UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2009

¨

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
for the transition period from _________________ to _______________

Commission File Number 333-136436

DIAGNOSTIC IMAGING INTERNATIONAL CORP.

 (Exact name of registrant as specified in charter)

NEVADA		98-0493698
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

848 N. Rainbow Blvd #2494, Las Vegas, Nevada		89107
Address of principal executive offices)		(Zip Code)

Registrant's telephone number, including area code   (877) 331-3444

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes x    No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o    No o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o    No x

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  ¨ (Do not check if smaller reporting company)		Smaller Reporting Company  ý

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: As of November 23, 2009 the Company had outstanding   16,531,256 shares of its common stock, par value $0.001.

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TABLE OF CONTENTS

ITEM NUMBER AND CAPTION		PAGE
PART I
ITEM 1.	Consolidated Financial Statements	3
ITEM 2.	Management’s Discussion and Analysis of Financial Condition And Results of Operations	14
ITEM 3	Quantitative and Qualitative Disclosures About Market Risk Controls and Procedures	18
ITEM 4T	Controls and Procedures	18
PART II
ITEM 1.	Legal Proceedings	19
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	19
ITEM 3.	Defaults Upon Senior Securities	19
ITEM 4.	Submission of Matters to a Vote of Security Holders	19
ITEM 5.	Other Information	19
ITEM 6.	Exhibits	20

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PART I.  FINANCIAL INFORMATION

Item 1.   FINANCIAL STATEMENTS

Diagnostic Imaging International Corp.

Consolidated Balance Sheets

	September 30,			December 31,
	2009			2008
ASSETS	(Unaudited)			(Audited)
Current Assets:
Cash	$	25,077		$	428
Accounts Receivable, net		59,356			-
Total Current Assets		84,433			428
Property and Equipment:
Equipment		97,866			800
Less: Accumulated Depreciation		(89,570)			(200)
Total Property and Equipment, net		8,296			600
Intangible Assets
Hospital Contracts		794,707			-
Non-compete agreement		205,328			-
Less: Accumulated Amortization		(242,728)			-
Total Intangible Assets, net		757,307			-
Other Assets:
Deposits		2,798			4,089
Total Other Assets		2,798			4,089
TOTAL ASSETS	$	852,834		$	5,117
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts Payable and Accrued Expenses	$	175,413		$	70,618
Promissory Notes		279,799			-
Notes Payable - Shareholder		20,444			66,207
Loans Payable – Current Portion		34,419
Total Current Liabilities		510,075			136,825
Long Term Liabilities:
Loans Payable		5,542			-
Total Liabilities		515,617			136,825
Stockholders' Equity :
Preferred Stock - $0.001 par value; 5,000,000 shares authorized, no shares issued and outstanding		-			-
Common Stock - $0.001 par value; 100,000,000 shares authorized, 16,531,256 and 9,946,674 shares issued and outstanding at September 30, 2009 and December 31, 2008 respectively		16,533			9,947
Additional Paid-in Capital		1,260,855			107,908
Contingent Shares Payable on Acquisition		150,000
Comprehensive Loss Accumulated		474			108
Accumulated Deficit		(1,090,645)			(249,671)
Total Stockholders' Equity		337,217			(131,708)
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY	$	852,834		$	5,117

The accompanying notes are an integral part of these consolidated financial statements.

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Diagnostic Imaging International Corp.

Consolidated Statements of Operations

	Three months ended						Nine months ended
	September 30,			September 30,			September 30,			September 30,
	2009			2008			2009			2008
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Revenue:
Sales	$	558,350		$	-		$	1,079,041		$	-
Cost of sales (exclusive of depreciation shown separately below)		451,901			-			879,974			-
Gross Margin		106,449			-			199,067			-
Operating Expenses:
Administrative fees		6,017			4,271			26,045			10,759
Advertising		1,216			-			199,613			-
Amortization		104,026			-			242,728			-
Automobile		10			-			735			-
Bank and finance charges		1,220			53			2,353			2,619
Courier and freight		2,243			-			4,336			-
Depreciation		2,224			32			6,719			120
Dues and subscriptions		-			-			49			-
Equipment repair/rent		1,040			-			1,543			-
Insurance		2,679			-			8,267			-
Labor		13,382			-			26,072			-
Legal and professional		52,863			5,255			224,045			19,144
Licensing and permits		439			-			439			-
Management fees		11,000			-			161,000			-
Miscellaneous		8,967			-			16,192			-
Office and supplies		4,676			1,244			9,798			3,756
Rent		10,405			-			16,841			-
Stock option expense		-			-			9,000			-
Telephone and utilities		4,556			274			7,604			803
Travel		19			-			3,552			-
Total Operating Expenses		226,982			11,065			966,931			37,201
Operating Loss		(120,533)			(11,065)			(767,864)			(37,201)
Other Income and Expenses:
Other Income		17,597			-			17,597			-
Foreign Currency Losses		(64,251)			-			(64,251)			-
Interest Expense		(9,594)			(1,162)			(26,456)			-
Total Other Income/Expenses		(56,248)			(1,162)			(73,110)			-
Net Loss		(176,781)			(12,227)			(840,974)			(37,201)
Comprehensive Income/(Loss)		366			(100)			366			(22)
Total comprehensive Loss	$	(176,415)		$	(12,327)		$	(840,608)		$	(37,223)
Basic and Diluted Loss per Share	$	(0.011)		$	(0.001)		$	(0.060)		$	(0.004)
Weighted Average Shares Outstanding:
Basic and Diluted		16,364,223			9,946,674			14,075,892			9,946,674

The accompanying notes are an integral part of these consolidated financial statements.

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Diagnostic Imaging International Corp.

Consolidated Statements of Cash Flows

	Nine Months Ended
	September 30,			September 30,
	2009			2008
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss	$	(840,974)		$	(37,200)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities:
Depreciation		6,719			120
Stock Option Expense		9,000			-
Interest imputed on shareholder loan		18,693			-
Shares issued for services		348,700			-
Amortization of Intangible Assets		242,728			-
Foreign currency Transaction Loss		64,251			-
Changes in:
Accounts Receivable		(47,220)			-
Deposits		1,291			-
Accounts Payable		60,188			16,541
NET CASH (USED) BY OPERATING ACTIVITIES		(136,624)			(20,539)
CASH FLOWS FROM INVESTING ACTIVITIES:
Other Assets		-			(5,000)
Acquisition of CTS		(313,185)			-
NET CASH (USED) BY INVESTING ACTIVITIES		(313,185)			(5,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Notes Payable		-			20,407
Proceeds from Sale of Common Stock		633,137			4,500
Proceeds from related party debt		44,112			-
Principal payments on RP debt		(89,875)			-
Principal payments on debt		(113,285)			-
NET CASH PROVIDED BY FINANCING ACTIVITIES		474,089			24,907
Gain / (Loss) due to foreign currency translation		369			(22)
NET CHANGE IN CASH		24,649			(654)
CASH AT BEGINNING OF PERIOD		428			1,261
CASH AT END OF PERIOD	$	25,077		$	607
Cash paid during the year for:
Interest	$	7,763		$	-
Income Taxes	$	-		$	-
Non-cash financing and investing activities:
Purchase of business by issuing common stock	$	150,000		$	-
Contingent issuance of common stock on acquisition	$	150,000		$	-
Issuance of promissory note in exchange through notes payable to the sellers for business acquisition	$	234,887		$	-

The accompanying notes are an integral part of these consolidated financial statements.

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Diagnostic Imaging International Corp.

And Subsidiaries

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2009

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements of Diagnostic Imaging International Corp. (“Diagnostic” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in Diagnostic’s Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements, which would substantially duplicate the disclosure contained in the audited financial statements for 2008 as reported in the Form 10-K have been omitted.

Principle of Consolidation - The consolidated financial statements include the accounts of Diagnostic Imaging International, Corp., and Canadian Teleradiology Services, Inc (“CTS”).  Intercompany accounts and transactions have been eliminated in the consolidated financial statements.

Reclassification of Accounts – Certain prior period amounts have been reclassified to conform to September 30, 2009 presentation.

Use of Estimates and Assumptions - The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities, (ii) the disclosure of contingent assets and liabilities known to exist as of the date the financial statements are published, and (iii) the reported amount of net sales and expenses recognized during the periods presented. Adjustments made with respect to the use of estimates often relate to improved information not previously available. Uncertainties with respect to such estimates and assumptions are inherent in the preparation of financial statements; accordingly, actual results could differ from these estimates.

These estimates and assumptions also affect the reported amounts of revenues, costs and expenses during the reporting period.  Management evaluates these estimates and assumptions on a regular basis.  Actual results could differ from those estimates.

Cash and Cash Equivalents - The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.  At September 30, 2009, cash and cash equivalents include cash on hand and cash in the bank.

Accounts Receivable Credit Risk - The allowance for doubtful accounts is maintained at a level sufficient to provide for estimated credit losses based on evaluating known and inherent risks in the receivables portfolio.  Management evaluates various factors including expected losses and economic conditions to predict the estimated realization on outstanding receivables.  As of September 30, 2009 there was no allowance for bad debts.

Goodwill and Other Intangible Assets - The Company adopted Statement of Financial Accounting Standard (“FASB”) Accounting Standards Codification (“ASC”) Topic 350 Goodwill and Other Intangible Assets, effective July 1, 2002.  In accordance with (“ASC Topic 350”) "Goodwill and Other Intangible Assets," goodwill, represents the excess of the purchase price and related costs over the value assigned to net tangible and identifiable intangible assets of businesses acquired and accounted for under the purchase method, acquired in business combinations is assigned to reporting units that are expected to benefit from the synergies of the combination as of the acquisition date. Under this standard, goodwill and intangibles with indefinite useful lives are no longer amortized.  The Company assesses goodwill and indefinite-lived intangible assets for impairment annually during the fourth quarter, or more frequently if events and circumstances indicate impairment may have occurred in accordance with ASC Topic 350. If the carrying value of a reporting unit's goodwill exceeds its implied fair value, the Company records an impairment loss equal to the difference. ASC Topic 350 also requires that the fair value of indefinite-lived purchased intangible assets be estimated and compared to the carrying value. The Company recognizes an impairment loss when the estimated fair value of the indefinite-lived purchased intangible assets is less than the carrying value.  As of September 30, 2009 the Company has not acquired any indefinite-lived intangible assets and goodwill.

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Intangible Assets – The operating subsidiary of Diagnostic, Canadian Teleradiology Services Inc. (“CTS”) has contracts with various hospitals in the province of Ontario, Canada.  These contracts are for specific radiology services to be provided for a length of time.  Contracts vary between one and five years.  The contracts do not specify any minimum billings for any period of time. These contracts were valued on acquisition using a discounted cash flow model and the fair value as recorded is amortized over the life of the contract using the straight line method.

The Company also attributed value to the non-compete agreement obtained as part of the acquisition agreement with CTS’ former director. This agreement has a life of five years and the value attributed to it will be amortized over the same period.

Revenue Recognition - The Company holds contracts with several hospitals and/or groups of health care facilities to provide Teleradiology services for a specific period of time. The Company bills for services rendered on a monthly basis.  As of September 30, 2009 CTS held five contracts; three contracts that are renewable on a year-to-year basis and its two largest contracts which are five-year contracts renewing in 2013. As described above in accordance with the requirement of SAB 104 the Company recognizes revenue when (1) persuasive evidence of an arrangement exists (contracts) (2) delivery has occurred (monthly) (3) the seller’s price is fixed or determinable (per the customer’s contract) (4) collectability is reasonably assured (based upon our credit policy).

Impairment of Long-Lived Assets - In accordance with ASC Topic 3605, long-lived assets, such as property, plant, and equipment, and purchased intangibles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Goodwill and other intangible assets are tested for impairment.  Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. There were no events or changes in circumstances that necessitated an impairment of long lived assets.

Amortization and Depreciation - In previous reporting periods the company has presented the amortization and depreciation expenses above the gross profit line to maintain consistency with previous reporting. As of this quarter the company has decided to classify amortization and depreciation as operating expenses to better reflect the nature of the expenses.

Stock based compensation - Beginning January 1, 2006, the Company adopted an accounting standard for stock based compensation. The standard requires all share-based payments to employees (which includes non-employee Board of Directors), including employee stock options, warrants and restricted stock, be measured at the fair value of the award and expensed over the requisite service period (generally the vesting period). The fair value of common stock options or warrants granted to employees is estimated at the date of grant using the Black-Scholes option pricing model by using the historical volatility of comparable public companies. The calculation also takes into account the common stock fair market value at the grant date, the exercise price, the expected life of the common stock option or warrant, the dividend yield and the risk-free interest rate.

The Company from time to time may issue stock options, warrants and restricted stock to acquire goods or services from third parties. Restricted stock, options or warrants issued to other than employees or directors are recorded on the basis of their fair value. The options or warrants are valued using the Black-Scholes option pricing model on the basis of the market price of the underlying equity instrument on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance, is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period.

The Company recognized stock-based compensation expense from stock granted to non-employees for the nine months ended September 30, 2009 of $348,700.  The Company recognized stock-based compensation expense from warrants granted to non-employees for the nine months ended September 30, 2009 of $9,000.  

Fair Value of Financial Instruments - The fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced sale or liquidation. The carrying amounts of the Company’s financial instruments, including cash, accounts receivable, accounts payable and accrued liabilities, income tax payable and related party payable approximate fair value due to their most maturities.

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Foreign Currency Translation - The Company’s functional currency for their wholly owned subsidiary CTS is the Canadian dollar and these financial statements have been translated into U.S. dollars. The Canadian dollar based accounts of the Company’s foreign operations have been translated into United States dollars using the current rate method. Assets and liabilities of those operations are translated into U.S. dollars using exchange rates as of the balance sheet date; income and expenses are translated using the weighted average exchange rates for the reporting period. Translation adjustments are recorded as accumulated other comprehensive income (loss), a separate component of shareholders’ equity.

Recent Accounting Updates - Recent accounting updates that the Company has adopted or that will be required to adopt in the future are summarized below. On September 30, 2009, the Company adopted updates issued by the Financial Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards CodificationTM (ASC) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Condensed Consolidated Financial Statements.

In June 2009, the FASB issued guidance now codified as ASC Topic 105, “Generally Accepted Accounting Principles” (“ASC 105”), which establishes the FASB Accounting Standards Codification as the source of GAAP to be applied to nongovernmental agencies. ASC 105 explicitly recognizes rules and interpretive releases of the SEC under authority of federal securities laws as authoritative GAAP for SEC registrants. ASC 105 became effective for interim or annual periods ending after September 15, 2009. ASC 105 does not have a material impact on the Company’s consolidated financial statements presented hereby.

In May 2009, the FASB issued guidance now codified as ASC Topic 855, “Subsequent Events” (“ASC 855”). The pronouncement modifies the definition of what qualifies as a subsequent event—those events or transactions that occur following the balance sheet date, but before the financial statements are issued, or are available to be issued—and requires companies to disclose the date through which it has evaluated subsequent events and the basis for determining that date. The Company adopted the provisions of ASC 855 in the second quarter of 2009, in accordance with the effective date.

On April 1, 2009, the Company adopted updates issued by the FASB to the recognition and presentation of other-than-temporary impairments. These changes amend existing other-than-temporary impairment guidance for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities. The recognition provision applies only to fixed maturity investments that are subject to the other-than-temporary impairments. If an entity intends to sell, or if it is more likely than not that it will be required to sell an impaired security prior to recovery of its cost basis, the security is other-than-temporarily impaired and the full amount of the impairment is recognized as a loss through earnings. Otherwise, losses on securities which are other-than-temporarily impaired are separated into: (i) the portion of loss which represents the credit loss; or (ii) the portion which is due to other factors.

On January 1, 2009, the Company adopted updates issued by the FASB to accounting for intangible assets. These changes amend the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset in order to improve the consistency between the useful life of a recognized intangible asset outside of a business combination and the period of expected cash flows used to measure the fair value of an intangible asset in a business combination. The adoption of these changes had no impact on the Condensed Consolidated Financial Statements.

On January 1, 2009, the Company adopted updates issued by the FASB to the calculation of earnings per share. These changes state that unvested share-based payment awards that contain non forfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the two-class method for all periods presented. The adoption of these changes had no impact on the Condensed Consolidated Financial Statements.

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In April 2008, the FASB issued guidance now codified as ASC Topic 350, “Intangibles—Goodwill and Other” (“ASC 350”). This pronouncement amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under previous ASC 350 guidance, thereby improving the consistency between the useful life of a recognized intangible asset under ASC 350 and the period of expected cash flows used to measure the fair value of the asset under ASC Topic 805, “Business Combinations” (“ASC 805”). This pronouncement was effective for financial statements issued for fiscal years beginning after December 15, 2008 and must be applied prospectively to intangible assets acquired after the effective date. The Company has not acquired any intangible assets since adopting this pronouncement. As such, there has been no impact to the Company’s financial statements since the January 1, 2009 adoption date.

In December 2007, the FASB issued guidance now codified as ASC Topic 805, “Business Combinations” (“ASC 805”), which replaces previous ASC 805 guidance. This pronouncement establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any non-controlling interest in the acquiree and the goodwill acquired in connection with a business combination. This pronouncement also establishes disclosure requirements that will enable users to evaluate the nature and financial effect of the business combination. This pronouncement applies prospectively to business combinations for which the acquisition date is on or after the beginning of an entity’s first fiscal year that begins after December 15, 2008. The Company applied the provisions of ASC 805 in connection with the acquisition (discussed in note 4) that closed during the first quarter of 2009. The adoption of this pronouncement did not have a material impact on the Company’s consolidated financial statements.

Updates issued but not yet adopted

In October 2009, the FASB issued updates to revenue recognition guidance. These changes provide application guidance on whether multiple deliverables exist, how the deliverables should be separated, and how the consideration should be allocated to one or more units of accounting. This update establishes a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence, if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific or third-party evidence is available. The Company will be required to apply this guidance prospectively for revenue arrangements entered into or materially modified after January 1, 2011; however, earlier application is permitted. The Company has not determined the impact that this update may have on its Consolidated Financial Statements.

In August 2009, the FASB issued updates to fair value accounting for liabilities. These changes clarify existing guidance that in circumstances in which a quoted price in an active market for the identical liability is not available, an entity is required to measure fair value using either a valuation technique that uses a quoted price of either a similar liability or a quoted price of an identical or similar liability when traded as an asset, or another valuation technique that is consistent with the principles of fair value measurements, such as an income approach (e.g., present value technique). This guidance also states that both a quoted price in an active market for the identical liability and a quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. These changes will become effective for the Company’s Consolidated Financial Statements for the year ended December 31, 2009. The Company has not determined the impact that this update may have on its Consolidated Financial Statements.

Other than those described above, we do not believe the impact of any new accounting pronouncements will have a material impact on our financial statements.

NOTE 2 – PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is calculated on the straight-line method over the estimated useful life of the assets. As of September 30, 2009 and December 31, 2008, the major class of property and equipment are as follows:

		September 30, 2009		December 31, 2008		Estimated useful lives
Computer/Office Equip		97,866		800		3 years
Less: Accumulated Depreciation		(89,570)		(200)
Net Book Value		8,296		600

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NOTE 3 – LEASE COMMITMENT

Canadian Teleradiology Services, Inc., a wholly owned subsidiary of the Company, has a lease for its office space of $1,200 CAD per month. CTS is also leasing off-site servers at a cost of $1,800 CAD per month. As of November 1^st the cost of the monthly off-site servers has increased to $2,600 CAD monthly. This lease was accounted for as an operating lease and will expire in June of 2012. The lease agreement includes an automatic renewal term of one year at the same monthly lease payment, for a maximum of five annual renewal terms.

Expected remaining Lease commitment:

Year		Office Space			Servers			CAD			USD
2009			3,600			7,000			10,600			9,886
2010			14,400			31,200			45,600			42,530
2011			14,400			31,200			45,600			42,530
2012			14,400			31,200			45,600			42,530
		$	46,800		$	100,600		$	147,400		$	137,476

NOTE 4 – BUSINESS COMBINATION

On March 2, 2009 we acquired the shares of Canadian Teleradiology Services, Inc. (“CTS”) for consideration including cash and stock which is described in detail below. CTS provides remote radiology (teleradiology) technology to hospitals and practices, on-call 24 hours a day, seven days a week.  CTS connects its clients with a global teleradiology network, providing access to global partner facilities and American and Canadian board-certified radiologists.

This purchase has been accounted for as a business purchase pursuant to the new business combination standard adopted in 2009. We have evaluated this transaction and believe that the historical cost of the tangible assets acquired approximated fair market value given the current nature of the assets acquired. The fair value of the intangible assets was calculated using a discounted cash flow model of the expected net cash flows from these assets over the next five years. These assets will be amortized over their determined life, being the length of the current contract in effect as at the day of the acquisition.  The 500,000 shares issued pursuant to the acquisition were valued based on the closing price of our common stock at the date of the announcement.  An additional 500,000 shares have been reflected as part of the non-compete value based upon the fair market value of the contingent consideration to be issued.  The contingent consideration of 500,000 shares will be paid one year from the acquisition date if the revenues reach 90% of pre-acquisition levels.

A preliminary breakdown of the purchase price is as follows:

Cash	$	313,185
Promissory Note		234,887
500,000 contingent shares		150,000
500,000 Shares of DIIG		150,000
Total consideration paid	$	848,072

The fair value of the net assets acquired is recorded as follows:

Accounts receivable	$	12,136
Computer equipment		8,155
Hospital contracts		794,707
Non-compete agreement		205,328
Liabilities assumed		(172,254)
Net assets purchased	$	848,072

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The following unaudited pro-forma assumes the transaction occurred as of the beginning of the period presented as if it would have been reported during the nine month period below:

	Nine Months ended September 30, 2009 (Unaudited)
Sales	$	1,235,779
Cost of Sales		998,163
Gross Margin	$	237,616
Total Operating Expenses		972,67
Operating Income/Loss	$	(735,062)
Total Other Income/(Expenses)		19,314
Net Income/(Loss)	$	(715,748)
Comprehensive Income/(Loss)	$	366
Total Comprehensive Income/(Loss)	$	(715,382)
Basic and Diluted Earnings/(Loss) per Share		(0.05)
Weighted Average Shares Outstanding:
Basic and Diluted		14,075,892

NOTE 5 – COMMITMENTS AND CONTINGENCIES

Pursuant to the acquisition agreement of CTS, the Company has agreed to issue an additional 500,000 shares to the previous shareholders for CTS achieving certain milestones as discussed in Note 4 in its first year of post-acquisition operations.  This contingency is recorded in the equity section of the Company’s balance sheet.

NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

As of September 30, 2009 and December 31, 2008 the trade payables and accrued liabilities of the Company were $175,413 and $70,618, respectively. Of the total amount as of September 30, 2009, approximately $97,711 is related to CTS ongoing operations. The balance of the accounts is vendors supplying goods and services used in the normal course of business.  Of the total amount in 2008, $54,766 or approximately 80% was represented by three accounts, being our legal advisors, and accountants.

NOTE 7 – PROMISSORY NOTES

The company assumed debt of CTS for payments made against accounts payable by the former stockholders. Previous stockholders of CTS loaned CDN$125,760 to CTS to pay some accounts payable liabilities owed by CTS prior to consummation of the transaction. This loan is memorialized by a promissory note, secured by DIIG’s shares in and assets of CTS, and payable within 60 days. The Company also entered into promissory note agreements with the former shareholders of CTS as part of the acquisition agreement.

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The details of the notes are as follows:

Note holder		Face value1			USD			Maturity Date
Dawn Haider		$	36,000		$	28,186		May 2, 2009
Syed Haider			36,000			28,186		May 2, 2009
Quinte MRI			53,760			42,092		July 2, 2009
Dawn Haider			90,000			83,940		March 2, 2010
Syed Haider			90,000			83,940		March 2, 2010
Quinte MRI			120,000			111,920		March 2, 2010
		$	425,760		$	378,264

Note holder		Face value1			USD			Maturity Date
Dawn Haider			90,000			83,940		March 2, 2010
Syed Haider			90,000			83,940		March 2, 2010
Quinte MRI			120,000			111,919		March 2, 2010
		$	300,000		$	279,799

During the second quarter, ended June 30, 2009, the notes maturing on May 2, 2009 were paid in full.  The US dollar equivalent to satisfy the payments was $61,856.  An exchange loss of $5,484 was recorded on extinguishment of these notes. These notes were non-interest bearing.

During the third quarter, ended September 30, 2009, the note maturing on July 2, 2009 was paid in full.  The US dollar equivalent to satisfy the payments was $50,535.  An exchange loss of $8,443 was recorded on extinguishment of this note.

The remaining notes are non-interest bearing. The Company imputed interest on the notes at their normal borrowing rate of 10%. Imputed interest on these notes for the nine months ended Sep 30, 2009 was $17,505.

Face value of promissory notes is denominated in Canadian dollars. A foreign currency transactions loss of $44,910 was recorded due to foreign exchange rate change on the Canadian dollar denominated notes.

NOTE 8 – RELATED PARTIES

The Company has a loan from its president that is non-interest bearing and payable upon demand. At year-end imputed interest was calculated, at a 10% annualized rate, and recorded as an expense and additional paid in capital to the Company.  The balance at September 30, 2009 is $20,444. Imputed interest for the 9 months ended September 30, 2009 totaled $1,188 for this note.

The Company entered into six non-interest bearing note agreements associated with the acquisition of CTS. The cumulative balance of these notes as of September 30, 2009 was $279,799. Imputed interest for the 9 months ended Sep 30, 2009 for these notes totaled $17,505 at a 10% annualized rate.

CTS entered into a management agreement with Diagnostic in the second quarter to provide general business management, sales and infrastructure support.  The agreement is for approximately $10,000 per month through the end of 2009.  These charges are eliminated on consolidation.

NOTE 9 – LOANS PAYABLE

CTS borrowed funds for working capital from various sources.  A summary of the details are as follows:

Creditor		Maturity		Balance (US$)			Interest Rate
Syed Haider		None			4,393		0%
Frank Hiebert		June 20, 2010		$	19,833		10%
Greg Meehan		June 20, 2010		$	10,193		10%
Syed Haider		November 10, 2013		$	5,542		29.99%
				$	36,961

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NOTE 10 – COMMON STOCK

During the first quarter, 2,520,914 shares were issued by private placement for $378,137.

During the first quarter 300,000 shares were issued for services valued at $90,000 based upon the closing price of our common stock at the grant date.

During the first quarter 500,000 shares were issued pursuant to the purchase and sale agreement of CTS.  These shares were valued at $150,000 based upon the closing price of our common stock at the announcement date.

During the second quarter, 1,533,668 shares were issued by private placement for $230,000.

During the second quarter 1,530,000 shares were issued for services valued at $236,700 based upon the closing price of our common stock at the grant date.

During the second quarter 500,000 options were issued as part of a management agreement. The options can be exercised in September 2009 and are priced at $0.10 each.  The options were expensed when issued at a value of $0.018 each for a total expense of $9,000. This expense was valued using the Black-Scholes model and was expensed in the current quarter.

During the third quarter 100,000 shares were issued by private placement for $25,000.

During the third quarter 100,000 shares were issued for services valued at $22,000 based upon the closing price of our common stock at the grant date.

NOTE 11 – SUBSEQUENT EVENTS

The Company had no material subsequent events to disclose from the balance sheet date to the filing date. The company evaluated subsequent events through the filing date of November 23, 2009.

NOTE 12 – GOING CONCERN

As shown in the accompanying consolidated financial statements, the company incurred net losses of $840,974 for the nine months ended September 30, 2009 as well as a working capital deficit of $425,642. These conditions raise substantial doubt as to if the company’s ability to continue as a going concern. These consolidated financial statements do not include any adjustments that might be necessary if the company is unable to continue as a going concern.

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Item2.   MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward Looking Statements

This Form 10-Q quarterly report of Diagnostic Imaging International Corp. (the “Company”) for the nine months ended September 30, 2009, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby.  To the extent that there are statements that are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties.  In any forward-looking statement, where the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished.

The following are factors that could cause actual results or events to differ materially from those anticipated, and include, but are not limited to:  variations in revenue; possible inability to attract investors for its equity securities or otherwise raise adequate funds from any source should the Company seek to do so; increased governmental regulation; increased competition; unfavorable outcomes to litigation involving the Company or to which the Company may become a party in the future; and a very competitive and rapidly changing operating environment.

Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof.  The Company believes the information contained in this Form 10-Q to be accurate as of the date hereof. Changes may occur after that date, and the Company will not update that information except as required by law in the normal course of its public disclosure practices.

Additionally, the following discussion regarding the Company’s financial condition and results of operations should be read in conjunction with the financial statements and related notes contained in Item 1 of Part 1 of this Form 10-Q, as well as the financial statements in Item 7 of Part II of the Company’s Form 10-K for the fiscal year ended December 31, 2008.

Company History

Diagnostic Imaging International Corp., a Nevada Corporation, was incorporated on December 12, 2000. Prior to August 19, 2005, the Company was named Galloway Investments Corp. and was originally established to make investments in real estate properties with development or improvement potential. In July 2005, the Company engaged Mr. Richard Jagodnik to advise it on private healthcare opportunities in Canada and, if there was sufficient opportunity, to develop a new business plan with the objective of owning and operating private diagnostic clinics.  In March of 2009 the Company acquired Canadian Teleradiology Services (“CTS”), which provides remote, including after hours, diagnostic imaging services to hospitals in Ontario, Canada. The Company plans to expand CTS and at the same time continue to work towards developing its own diagnostic imaging clinics.

Plan of Operations

CTS Acquisition

On March 2, 2009, Diagnostic Imaging International Corp. (“DIIG”) completed its previously announced purchase of all of the outstanding shares of capital stock of Canadian Teleradiology Services (“CTS”) from CTS’ stockholders. As a result, CTS is now a wholly-owned subsidiary of DIIG.

Under the terms of the acquisition agreement, as amended, all of the outstanding shares of CTS were acquired for; a cash payment of CDN$400,000; aggregate promissory notes in the principal amount of CDN$300,000, payable in 12 months and secured by DIIG’s shares in and the assets of CTS; 500,000 shares of common stock of DIIG; and an earn-out for the selling shareholders aggregating 500,000 shares of common stock of DIIG, pro rata to the selling shareholders, payable on March 2, 2010 if and only if the revenues of CTS for fiscal year 2009 are at or above 90% of the fiscal year 2007 revenues of CTS.  

In addition, from the aggregate CND$400,000 cash payment they received from DIIG, the previous stockholders of CTS loaned CDN$125,760 to CTS to pay some accounts payable liabilities owed by CTS prior to consummation of the transaction. This loan is memorialized by a promissory note, secured by DIIG’s shares in and assets of CTS, payable within 60 days.

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CTS Business Description

CTS provides leading edge remote radiology (teleradiology) technology to hospitals and practices, on-call 24 hours a day, 7 days a week.  CTS connects clients with a global teleradiology network, providing access to global partner facilities and American and Canadian board-certified radiologists.

CTS offers Preliminary and Final Official Interpretations and Quality Assurance Over-reads.  The Company specializes in MRI, CT, PET, US, NM, MAMMO, X-Ray and BMD modalities.  Preliminary interpretations are available within an average of 30 minutes.  The CTS operation centre co-ordinates physicians and radiologists 24 hours a day, 365 days a year.

CTS receives MRI and CT scans from hospitals and clinics, and transmits them to approved, certified radiologists, who are typically located in larger urban medical centers. The radiologists read the scans and review the audio information, prepare a medical report, and transmit the reports to the hospitals and clinics. The benefit of the CTS system of services is to allow hospitals and clinics access to radiologists. There is an estimated labour shortage of radiologists. The benefits to the radiologists that join the CTS Team, include but are not limited to; an ability to make additional income, flexibility to work from home as opposed to being “locked” in a room in the hospital, and an ability to spend time with their families.  This service system also helps hospitals and clinics in remote locations, where it is difficult to hire skilled radiologists, and access professional, skilled radiology staff.

CTS has been providing teleradiology services to North America for the past three years, and recently was approved for a five year extension of its largest current service contract. The contract covers three public hospitals and CTS will provide remote reading and reporting covering modalities such as MRI, CT, X-Ray and Ultrasound.

CTS also offer similar services to other public hospitals and is looking to expand into other provinces and the U.S.

CTS services include:

Ø Full PACS Networking and Compatibility *

Ø Certified Radiologists based in North America and are vetted by the hospital

Ø 24 Hour Turnaround on Non-emergency Reports

Ø 1 Hour Turnaround on Emergency Verbal STAT Reports

Ø References from Client Public Hospitals and Clinics on request

*The Picture Archiving and Communications System (PACS) offers Remote Teleradiology Services to PACS-based hospitals and clinics.

Compressed scanned images are transmitted to the CTS Data Centre, including audio dictation, and stored in the PCAS system. Orders and reports are generated automatically.  The scanned images are read, and reports transcribed and completed.  The system has the ability to update reports.  Certified Radiologists sign-off on the transcribed final report.

CTS adheres to all standards and Medical Insurance Plans (Ontario and PHIPA (Personal Health Information Protection Act) guidelines.

About Teleraradiology

Teleradiology is the process of assessing radiological patient images, such as x-rays, CTs, and MRIs, from one location to another for the purposes of interpretation and/or consultation. Radiologists are increasingly a scarce resource given that imaging procedures are growing approximately 15% annually against an increase of only 2% in the Radiologist population.

Teleradiology improves patient care by allowing Radiologists to provide services without actually having to be at the location of the patient. This is particularly key when a sub specialist such as an MRI Radiologist, Neuroradiologist, Pediatric Radiologist, or Musculoskeletal Radiologist is needed as these professionals are generally only located in large metropolitan areas. Teleradiology allows trained specialists to be available 24/7.

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The Teleradiology Network is performed using secured network technologies such as the Internet, telephone lines, wide area network (WAN), or over a local area network (LAN). Highly specialized software is used to transmit the images and enable the Radiologist to effectively analyze what can be 100's of images for a given study. Technologies such as advanced graphics processing, voice recognition, and image compression are often used in Teleradiology. Through Teleradiology, images can be sent to another part of the hospital, or to other locations around the world.

Teleradiologists can provide a Preliminary Read Report for emergency room purposes or a Final Read Report for the official patient record and for use in billing.

Preliminary Reports include all pertinent findings and a phone call for any critical findings. For some Teleradiology services, the turnaround time is extremely quick with a 30 minute standard turnaround, expedited for critical and stroke studies.

Teleradiology Final Reports can be provided for emergent and non-emergent studies. Final reports include all findings and require access to prior studies and all relevant patient information for a complete diagnosis. Phone calls with any critical findings are signs of quality services.

In addition, some teleradiologists are fellowship trained radiologists and have a wide variety of subspecialty expertise including such difficult-to-find areas like: MRI radiology, Neuroradiology, Pediatric Neuroradiology.

Teleradiology Preliminary or Final Reports can be provided for all doctors and hospitals overflow studies. Teleradiology can be available for intermittent coverage as an extension of practices and will provide patients with the highest quality care.

Diagnostic Imaging Clinics in Canada

In addition to the focus on Teleradiology the Company is still working towards its goal of opening and operating diagnostic imaging clinics in Canada. Our primary plan will focus on Magnetic Resonance Imaging (“MRI”) clinics. If we are successful in the implementation of the MRI clinics, we anticipate adding Computed Tomography (“CT”) scan equipment to those facilities and also will examine future opportunities for Positron Emission Tomography (“PET”) clinics. We intend to provide imaging services for fees to private individuals, workers compensation boards, private insurance companies and those not covered by government insured programs.

In the third quarter of 2009 we focused our energies on CTS and made minimal progress on opening new clinics. The Company plans to continue to work on its first clinic in the fourth quarter of 2009.

No assurance can be given that Diagnostic Imaging will be successful in implementing any phase or all phases of the proposed business plan. Implementation depends on many factors, including, among other things, having enough funds when needed for each phase, acquiring the appropriate operating licenses, achieving market acceptance for our services, effective marketing, and developing a competent and sufficient management and medical staff team.

Property

CTS and Diagnostic are leasing an office in Toronto as our administrative premises for $1,200 CAD per month. CTS is also leasing off-site servers at a cost of $1,800 CAD per month. As of November 1^st 2009 the cost of the monthly off-site servers has increased to $2,600 CAD monthly.

Employees and Directors

Diagnostic Imaging and CTS currently has two full time employees who are the chief executive officer and chairman of the board as well as an accounting and administrative assistant. Additionally the Company employs many contractors who are radiologists, accountants, business development consultants and IT professionals.  While we implement our business plan we will require additional employees.

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Financial Condition and Changes in Financial Condition

Overall Operating Results:

The Company had no revenues from inception through the year ended December 31, 2008.  During the nine and three months ended September 30, 2009 the Company generated $1,079,041, and 558,350, respectively, in revenues from radiological services.

The company did not incur any cost of sales through the year ended December 31, 2008. During the nine months and three months ended September 30, 2009 the company incurred $879,974, and $451,901, respectively.

 Operating expenses for the nine months ended September 30, 2009, and September 30, 2008 totaled $966,931, and $37,201, respectively. During the nine months ended September 30, 2009, we incurred $249,447 in amortization and depreciation expenses, $224,045 in legal and professional fees, $26,045 in administrative costs, $161,000 in management fees and $199,613 in advertising and promotion.  The remaining $106,779 in expenses was incurred for rent and general business operations. During the nine months ended September 30, 2008, we incurred $120 in depreciation expense, $19,144 in legal and professional fees, and$10,759 in administrative costs. We didn’t incur any management fees, or advertising and promotion expenses. The remaining $7,178 in expenses was incurred for general office expenses.

Operating expenses for the three months ended September 30, 2009, and September 30, 2008 totaled $226,982 and $11,065. During the three months ended September 30, 2009, we incurred $106,250 in amortization and depreciation expenses, $52,863 in legal and professional fees, $6,017 in administrative costs, $4,676 in office supplies, $11,000 in management fees, and $13,382 in wages and payroll costs.  The remaining $32,356 in expenses was incurred for rent and general business operations. During the three months ended September 30, 2008, we incurred $32 in depreciation expense, $5,255 in legal and professional fees, and $4,271 in administrative costs. The remaining $1,571 in expenses was incurred for general office expenses.

We believe we will incur substantial expenses in the near term as we implement our business plan.

Liquidity and Capital Resources:

Prior to 2009, the Company funded its operations and working capital through the sale of common stock.  In 2009, the Company has continued to fund its operations and working capital with the sale of common stock.

During the past two years, the company sold an aggregate of 4,154,582 shares of common stock in several private offerings to accredited investors, in which it raised an aggregate of $633,137. The Company issued 100,000 shares in September 2009, at a per share price of $0.22 for services, 100,000 shares in September 2009 at a per share price of $0.25 for $25,000, 300,000 Shares in April 2009 at a per share price of $0.23 for services, 210,000 shares in May 2009 at a per share price of $0.07 for services, 1,020,000 shares in June 2009 at a per share price of $0.15 for services, 1,533,668 shares in June 2009 at a per share price of $0.15 for $230,000, 500,000 shares in March 2009 at a price per share of $0.30 for investment,2,520,914 in March 2009 at a per share price of $0.15, 300,000 shares in March 2009 at a per share price of $0.30 for services . In connection with the capital raising activities, the Company paid $53,750 in certain fees and other expenses, such as professional fees and filing fees.

The Company’s operations have produced $558,350 and $1,079,041 of revenues during the three and nine months ended September 30, 2009, respectively, which have been used to fund its operating expenses, and to reduce its liabilities. The Company expects that current operations will be able to cover its expenses on an ongoing basis through 2009, 2010 and beyond. The company will be required to raise additional capital to expand its business, implement additional aspects of its business plan, and to retire the $300,000 CAD in notes payable in March 2010. 

Since inception, our president has loaned the Company $109,519 to fund our operations. The note is non-interest bearing and payable upon demand.  As of September 30, 2009 the balance outstanding on this note is $20,444.

As of September 30, 2009, our assets totaled $852,834 which consisted of cash balances, accounts receivable, intangible assets and computer and office equipment. Our total liabilities consisted of accounts payable and accrued liabilities of $175,413, notes payable of $20,444 due to our president, loans payable of $39,961 and promissory notes of $279,799. We had an accumulated deficit of $1,090,645 and had working capital deficit of $425,642.

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Our independent auditors, in their report on the financial statements for the year ended December 31, 2008 have indicated that the Company has experienced recurring losses from operations and has minimum cash, which raises substantial doubt about our ability to continue as a going concern.

We have limited working capital with which to run our current operations.  We may need additional funds to pay off our debts related to our acquisition of CTS and to continue to fund our current business operations.  We will need significant funds to consummate the acquisition of any additional diagnostic imaging clinics in the future.  We anticipate that any funds raised will be raised through the sale of our securities in public or private placement transactions, and/or the issuance of convertible debentures and/or loans from financial institutions.  We have to commitments at this time and we cannot give any assurances that we will be successful in raising adequate funds in order to implement our business plan.

New Accounting Pronouncements

Diagnostic Imaging does not expect the adoption of recently issued accounting pronouncements to have a significant impact on Diagnostic Imaging’s results of operations, financial position, or cash flow.

Item 3 – Quantitative and Qualitative Analysis of Market Risks

There are no material changes in the market risks faced by us from those reported in our Annual Report on Form 10-K for the year ended December 31, 2008.

Item 4T. – Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures.  We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) that are designed to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management and our board of directors, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures as of September 30, 2009. This evaluation was carried out under the supervision and with the participation of our management, including our chief executive officer (who is also our principal financial and accounting officer). Based upon the evaluation, our chief executive officer concluded that our disclosure controls and procedures were not effective at the date of management’s evaluation through the date of this report.

(b) Changes in Internal Controls. There was no change in the Company’s internal controls over financial reporting during our most recently completed fiscal quarter that has materially affected, or is reasonably likely to affect the Company’s internal control over financial reporting.

Our determination of non-effectiveness is based upon the number and magnitude of adjustments proposed by our independent auditor during their review of our quarterly results.

1.  As of September 30, 2009, we did not maintain effective controls over the control environment.  Specifically, the Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 207(d)(5)(ii) of Regulation S-B.  Since these entity level programs have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness.

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2. As of September 30, 2009, we did not maintain effective controls over financial statement disclosure. Specifically, controls were not designed and in place to ensure that all disclosures required were originally addressed in our financial statements. Accordingly, management has determined that this control deficiency constitutes a material weakness.

Management is evaluating our control environment and plans to make improvements to the quality of our controls.  When changes are made to our control structure it will be disclosed in future filings.

PART II

ITEM 1.  Legal Proceedings

On August 13, 2009, the Company filed a Statement of Claim, in the Ontario Superior Court of Justice, Case Number CV-09384970, against Syed Haider, Dawn Haider, and Quinte Magnetic Resonance Imaging Inc. (“Vendors”), to recover monies owed to the Company by the defendants for breach of the terms of the purchase contract to acquire the assets and business of CTS. On September 16, 2009, the Vendors filed a Statement of Defense and Syed Haider filed a Statement of Defense and Counterclaim, the latter for monies claimed to be owed under his consulting contract. The Statement of Defence and Counterclaim also asks for $1,500.00 in legal costs alleged due under a promissory note and a declaration of the breach of the promissory note and a declaration that the security agreement has been breached on a number of grounds. The Company plans to vigorously pursue its action against the Vendors and defend against the counterclaim.

On or about October 20, 2009, Syed Haider served a Notice of Motion to enforce the terms of a security agreement relating to the assets of CTS, based on his assertion he is due certain sums under the consulting contract, about which the Company has asserted a right of set off and his breach. The Company believes that this motion related to the security interest in the assets of CTS has been brought in the wrong court and that Syed Haider is trying to circumvent the lawsuit the Company has filed against him. The Company will oppose the motion and intends to vigorously defend itself and its assets against this motion.

ITEM 2.  Unregistered Sales of Equity Securities and Use of Proceeds.

During the quarter ended September 30, 2009 the Company issued 200,000 shares of common stock.

The Company issued 100,000 shares of common stock to one individual for services rendered. The shares were valued at    $22,000 based on the closing price of our common stock on the dates of issue.

The company issued 100,000 shares of common stock for $25,000 in cash.

ITEM 3.  Defaults Upon Senior Securities

None

ITEM 4. Submission of Matters to a Vote of Security Holders

None

ITEM 5.  Other Information

None

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ITEM 6.  Exhibits

(a) Exhibits.

Exhibit No.            Description

31.1

Certification of Chief Executive Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (1)

31.2

Certification of Chief Financial Officer, pursuant to Rule 13a-14(a) of the Exchange Act, as enacted by Section 302 of the Sarbanes-Oxley Act of 2002. (1)

32.1

Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 United States Code Section 1350, as enacted by Section 906 of the Sarbanes-Oxley Act of 2002. (1)

_____________________

(1)  Filed herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	(Registrant)	DIAGNOSTIC IMAGING INTERNATIONAL CORP.
	By:	/s/ Richard Jagodnik
		Richard Jagodnik
		President
		(Principal Executive Officer)
	Date:	November 23, 2009

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