DIAMOND DISCOVERIES INTERNATIONAL CORP - FORM 10-Q

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EX-31.1 - CERTIFICATION - DIAMOND DISCOVERIES INTERNATIONAL CORP	dmdd_ex311.htm
EX-32.1 - CERTIFICATION - DIAMOND DISCOVERIES INTERNATIONAL CORP	dmdd_ex321.htm
EXCEL - IDEA: XBRL DOCUMENT - DIAMOND DISCOVERIES INTERNATIONAL CORP	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2011.

o	TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT

For 1934 for the transition period from________to_________

Commission file number 000-31585

DIAMOND DISCOVERIES INTERNATIONAL CORP.

(Exact name of small business issuer as specified in its charter)

Delaware		06-1579927
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

45 Rockefeller Plaza, Suite 2000

New York, NY 10111

(Address of principal executive offices)

(212) 332-8016

(Issuer’s telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No

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 þ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company þ
		(Do not check if a smaller reporting company)

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

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court Yes o No o

APPLICABLE ONLY TO CORPORATE ISSUERS

The number of shares outstanding of Registrant’s common stock, as of November 21, 2011 is 448,303,795.

Transitional Small Business Disclosure Format (check one): Yes o No þ

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DIAMOND DISCOVERIES INTERNATIONAL CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30, 2011 and December 31, 2010

(Unaudited)

	Sept. 30, 2011				Dec. 31, 2010
ASSETS
Current assets
Cash	$	11,103		$	6,801
	11,103				6,801

Mineral rights - Caribou properties	237,804				243,614

Total	$	248,907		$	250,415


LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Liabilities:
Notes payable	$	1,467,753		$	1,561,313
Accounts payable	243,603				257,177
Accrued expenses	10,000				—
Advances from stockholders	366,606				315,001
	2,087,962				2,133,491

Total liabilities	2,087,962				2,133,491

Commitments and contingencies

Stockholders’ deficiency:
Preferred stock, par value $.001 per share; 20,000,000 shares authorized; none issued	—				—
Common stock, par value $.001 per share; 480,000,000 shares authorized; 448,303,795 and 391,884,907 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively	448,304				391,885
Additional paid-in capital	17,309,785				17,233,226
Deficit accumulated during the exploration stage	(18,752,339		)		(18,585,001	)
Accumulated other comprehensive income (loss)	(844,805		)		(923,186	)
Unearned compensation	—				—

Total stockholders’ deficiency	(1,839,055		)		(1,883,076	)

Total	$	248,907		$	250,415

See Notes to Condensed Consolidated Financial Statements

DIAMOND DISCOVERIES INTERNATIONAL CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 AND PERIOD

FROM APRIL 24, 2000 (DATE OF INCEPTION) TO SEPTEMBER 30, 2011

(Unaudited)

	Nine Months Ended Sept. 30,						Three Months Ended Sept. 30,
	2011			2010			2011			2010			Cumulative

Revenues	$	—		$	—		$	—		$	—		$	—

Operating expenses:
Exploration costs		—			23,068			—			1,780			4,004,530
Reimbursements of exploration costs		—			—			—			—			(1,549,438	)
Exploration costs, net of reimbursements		—			23,068			—			1,780			2,455,092
General and administrative expenses		167,338			12,768			71,693			9,009			16,596,134
Totals		167,338			35,836			71,693			10,789			19,051,226

Operating loss		(167,338	)		(35,836	)		(71,693	)		(10,789	)		(19,051,226	)

Other income (expenses)
Gain on modification of debt		—			—			—			—			1,193,910
Interest expense		—			—			—			—			(895,023	)

Net loss	$	(167,338	)	$	(35,836	)	$	(71,693	)	$	(10,789	)	$	(18,752,339	)

Basic and diluted net loss per common share	$	—		$	—		$	—		$	—

Basic and diluted weighted average common shares Outstanding		412,886,620			401,491,830			431,521,186			401,491,830

See Notes to Condensed Consolidated Financial Statements.

DIAMOND DISCOVERIES INTERNATIONAL CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

NINE MONTHS ENDED SEPTEMBER 30, 2011 AND PERIOD FROM APRIL 24, 2000

(DATE OF INCEPTION) TO SEPTEMBER 30, 2011

	Preferred stock				Common stock				Additional		Deficit Accumulated during the			Accumulated other comprehensive		Subscriptions receivable
									paid-in		exploration			income								Unearned
	Shares		Amount		Shares		Amount		capital		stage			(loss)		Shares			Amount			compensation			Total
Issuance of shares to founders effective as of April 24, 2000		—	$	—		4,850,000	$	4,850	$	—	$	—			—		—		$	—		$	—		$	4,850
Issuance of shares as payment for legal services		—		—		150,000		150		3,600		—			—		—			—			—			3,750
Issuance of shares in connection with acquisition of mineral permits		—		—		2,000,000		2,000		48,000		—			—		—			—			—			50,000
Subscription for purchase of 10,000,000 shares		—		—		10,000,000		10,000		240,000		—			—		10,000,000			(250,000	)		—			—
Proceeds from issuance of common stock		—		—		—		—		—		—			—		(1,000,000	)		25,000			—			25,000
Net loss		—		—		—		—		—		(713,616	)		—		—			—			—			(713,616	)
Balance, December 31, 2000		—		—		17,000,000		17,000		291,600		(713,616	)				9,000,000			(225,000	)		—			(630,016	)
Proceeds from issuance of common stock		—		—		—		—		—		—			—		(9,000000	)		225,000			—			225,000
Net loss		—		—		—		—		—		(1,021,190	)		—		—			—			—			(1,021,190	)
Balance, December 31, 2001		—		—		17,000,000		17,000		291,600		(1,734,806	)				—			—			—			(1,426,206	)
Proceeds from private placements of units of common stock and warrants		—		—		1,685,000		1,685		756,565		—			—		51,758			(23,291	)		—			734,959
Net loss		—		—		—		—		—		(877,738	)		—		—			—			—			(877,738	)
Balance, December 31, 2002		—		—		18,685,000		18,685		1,048,165		(2,612,544	)				51,758			(23,291	)		—			(1,568,985	)
Issuance of shares as payment for accounts payable		—		—		3,000,000		3,000		295,423		—			—		—			—			—			298,423
Issuance of shares as payment for services		—		—		6,715,000		6,715		1,368,235		—			—		—			—			—			1,374,950
Issuance of stock options		—		—		—		—		1,437,000		—			—		—			—			(1,437,000	)		—
Issuance of shares as payment for advances from stockholders		—		—		7,500,000		7,500		767,500		—			—		—			—			—			775,000
Issuance of shares as payment for notes payable		—		—		1,810,123		1,810		124,898		—			—		—			—			—			126,708
Proceeds from issuance of common stock		—		—		6,000,000		6,000		444,000		—			—		4,000,000			(281,250	)		—			168,750
Proceeds from issuance of common stock in connection with exercise of stock options		—		—		10,050,000		10,050		292,450		—			—		—			—			—			302,500

Amortization of unearned compensation	—	—	—	—	—	—		—		—		—		169,744		169,744
Net loss	—	—	—	—	—	(3,222,057	)	—		—		—		—		(3,222,057	)
Foreign currency translation adjustment	—	—	—	—	—	—		(360,900	)	—		—		—		(360,900	)
Total comprehensive loss ($3,582,957)	—	—	—	—	—	—		—		—		—		—		—
Balance, December 31, 2003	—	—	53,760,123	53,760	5,777,671	(5,834,601	)	(360,900	)	4,051,758		(304,541	)	(1,267,256	)	(1,935,867	)
Issuance of shares as payment for services	—	—	16,842,000	16,842	1,614,858	—		—		—		—		—		1,631,700
Proceeds from issuance of common stock	—	—	4,000,000	4,000	384,832	—		—		524,207		(56,754	)	—		332,078
Issuance of shares as payment for accounts payable	—	—	1,400,000	1,400	138,600	—		—		—		—		—		140,000
Issuance of stock options	—	—	—	—	1,139,000	—		—		—		—		(1,139,000	)	—
Proceeds from issuance of common stock in connection with exercise of stock options	—	—	31,125,000	31,125	395,125	—		—		—		—		—		426,250
Forgiveness of stock subscriptions	—	—	—	—	—	—		—		(4,575,965	)	361,295		—		361,295
Amortization of unearned compensation	—	—	—	—	—	—		—		—		—		529,423		529,423
Net loss	—	—	—	—	—	(3,724,106	)	—		—		—		—		(3,724,106	)
Foreign currency translation adjustment	—	—	—	—	—	—		(131,269	)	—		—		—		(131,269	)
Total comprehensive loss ($3,855,375)	—	—	—	—	—	—		—		—		—		—		—
Balance, December 31, 2004	—	—	107,127,123	107,127	9,450,086	(9,558,707	)	(492,169	)	—		—		(1,876,833	)	(2,370,496	)
Issuance of shares as payment for services	—	—	6,000,000	6,000	204,000	—		—		—		—		—		210,000
Proceeds from issuance of common stock	—	—	69,883,657	69,884	2,376,044	—		—		—		—		—		2,445,928
Issuance of shares as payment for accounts payable	—	—	36,481,050	36,481	1,156,386	—		—		—		—		—		1,192,867
Issuance of stock options	—	—	—	—	1,218,500	—		—		—		—		(1,218,500	)	—

Proceeds from issuance of common stock in connection with exercise of stock options	—	—	28,125,000	28,125	253,125	—		—		—	—	—		281,250
Amortization of unearned compensation	—	—	—	—	—	—		—		—	—	889,960		889,960
Net loss	—	—	—	—	—	(3,419,547	)	—		—	—	—		(3,419,547	)
Foreign currency translation adjustment	—	—	—	—	—	—		(151,691	)	—	—	—		(151,691	)
Total comprehensive loss ($3,571,238)	—	—	—	—	—	—		—		—	—	—		—
Balance, December 31, 2005	—	—	247,616,830	247,617	14,658,141	(12,978,254	)	(643,860	)	—	—	(2,205,373	)	(921,729	)
Issuance of shares as payment for services	—	—	46,000,000	46,000	1,334,000	—		—		—	—	—		1,380,000
Proceeds from issuance of common stock	—	—	100,000	100	3,400	—		—		—	—	—		3,500
Issuance of stock options	—	—	—	—	150,000	—		—		—	—	(150,000	)	—
Proceeds from issuance of common stock in connection with exercise of stock options	—	—	11,500,000	11,500	103,500	—		—		—	—	—		115,000
Amortization of unearned compensation	—	—	—	—	—	—		—		—	—	1,142,674		1,142,674
Net loss	—	—	—	—	—	(3,053,173	)	—		—	—	—		(3,053,173	)
Foreign currency translation adjustment	—	—	—	—	—	—		(48,535	)	—	—	—		(48,535	)
Total comprehensive loss ($3,101,708)	—	—	—	—	—	—		—		—	—	—		—
Balance, December 31, 2006	—	—	305,216,830	305,217	16,249,041	(16,031,427	)	(692,395	)	—	—	(1,212,699	)	(1,382,263	)
Issuance of shares as payment for services	—	—	52,000,000	52,000	416,000	—		—		—	—	—		468,000
Issuance of stock options	—	—	—	—	10,000	—		—		—	—	(10,000	)	—
Proceeds from issuance of common stock in connection with exercise of stock options	—	—	1,000,000	1,000	9,000	—		—		—	—	—		10,000
Amortization of unearned compensation	—	—	—	—	—	—		—		—	—	784,560		784,560
Net loss	—	—	—	—	—	(1,470,562	)	—		—	—	—		(1,470,562	)
Foreign currency translation adjustment	—	—	—	—	—	—		(244,177	)	—	—	—		(244,177	)
Total comprehensive loss ($1,714,741)	—	—	—	—	—	—		—		—	—	—		—

Balance, December 31, 2007				358,216,830			358,217			16,684,041			(17,501,989	)		(936,572	)					(438,139	)		(1,834,442	)
Issuance of shares as payment for services	—		—	10,025,000			10,025			121,600			—			—		—		—		—			131,625
Issuance of shares in connection with acquisition of mineral permits	—		—	10,000,000			10,000			120,000			—			—		—		—		—			130,000
Proceeds from issuance of common stock	—		—	5,750,000			5,750			135,500			—			—		—		—		—			141,250
Amortization of unearned compensation	—		—	—			—			—			—			—		—		—		431,634			431,634
Net loss	—		—	—			—			—			(874,494	)		—		—		—		—			(874,494	)
Foreign currency translation adjustment	—		—	—			—			—			—			289,988		—		—		—			289,988
Total comprehensive loss ($584,506)	—		—	—			—			—			—			—		—		—		—			—
Balance, December 31, 2008	-	$	-	383,991,830		$	383,992		$	17,061,141		$	(18,376,483	)		(646,584	)	-	$	-	$	(6,505	)	$	(1,584,439	)
Proceeds from issuance of common stock	—		—	17,500,000			17,500			157,500			—			—		—		—		—			175,000
Amortization of unearned compensation	—		—	—			—			—			—			—		—		—		6,505			6,505
Net loss	—		—	—			—			—			(114,341	)		—		—		—		—			(114,341	)
Foreign currency translation adjustment	—		—	—			—			—			—			(193,909	)	—		—		—			(193,909	)
Total comprehensive loss ($308,237)	—		—	—			—			—			—			—		—		—		—			—
Balance, December 31, 2009	-	$	-	401,491,830		$	401,492		$	17,218,641		$	(18,490,824	)		(840,493	)	-	$	-	$	-		$	(1,711,184	)
Redemption of common stock	—		—	(23,060,000	)		(23,060	)		(6,940	)		—			—		—		—		—			(30,000	)
Proceeds from issuance of common stock	—		—	13,453,077			13,453			21,525			—			—		—		—		—			34,978
Net loss	—		—	—			—			—			(94,177	)		—		—		—		—			(94,177	)
Foreign currency translation adjustment	—		—	—			—			—			—			(82,693	)	—		—		—			(82,693	)
Total comprehensive loss ($176,870)	—		—	—			—			—			—			—		—		—		—			—
Balance, December 31, 2010	—	$	—	391,884,907		$	391,885		$	17,233,226		$	(18,585,001	)	$	(923,186	)	—	$	—	$	—		$	(1,883,076	)
Issuance of shares as payment for services	—		—	22,500,000			22,500			40,500			—			—		—		—		—			63,000
Proceeds from issuance of common stock	—		—	33,918,888			33,919			36,059			—			—		—		—		—			69,978
Net loss	—		—	—			—			—			(167,338	)		—		—		—		—			(167,338	)
Foreign currency translation adjustment	—		—	—			—			—			—			78,381		—		—		—			78,381
Total comprehensive loss ($88,957)	—		—	—			—			—			—			—		—		—		—			—
Balance, Sept. 30, 2011	—	$	—	448,303,795		$	448,304		$	17,309,785		$	(18,752,339	)	$	(844,805	)	—	$	—	$	—		$	(1,839,055	)

See Notes to Condensed Consolidated Financial Statements.

DIAMOND DISCOVERIES INTERNATIONAL CORP.

(An Exploration Stage Company)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010 AND PERIOD FROM

APRIL 24, 2000 (DATE OF INCEPTION) TO SEPTEMBER 30, 2011

(Unaudited)

	Nine Months Ended Sept. 30,
	2011			2010			Cumulative

Operating activities:
Net loss	$	(167,338	)	$	(35,836	)	$	(18,752,339	)
Adjustments to reconcile net loss to net cash used in operating activities:
Costs of services paid through issuance of common stock		63,000			—			5,267,875
Amortization of unearned compensation		—			—			3,954,500
Amortization of discount on note payable		—			—			45,107
Forgiveness of stock subscription		—			—			361,295
Gain on modification of debt		—			—			(1,193,910	)
Cost of mineral permits paid through issuance of common stock		—			—			50,000
Loss on disposal of property and equipment		—			—			74,680
Depreciation		—			—			171,953
Changes in operating assets and liabilities –
Other assets		—			—			(34,133	)
Accounts payable		(5,300	)		—			2,926,363
Accrued expenses		10,000			(5,000	)		10,000
Net cash used in operating activities		(99,638	)		(40,836	)		(7,118,609	)

Investing activities
Purchases of property and equipment		—			—			(252,733	)
Acquisition of Caribou property		—			—			(75,000	)
Proceeds from sale of property and equipment		—			—			10,000
Net cash used in investing activities		—			—			(317,733	)

Financing activities:
Advances from stockholders, net		48,962			37,166			1,828,295
Proceeds from issuance of notes payable, net of payments		(15,000	)		—			212,729
Proceeds from issuance of common stock		69,978			—			5,436,421
Net cash provided by financing activities		103,940			37,166			7,447,445

Net increase (decrease) in cash		4,302			(3,670	)		11,103

Cash, beginning of period		6,801			5,533			—

Cash, end of period	$	11,103		$	1,863		$	11,103

Supplemental information
Cash paid for
Interest	$	—		$	—		$	895,023
Income taxes	$	—		$	—		$	—

See Notes to Condensed Consolidated Financial Statements.

DIAMOND DISCOVERIES INTERNATIONAL CORP.

(An Exploration Stage Company)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 – Business and basis of presentation:

The condensed consolidated financial statements include the accounts of Diamond Discoveries International Corp., which was incorporated in the State of Delaware on April 24, 2000, and its wholly owned subsidiaries Diamond Discoveries Canada, Inc. and Platinum Discoveries Corp. (the “Company”). All intercompany accounts and transactions have been eliminated in consolidation. The Company is engaged in activities related to the exploration for mineral resources in Canada. It conducts exploration and related activities through contracts with third parties.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, consisting of normal recurring accruals, necessary to present fairly the financial position of the Company as of September 30, 2011, its results of operations for the nine and three months ended September 30, 2011 and 2010, its changes in stockholders’ deficit for the nine months ended September 30, 2011, its cash flows for the nine months ended September 30, 2011 and 2010 and the related cumulative amounts for the period from April 24, 2000 (date of inception) to September 30, 2011. Pursuant to the rules and regulations of the United States Securities and Exchange Commission (the “SEC”), certain information and disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed in or omitted from these financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements as of and for the years ended December 31, 2010 and 2009 and the notes thereto (the “Audited Financial Statements”) and the other information included in the Company’s Annual Report on Form 10-K (the “Form 10-K”) for the year ended December 31, 2010 that was previously filed with the SEC.

The results of operations for the nine and three months ended September 30, 2011 are not necessarily indicative of the results to be expected for the full year ending December 31, 2011.

The Company acquired mineral permits for property in the “Torngat Fields” located in the Province of Quebec, Canada. The Company intended to develop the permits from early stage exploration through completion of the exploration phase. Prior to any further exploration decisions, a mineral deposit must be appropriately assessed. Gathering this data usually takes several years. Once the appropriate data was gathered, management determined not to proceed any further with the exploration of this property.

In March 2008, the Company acquired mineral rights for property located in the Thetford Mines area (the “Caribou Property”). The Company intends to develop the mineral rights from the early stage exploration through completion of the exploration phase. Prior to any further exploration decisions, a mineral deposit must be appropriately assessed. Gathering this data usually takes several years. Once the appropriate data has been gathered, management will determine how to proceed with the exploration of this property.

Other than contracting with third parties to conduct exploration and gather data on its behalf, the Company had not conducted any operations or generated any revenues as of September 30, 2011. Accordingly, it is considered an “exploration stage company” for accounting purposes. In addition to exploration costs, the Company incurs general and administrative expenses which consist primarily of professional fees relating to corporate filings and consulting and other expenses incurred in operating our business.

The accompanying condensed consolidated financial statements have been prepared assuming the Company will continue as a going concern. However, in addition to not generating any revenues, the Company had a working capital deficit of approximately $2,077,000 and a stockholders’ deficit of approximately $1,839,000 as of September 30, 2011. Management believes that the Company will not generate any revenues during the twelve month period subsequent to September 30, 2011 in which it will be gathering and evaluating data related to the Caribou Property. Since its inception, the Company has received total consideration of $7,447,445 as a result of proceeds from shareholder advances, the issuance of notes payable and the sales of common stock. Management believes that the Company will still need total additional financing of approximately $500,000 to $1,000,000 to continue to operate as planned during the twelve month period subsequent to September 30, 2011. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management plans to obtain such financing through private offerings of debt and equity securities. However, management cannot assure that the Company will be able to obtain any or all of the additional financing it will need to continue to operate through at least September 30, 2012 or that, ultimately, it will be able to generate any profitable commercial mining operations. If the Company is unable to obtain the required financing, it may have to curtail or terminate its operations and liquidate its remaining assets and liabilities.

The accompanying condensed consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue its operations as a going concern.

Note 2—Summary of significant accounting policies:

Use of estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Mining costs:

Exploration and evaluation costs are expensed as incurred. Management’s decision to develop or mine a property will be based on an assessment of the viability of the property and the availability of financing. The Company will capitalize mining exploration and other related costs attributable to reserves in the event that a definitive feasibility study establishes proven and probable reserves. Capitalized mining costs will be expensed using the unit of production method and will also be subject to an impairment assessment.

Concentrations of credit risk:

The Company maintains its cash in bank deposit accounts, the balances of which, at times, may exceed Federal insurance limits. Exposure to credit risk is reduced by placing such deposits with major financial institutions and monitoring their credit ratings.

Impairment of long-lived assets:

Impairment losses on long-lived assets, such as mining claims, are recognized when events or changes in circumstances indicate that the undiscounted cash flows estimated to be generated by such assets are less than their carrying value and, accordingly, all or a portion of such carrying value may not be recoverable. Impairment losses are then measured by comparing the fair value of assets to their carrying amounts.

Income taxes:

Income tax expense is provided for the tax effects of transactions reported in the financial statements and consist of taxes currently due plus deferred taxes. Deferred taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate primarily to the effects of net operating loss carry forwards. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company’s policy is to recognize interest and/or penalties related to income tax matters in income tax expense.

Refundable tax credit:

The Company is eligible for a refundable tax credit given by the Province of Quebec to encourage mineral exploration in the province. Eligible expenses include exploration expenses within Quebec.

The Company files a tax return claiming the refundable tax credit. However, the Quebec government subjects the return to a review process which may result in a substantial adjustment to the initial claimed credit prior to issuing an assessment of the refundable tax credit. Due to the uncertainty of the amount approved by the Quebec government, the Company’s policy is to record the refundable tax credit at such time that it has been notified by the Quebec government of an assessment. During the nine and three months ended September 30, 2011 and 2010, the Company did not receive any refunds under the program.

Net earnings (loss) per share:

The Company presents “basic” earnings (loss) per share and, if applicable, “diluted” earnings per share pursuant to the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 260, “Earnings per Share”. Basic earnings (loss) per share is calculated by dividing net income or loss by the weighted average number of common shares outstanding during each period. The calculation of diluted earnings per share is similar to that of basic earnings per share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, such as those issuable upon the exercise of stock options and warrants, were issued during the period. Since the Company incurred losses for all periods presented, shares issuable upon exercise of options and warrants are antidulitive. Accordingly basic and diluted earnings per share are the same.

Foreign currency translation and transactions:

The functional currency of the Company’s operations is Canadian dollars. The assets and liabilities arising from these operations are translated at current exchange rates and related revenues and expenses at average exchange rates in effect during the year. Resulting translation adjustments, if material, are recorded in the statement of changes in stockholders' deficiency while foreign currency transaction gains and losses are included in operations.

The Company recorded a loss of $167,338 and $35,836 during the nine months ended September 30, 2011 and 2010, respectively. During the nine months ended September 30, 2011 and 2010, the Company recorded a net foreign currency translation adjustment of $78,381 and $(31,177), respectively, in its interest in the Caribou Property and operations reflecting a strengthening of the Canadian dollar against the U. S. dollar which is included in accumulated other comprehensive income (loss).

Comprehensive loss

Comprehensive loss consists of net loss for the period, unrealized hedging transactions and foreign currency translation adjustments.

Recent accounting pronouncements:

Not Yet Adopted

In May 2011, the FASB issued ASU 2011-04, Fair Value Measurement (Topic 820), Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The update contains the results of the work of the FASB and the IASB to develop common requirements for measuring fair value and for disclosing fair value measurements in accordance with U.S. GAAP and IFRSs. The amendments in this update are effective for periods beginning after December 15, 2011 and as a result are not yet applicable to the Company. The Company is evaluating the impact of the update on its financial statements.

Adopted

In April 2010, the FASB issued ASU 2010-17 Revenue Recognition-Milestone Method (Topic 605). The update is intended to assist with the definition of a milestone event and determining when the application of milestone revenue recognition in connection with revenue recognition for research and development transaction. Disclosures will include the description of the milestone payment arrangement, a description of each milestone and the related payment or contingent payment, a determination whether the milestones are substantive, the factors considered in making the determination of the substantive nature of the milestones and the amount of revenue recognized during the period related to the milestone or milestones. The standard is effective for fiscal years beginning on or after June 15, 2010. The Company has adopted the standard but does not currently have any such contracts. The adoption of the standard has not had a material impact on its financial statements.

In January 2010, the FASB issued ASU, 2010-06, Fair Value Measurement and Disclosures (Topic 820-10-65-7), which relates to the disclosure requirements for fair value measurements and provides clarification for existing disclosure requirements. This update will require an entity to disclose separately the amounts of significant transfers in and out of Levels 1 and 2 fair value measurements and to describe the reasons for the transfers. It also will require entities to disclose information about purchases, sales, issuances and settlements to be presented separately (i.e. present the activity on a gross basis rather than net) in the reconciliation for fair value measurements using significant unobservable inputs (Level 3 inputs). This guidance clarifies existing disclosure requirements for the level of disaggregation used for classes of assets and liabilities measured at fair value and requires disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements using Level 2 and Level 3 inputs. The new disclosures and clarifications of existing disclosure are effective for fiscal years beginning after December 15, 2009, except for the disclosure requirements related to the purchases, sales, issuances and settlements in the roll forward activity of Level 3 fair value measurements. Those disclosure requirements are effective for fiscal years ending after December 31, 2010. The adoption of the disclosure requirement did not have a material impact on the Company's financial statements.

In 2010, the FASB issued ASU 2010-28, Intangibles-Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for Reporting Units with Zero or Negative Carrying Amounts. It is effective for fiscal years beginning after December 15, 2010. Essentially the FASB is requiring testing be performed at the Reporting Unit level with zero or negative carrying amounts. For goodwill and other intangible assets, testing for impairment is a two-step test. When a goodwill impairment test is performed (either on an annual or interim basis), an entity must assess whether the carrying amount of a reporting unit exceeds its fair value (Step 1). If it does, an entity must perform an additional test to determine whether goodwill has been impaired and to calculate the amount of that impairment (Step 2). The effect will potentially be an impairment of goodwill or other intangibles that will be required to be reported sooner than under current standards. The Company has adopted the standard but does not have any negative goodwill issues. Therefore, the adoption did not have a material impact on the Company's financial statements.

In January 2010, the FASB adopted ASU 2010-06 - Fair Value Measurements and Disclosures-Improving Disclosures about Fair Value Measurements (Topic 820). This statement enhances disclosure relating to recurring or nonrecurring fair value measurement, specifically transfers between Level 1 and Level 2 inputs and the reasons for such transfers, the Level 3 activity reporting information on a gross rather than a net basis and improved guidance about disclosure by classes of assets and liabilities. Also, disclosure should include the various inputs and techniques used for valuation of assets and liabilities. Our adoption of ASU 2010-06 did not have a material impact on our financial statements.

Note 3 – Notes payable:

In November 2005, the Company and Prospecting Geophysics Ltd. (“PGL”) entered into an agreement whereby the amount due to PGL was converted to a non-interest bearing note payable totaling $1,500,000 (Canadian). The note is secured with the permits identified in Note 3 in the Audited Financial Statements. In connection with the agreement, the Company recorded a gain on the modification of debt of $1,349,623. The Company recorded the note using a 12% discount rate. The Company was unable to make the scheduled payments ($600,000 Canadian) during 2006 under this note payable and therefore the note is effectively in default. As such, the entire balance of the note payable is shown as being currently due in the accompanying consolidated balance sheet.

Note 4 – Advances from stockholders:

Advances from stockholders of $366,606 at September 30, 2011 were non-interest bearing and due on demand.

Note 5 – Income taxes:

As of September 30, 2011, the Company had net operating loss carry forwards of approximately $19,597,000 available to reduce future Federal taxable income which will expire through 2026. The Company had no other material temporary differences as of that date. Due to the uncertainties related to, among other things, the changes in the ownership of the Company, which could subject those loss carry forwards to substantial annual limitations, and the extent and timing of its future taxable income, the Company offset the deferred tax assets of approximately $7,839,000 attributable to the potential benefits from the utilization of those net operating loss carry forwards by an equivalent valuation allowance as of September 30, 2011.

The Company had also offset the potential benefits from net operating loss carry forwards by an equivalent valuation allowance as of December 31, 2010. As a result of the increases (decrease) in the valuation allowance of approximately ($22,000) and $36,000 in the nine and three months ended September 30, 2011, respectively, and $27,000 and $24,000 in the nine and three months ended September 30, 2010, respectively, and $7,839,000 in the period from April 24, 2000 to September 30, 2011, the Company did not recognize any credits for income taxes in the accompanying condensed statements of operations to offset its pre-tax losses in any of those periods.

Management periodically evaluates tax reporting methods to determine if any uncertain tax positions exist that would require the establishment of a loss contingency. A loss contingency would be recognized if it were probable that a liability has been incurred as of the date of the financial statements and the amount of the loss can be reasonably estimated. The amount recognized is subject to estimates and management’s judgment with respect to the likely outcome of each uncertain tax position. The amount that is ultimately incurred for an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ from the amount recognized. Management has determined that no significant uncertain tax positions existed as of September 30, 2011 and December 31, 2010.

Note 6 – Stockholders’ deficiency:

Preferred stock

As of September 30, 2011, the Company was authorized to issue up to 20,000,000 shares of preferred stock with a par value of $.001 per share. The preferred stock may be issued in one or more series with dividend rates, conversion rights, voting rights and other terms and preferences to be determined by the Company’s Board of Directors, subject to certain limitations set forth in the Company’s Articles of Incorporation. No shares of preferred stock had been issued by the Company as of September 30, 2011.

Common stock

During the period from April 24, 2000 to December 31, 2000, the Company issued 150,000 shares of common stock as payment for legal services. Accordingly, general and administrative expenses in the accompanying statement of operations, and common stock and additional paid-in capital in the accompanying statements of stockholders’ deficiency, for the period from April 24, 2000 to December 31, 2004 was increased to reflect the estimated fair value of the shares of $3,750.

On May 20, 2000, the Company completed the sale of 10,000,000 shares of common stock for $250,000, or $.025 per share, through a private placement intended to be exempt from registration under the Securities Act of 1933 (the “Act”). Initially, the buyer paid $25,000 in cash and $225,000 through the issuance of a 10% promissory note. The exchange of shares for a note receivable was a noncash transaction that is not reflected in the accompanying statement of cash flows for the period from April 24, 2000 to December 31, 2004. The 10% promissory note was paid on various dates through May 20, 2001.

During the year ended December 31, 2002, the Company received total cash consideration of $734,959 as a result of the sale of 1,633,242 units of common stock and warrants to purchase common stock at $.45 per unit through private placements intended to be exempt from registration under the Act. Each unit consisted of one share of common stock and one warrant to purchase one share of common stock exercisable at $.75 per share for a two year period from the date of purchase. The Company had also received subscriptions through the private placements for the purchase of 51,758 units at $.45 per unit or a total of $23,291 as of December 31, 2002. The notes receivable from the subscribers are noninterest bearing and were due six months from the respective dates of sale, but remained outstanding at December 31, 2004.

In 2003, the Company issued 6,715,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $1,374,950, or $0.20 per share, for the fair value of the shares.

In May 2003, the Company issued 1,500,000 shares of its common stock in payment of accounts payable to Prospecting Geophysics, Ltd. of $148,423, or $0.10 per share, which approximated the fair value of the shares.

From July 2003 to September 2003, the Company issued 1,810,123 shares of its common stock in payment of 8% demand notes payable of $126,708, or $0.07 per share, which approximated the fair value of the shares.

In August 2003, in connection with a private placement of its common stock, the Company issued 2,000,000 shares of its common stock for $150,000, or $0.08 per share. In addition, the Company issued 6,500,000 shares of its common stock for $65,000, or $0.01 per share, in connection with the exercise of stock options.

In September 2003, the Company issued 5,000,000 shares of its common stock in payment of advances from stockholders of $525,000, or $0.11 per share, which approximated the fair value of the shares.

In October 2003, the Company issued 2,500,000 shares of its common stock in payment of advances from stockholders of $250,000, or $0.10 per share, which approximated the fair value of the shares. In addition, in connection with a private placement of its common stock, the Company issued 4,000,000 shares of its common stock for $300,000, or $0.08 per share, $281,250 of which represents a subscription receivable at December 31, 2004. Also, the Company issued 540,000 shares of its common stock in payment for accounts payable of $54,000, or $0.10 per share, which approximated the fair value of the shares. Further, the Company issued 2,350,000 shares of its common stock for $225,500, or $0.10 per share, in connection with the exercise of stock options.

In November 2003, the Company issued 1,200,000 shares of its common stock for $12,000, or $0.01 per share, in connection with the exercise of stock options.

In December 2003, the Company issued 960,000 shares of its common stock in payment for accounts payable of $96,000, or $0.10 per share, which approximated the fair value of the shares.

In 2004, the Company issued 15,467,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $1,546,700 for the fair value of the shares.

In March 2004, in connection with a private placement of its common stock, the Company issued 2,500,000 shares of its common stock for $238,832.

In March 2004, the Company issued 450,000 shares of its common stock in payment of $45,000 of accounts payable, which approximated the fair value of the shares.

In May 2004, in connection with a private placement of its common stock, the Company issued 125,000 shares of its common stock valued at $12,500 as payment for the commission associated with the private placement.

In May 2004, the Company issued 950,000 shares of its common stock in payment of $95,000 of accounts payable, which approximated the fair value of the shares.

In July 2004, in connection with a private placement of its common stock, the Company issued 1,500,000 shares of its common stock for $150,000. In addition, the Company issued 1,250,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $99,750 for the fair value of the shares. Further, the Company issued 1,250,000 shares of its common stock in connection with the exercise of stock options.

In December 2004, the Company issued 29,875,000 shares of its common stock in connection with the exercise of stock options.

In January 2005, the Company issued 2,600,000 shares of its common stock in connection with the exercise of stock options.

In July 2005, in connection with a private placement of its common stock, the Company issued 27,750,000 shares of its common stock for $971,250. In addition, the Company issued 8,587,858 shares of its common stock in payment of $302,500 of accounts payable, which approximated the fair value of the shares.

In August 2005, the Company issued 1,100,000 shares of its common stock in connection with the exercise of stock options.

In September 2005, in connection with a private placement of its common stock, the Company issued 2,300,000 shares of its common stock for $80,500.

In October 2005, the Company issued 6,000,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $210,000 for the fair value of the shares.

In December 2005, in connection with a private placement of its common stock, the Company issued 39,833,657 shares of its common stock for $1,394,178. In addition, the Company issued 27,893,192 shares of its common stock in payment of $890,367 of accounts payable, which approximated the fair value of the shares. Further, the Company issued 24,425,000 shares of its common stock in connection with the exercise of stock options.

In January 2006, the Company issued 11,500,000 shares of its common stock in connection with the exercise of stock options. In addition, in connection with a private placement of its common stock, the Company issued 100,000 shares of its common stock for $3,500. Finally, the Company issued 46,000,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $1,380,000 which approximated the fair value of the shares.

In September 2007, the Company issued 52,000,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $468,000 which approximated the fair value of the shares. In October 2007, the Company issued 1,000,000 shares of its common stock in connection with the exercise of stock options.

In May 2008, in connection with a private placement of its common stock, the Company issued 5,750,000 shares of its common stock for $141,250. In June 2008, the Company issued 10,000,000 shares of its common stock in connection with the acquisition of the Caribou property which is recorded in other assets in the accompanying balance sheet of $130,000 which approximated the fair value of the shares. In October 2008, the Company issued 10,025,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $131,625 which approximated the fair value of the shares.

In April 2009, in connection with a private placement of its common stock, the Company issued 17,500,000 shares of its common stock for $175,000.

In November 2010, the Company redeemed 23,060,000 shares of its common stock for $30,000.

In December 2010, in connection with a private placement of its common stock, the Company issued 13,453,077 shares of its common stock for $34,978.

In January 2011, in connection with a private placement of its common stock, the Company issued 11,530,000 shares of its common stock for $29,978.

In July 2011, in connection with a private placement of its common stock, the Company issued 22,388,888 shares of its common stock for $40,000. In July 2011, the Company issued 500,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $1,400 which approximated the fair value of the shares. In September 2011, the Company issued 22,000,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $61,600 which approximated the fair value of the shares.

The issuances of common stock for services and in payment of accounts payable, 8% demand notes payable, advances to stockholders and acquisitions were non-cash transactions and, accordingly, they are not reflected in the accompanying statements of cash flows for the nine months ended September 30, 2011 and 2010 and the period from April 24, 2000 (Date of Inception) to September 30, 2011.

Stock Option Plans

2005 Plan

On November 14, 2005, the Company adopted the Diamond Discoveries International Corp. 2005 Stock Incentive Plan (the “2005 Plan”). Under the 2005 Plan, 35,000,000 shares of common stock are reserved for issuance. The purpose of the 2005 Plan is to provide incentives for officers, directors, consultants and key employees to promote the success of the Company, and to enhance the Company’s ability to attract and retain the services of such persons. Options granted under the 2005 Plan may be either: (i) options intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986; or (ii) non-qualified stock options. Stock options may be granted under the 2005 Plan for all employees and consultants of the Company, or employees of any present or future subsidiary or parent of the Company. The 2005 Plan is administered by the Board of Directors. The Compensation Committee is empowered to interpret the 2005 Plan and to prescribe, amend and rescind the rules and regulations pertaining to the 2005 Plan. Options granted under the 2005 Plan generally vest over three years. No option is transferable by the optionee other than by will or the laws of descent and distribution and each option is exercisable, during the lifetime of the optionee, only by the optionee. The Compensation Committee may not receive options.

Any incentive stock option that is granted under the 2005 Plan may not be granted at a price less than the fair market value of the Company’s Common Stock on the date of grant (or less than 110% of the fair market value in the case of holders of 10% or more of the total combined voting power through all classes of stock of the Company or a subsidiary or parent of the Company.) Non-qualified stock options may be granted at the exercise price established by the Compensation Committee, which may be less than the fair market value of the Company’s Common Stock on the date of grant.

Each option granted under the 2005 Plan is exercisable for a period not to exceed ten years from the date of grant (or five years in the case of a holder of more than 10% of the total combined voting power of all classes of stock of the Company or a subsidiary or parent of the Company) and shall lapse upon expiration of such period, or earlier upon termination of the recipient’s employment with the Company, or as determined by the Compensation Committee.

2004 Plan

On September 30, 2004, the Company adopted the Diamond Discoveries International Corp. 2004 Stock Incentive Plan (the “2004 Plan”). Under the 2004 Plan, 35,000,000 shares of common stock are reserved for issuance. The purpose of the 2004 Plan is to provide incentives for officers, directors, consultants and key employees to promote the success of the Company, and to enhance the Company’s ability to attract and retain the services of such persons. Options granted under the 2004 Plan may be either: (i) options intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986; or (ii) non-qualified stock options. Stock options may be granted under the 2004 Plan for all employees and consultants of the Company, or employees of any present or future subsidiary or parent of the Company. The 2004 Plan is administered by the Board of Directors. The Compensation Committee is empowered to interpret the 2004 Plan and to prescribe, amend and rescind the rules and regulations pertaining to the 2004 Plan. Options granted under the 2004 Plan generally vest over three years. No option is transferable by the optionee other than by will or the laws of descent and distribution and each option is exercisable, during the lifetime of the optionee, only by the optionee. The Compensation Committee may not receive options.

Any incentive stock option that is granted under the 2004 Plan may not be granted at a price less than the fair market value of the Company’s Common Stock on the date of grant (or less than 110% of the fair market value in the case of holders of 10% or more of the total combined voting power through all classes of stock of the Company or a subsidiary or parent of the Company.) Non-qualified stock options may be granted at the exercise price established by the Compensation Committee, which may be less than the fair market value of the Company’s Common Stock on the date of grant.

Each option granted under the 2004 Plan is exercisable for a period not to exceed ten years from the date of grant (or five years in the case of a grant of an incentive stock option to a holder of more than 10% of the total combined voting power of all classes of stock of the Company or a subsidiary or parent of the Company) and shall lapse upon expiration of such period, or earlier upon termination of the recipient’s employment with the Company, or as determined by the Compensation Committee.

2003 Plan

On May 30, 2003, the Company adopted the Diamond Discoveries International Corp. 2003 Stock Incentive Plan (the “2003 Plan”). Under the 2003 Plan, 15,000,000 shares of common stock are reserved for issuance. The purpose of the 2003 Plan is to provide incentives for officers, directors, consultants and key employees to promote the success of the Company, and to enhance the Company’s ability to attract and retain the services of such persons. Options granted under the 2003 Plan may be either: (i) options intended to qualify as “incentive stock options” under Section 422 of the Internal Revenue Code of 1986; or (ii) non-qualified stock options. Stock options may be granted under the 2003 Plan for all employees and consultants of the Company, or employees of any present or future subsidiary or parent of the Company. The 2003 Plan is administered by the Board of Directors. The Compensation Committee is empowered to interpret the 2003 Plan and to prescribe, amend and rescind the rules and regulations pertaining to the 2003 Plan. Options granted under the 2003 Plan generally vest over three years. No option is transferable by the optionee other than by will or the laws of descent and distribution and each option is exercisable, during the lifetime of the optionee, only by the optionee. The Compensation Committee may not receive options.

Any incentive stock option that is granted under the 2003 Plan may not be granted at a price less than the fair market value of the Company’s Common Stock on the date of grant (or less than 110% of the fair market value in the case of holders of 10% or more of the total combined voting power through all classes of stock of the Company or a subsidiary or parent of the Company.) Non-qualified stock options may be granted at the exercise price established by the Compensation Committee, which may be less than the fair market value of the Company’s Common Stock on the date of grant.

Each option granted under the 2003 Plan is exercisable for a period not to exceed ten years from the date of grant (or five years in the case of a grant of an incentive stock option to a holder of more than 10% of the total combined voting power of all classes of stock of the Company or a subsidiary or parent of the Company) and shall lapse upon expiration of such period, or earlier upon termination of the recipient’s employment with the Company, or as determined by the Compensation Committee.

In 2003, the Company issued options to acquire 13,875,000 shares of its common stock at a weighted average exercise price of $.04 per share to consultants and other non-employees. The options had an aggregate fair market value of $1,437,000 at the respective dates of issuance as determined based on the Black-Scholes options-pricing model. Accordingly, the Company initially increased unearned compensation and additional paid-in capital by $1,437,000 to record the fair value of the options.

In February 2004, the Company issued options to acquire 1,000,000 shares of its common stock at an exercise price of $.10 per share to consultants and other non-employees. The options had an aggregate fair market value of $90,000 at the date of issuance as determined based on the Black-Scholes options-pricing model. Accordingly, the Company initially increased unearned compensation and additional paid-in capital by $90,000 to record the fair value of the options.

In December 2004, the Company issued options to acquire 33,975,000 shares of its common stock at an exercise price of $.01 per share to consultants and other non-employees. The options had an aggregate fair market value of $1,049,000 at the date of issuance as determined based on the Black-Scholes options-pricing model. Accordingly, the Company initially increased unearned compensation and additional paid-in capital by $1,049,000 to record the fair value of the options.

In July 2005, the Company issued options to acquire 1,150,000 shares of its common stock at an exercise price of $.01 per share to consultants and other non-employees. The options had an aggregate fair market value of $34,500 at the date of issuance as determined based on the Black-Scholes options-pricing model. Accordingly, the Company initially increased unearned compensation and additional paid-in capital by $34,500 to record the fair value of the options.

In December 2005, the Company issued options to acquire 30,000,000 shares of its common stock at an exercise price of $.01 per share to consultants and other non-employees. The options had an aggregate fair market value of $1,184,000 at the date of issuance as determined based on the Black-Scholes options-pricing model. Accordingly, the Company initially increased unearned compensation and additional paid-in capital by $1,184,000 to record the fair value of the options.

In January 2006, the Company issued options to acquire 5,000,000 shares of its common stock at an exercise price of $.01 per share to consultants and other non-employees. The options had an aggregate fair market value of $150,000 at the date of issuance as determined based on the Black-Scholes options-pricing model. Accordingly, the Company initially increased unearned compensation and additional paid-in capital by $150,000 to record the fair value of the options.

In October 2007, the Company issued 1,000,000 shares of its common stock in connection with the exercise of stock options. The options had an aggregate fair market value of $10,000 at the date of issuance as determined based on the Black-Scholes options-pricing model. Accordingly, the Company initially increased unearned compensation and additional paid-in capital by $10,000 to record the fair value of the options

There were no options granted during the nine months ended September 30, 2011.

The Company recorded a charge of $0 and $0 to compensation expense to amortize unearned compensation for the nine and three months ended September 30, 2011, respectively, and $0 and $0 to compensation expense to amortize unearned compensation for the nine and three months ended September 30, 2010.

The following table summarizes information with respect to options granted under the 2005 Plan, 2004 Plan and the 2003 Plan as of and for the three months ended September 30, 2011 and 2010.

	2011				2010
	Shares		Weighed Average Exercise Price		Shares		Weighted Average Exercise Price

Options outstanding beginning of period		—	$	—		—	$	—
Options canceled		—		—		—		—
Options exercised		—		—		—		—
Options granted		—		—		—		—

Options outstanding end of period		—	$	—		—	$	—

Options exercisable end of period		—	$	—		—	$	—

Options price range, end of period	$	—			$	—
Options price range for exercised shares	$	—			$	—
Options available for grant at end of period		3,700,000				3,700,000
Weighted average fair value of options granted during the period	$	—			$	—
Weighted average exercise price of options granted during the period	$	—			$	—

Note 7 – Guarantee:

On March 14, 2003, the Company became a guarantor of a promissory note issued by one of its stockholders with an outstanding balance of approximately $101,200 that was originally scheduled to mature on July 31, 2003. The maturity dates of the promissory note and the guaranty have been extended to April 30, 2012.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. The following discussion regarding us and our business and operations contains forward-looking statements. Such statements consist of any statement other than a recitation of historical fact, and can be identified by the use of such forward-looking terminology such as “may,” “expect,” “anticipate,” “estimate” or “continue” or the negative thereof or other variations thereon, or comparable terminology. The reader is cautioned that all forward-looking statements are necessarily speculative, and there are certain risks and uncertainties that could cause actual events or results to differ materially from those referred to in such forward-looking statements.

Operations to Date

We were incorporated in the State of Delaware in April of 2000. We have not engaged in commercial operations since inception, and therefore have not realized any revenues from operations since inception. We do not expect to commence operations in the foreseeable future and do not expect to generate revenue in calendar year 2011.

For the nine and three months ended September 30, 2011 and 2010 and the period from April 24, 2000 (date of inception) to September 30, 2011, we incurred $0, $0, $23,068, $1,780 and $2,455,092 in exploration costs, net of reimbursements, and $167,338, $71,693, $12,768, $9,009 and $16,596,134 in general and administrative expenses, respectively. General and administrative expenses consisted primarily of professional fees related to our corporate filings and consulting and other expenses incurred in operating our business. We incurred a net loss of approximately $167,000 or $0 per share based on 412,886,620 weighted average shares outstanding for the nine months ended September 30, 2011 and a net loss of approximately $72,000 or $0 per share based on 431,521,186 weighted average shares outstanding for the three months ended September 30, 2011compared to a net loss of approximately $36,000 or $0 per share based on 401,491,830 weighted average shares outstanding for the nine months ended September 30, 2010 and a net loss of approximately $11,000 or $0 per share based on 401,491,830 weighted average shares outstanding for the three months ended September 30, 2010.

Going Concern

In connection with their report on our financial statements as of December 31, 2010, Rodefer Moss & Co, PLLC, our independent registered public accounting firm, expressed substantial doubt about our ability to continue as a going concern because such continuance is dependent upon our ability to raise capital.

We have explored, and continue to explore, all avenues possible to raise the funds required. We have no revenue-producing activity. We cannot continue our exploration efforts until we have raised sufficient capital.

Ultimately, we must achieve profitable operations if we are to be a viable entity. Although we believe that there is a reasonable basis to believe that we will successfully raise the needed funds to continue exploration, we cannot assure you that we will be able to raise sufficient capital to continue exploration, or that if such funds are raised, that exploration will result in a finding of commercially exploitable reserves, or that if exploitable reserves exist on our properties, that extraction activities can be conducted at a profit.

Cash Flow and Capital Resources

Through September 30, 2011, we have relied on the total consideration of $7,447,445 as a result of proceeds from shareholder advances, the issuance of notes payable and the sales of common stock to support our limited operations. As of September 30, 2011, we had a cash balance of $11,103.

We plan to seek additional equity or debt financing of up to $1,000,000 which we plan to use for the next phase of our exploration program to be conducted through the next twelve months, as well as working capital purposes. We currently have limited sources of capital, including the public and private placement of equity securities and the possibility of issuance of debt securities to our stockholders. With virtually no assets, the availability of funds from traditional sources of debt will be limited, and will almost certainly involve pledges of assets or guarantees by officers, directors and stockholders. Stockholders have advanced funds to us in the past, but we cannot assure you that they will be a source of funds in the future. If we do not get sufficient financing, we may not be able to continue as a going concern and we may have to curtail or terminate our operations and liquidate our business (see Note 1 to financial statements).

Plan of Operation

Our business plan for the next year will consist of further exploration on the properties over which we hold the mineral exploration permits as well as preliminary marketing efforts.

We estimate that it will require approximately $500,000 to $1,000,000 to conduct an exploration program on the Caribou property over the next twelve months. This amount will be used to pay for continued drilling of identified targets, prospecting and geological mapping, helicopter and airplane support, lodging and food for workers, pick-up truck rentals, assays, property taxes to the Quebec Department of Natural Resources and supervision. If we continue with the exploration of the Caribou property, we plan to raise $500,000 to $1,000,000 through one or more private offerings pursuant to Rule 506 or Regulation D or through an offshore offering pursuant to Regulation S; however, nothing in this quarterly report shall constitute an offer of any securities for sale. Such shares when sold will not have been registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. If we are unable to raise this amount, we will most likely cease all activity related to our exploration program, or at the very least, proceed on a reduced scale. We have to date relied on a small number of investors to provide us with financing for the commencement of our exploration program, including TVP Capital Corp., a principal stockholder. Amounts owed to these individuals are payable upon demand.

We employ one individual on a part time basis, who is an executive officer. We do not expect any significant changes in the number of employees within the next twelve months.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of September 30, 2011. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer, Mr. Antonio Sciacca. Based upon that evaluation, our Chief Executive Officer concluded that, as of September 30, 2011, our disclosure controls and procedures were not effective. In making this evaluation, the Chief Executive Officer considered, among other things, the material weakness in our internal control over financial reporting described below.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.

Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with United States’ generally accepted accounting principles (US GAAP), including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company’s assets that could have a material effect on the financial statements.

Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on this evaluation, management concluded that, as of September 30, 2011, the Company did not maintain effective internal controls over financial reporting due to our limited number of employees which resulted in our inability to effectively segregate all conflicting duties.

Currently we use one consultant to assist in the preparation of the financial statements and accompanying footnotes.

To remedy this material weakness, we will, to the extent possible, implement procedures to assure the initiation of transactions, the custody of assets and the recording of transactions will be performed by separate individuals. Further, concurrent with having sufficient resources we will engage additional individuals to assist us in remedying this material weakness.

There was no change in our internal controls over financial reporting during the quarter ended September 30, 2011 that has materially affected, or that is reasonably likely to materially affect our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will necessarily prevent all fraud and material error. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving our objectives and our Chief Executive Officer concluded that our disclosure controls and procedures are effective at that reasonable assurance level. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

None

ITEM 1A. RISK FACTORS.

There have been no material changes with respect to the risk factors previously disclosed in our 2010 10-K.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

In July 2011, in connection with a private placement of its common stock, the Company issued 22,388,888 shares of its common stock for $40,000 which was used for general working capital purposes. In July 2011, the Company issued 500,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $1,400 which approximated the fair value of the shares. In September 2011, the Company issued 22,000,000 shares of its common stock in exchange for services performed by various consultants and recorded a charge to general and administrative expenses of $61,600 which approximated the fair value of the shares.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None

ITEM 5. OTHER INFORMATION.

None

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.

Exhibits.

Exhibit Number		Description of Document
31.1		Certification by the Chief Executive Officer pursuant to Rule 15d-14(a) of the Securities Exchange Act of 1934.

32.1		Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.

SIGNATURES

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Dated: November 21, 2011	By:	/s/ Antonio Sciacca
		Antonio Sciacca,
		Chief Executive Officer and Director

DIAMOND DISCOVERIES INTERNATIONAL CORP - FORM 10-Q - November 21, 2011

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DIAMOND DISCOVERIES INTERNATIONAL CORP Reports