Medical Imaging (MEDD) 10-Q 2008 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C.  20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

OR

p TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _______________

Commission file number:

333-1364363

DIAGNOSTIC IMAGING INTERNATIONAL CORP.

 (Exact name of small business issuer as specified in its 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:(603)727-8613

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.  

ýYes ¨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. See 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 Companyý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

¨Yes ýNo

As of August 15, 2008, there were outstanding 9,946,674 shares of common stock, $0.001 par value per share.

TABLE OF CONTENTS

ITEM NUMBER AND CAPTION
		PAGE
PART I
ITEM 1.	Financial Statements	3
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	15
ITEM 4T.	Controls and Procedures	16
PART II
ITEM 1.	Legal Proceedings	16
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	16
ITEM 3.	Defaults Upon Senior Securities	16
ITEM 4.	Submission of Matters to a Vote of Security Holders	16
ITEM 5.	Other Information	17
ITEM 6.	Exhibits	17

2

PART I – FINANCIAL INFORMATION

ITEM 1.  Financial Statements.

Diagnostic Imaging International Corp.

(A Development Stage Company)

Consolidated Balance Sheet

As of June 30, 2008

Assets
Current Assets
Operating Cash - US Bank	$	494.33
Operating Cash - Canada Bank		251.41
		745.74
Fixed Assets		608.00
Other Assets		-
Total Assets	$	1,353.74
Liabilities
Current liabilities
Accounts Payable		52,810.49
Long-term Liabilities		47,349.02
Total Liabilities	$	100,159.51
Shareholders' Equity
Common Stock, .001 par value, 100,000,000 shares authorized, 9,946,674 issued and outstanding		9,946.67
Additional paid-in capital		99,553.38
(Deficit) accumulated during the development stage		(208,669.21)
Comprehensive income (loss) accumulated during the development stage		363.39
Total Shareholders' Equity	$	(98,805.77)
Total Liabilities and Shareholders' equity	$	1,353.74

See notes to unaudited financial statements.

3

Diagnostic Imaging International Corp.

(A Development Stage Company)

Statements of Income

	Three months Ended June 30, 2008 $		Three months Ended June 30, 2007 $
Sales		-		-
Operating expense
Bank service charges		64.45		134.93
Interest Expense		1,307.52		0.51
Depreciation and amortization		76.00		-
Telephone		267.71		-
Office		2,073.75		-
Administration fees		4,253.86		14,758.00
Professional fees		11,263.72		22,584.69
Web design		-		-
Total expenses		19,307.01		37,478.13
Operating income (loss)		(19,307.01)		(37,478.13)
Net income (loss) before taxes		(19,307.01)		(37,478.13)
Income taxes
Net income (loss) after taxes		(19,307.01)		(37,478.13)
Gain (loss) on foreign exchange		(4.95)		531.41
Comprehensive income (loss)		(19,311.97)		(36,946.72)

See notes to unaudited financial statements.

4

Diagnostic Imaging International Corp.

(A Development Stage Company)

Statements of Income

	Six months Ended June 30, 2008 $	Six months Ended June 30, 2007 $		March 14, 2002 (Date of Inception) to June 30, 2008
Sales	-		-		-
Operating expense
Administration Fees	6,488.86		14,758.00		49,966.00
Bank service charges	96.00		134.93		1,028.68
Interest Expense	1,307.52		0.51		3,363.28
Depreciation and amortization	152.00		-		192.00
Licenses, Fees, Permits	-		-		671.00
Management Fees	-		-		7,000.00
Marketing Fee	-		-		32,500.00
Telephone	529.42		-		529.42
Travel	-		-		425.00
Office	2,511.63		-		2,511.63
Professional fees	13,888.73		22,584.69		110,482.20
Total expenses	24,974.16		37,478.13		208,699.21
Operating income (loss)	(24,974.16)		(37,478.13)		(208,669.21)
Net income (loss) before taxes	(24,974.16)		(37,478.13)		(208,669.21)
Income taxes	-		-		-
Net income (loss) after taxes	(24,974.16)		(37,478.13)		(208,669.21)
Gain (loss) on foreign exchange	(14.18)		559.77		363.39
Comprehensive income (loss)	(24,988.34)		(36,918.36)		(208,305.82)

See notes to unaudited financial statements.

5

Diagnostic Imaging International Corp.

(A Development Stage Company)

Consolidated Statements of Changes in Stockholders’ Capital

From Inception March 14, 2002 to June 30, 2008

					Accumulated
			Additional		Other
	Common Stock		Paid-in	Accumulated	Comprehensive
	Amount	Shares	Capital	Deficit	Loss	Total
14-Mar-02	-					-
Proceeds from Sale of Stock	2,600.00	2,600,000.00	10,400.00			13,000.00
Additional Paid in Capital			4,500.00			4,500.00
Comprehensive income (Loss)					(16.00)	(16.00)
Net Income (Loss)				(9,823.27)		(9,823.27)
31-Dec-02	2,600.00	2,600,000.00	14,900.00	(9,823.27)	(16.00)	7,660.73
Proceeds from Sale of Stock
Additional Paid in Capital			6,000.00			6,000.00
Comprehensive income (Loss)					264.74	264.74
Net Income (Loss)				(7,387.32)		(7,387.32)
31-Dec-03	2,600.00	2,600,000.00	20,900.00	(17,210.59)	248.74	6,538.15
Proceeds from Sale of Stock
Additional Paid in Capital			6,000.00			6,000.00
Comprehensive income (Loss)					100.03	100.03
Net Income (Loss)				(6,528.00)		(6,528.00)
31-Dec-04	2,600.00	2,600,000.00	26,900.00	(23,738.59)	348.77	6,110.18
Proceeds from Sale of Stock	7,156.67	7,156,674.00	23,343.38			30,500.05
Additional Paid in Capital			6,000.00			6,000.00
Comprehensive income (Loss)					(151.74)	(151.74)
Net Income (Loss)				(17,593.09)		(17,593.09)
31-Dec-05	9,756.67	9,756,674.00	56,243.38	(41,331.68)	197.03	24,865.40
Proceeds from Sale of Stock	40.00	40,000.00				40.00
Additional Paid in Capital			11,960.00			11,960.00
Comprehensive income (Loss)					(404.27)	(404.27)
Net Income (Loss)				(67,561.13)		(67,561.13)
31-Dec-06	9,796.67	9,796,674.00	68,203.38	(108,892.81)	(207.24)	(31,100.00)
Proceeds from Sale of Stock	150.00	150,000.00	22,350.00			22,500.00
Additional Paid in Capital			6,000.00			6,000.00
Comprehensive income (Loss)					584.81	584.81
Net Income (Loss)				(74,802.24)		(74,802.24)
31-Dec-07	9,946.67	9,946,674.00	96,553.38	(183,695.05)	377.57	(76,817.43)
Proceeds from Sale of Stock						-
Additional Paid in Capital			3,000.00			3,000.00
Comprehensive income (Loss)					(14.18)	(14.18)
Net Income (Loss)				(24,974.16)		(24,974.16)
30-Jun-08	9,946.67	9,946,674.00	99,553.38	(208,669.21)	363.39	(98,805.77)

See notes to unaudited financial statements.

6

Diagnostic Imaging International Corp.

(A Development Stage Company)

STATEMENT OF CASH FLOWS

	For the Six Months ended June 30, 2008		For the Six Months ended June 30, 2007		March 14, 2002 (date of inception) to June 30, 2008
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(24,974.16)	$	(37,478.13)	$	(208,669.21)
Adjustments to reconcile net income (used in) operating activities:
Depreciation and amortization		152.00		-		192.00
Gain (Loss) on foreign exchange		(14.18)		559.77		363.39
Decrease (Increase) in:
Accounts receivable		-		-		-
Accounts payable		5,772.14		13,281.72		52,810.49
Net cash provided by (used in) operating activities		(19,064.20)		(23,636.64)		(155,303.33)
CASH FLOWS FROM INVESTING ACTIVITIES
Fixed assets		-		-		(800.00)
Proceeds from sale of available-for-sale securities		-		-		-
Net cash provided by (used in) investing activities		-		-		(800.00)
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable borrowings		15,549.02		20,000.00		47,349.02
Additional paid in capital		3,000.00		3,000.00		43,460.00
Proceeds from sale of stock				-		66,040.05
Net cash provided by (used in) financing activities		18,549.02		23,000.00		156,849.07
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(515.18)		(636.64)		745.74
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		1,260.92		2,993.37		-
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	745.74	$	2,356.73	$	745.74

See notes to unaudited financial statements.

7

Diagnostic Imaging International Corp.

And Subsidiaries

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

1.   Organization and Summary of Significant Accounting Policies

Organization

Diagnostic Imaging International Corp, (the “Company”, “Diagnostic” or the “Registrant”) A Nevada Corporation was incorporated on December 12, 2000 to engage in the transaction of any and all lawful businesses for which corporations may be incorporated under the Nevada Business Corporation Act. Prior to August 19, 2005, the Company was named Galloway Investments Corp. Upon inception Galloway Investment Corp created a subsidiary Galloway Properties Corp which was effectively dissolved in August 2005. The Company does not currently have any subsidiaries.

Use of Estimates

The preparation of the Company’s consolidated financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of the Company and all of its previously wholly-owned and majority-owned subsidiaries. All significant inter-company accounts and transactions are eliminated in consolidation.

Cash and Cash Equivalents

The company considers all investments with maturities of ninety days or less when purchased to be cash equivalents.

Income Taxes

The Company accounts for income taxes in accordance with Statement of Financial accounting Standards (SFAS) No. 109, Accounting for Income Taxes. This statement prescribes the use of the asset and liability method whereby deferred tax asset and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Loss Per Share

The Company follows the provisions of SFAS No. 128, Earnings Per Share. Basic net loss per share is computed by dividing net loss available to common stockholders by the weighted average number of common shares outstanding during the period.

Segments

In 1997, the Financial Accounting Standards Board issued SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information, which establishes reporting standards for a company’s operating segments in annual financial statements and the reporting of selected information about operating segments in financial statements. The adoption of SFAS No. 131 had no effect on the disclosure of segment information as the Company is considered to be a developmental stage company thus far without segments.

8

Diagnostic Imaging International Corp.

And Subsidiaries

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

Foreign Currency Translation

Assets and liabilities of the Company’s foreign operations are translated into U.S. dollars at the exchange rate in effect at the balance sheet date.  Revenue and expenses are translated at average rates in effect during the period.  The resulting translation adjustment is reflected as accumulated other comprehensive income (loss), a separate component of shareholders’ equity on the consolidated balance sheets.  The Company recognized a loss of $(14) and a gain of $560 for the six months ended June 30, 2008 and 2007, respectively.

2. Property and Equipment

Property and Equipment are stated at cost. Depreciation is calculated on the accelerated method over the estimated useful life of the assets. At June 30, 2008 and 2007, the major class of property and equipment are as follows:

	2008	2007	Estimated useful lives
Computer/Office Equipment	800	-0-	5 years
Less: Accumulated Depreciation	(192)	-0-
Net Book Value	608	-0-

3. Development Stage Operations

The corporation was incorporated in December 2000 but didn’t have any activity until Spring of 2002.  In 2002 the original articles of incorporation were amended to increase the authorized number of shares of common stock from 1,000,000 to 100,000,000 and authorized 10,000,000 in preferred stock.  The company remained dormant until August of 2005 when the original shareholders sold their shares to the now majority shareholders at which time the company filed another amended articles of incorporation with the state of Nevada changing the name of the corporation from Galloway Investments Inc. to Diagnostic Imaging International Corporation. It is the intent of the current majority shareholders to operate a chain of MRI clinics across Canada after it raises the necessary capital.  Consequently, until such time as the capital is raised and the company starts operations there is a good likelihood that the company could have going concern issues.

4. Income Taxes.

As of June 30, 2008, the company had estimated federal net operating loss carry-forwards approximating $ 42,042. The net operating losses will expire beginning in 2017, if not utilized.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The companies deferred taxes are attributable to the net operating loss carry-forwards.  The deferred tax asset equals $ 4,744 at June 30, 2008.

A valuation allowance has been established equal to the net deferred tax asset due to the uncertainties regarding their realization as the result of this being a developmental company which has little certainties of future profits. As of June 30, 2008 the company reduced net income by the amount of the valuation allowance.

The reconciliation of generally accepted accounting principles net loss to taxable net loss is as follows:

	Six Months Ended June 30, 2008
GAAP Net Loss before taxes	$	(24,974)
Increase (decrease) expenses (non-deductible expenses)		3,000
After converting for exchange rate
Taxable Net Loss	$	(21,974)

9

Diagnostic Imaging International Corp.

And Subsidiaries

(A Development Stage Company)

NOTES TO FINANCIAL STATEMENTS

June 30, 2008

5. Commitments & Contingencies

None

6. Related Party Transactions

During 2008 and 2007, Richard Jagodnik (an office and shareholder of the Company), loaned the Company $47,349. The note is non-interest bearing and payable on demand. The balance as of June 30, 2008 is $47,349.

7. Subsequent Events

None.

8. Going Concern

As shown in the accompanying financial statements, the company incurred net losses of $24,974 and $37,478 for the six months ended June 30, 2008 and 2007, respectively. These conditions raise substantial doubt as to if the company’s ability to continue as a going concern. These financial statements do not include any adjustments that might be necessary if the company is unable to continue as a going concern.

9. Correction of Errors in Previously Issued Financial Statements

In previously issued financial statements, management omitted the fair value of certain services rendered to the company by its President, Richard Jagodnik.  Mr. Jagodnik provides office space for the company which includes utilities and office supplies.  Management estimates the fair value of these services to be $6,000.00 per year based on market comparisons of similar facilities.  The information presented in the following tables has been adjusted to reflect the restatement of the Company’s financial results:

	12/31/2005 (Restated) $	12/31/2004 (Restated) $	12/31/2003 (Restated) $	12/31/2002 (Restated) $	3/14/2002 (Inception) To 12/31/2005 (Restated) $
STATEMENT OF INCOME DATA
Administration Fees	6,876.00	6,600.00	7,750.00	7,085.00	28,311.00
Comprehensive Income (Loss)	(17,744.83)	(6,427.97)	(7,122.58)	(9,839.27)	(41,134.65)
Income (Loss) per share	(.0028)	(.0024)	(.0027)	(.0038)	(.0028)
BALANCE SHEET AND OTHER DATA
Additional Paid In Capital	56,243.38	26,900.00	20,900.00	4,500.00	56,243.38
(Deficit) Accumulated during development stage	(41,331.68)	(23,738.59)	(17,210.59)	(9,823.27)	(41,331.68)

As discussed in Note 4 “Income Taxes”, the company has deferred tax assets of $4,744 at June 30, 2008. A valuation allowance has been established equal to the net deferred tax asset due to the uncertainties regarding their realization as the result of this being a developmental company which has little certainties of future profits.  As of June 30, 2008, the Company reduced net income by the amount of the valuation allowance.

10

ITEM 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward Looking Statements

This Form 10-Q quarterly report of Diagnostic Imaging International Corp. (the “Company”) for the three months ended June 30, 2008, 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: general economic, financial and business conditions; the Company’s ability to minimize expenses; the Company’s current dependency on its sole executive officer to continue funding the Company’s operations and, to the extent he should ever become unwilling to do so, the Company’s ability to obtain additional necessary financing from outside investors and/or bank and mezzanine lenders; and the ability of the Company to generate sufficient revenues to cover operating losses and position it to achieve positive cash flow.

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-KSB for the fiscal year ended December 31, 2007.

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. Galloway Investment Corp. was originally established to make investments in real estate properties with development or improvement potential.  One market in which this business plan was going to be pursued was in Canada and for that reason, upon inception, Galloway Investments Corp. created a subsidiary called Galloway Properties Corp.  The real estate market in both the United States and Canada, however, became very active and prices increased rapidly in the 2001-2004 time period.  The then management did not believe there were properties with the characteristics it sought and sufficient upside value to be found.  Therefore, the Company did not pursue any acquisitions of real estate.  In its pursuit of its real estate business objectives, management observe d a certain amount of leasing activity in Canada in connection with private medical facilities, and management came to believe that there was a potential for growth of independent medical clinics in Canada.  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 August 2005, Galloway Properties Corp. was effectively dissolved.

11

BUSINESS

Plan of Operations

Diagnostic Imaging is a development-stage company. We currently do not offer any products or services.

Our proposed business plan is to open and/or acquire and operate 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 1984, the Government of Canada passed the Canada Health Act (CHA). The Canada Health Act created a publicly administered health care system that is comprehensive, universal and accessible. All medically necessary procedures are provided free of charge. The system provides diagnostic, treatment and preventive services regardless of income level or station in life. Access to care is not based on health status or ability to pay. Coverage is portable between provinces and territories.

Canada’s healthcare system, otherwise known as Medicare, is a single insurance pay system. This means that any Canadian resident can receive medically necessary services from a doctor or a hospital without paying out of pocket. Instead, they are covered by compulsory government health insurance.

We believe that the future for private MRI clinics in Canada is positive. The present public delivery model is not meeting the requirements of all Canadians. Waiting lists are long and there is widespread public dissatisfaction with the current services provided. According to the Future of Health Care in Canada – Final Report dated November 2002, studies and public opinion polls have consistently shown that one of the top concerns of rural and urban Canadians is health care access. At their August 2002 meeting, Canada’s Premier’s acknowledged that access to health services was the highest priority for all Canadian citizens. Time and time again, the Commission heard that when it comes to access to specific diagnostic procedures and surgical procedures, wait lists (i.e. the number of people waiting for a particular service) and waiting times (i.e. the average time people are on the wait list before they receive service) are too long. Long wai t times are the main, and in many cases, the only reason some Canadians say they would be willing to pay for treatments outside of the public health care system.

In addition, The Conference Board of Canada issued a report in February 2006, “Healthy Provinces, Healthy Canadians – A Provincial Benchmarking Report indicating that a 2005 Commonwealth Fund International Health Policy Survey showed that Canadians are dissatisfied with the overall state of their health care system, with 78% indicating that the system needs to be fundamentally changed or completely rebuilt.

Based on existing MRI clinics per population and provincial restrictions, we believe that Vancouver, British Columbia and Winnipeg, Manitoba are the best locations for the start-up of our diagnostic imaging clinics. If we are successful with those operations we intend to open a third clinic in Montreal, Quebec. After the implementation of the initial three MRI clinics, we anticipate adding Computed Tomography scan equipment to those facilities and also will evaluate future opportunities for Positron Emission Tomography clinics as well as additional MRI clinics in other locations throughout of Canada.  Such additional locations will depend on an analysis of the various markets, costs, and availability of capital.

12

We believe it will take approximately 24 months to open and commence operations for an initial clinic.  We expect that once we have a clinic open and operating, subsequent clinics will be able to be opened and operational in three to six months.  The reason for the faster establishment time for later opened clinics will be the ability of the company to obtain approvals more quickly because of its having operations, the work in locating and establishing relations with vendors will have been accomplished, it will have build-out experience and plans, and it will have other experience that will facilitate the development of additional clinics.

The first phase of our business plan will focus on raising the required capital. We believe we will need approximately $10,000,000 in order to open our first three diagnostic imaging clinics. We anticipate acquiring the funding through any one or a combination of the sale of our securities in public or private placement transactions, the issuance of convertible debentures or obtaining loans from financial institutions. The Company plans to seek financing during 2007, and expects to commence contacting investment bankers and private placement agents sometime after the beginning of the year.  If there is interest shown by these professionals, it is expected that it would take at least three to six months to locate interested investors and negotiate terms for an investment. Other than commencing to internally identify investment professionals who may be interested in a company our size and our industry, we have not yet contacted any investment professio nals or taken any steps to commence the search for future additional financing. Any new financing is expected to be either common equity or convertible into common equity.  To the extent that common equity is issued, there will be dilution to the then current stockholders of their percentage ownership.  To the extent that securities are convertible, either under convertible notes, preferred stock or warrants, there will likely be a market diluting effect from the overhang.  If the financing is in the form of debt or preferred stock, the company will likely be subject to financial covenants that may restrict its operations and ability to obtain other financing because of consent requirements or various possible earnings requirements, debt to equity ratios and secured party rights, among others.  Moreover, debt and preferred stock will often require interest and dividend payments, which may be accumulated, and limits on declaring dividends on the common stock.  The existence of debt an d preferred stock with restrictive covenants or priority in security interests that we may have to give, could limit our ability to find financing in the future and to purchase equipment under purchase lien programs. If we are only able to raise less than the $10,000,000, then we will have to scale back our plans, which may be to reduce the number of clinics according to the amount of capital we have.  We expect to incur substantial expenses in the implementation of our plan of operations before we realize any revenues from our efforts. Because we are in the early stages of implementing our business plan, we cannot indicate now if we will ever be profitable. We also anticipate that we will need additional capital to significantly expand our currently planned operations and to pursue other prospects. We may need additional capital in the event we encounter unexpected operating expenses and requirements.

Once we have adequate funding we will begin the second phase of our business plan. This phase will include the hiring of a physician or radiologist as our Chief Medical Officer.  We plan to hire such a person on a part-time or consulting basis in order to keep our costs and commitments to a minimum in the earlier stage of development and implementation of the business plan.  However, depending on the business activities required of this person, we may have to have the person as a full time employee.  We believe that there are persons readily available for this position on a part-time, consulting and full-time basis.  His or her initial responsibility will be to assist in obtaining the appropriate licensing permits. We will be subject to a substantial amount of regulation by the Canadian government, provinces and territories in which we conduct our business. In order to open a clinic, it must be licensed by the Ministry of Health and sa nctioned by the College of Physicians and Surgeons in the province in which it is located. A Chief Medical Officer is needed in order to navigate through the lengthy approvals process. There will also be requirements for handling bio-hazardous and radioactive materials and wastes. We believe the licensing process will require from 12 to 18 months and it is expected to cost $50,000.  The costs will be associated with salaries, engaging consultants for the application process, filing fees and other costs that may arise.

The third phase of our plan will entail locating clinic sites and obtaining the necessary diagnostic imaging and other equipment. Each MRI clinic will require approximately 2,000 square feet. Ideally, the clinic should be located in or close to an existing medical facility for the convenience of customers.  We intend to lease the premises for our clinics. We anticipate that each site will require extensive renovations. The building must be structurally sound in order to support the weight of a MRI machine which is approximately 12,000 lbs. per machine. Each facility will require a separate insulated room for the MRI scanner, a control room, clothing change rooms, offices, storage area, a reception/waiting room and a washroom. Each facility will require 220 volt – 3 phase electricity into the building. We anticipate that the renovation work alone will be from $600,000 to $800,000 per facility.  We may receive rent con cessions from landlords for renovations, the amounts of which would depend on the length of the term of the lease. The vendors of MRI equipment advised us that they will do all of the necessary leasehold improvements to the site in order to have it ready for operation. This includes taking down existing exterior and interior walls. The room where the MRI machine is to be housed must be insulated – the four walls, ceiling and floor have to be insulated with fine copper mesh (to eliminate RF interference). The equipment is brought on site, usually with the use a crane, through an exterior wall. All exterior and interior walls are then repaired by the vendor. The vendor then sets up, fully inspects and tests the equipment once it is on site in the room. Two different vendors of medical imaging equipment said that costs for renovations typically run in the $600,000 - $800,000 range. We also anticipate having to obtain building permits and similar permissions, however, this requirement may be reduced or alle viated if we are located in medical office buildings where it is common that the landlord has obtained or will participate in obtaining necessary permits.

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The capital cost to acquire a high field strength MRI machine varies with the field strength. All MRI machines are calibrated in “Tesla” units. The strength of a magnetic field is measured in Tesla units or Gauss units. The stronger the magnetic field, the stronger the amount of radio signals which can be elicited from the body’s atoms and therefore the higher the quality of MRI images. High field strength machines provide faster and better quality scanning. We anticipate an MRI machine will cost about $2.2 million per machine and annual equipment maintenance costs range from $150,000 to $180,000 per machine.  MRI machines use super conducting magnets which utilize a considerable amount of water. As cold water must run through the magnet in order to cool it, a chiller is required for cold water. A chiller costs approximately $40,000. We will also require a Universal Power Supply (UPS) back up for brown outs an d black outs. The cost of a UPS system is approximately $80,000.  We believe that suppliers of these components offer purchase financing.  For a start up operation, such financing is anticipated to be limited to a smaller portion of the acquisition cost and may be at higher rates than offered to operating companies, and may require letters of credit or guarantees.  We plan to explore opportunities for such financing and evaluate it in light of its cost and the availability of funds to the company and its working capital.  Initially, we are planning on being required to purchase such machinery without financing.

In addition to the MRI machines and facilities, we also need office equipment in each facility. We will need various pieces of furniture such as desks, chairs, filing cabinets and various electronic equipment such as copiers, fax machines, telephone systems, computers and security equipment. We currently estimate these costs to be approximately $23,000.

We will need to purchase supplies such as Gadolinium, which is a contrast agent that is required for those scans that require a contrast (about 30% of scans). Gadolinium can be purchased from a pharmaceutical company, and we believe it is reasonably available in the market place. Smocks, linens, towels can be obtained through a laundry service provider.  These supplies will not be required until the clinic is near to operational and can be sourced at that time.

Once we have obtained the clinic sites and equipment we will begin staffing each of our facilities. Each clinic will require a radiologist (who will also serve as the Chief Medical Officer of the facility), MRI technicians, office manager, receptionist and a marketing manager at minimum. In addition to overseeing the licensing functions, the radiologist will be responsible for reading the scans. The MRI technician will perform the imaging scans. The office manager will do the scheduling, greet patients and perform the invoicing and accounting functions. The receptionist will be responsible for answering the phones and typing the radiologist’s dictations and faxing them to the family doctors.  The marketing manager will be responsible for meeting regularly with doctors, physicians, private insurance companies and workers compensation boards in order to promote the Company’s business.  We anticipate that our prima ry business office will require a Chief Medical Officer (a radiologist) and a Vice President of Finance/Controller.  We believe these persons are available for hire in the cities we plan to locate our facilities.  However, because of the demand for these persons and the fact that training facilities are not graduating as many as the market requires the ability of any potential employer to find these persons are often difficult.  Therefore, we anticipate having to compete for such hires, and we may have to offer substantially better employment packages than our competitors.  We believe that for our clinics to operate efficiently, these persons will have to be direct and full time employees. As a result the company will have to make substantial employment commitments.  Notwithstanding, the company will seek to use part-time employees and outsource providers where available, cost effective and conducive to the standards of service that will enhance our operations and reputations.

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.

If we are unable to raise the full $10,000,000 that we believe is needed in order to open three fully operational clinics we will have to scale back our operational plans. Such scale backs could include opening only one or possibly two clinics, leasing the MRI equipment as opposed to the purchase of the equipment and employ less than the number of personnel than we anticipate that we will need to staff our operations.

If management is unable to implement its proposed business plan, it does not have any alternative proposals. In that event, investors should anticipate that their investment will be lost and there will be no ability to profit from the business opportunity of our proposed diagnostic imaging services operations.

Property

We are entitled to use office space otherwise provided to our executive officer pursuant to an oral agreement. In addition, we are provided office services as may be required. We currently do not pay any amount for the office space or services. We estimate that the current fair market value of the office space provided by our executive officer to be approximately $4,800 per year. In addition, our executive officer provides us with telephone, office supplies and other minor operating expenses valued at approximately $1,200 per year. These amounts are included in the financial statements presented herein.  We believe that this facility is adequate to meet our corporate headquarter needs until such time as we begin business operations.

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Employees and Directors

Diagnostic Imaging currently has one employee who is the chief executive officer and chairman of the board. He currently does not receive any cash remuneration for his services. As we implement our business plan we will need additional employees.

Financial Condition and Changes in Financial Condition

Overall Operating Results:

The Company had no revenues from inception through the six months ended June 30, 2008.

Operating expenses for the three months ended June 30, 2008 totaled $19,307. We incurred $11,264 in professional fees and $4,250 in administration fees. The remaining $3,793 in expenses were incurred for rent and general business operations.

Operating expenses for the three months ended June 30, 2007 totaled $37,478. The Company incurred professional fees of $22,585 primarily related to legal and audit services.  The remaining $14,893 in expenses was incurred for rent and general business operations.

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

Liquidity and Capital Resources:

Since inception to June 30, 2008, we have funded our operations from the sale of our common stock and loans from our president and majority shareholder.

In September, 2005, the Company sold 80,004 shares of its common stock to 12 individuals for total proceeds of $12,001. In October, 2005, we sold 50,002 shares to 8 individuals for total proceeds of $7,500. In November, 2005, we sold 26,666 shares to 6 individuals for total proceeds of $4,000. In February, 2006, we sold 13,334 shares to 2 individuals for total proceeds of $2,000. In March, 2006 we sold 26,668 shares to 4 individuals for total proceeds of $4,000. All of the sales were through private placements at $0.15 per share. We utilized the funds received for working capital.

Since inception, our president has loaned the Company $47,349 to fund our operations. The note is non-interest bearing and payable upon demand.  

As of June 30, 2008, our assets totaled $1,359, which consisted solely of cash balances and a computer. Our total liabilities consisted of accounts payable of $52,810 and notes payable of $47,349 due to our president. We had an accumulated deficit of $208,669 and had working capital deficit of $52,060.

Our independent auditors, in their report on the financial statements for the year ended December 31, 2007 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. As indicated herein, we have need of capital for the implementation of our business plan, and we will need additional capital for continuing our operations over the longer term.  Management believes that at this stage of the operations of the Company, where we have minimal operations, we will be able to obtain sufficient amounts for day to day operations for the near term.  However, thereafter, unless it is able to raise working capital, it is likely that the Company either will have to cease operations or substantially change its methods of operations or change its business plan.

We do not have sufficient working capital to begin the implementation of our business plan. We anticipate that we will need to raise at least $10,000,000 to open our first three diagnostic imaging clinics. We currently do not have any sources for this funding.  We anticipate raising the required funding 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 no 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.  We will require additional capital in order to begin operations for additional clinics in the future.

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 Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

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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 June 30, 2008. 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 of limited effectiveness at the reasonable assurance level at such date.

(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.

PART II--OTHER INFORMATION

Item 1.  Legal Proceedings

None

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

None

Item 3.  Defaults Upon Senior Securities

None

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

None

Item 5.  Other Information

None

Item 6.  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

In accordance with the requirements of the Exchange Act, the Registrant 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)

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.

Signature	Title	Date
/s/ Richard Jagodnik	President, Chief Financial Officer and	August 18, 2008
Richard Jagodnik	Director (Principal Executive Officer and Accounting Officer)

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