to 2007. One of the reasons for the
increase over the same period of 2007 was due to orders for the year ended
December 31, 2007 being materialized during the first quarter of
2008. Additionally, we were able to sell some of our inventories of
raw metals, which have significantly increased in value. We believe
that our sales have stabilized during the first six months of 2008.
Typically,
revenues experience significant seasonal volatility in the jewelry
industry. The first two quarters of any given year typically
represent approximately 15%-25% of total year revenues, based on historic
results. The holiday buying season during the last two quarters of
every year typically account
for
the remainder of annual sales. We anticipate that the first two
quarters of 2008, to represent approximately 35% - 40% of our total sales of
2008 as a result of being able to sell additional inventories of raw metals in
addition to our typical sales.
Cost of
Sales
Cost
of sales for the six months ended June 30, 2008 was $302,129 a decrease of
$283,838, or 48%, from $585,967
for the six months ended
June 30, 2007. During the first quarter of 2008, we experienced an
increase in cost of sales primarily as a result of having higher sales during
the quarter ended March 31, 2008. Additionally, we had higher cost of
sales associated with the sale of our raw metals being sold during the first
quarter.
During the six months ended June 30,
2007, we experienced a write-down of approximately $284,000 of inventory values
to the less of cost or market value. The inventory write-down was a
result of the refinement of cost and quantity of on hand data attributable to
the conversion of the Company’s books and records to new accounting software in
the beginning of 2007. As a result of this write-down our
cost of sales for the six months ended June 30, 2007, were not necessarily
representative of typical cost of sales expenses and therefore we were able to
show a decrease in our cost of sales on a year over year basis. We
did no record any inventory write-down for the six months ended June 30, 2008
and believe the cost of sales expenses are more reflective of what we expect our
cost of sales expenses to be going forward.
Gross
Profit:
During
the six months ended June 30, 2007, we experienced a gross loss as a percentage
of revenue, in contrast to a gross profit as a percentage of revenue of 53% for
the six months ended June 30, 2008. The increase for the first two
quarters of 2008 profit margin is primarily attributable to the sale of raw
metals in addition to our typical sales of our jewelry line. The
Company expects its gross profit to stabilize during the next twelve
months.
OPERATING
EXPENSES:
|
|
Six
Months Ended June 30,
|
|
|
Increase
/ (Decrease)
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
$
|
|
%
|
Selling
Expenses
|
|
$
|
143,765
|
|
|
$
|
233,803
|
|
|
$
|
(90,038
|
)
|
|
|
(39
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
|
|
|
796,071
|
|
|
|
564,569
|
|
|
|
231,502
|
|
|
|
41
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
|
939,836
|
|
|
|
798,372
|
|
|
|
141,464
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss)
|
|
$
|
(485,516
|
)
|
|
$
|
(787,777
|
)
|
|
$
|
(302,261
|
)
|
|
|
(38
|
%)
|
Selling
Expenses
Total selling expenses were $143,765
for the six months ended June 30, 2008, which was approximately a 39% decrease
from $233,803
of total
selling expenses for the six months ended June 30, 2007. Selling
expenses include advertising, trade show expenses and selling commissions. The
reduction in selling expenses during the six months ended June 30, 2008 is
generally attributable to the Company’s efforts to reduce its marketing budget
associated with advertising campaigns and trade show participation, coupled with
a general reduction in commission-based salespeople.
General and
Administrative Expenses
General
and administrative expenses were $796,071
for the six months ended
June 30, 2008 versus $564,569 for the six months ended June 30,
2007. The increase in general & administrative expenses is due
primarily to a non-cash charge related to stock based compensation of
approximately $518,678, for services provided by third parties during the six
months ended June 30, 2008. In contrast, we had previously
experienced minimal stock based compensation. A majority of the
services provided by the third parties relate to professional and consulting
fees associated with the current “going-public” process. If and when,
we become a public company, we expect a significant increase in professional
fees associated with the financial reporting mandated by the Securities and
Exchange Commission.
Other
Expense
Other
Expense is comprised primarily of interest incurred on bank lines of credit,
corporate credit cards, term loans and capital leases in connection with
operations related to manufacturing and indirect operating
expenses. The slight decrease in costs is attributable to having
lower interest associated with our bank lines of credits and term loans as a
result of having lower principal amounts outstanding.
Income Tax Provision
(Benefit)
The Company reported an income tax
benefit of $168,446
for
the six months ended June 30, 2008 as compared to a tax provision of
$148,221
for the six
months ended June 30, 2007. The tax benefit is primarily attributable
to the increased net operating loss carryforwards incurred, which management
believes are more likely than not to be realized.
Net Loss
The Company incurred a net loss of
$485,516
for six
months ended June 30, 2008 versus a net loss of $787,777
for the six months ended
June 30, 2007. Although we did experience higher general and
administrative expenses for the six months ended June 30, 2008, we were able to
decrease our net loss when compared to the six months ended June 30,
2007. The net loss is primarily attributable to a significant
increase in costs associated with the non-cash stock compensation paid during
the six months ended June 30, 2008 to various third party
providers.
Liquidity
and Capital Resources
The
following table summarizes total assets, accumulated deficit, stockholders’
equity and working capital at June 30, 2008 compared to December 31,
2007.
|
June
30, 2008
|
December
31, 2007
|
Increase
/ (Decrease)
|
$
|
%
|
|
|
|
|
|
Current
Assets
|
$2,012,108
|
$2,074,989
|
$(62,881)
|
(3%)
|
|
|
|
|
|
Current
Liabilities
|
$1,627,117
|
$1,549,538
|
$77,579
|
5%
|
|
|
|
|
|
Working
Capital
|
$384,991
|
$525,451
|
$(140,460)
|
(27%)
|
As
of June 30, 2008, Diamond had a cash balance of zero and a cash overdraft of
$157,595, compared to a cash overdraft of $48,144 at December 31,
2007. During the second quarter of 2007, Diamond conducted a private
placement and raised approximately $425,000, which Diamond believes the capital
raised in conjunction with its net earnings from operations will be sufficient
to fund its short term capital and liquidity needs. However, it is
anticipated that Diamond will need to sell additional equity or debt securities
or obtain credit facilities from financial institutions to meet its long-term
liquidity and capital requirements, which include strategic growth through
mergers and acquisitions. There is no assurance that Diamond will be
able to obtain additional capital or financing in amounts or on terms acceptable
to Diamond, if at all or on a timely basis.
During
2007, Diamond entered into a debt conversion agreement and agreed to issue
100,000 shares of common stock at a fair market value of $1 per share to a
vendor as full satisfaction for accounts payable previously due and as
pre-payment for future services to be rendered. Of the total $100,000 of common
stock issued, approximately $55,000 was to satisfy previous accounts payable
balances, and the difference of approximately $45,000 was issued as
consideration for future services to be rendered.
Also
during 2007, Diamond entered into another debt conversion agreement and agreed
to issue 150,000 shares of common stock at fair market value of $1 per share to
a vendor as full satisfaction of an accounts payable balance of approximately
$150,000. The debt conversion agreement allows for the vendor to
purchase for a period of 60 months, 150,000 “Class A” purchase warrants, which
have an exercise price of $1.50 per share. As of the period ended June 30, 2008,
no “Class A” purchase warrants had been acquired by the vendor.
Accounts receivable at June 30, 2008
was $616,523
and
$692,619 at December 31, 2007, representing a decrease of
11%. Diamond typically offers its customers 60, 90 or 120 day payment
terms on sales, depending upon the product mix purchased. When
setting terms with its customers, Diamond also considers the term of the
relationship with individual customers and management’s assessed credit risk of
the respective customer, and may at management’s discretion, increase or
decrease payment terms based on those considerations. The decrease in
accounts receivable from December 31, 2007 to June 30, 2008 is attributable
primarily to collecting payment immediately from the sale of raw metals, which
we were able to sell during the six months ended June 30, 2008.
Inventory at December 31, 2007 was
$1,333,752 and $1,370,305
at June 30, 2008. Diamond’s management
seeks to maintain a very consistent inventory level that it believes is
commensurate with current market conditions and manufacturing requirements
related to anticipated sales volume. Additionally, Diamond
historically did not have an inventory reserve for slow moving or obsolete
products due to the nature of its inventory of precious metals and stones, which
are commodity-type raw materials and rise in value based on quoted market prices
established in actively trade markets. This allows for the Company to
resell or recast these materials into new products and/or designs as the market
evolves.
Accounts payable and accrued expenses
at December 31, 2007 was $389,798 compared to $234,781 at June 30, 2008, which
represents a 40% decrease. The slight increase in accounts payable
after the first quarter is a result of having to acquire some additional pieces
for a trade show at the end of the second quarter. However, overall
the Company was able to decrease its accounts payable from December 31, 2007 to
June 30, 2008 as a result of the conscious effort made by the Company to pay
vendors as cash became available.
Results
of Operations for the Years Ended December 31, 2007 and 2006
The
following table summarizes selected items from the statement of operations at
December 31, 2007 compared to December 31, 2006.
INCOME:
|
|
Year
Ended December 31,
|
|
|
Increase
/ (Decrease)
|
|
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
|
%
|
|
|
|
|
|
|
[Restated]
|
|
|
|
|
|
|
|
|
Sales
|
|
$
|
1,296,585
|
|
|
$
|
1,974,008
|
|
|
$
|
(677,423
|
)
|
|
|
(34
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
|
1,226,561
|
|
|
|
1,063,641
|
|
|
|
162,920
|
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
Profit
|
|
|
70,024
|
|
|
|
910,367
|
|
|
|
(840,343
|
)
|
|
|
(92
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
(Loss) Profit Percentage of Revenue
|
|
|
5
|
%
|
|
|
46
|
%
|
|
|
--
|
|
|
|
(39
|
%)
|
Sales
Sales
for the year ended December 31, 2007 were $1,296,585 compared to $1,974,008 for
the year ended December 31, 2006. This resulted in a decrease of
$677,423 or 34% from the comparable period in 2006. One of the
reasons for the decrease in 2007 was due to an unusually high amount of product
return, estimated to be approximately $600,000, which included $150,000 worth of
product returns related to 2006 sales to a specific customer prompting
restatement of the Company’s financial statements and is discussed in greater
detail in footnote 3 to the Company’s financial statements. The
remaining $450,000 worth of product returns related exclusively to 2007
sales. The 2007 product returns were prompted by weaker than expected
market conditions due to a declining economy and less consumer spending than
anticipated by retailers. During 2007, Diamond speculated that more
customers choose to “trade up” instead of buying new jewelry
products. Additionally, Diamond spent a significant amount on the
“going public” process during 2007, which ultimately affected our marketing
budgets and our ability to market and brand our products as we would typically
do.
Typically,
revenues experience significant seasonal volatility in the jewelry
industry. The first two quarters of any given year typically
represent approximately 15%-25% of total year revenues, based on historic
results. The holiday buying season during the last two quarters of every year
typically account for the remainder of annual sales. As a result of
having a weaker market condition in 2007, the last two quarters of 2007 were
weaker than past holiday seasons. However, our sales during the last
two fiscal quarters of 2007, still accounted for approximately 56% of our total
sales during 2007.
Cost of
Sales
Cost
of sales for the year ended December 31, 2007 was $1,226,561 an increase of
$162,920, or 15%, from $1,063,641 for the year ended December 31,
2006. The increase in cost of sales is attributable primarily to a
write-down of inventory values incurred during 2007, to the lesser of cost or
market value. During the year ended December 31, 2007, Diamond recorded a
charge related to the write-down of certain inventory items amounting to
approximately $284,000 to appropriately value amounts on hand at the lower of
cost or market. The inventory write-down was a result of the
refinement of cost and quantity of on hand data attributable to the conversion
of the Company’s books and records to new accounting software in the beginning
of 2007. Substantially all inventories consist of finished
goods and are valued
at
the lower of cost or market. Cost is determined using the weighted
average method and average cost is recomputed after each inventory purchase or
sale.
Diamond
did not record any inventory write-down for the year ended December 31,
2006.
Gross
Profit:
Gross
profit as a percentage of revenue decreased from 46% for the year ended December
31, 2006 to 5% for the year ended December 31, 2007. The decrease
shown in the 2007 profit margin is primarily attributable to the aforementioned
inventory write-down of approximately $284,000 realized in 2007. The
Company expects its gross profit to stabilize during the next twelve
months.
OPERATING
EXPENSES:
|
|
Year
Ended December 31,
|
|
|
Increase
/ (Decrease)
|
|
|
|
2007
|
|
|
2006
|
|
|
$
|
|
|
|
%
|
|
|
|
|
|
|
[Restated]
|
|
|
|
|
|
|
|
|
Selling
Expenses
|
|
$
|
392,793
|
|
|
$
|
442,061
|
|
|
$
|
(49,268
|
)
|
|
|
(11
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses
|
|
|
1,095,549
|
|
|
|
316,493
|
|
|
|
779,056
|
|
|
|
246
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Operating Costs
|
|
|
1,488,342
|
|
|
|
758,554
|
|
|
|
729,788
|
|
|
|
96
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(Loss) Income
|
|
$
|
(1,171,980
|
)
|
|
$
|
62,241
|
|
|
$
|
(1,234,221
|
)
|
|
|
(1,983
|
%)
|
Selling and Marketing
Expenses
Total selling expenses were $392,793
for the year ended December 31, 2007, which was approximately an 11% decrease
from $442,061 of total selling expenses for the year ended December 31,
2006. Selling expenses include advertising, trade show expenses and
selling commissions. The reduction in selling expenses for the 2007 year is
attributable to generally more favorable costs associated with similar
advertising campaigns and trade show participation, coupled with a general
reduction in commission-based salespeople. Additionally, we spent
significant amount of capital on the “going public” process during 2007, which
also impacted our marketing budget and resources.
General and Administrative
Expenses
General
and administrative expenses were $1,095,549 for the year ended December 31, 2007
versus $316,493 for the year ended December 31, 2006. The increase in
general & administrative expenses is due primarily to professional fees and
the hiring of staff associated with
the “going-public” process. In the beginning of 2007, Diamond
entered into a reverse merger transaction with a publicly traded
company. However, the merger was not successful and it was terminated
at the end of 2007. Even though the merger was terminated, we incurred
significant costs of approximately $600,000, which were associated with this
merger in consulting, salaries and professional fees. If and when, we
become a public company, we expect a significant increase in professional fees
associated with the financial reporting mandated by the Securities and Exchange
Commission. However, we do not expect them to be as significant as
those experienced in 2007.
Other
Expense
Other
Expense is comprised primarily of interest incurred on bank lines of credit,
corporate credit
cards,
term loans and capital leases in connection with operations related to
manufacturing and indirect operating expenses. The increased costs
are attributable to additional financing required to supplement working capital
needs as prompted by the decline in sales volume during the 2007
year.
Income Tax Provision
(Benefit)
The Company reported an income tax
benefit of $331,642 for the year ended December 31, 2007 as compared to a tax
provision of $34,953 for the year ended December 31, 2006. The tax
benefit in 2007 is primarily attributable to the increased net operating loss
carry-forwards incurred during the 2007 year, which management believes are more
likely than not to be realized.
Net Loss
The Company incurred a net loss of
$1,171,980 for the year ended December 31, 2007 versus a net income of $62,241
for the year ended December 31, 2006. The net loss is primarily
attributable to a significant increase in costs associated with the terminated
reverse merger transaction, which lead to increased costs relating to legal
support, accounting services, and consulting services. Furthermore,
we recorded a charge for the write-down in carrying values of certain inventory
items.
Liquidity
and Capital Resources
Bank Lines of Credit and
Notes Payable
Diamond’s indebtedness is comprised of
various bank credit lines, term loans, capital leases and credit cards intended
to provide capital for the ongoing manufacturing of its jewelry line, in advance
of receipt of the payment from its retail distributors. As of
December 31, 2007, Diamond had 2 outstanding term loans. One of loans
is for $150,000 with Columbia Bank, which is payable in monthly installments and
matures in May of 2009. The note bears an annual interest rate of
7.25% and as of December 31, 2007, there was an outstanding balance of
$70,833. Diamond also has a $300,000 term loan with JPMorgan Chase,
which is payable in monthly installments and matures in May 2011. The
note bears an annual interest rate of 7.96% and as of December 31, 2007 there
was an outstanding balance of $216,422. Both of these notes are
collateralized by the assets of the Company as well as a personal guarantee by
the Company’s CEO, Berge Abajian.
In
addition to the notes payable, Diamond utilizes bank lines of credit to support
working capital needs. As of December 31, 2007, Diamond had 2 lines
of credit. One bank line of credit is for $700,000 with Columbia Bank
and requires minimum monthly payment of interest only. The interest
is calculated at the bank’s prime rate plus 0.75%. As of December 31,
2007, Diamond has an outstanding balance of $699,999 at an effective annual
interest rate of 8%. Additionally, Diamond has a bank line of credit
of $55,000 with JPMorgan Chase Bank, which also requires a monthly payment of
interest only. The interest rate is calculated at the bank’s prime
rate plus 0.75%. As of December 31, 2007, Diamond has an outstanding
balance of $48,293 at an effective annual interest rate of 8%. Each
credit line renews annually and is collateralized by the assets of the Company
as well as a personal guarantee by the Company’s CEO, Berge
Abajian. Pursuant to the terms of Diamond’s lines of credit, it is
required to maintain certain financial ratios which we were in compliance with
as of December 31, 2007.
In
addition to the bank lines of credit and term loans, Diamond has a number of
various unsecured credit cards totaling $111,400 in available
credit. These credit cards require minimal monthly payments of
interest only and as of December 31, 2007 have interest rates ranging from 8.24%
to 29.49%. As of December 31, 2007, Diamond has outstanding balances
of $105,329. As of December 31, 2007, Diamond had approximately
$13,000 of available credit under these facilities.
Satisfaction
of our cash obligations for the next 12 months.
A
critical component of our operating plan impacting our continued existence is to
efficiently manage the production of our jewelry lines and successfully develop
new lines through our Company or through possible acquisitions and/or mergers.
Our ability to obtain capital through additional equity and/or debt financing,
and joint venture partnerships will also be important to our expansion plans. In
the event we experience any significant problems assimilating acquired assets
into our operations or cannot obtain the necessary capital to pursue our
strategic plan, we may have to reduce the growth of our operations. This may
materially impact our ability to increase revenue and continue our
growth.
Over
the next twelve months we believe that our existing capital combined with cash
flow from operations will be sufficient to sustain our current
operations. However, in the event we locate potential acquisitions
and/or mergers we will most likely require additional financing.
Summary
of product and research and development that we will perform for the term of our
plan.
We
are not anticipating significant research and development expenditures in the
near future.
Expected
purchase or sale of plant and significant equipment.
We
do not anticipate the purchase or sale of any plant or significant equipment; as
such items are not required by us at this time.
Significant
changes in the number of employees.
We
currently have 4 full-time employees and 2 part-time employees. Of
Diamond’s current employees, 1 is sales and marketing personnel, 1 is
manufacturing and 2 hold administrative and executive positions. None
of our employees are subject to any collective bargaining
agreements. We do not anticipate a significant change in the number
of full time employees over the next 12 months.
Off-Balance
Sheet Arrangements
We
do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition, results or
operations, liquidity, capital expenditures or capital resources that is deemed
material.
Critical
Accounting Policies
The
Company prepares its financial statements in accordance with accounting
principles generally accepted in the United States. Preparing financial
statements in accordance with generally accepted accounting principles requires
the Company to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
as of the date of the financial statements and the reported amounts of revenue
and expenses during the reported period. Our critical accounting policies are as
follows:
Accounts
Receivable.
Management periodically performs a detailed review
of amounts due from customers to determine if accounts receivable balances are
impaired based on factors affecting the collectibility of those
balances. Fine jewelry is sold to retail outlets throughout the
United States. For the year ended December 31, 2007, accounts
receivable were substantially comprised of balance due from
retailers. As of December 31, 2007 and 2006, the Company recorded an
allowance for doubtful accounts of approximately $0 and $36,000,
respectively. Further, for the years ended December 31, 2007 and
2006,
there were no bad debt write-off’s.
Long-Lived
Assets.
In accordance with Statement of Financial Accounting
Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets, long-lived tangible assets subject to depreciation or
amortization are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. If an asset is determined to be impaired, the loss is
measures by the excess of the carrying amount of the asset over its fair value
as determined by an estimate of discounted future cash flows. As
these factors are difficult to predict and are subject to future events that may
alter management’s assumptions, the future cash flows estimated by management in
their impairment analyses may not be achieved. For the years ended
December 31, 2007 and 2006, there was no impairment charge recorded
within the Statements of Operations for long-lived tangible
assets subject to depreciation or amortization as management estimated there
were no events or changes in circumstances in the carrying amount of those
assets in accordance with the prescribed guidance of SFAS No. 144.
Revenue Recognition.
The
Company’s management recognizes revenue when realized or realizable and
earned. In connection with revenue recorded, the Company establishes
a sales returns and allowances reserve for anticipated merchandise to be
returned. The estimated percentage of sales to be returned is based
on the Company’s historical experience of returned merchandise as prescribed by
promulgated accounting principles. Also, management calculates an estimated
gross profit margin on returned merchandise deriving a cost for the anticipated
returned merchandise also based on the Company’s historical
operations.
The
Company’s sole revenue producing activity as a manufacturer and distributor of
upscale jewelry is affected by movement in fashion trends and customer desire
for new designs, varying economic conditions affecting consumer spending and
changing product demand by retailers affecting their desired inventory
levels.
Therefore,
management’s estimation process for merchandise returns can result in actual
amounts differing from those estimates. This estimation process is
susceptible to variation and uncertainty due to the challenges faced by
management to comprehensively discern all conditions affecting future
merchandise returns whether prompted by fashion, the economy or customer
relationships. Ultimately, management believes historical factors
provide the best indicator of future conditions based on the Company’s
responsiveness to changes in fashion trends, the cyclical nature of the economy
in conjunction with the number of years in business and consistency and
longevity of its customer mix.
Recent Accounting
Pronouncements
In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities – Including an amendment of FASB
Statement No. 115," which is effective for fiscal years beginning after
November 15, 2007. This statement permits entities to choose to measure
many financial instruments and certain other items at fair value. This statement
also establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. Unrealized gains and losses on items
for which the fair value option is elected would be reported in earnings. We
have evaluated the new statement and have determined that it will not have a
significant impact on the determination or reporting of our financial
results.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" (SFAS 141(R)), which replaces SFAS No. 141, "Business
Combinations." SFAS 141(R) retains the underlying concepts of SFAS 141 in that
all business combinations are still required to be accounted for
at
fair value under the acquisition method of accounting but SFAS 141(R) changed
the method of applying the acquisition method in a number of significant
aspects. Acquisition costs will generally be expensed as incurred;
noncontrolling interests will be valued at fair value at the acquisition date;
in-process research and development will be recorded at fair value as an
indefinite-lived intangible asset at the acquisition date; restructuring costs
associated with a business combination will generally be expensed subsequent to
the acquisition date; and changes in deferred tax asset valuation allowances and
income tax uncertainties after the acquisition date generally will affect income
tax expense. SFAS 141(R) is effective on a prospective basis for all business
combinations for which the acquisition date is on or after the beginning of the
first annual period subsequent to December 15, 2008, with the exception of
the accounting for valuation allowances on deferred taxes and acquired tax
contingencies. SFAS 141(R) amends SFAS 109 such that adjustments made to
valuation allowances on deferred taxes and acquired tax contingencies associated
with acquisitions that closed prior to the effective date of SFAS 141(R) would
also apply the provisions of SFAS 141(R). Early adoption is not permitted. We
are currently evaluating the effects, if any, that SFAS 141(R) may have on our
financial statements and believe it could have a significant impact if business
combinations are consummated. However, the effect of which is
indeterminable as of December 31, 2007.
In
December 2007, the FASB issued Financial Accounting Standards No. 160,
"Noncontrolling Interests in Consolidated Financial Statements—an amendment of
ARB No. 51." This statement is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008,
with earlier adoption prohibited. This statement requires the recognition of a
noncontrolling interest (minority interest) as equity in the consolidated
financial statements and separate from the parent's equity. The amount of net
income attributable to the noncontrolling interest will be included in
consolidated net income on the face of the income statement. It also amends
certain of ARB No. 51's consolidation procedures for consistency with the
requirements of SFAS 141(R)
.
This statement also includes expanded disclosure requirements regarding
the interests of the parent and its noncontrolling interest. We are currently
evaluating this new statement and anticipate that the statement will not have a
significant impact on the reporting of our results of operations.
In
March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The new standard is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity’s financial
position, financial performance, and cash flows. It is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The company is currently evaluating
the impact of adopting SFAS. No. 161 on its financial statements.
CHANGES
IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON
ACCOUNTING AND FINANCIAL DISCLOSURE
We
have had no disagreements with our independent auditors on accounting or
financial disclosures.
DIRECTORS,
EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
The
members of our board of directors serve for one year terms and are elected at
the next annual meeting of stockholders, or until their successors have been
elected. The officers serve at the pleasure of the board of
directors. Currently, Diamond only has one executive officer and
director.
Name
|
Age
|
Position
|
Berge
Abajian
|
47
|
Chief
Executive Officer, President and Sole Director
|
Alfred
Sirica
|
46
|
Chief
Financial Officer
|
Duties,
Responsibilities and Experience
Berge
Abajian
comes from a family background in jewelry
manufacturing. The Abajian family started manufacturing jewelry in
the 1930’s and Berge entered into the industry as a manufacturer in
1980. From 1980 to 1983, Mr. Abajian served as the
Secretary and Treasurer of Pyramid Jewelry, a jewelry manufacturing
company. Mr. Abajian established operations of Diamond Information
Institute in 1995 and started his “Bergio” brand label over ten years
ago. Currently, Mr. Abajian is the chief executive officer, president
and sole director of Diamond. The Bergio line was one of the first to
introduce yellow diamonds in jewelry and has continued to be on the cutting edge
of jewelry trends. In 2002, Mr. Abajian also began production of his
Bergio Bridal Collection. Mr. Abajian has a BS in Business
Administration from Fairleigh Dickinson University and is well known and
respected in the jewelry industry. Since 2005, Mr. Abajian has served
as the President of the East Coast branch of the Armenian Jewelry Association
and has also served as a Board Member on MJSA (Manufacturing Jewelers and
Suppliers of America), New York Jewelry Association, and the 2001-2002 Luxury
Show.
Alfred
Sirica
has been working in accounting for over 20 years. In
1984, Mr. Sirica graduated from St. John’s University with a degree in
accounting and began working for Breiner & Bodian. In 1988, Mr.
Sirica left Breiner & Bodian to start his own firm of Sirica & Sirica,
LLC where he is the managing partner. In January 2008, Mr. Sirica
agreed to assist Diamond Information Institute with its accounting functions and
will oversee the quarterly reviews and annual audits of the
Company.
No
Executive Officer or Director of the Corporation has been the subject of any
Order, Judgment, or Decree of any Court of competent jurisdiction, or any
regulatory agency permanently or temporarily enjoining, barring suspending or
otherwise limiting him from acting as an investment advisor, underwriter, broker
or dealer in the securities industry, or as an affiliated person, director or
employee of an investment company, bank, savings and loan association, or
insurance company or from engaging in or continuing any conduct or practice in
connection with any such activity or in connection with the purchase or sale of
any securities.
No
Executive Officer or Director of the Corporation has been convicted in any
criminal proceeding (excluding traffic violations) or is the subject of a
criminal proceeding which is currently pending.
No
Executive Officer or Director of the Corporation is the subject of any pending
legal proceedings.
Employment Agreements and
Compensation
During
the 2007 year, Diamond entered into employment agreements with its Chief
Executive Officer, Berge Abajian, and its then President, Scott
Wanstrath. Both agreements were to not take effect until the Company
had raised a significant amount of capital. Subsequent to the year
ended December 31, 2007, Mr. Wanstrath gave notice of his termination and Mr.
Abajian agreed to terminate the employment agreement. As of the date
of this filing, the Company does not have any employment agreements in
place. The Company intends to draft a new employment agreement with
Mr. Abajian after the registration statement has become effective and the
Company has raised additional capital.
On
January 20, 2008, Diamond authorized the issuance of 100,000 shares to Mr. Zareh
Beylerian in conjunction with Mr. Beylerian being appointed to the Company’s
Advisory Panel. The shares were issued in advance for the 2008 fiscal
year, in which Mr. Beylerian agreed to serve on Diamond’s Advisory
Panel. Nvair Beylerian is Zareh Beylerian’s wife and Mr. Beylerian
elected to gift 50,000 shares of the 100,000 issued shares of Diamond’s common
stock to her.
On February 21, 2008, Diamond cancelled
2,000,000 shares previously granted to Mr. Ralph Amato and cancelled
200,000 shares previously granted to Mr. Scott Wanstrath. The shares
were cancelled as a result of both gentlemen no longer providing services to
Diamond and as a result of not fulfilling the terms of their
agreements. Mr. Abajian also agreed to cancel 5,000,000 of his shares
to reduce some of his ownership position in the Company.
Advisory
Panel
On
April 2, 2007, Diamond’s Board of Directors approved the establishment of an
Advisory Panel to provide on-going advice to the Company’s
officers. Under the terms of the resolution adopting the panel, the
Board of Directors agreed to issue 50,000 shares of common stock to each panel
member as remuneration of their services. During the year ended
December 31, 2007, there were two members and Mr. Hagop Baghdadlian still
remains on the panel. Mr. Baghdadlian opened Hagop Baghdadlian LTD,
in 1977 as a diamond dealer in New York City. In 2003, Hagop
Baghdadlian LTD merged with Cora Diamonds, Inc., a diamond manufacturer and Mr.
Baghdadlian became President of Cora International, LLC. Cora
International has since become a leading manufacturer of fancy colored
diamonds.
Subsequent
to the year ended December 31, 2007, we appointed another member to the panel so
that our panel again has two members. Mr. Zareh Beylerian will serve
on the Advisory Panel and has agreed to assist the Company’s
officers. Mr. Beylerian is an attorney with over 20 years of law
experience. Mr. Beylerian in 2004 decided to open his current firm of
Beylerian & Associates, which handles general litigation and commercial
matters, bankruptcy, personal injury, immigration, real estate, intellectual
property and more.
Audit
Committee
Currently,
we do not have an Audit Committee. At this time, the board of
directors will perform the necessary functions of an Audit Committee, such as:
recommending an independent registered public accounting firm to audit the
annual financial statements; reviewing the independence of the independent
registered public accounting firm; review of the financial statements and other
required regulatory financial reporting; and reviewing management’s policies and
procedures in connection with its internal control over financial
reporting.
Additionally,
we do not have a financial expert. We believe the cost related to retaining a
financial expert at this time is prohibitive and is not warranted at this point
in time. However, at such time the Company has the financial
resources a financial expert will be hired
The
following table sets forth the compensation of our executive officers for the
year ended December 31, 2007.
Summary
Compensation Table
Name
and Principal Position
|
Year
Ended
December 31,
|
Salary
|
Stock
Awards
(1)
|
Total
|
Berge
Abajian, CEO
|
2007
|
$63,108
|
$50,000
|
$113,108
|
Scott
Wanstrath, President
|
2007
|
$-0-
|
$250,000
(2)
|
$250,000
|
(1)
|
The
amounts shown in this column reflect the expense recognized for financial
statement reporting purposes for the fiscal year ended December 31, 2007,
in accordance with FAS 123R.
|
(2)
|
The
Company had agreed to issue 250,000 shares of its common stock pursuant to
Mr. Wanstrath’s employment agreement. The common shares issued
were those held by the Company’s CEO. However, subsequent to the year
ended December 31, 2007, Mr. Wanstrath gave notice of his resignation and
the Company cancelled 200,000 shares as a result of the agreement not
being completed to its full term.
|
Employment
Agreement
Diamond
currently does not have any employment agreements in place. During
2007, Mr. Abajian had executed an employment agreement and an addendum stating
the previously executed employment agreement would not take effect until the
Company had received private equity financing. Subsequent to the year
ended December 31, 2007, Mr. Abajian cancelled the agreement and will draft a
new employment agreement after the registration statement has become effective
and the Company has raised additional capital.
Compensation
Committee
We
currently do not have a compensation committee on the board of
directors. Until a formal committee is established our entire board
of directors will review all forms of compensation provided to our executive
officers, directors, consultants, and employees, including stock
compensation.
Equity
Awards
Our sole officer and director was also
the founder of Diamond and therefore originally owned a total of 15,000,000
shares of our common stock. Subsequent to the year ended December 31,
2007, Mr. Abajian agreed to cancel 5,000,000 shares owned by him. As
of the date of this filing, he currently owns 10,100,000 shares. The
additional 100,000 shares owned by Mr. Abajian were issued as compensation for
serving on our Board of Directors for the 2007 year and in advance for the 2008
fiscal year. None of the shares owned by Mr. Abajian have any
registration rights attached to them.
Director
Compensation and Other Arrangements
Diamond has agreed to issue 50,000
shares per year as compensation to our board of directors and members of our
advisory panel. We anticipate in the future, once additional members
are added to the board of directors, that the Company will reimburse all
directors for expenses when attending board or committee meetings.
Termination
of Employment
There
are no compensatory plans or arrangements, including payments to be received
from the Company, with respect to any person associated with the Company which
would in any way result in payments to any such person because of his
resignation, retirement, or other termination of such person’s employment with
the Company or its subsidiaries, or any change in control of the Company, or a
change in the person’s responsibilities following a change in control of the
Company.
SECURITY
OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
The
following table presents information, to the best of our knowledge, about the
beneficial ownership of our common stock on July 2, 2008, held by those persons
known to beneficially own more than 5% of our capital stock and by our directors
and executive officers.
The
percentage of beneficial ownership for the following table is based on
11,443,100 shares of common stock outstanding as of July 2, 2008. The
percentage of beneficial ownership after the exercise of warrants is based on
12,018,100 shares of common stock outstanding assuming the issuance 575,000
shares of common stock that may be issued upon exercise of warrants held by
selling security holders.
Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission and does not necessarily indicate beneficial ownership for
any other purpose. Under these rules, beneficial ownership includes those shares
of common stock over which the stockholder has sole or shared voting or
investment power. It also includes (unless footnoted) shares of common stock
that the stockholder has a right to acquire within 60 days after July 2, 2008
through the exercise of any option, warrant or other right. The percentage
ownership of the outstanding common stock, however, is based on the assumption,
expressly required by the rules of the Securities and Exchange Commission, that
only the person or entity whose ownership is being reported has converted
options or warrants into shares of our common stock.
Name
of Beneficial Owner, Officer or Director (1)
|
|
Number
of
Shares
|
|
|
Percent
Before Exercise of Warrants (2)
|
|
|
Percent
After Exercise of Warrants (2)(3)
|
|
Berge
Abajian, Chief Executive Officer
|
|
|
10,100,000
|
|
|
|
88.2
|
%
|
|
|
84.0
|
%
|
Alfred
Sirica, Chief Financial Officer (4)
|
|
|
16,667
|
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
Directors
and Officers as a Group
|
|
|
10,116,667
|
|
|
|
88.4
|
%
|
|
|
84.1
|
%
|
(1)
|
As
used in this table, “beneficial ownership” means the sole or shared power
to vote, or to direct the voting of, a security, or the sole or shared
investment power with respect to a security (i.e., the
power to dispose
of, or to direct the disposition of, a security). The address
of each person is care of the
Company.
|
(2)
|
Figures
are rounded to the nearest tenth of a percent. The percentage
of beneficial ownership is based on 11,443,100 shares of common stock,
which does not include the exercise of any warrants currently held by
selling security holders.
|
(3)
|
The
percentage of beneficial ownership is based on 12,018,100 shares of common
stock outstanding assuming the issuance of 575,000 shares of common stock
that may be issued upon exercise of warrants held by current selling
security holders.
|
(4)
|
Mr.
Sirica agreed to become the Chief Financial Officer for the Company
subsequent to December 31, 2007.
|
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Diamond
receives advances from time to time from its CEO, Berge Abajian based upon cash
flow needs. As of December 31, 2007 and 2006, $90,289 and $25,080 was
due to Mr. Abajian, respectively. Repayment and interest terms have
not been established at this point in time and therefore the amount has been
classified as a current liability.
In
addition, Diamond hired an information technology company, Advanced Integrated
Solutions, Inc. to provide consultation and technical support related to certain
software applications and technology infrastructure. The information
technology company is owned by Mr. Hagop Beledankian, who is also a shareholder
of the Company but has a total ownership of less than 1%. Although,
Advanced Integrated Solutions is managed by a shareholder of the Company,
Diamond believes the terms for the services performed by Advanced Integrated
Solutions,
were not
more favorable than they would have been if performed by an arms-length service
provider. During the year ended December 31, 2007, we issued 100,000
shares to this information technology company in connection with services
rendered and for future services to be performed. At the time of the
100,000 shares being issued, approximately $55,000 was to satisfy previous
account payable balances and approximately $45,000 was for future services to be
rendered. As of December 31, 2007, the remaining portion of common
stock issued for future services totaled approximately $14,000.
Index
To Financial Statements
For
the Annual Periods Ended December 31, 2007 and 2006 (Audited) and the Six Month
Interim Periods Ended June 30, 2008 and 2007 (Unaudited)
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F-1
|
BALANCE
SHEETS
|
F-2
|
STATEMENTS OF OPERATIONS
|
F-4
|
STATEMENTS OF STOCKHOLDERS’ EQUITY
|
F-5
|
STATEMENTS OF CASH FLOWS
|
F-7
|
NOTES
TO FINANCIAL STATEMENTS
|
F-9-F-20
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Board of Directors and Shareholders of
Diamond Information Institute, Inc.
d/b/a Designs by Bergio
Fairfield, NJ
We
have audited the accompanying balance sheets of Diamond Information Institute,
Inc. d/b/a Designs by Bergio (the "Company") as of December 31, 2007 and 2006,
and the related statements of operations, stockholders' equity and cash flows
for the years ended December 31, 2007 and 2006. 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 audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. 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 audits provide a reasonable basis
for our opinion.
In
our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Diamond Information Institute, Inc.
d/b/a Designs by Bergio as of December 31, 2007 and 2006, and the results of its
operations and its cash flows for the years ended December 31, 2007 and 2006, in
conformity with accounting principles generally accepted in the United States of
America.
As
described in Note 3 to the financial statements, the 2006 financial statements
have been restated for technical correction of an error in the application of an
accounting principle related to revenue recognition.
/s/ Moore Stephens,
P.C.
MOORE STEPHENS, P.C.
Certified Public
Accountants
Cranford,
New Jersey
March
25, 2008
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
|
BALANCE
SHEETS
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
[Unaudited]
|
|
|
|
|
|
|
|
|
|
|
|
Assets:
|
|
|
|
|
|
|
Current
Assets:
|
|
|
|
|
|
|
Accounts
Receivable
|
|
$
|
616,523
|
|
|
$
|
692,619
|
|
Inventory
|
|
|
1,370,305
|
|
|
|
1,333,752
|
|
Prepaid
Expenses
|
|
|
25,280
|
|
|
|
48,618
|
|
|
|
|
|
|
|
|
|
|
Total
Current Assets
|
|
|
2,012,108
|
|
|
|
2,074,989
|
|
|
|
|
|
|
|
|
|
|
Property
and Equipment - Net
|
|
|
191,849
|
|
|
|
222,715
|
|
|
|
|
|
|
|
|
|
|
Other
Assets:
|
|
|
|
|
|
|
|
|
Deferred
Tax Asset
|
|
|
78,891
|
|
|
|
-
|
|
Investment
in Unconsolidated Affiliate
|
|
|
5,829
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
Total
Other Assets
|
|
|
84,720
|
|
|
|
5,000
|
|
|
|
|
|
|
|
|
|
|
Total
Assets
|
|
$
|
2,288,677
|
|
|
$
|
2,302,704
|
|
|
|
|
|
|
|
|
|
|
See
Notes to Financial Statements.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
|
|
|
BALANCE
SHEETS
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
[Unaudited]
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and Stockholders' Equity:
|
|
|
|
|
|
|
Current
Liabilities:
|
|
|
|
|
|
|
Cash
Overdraft
|
|
$
|
157,595
|
|
|
$
|
48,144
|
|
Accounts
Payable and Accrued Expenses
|
|
|
234,781
|
|
|
|
389,798
|
|
Bank
Lines of Credit - Net
|
|
|
891,858
|
|
|
|
853,621
|
|
Current
Maturities of Notes Payable
|
|
|
105,856
|
|
|
|
110,088
|
|
Current
Maturities of Capital Leases
|
|
|
19,979
|
|
|
|
19,060
|
|
Advances
from Stockholder - Net
|
|
|
182,650
|
|
|
|
90,289
|
|
Sales
Returns and Allowances Reserve
|
|
|
34,398
|
|
|
|
24,726
|
|
Deferred
Tax Liability
|
|
|
-
|
|
|
|
13,812
|
|
|
|
|
|
|
|
|
|
|
Total
Current Liabilities
|
|
|
1,627,117
|
|
|
|
1,549,538
|
|
|
|
|
|
|
|
|
|
|
Long-Term
Liabilities
|
|
|
|
|
|
|
|
|
Notes
Payable
|
|
|
127,910
|
|
|
|
177,167
|
|
Capital
Leases
|
|
|
50,756
|
|
|
|
60,924
|
|
Deferred
Tax Liability
|
|
|
-
|
|
|
|
78,672
|
|
|
|
|
|
|
|
|
|
|
Total
Long-Term Liabilities
|
|
|
178,666
|
|
|
|
316,763
|
|
|
|
|
|
|
|
|
|
|
Commitments
and Contingencies
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
|
|
|
|
|
Common
Stock - $.001 Par Value, 25,000,000
Shares
Authorized, 11,443,100 and 18,075,000
Shares
Issued and Outstanding as of June 30,
2008
and December 31, 2007, respectively
|
|
|
11,444
|
|
|
|
18,075
|
|
Additional
Paid-In Capital
|
|
|
1,349,906
|
|
|
|
825,175
|
|
Stock
Subscription Receivable
|
|
|
(400
|
)
|
|
|
-
|
|
Accumulated
Deficit
|
|
|
(878,056
|
)
|
|
|
(392,540
|
)
|
Deferred
Compensation
|
|
|
-
|
|
|
|
(14,307
|
)
|
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity
|
|
|
482,894
|
|
|
|
436,403
|
|
|
|
|
|
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
|
$
|
2,288,677
|
|
|
$
|
2,302,704
|
|
See
Notes to Financial Statements.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
|
STATEMENTS
OF OPERATIONS
|
|
|
|
|
|
|
June 30,
|
|
June 30,
|
|
December 31,
|
|
December 31,
|
|
|
2008
|
|
2007
|
|
2007
|
|
2006
|
|
|
[Unaudited]
|
|
[Unaudited]
|
|
|
|
[Restated]
|
|
|
|
|
[Restated]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
$ 642,883
|
|
$ 508,211
|
|
$ 1,296,585
|
|
$ 1,974,008
|
|
|
|
|
|
|
|
|
|
Cost
of Sales
|
|
302,129
|
|
585,967
|
|
1,226,561
|
|
1,063,641
|
|
|
|
|
|
|
|
|
|
Gross
Profit [Loss]
|
|
340,754
|
|
(77,756)
|
|
70,024
|
|
910,367
|
|
|
|
|
|
|
|
|
|
Selling
Expenses
|
|
143,765
|
|
233,803
|
|
392,793
|
|
442,061
|
|
|
|
|
|
|
|
|
|
General
and Administrative Expenses *
|
|
796,071
|
|
564,569
|
|
1,095,549
|
|
316,493
|
|
|
|
|
|
|
|
|
|
Total
Operating Expenses
|
|
939,836
|
|
798,372
|
|
1,488,342
|
|
758,554
|
|
|
|
|
|
|
|
|
|
[Loss]
Income from Operations
|
|
(599,082)
|
|
(876,128)
|
|
(1,418,318)
|
|
151,813
|
|
|
|
|
|
|
|
|
|
Other
[Expense] - Net
|
|
(54,880)
|
|
(59,870)
|
|
(85,304)
|
|
(54,619)
|
|
|
|
|
|
|
|
|
|
[Loss]
Income Before Income Tax [Benefit] Provision
|
|
(653,962)
|
|
(935,998)
|
|
(1,503,622)
|
|
97,194
|
|
|
|
|
|
|
|
|
|
Income
Tax [Benefit] Provision
|
|
(168,446)
|
|
(148,221)
|
|
(331,642)
|
|
34,953
|
|
|
|
|
|
|
|
|
|
Net
[Loss] Income
|
|
$ (485,516)
|
|
$ (787,777)
|
|
$ (1,171,980)
|
|
$ 62,241
|
|
|
|
|
|
|
|
|
|
Net
[Loss] Earnings Per Share - Basic and Diluted
|
|
$ (0.04)
|
|
$ (0.05)
|
|
$ (0.07)
|
|
$ 0.00
|
|
|
|
|
|
|
|
|
|
Weighted
Average Common Shares Outstanding
|
|
13,249,460
|
|
17,502,072
|
|
17,790,890
|
|
17,250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
- Includes common stock issued for share-based compensation expense and
legal services rendered in connection with SEC
filings.
|
See
Notes to Financial Statements.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
|
STATEMENT
OF CHANGES IN STOCKHOLDERS' EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retained
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
Earnings/
|
|
|
|
|
|
Total
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Stock Subscription
|
|
|
[Accumulated
|
|
|
Deferred
|
|
|
Stockholders'
|
|
Description
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Receivable
|
|
|
Deficit]
|
|
|
Compensation
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2006
|
|
|
17,250,000
|
|
|
|
17,250
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
717,199
|
|
|
|
-
|
|
|
|
735,449
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income, As Restated
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
62,241
|
|
|
|
-
|
|
|
|
62,241
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2006 [Restated]
|
|
|
17,250,000
|
|
|
|
17,250
|
|
|
|
1,000
|
|
|
|
-
|
|
|
|
779,440
|
|
|
|
-
|
|
|
|
797,690
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private
Placement
Offering
of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
425,000
|
|
|
|
425
|
|
|
|
424,575
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
425,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-Based
Compensation
|
|
|
150,000
|
|
|
|
150
|
|
|
|
149,850
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
150,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of
Common
Stock in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange
for
Debt
Conversions
and
Services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
To
be Rendered
|
|
|
250,000
|
|
|
|
250
|
|
|
|
249,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(44,307
|
)
|
|
|
205,693
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of
Deferred
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
Connection
with
Services
Rendered
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
30,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
[Loss]
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,171,980
|
)
|
|
|
-
|
|
|
|
(1,171,980
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of December 31, 2007
|
|
|
18,075,000
|
|
|
|
18,075
|
|
|
|
825,175
|
|
|
|
-
|
|
|
|
(392,540
|
)
|
|
|
(14,307
|
)
|
|
|
436,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cancellation
of
Common
Stock
Outstanding
|
|
|
(7,200,000
|
)
|
|
|
(7,200
|
)
|
|
|
7,200
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share-Based
Compensation
|
|
|
317,500
|
|
|
|
319
|
|
|
|
267,182
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
267,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
of
Deferred
Compensation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in
Connection
with
Services
Rendered
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
14,307
|
|
|
|
14,307
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
Issued
for
Professional
Services
|
|
|
250,000
|
|
|
|
250
|
|
|
|
249,750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Private
Placement
Offering
of
Common
Stock
|
|
|
600
|
|
|
|
1
|
|
|
|
599
|
|
|
|
(400
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
[Loss]
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(485,516
|
)
|
|
|
-
|
|
|
|
(485,516
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of June 30, 2008
|
|
|
11,443,100
|
|
|
$
|
11,444
|
|
|
$
|
1,349,906
|
|
|
$
|
(400
|
)
|
|
$
|
(878,056
|
)
|
|
$
|
-
|
|
|
$
|
482,894
|
|
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
|
|
|
|
|
|
|
STATEMENTS
OF CASH FLOWS
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2007
|
|
|
2006
|
|
|
|
[Unaudited]
|
|
|
[Unaudited]
|
|
|
|
|
|
[Restated]
|
|
|
|
|
|
|
[Restated]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
[Loss] Income
|
|
$
|
(485,516
|
)
|
|
$
|
(787,777
|
)
|
|
$
|
(1,171,980
|
)
|
|
$
|
62,241
|
|
Adjustments
to Reconcile Net [Loss]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
to Net Cash [Used in ] Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
Returns and Allowance Reserve
|
|
|
9,672
|
|
|
|
35,437
|
|
|
|
(17,450
|
)
|
|
|
42,176
|
|
Depreciation
and Amortization
|
|
|
30,866
|
|
|
|
27,252
|
|
|
|
55,020
|
|
|
|
26,208
|
|
Share-Based
Compensation
|
|
|
267,500
|
|
|
|
75,000
|
|
|
|
150,000
|
|
|
|
-
|
|
Services
Rendered for Common Stock
|
|
|
250,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Amortization
of Deferred Compensation
|
|
|
14,307
|
|
|
|
-
|
|
|
|
30,000
|
|
|
|
-
|
|
Appreciation
in Fair Value of Investment
|
|
|
(829
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Deferred
Tax [Benefit] Provision
|
|
|
(171,375
|
)
|
|
|
(150,720
|
)
|
|
|
(275,126
|
)
|
|
|
34,257
|
|
Allowance
for Doubtful Accounts
|
|
|
-
|
|
|
|
(18,781
|
)
|
|
|
(36,250
|
)
|
|
|
21,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes
in Assets and Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
[Increase]
Decrease in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
Receivable
|
|
|
76,096
|
|
|
|
460,089
|
|
|
|
466,234
|
|
|
|
(335,318
|
)
|
Inventory
|
|
|
(36,553
|
)
|
|
|
(43,923
|
)
|
|
|
272
|
|
|
|
(7,364
|
)
|
Prepaid
Expenses
|
|
|
23,338
|
|
|
|
(15,904
|
)
|
|
|
(6,425
|
)
|
|
|
(21,333
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
[Decrease] in:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
Payable and Accrued Expenses
|
|
|
(155,017
|
)
|
|
|
44,298
|
|
|
|
183,067
|
|
|
|
30,121
|
|
Total
Adjustments
|
|
|
308,005
|
|
|
|
412,748
|
|
|
|
549,342
|
|
|
|
(210,003
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash - Operating Activities
|
|
|
(177,511
|
)
|
|
|
(375,029
|
)
|
|
|
(622,638
|
)
|
|
|
(147,762
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
|
|
|
-
|
|
|
|
(50,692
|
)
|
|
|
(51,542
|
)
|
|
|
(90,758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financing
Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Overdraft
|
|
|
109,451
|
|
|
|
-
|
|
|
|
48,144
|
|
|
|
-
|
|
Advances
under Lines of Credit - Net
|
|
|
38,237
|
|
|
|
286,565
|
|
|
|
204,488
|
|
|
|
-
|
|
Proceeds
from Notes Payable
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
450,000
|
|
Repayments
of Notes Payable
|
|
|
(53,489
|
)
|
|
|
(47,347
|
)
|
|
|
(99,678
|
)
|
|
|
(221,210
|
)
|
Advances
[Repayments] from Stockholder - Net
|
|
|
92,361
|
|
|
|
(6,685
|
)
|
|
|
65,209
|
|
|
|
1,041
|
|
Repayments
of Capital Leases
|
|
|
(9,249
|
)
|
|
|
(3,959
|
)
|
|
|
(11,450
|
)
|
|
|
(4,567
|
)
|
Proceeds
from Private Placements of Common Stock
|
|
|
200
|
|
|
|
425,000
|
|
|
|
425,000
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Cash - Financing Activities
|
|
|
177,511
|
|
|
|
653,574
|
|
|
|
631,713
|
|
|
|
225,264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Increase [Decrease] in Cash
|
|
|
-
|
|
|
|
227,853
|
|
|
|
(42,467
|
)
|
|
|
(13,256
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- Beginning of Periods
|
|
|
-
|
|
|
|
42,467
|
|
|
|
42,467
|
|
|
|
55,723
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
- End of Periods
|
|
$
|
-
|
|
|
$
|
270,320
|
|
|
$
|
-
|
|
|
$
|
42,467
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
|
|
|
|
|
|
|
STATEMENTS
OF CASH FLOWS
|
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2007
|
|
|
2006
|
|
|
|
[Unaudited]
|
|
|
[Unaudited]
|
|
|
|
|
|
[Restated]
|
|
|
|
|
|
|
[Restated]
|
|
|
|
|
|
|
|
Supplemental Disclosures of Cash Flow
Information:
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Paid during the years for:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
59,000
|
|
|
$
|
59,000
|
|
|
$
|
119,000
|
|
|
$
|
57,000
|
|
Income
Taxes
|
|
$
|
4,000
|
|
|
$
|
2,000
|
|
|
$
|
2,000
|
|
|
$
|
700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosures of Non-Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During
2007, the Company issued 250,000 shares of common stock to
vendors
|
|
totaling
$250,000. There shares were issued as consideration for payment of
accounts
|
|
payable
balances and pre-payments for services to be rendered.
|
|
|
|
During
2007 and 2006, the Company entered into certain capital leases for
the
|
|
purchase
of equipment having an aggregate net present value of $40,000 and
$56,000,
|
|
respectively.
|
|
See
Notes to Financial Statements.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS
[1]
Nature of Operations
Diamond
Information Institute Inc. d/b/a Designs by Bergio [the "Company"] is engaged in
the product design, manufacturing, distribution of fine jewelry throughout the
United States and is headquartered from its corporate office in Fairfield, New
Jersey. Based on the nature of operations, the Company's sales cycle
experiences significant seasonal volatility with the first two quarters of the
year representing 15% - 25% of annual sales and the remaining two quarters
representing the remaining portion of annual sales.
[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 the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates.
Cash and Cash
Equivalents -
Cash equivalents are comprised of certain highly liquid
instruments with a maturity of three months or less when
purchased. The Company did not have any cash equivalents on hand at
December 31, 2007 and 2006.
Accounts
Receivable -
Fine jewelry is sold to retail outlets throughout the United
States. For the year ended December 31, 2007 and 2006, accounts receivable were
substantially comprised of balances due from retailers. As of December 31, 2007
and 2006, allowance for doubtful accounts of $-0- and approximately $36,000 have
been recorded.
Inventory
-
Substantially all inventory consists primarily of finished goods and is
valued at the lower of cost or market. Cost is determined using the weighted
average method and average cost is recomputed after each inventory purchase or
sale.
During
the year ended December 31, 2007, the Company recorded an inventory adjustment
of approximately $284,000 to more appropriately value amounts on hand at the
lower of cost or market. The inventory adjustment was prompted by the
refinement of cost and quantity on hand data attributable to the conversion of
the Company's books and records to new accounting software in early
2007. Subsequent to implementation of the new accounting system, cost
and quantity on hand data was refined as the Company discovered product data was
not properly defined for importing into the new accounting
module. These data conversion complications were attributable to
product information not established on a more disaggregated basis for proper
recognition by the accounting module. In other words, products
offered with varying metal and stone qualities were not enumerated as needed,
resulting in erroneous price averaging or improper quantities on hand, as
product counts were not performed prior to data conversion.
As
management's sophistication for use of the accounting software increased, these
discrepancies were discovered and corrected through greater specification of the
product type in the accounting module and revision of unit costs by comparing to
original purchasing documents or physical count of on hand
quantities. These corrective efforts prompted the aforementioned
inventory adjustment. There was no inventory adjustment during the
year ended December 31, 2006.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #2
[2]
Summary of Significant Accounting Policies [Continued]
Concentrations of
Credit Risk –
Financial instruments which potentially subject the Company
to concentrations of credit risk consist principally of cash and cash
equivalents and accounts receivables. The Company places its cash and
cash equivalents with high credit quality financial institutions. The
Company, from time to time, maintains balances in financial institutions beyond
the insured amounts. As of December 31, 2007 and 2006, the Company
$-0- and $13,000 of cash balances beyond the federally insured
amounts.
Concentrations
of credit risk with respect to accounts receivable is limited due to the wide
variety of customers and markets into which the Company's services are provided,
as well as their dispersion across many different geographical
areas. As is characteristic of the Company's business and of the
jewelry industry generally, the Company extends its customers seasonal credit
terms which results in the Company carrying its customer's receivables for
relatively long periods, exposing the Company to credit risk associated with
non-payment by this customer. The carrying amount of receivables approximates
fair value. The Company routinely assesses the financial strength of its
customers and based upon the factors surrounding the credit risk of its
customers, establishes an allowance for uncollectible accounts and, as a
consequence believes that its accounts receivable credit risk exposure beyond
the allowance for doubtful accounts is limited. The Company does not
require collateral to support these financial instruments.
For
the year ended December 31, 2007, one customer had 13%, or approximately
$90,000 of gross accounts receivable outstanding. For the year ended
December 31, 2006, no customer exceeded 10% of sales or accounts
receivable.
Property and
Equipment and Depreciation -
Property and equipment are stated at
cost. Depreciation is computed using the straight-line method over
estimated useful lives ranging from five (5) to seven (7) years.
Expenditures
for repairs and maintenance are charged to expense as incurred whereas
expenditures for renewals and improvements that extend the useful life of the
assets are capitalized. Upon the sale or retirement, the cost and the
related accumulated depreciation are eliminated from the respective accounts and
any resulting gain or loss is reported within the Statements of Operations in
the year of disposal.
Long-Lived Assets
-
In accordance with Statement of Financial Accounting Standards ["SFAS"]
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets,
long-lived tangible assets subject to depreciation or amortization are reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset over it's fair value as determined by an estimate
of discounted future cash flows. For the years ended December 31,
2007 and 2006, no impairment charge was recorded within the Statement of
Operations based on management's estimate of no events or changes in
circumstances in the carrying amount of those assets in accordance with the
prescribed guidance of SFAS No. 144.
Losses
on assets held for disposal are recognized when management has approved and
committed to a plan to dispose of the assets, and the assets are available for
disposal.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #3
[2]
Summary of Significant Accounting Policies [Continued]
Fair Value of
Financial Instruments -
Generally accepted accounting principles require
disclosing the fair value of financial instruments to the extent practicable for
financial instruments, which are recognized or unrecognized in the balance
sheet. The fair value of the financial instruments disclosed herein
is not necessarily representative of the amount that could be realized or
settled, nor does the fair value amount consider the tax consequences of
realization or settlement. In assessing the fair value of these
financial instruments, the Company used a variety of methods and assumptions,
which were based on estimates of market conditions and risks existing at that
time. For certain instruments, including cash, accounts receivable,
accounts payable and accrued expenses, it was estimated that the carrying amount
approximated fair value for the majority of these instruments because of their
short maturity. The fair value of furniture, fixtures and equipment
is estimated to approximate their net book value. The fair value of
debt obligations as recorded approximates their fair values due to the variable
rate of interest associated with these underlying obligations.
Investments in
Unconsolidated Affiliates
-
Investments in
unconsolidated affiliates, jointly owned companies and other investees in which
the Company owns 20% to 50% interest or otherwise exercises significant
influence are carried at cost, adjusted for the Company's proportionate share of
their undistributed earnings or losses. Investments in unconsolidated
affiliates, in which the Company owns less than 20% or otherwise does not
exercise significant influence, are stated at cost. At December 31,
2007 and 2006, the Company had an investment in which, the Company owned less
than 1% interest in an unconsolidated affiliate and therefore the investment is
carried at cost
Revenue
Recognition -
Revenue is recognized upon the shipment of products to
customers with the price to the buyer being fixed and determinable and
collectibility reasonably assured. The Company maintains a reserve
for potential product returns based on historical experience.
Warranty Costs
-
The Company maintains a reserve for costs that it estimates will be
needed to cover future product warranty obligations for products sold during the
year. This estimate is based upon the Company's historical experience as well as
current production techniques. Historically, these costs have been
immaterial.
Share-Based
Compensation -
The Company does not currently sponsor stock option plans
or restricted stock awards plans. However, on January 1, 2006, the
Company adopted the provisions of SFAS No. 123(R), "Share-Based Payment" using
the modified prospective method. SFAS No. 123(R) requires companies to recognize
the cost of employee services received in exchange for awards of equity
instruments based upon the grant date fair value of those awards. Under the
modified prospective method of adopting SFAS No. 123(R), the Company
recognized compensation cost for all share-based payments granted after January
1, 2006, plus any awards granted to employees prior to January 1, 2006 that
remain unvested at that time. Under this method of adoption, no restatement of
prior periods is made.
The
Company applies the fair value provisions of SFAS No. 123(R), to issuance of
non-employee equity instruments at either the fair value of the services
rendered or the instruments issued in exchange for such services, whichever is
more readily determinable, using the measurement date guidelines enumerated in
EITF 96-18, "Accounting for Equity Instruments That are Issued to Other Than
Employees for Acquiring, or in Conjunction with Selling, Goods or
Services".
During
2007, the Company issued 150,000 shares of restricted common stock to employees
at a
fair
value of $1 and recognized the cost of this compensation ratably over a service
term of one year. Also, the Company issued approximately 45,000
shares of common stock to non-employees for services rendered of which, $30,000
worth of those shares were expensed in 2007. The fair value of both
shares issuances were measured based upon other arms length transactions entered
into for which, common stock was issued at $1 per share. For the year ended
December 31, 2006, no share-based compensation was recognized.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #4
[2]
Summary of Significant Accounting Policies [Continued]
Advertising and
Promotional Costs -
Advertising and promotional costs are expensed as
incurred and are recorded as part of Selling Expenses in the Statement of
Operations. The total cost was approximately $151,000 and $178,000
for the years ended December 31, 2007 and 2006, respectively.
During
the year, the Company prepays costs associated with trade shows which, are
recorded as Prepaid Expenses in the Balance Sheet and are charged to the
Statement of Operations upon the trade shows being conducted. As of
December 31, 2007, approximately $49,000 of prepaid trade show expenses have
been recorded.
Income Taxes -
The Company follows the provisions of SFAS No. 109, "Accounting for
Income Taxes." Under the asset and liability method of SFAS 109,
deferred income tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred income tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. Under SFAS 109, the effect on deferred income tax assets and
liabilities of a change in tax rates is recognized in earnings in the period
that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to amounts expected to
be realized.
On
January 1, 2007, we adopted the provisions of FIN 48, "Accounting for
Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109",
which provides a financial statement recognition threshold and measurement
attribute for a tax position taken or expected to be taken in a tax
return. Under FIN 48, we may recognize the tax benefit from an
uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities, based on the
technical merits of the position. The tax benefits recognized in the
financial statements from such a position should be measured based on the
largest benefit that has a greater than 50% likelihood of being realized upon
ultimate settlement. FIN 48 also provides guidance on derecognition
of income tax assets and liabilities, classification of current and deferred
income tax assets and liabilities, accounting for interest and penalties
associated with tax positions, and income tax disclosures. The
adoption of FIN 48 did not have a material impact on our financial
statements.
Basic and Diluted
Loss Per Share -
Basic earnings per share includes no dilution and is
computed by dividing earnings available to common stockholders by the
weighted average number of common shares outstanding for the period. Dilutive
earnings per share reflect the potential dilution of securities that could occur
through the effect of common shares issuable upon the exercise of stock options,
warrants and convertible securities. For the years ended December 31,
2007 and 2006, potential common shares amount to 425,000 shares under its Class
A purchase warrants and have not been included in the computation of diluted
loss per share since the effect would be anti-dilutive.
Reclassifications
-
Certain prior year amounts have been reclassified to conform to current
interim period presentation.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #5
[3]
Restatement of Financial Statements
The
Company restated its initially reported annual 2006 financial statements to
correct for deficiencies related to the recognition of a sales returns and
allowances reserve in accordance with Statement of Financial Accounting
Standards ["SFAS"] No. 48, "Revenue Recognition When Right of Return Exists."
The Company did not previously employ a policy sufficient to comply with the
provisions of SFAS No. 48 and as a result, required establishment of a reserve
based on the significance of returns applicable to the prior period to ensure
matching of sales returns to the period the sales were consummated.
The
net effect of the restatement for the 2006 annual period, was to reduce sales
and cost of sales by approximately $150,000 and $108,000,
respectively. In addition, previously reported net income was reduced
by approximately $42,000 from $104,000 to $62,000 and is reflected in both the
Statement of Operations and Statement of Stockholders' Equity. Also,
the Statement of Cash Flows reflects the reduction of net income and the
adjustment to reconcile operating activities for the recognition of the sales
returns and allowances reserve.
[4]
Property and Equipment
Property
and equipment and accumulated depreciation and amortization are as
follows:
|
|
December
31,
|
|
|
|
2007
|
|
|
|
|
|
Selling
Equipment
|
|
$
|
56,000
|
|
Office
and Equipment
|
|
|
242,271
|
|
Leasehold
Improvements
|
|
|
7,781
|
|
Furniture
and Fixtures
|
|
|
18,487
|
|
|
|
|
|
|
Total
– At Cost
|
|
|
324,539
|
|
Less:
Accumulated Depreciation and Amortization
|
|
|
101,824
|
|
|
|
|
|
|
Property
and Equipment - Net
|
|
$
|
222,715
|
|
Depreciation
and amortization expense for the years ended December 31, 2007 and 2006 was
approximately $55,000 and $26,000, respectively.
[5]
Notes Payable
|
|
December
31,
|
|
|
|
2007
|
|
|
|
|
|
Notes
payable due in equal monthly installments, over 36 months,
maturing
through May 2009 at interest rates of 7.25%. The notes
are
collateralized
by the assets of the Company.
|
|
$
|
70,833
|
|
|
|
|
|
|
Notes
payable due in equal monthly installments, over 60 months,
maturing
through May 2011 at interest rates of 7.96%. The notes
are
collateralized
by the assets of the Company.
|
|
|
216,422
|
|
|
|
|
|
Total
|
|
|
287,255
|
|
Less:
Current Maturities Included in Current Liabilities
|
|
|
110,088
|
|
|
|
|
|
|
Total
Long-Term Portion of Debt
|
|
$
|
177,167
|
|
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #6
[5]
Notes Payable [Continued]
Maturities
of long-term debt is as follows:
Years
ended
|
|
|
|
December
31,
|
|
|
|
2008
|
|
$
|
110,100
|
|
2009
|
|
|
80,700
|
|
2010
|
|
|
67,500
|
|
2011
|
|
|
28,900
|
|
2012
|
|
|
--
|
|
Thereafter
|
|
|
--
|
|
|
|
|
|
|
Total
|
|
$
|
287,200
|
|
[6]
Bank Lines of Credit
During
2007, the Company refinanced its existing credit facilities and notes payable
with various other financial institutions. A summary of
these credit facilities is as follows:
|
|
December
31,
|
|
|
|
2007
|
|
|
|
|
|
Credit
Line of $700,000, minimum payment of interest only is due monthly at the
bank's prime rate plus .75%. At December 31, 2007, the interest rate was
8.00%. The Credit Line renews annually in May 2008 and is collateralized
by the assets of the Company.
|
|
|
699,999
|
|
|
|
|
|
|
Credit
Line of $55,000, minimum payment of interest only is due monthly at the
bank's prime rate plus .75%. At December 31, 2007, the interest rate was
8.00%. The Credit Line renews annually in July 2008 and is collateralized
by the assets of the Company.
|
|
|
48,293
|
|
|
|
|
|
|
Various
unsecured Credit Cards of $111,400 and $250,000, minimum payment of
principal and interest are due monthly
at
the credit card's annual interest rate. At December 31,
2007,
the
interest rates ranged from 8.24% to 29.49%.
|
|
|
105,329
|
|
|
|
|
|
|
Total Bank Lines of Credit
|
|
$
|
853,621
|
|
The
Company's CEO and majority shareholder, also serves as a guarantor of the
Company's debt.
The
Company had approximately $13,000 available under the various credit facilities
at December 31, 2007.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #7
[7]
Equipment Held Under Capital Leases
During
2007 and 2006, the Company entered into capital leases for the purchase of
equipment. The Company's equipment held under the capital lease
obligations as of December 31, 2007 is summarized as follows:
Showroom
Equipment
|
|
$
|
96,000
|
|
Less:
Accumulated Amortization
|
|
|
16,533
|
|
|
|
|
|
|
Equipment
Held under Capitalized Lease Obligations - Net
|
|
$
|
79,467
|
|
During
2007 and 2006, the Company recorded amortization of approximately $12,000 and
$5,000 related to the equipment held under capital leases,
respectively.
As
of December 31, 2007, the future minimum lease payments under the capital leases
are as follows:
2008
|
|
|
26,432
|
|
2009
|
|
|
26,432
|
|
2010
|
|
|
26,432
|
|
2011
|
|
|
17,405
|
|
2012
|
|
|
--
|
|
Thereafter
|
|
|
--
|
|
|
|
|
|
|
Total
|
|
|
96,701
|
|
Less:
Amount Representing Imputed Interest
|
|
|
(16,717
|
)
|
|
|
|
|
|
Present
Value of Net Minimum Capital Lease Payments
|
|
|
79,984
|
|
Current
Portion of Capitalized Lease Obligations
|
|
|
19,060
|
|
|
|
|
|
|
Non Current Portion of Capitalized Lease
Obligations
|
|
$
|
60,924
|
|
During
2007 and 2006, interest expense related to the capital leases was approximately
$1,300 and $2,400, respectively.
[8]
Income Taxes
The
income tax [benefit] provision for the years ended December 31, are as
follows:
|
|
December
31,
|
|
|
|
2007
|
|
|
2006
|
|
Current:
|
|
|
|
|
|
|
Federal
|
|
$
|
--
|
|
|
$
|
--
|
|
State
|
|
|
2,117
|
|
|
|
696
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
2,117
|
|
|
|
696
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
Federal
|
|
|
(222,506
|
)
|
|
|
22,979
|
|
State
|
|
|
(111,253
|
)
|
|
|
11,278
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
|
(333,759
|
)
|
|
|
34,257
|
|
|
|
|
|
|
|
|
|
|
Totals
|
|
$
|
(331,642
|
)
|
|
$
|
34,953
|
|
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #8
[8]
Income Taxes [Continued]
Reconciliation
of the federal statutory income tax rate to the effective income tax rate is as
follows:
|
|
2007
|
|
|
2006
|
|
U.S.
Statutory Rate
|
|
|
15.00
|
%
|
|
|
15.00
|
%
|
State
Income Taxes [Net of Federal Benefit]
|
|
|
7.50
|
%
|
|
|
7.50
|
%
|
Per
Market Differences and Other
|
|
|
--
|
%
|
|
|
13.46
|
%
|
|
|
|
|
|
|
|
|
|
Effective rate
|
|
|
22.50
|
%
|
|
|
35.96
|
%
|
Deferred
income tax [assets] liabilities at December 31 2007, is as follows:
|
|
2007
|
|
Deferred
Income Tax Assets:
|
|
|
|
Net
Operating Loss Carry-forward
|
|
$
|
(301,900
|
)
|
Differences
in Income Tax to Financial Reporting Accounting Method
|
|
|
(88,316
|
)
|
|
|
|
|
|
Totals
|
|
|
(390,216
|
)
|
|
|
|
|
|
Deferred
Income Tax Liabilities:
|
|
|
|
|
Property,
Plant and Equipment
|
|
$
|
14,388
|
|
Differences
in Income Tax to Financial Reporting Accounting Method
|
|
|
468,312
|
|
|
|
|
|
|
Totals
|
|
|
482,700
|
|
|
|
|
|
|
Total
Deferred Taxes
|
|
$
|
92,484
|
|
The
Company has recorded a deferred income tax benefit of approximately $334,000
reflecting a benefit of approximately $271,200 for net operating loss
carryforwards and $66,000 for differences related to the varying accounting
method from income taxes to external financial reporting along with expenses of
approximately $3,200 for depreciation and amortization. The deferred
tax component, Differences in Income Tax to Financial Reporting Accounting
Method, represents temporary timing differences of accrual based assets and
liabilities. Namely, accounts receivable, inventory, prepaid
expenses, accounts payable and accrued expenses due to the Company's recognition
of its income tax reporting on a cash basis while, the financial statements are
recognized on an accrual basis.
In
2008, management will voluntarily elect a change in its income tax accounting to
the accrual basis in accordance with Section 481(a) of the Internal Revenue Code
(the "IRC"). In management's opinion, based on provisions of the IRC,
a voluntary election to the accrual basis of tax reporting should not subject
the Company to tax examinations for previous years that income tax returns have
been filed and prompt an uncertain tax position in accordance with the Financial
Accounting Standards Board Interpretation ["FIN"] No. 48, Accounting for
Uncertainty in Income Taxes. As a result, no contingent liability has
been recorded for the anticipated change in tax reporting. Further,
the resulting tax liability has been offset against net operating losses
previously incurred as it is considered ordinary income in accordance with
provisions of the IRC.
At
December 31, 2007, the Company had approximately $1,300,000 of federal net
operating tax loss carry-forwards expiring at various dates through
2027. The Tax Reform Act of 1986 enacted a complex set of rules which
limits a company's ability to utilize net operating loss carry-forwards and tax
credit carryforwards in periods following an ownership change. These rules
define an ownership change as a greater than 50 percent point change in stock
ownership within a defined testing period which is generally a three-year
period. As a result of stock which may be issued by us from time to time and the
conversion of warrants, options or the result of other changes in ownership of
our outstanding stock, the Company may experience an ownership change and
consequently our utilization of net operating loss carry-forwards could be
significantly limited.
Although
realization is not assured and dependent upon things such as generating
sufficient taxable income in future periods, management believes it is more
likely than not that all of the deferred tax asset will be
realized. The amount of the deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable income
during the future periods decline.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #9
[9]
Stockholders' Equity
Articles of
Incorporation Amendment and Stock Split -
The Company's Certificate of
Incorporation, as amended, authorizes the issuance of up to 25,000,000 shares of
common stock at a par value of $.001 per share. Over the course of
2007, the Company's Board of Directors ratified two forward stock splits. The
first stock split, for 1.725 to 1 and the second for 10,000 to 1.
This
resulted in common stock outstanding increasing from 1,000 to 17,250,000 which
were all owned by the Company's founder and CEO. The per share data
for all periods presented has been retroactively adjusted due to each of the
stock splits.
Subsequent
to the forward stock splits, the Company's founder and CEO transferred 2,250,000
shares to the Company's President and an Advisory Panel member. Upon
resignation of the Company’s President and Advisory Panel Member in late 2007,
the Company cancelled 2,200,000 of the shares previously
issued. These shares were cancelled in February 2008 - see footnote
13.
The
per share data for all periods presented has been retroactively adjusted due to
each of the stock splits.
Private Placement
Offering -
During the second quarter of 2007
,
the Company conducted a
private placement offering (the "Offering") of its common stock to Accredited
Investors in accordance with SEC regulations. The offering was up to
40 units at $25,000 per unit or $1,000,000 in total. Each unit was
composed of 25,000 shares of common stock and 25,000 "Class A" common stock
purchase warrants to purchase additional shares at $1.50 per share.
Through
the aforementioned period, the Company issued 17 units or 425,000 shares
resulting in total cash proceeds of $425,000. Through December 31,
2007, no "Class A" purchase warrants were bought by the investors.
Debt Conversions
-
In April 2007, the Company entered into a Debt Conversion Agreement
(the "Agreement") and issued 100,000 shares of common stock at $1 per share to a
vendor as full satisfaction for accounts payable previously due and future
services to be rendered. Of the total $100,000 of common stock
issued, $55,000 was to satisfy previous account payable balances and $45,000 was
issued as consideration for future services to be rendered and is reflected in
the Deferred Compensation caption of the stockholders' equity section of the
Balance Sheet. The shares have a one year restriction from sale or
offering.
In
June 2007, the Company entered into a Debt Conversion Agreement (the
"Agreement") and issued 150,000 shares of common stock at a fair market value of
$1 per share to a vendor as full satisfaction of an accounts payable balance of
$150,000. The shares have a one year restriction from sale or
offering and the Agreement allows for the vendor to purchase for a period of 60
months from the date of closing of this Agreement 150,000 "Class A" purchase
warrants at $1.50 per share. Through December 31, 2007, no "Class A"
purchase warrants were bought by the vendor.
Of
the total 250,000 shares issued in connection with debt conversions and future
services to be rendered, 205,000 shares of common stock valued at $1 per share
or $205,000 were in full satisfaction of prior debts outstanding while, 45,000
shares of common stock valued at $1 or $45,000 were issued in connection with
future services to be rendered. As of December 31, 2007,
approximately $14,000 of Deferred Compensation remained unamortized in
connection with the 45,000 shares previously issued.
Restricted Share
Issuances -
During 2007, the Board of Directors ratified issuance of
50,000 restricted shares of common stock to the Company's CEO, also serving as a
director, as compensation for services rendered through December 31,
2007. The Board of Directors also ratified issuance of 100,000
restricted shares of common stock to two of the Company's Advisory Panel Members
as compensation for services rendered from January through December of
2007.
For
the year ended December 31, 2007, the Company recorded $150,000 of stock based
compensation expense and is reflected as part of General and Administrative
expenses in the Statement of Operations.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #10
[10]
Related Party Transactions
The
Company receives advances from time to time from its stockholder based upon the
Company's cash flow needs. At December 31, 2007, $90,289 was due to
the shareholder. Repayment and interest terms have not been
established and as a result the amount has been classified as a current
liability. In addition, the Company leased office space from the
majority stockholder totaling $7,000 during 2006 which, is reflected in the
General and Administrative Expenses caption of the Statement of
Operations.
In
2007, the Company hired an information technology company to provide
consultation and technical support related to certain software applications and
technology infrastructure. The information technology company is also
a shareholder of the Company with a total ownership interest of less than
1%. During 2007, common stock issued to this information technology
company in connection with services rendered or, to be performed in future
periods totaled $100,000 or 100,000 shares of common stock valued at $1 per
share. As of December 31, 2007, the remaining portion of common stock
issued for future services totaled approximately $14,000 and is reflected in
Deferred Compensation within the Stockholders' Equity section of the Balance
Sheet.
[11] Commitment
and Contingencies
Operating Leases
-
The Company leases certain office and manufacturing facilities and
equipment. The lease agreements, which expire at various dates through 2011, are
subject, in many cases, to renewal options and provide for the payment of taxes,
and operating costs, such as insurance and maintenance. Certain
leases contain escalation clauses resulting from the pass-through of increases
in operating costs and property taxes. All these leases are
classified as operating leases.
Aggregate
minimum annual rental payments under non-cancelable operating leases are as
follows:
Years
ended
|
|
|
|
December
31,
|
|
|
|
2008
|
|
$
|
21,400
|
|
2009
|
|
|
21,400
|
|
2010
|
|
|
14,800
|
|
2011
|
|
|
600
|
|
2012
|
|
|
--
|
|
Thereafter
|
|
|
--
|
|
|
|
|
|
|
Total
|
|
$
|
58,200
|
|
Rent
expense for the Company's operating leases, including shareholder rent was
approximately $26,000 and $27,000 for the years ended December 31, 2007 and
2006, respectively.
Litigation
-
The Company, in the normal course of business, is involved in certain
legal matters for which it carries insurance, subject to certain exclusions and
deductibles. As of December 31, 2007 and through the date of issuance
of these financial statements, there was no asserted or unasserted litigation,
claims or assessments warranting recognition and/or disclosure in the financial
statements.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #11
[12]
Recently Issued Accounting Standards
In
February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for
Financial Assets and Financial Liabilities – Including an amendment of FASB
Statement No. 115," which is effective for fiscal years beginning after
November 15, 2007. This statement permits entities to choose to measure
many financial instruments and certain other items at fair value. This statement
also establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for
similar types of assets and liabilities. Unrealized gains and losses on items
for which the fair value option is elected would be reported in earnings. We
have evaluated the new statement and have determined that it will not have a
significant impact on the determination or reporting of our financial
results.
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), "Business
Combinations" (SFAS 141(R)), which replaces SFAS No. 141, "Business
Combinations." SFAS 141(R) retains the underlying concepts of SFAS 141 in that
all business combinations are still required to be accounted for at fair value
under the acquisition method of accounting but SFAS 141(R) changed the method of
applying the acquisition method in a number of significant aspects. Acquisition
costs will generally be expensed as incurred; noncontrolling interests will be
valued at fair value at the acquisition date; in-process research and
development will be recorded at fair value as an indefinite-lived intangible
asset at the acquisition date; restructuring costs associated with a business
combination will generally be expensed subsequent to the acquisition date; and
changes in deferred tax asset valuation allowances and income tax uncertainties
after the acquisition date generally will affect income tax expense. SFAS 141(R)
is effective on a prospective basis for all business combinations for which the
acquisition date is on or after the beginning of the first annual period
subsequent to December 15, 2008, with the exception of the accounting for
valuation allowances on deferred taxes and acquired tax contingencies. SFAS
141(R) amends SFAS 109 such that adjustments made to valuation allowances on
deferred taxes and acquired tax contingencies associated with acquisitions that
closed prior to the effective date of SFAS 141(R) would also apply the
provisions of SFAS 141(R). Early adoption is not permitted. We are currently
evaluating the effects, if any, that SFAS 141(R) may have on our financial
statements and believe it could have a significant impact if business
combinations are consummated. However, the effect of which is
indeterminable as of December 31, 2007.
In
December 2007, the FASB issued Financial Accounting Standards No. 160,
"Noncontrolling Interests in Consolidated Financial Statements-an amendment of
ARB No. 51." This statement is effective for fiscal years, and interim
periods within those fiscal years, beginning on or after December 15, 2008,
with earlier adoption prohibited. This statement requires the recognition of a
noncontrolling interest (minority interest) as equity in the consolidated
financial statements and separate from the parent's equity. The amount of net
income attributable to the noncontrolling interest will be included in
consolidated net income on the face of the income statement. It also amends
certain of ARB No. 51's consolidation procedures for consistency with the
requirements of SFAS 141(R)
.
This statement also includes expanded disclosure requirements regarding
the interests of the parent and its noncontrolling interest. We are currently
evaluating this new statement and anticipate that the statement will not have a
significant impact on the reporting of our results of operations.
In
March 2008, the Financial Accounting Standards Board ["FASB"] issued FASB
Statement No. 161, "Disclosures about Derivative Instruments and Hedging
Activities." The new standard is intended to improve financial
reporting about derivative instruments and hedging activities by requiring
enhanced disclosures to enable investors to better understand their effects on
an entity's financial position, financial performance, and cash
flows. This statement is effective for
financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The Company is currently
evaluating the impact of adopting SFAS No. 161 on its financial
statements.
DIAMOND
INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
NOTES
TO FINANCIAL STATEMENTS, Sheet #12
[13]
Subsequent Events
In
January 2008, two Advisory Panel members and a Board of Director member received
restricted common stock for services to be rendered throughout
2008. The two Advisory Panel members received 50,000 and 100,000
shares, respectively, valued at $1 per share or $150,000 while the Board of
Director member received 50,000 shares valued at $1 per share or
$50,000. These shares will be charged to the Statement of Operations
as share-based compensation expense ratably over the course of the
year.
Also
in January 2008, the Company issued 118,100 shares of restricted common stock
valued at $1 per share or $118,100 to employees and individual
investors. Shares issued in connection with the Board of Director
consent, are to be dispersed ratably over the first two quarters of 2008 as
authorized in the consent.
In
addition, to the aforementioned share issuances, the Company issued to its SEC
counsel, 150,000 shares of restricted common stock at $1 per share or $150,000
for services previously rendered or anticipated to be performed.
In
February 2008, certain stockholders of the Company with significant ownership,
cancelled shares they owned for no consideration. The share
cancellation totaled 7,200,000 of shares preciously outstanding.
In
2008, the Company is seeking to register its common stock with the SEC through a
Form S-1 filing (The "Registration Statement"). As of December 31,
2007, the Company had 18,075,000 shares of common stock outstanding and through
the first quarter of 2008, issued and additional 409,350 shares as described in
the aforementioned paragraphs. As previously mentioned, the Company
also cancelled 7,200,000 shares of its common stock.
Overall,
this represents 11,343,100 shares of common stock outstanding in connection with
the aforementioned Registration Statement of which, the Company is looking to
exclude from registration all the shares beneficially owned by its CEO and sole
director totaling 10,100,000, which have no registration rights associated with
them.
This
results in common stock held by current security holders to be registered of
1,243,100 along with 575,000 shares issuable upon the exercise of warrants also
held by the security holders totaling 1,818,100 shares to be registered in
connection with the Registration Statement.
[14]
Unaudited Interim Statements
The
financial statements as of June 30, 2008 and for the six months ended June 30,
2008 and 2007 are unaudited; however, in the opinion of management, all
adjustments (consisting solely of normal recurring adjustments) necessary in
order to make the interim financial statements not misleading have been
made. The results of the interim period are not necessarily
indicative of the results to be obtained for a full year.
. . . . . . . . . .
No
dealer, salesman or any other person has been authorized to give any
information or to make any representation other than those contained in
this prospectus and, if given or made, such information or representation
must not be relied upon as having been authorized by us. This prospectus
does not constitute an offer to sell or a solicitation of any offer to buy
any security other than the shares of common stock offered by this
prospectus, nor does it constitute an offer to sell or a solicitation of
any offer to buy the shares of a common stock by anyone in any
jurisdiction in which such offer or solicitation is not authorized, or in
which the person making such offer or solicitation is not qualified to do
so, or to any person to whom it is unlawful to make such offer or
solicitation. Neither the delivery of this prospectus nor any sale made
hereunder shall, under any circumstances create any implication that
information contained in this prospectus is correct as of any time
subsequent to the date of this prospectus.
DEALER
PROSPECTUS
DELIVERY
OBLIGATION
Until
_________, 2008, all dealers that effect transactions in these securities,
whether or not participating in this offering, may be required to deliver
a prospectus. This is in addition to the dealers’ obligation to deliver a
prospectus when acting as underwriters and with respect to their unsold
allotments or subscriptions.
_________,
2008
|
DIAMOND
INFORMATION INSTITUTE, INC.
|
TABLE OF CONTENTS
|
Prospectus
Summary…
Summary
of the Offering…
Summary
Financial Information…
Risk
Factors…
About
This Prospectus…
Available
Information…
Special
Note Regarding Forward-Looking Information…
Use
of Proceeds…
Selling
Security Holders…
Plan
of Distribution…
Description
of Securities…
Interest
of Named Experts and Counsel…
Disclosure
of Commission Position on Indemnification for Securities Act
Liabilities…
Description
of Business…
Description
of Property…
Legal
Proceedings…
Market
for Common Equity and Related
Stockholder
Matters…
Management’s
Discussion and Analysis of
Financial
Condition and Results of Operations…
Changes
in and Disagreements with Accountants…
Directors,
Executive Officers, Promoters and Control
Persons…
Executive
Compensation…
Security
Ownership of Beneficial Owners and Management…
Certain
Relationships and Related Transactions
Audited
Financial Statements
Report
of Independent Registered Public Accounting Firm…
Balance
Sheets…
Statement
of Operations…
Statement
of Stockholders’ Equity…
Statement
of Cash Flows …
Notes
to Financial Statements…
|
Page
1
2
3
4
9
9
10
11
11
14
18
20
20
21
25
25
25
27
37
37
39
40
41
F-1
F-2
F-4
F-5
F-7
F-9
|
PART
II: INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION
OF OFFICERS AND DIRECTORS
None
of our directors will have personal liability to us or any of our shareholders
for monetary damages for breach of fiduciary duty as a director involving any
act or omission of any such director since provisions have been made in the
Certificate of Incorporation limiting such liability.
The
Bylaws provide for indemnification of the directors, officers, and employees of
Diamond Information Institute, Inc. in most cases for any liability suffered by
them or arising out of their activities as directors, officers, and employees of
Diamond Information Institute, Inc. if they were not engaged in willful
misfeasance or malfeasance in the performance of his or her duties; provided
that in the event of a settlement the indemnification will apply only when the
Board of Directors approves such settlement and reimbursement as being for the
best interests of the Corporation. The Bylaws, therefore, limit the liability of
directors to the maximum extent permitted by New Jersey law.
Our
officers and directors are accountable to us as fiduciaries, which means they
are required to exercise good faith and fairness in all dealings affecting us.
In the event that a shareholder believes the officers and/or directors have
violated their fiduciary duties to us, the shareholder may, subject to
applicable rules of civil procedure, be able to bring a class action or
derivative suit to enforce the shareholder’s rights, including rights under
certain federal and state securities laws and regulations to recover damages
from and require an accounting by management. Shareholders who have suffered
losses in connection with the purchase or sale of their interest in Diamond
Information Institute, Inc. in connection with such sale or purchase, including
the misapplication by any such officer or director of the proceeds from the sale
of these securities, may be able to recover such losses from us.
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the
expenses payable by the Company in connection with the distribution of the
shares registered hereby.
SEC
Registration Fee
|
|
$
|
55.82
|
|
Accounting
Fees and Expenses
|
|
$
|
250,000
|
|
Legal Fees and Expenses
(*)
|
|
$
|
200,000
|
|
Printing
Expenses
|
|
$
|
0.00
|
|
Miscellaneous
Expenses
|
|
$
|
5,000
|
|
|
|
|
|
|
Total
|
|
$
|
455,055
.82
|
|
**Stoecklein
Law Group has agreed to receive shares of our common stock as compensation for
their services relating to this prospectus and its preparation. The
value shown above is estimate of the shares being issued at a value of $1.00 per
share.
RECENT
SALES OF UNREGISTERED SECURITIES
During the last three years, we issued
and sold the following unregistered securities:
Issuances to Officers,
Directors and Advisory Panel Members
During the year ended December 31,
2007, the Board of Directors ratified two forward splits, which resulted in the
common stock outstanding increasing from 1,000 to 17,250,000 which were all
owned by the Company’s founder, Chief Executive Officer and sole director, Mr.
Berge Abajian. Subsequent to the forward stock splits, the Company’s
founder and CEO transferred 3,350,000 shares to then Company’s President and two
members of the Advisory Panel for no consideration.
On June 6, 2007, the Company issued
50,000 restricted shares of our common stock to our CEO, Mr. Berge Abajian as
compensation for services rendered through December 31, 2007.
On June 6, 2007, the Company issued
50,000 shares each to its two members then sitting on the Advisory Panel, Mr.
Hagop Baghdadlian and Mr. Ralph Amato as compensation for their services
rendered during the 2007 fiscal year.
On January 20, 2008, the Company
authorized the issuance of 50,000 shares to its CEO, Mr. Abajian as compensation
for future services for the 2008 year.
On January 20, 2008, the Company
authorized the issuance of 50,000 shares to Mr. Baghdadlian as compensation for
his services on the Advisory Panel for the 2008 year.
On
January 20, 2008, the Company authorized a total issuance of 100,000 shares
(50,000 each) of commons stock to Zareh and Nvair Beylerian as compensation for
past and future services.
We
believe that the issuances of the shares described above were exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2). Mssrs. Abajian, Baghdadlian and Beylerian, because of
their position or affiliations with our company, were deemed to be an accredited
investors, as such term is defined in rule 501(a) of Regulation D promulgated
under the Securities Act of 1933. The shares were issued directly by us and did
not involve a public offering or general solicitation. There were no commissions
paid on the issuance of the shares.
Private
Placement
During the second quarter of 2007, the
Company conducted a private placement offering of its common stock to Accredited
Investors. Pursuant to the offering, each unit contained 25,000
shares of our common stock and 25,000 “Class A” purchase
warrants. Each unit was sold for $25,000 and a total of 17 units or
425,000 shares were issued as a result of the offering.
We
believe that the issuance and sale of the units was exempt from the registration
and prospectus delivery requirements of the Securities Act of 1933 by virtue of
Section 4(2), Regulation D. The units were issued directly by us and did not
involve a public offering or general solicitation. The recipients of the units
were afforded an opportunity for effective access to files and records of our
company that contained the relevant information needed to make their investment
decision, including our financial statements. We reasonably believed that the
recipients, immediately prior to issuing the units, had such knowledge and
experience in our financial and business matters that they were capable of
evaluating the merits and risks of their investment. The recipients
had the opportunity to speak with our management on several occasions prior to
their investment decision. There were no commissions paid on the issuance and
sale of the units.
Debt
Conversion
In April 2007, the Company entered into
a Debt Conversion Agreement with Advanced Integrated Solutions, Inc. and issued
100,000 shares of common stock at $1 per share as satisfaction of services
previously rendered and for future services to be rendered.
In June 2007, the Company entered into
a Debt Conversion Agreement with Artinian Co., Ltd. and issued 150,000 shares of
common stock at $1 per share as full satisfaction of services
rendered. In addition to the shares issued, the Company issued
150,000 “Class A’ warrants.
We
believe that the issuance of the shares was exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933 by virtue of
Section 4(2). The shares were issued directly by us and did not involve a public
offering or general solicitation. The recipients of the shares were afforded an
opportunity for effective access to files and records of our company that
contained the relevant information needed to make their investment decision,
including our financial statements. We reasonably believed that the recipients,
immediately prior to issuing the shares, had such knowledge and experience in
our financial and business matters that they were capable of evaluating the
merits and risks of their investment. The recipients had the
opportunity to speak with our management on several occasions prior to their
investment decision. There were no commissions paid on the issuance of the
shares.
Issuance of
Warrants
As discussed above, we issued warrants
to purchase a total of 425,000 shares of our common stock in conjunction with
the private placement conducted during the second quarter of
2007. The warrants are exercisable for 60 months from the close of
the offering at an exercise price of $1.50 per share.
As discussed above, we issued warrants
to purchase a total of 150,000 shares of our common stock pursuant to the Debt
Conversion Agreement with Artinian Co., Ltd. The warrants are
exercisable for 60 months from the date of the Agreement at an exercise price of
$1.50 per share.
We
believe that the issuance of the warrants was exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933 by virtue of
Section 4(2), Regulation D. The warrants were issued directly by us and did not
involve a public offering or general solicitation. The recipients of the
warrants were afforded an opportunity for effective access to files and records
of our company that contained the relevant information needed to make their
investment decision, including our financial statements. We reasonably believed
that the recipients, immediately prior to issuing the warrants, had such
knowledge and experience in our financial and business matters that they were
capable of evaluating the merits and risks of their investment. The
recipients had the opportunity to speak with our management on several occasions
prior to their investment decision. There were no commissions paid on the
issuance of the warrants.
Issuances to Consultants and
Employees
On January 20, 2008, the Company
authorized the issuance of 150,000 shares of common stock to Stoecklein Law
Group pursuant to its retainer agreement for legal services.
On January 20, 2008, the Company
authorized a total issuance of 117,500 shares of common stock to employees of
the Company as bonus compensation.
On April 28, 2008, the Company
authorized the issuance of 100,000 shares of common stock to Stoecklein Law
Group pursuant to its retainer agreement for legal services.
We
believe that the issuance of the shares was exempt from the registration and
prospectus delivery requirements of the Securities Act of 1933 by virtue of
Section 4(2) / Regulation D. The shares were issued directly by us and did not
involve a public offering or general solicitation. The recipients of the shares
were afforded an opportunity for effective access to files and records of our
company that contained the relevant information needed to make their investment
decision, including our financial statements. We reasonably believed that the
recipients, immediately prior to issuing the shares, had such knowledge and
experience in our financial and business matters that they were capable of
evaluating the merits and risks of their investment. The recipients
had the opportunity to speak with our management on several occasions prior to
their investment decision. There were no commissions paid on the issuance of the
shares.
Other
Issuances
On January 20, 2008, the Company sold a
total of 600 shares to 5 accredited investors for a total purchase price of
$600.
We
believe that the issuance and sale of the shares was exempt from the
registration and prospectus delivery requirements of the Securities Act of 1933
by virtue of Section 4(2) / Regulation D. The shares were issued directly by us
and did not involve a public offering or general solicitation. The recipients of
the shares were afforded an opportunity for effective access to files and
records of our company that contained the relevant information needed to make
their investment decision, including our financial statements. We reasonably
believed that the recipients, immediately prior to issuing the shares, had such
knowledge and experience in our financial and business matters that they were
capable of evaluating the merits and risks of their investment. The
recipients had the opportunity to speak with our management on several occasions
prior to their investment decision. There were no commissions paid on the
issuance and sale of the shares.
Stock
Cancellations
On February 20, 2008, the Company
cancelled a total of 7,200,000 shares of its common stock from its Chief
Executive Officer, former President and former member of its Advisory
Panel.
EXHIBITS
The
Exhibits required by Item 601 of Regulation S-K, and an index thereto, are
attached.
UNDERTAKINGS
A. The
undersigned registrant hereby undertakes to:
(1) File,
during any period in which it offers or sells securities, a post-effective
amendment to this registration statement to:
(i) Include
any prospectus required by section 10(a)(3) of the Securities Act;
(ii) Reflect
in the prospectus any facts or events which, individually or together, represent
a fundamental change in the information in the registration statement; and
notwithstanding the forgoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in the volume and price represent no more than a 20%
change in the maximum aggregate offering price set forth in the “Calculation of
Registration Fee” table in the effective registration statement.
(iii) Include
any additional or changed material information on the plan of
distribution.
(2) For
determining liability under the Securities Act, treat each post-effective
amendment as a new registration statement of the securities offered, and the
offering of the securities at that time to be the initial bona fide
offering.
(3) File
a post-effective amendment to remove from registration any of the securities
that remain unsold at the end of the offering.
B.
(1) Insofar
as indemnification for liabilities arising under the Securities Act of 1933 (the
“Act”) may be permitted to directors, officers and controlling persons of the
issuer pursuant to the foregoing provisions, or otherwise, the issuer has been
advised 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.
(2) In
the event that a claim for indemnification against such liabilities (other than
the payment by the issuer of expenses incurred or paid by a director, officer or
controlling person of the issuer in the successful defense of any action, suit
or proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the issuer will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
(3) Each
prospectus filed pursuant to Rule 424(b) as part of a registration statement
relating to an offering, other than registration statements relying on Rule 430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be
part of and included in the registration statement as of the date it is first
used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement
or made in a document incorporated or deemed incorporated by reference into the
registration statement or prospectus that is part of the registration statement
will, as to a purchaser with a time of contract of sale prior to such first use,
supersede or modify any statement that was made in the registration statement or
prospectus that was part of the registration statement or made in any such
document immediately prior to such date of first use.
SIGNATURES
In
accordance with the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-1 and authorized this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorize, in the
City of Fairfield, State of New Jersey on August 28, 2008.
DIAMOND
INFORMATION INSTITUTE, INC.
By:
/s/ Berge
Abajian
Berge
Abajian, Chief Executive Officer
and Principal Accounting
Officer
In accordance with the requirements of
the Securities Act of 1933, this registration statement was signed by the
following persons in the capacities and on the dates stated:
Signature
Title
Date
/s/ Berge
Abajian
_______ CEO,
Director August
28, 2008
Berge
Abajian Principal
Accounting
Officer
/s/ Alfred
Siricia
Chief
Financial
Officer August
28, 2008
Alfred
Siricia
EXHIBIT
INDEX
|
|
|
Incorporated
by reference
|
Exhibit
|
Exhibit
Description
|
Filed
herewith
|
Form
|
Period
ending
|
Exhibit
|
Filing
date
|
3(i)
|
Certificate
of Incorporation, dated October 24, 1988
|
X
|
|
|
|
|
3(i)(b)
|
Certificate
of Trade Name, dated January 31, 1997
|
X
|
|
|
|
|
3(i)(c)
|
Certificate
of Amendment to the Certificate of Incorporation, dated May 31,
2007
|
X
|
|
|
|
|
3(ii)
|
Bylaws
of Diamond Information Institute, Inc.
|
X
|
|
|
|
|
5
|
Opinion
of Legal Counsel (Stoecklein Law Group) – Dated August 28,
2008
|
X
|
|
|
|
|
10.1
|
Sample
Subscription Agreement for the $25,000 unit offering
|
X
|
|
|
|
|
23.1
|
Consent
of Moore Stephens, PC – Dated August 28, 2008
|
X
|
|
|
|
|
23.2
|
Consent
of Legal Counsel (Stoecklein Law Group) – Dated August 28,
2008
|
X
|
|
|
|
|
BYLAWS
OF
DIAMOND
INFORMATION INSTITUTE, INC.
a
New Jersey Corporation
ARTICLE
I
OFFICES
Section
1. Principal Executive Office
. The principal
executive office of the corporation shall be located as directed by the board of
directors.
Section 2. Other
offices
. Other business offices may at any time be established
by the board of directors at any place or places by them or where the
corporation is qualified to do business.
ARTICLE
II
MEETINGS OF
SHAREHOLDERS
Section 1. Place
of Meetings
. All meetings of shareholders shall be held at the
principal executive office of the corporation, or at any other place within or
without the State of New Jersey which may be designated either by the board of
directors or by the written consent of all person entitled to vote thereat and
not present at the meeting, given either before or after the meeting and filed
with the secretary of the corporation.
Section 2. Annual
Meetings
. The annual meeting of shareholders shall be fixed by
the board of directors. At such meetings directors shall be elected,
reports of the affairs of the corporation shall be considered, and any other
business may be transacted which is within the powers of the
shareholders.
Section
3. Special Meetings
. Special meetings of the
shareholders, for the purpose of taking any action permitted by the shareholders
under the New Jersey General Corporation Law and the certificate of
incorporation of the corporation, may be called at any time by the chairman of
the board or the president, or by the board of directors, or by one or more
holders of shares entitled to cause in the aggregate not less than twenty
percent (20%) of the votes at the meeting. Upon request in writing
that a special meeting of shareholders be called for any proper purpose,
directed to the chairman of the board, president, vice president or secretary by
any person (other than the board of directors) entitled to call a special
meeting of shareholders, the officer forth with shall cause notice to be given
to shareholders entitled to vote that a meeting will be held at a time requested
by the person or person calling the meeting, not less than thirty-five (35) nor
more than sixty (60) days after receipt of the request.
Section 4. Notice
of Annual or Special Meeting.
Written notice of each annual or
special meeting of shareholders shall be given not less than ten (10) nor more
than sixty (60) days before the date of the meeting to each shareholder entitled
to vote thereat. Such written notice shall be given either personally
or by mail or other means of written communication, charges prepaid, addressed
to such shareholder at his address appearing on the books of the corporation or
given by him to the corporation for the purpose of notice. If any
notice or report addressed to the shareholder at the address of such shareholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service as unable to deliver the notice or report to the
shareholder at such address, all future notices or reports shall be deemed to
have been duly given without further mailing if the same shall be available for
the shareholder upon written demand of the shareholder at the principal
executive office of the corporation for a period of one (1) year from the date
of the giving of the notice or report to all other shareholders. If a
shareholder gives no address, notice shall be deemed to have been given him if
sent by mail or other means of written communication addressed to the place
where the principal executive office of the corporation is situated, or if
published at least once in some newspaper of general circulation in the county
in which said principal executive office is located.
Any
such notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by other means of written
communication. An affidavit of mailing of any such notice in
accordance with the foregoing provisions, executed by the secretary, assistant
secretary or any transfer agent of the corporation, shall be prima facie
evidence of the giving of the notice.
Section
5. Quorum
. The presence in person or by proxy of
the holders of a majority of the shares entitled to vote at any meeting shall
constitute a quorum for the transaction of business at any meeting of
shareholders. The shareholders present at a duly called or held
meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave less
than a quorum, if any action taken (other than adjournment) is approved by at
least a majority of the shares required to constitute a quorum.
Section
6. Adjourned Meeting and Notice Thereof
. Any
shareholders’ meeting, annual or special, whether or not a quorum is present,
may be adjourned from time to time by the vote of a majority of the shares, the
holders of which are either present in person or represented by proxy thereat,
but in the absence of a quorum at the commencement of the meeting, no other
business may be transacted at such meeting.
When
any shareholder’ meeting, either annual or special, is adjourned for thirty (30)
days or more, or if after adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given as in the case
of an original meeting. Except as provided above, it shall not be
necessary to give any notice of the time and place of the adjourned meeting or
of the business to be transacted thereat, other than by announcement of the time
and place thereof at the meeting at which such adjournment is
taken.
Section
7. Voting
. The shareholders entitled to vote at any
meeting of shareholders shall be determined in accordance with the New Jersey
General Corporation Law (relating to voting of shares held by a fiduciary, in
the name of a corporation, or in joint ownership). The shareholders
may vote by voice vote or by ballot; provided, however, that all elections for
director shall be by ballot. If a quorum is present, the affirmative
vote of the majority of the shares represented at the
meeting
and entitled to vote on any matter shall be the act of the shareholders, unless
the vote of a greater number of voting by classes is required by the New Jersey
General Corporation Law or the certificate of incorporation.
Section
8. Validation of Defectively Called or Noticed
Meeting
. The transactions of any meeting of shareholders,
either annual or special, however called and noticed, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum be
present either in person or by proxy, and if, either before or after the
meeting, each of the persons entitled to vote, not present in person or by
proxy, or who, though present, has, at the beginning of the meeting, properly
objected to the transaction of any
not lawfully called or
convened, or to particular matters of business legally required to be included
in the notice, but not so included, signs a written waiver of notice or consent,
except that if action is taken or proposed to be taken for approval of any of
those matters specified in Section 4 above, the waiver of notice or consent
shall state the general nature of the proposal.
Section 9. Action
without Meeting
. Directors may be elected without a meeting by
a consent in writing, setting forth the action so taken, signed by all of the
persons who would be entitled to vote for the election of directors, provided
that, without prior notice except as hereinafter set forth, a director may be
elected at any time to fill a vacancy not filled by the directors by the written
consent of persons holding a majority of the outstanding shares entitled to vote
for the election of directors.
Any
other action which, under any provision of the New Jersey General Corporation
Law, may be taken at a meeting of the shareholders, may be taken without a
meeting, and without prior notice except as hereinafter set forth, if a consent
in writing, setting forth the action so taken, is signed by the holders of
outstanding shares having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, unless the consents of all
shareholders entitled to vote have been solicited in writing.
Unless,
as provided in Section 12 of this Article II, the board of directors has fixed a
record date for the determination of shareholders entitled to notice of any to
give such written consent, the record date for such determination shall be the
day on which the first written consent is given. All such written
consents shall be filed with the secretary of the corporation.
Any
shareholder giving a written consent, or the shareholder’s proxy holders, or a
transferee of the shares or a personal representative of the shareholder or
their respective proxy holders, may revoke the consent by a writing received by
the corporation prior to the time that written consents of the number of shares
required to authorize the proposed action have been filed with the secretary of
the corporation, but may not do so thereafter. Such revocation is
effective upon its receipt by the secretary of the corporation.
Section
10. Proxies
. Every person entitled to vote or
execute consents shall have the right to do so either in person or by one or
more agents authorized by a written proxy executed by such person or his duly
authorized agent and filed with the secretary of the corporation. Subject to the
New Jersey General Corporation Law in the case of any proxy which states that it
is irrevocable, any proxy duly executed shall continue in full force and effect
until (i) an instrument revoking it or a duly executed proxy bearing a later
date is filed with the secretary of the corporation prior to the vote pursuant
thereto, (ii) the person executing the proxy attends the meeting and votes
in
person,
or (iii) written notice of the death or incapacity of the maker of such proxy is
received by the corporation before the vote pursuant thereto is counted’
provided that no such proxy shall be valid after the expiration of three (3)
years from the date of its execution, unless otherwise provided for in the
proxy. The dates contained on the forms of proxy shall presumptively
determine the order of execution of the proxies, regardless of the postmark
dates on the envelopes in which they are mailed.
Without
limiting the manner in which a shareholder may authorize another person or
persons to act for him as proxy, the following shall constitute a valid means by
which a shareholder may grant such authority.
(a)
|
A
Shareholder may execute a writing authorizing another person or persons to
act for him as proxy. Execution may be accomplished by the
shareholder or his authorized officer, director, employee or agent signing
such writing or causing his or her signature to be affixed to such writing
by any reasonable means including, but not limited to, by facsimile
signature.
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(b)
|
A
shareholder may authorize another person or persons to act for him as
proxy by transmitting or authorizing the transmission of a telegram,
cablegram, or other means of electronic transmission to the person who
will be the holder of the proxy or to a proxy solicitation firm, proxy
support service organization or like agent duly authorized by the person
who will be the holder of the proxy to receive such transmission, provided
that any such telegram, cablegram or other means of electronic
transmissions are valid, the inspectors or, if there are no inspectors,
such other persons making that determination shall specify the information
upon which they relied.
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(c)
|
Any
copy, facsimile telecommunication or other reliable reproduction of the
writing or transmission described in Paragraphs (a) or (b) may be
substituted or used in lieu of the original writing or transmission for
any and all purposes for which the original writing or transmission could
be used, provided that such copy, facsimile telecommunication or other
reproduction shall be a complete reproduction of the entire original
writing or transmission.
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Section
11. Inspectors of Election
. In advance of any
meeting of shareholders, the board of directors may appoint any person or
persons other than nominees for office as inspectors of election to act at such
meeting or any adjournment thereof. If inspectors of election be not
so appointed, the chairman of any such meeting may, and on the request of any
shareholder or his proxy shall, make such appointment at the
meeting. The number of inspectors shall be either one (1) or three
(3) which inspector(s) are to be appointed. In case any person
appointed as inspector fails to appear or fails or refuses to act, the vacancy
may, and on the request of any shareholder or a shareholders’ proxy shall, be
filled by appointment by the board of directors in advance of the meeting, or at
the meeting by the chairman of the meeting.
The
duties of such inspectors shall be as prescribed by the New Jersey General
Corporation Law and shall include: determining the number of shares outstanding
and the voting power of each, the shares represented at the meeting, the
existence of quorum, the authenticity, validity and effect of proxies; receiving
votes, ballots or consents; hearing and determining all challenges and questions
in any way arising in connection with the right to vote; counting and tabulating
all votes
or
consents; determining when the pools shall close; determining the result; and
such acts as may be proper to conduct the election or vote with fairness to all
shareholders.
The
inspectors of election shall perform their duties impartially, in good faith, to
the best of their ability and as expeditiously as is practical. If
there are three (3) inspectors of election, the decision, act or certificate of
a majority is effective in all respects as the decision, act or certificate of
all. Any report or certificate made by the inspectors of election is
prima facie evidence of the facts stated therein.
Section
12. Record Date for Shareholder Notice, Voting and Giving
Consents
. For purposes of determining the shareholders
entitled to notice of any meeting or to vote entitled to give consent to
corporate action without a meeting, the board of directors may fix, in advance,
a record date, which shall not be more than sixty (60) days nor less than ten
(10) days before the date of any such meeting nor more than sixty (60) days
before any such action without a meeting, and in this event only shareholders of
record on the date so fixed are entitled to notice and to vote or to give
consents, as the case may be, notwithstanding any transfer of any shares on the
books of the corporation after the record date, except as otherwise provided in
the New Jersey General Corporation Law.
If
the board of directors does not so fix a record date:
(a)
|
The
record date for determining shareholders entitled to notice of or to vote
at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given, or if notice
is waived, at the close of business on the business day next preceding the
day on which the meeting is held.
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(b)
|
The
record date for determining shareholders entitled to give consent to
corporate action in writing without a meeting, (i) when no prior action by
the board has been taken, shall be the day on which the first written
consent is given, or (ii) when prior action of the board is required by
the New Jersey General Corporation Law, shall be at the close of business
on the day on which the board adopts the resolution relating to that
action, or the sixtieth (60
th
)
day before the date of such other action, whichever is
later.
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ARTICLE
III
DIRECTORS
Section 1.
Powers
. Subject to the provisions of the New Jersey General
Corporation Law, and to any limitations in the certificate of incorporation and
these bylaws, relating to action required to be approved by the shareholders or
approved by the outstanding shares, all corporate powers shall be exercised by
or under the authority of, and the business and affairs of the corporation shall
be managed by, the board of directors. Without prejudice to such
general powers, but subject to the same limitations, it is hereby expressly
declared that the board of directors shall have the following powers, to
wit:
(a)
|
To
select and remove all the officers, agents and employees of the
corporation, prescribe such powers and duties for them as may not be
inconsistent with law,
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(b)
|
with
the certificate of incorporation or with these bylaws, fix their
compensation and require from them security for faithful
service.
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(c)
|
To
conduct, manage and control the affairs and business of the corporation,
and to make such rules and regulations therefor not inconsistent with law,
or with the certificate of incorporation or with these bylaws, as they may
deem best.
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(d)
|
To
change the principal executive office and principal office for the
transaction of the corporation from one location to another; to fix and
locate from time to time one or more subsidiary offices of the corporation
within or without the State of New Jersey; to designate any place within
or without the State of New Jersey for the holding of any shareholders’
meeting or meetings; and to adopt, make and use a corporate seal, and to
prescribe the forms of certificates of stock, and to alter the form of
such seal and of such certificates from time to time, as in their judgment
they may deem best, provided such seal and such certificates shall at all
times comply with the provisions of
law.
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(e)
|
To
authorize the issuance of shares of stock of the corporation from time to
time, upon such terms as may be
lawful.
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(f)
|
To
borrow money and incur indebtedness for the purposes of the corporation,
and to cause to be executed and delivered therefor, in the corporate name,
promissory notes, bonds, debentures, deeds of trust, mortgages, pledges,
hypothecations or other evidences of debt and securities
therefor.
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Section 2. Number
and Qualification of Directors.
The authorized number of
directors shall be no less than one, and shall be such maximum number of persons
as may be determined from time to time by resolutions of the board of
directors.
Section
3. Election and Term of Office.
The directors shall
be elected at each annual meeting of shareholders but, if any such annual
meeting is not held or the directors are not elected thereat, the directors may
be elected at any special meeting of shareholders held for that
purpose. All directors shall hold office until their respective
successors are elected and qualified, subject to the New Jersey General
Corporation Law and the provisions of these bylaws with respect to vacancies on
the board of directors.
Section
4. Vacancies
. A vacancy in the board of directors
shall be deemed to exist in case of the death, resignation or removal of any
director, or if the board of directors by resolution declares vacant the office
of a director who has been declared of unsound mind by order of count or
convicted of a felony, or if the authorized number of directors be increased, or
if the shareholders fail, at any annual or special meeting of shareholders at
which any director or directors are elected, to elect the full authorized number
of directors to be voted for at that meeting.
Vacancies
in the board of directors, except for a vacancy created by the removal of a
director, may be filled by a majority of the remaining directors, though less
than a quorum, or by
a
sole remaining director, and each director so elected shall hold office until
his successor is elected at an annual or a special meeting of the
shareholders. A vacancy in the board of directors created by the
removal of a director may only be filled by the vote of a majority of the shares
entitled to vote represented at a duly held meeting at which a quorum is
present, or by the written consent of the holders of a majority of the
outstanding shares entitled to vote.
The
shareholders may elect a director or directors at any time to fill any vacancy
or vacancies not filled by the directors. Any such election by
written consent shall require the consent of holders of a majority of the
outstanding shares entitled to vote.
Any
director may resign effective upon giving written notice to the chairman of the
board, the chief executive officer, the president, the secretary or the board of
directors of the corporation, unless the notice specifies a later time for the
effectiveness of such resignation. If the board of directors accepts
the resignation of a director tendered to take effect at a future time, the
board of directors or the shareholders shall have power to elect a successor or
take office when the resignation is to become effective.
No
reduction of the authorized number of directors shall have the effect of
removing any director prior to the expiration of his term of
office.
Section 5. Place
of Meeting
. Regular meeting of the board of directors shall be
held at any place within or without the State of New Jersey which has been
designated from time to time by resolution by the board or by written consent of
all members of the board of directors. In the absence of such
designation, regular meetings of the board may be held either at a place so
designated or at the principal executive office.
Section 6. Annual
Meeting
. Immediately following each annual meeting of
shareholders, the board of directors shall hold a regular meeting at the place
of said annual meeting or at such other place as shall be fixed by the board of
directors, for the purpose of organization, election of officers, and the
transaction of other business. Call and notice of such meetings are
herby dispensed with.
Section 7. Other
Regular Meetings
. Other regular meetings of the board of
directors shall be held without call on the date and at the time which the board
of directors may from time to time designated; provided, however, that should
the day so designated fall upon a Saturday, Sunday or legal holiday observed by
the corporation at its principal executive office, then said meeting shall be
held at the same time on the next day thereafter ensuing which is a full
business day. Notice of all such regular meetings of the board of
directors is hereby dispensed with.
Section
8. Special Meetings
. Special meetings of the board
of directors for any purpose or purposes shall be called at any time by the
chairman of the board, the president, any vice president, the secretary or by
any director.
Special
meetings of the board of directors shall be held upon four (4) days’ written
notice or forty-eight (48) hours’ notice given personally or by telephone,
telegraph, telex or other similar means of communication. Any such
notice shall be addressed or delivered to each director at such director’s
address as it is shown upon the records of the corporation or as may have been
given to the corporation by the director for purposes of notice or, if such
address is not shown on such records or is not readily ascertainable, at the
place in which the meetings of the directors are regularly held.
Notice
by mail shall be deemed to have been given at the time a written notice is
deposited in the United States mail, postage prepaid. Any other written notice
shall be deemed to have been given at the time it is personally delivered to the
recipient or is delivered to a common carrier for transmission, or actually
transmitted by the person giving the notice by electronic means, to the
recipient. Oral notice shall be deemed to have been given at the time it is
communicated to the
recipient
or to a person at the office of the recipient who the person giving the notice
has reason to believe will promptly communicate it to the
recipient.
Any
notice shall state the date, place and hour of the meeting. Notice
given to a director in accordance with this section shall constitute due, legal
and personal notice to such director.
Section 9. Action
at a Meeting: Quorum and Required Vote.
The presence of a
majority of the authorized number of directors at a meeting of the board of
directors constitutes a quorum for the transaction of business, except as
hereinafter provided. Every act or decision done or made by a
majority of the directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the board of directors, unless a greater
number, or the same number, after disqualifying one or more directors from
voting, is required by law, by the certificate of incorporation or by these
bylaws. A meeting at which a quorum is initially present may continue to
transact business notwithstanding the withdrawal of directors, provided that any
action taken is approved by at least a majority of the required quorum for such
meeting.
Section
10. Validation of Defectively Called or Noticed
Meetings
. The transactions of any meeting of the board of
directors, however called and noticed or wherever held, shall be as valid as
though had at a meeting duly held after regular call and notice, if a quorum is
present and if, either before or after the meeting, each of the directors not
present or who, though present, has prior to the meeting or at its commencement,
protested the lack of proper notice to him, signs a written waiver of notice or
a consent to holding such meeting or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with
the corporate records or made a part of the minutes or the meeting.
Section
11. Adjournment
. A majority of the directors
present, whether or not constituting a quorum, may adjourn any board of
directors’ meeting to another time or place.
Section
12. Notice of adjournment
. If a meeting is
adjourned for more than twenty-four (24) hours, notice of any adjournment to
another time or place shall be given prior to the time of the adjourned meeting
to the directors who were not present at the time of adjournment to another time
or place shall be given prior to the time of the adjourned meeting to the
directors who were not present at the time of adjournment; otherwise, notice of
the time and place of holding an adjourned meeting need not be given to absent
directors if the time and place be fixed at the meeting adjourned.
Section
13. Participation in Meeting by Conference
Telephone
. Members of the board of directors may participate
in a meeting through use of conference telephone or similar communications
equipment, so long as all members participating in such meeting can hear one
another. Participating in a meeting as permitted in this Section
constitutes presence in person at such meeting.
Section
14. Action Without Meeting
. Any action by the board
of directors may be taken without a meeting if all members of the board shall
individually or collectively consent in writing to such action. Such written
consent or consents shall be filed with the minutes of the
proceedings
of
the board and shall have the same force and effect as a unanimous note of such
directors.
Section 15. Fees
and Compensation
. Directors and members of committees may
receive such compensation, if any, for their services, and such reimbursement
for expenses, as may be fixed or determined by resolution of the board of
directors.
Section
16. Committees
. The board of directors may, by
resolution adopted by a majority of the authorized number of directors,
designate an executive and other committees, each consisting of two (2) or more
directors, to serve at the pleasure of the board of directors, and may prescribe
the manner in which proceedings of any such committee meetings of such committee
may be regularly scheduled in advance and may be called at any time by any two
(2) members thereof; otherwise, the provisions of these bylaws with respect to
notice and conduct of meetings of the board of directors shall
govern. Any such committee, to the extent provided in a resolution of
the board of directors, shall have all of the authority of the board of
directors, except as limited by the New Jersey General Corporation
Law.
ARTICLE
IV
OFFICERS
Section
1. Officers
. The officers of the corporation shall
be a chief executive officer, a president, a secretary and a chief financial
officer. The corporation may also have, at the discretion of the
board of directors, a chairman of the board, one or more vice presidents, one or
more assistant secretaries, one or more assistant treasures, and such other
officers as may be appointed in accordance with the provisions of Section 3 of
this Article. Any number of offices may be held by the same
person.
Section
2. Election
. The officers of the corporation,
except such officers as may be appointed in accordance with the provisions of
Section 3 or Section 6 of this Article, shall be chosen annually by, and shall
serve at the pleasure of, the board of directors, and each shall hold his office
until he or she shall resign or shall be removed or otherwise disqualified to
serve, or his or her successor shall be elected and qualified.
Section
3. Subordinate Officer
. The board of directors or
the chief executive officer may appoint such other officers as the business of
the corporation may require, each of whom shall hold office for such period,
have such authority and perform such duties as are provided in these bylaws or
as the board of directors may from time to time determine.
Section
4. Removal and Resignation
. Subject to the rights,
if any, of an officer under any contract of employment, any officer may be
removed, either with or without cause, by the board of directors, at any regular
or special meeting thereof, or, except in case of an officer chosen by the board
of directors, by any officer upon whom such power or removal may be conferred by
the board of directors.
Any
officer may resign at any time by giving written notice to the board of
directors, or to the president or to the secretary of the
corporation. Any resignation is without prejudice to the rights, if
any, of the corporation under any contract to which such officer is a
party. Any such resignation shall take effect at the date of the
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section
5. Vacancies
. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
in the matter prescribed in these bylaws for regular election or appointment to
such office.
Section
6. Chairman of the Board
. The chairman of the
board, if there be such an office, shall preside at all meetings of the board of
directors and exercise and perform such other powers
and
duties as may be from time to time assigned to him by the board of directors or
prescribed by these bylaws.
Section 7. Chief Executive
Officer
. Subject to such supervisory powers, if any, as may be
given by the board of directors to the chairman of the board, if there be such
an officer, the chief executive officer shall be the chief executive officer of
the corporation and shall, subject to the control of the board of directors,
have general supervision, direction and control of the business and officers of
the corporation. He shall preside at all meetings of the shareholders
and at all meetings of the board of directors. He shall be ex officio
a member of all the standing committees, including the executive committee, if
any and shall have the general power and duties of management usually vested in
the office of president of a corporation, and shall have such other powers and
duties as may be prescribed by the board of directors or these
bylaws.
Section
8. President
. The president shall be the chief
operating officer of the corporation, and in the event of absence or disability
of the chief executive officer, or if no chief executive officer has been
appointed by the board of directors, shall perform all the duties of the chief
executive officer, and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the chief executive officer.
Section 9. Vice
President
. In the absence or disability of the president, the
vice presidents in order of their rank as fixed by the board of directors or, if
not ranked, a vice president designated by the board of directors, if there be
such an officer or officers, shall perform all the duties of the president, and
when so acting shall have all the powers of, and be subject to all the
restrictions upon, the president. The vice presidents, if there be
such an officer or officers, shall have such other powers and perform such other
duties as from time to time may be prescribed for them respectively by the board
of directors of these bylaws.
Section
10. Secretary
. The secretary shall record or cause
to be recorded , and shall keep or cause to be kept, at the principal executive
office or such other place as the board of directors may order, a book of
minutes of all meetings and actions, of the shareholders, the board
directors and all committees thereof, with the time and place of holding of
meetings, whether regular or special, and if special, how authorized, the notice
thereof given, the names of those present at directors’ meetings, the number of
shares present or represented at shareholders’ meetings, and the proceedings
thereof.
The
secretary shall keep, or cause to be kept, at the principal executive office or
at the office of the corporations’ transfer agent, or registrar, if one be
appointed, a share register, or a duplicate share register, showing the names of
the shareholders and their addresses, the number and classes of shares held by
each, the number and date of certificates issued for the same, and the number
and date of cancellation of every certificate surrendered for
cancellation.
Section 11. Chief
Financial Officer
. The chief financial officer shall keep and
maintain, or cause to be kept and maintained, adequate and colored accounts of
the properties and business transactions of the corporation, including accounts
of its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings and shares. The books of account shall at all
reasonable times be open to inspection by any director.
The
chief financial officer shall deposit all moneys and other valuables in the name
and to the credit of the corporation with such depositories as may be designated
by the broad of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all
of
his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such powers and perform such other duties as may be
prescribed by the board of directors or these bylaws.
Section
12. Assistant Secretaries and Assistant
Treasurers
. In the absence or disability of the secretary or
the chief financial officer, their duties shall be performed and their powers
exercised, respectively, by any assistant secretary or any assistant treasurer
which the board of directors may have elected or appointed. The
assistant secretaries and the assistant treasurers shall have such other duties
and powers as may have been delegated to them, respectively, by the secretary or
the chief financial officer or by the board of directors.
ARTICLE
V
INDEMNIFICATION
OF DIRECTORS,
OFFICERS, EMPLOYEES AND
OTHER AGENTS
Section
1. Definitions
. For the purpose of this Article V,
“agent” means any person who is or was a director, officer, employee or other
agent of the corporation, or is or was serving at the request of the corporation
as a director, officer, employee or agent of another foreign or domestic
corporation, partnership, joint venture, trust or other enterprise, or was a
director, officer, employee or agent of a foreign or domestic corporation which
was a predecessor corporation of the corporation or of another enterprise at the
request of such predecessor corporation; “proceeding” means any threatened,
pending or completed action or proceeding, whether civil, criminal,
administrative or investigative; and “expenses” includes,
without limitation,
attorneys’ fees and any expenses of establishing a right to indemnification
under Section 4 or Section 5 of this Article V.
Section
2. Actions by Third Parties
. The corporation shall
indemnify any person who was or is a party, or is threatened to be made a party,
or is threatened to be made a party, to any proceeding (other than an action by
or in the right of the corporation) by reason of the fact that such person is or
was an agent of the corporation, against expenses, judgments, fines, settlements
and other amounts actually had reasonably incurred in connection with such
proceeding to the fullest extent permitted by the laws of the State of New
Jersey as they may exist from time to time.
Section
3. Actions by or in the Right of the
Corporation
. The corporation shall indemnify any person who
was or is a party, or is threatened to be made a party, to any threatened,
pending or completed action by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a agent
of the corporation, against expenses actually and reasonably incurred by such
person in connection with the defense of settlement of such action to the
fullest extent permitted by the laws of the State of New Jersey as they may
exist from time to time.
Section
4. Advance of Expenses
. Expenses incurred in
defending any proceeding may be advanced by the corporation prior to the final
disposition of such proceeding upon receipt of a request therefore and an
undertaking by or on behalf of the agent to repay such amount unless it shall be
determined ultimately that the agent is not entitled to be indemnified as a
authorized in this Article V.
Section5. Contractual
Nature
. The provision of this Article V shall be deemed to be
a contract between the corporation and each director and officer who serves in
such capacity at any
time
while this Article is in effect, and any repeal or modification thereof shall
not affect any rights or obligations then existing with respect to any state of
facts then or theretofore existing or any action, suite or proceeding
theretofore existing or any action, suite or proceeding theretofore or
thereafter brought based in whole or in part upon any such state of
facts.
Section
6. Insurance
. Upon and in the event of a
determination by the board of directors to purchase such insurance, the
corporation shall purchase and maintain insurance on behalf of any agent of the
corporation against any liability asserted against or incurred by the agent in
such capacity or arising out of the agent’s status as such whether or not the
corporation would have the power to indemnify the agent against such liability
under the provisions of this Article V. All amounts received by an agent under
any such policy of insurance shall be applied against, but shall not limit, the
amounts to which the agent is entitled pursuant to the foregoing provisions of
the Article V.
Section
7. ERISA
. To assure indemnification under this
provision of all such person who are or were “fiduciaries” of an employee
benefit plan governed by the Employee Retirement Income Security Act of 1974, as
amended from time to time (“ERISA”), the provisions of this Article V shall,
except as limited by Section 410 of ERISA, be interpreted as follows: an “other
enterprise” shall be deemed to include an employee benefit plan; the corporation
shall be deemed to have requested a person to serve as an employee of an
employee benefit plan where the performance by such person of his duties to the
corporation also imposes duties on, or otherwise involves services by, such
person to the plan or participants or beneficiaries of the plan; excise taxes
assessed on a person with respect to an employee benefit plan in the performance
of such person’s duties for a purpose reasonably believed by such person to be
in compliance with ERISA and the terms of the plan shall be deemed to be for a
purpose which is not opposed to the best interests of the
corporation.
ARTICLE
VI
GENERAL CORPORATE
MATTERS
Section 1. Record
Date for Purposes Other Than Notice and Voting
. For purposes
of determining the shareholders entitled to receive payment of any dividend or
other distribution or allotment of any rights or entitled to exercise any right
in respect of any other lawful action (other than as provided in Section 12 of
Article II of these bylaws), the board of directors may fix, in advance, a
record date, which shall not be more than sixty (60) days before any such
action, and in that case only shareholders of record on the date so fixed are
entitled to receive the dividend, distribution, or allotment of rights or to
exercise the rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed , except
as otherwise provided in the New Jersey General Corporation Law.
If
the board of directors does not so fix a record date, the record date for
determining shareholders for any such purpose shall be at the close of business
on the day on which the board adopts the applicable resolution or the sixtieth
(60
th
) day
before the date of that action, whichever is later.
Section
2. Inspection of Corporate Records
. The accounting
books and records, the records of shareholders, and minutes of proceeding of the
shareholders and the board and committees of the board of directors of the
corporation and any subsidiary of the corporation shall be open to inspection
upon the written demand on the corporation of any shareholder or holder
of
a
voting trust certificate at any reasonable time during usual business hours, for
a purpose reasonably related to such holders’ interests as a shareholder or as
the holder of such voting trust certificate. Such inspection by a
shareholder or holder of a voting trust certificate may be made in person or by
an agent or attorney, and the right of inspection includes the right to copy and
make extracts. A shareholder or shareholders holding at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who hold at least one percent (1%) of such voting shares and have
filed a Schedule 14B with the United States Securities and Exchange Commission
relating to the election of directors of the corporation shall have (in person,
or by agent or attorney) the right to inspect and copy the record of
shareholders’ names and addresses and shareholdings during usual business hours
upon five (5) business days’ prior written demand upon the corporation and to
obtain from the transfer agent, if any, for the corporation, upon written demand
and upon the tender of its usual charges, a list of the shareholders’ names and
addresses, who are entitled to vote for the election of directors, and their
shareholdings, and of the most recent record date for which it has been compiled
or as of a date specified by the shareholder subsequent to the date of
demand. The list shall be made available on or before the later of
five (5) business days after the demand is received or the date specified
therein as the date as of which the list is to be compiled or as of a date
specified by the shareholder subsequent to the date of demand. The
list shall be made available on or before the later of five (5) business days
after the demand is received or the date specified therein as the date as of
which the list is to be compiled.
Every
director shall have the absolute right at any reasonable time to inspect and
copy all books, records and documents of every kind and to inspect the physical
properties of the corporation. Such inspection by a director may be
made in person or by agent or attorney, and the right of inspection includes the
right to copy and make extracts.
Section
3. Inspection of Bylaws
. The corporation shall keep
in its principal executive office in Fairfield, New Jersey, or any other
principal executive office of the corporation (or otherwise provide upon written
request of any shareholder) the original or a copy of the bylaws as amended or
otherwise altered to date, certified by the secretary, which shall be open to
inspection by the shareholders at all reasonable times during office
hours.
Section
4. Checks, Drafts, Etc
. All checks, drafts or other
orders for payment of money, notes or other evidences of indebtedness, issued in
the name of or payable to the corporation, shall be signed or endorsed by such
person or persons and in such manner as, from time to time, shall be determined
by resolution of the board of directors.
Section
5. Contracts and Instruments; How Executed
. The
board of directors, except as in these bylaws otherwise provided, may authorize
any officer or officers, agent or agents, to enter into any contract or execute
any instrument in the name of and on behalf of the corporation, and such
authority may be general or confined to specific instances; and, unless so
authorized or ratified by the board of directors, no officer, agent or employee
shall have any power or authority to bind the corporation by any contract or
engagement or to pledge its credit or to render it liable for any purpose or to
any amount.
Section
6. Certificate for Shares.
Every holder of shares
in the corporation shall be entitled to have a certificate signed in the name of
the corporation by the chairman of the board or the president or a vice
president or a vice president and by the chief financial officer or an assistant
treasurer or the secretary or any assistant secretary, certifying the number of
shares and the Class or series of shares owned by the
shareholder. Any of the signatures on the certificate may be
facsimile. In case any officer, transfer agent or registrar who has
signed or whose facsimile
signature
has been placed upon a certificate is issued, it may be issued by the
corporation with the same effect as if such person were an officer, transfer
agent or registrar at the date of issue.
Any
such certificate shall also contain such legend or other statement as may be
required by applicable state securities laws, the federal securities laws, and
any agreement between the corporation and the shareholders thereof.
Certificates
for shares may be issued prior to full payment under such restrictions and for
such purposes as the board of directors or these bylaws may provide; provided,
however, that on any certificate issued to represent any partly paid shares, the
total amount of the consideration to be paid therefore and the amount paid
thereon shall be stated.
Except
as provided in this Section 6, no new certificate for shares shall be issued in
lieu of an old one unless the latter is surrendered and canceled at the same
time. The board of directors may, however, in case any certificate
for shares is alleged to have been lost, stolen, or destroyed, authorize the
issuance of a new certificate in lieu thereof, and the corporation may require
that the corporation be given a bond or other adequate security sufficient to
indemnify it against any claim that may be made against it (including expense or
liability) on account of the alleged loss, theft, or destruction of such
certificate of the issuance of such new certificate.
At
any time a certificate may be issued pursuant to this section, the corporation
is authorized to issue an uncertificated issuance of shares for purposes of
electronic transfer.
Section
7. Representation of Shares of Other
Corporations
. The president or any other officer or officers
authorized by the board of directors or the president are each authorized to
vote, represent and exercise on behalf of the corporation all rights incident to
any and all shares of any other corporation or corporations standing in the name
of the corporation. The authority herein granted may be exercised
either by any such officer in person or by any other person authorized so to do
by proxy or power of attorney duly executed by said officer.
Section
8. Construction and Definitions
. Unless the context
otherwise requires, the general provisions, rules of construction and
definitions contained in the New Jersey General Corporation Law shall govern the
construction of these bylaws. Without limiting the generality of the
foregoing, the masculine gender includes the feminine and neuter, the singular
number includes the plural and the plural number includes the singular, and the
term “person” includes a corporation as well as a natural person.
ARTICLE
VII
AMENDMENTS TO
BYLAWS
Section
1. Amendment by Shareholders
. New bylaws may be
adopted or these bylaws may be amended or repealed by the vote or written
consent of holders of a majority of the outstanding shares entitled to vote;
provided, however, that if the certificate of incorporation, the authorized
number of directors may be changed only by an amendment of the certificate of
incorporation.
CERTIFICATE
OF SECRETARY
I,
the undersigned, do hereby certify:
That
I am the duly elected and acting secretary of Diamond Information Institute,
Inc., a New Jersey corporation; and, that the foregoing Bylaws, comprising
Fifteen (15) pages, constitute the Bylaws of said corporation as duly adopted
and approved by the board of directors of said corporation by a Unanimous
Written Consent dated as of October 24, 1988.
IN
WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said
corporation this 24
th
day of
October, 1988
/s/Berge
Abajian
Berge
Abajian, Secretary
Diamond
Information Institute, Inc.
***ALL
INFORMATION WILL BE TREATED CONFIDENTIALLY***
INSTRUCTIONS: This
Questionnaire is being sent to each individual who has indicated an interest in
purchasing the Common Stock (the "Common Shares") and the Common Stock Purchase
Warrants (the Warrants”) of Diamond Information Institute, Inc., a New Jersey
corporation (the "Company"). The purpose of this Questionnaire is to
assure the Company that each investor will meet the standards imposed by
applicable federal and state law, since the Common Shares and the Warrants
offered hereunder will not be registered with the Securities and Exchange
Commission or with the securities regulatory agency of any state.
If the answer to any
questions is "None" or "Not Applicable", please so state.
Your
answers will, at all times, be kept strictly confidential. However,
by signing this questionnaire, you agree that the Company and/or seller may
present this Questionnaire to such parties as it deems appropriate, if called
upon under law to establish the availability under state or federal securities
laws of an exemption from registration of this private placement. Please
complete, sign, date, and return the questionnaire to the
Company.
Name_____________________________________________________________
Residence
Address __________________________________________________
_________________________________________________________________
Phone
Number _____________________________________________________
Occupation________________________________________________________
Business
Address ___________________________________________________
_________________________________________________________________
Business
Telephone __________________________________________________
*
If Corporate Purchaser:
Publicly
Owned _____________ or Privately Owned ________________
Jurisdiction
of Incorporation _______________________________________
Fiscal
Year End ________________________________________________
If
Partnership Purchaser: Date of Formation
___________________________
Fiscal
Year End ________________________________________________
I
prefer to have correspondence sent to my:
Home
Address (___) Business Address
(___)
1.
|
Set
forth in the space provided below the state(s) in which you have
maintained your principal residence during the past two years and the
dates during which you resided in each
state.
|
____________________________________________________________
____________________________________________________________
2.
|
Do
you maintain a house or apartment in any other state(s)? If
yes, in which state(s)?
|
____________________________________________________________
3.
|
In
which state, if any, do you pay state income
taxes?
|
____________________________________________________________
4.
|
In
which state, if any, are you registered to
vote?
|
____________________________________________________________
5.
|
What
is your present age?
|
____________________________________________________________
6. The
undersigned has previously purchased Private Placements (securities which were
sold in reliance upon the non-public offering exemption from registration under
the Securities Act of 1933).
7. Do
you believe that you are capable of evaluating the merits and risks of this
investment?
Yes
(___) No (___) If yes, please describe and set
forth the reasons.
____________________________________________________________
____________________________________________________________
____________________________________________________________
8.
|
Do
you intend to use a Purchaser Representative to assist you in your
understanding of this
investment?
|
If
you use a Purchaser Representative, fill out the enclosed Selection of Purchaser
Representative Form.
Print
Name: ____________________________ Date:___________
II. STATUS AS ACCREDITED or NON-
ACCREDITED INVESTOR
(Please answer
each
question.)
9.
|
|
(a)
|
Does
your individual net worth (
inclusive
of
home, furnishings and automobiles valued at fair market value) or the
joint net worth of you and your spouse (if any), exceed $1,000,000 at the
present time?
|
Yes
___________________ No
______________________
(b)
|
Did
your individual income exceed $200,000 in each of the last two years and
do you expect an income in excess of $200,000 this
year?
|
(For this purpose, income is computed by adding the following items to adjusted
gross income as computed for federal income tax purposes, but not including
any amounts attributable to a spouse or property owned by a
spouse): any deductions for a long-term capital gain or
depletion, any exclusion of interest earned on tax-exempt bonds, any losses
allocated from a limited partnership, amounts contributed to an IRA or Keogh
retirement plan and alimony payments.)
Yes
__________________ No
______________________
(c)
|
If
married, did your joint combined income with that of your spouse exceed
$300,000 in each of the last two years and do you expect a joint combined
income in excess of $300,000 this
year?
|
Yes
__________________ No
______________________
I
hereby warrant and represent that:
(a)
|
The
information contained in this Investor Questionnaire is true, complete and
accurate, and may be relied upon by the Corporation in determining whether
the offering in which I propose to participate is exempt from registration
under the Act of 1933, pursuant to Regulation D or otherwise,
and applicable state securities
laws.
|
(b)
|
I
have sufficient knowledge and experience in financial and business matters
to evaluate the merits and risks of a prospective investment. I
understand the risks associated with an investment
herein.
|
(c)
|
I
understand that a false representation may constitute a violation of law,
and agree to indemnify and hold harmless anyone who relies on my
representations from any loss or damages resulting from any misstatement
in this Investor
Questionnaire.
|
(d)
|
I
will notify the Company of any material changes in the information
provided which occur prior to the acceptance of my
subscription.
|
(e)
|
I am experienced in
investing in small, early-stage companies and the amount that I am
investing is no more than 15% of my net
worth.
|
I
have executed this Investor Questionnaire this ____ day of ____________, 2007,
for the purpose of qualifying for the purchase of privately placed
securities.
______________________________ _____________________________
Signature
of
subscriber Signature
of co-owner (if the Units are
to be purchased in
joint
name or as community
property)
[The
remainder of this page has been left intentionally blank.]
DIAMOND INFORMATION INSTITUTE,
INC.
A DIAMOND INFORMATION INSTITUTE
CORPORATION
|
Date:_____________________
|
Memorandum
No.___________
1.
The
undersigned hereby acknowledges receipt of the following information on DIAMOND
INFORMATION INSTITUTE, INC., a New Jersey corporation (the
"Company"):
a) Confidential
Private Placement Memorandum dated April 2, 2007;
b) Audited Financial
Statements as of 12/31/2006;
c) Articles of
Incorporation and Bylaws for the Company;
d) Certificate of
Designation of Preferences.
2.
The
undersigned hereby tenders this Investment Agreement for the purchase of the
Company's Common Stock and Common Stock Purchase Warrants (the
"Securities").
3.
Experience in Investing & Matter
of Net Worth
. The undersigned warrants and represents that: (a)
Subscriber is experienced in making investments into small, early-stage
companies that have no or little record of generating revenues; and (b)
Subscriber is investing no more than 15% of his net worth in connection with the
purchase of the Securities hereunder.
4.
The
undersigned hereby represents and warrants to the Company as
follows:
a.) The Subscriber understands that the representations contained herein are
made for the purpose of satisfying the Company that the Subscriber is an
Accredited Investor.
THE
SUBSCRIBER HEREBY REPRESENTS THAT THE STATEMENT OR STATEMENTS MADE HEREIN ARE
TRUE AND CORRECT IN ALL RESPECTS. THE SUBSCRIBER UNDERSTANDS THAT A
FALSE REPRESENTATION MAY CONSTITUTE A VIOLATION OF LAW AND THAT ANY PERSON WHO
SUFFERS DAMAGE AS A RESULT OF A FALSE REPRESENTATION MAY HAVE A CLAIM AGAINST
THE SUBSCRIBER FOR DAMAGES.
b.) In connection
with this Investment Agreement, the Subscriber has been advised and understands
that immediately prior to the offer and purchase of the Securities pursuant to
this Agreement:
(i) The
Subscriber had such knowledge and experience in financial and business matters
that the subscriber was capable of evaluating the merits and risks of the
prospective investment; and
(ii) The
Subscriber was able to bear the economic risk of the investment;
and
(iii)
Status as Accredited
Investor
. The Subscriber is an Accredited Investor as that
term is defined under Regulation D, Rule 501(a). Under Regulation D,
an individual
Accredited Investor must
meet the following criteria
:
a.) The Subscriber
is a natural person and had an
individual
income in
excess of $200,000 or
joint
income with the
Subscriber’s spouse in excess of $300,000 in each of the two most recent years
and who reasonably expects reaching the same level of income in the current
year;
and/or
b.) The Subscriber
is a natural person is a natural person and his/her net worth as of a current
date (i.e., the excess of total assets over total liabilities),
ex
clusive
of home, home
furnishings, and automobiles, either individually or jointly with his/her
spouse, exceeds $1,000,000.
c.)
Investment
Intent
. Subscriber is acquiring the Securities for his/her own
home account and not for the account of others and for investment purposes only
and not with a view to or for the sale, offer for sale, transfer, assignment,
resale, or distribution thereof, in whole or in part. Subscriber has
no contract to sell, transfer, assign, or pledge to any person the Securities
subscribed for, or any part thereof. Subscriber has no present plans
to enter into any such contract, undertaking, or
arrangement. Subscriber will not transfer or assign the Investment
Agreement or any of his interest herein. Subscriber understands the
meaning and legal consequences of the foregoing representations and
warranties.
d.)
Reliance Upon Own Advisors
.
Subscriber has consulted with and is relying upon such legal, tax, and other
counsel, each of whom Subscriber has found necessary to consult concerning this
transaction, and such consultation has included an examination of applicable
documents and an analysis of all tax, financial, corporate, and securities law
aspects. Subscriber, Subscriber’s counsel, Subscriber’s advisors, and
such other persons with whom Subscriber found it necessary to consult, have
sufficient knowledge and experience in such matters to evaluate the information
and the risks of the investment and to make an informed investment decision with
respect thereto.
e.)
Reliance Upon Own Tax
Advisor
. With respect to the tax aspects of his investment,
Subscriber is relying solely upon the advice of his own personal tax advisors
and upon his own knowledge with respect thereto. Subscriber is aware
that any Federal Income Tax benefits which may be available to him may be lost
through adoption of new laws or regulations, amendments to existing laws and
regulations, or changes in the interpretation of existing laws and
regulations.
f.)
Absence of Registration; Restricted
Securities
. Subscriber understands and is aware that the Securities have
not been registered under the Securities Act of 1933, as amended
("the Act"), nor pursuant to any other Federal law in reliance on
exemptions for private offerings contained in Section 4(2) and Section 4(6) of
the Act. Subscriber is fully aware that any Securities
purchased him are to be sold in reliance upon such exemption based upon his
representations, warranties, and agreements set forth
herein. Subscriber is also aware and understands that such exemption
is dependent upon the accuracy of the statements made by Subscriber
herein. There is no assurance that the Company’s planned information
statement will become effective or that any trading market will develop or be
maintained.
g.)
Understanding Economic Risks
.
Subscriber is fully aware of the restrictions on sale, transferability, and
assignment of the Securities, and Subscriber must bear economic risk of his
investment in the Company for an indefinite period of time because the
Securities (and any Shares of the Company's Common Stock acquired in connection
with the purchase of the Securities) have not been registered under
the Act, and therefore, cannot be offered or sold unless they are
subsequently registered under the Act or an exemption from such
registration is available.
h.) Subscriber
is aware that the Securities are speculative investments involving an
EXTREMELY HIGH LEVEL OF RISK
and that any right to transfer his Securities in the Company is limited
and restricted by law.
i.)
Absence of
Any Other Representations
. No representations or warranties
have been made to Subscriber other than those contained herein, and Subscriber
has not relied upon any other representation or warranty.
j.) Subscriber is over the age of 21, and Subscriber, either alone or
together with Subscriber’s offeree representative (if any), has business and
investment experience and knowledge sufficient to enable Subscriber to evaluate
the hazards and merits of making this investment.
k.) The foregoing representations and warranties are true and
accurate as of the date hereof and will be true and correct as of the date of
his purchase of the Securities. All representations and warranties
made in this Agreement shall survive Investor's purchase of the Securities and
any execution of this Agreement.
5.
|
Receipt of Memorandum
.
Investor further acknowledges and represents that Subscriber has received,
read, understood, and is familiar with and understands the Private
Placement Memorandum bearing all attachments and exhibits thereto
concerning the Company and the offering pursuant to which this Investment
Agreement is being made. Subscriber further acknowledges that,
except as set forth herein, no representations or warranties have been
made to Subscriber or to Subscriber’s advisors by the Company or by any
person acting on behalf of the Company, the financial condition of the
Company, the deductibility of any item for tax purposes, and/or the
economic, tax, or any other aspects or consequences of a purchase of a
share and/or investment in the Company, and Subscriber has not relied upon
any information concerning the offering, written or oral, other than as
contained herein.
|
6.
|
The
undersigned understands that these Securities of the Company are being
purchased for the undersigned's own account for investment and not for
distribution or resale to others. The undersigned agrees that
Subscriber will not sell or otherwise transfer these securities unless
they are registered under the Federal Act of 1933 or unless an
exemption from such registration is available. The undersigned
represents that Subscriber has adequate means of providing for his current
needs and possible personal contingencies and that Subscriber has no need
for liquidity of this investment.
|
|
7.
The
provisions of this Agreement shall be deemed to obligate, extend to and
inure to the benefit of the successors, assigns, transferees, grantees,
and indemnities of both parties to this
Agreement.
|
8.
|
Wherever
the context so requires: the singular number shall include the
plural; the plural shall include the singular; and the masculine gender
shall include the feminine and neuter
genders.
|
9.
|
This
Agreement, after full execution, acknowledgment and delivery, memorializes
and constitutes the entire agreement and understanding between the parties
and supersedes and replaces all prior negotiations and agreements of the
parties, whether written or unwritten. Each of the parties to
this Agreement acknowledges that no other party, nor any agent or attorney
of any other party has made any promises, representations, or warranty
whatsoever, expressed or implied, which is not expressly contained in this
Agreement; and each party further acknowledges that Subscriber or it has
not executed this Agreement in reliance upon any belief as to any fact not
expressly recited herein above. No amendment or waiver of any
provision, term, or condition of this Agreement shall be effective unless
the same is executed by the party against whom enforcement is
sought.
|
10.
This
Agreement may be executed in any number of counterparts.
11.
ARBITRATION
.
Any dispute or claim arising to or in
any way related to this Agreement shall be settled by binding arbitration in
Fairfield
,
New Jersey
and this Agreement and the
interpretation of this Agreement shall be governed by
New Jersey
law.
All
arbitration shall be conducted in accordance with the rules and regulations of
the American Arbitration Association ("AAA"). AAA shall designate an
arbitrator from an approved list of arbitrators following both parties' review
and deletion of those arbitrators on the approved list having a conflict of
interest with either party. Each party shall pay its own expenses
associated with such arbitration. A demand for arbitration shall be
made within a reasonable time after the claim, dispute or other matter has
arisen and in no event shall such demand be made after the date when institution
of legal or equitable proceedings based on such claim, dispute or other matter
in question would be barred by the applicable statutes of
limitations. The decision of the arbitrators shall be rendered within
60 days of submission of any claim or dispute, shall be in writing and mailed to
all the parties included in the arbitration.
The decision of the arbitrator shall
be bi
nding upon the
parties and judg
ment in
accordance with that decision may be entered in any court having jurisdiction
thereof.
IN WITNESS WHEREOF
, I have
executed this Investment Agreement this _____ day of __________,
2007.
Dollar
Amount of Securities Purchased: $______________
Number
of Units Purchased:___________________
Name
(please print):__________________________________________________
Subscriber
Signature: _________________________________________________
Signature
of Co-Subscriber (if any): ______________________________________
Signature
of Spouse:__________________________________________________
ACCEPTED:
______________________________ Date: ____________________
Diamond
Information Institute, Inc.
DIAMOND INFORMATION INSTITUTE,
INC.
A DIAMOND INFORMATION INSTITUTE
CORPORATION
|
Date:_____________________
|
Memorandum
No.____________
Provide
Name(s) exactly as you wish your interest in the Company to be
registered:
______________________________________________________________________________
(please
print clearly)
______________________________________________________________________________
Provide
Address:
______________________________________________________________________________
1.
If Not in Your Name, Provide Manner of Ownership
(Joint
Tenancy, Tenants in Common, etc.):
______________________________________________________________________________
2. Social
Security Number and Address of Each Owner:
Owner
Name
S.S.
No.
(Street/City/State/Zip)
A.____________________ _______________ ___________________________
B.____________________ _______________ ___________________________
C.____________________ _______________ ___________________________
PURCHASER REPRESENTATIVE
QUESTIONNAIRE
DIAMOND INFORMATION INSTITUTE,
INC.
A DIAMOND INFORMATION INSTITUTE
CORPORATION
Date:______________________
Memorandum
No.____________
Name
of
Offeree: ________________________________________________________
Please
complete the following questionnaire fully, attaching additional sheets if
necessary.
1.
Name
_______________________________________________________________
Age
_________________ Business Address:
______________________________________________________________________
______________________________________________________________________
2.
Present occupation or position, indicating period of such practice or employment
and field or professional specialization, if any:
______________________________________________________________________
3.
List any business or professional education, including degrees received, if
any:
______________________________________________________________________
______________________________________________________________________
4.
Have you had prior experience in advising clients with respect to investments of
this type:
5.
List any professional licenses or registration, including bar admissions,
accounting certificates, real estate brokerage licenses, and SEC or state
broker-dealer registrations, held by you:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
6.
Describe generally any business, financial or investment experience that would
help you to evaluate the merits and risks of this investment:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
7.
State how long you have known the Offeree and in what capacity:
______________________________________________________________________
______________________________________________________________________
______________________________________________________________________
8.
In advising the Offeree in connection with Offeree's prospective investment in
the Offering, I will be relying in part on the Offeree's own expertise in
certain areas.
9.
In advising Offeree in connection with Offeree's prospective investment in the
Offering, I will be relying in part on the expertise of an additional Purchase
Representative or Representatives.
If
"Yes" give the name and address of such additional Representative or
Representatives:
______________________________________________________________________
______________________________________________________________________
I
understand that the Company will be relying on the accuracy and thoroughness of
my responses to the foregoing questions, and I represent and warrant to the
selling agent and the Company the following: (i) I am acting as Purchaser
Representative for
_______________________________________________________________
in
connection with evaluating the merits and risks of the prospective investment by
the Offeree in Diamond Information Institute, Inc.,
(ii) The answers to the above questions are true and correct and may
be relied upon by the underwriter in determining whether the Offering in
connection with which I have executed this questionnaire is exempt from
registration under Sections 4(2) and 4(6) and Regulation D of the Act
of 1933, as amended, and under applicable state securities laws; (iii) to the
best of my knowledge, the information contained in the Offeree's suitability
questionnaire, which I have reviewed, is true and correct, and, in my opinion,
the Offeree is capable of bearing the economic risk of the proposed investment;
(v) I have received copies of the Offering document and have reviewed same with
the Offeree; (vi) The representations, warranties and acknowledgments
made by the Offeree in the Investment Agreement which pertain are true and
correct, and those which pertain to the Offeree, to the best of my knowledge,
are true and correct; (vii) I personally (or together with the Offeree of the
additional Purchaser Representative or Representatives indicated above) have
such knowledge and experience in financial and business matters that I am
capable of evaluating the merits and risks of the Offeree's prospective
investment in the Offering. Executed at
_____________________________,
______________________ on
this
______________ day of ___________________, 2007.
_____________________________________________
(Signature
of Purchaser Representative)
_____________________________________________
(Print
Name of Purchaser Representative)
_____________________________________________
(Print
Address of Purchaser Representative)
_____________________________________________
_____________________________________________
(Print
Telephone No. w/Area Code)