As we approach the holiday season, Diamond Discoveries International Corp. (OTCBB: DMDD) remains in the same fragile financial condition we noted when we first wrote about the Company in August 2002. See Zero Degrees of Separation - The Last Hurrah?, Part I; and Zero Degrees of Separation - The Last Hurrah?, Part II.
At the time of our earlier report, Diamond Discoveries had no revenues, no marketable diamonds, and a mere $276 in cash. Well, things have improved. The Company still has no marketable diamonds and no revenues, but now it has $1,758 in the bank. Since the Company has no other assets, and almost $2 million in liabilities, it would seem to be in trouble.
When the Company’s auditor’s completed their most recent audit, for the year ended December 31, 2002, they expressed substantial doubt about its ability to continue as a going concern. Nine months later, the situation does not seem any more promising.
The Company concedes that it has no revenue producing activities and cannot continue its exploration activities until it raises sufficient capital.
On November 17, 2003 the Company replaced those auditors.
Adding to these woes, the Securities and Exchange Commission has charged the Company’s CEO, Teodisio Pangia, with violating the securities laws, and the Ontario (Canada) Securities Commission is seeking sanctions against Pangia that would include barring him from trading securities and serving as an officer or director of a public company. A hearing on the Canadian charges is scheduled for February 17, 2004.
This multitude of problems has not stopped Diamond Discoveries from moving forward on two fronts; issuing shares and generating publicity.
In August 2003, the Company issued 2 million shares of stock in exchange for $150,000. It issued an additional 6.5 million shares that same month when stock options were exercised for $65,000. Another 2 million shares were handed out in September 2003 “in payment of advances to shareholders of $525,000,” which the Company claims “approximated the fair value of the shares.” That valuation could be considered generous in view of the Company’s precarious financial state.
Some of the Company’s shareholders could see profits, even if Diamond Discoveries has none. On July 25, 2003, the Company filed a Form S-8 Registration Statement, registering 15 million shares for its “2003 Stock Incentive Plan.” Were the 6.5 million options exercised in August 2003 issued under that Plan? If so, those shareholders could have enjoyed a healthy return; Diamond Discoveries’ stock price has ranged from 10 cents a shares to 21 cents a share since early August 2003.
The Company also has been moving forward on the public relations front. On September 23, 2003, Diamond Discoveries announced that it had discovered “diamond fragments” on samples obtained during its 2002 “exploration season.” But while the Company claimed it had found new “diamond bearing dykes,” the September 23rd press release offered no details that suggested that this “find” was likely to lead to the discovery of marketable diamonds.
Similarly vague revelations were included in a November 13th press release declaring the end of the Company’s fourth exploration season.
Despite this scant information, and its precarious financial state, on November 6, 2003 Diamond Discoveries announced that it had retained an entity called Equitilink “to lead its U.S. financial communications and shareholder relations campaign.” It did not say how it planned to pay Equitilink.
In the words of Teodisio Pangia, who has remained as Diamond Discoveries’ CEO despite the pending securities fraud charges in the U.S. and Canada
The hiring of Equitilink coincides with the article in the November /03 issue of the Robb Report magazine regarding the Canadian diamond rush. The number of inquiries from our most recent news release (September, 23/03) coupled with the article in the magazine has created a need to hire a quality investor relations firm such as Equitilink.
Pangia did not say what inquiries the Company had been receiving, although shareholders might well have wondered about the exact value of those “diamond fragments.”
For its part, Equitilink sounded eager for the assignment. According to Thomas N. Maloney, Managing Director of Equitilink, "We believe after reviewing the company's business plan that Diamond Discoveries is in the unique position as being the only U.S.OTC public company focused on the Canadian diamond play."
At least in a fragmentary sort of way.
IF YOU HAVE QUESTIONS OR COMMENTS FOR STOCKPATROL.COM, CONTACT US AT editor@stockpatrol.com