UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
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(Mark One) |
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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For the fiscal year ended December 31, 2003 |
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OR |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 000-31585
DIAMOND DISCOVERIES INTERNATIONAL CORP.
(Name of Small Business Issuer)
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Delaware |
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06-1579927 |
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(State or Other Jurisdiction |
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(IRS Employer Identification No.) |
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of Incorporation) |
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804 – 750 West Pender St. |
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Vancouver, B.C. |
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V6C 2T7 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
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(604) 683-1368 |
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(Issuer’s Telephone Number, Including Area Code) |
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Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: Common Stock
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Title of Each Class |
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Name of
Each Exchange |
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Common Stock, par value $.001 |
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None |
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Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o
Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10- KSB or any amendment to this Form 10-KSB. o
Issuer’s revenues for its most recent fiscal year were: $0.
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold as of April 13, 2004 is $7,400,697.
The number of shares outstanding of the Company’s common stock, as of April 14, is 69,227,123.
Transitional Small Business Disclosure Format (check one): Yes o No ý
TABLE OF CONTENTS
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
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PART I
This Annual Report on Form 10-KSB and the information incorporated by reference includes “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Various statements, estimates, predictions, and projections stated under “Risk Factors,” “Management’s Discussion and Analysis or Plan of Operations” and “Business,” and elsewhere in this Annual Report are “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These statements appear in a number of places in this Annual Report and include statements regarding the intent, belief or current expectations of Diamond Discoveries International or our officers with respect to, among other things, the ability to successfully implement our acquisition and exploration strategies, including trends affecting our business, financial condition and results of operations. While these forward-looking statements and the related assumptions are made in good faith and reflect our current judgment regarding the direction of the related business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions, or other future performance suggested herein. These statements are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond our control and reflect future business decisions which are subject to change. Some of these assumptions inevitably will not materialize, and unanticipated events will occur which will affect our results. Some important factors (but not necessarily all factors) that could affect our revenues, growth strategies, future profitability and operating results, or that otherwise could cause actual results to differ materially from those expressed in or implied by any forward-looking statement, include the following:
• our ability to successfully implement our acquisition and exploration strategies;
• the success or failure of our exploration activities and other opportunities that we may pursue;
• changes in the availability of debt or equity capital and increases in borrowing costs or interest rates;
• changes in regional and national business and economic conditions, including the rate of inflation;
• changes in the laws and government regulations applicable to us; and
• increased competition.
Stockholders and other users of this Annual Report on Form 10-KSB are urged to carefully consider these factors in connection with the forward-looking statements. We do not intend to publicly release any revisions to any forward-looking statements contained herein to reflect events or circumstances occurring after the date hereof or to reflect the occurrence of unanticipated events.
Item 1. Description of Business
We were incorporated in the State of Delaware on April 24, 2000. We are a exploration stage company that is engaged in the acquisition and exploration of mineral properties. Our initial focus is in the area of the Torngat fields located in the province of Quebec, Canada. Other than contracting with a third party to conduct exploration and gather data on our behalf, we have conducted no operations to date and do not expect to receive any revenues for at least two years. During these two years we plan to concentrate our efforts on exploration and data gathering. During these two years we will be solely dependent on the availability of external financing to fund our operations. Our independent public accountants expressed substantial doubt about our ability to continue as a going concern because such continuance is dependent upon our ability to raise capital. If we are unable to secure adequate financing we will be unable to continue our exploration and data gathering efforts. Because we are an exploration stage company, we do not know if a commercially viable mineral deposit exists on any of our properties. Further exploration will be required before the economic and legal feasibility of developing the properties can be determined.
Acquisition Agreement
On September 12, 2000, we entered into an Acquisition Agreement with Messrs. Peter Ferderber and Stanley G. Hawkins, and Tandem Resources Ltd., a Canadian mineral exploration company of which Mr. Hawkins is the President. Pursuant to such Agreement, we acquired certain mineral exploration permits covering an area of approximately 469.05 square kilometers in the Torngat fields, which are located on the east coast of Ungava Bay, in the northwestern part of Quebec. The Torngat fields are one of four fields in Quebec that contain diamondiferous kimberlite formations. The Torngat
1
fields are composed of a central plateau about 400 meters above sea level, and are broken by steep-sided gorges and fjords along the coast. The largest of these features, Alluviaq Fjord, bisects the property covered by the permits. Several dykes in the area are well exposed sub-vertical features in the Alluviaq Fjord, and display horizontal and vertical continuity. These traits result from rock being pushed up from below the surface, into a vertical position against other horizontal rocks. Geologists usually identify these rock formations as strong targets for the presence of diamonds.
The consideration paid under the Acquisition Agreement was 1,000,000 shares of our common stock to each of Messrs. Ferderber and Hawkins, and the payment of $Cdn35,000 to Mr. Hawkins and $Cdn25,000 to Mr. Ferderber. We also assigned to Messrs. Ferderber and Hawkins a one per cent (1%) interest in the “Net Smelter Returns” of the property, one half of which is payable over the first $Cdn50 million in revenues from the property. (Net Smelter Returns are determined by the net amount of money received from the sale of ore, or ore concentrates or other products from a property to a smelter or other ore buyer.) Once Messrs. Ferderber and Hawkins have received $Cdn10 million from these Net Smelter Returns, their interest terminates. Tandem Resources Ltd. received an option to purchase 40% of the mineral rights on the properties. This option is conditioned on a number of events occurring, which are:
(1) The expenditure by us of $Cdn5 million on exploration of the property;
(2) Tandem paying us $Cdn2 million; and
(3) Tandem and us entering into a joint venture agreement to operate the property, within 60 days of a demonstration by us of the expenditure of $Cdn5 million on exploration of the property.
In addition, we will have twenty-one (21) days from the date we notify Tandem that we have made the $Cdn5 million exploration expenditure, to negotiate a financing agreement with Tandem to provide Tandem with the $Cdn2 million required to exercise the option. Should no agreement be reached in such 21-day period, our right to provide this financing shall expire.
Based upon an analysis of samples taken from these properties, we believe that the properties for which we have exploration permits contain kimberlite. Kimberlite is a type of igneous rock that occasionally contains tiny to extremely tiny diamonds, and on very rare occasions contains gem quality diamonds. Certain samples taken from our properties have contained both macro diamonds and micro diamonds. Samples from most of the dykes contain diamond fragments as well.
Prospecting Geophysics Ltd., a Quebec-based firm of which Mr. Ferderber is President, has provided us with a Progress Report, dated August 29, 2000, which discusses these samples, which they had collected. Prospecting Geophysics Ltd. has been contracted to conduct further surveys and exploration on this property.
Mr. Ferderber is the record owner of the property covered by the permits, which he has transferred to us. He had originally executed an agreement, as of June 20, 2000, transferring the right to explore the properties covered by the permits to us. This June 20, 2000 agreement was subsequently incorporated into the Acquisition Agreement discussed above. We have received an opinion of Lavery, de Billy, a firm of barristers and solicitors of Montreal, Canada, dated July 10, 2000, that Mr. Ferderber is the record owners of the permits under the Mining Act (Quebec), and that the permits are in good standing as of June 21, 2000. The opinion further states that at the date of examination, there were no liens, charges or encumbrances registered against any of the permits. The opinion disclaimed any physical verification of the location of the properties covered by the permits, and states that no survey of the area covered by the permits was conducted.
The permits expire at dates ranging from October 17, 2004 to March 30, 2005. These permits, once expired, may be renewed for an additional five years at an annual license fee of $Cdn75 per square kilometer.
Exploration Program
We intend, in conjunction with Messrs. Ferderber and Hawkins (and their affiliated entities) to explore the properties from early-stage exploration through completion of the exploration phase. Prospecting Geophysics Ltd. will perform all exploration activities. We will be paying, pursuant to an agreement with Prospecting Geophysics Ltd., an hourly rate to Mr. Ferderber and his staff for their services, as well as reimbursement for expenses, including equipment, transportation, lodging and meals.
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Prospecting Geophysics Ltd. commissions crews of workers who gather samples of rock from the properties, and transport the samples to a facility where they can be tested for properties which tend to indicate the presence of diamonds. We have established camp sites for the workers at the location of the properties, in order to decrease the costs of lodging. In addition, we plan to use commercial supply boats, rather than commissioning private boats, to transport the rock samples. Because the properties are only accessible by air, we plan to rent helicopters as well as fixed wing aircraft known as “beavers” to transport workers and samples to and from the properties.
Due to extremely cold temperatures and snow accumulation caused by the inclement weather in the region during the period from, approximately, November to March, there can be no exploration on the properties covered by the permits during these months.
Prospecting Geophysics Ltd. also identifies specific exploration targets in kimberlite dykes by examining maps of the area, and by using an airborne magnetometer. From the air, this magnetometer detects magnetic properties in the rock below. The data so gathered can be analyzed and used to focus the gathering process on areas of higher magnetism. Some underground sites can be located using certain geochemistry tests.
Thus far we have begun early stage exploration activities, and have gathered samples from one property for analysis. An exploration team of eight men gathered samples and data at this property. The samples are taken from dykes or “pipes” containing kimberlite. These samples were analyzed by Lakefield Research Limited, of Ontario, an independent laboratory, which uses caustic dissolution to extract the diamonds from the samples. This laboratory issued reports dated September 26 and September 27, 2000, on two samples, one of which indicates that out of a 24.65 kilogram sample, two diamonds were found weighing 0.015 carats in the aggregate. The second sample of 30.22 kilograms yielded eight diamonds, with a total weight of 0.001 carats.
During the second phase of our exploration stage, we, through Prospecting Geophysics Ltd., plan to find the extent of the kimberlite dykes that were located in phase one, and to gather larger mini-bulk and bulk samples. These next samples are expected to be up to 7,000 pounds. This should enable the Company to test for larger, and potentially more marketable diamonds which may, or may not, exist in the kimberlite dykes. There is, of course, a substantial risk that we will not find such diamonds. Prospecting Geophysics Ltd. will, at the same time, be attempting to locate additional kimberlite dykes and pipes, and sample them as well. The second stage exploration tasks began in April of 2001, after the weather in northwestern Quebec allowed for exploration activities.
In 2002, we acquired permits for an additional 50,000 acres adjacent to the property where we already have permits located in the Torngat mountain region of Quebec. We acquired the permits by staking the property and paying the requisite fees to the Quebec Department of Natural Resources. In addition to paying the fees, we must perform a certain amount of assessment work on each claim to keep them in good standing. We have successfully completed all assessment work related to this property. During our exploration for the 2002 season, we continued to take large rock bulk samples from property included in the original 469.05 square kilometers. In addition, we began to focus our efforts on the property included in the newly acquired 50,000 acres. We have been successful in locating four new kimberlite dyke systems that contain 27 new dykes, most of which have been sampled. Reduced samples from the original field samples were subject to micro-probed analysis and found to contain typical kimberlite minerals, phologopite and olivine and the important indicator minerals chrome diopside, pyrope garnet, picro-ilmenite and chromite. One 110 pound sample containing an olivine xenolith was found to contain a large population of indicator minerals including 243 G9 garnets, 65 chrome diopsides, and 143 spinels. This mineral assemblage is similar to the Arx Dyke which is located on our permit property that contained the nine micro and one macro diamonds. Phase two was suspended due to inclement weather during the winter months of 2002 and resumed in June 2003.
The 2003 exploration program, managed by Prospecting Geophysics Ltd. of Val D'Or, Quebec consisted of geological mapping, rock sampling, stream geochemistry, ground magnetometer surveys and prospecting. Analytical results are still being received. The program defined and evaluated four loosely bounded belts containing more than 50 Kimberlite dykes, two kimberlite pipes and several suspected dykes. Besides the two macro diamonds and 13 micro diamonds previously discovered in the "A" dyke in 2000, and the rubies reported from the D, F and K dykes in 2001, SGS Lakefield Research discovered diamond fragments from kimberlite/aillikite samples taken from the F, E, B, G, Yvon #2, Champagne pipe, Peter Lake, P, U, Bella, at eight locations on the St. Pierre N. dyke and at five locations along the MJR kimberlite dyke in 2003. Subsequently in 2003, diamond fragments have been verified at Mount Jacques Rousseau.
Geologist, Robert Dillman, consultant to Diamond Discoveries, received results from C.F. Mineral Research Limited of microprobe analysis of several picked mineral samples from various dykes. The January 2004 results indicated forsterite olivines and clinopyroxenes with diamond inclusion compositions, some of which are associated with large diamonds were noted in the Yvon #2, K16 and St. Pierre Southdykes. The February 2004 results determined the presence of chrome diopside and forsterite olivine (Diamond Indicator Minerals) from seven dykes named: St. Pierre dyke, St. Pierre Extension, A Dyke, C Dyke Champagne, K dyke and K25 dyke. Five of the dykes have an aillikite composition and the St. Pierre and St. Pierre extension have a kimberlite composition. Using the C.F. Minerals classification, 100% of the olivine grains analyzed from the St. Pierre, St. Pierre Extension and the K dyke are classified as having diamond inclusion compositions and there is potential for these dykes to host diamonds.
With these results in hand, Diamond Discoveries International Corp. is planning an aggressive program of core drilling and bulk sampling of the many targets that are presently defined. The Company is budgeting $1.3 million for further bulk sampling, core drilling and caustic fusion analysis for 2004.
Prior to any decision to develop the properties, a diamond deposit must be assessed to determine the total tonnage of diamond bearing material, the average grade of the rock, the estimated size distribution of the diamonds in the deposit, and the average value, per carat, of the diamonds. Gathering this data usually takes, as noted above, at least two years. At that time, we will decide whether, and, if so, how, to proceed. We may seek either a joint venture partner or a senior partner that will undertake the exploration of the properties. It must be noted that there is a substantial risk that no commercially viable diamond deposit will be found, and if that is the case, we are likely to have difficulty finding any partners to undertake further exploration.
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Additionally, on March 27, 2001, the Gem Trade Laboratory of the Gemological Institute of America (“G.I.A.”), an independent laboratory, issued a report in which they analyzed “random samples” of numerous transparent pink crystal fragments that were obtained from the property covered by our permits known as D.D.I #1 (See map at Appendix A on page 38 of this Annual Report) in October 2000, by our agent Prospecting Geophysics Ltd. These samples were taken from property located in the original 469.05 square kilometers in the Torngat mountain region. The conclusion of the report was that the samples that ranged in size from approximately 0.40 to 0.70 MM consisted of natural corundum. Corundum is the hardest mineral after diamond. The samples obtained from the property covered by our permit were transparent pink suggesting that they consist of the “ruby” gem. A ruby is a red variety of the mineral corundum. We expect to continue to collect additional samples of this mineral during the 2004 exploration season.
At the present time, we do not hold any interest in a mineral property that is in production. Our viability and potential success lie in our ability to successfully explore, exploit and generate revenue from our properties. There can be no assurance that such revenues will be obtained. The exploration of mineral deposits involves significant risks over a long period of time, which even a combination of careful evaluations, experience and knowledge may not eliminate. It is impossible to ensure that the current or proposed exploration programs on the exploration permits will be profitable or successful. Our inability to locate a viable diamond deposit on our properties could result in a total loss of our business. We believe that the typical cost to locate a diamond deposit can range from $US 5-10 million.
Our exploration operations are subject to all of the hazards and risks normally incident to exploration of this type, any of which could result to damage to life or property, environmental damage, and possible legal liability for any or all damages. Our activities may be subject to prolonged disruptions due to weather conditions surrounding the location of properties over which we have permits. Difficulties, such as an unusual or unexpected rock formation encountered by workers but not indicated on a map, or other conditions may be encountered in the gathering of samples and data, and could delay our exploration program. While we may obtain insurance against certain risks in such amounts as we deem adequate, the nature of these risks are such that liabilities could exceed policy limits or be excluded from coverage. We do not currently carry insurance to protect against these risks and there is no assurance that we will obtain such insurance in the future. There are also risks against which we cannot, or may not elect to, insure. The potential costs which could be associated with any liabilities not covered by insurance or in excess of insurance coverage or compliance with applicable laws and regulations may cause substantial delays and require significant capital outlays, adversely affecting our final position, future earnings, and/or competitive position.
Government Regulation and Licensing
Our operations require licenses and permits from various governmental authorities. We believe that we presently hold all necessary licenses and permits required to carry on with our intended activities under applicable laws and regulations, and we believe that we are complying at the present time in all material respects with the terms of such licenses and permits. However, our licenses and permits are subject to changes in regulations and in various operating circumstances. We may not be able to obtain all necessary licenses and permits required to carry out exploration activities.
We are currently subject to the environmental regulations set forth under the Environmental Act (Quebec), the Mining Act (Quebec) and the Forest Act (Quebec). We believe that we are in compliance with all of these acts, and moreover, we believe that the environmental impact of our exploration activities will be minimal. To the extent that we remove large amounts of rock or soil from the properties, we will likely have to remediate any environmental disruption caused by our activities. It is impossible to assess with any certainty the cost of such replacement or remediation activities, or the potential liability that we would face if we were to be found to have violated one, or more, of these Acts.
Employees
We do not have any full time employees at the present time. We have two part time employees, Mr. John Kowalchuk, and Mr. Edward C. Williams, both of whom are executive officers. We have entered into a prospecting and survey agreement with Prospecting Geophysics Ltd. to act as an on-site project manager; they have four full time employees, and contract with other personnel on an as-needed basis.
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Competition
The mineral exploration business is competitive in all of its phases. We expect to compete with numerous other exploration companies and individuals, including competitors with greater financial, technical and other resources than us, for the resources required for exploration. The greater resources of other entities will likely position these competitors to conduct exploration within a shorter time frame than we can, giving them a market advantage.
Currency Fluctuation
We also have exposure to currency fluctuations, since our properties are located in Canada, and thus our transactions are largely in Canadian dollars. Such fluctuations can materially affect our financial position and other results of operations. References to the “dollar” or “$US” in this Registration Statement are to United States Dollars, and “Canadian” or “$Cdn” refers to Canadian dollars. Unless otherwise stated, the translations of $US to $Cdn and vice versa have been made at the average rate for the year indicated. The following table sets forth the high and low exchange rate of the Canadian dollar per US dollar as of the latest praticable date and for each of the last six months:
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Period |
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High |
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Low |
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April 13, 2004 |
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1.3300 |
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1.3037 |
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March 2004 |
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1.3570 |
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1.3055 |
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February, 2004 |
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1.3512 |
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1.3069 |
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January 2004 |
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1.3360 |
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1.2683 |
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December 2003 |
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1.3420 |
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1.2839 |
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November 2003 |
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1.3410 |
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1.2948 |
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October 2003 |
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1.3518 |
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1.3021 |
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(1) Represents the low rate on April 6, 2004.
Item 2. Description of Property
Please refer to Appendix A to this Annual Report at page 34, which contains a map of our permit locations.
The Company recently entered into a lease for office space beginning February 1, 2004 and terminating on April 30, 2007. Under the terms of the lease, the Company pays approximately $Cdn 1,033 per month. However, the Company is not obligated to pay rent for the period from February 1, 2004 to April 30, 2004.
We do not own real property, nor do we hold any other real property interest other than the lease describe above and the exploration permits which we discuss above under the caption “Description of Business.” As noted above, we have engaged Prospecting Geophysics Ltd. as our on-site project manager for our exploration activities.
In compliance with Guide 7 of Industry Guides under the Securities Act of 1933 and the Securities Exchange Act of 1934, the following information is provided, since we are engaged or to be engaged in significant mining operations:
(1) The permits were acquired in the Acquisition Agreement cover 469.05 square kilometers of properties in northwest Quebec, Canada, on the eastern shore of Ungava Bay and by staking an additional 50,000 acres adjacent to such properties and paying the requisite fees to the Quebec Department of Natural Resources. With the exception of the five (5) month period from November to March in which there is inclement weather in the area surrounding the properties, there is nothing preventing access to the properties. However, hazardous weather conditions could prevent us from accessing the properties in other months as well. The properties are only accessible by air via a helicopter or by boat. There are no roads that permit direct access to the properties.
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(2) Pursuant to an agreement between us and Peter Ferderber, Peter Ferderber has transferred to us six (6) permits for the properties. The properties covered by the permits are indicated on the map presented in Appendix A by the areas marked D.D.I. Further, pursuant to the Acquisition Agreement, in consideration for the permits, we have issued 1,000,000 shares of our common stock to Mr. Ferderber and have paid him $25,000 Canadian, and at Mr. Ferderber’s request, $35,000 Canadian to Stanley G. Hawkins. We have obtained the opinion of Lavery, de Billy, Barristers and Solicitors of Montreal, Canada dated July 10, 2000, that Mr. Ferderber was the record owner of the permits under the Mining Act of Quebec and that the permits were in good standing as of June 21, 2000.
(3) To our knowledge, Messrs. Ferderber and Hawkins staked the 469.05 square kilometer property in the Torngat fields in northwest Quebec, Canada, on the eastern shore of Ungava Bay in 1999, and there were no previous owners, operators, or operations on the property.
(4) Although there can be no assurance of successful diamond development, initial progress reports of the property have indicated that there are micro diamonds on the property. A 24.65 kilogram sample taken from the property, has yielded two diamonds weighing 0.015 carats and a 30.22 kilogram sample has yielded eight diamonds weighing 0.001 carats.
Geology
The Torngat Property, where the properties for which we have mineral permits are located, lies within the Torngat mountain province. The crust in the province is thickened because two continental plates were pushed, more than a billion years ago, one on top of the other. The predominant rock type on the properties are the Tasiuyak Gneiss, a northwest trending belt of gneissic rock. The gneisses are considered to be altered sedimentary rocks.
The rocks of the Torngat mountain province strike northwest-southeast within the Torngat property. Cross-cutting the gneisses, there are a number of kimberlite dykes. The individual dykes are dark green and generally coarse grained across most of their width.
The properties are in a location over an early Precambrian bedrock segment which is bedrock dating back to the earliest era of geological history, called an “Archon.” An Archon is an immobile segment of the earth’s crust exceeding 1.5 billion years in age. Kimberlite, a form of igneous rock, is widely regarded as the main source for diamonds, and is reported from postulated Archon called the “Baltic Shield.” Only in the past decade have diamond explorers recognized that these Baltic Shield rocks are potentially viable for diamonds.
The Property is Without Known Reserves and our Proposed Program is Exploratory in Nature. Exploration for diamonds on the properties began because the formation and layout of the rocks on the properties indicated that some of the rocks had been pushed up through the earth’s crust. This is initially identified by geologists from the age and shape of the rocks. When these different or unexpected rock formations appear, geologist then consider the area surrounding these rocks as strong targets for exploration for diamonds. This is because, geologists believe, as the rocks are pushing up through the earth’s surface from great depths, the rocks travel through diamond fields located below the earth’s surface and therefore rocks containing diamonds are forced to the surface.
Rocks containing these characteristics were identified on the properties covered by our mineral permits. Once these rocks were identified, we then conducted a magnetometer survey. The magnetometer is a small electronic device used by geologists to survey the land for areas of high magnetism. This can be used in the air or on the ground. This test is conducted because, when the rocks are being pushed through the earth’s surface (as described above), in addition to bringing rocks containing diamonds, iron from below the Earth’s surface is also forced to the surface. The magnetometer reads the surface of the Earth for any magnetism created by the iron upon the belief that if a particular property contains a high concentration of iron that was forced up from below the earth’s surface; the property may also contain diamonds that have been similarly forced up to the surface.
An airborne magnetometer survey was conducted over the properties for which we have mineral permits, and six (6) magnetic dykes were discovered. This indicated to us that these properties were potentially a source for diamonds. In addition, samples of rock taken from the properties have yielded small diamonds.
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We have hired Prospecting Geophysics Ltd. to conduct these exploration procedures. Mr. Peter Ferderber is the President of Prospecting Geophysics Ltd. Mr. Ferderber has over forty years of experience in mining exploration. Prospecting Geophysics Ltd. plans to conduct the exploration of the property which is expected to last for the next two years. The first phase involved identifying areas on the property from which to take samples and gathering small samples from the properties for analysis. This analysis to date has demonstrated the presence of 10 micro diamonds in two samples taken. The second phase involves determining the extent of any kimberlite dykes that were located in phase one and to gather mini-bulk and bulk samples. This will enable us to determine if there are larger and more marketable diamonds on the properties. We began phase two exploration in April 2001 and assuming adequate funding and reasonable weather conditions, this phase is expected to take four (4) years to complete. Operations are generally suspended from October to April because of inclement weather. The following is a breakdown of the estimated budget for particular aspects of our exploration activities:
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Prospecting and geological mapping |
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$ |
190,000 |
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Helicopter support |
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225,000 |
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Lodging and food |
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110,000 |
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Airplane support |
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100,000 |
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Mobilization and Demobilization |
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60,000 |
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Fuel for helicopter, airplane and camps |
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40,000 |
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Fuel transport by boat |
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8,000 |
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Pick-up truck rental |
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15,000 |
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Drill program |
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250,000 |
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Testing samples for Diamonds |
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150,000 |
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Property Taxes (Quebec Dept. of Natural Resources) |
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60,000 |
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Supervision |
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60,000 |
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Total |
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$ |
1,268,000 |
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(5) In the Quebec sector of the Torngat belt, roughly fifteen dykes have been mapped. These dykes occupy fractures oriented at an approximately right angle to the country rocks, suggesting tensions opened up by later scale folding. Two of these dykes on an adjacent property have been sampled, confirming the presence of diamonds. However, to date, no proven reserves have been established and there can be no assurance that any such reserves will ever exist.
There are no legal proceedings pending or threatened against us.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of calendar year 2003, no matters were submitted to a vote of the security holders of the Company.
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PART II.
Item 5. Market for Common Equity and Related Stockholder Matters.
As of July 18, 2002 prices for the Common Stock were quoted on the Over the Counter Bulletin Board operated by the National Association of Securities Dealers, Inc. under the symbol DMDD. The following table sets forth the high and low closing bid prices of the Company’s Common Stock for the periods indicated as reported by the NASD. These quotations reflect inter-dealer prices without retail markup, markdown or commissions and may not necessarily represent actual transactions.
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High |
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Low |
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Fiscal Year 2002 |
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Third Quarter |
|
1.500 |
|
0.250 |
|
|
Fourth quarter |
|
0.600 |
|
0.160 |
|
|
|
|
|
|
|
|
|
Fiscal Year 2003 |
|
|
|
|
|
|
First Quarter |
|
0.370 |
|
0.110 |
|
|
Second Quarter |
|
0.330 |
|
0.090 |
|
|
Third Quarter |
|
0.180 |
|
0.080 |
|
|
Fourth Quarter |
|
0.210 |
|
0.090 |
|
|
|
|
|
|
|
|
|
Fiscal Year 2004 |
|
|
|