UNITED STATES SECURITIES
AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1 to
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
THE DIAMOND CARTEL, INC.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 6770 80-0914174
---------------------------- --------------------------- --------------------
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Identification Number)
organization Number)
28 Banting Crescent
London, Ontario
Canada N6G 4G2
(519) 619-4370
-----------------------------
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
Michel Atlidakis, President
28 Banting Crescent
London, Ontario
Canada N6G 4G2
(519) 619-4370
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(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
William T. Hart
Hart & Hart, LLC
1624 Washington St.
Denver, CO 80203
As soon as practicable after the effective date of this Registration Statement
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Approximate date of commencement of proposed sale to the public:
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration for the same offering. [ ]
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If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer", "accelerated filer", and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of "large accelerated filer", and "smaller reporting company" in
Rule 12b-2 of the Exchange Act.
Large accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
-------------------------------------------------------------------------------
Title of Each Proposed Proposed Amount of
Class of Amount Maximum Maximum egistration
Security Being Being Offering Price Aggregate Fee
Registered Registered per Share (1) Offering Price R
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Common Stock 3,000,000 $ 0.05 $150,000 $18
(1) Offering price computed in accordance with Rule 457.
Pursuant to Rule 416, this Registration Statement includes such indeterminate
number of additional securities as may be required for issuance as a result of
any stock dividends, stock splits or similar transactions.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until the Registration Statement shall
become effective on such date as the Securities and Exchange Commission, acting
pursuant to said Section 8(a), may determine.
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PROSPECTUS
THE DIAMOND CARTEL, INC.
We are offering up to 3,000,000 shares of our common stock to the owners of
one or more business that we may acquire. Until a pubic market develops for our
common stock, the shares we are offering will be valued at $0.05 per share for
the purpose of any an acquisition. If and when a public market develops for our
common stock, the shares we are offering, assuming we have not completed an
acquisition by that time, we be valued at a discount to the trading price of our
common stock. The discount will be determined by our board of directors. As of
the date of this prospectus we had not identified any business that we may
attempt to acquire.
As of the date of this prospectus there was no public market for our common
stock.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
These securities are speculative and involve a high degree of risk. For a
description of certain important factors that should be considered by
prospective investors, see "risk factors" beginning on page 6 of this
prospectus.
The date of this prospectus is April __, 2017.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
DESCRIPTIVE INFORMATION APPEARING ELSEWHERE IN THIS PROSPECTUS. PROSPECTIVE
INVESTORS SHOULD CAREFULLY READ THE ENTIRE PROSPECTUS AND SHOULD CONSIDER, AMONG
OTHER FACTORS, THE MATTERS SET FORTH UNDER THE "RISK FACTORS."
Implications of Being an Emerging Growth Company
We qualify as an emerging growth company as that term is used in the JOBS
Act. An emerging growth company may take advantage of specified reduced
reporting and other burdens that are otherwise applicable generally to public
companies. These provisions include:
o a requirement to have only two years of audited financial statements
and only two years of related MD&A;
o reduced disclosure concerning executive compensation arrangements;
o exemption from the auditor attestation requirement in the assessment
of the emerging growth company's internal control over financial
reporting under Section 404 of the Sarbanes-Oxely Act of 2002; and
o No non-binding advisory votes on executive compensation or golden
parachute arrangements.
We have taken advantage of some of these exemptions in this prospectus,
which are also available to us as a smaller reporting company as defined under
Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
In addition, Section 107 of the JOBS act also provides that an emerging
growth company can take advantage of the extended transition period provided in
Section 7(a)(2)(b) of the Securities Act of 1933, as amended (the "Securities
Act") for complying with new or revised accounting standards. We are choosing to
"opt out" of such extended transition period, and as a result, we will comply
with new or revised accounting standards on the relevant dates on which adoption
of such standards is required for non-emerging growth companies. Section 107 of
the JOBS Act provides that our decision to opt out of the extended transition
period for complying with new or revised accounting standards is irrevocable.
We could remain an emerging growth company for up to five years, or until
the earliest of (i) the last day of the first fiscal year in which annual gross
revenue exceeds $1 billion, (ii) the date that we become a "large accelerated
filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the
market value of our common stock that is held by non-affiliates exceeds $700
million as of the last business day of our most recently completed second fiscal
quarter, or (iii) the date on which we have issued more than $1 billion in
non-convertible debt during the preceding three year period.
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General
We are a Special Purpose Acquisition Company, (also known as a "blank check
company"), formed in Delaware on August 17, 2005, with plans for effecting a
merger, capital stock exchange, asset acquisition, stock purchase,
reorganization or similar business combination with one or more businesses,
which we refer to throughout this prospectus as a business combination. We have
not identified any business combination target and we have not, nor has anyone
on our behalf, initiated any substantive discussions, directly or indirectly,
with any business combination target.
The Offering
By means of this prospectus we are offering up to 3,000,000 shares of our
common stock to the owners of one or more business that we may acquire. As of
the date of this prospectus we had not identified any business that we may
attempt to acquire..
The acquisition of the securities offered by this prospectus involves a
high degree of risk. Risk factors include the lack of any relevant operating
history, losses since we were incorporated, the possible need for us to sell
shares of our common stock to raise capital and our auditors, in their report on
our financial statements for the year ended April 30, 2016 and 2015, expressed
substantial doubt as to our ability to continue in business. See the "Risk
Factors" section of this prospectus below for additional Risk Factors.
As of the date of this prospectus, we had 895,750 outstanding shares of
common stock.
Forward-Looking Statements
This prospectus contains or incorporates by reference forward-looking
statements, concerning our financial condition, results of operations and
business. These statements include, among others:
o statements concerning the benefits that we expect will result from the
business activities that we contemplate; and
o statements of our expectations, beliefs, future plans and strategies,
anticipated developments and other matters that are not historical
facts.
You can find many of these statements by looking for words such as
"believes", "expects", "anticipates", "estimates" or similar expressions used in
this prospectus.
These forward-looking statements are subject to numerous assumptions, risks
and uncertainties that may cause our actual results to be materially different
from any future results expressed or implied in those statements. Because the
statements are subject to risks and uncertainties, actual results may differ
materially from those expressed or implied. We caution you not to put undue
reliance on these statements, which speak only as of the date of this
prospectus.
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To the extent, the information contained in this prospectus, changes in any
material respect, we will amend this prospectus.
RISK FACTORS
This section discloses all material risks known to us. We do not make, nor
have we authorized any other person to make, any representation about the future
market value of our common stock. In addition to the other information contained
in this registration statement, the following factors should be considered
carefully in evaluating an investment in our securities. If any of the risks
discussed below materialize, our current and intended business could fail and
our common stock could decline in value or become worthless.
We are a development stage company with no operating history and no revenues,
and you have no basis on which to evaluate our ability to achieve our business
objective.
We are a development stage company with no operating results, and we will
not commence operations until we complete a business combination. Because we
lack an operating history, you have no basis upon which to evaluate our ability
to achieve our business objective of completing our initial business combination
with one or more target businesses. We have no plans, arrangements or
understandings with any prospective target business concerning a business
combination and may be unable to complete our business combination. If we fail
to complete our business combination, we will never generate any operating
revenues.
Our stockholders may not be afforded an opportunity to vote on any proposed
business combination, which means we may complete a business combination even
though a majority of our stockholders do not support such a combination.
We may not hold a stockholder vote before we complete a business
combination unless the business combination would require stockholder approval
under applicable law or if we decide to hold a stockholder vote for business or
other legal reasons. Accordingly, we may complete a business combination even if
a majority of our shareholders do not approve of the business combination.
Because we are not limited to a particular industry sector or any specific
target businesses with which to pursue our initial business combination, you
will be unable to ascertain the merits or risks of any particular target
business' operations.
We will seek to complete a business combination with an operating company.
Because we have not yet identified or approached any specific target business
with respect to a business combination, there is no basis to evaluate the
possible merits or risks of any particular target business's operations, results
of operations, cash flows, liquidity, financial condition or prospects. To the
extent we complete our business combination, we may be affected by numerous
risks inherent in the business operations with which we combine. For example, if
we combine with a financially unstable business or an entity lacking an
established record of sales or earnings, we may be affected by the risks
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inherent in the business and operations of a financially unstable or a
development stage entity. Although management will endeavor to evaluate the
risks inherent in a particular target business, we cannot assure you that we
will properly ascertain or assess all of the significant risk factors or that we
will have adequate time to complete due diligence. Furthermore, some of these
risks may be outside of our control and leave us with no ability to control or
reduce the chances that those risks will adversely impact a target business. We
also cannot assure you that an investment in our common stock will ultimately
prove to be profitable.
Although we identified general criteria and guidelines that we believe are
important in evaluating prospective target businesses, we may enter into our
initial business combination with a target does not meet such criteria and
guidelines, and as a result, the target business with which we enter into our
initial business combination may not have attributes entirely consistent with
our general criteria and guidelines.
Although we have identified general criteria and guidelines for evaluating
prospective target businesses, it is possible that a target business with which
we enter into a business combination will not have all of these positive
attributes. If we complete a business combination with a target that does not
meet some or all of these guidelines, such combination may not be as successful
as a combination with a business that does meet all of our general criteria and
guidelines. In addition, if stockholder approval of the transaction is required
by law, or we decide to obtain stockholder approval for business or other legal
reasons, it may be more difficult for us to attain stockholder approval of our
initial business combination if the target business does not meet our general
criteria and guidelines.
We may seek investment opportunities with a financially unstable business or an
entity lacking an established record of sales or earnings.
To the extent we complete a business combination with a financially
unstable business or an entity lacking an established record of sales or
earnings, we may be affected by numerous risks inherent in the operations of the
business with which we combine. These risks include volatile revenues or
earnings and difficulties in obtaining and retaining key personnel. Although
management will endeavor to evaluate the risks inherent in a particular target
business, we may not be able to properly ascertain or assess all of the
significant risk factors and we may not have adequate time to complete due
diligence. Furthermore, some of these risks may be outside of our control and
leave us with no ability to control or reduce the chances that those risks will
adversely impact a target business.
We may have a limited ability to assess the management of a prospective target
business and, as a result, we may complete conducting a business combination
with a target business whose management may not have the skills, qualifications
or abilities to manage a public company.
When evaluating the desirability of conducting a business combination with
a prospective target business, our ability to assess the target business'
management may be limited due to a lack of time, resources or information. Our
assessment of the capabilities of the target's management, therefore, may prove
to be incorrect and such management may lack the skills, qualifications or
abilities we suspected. Should the target's management not possess the skills,
qualifications or abilities necessary to manage a public company, the operations
and profitability of the post-combination business may be negatively impacted.
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Accordingly, any stockholders who choose to remain stockholders following the
business combination could suffer a reduction in the value of their shares. Such
stockholders are unlikely to have a remedy for such reduction in value unless
they are able to successfully claim that the reduction was due to the breach by
our officers or directors of a duty of care or other fiduciary duty owed to
them, or if they are able to successfully bring a private claim under securities
laws that the tender offer materials or proxy statement relating to the business
combination contained an actionable material misstatement or material omission.
The officers and directors of an acquisition candidate may resign upon
completion of a business combination. The loss of a business combination
target's key personnel could negatively impact the operations and profitability
of our post-combination business.
The role of an acquisition candidate's key personnel upon the completion of
a business combination cannot be ascertained at this time. Although we
contemplate that certain members of an acquisition candidate's management team
will remain associated with the acquisition candidate following a business
combination, it is possible that members of the management of an acquisition
candidate will not wish to remain in place.
We may attempt to complete a business combination with a private company about
which little information is available, which may result in a business
combination with a company that is not as profitable as we suspected, if at all.
In pursuing our acquisition strategy, we may seek to complete a business
combination with a privately held company. By definition, very little public
information exists about private companies, and we could be required to make our
decision on whether to pursue a potential initial business combination on the
basis of limited information, which may result in a business combination with a
company that is not as profitable as we suspected, if at all.
We may never be profitable.
Since we recently adopted a new business plan, it is difficult for
potential investors to evaluate our business. We will need to raise additional
capital in order to fund our operations. There can be no assurance that we will
be profitable or that our shares will have any value.
There is substantial doubt about our ability to continue as a going
concern. Our financial statements have been prepared on a going concern basis,
which assumes that we will be able to realize our assets and discharge our
liabilities in the normal course of business for the foreseeable future. We
incurred a loss since inception and through April 30, 2016 of $(4,922), and
further losses are anticipated in the development of our business.
Our ability to continue as a going concern is dependent upon our becoming
profitable in the future and/or obtaining the necessary financing to meet our
obligations and repay our liabilities arising from normal business operations
when they come due. There is no guarantee that we will be successful in
achieving these objectives.
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Since our officers plan to devote only a portion of their time to our
business, our chances of being profitable will be less than if we had full time
management. As of the date of this prospectus we had one officer. This officer
is employed at other companies and his other responsibilities could take
precedence over his duties to us.
The price of the shares in this offering was arbitrarily established.
The price of the shares being offered by the Selling Shareholders does not
bear any relationship to the Company's assets, book value or net worth, and may
be greater than the price which investors in this offering may receive when they
resell any securities purchased in this offering. Accordingly, the offering
price of the shares should not be considered to be any indication of the value
of its common stock. The factors considered in determining the offering price
included the Company's future prospects and the likely trading price for its
common stock.
Disclosure requirements pertaining to penny stocks may reduce the level of
trading activity in the market for our common stock and investors may find it
difficult to sell their shares.
Trading of our common stock will be subject to Rule 15g-9 of the Securities
and Exchange Commission, which rule imposes certain requirements on
broker/dealers who sell securities subject to the rule to persons other than
established customers and "accredited investors." For transactions covered by
the rule, brokers/dealers must make a special suitability determination for
purchasers of the securities and receive the purchaser's written agreement to
the transaction prior to sale. The Securities and Exchange Commission also has
rules that regulate broker/dealer practices in connection with transactions in
"penny stocks". Penny stocks generally are equity securities with a price of
less than $5.00 (other than securities registered on certain national securities
exchanges or quoted on the NASDAQ system, provided that current price and volume
information with respect to transactions in that security is provided by the
exchange or system). The penny stock rules require a broker/dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document prepared by the Securities and Exchange
Commission that provides information about penny stocks and the nature and level
of risks in the penny stock market. The broker/dealer also must provide the
customer with current bid and offer quotations for the penny stock, the
compensation of the broker/dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customer's account. The bid and offer quotations, and the broker/dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customer's confirmation.
There is currently no market for our securities and a market for our
securities may not develop, which would adversely affect the liquidity and price
of our securities.
There is currently no market for our securities. Stockholders therefore
have no access to information about prior market history on which to base their
investment decision. Following this offering, the price of our securities may
vary significantly due to one or more potential business combinations and
general market or economic conditions. Furthermore, an active trading market for
our securities may never develop or, if developed, it may not be sustained. You
9
may be unable to sell your securities unless a market can be established and
sustained.
We are an "emerging growth company," subject to less stringent reporting
and regulatory requirements of other publicly-held companies, and this status
may have an adverse effect on our ability to attract interest in our common
stock.
We are an "emerging growth company" as defined in the Jumpstart Our
Business Startups Act of 2012, or "JOBS Act." As long as we remain an "emerging
growth company," we may take advantage of certain exemptions from various
reporting and regulatory requirements that are applicable to other public
companies that are not an "emerging growth company." We cannot predict if
investors will find our common stock less attractive if we choose to rely on
these exemptions. If some investors find our common stock less attractive as a
result of any choices to reduce future disclosure, there may be a less active
trading market for our common stock and our stock price may be more volatile.
MARKET FOR OUR COMMON STOCK
There is no current public market for our common stock.
Approximately 256,000 shares of our common stock have satisfied the resale
requirements of Securities and Exchange Commission Rule 144.
Holders of our common stock are entitled to receive dividends as may be
declared by the Board of Directors. Our Board of Directors is not restricted
from paying any dividends but is not obligated to declare a dividend. No cash
dividends have ever been declared and it is not anticipated that cash dividends
will ever be paid. We currently intends to retain any future earnings to finance
future growth. Any future determination to pay dividends will be at the
discretion of our directors and will depend on our financial condition, results
of operations, capital requirements and other factors the board of directors
considers relevant.
Our Certificate of Incorporation authorizes the Board of Directors to issue
up to 1,000,000 shares of preferred stock. The provisions in the Articles of
Incorporation relating to the preferred stock allow directors to issue preferred
stock with multiple votes per share and dividend rights, which would have
priority over any dividends paid with respect to the holders of common stock.
The issuance of preferred stock with these rights may make the removal of
management difficult even if the removal would be considered beneficial to
shareholders generally, and will have the effect of limiting shareholder
participation in certain transactions such as mergers or tender offers if these
transactions are not favored by management.
As of March 31, 2017, we had approximately 40 shareholders of record and
895,750 outstanding shares of common stock.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are currently a Special Purpose Acquisition Company (also known as a
"blank check company") incorporated on August 17, 2005 as a Delaware
corporation. We plan to effect a merger, capital stock exchange, asset
acquisition, stock purchase, reorganization or similar business combination with
one or more businesses. We have not identified any business combination target
and we have not, nor has anyone on our behalf, initiated any substantive
discussions directly or indirectly, with respect to identifying any business
combination target. We intend to effectuate a business combination.
The issuance of additional shares of our stock in a business combination:
o may significantly dilute the equity interest of investors in this
offering;
o may subordinate the rights of holders of common stock if preferred
stock is issued with rights senior to those afforded our common stock;
o could cause a change in control if a substantial number of shares of
our common stock is issued, which may affect, among other things, our
ability to use our net operating loss carry forwards, if any, and
could result in the resignation or removal of our present officers and
directors;
o may have the effect of delaying or preventing a change of control of
us by diluting the stock ownership or voting rights or a person
seeking to obtain control of us; and
o may adversely affect prevailing market prices for our common stock.
Similarly, if we issue debt securities, it could result in:
o default and foreclosure on our assets if our operating revenues after
an business combination are insufficient to repay our debt
obligations;
o acceleration of our obligations to repay the indebtedness even if we
make all principal and interest payments when due if we breach certain
covenants that require the maintenance of certain financial ratios or
reserves without a waiver or renegotiation of that covenant;
o our immediate payment of all principal and accrued interest, if any,
if the debt security is payable on demand;
o our inability to obtain necessary additional financing if the debt
security contains covenants restricting our ability to obtain such
financing while the debt security is outstanding;
o our inability to pay dividends on our common stock;
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o using a substantial portion of our cash flow to pay principal and
interest on our debt, which will reduce the funds available for
dividends on our common stock if declared, expenses, capital
expenditures, acquisitions and other general corporate purposes;
o limitations on our flexibility in planning for and reacting to changes
in our business and in the industry in which we operate;
o increased vulnerability to adverse changes in general economic,
industry and competitive conditions and adverse changes in government
regulation; and
o limitations on our ability to borrow additional amounts for expenses,
capital expenditures, acquisitions, debt service requirements,
execution of our strategy and other purposes and other disadvantages
compared to our competitors who have less debt.
As indicated in the accompanying financial statements, at October 31, 2016,
we had approximately $-0- in cash and liabilities of approximately $22,000.
Further, we expect to continue to incur significant costs in the pursuit of our
acquisition plans. We cannot assure you that our plans to complete our business
combination will be successful.
Until we complete an acquisition, we may seek to raise additional funds
through a private offering of debt or equity to fund our operations, including
the costs associated with being a public company. We are not a party to any
arrangement or understanding with any third party with respect to raising any
additional capital.
Results of Operations and Known Trends or Future Events
We have neither engaged in any operations nor generated any revenues to
date. Our only activities since inception have been organizational activities
and those necessary to prepare for this offering. Following this offering, we
will not generate any operating revenues until after completion of our business
combination. There has been no significant change in our financial or trading
position and no material adverse change has occurred since the date of our
audited financial statements. After this offering, we expect to incur increased
expenses as a result of being a public company (for legal, financial reporting,
accounting and auditing compliance), as well as for due diligence expenses. We
expect our expenses to increase substantially after the closing of this
offering.
Controls and Procedures
We are not currently required to maintain an effective system of internal
controls as defined by Section 404 of the Sarbanes-Oxley Act. We may be required
to comply with the internal control requirements of the Sarbanes-Oxley Act for
the fiscal year ending April 30, 2018. Only in the event that we are deemed to
be a large accelerated filer or an accelerated filer would we be required to
comply with the independent registered public accounting firm attestation
requirement. Further, for as long as we remain an emerging growth company as
defined in the JOBS Act, we intend to take advantage of certain exemptions from
various reporting requirements that are applicable to other public companies
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that are not emerging growth companies including, but not limited to, not being
required to comply with the independent registered public accounting firm
attestation requirement.
Related Party Transactions
In September, 2005 we acquired all of the outstanding shares of the Diamond
Cartel Inc. (Canada), an Ontario, Canada corporation, for 187,500 shares of our
common stock. At the time of this acquisition, the assets of Diamond (Canada)
consisted of the concept for the Diamond Cartel's business plan and the software
which was to be used by the Diamond Cartel for its website and internal
operations. Michel Atlidakis is the sole officer and director of the Diamond
Cartel Inc. (Canada). In connection with this acquisition Mr. Atlidakis, our
officer and director, received 154,725 shares of the Diamond Cartel's common
stock.
On June 25, 2007 Mr. Atlidakis purchased 464,175 shares of our Series A
preferred stock. On October 15, 2010 Mr. Atlidakis converted these Series A
preferred shares into 344,175 shares of our common stock.
As at April 15, 2017, we owed Mr. Atlidakis $18,041 for expenses incurred
on our behalf. The amount we owe Mr. Atlidakis is non-interest bearing,
unsecured, and due on demand.
Off-Balance Sheet Arrangements; Commitments and Contractual Obligations
As of the date of this prospectus, we did not have any off-balance sheet
arrangements and did not have any commitments or contractual obligations.
Critical Accounting Policies and New Accounting Pronouncements
See Note 3 to the financial statements included as part of this prospectus,
for a description of the Company's critical accounting policies and the
potential impact of the adoption of any new accounting pronouncements.
PROPOSED BUSINESS
Introduction
We are currently a Special Purpose Acquisition Company (also known as a
"blank check company") incorporated on August 17, 2005 as a Delaware
Corporation. We plan to acquire a privately held company using shares of our
common stock. We have not identified any business combination target and we have
not, nor has anyone on our behalf, initiated any substantive discussions,
directly or indirectly, with respect to identifying any business combination
target.
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Business Strategy
We intend to pursue an acquisition opportunity in any business industry or
sector. However, we believe the following general criteria and guidelines are
important in evaluating prospective target businesses, but we may decide to
enter into a business combination with a target business that does not meet
these criteria and guidelines.
o High-Growth Markets. We will seek out opportunities in faster-growing
segments of developed markets and emerging international markets. Our
management has extensive experience operating media businesses and
leading transactions in international markets.
o Business with Revenue and Earnings Growth Potential. We will seek to
acquire one or more businesses that have multiple, diverse potential
drivers of revenue and earnings growth, including but not limited to a
combination of development, production, digital and distribution
capabilities and balance sheet management. We will focus on assets
that currently are undervalued or sub-optimally managed, including
those undergoing debt or operational restructuring, where our
management is well-positioned to unlock their value.
o Companies with Potential for Strong Free Cash Flow Generation. We will
seek to acquire one or more businesses that have the potential to
generate strong and stable free cash flow.
We anticipate structuring our business combination so that the
post-transaction company in which our public stockholders own shares will own or
acquire 100% of the equity interests or assets of the target business or
businesses. We may, however, structure our business combination such that the
post-transaction company owns or acquires less than 100% of such interests or
assets of the target business in order to meet certain objectives of the target
management team or shareholders or for other reasons, but we will only complete
such business combination if the post-transaction company owns or acquires 50%
or more of the outstanding voting securities of the target or otherwise acquires
a controlling interest in the target sufficient for it not to be required to
register as an investment company under the Investment Company Act of 1940, as
amended, or the Investment Company Act. Even if the post-transaction company
owns or acquires 50% or more of the voting securities of the target, our
stockholders prior to the business combination may collectively own a minority
interest in the post-transaction company, depending on valuations ascribed to
the target and us in the business combination transaction. For example, we could
pursue a transaction in which we issue a substantial number of new shares in
exchange for all of the outstanding capital stock of a target. In this case, we
would acquire a 100% controlling interest in the target. However, as a result of
the issuance of a substantial number of new shares, our stockholders immediately
prior to our business combination could own less than a majority of our
outstanding shares subsequent to our business combination.
Status as a public
company
14
We believe our structure will make us an attractive business combination
partner to target businesses. As a public company, we offer a target business an
alternative to the traditional initial public offering through a merger or other
business combination. In this situation, the owners of the target business would
exchange their shares of stock in the target business for shares of our stock or
for a combination of shares of our stock and cash, allowing us to tailor the
consideration to the specific needs of the sellers. Although there are various
costs and obligations associated with being a public company, we believe target
businesses will find this method a more certain and cost effective method to
becoming a public company than the typical initial public offering. In a typical
initial public offering, there are additional expenses incurred in marketing,
road show and public reporting efforts that may not be present to the same
extent in connection with a business combination with us.
Furthermore, once a proposed business combination is completed, the target
business will have effectively become public, whereas an initial public offering
is always subject to the underwriters' ability to complete the offering, as well
as general market conditions, which could prevent the offering from occurring.
Once public, we believe the target business would then have greater access to
capital and an additional means of providing management incentives consistent
with stockholders' interests. It can offer further benefits by augmenting a
company's profile among potential new customers and vendors and aid in
attracting talented employees.
We may seek to complete our initial business combination with a company or
business that may be financially unstable or in its early stages of development
or growth, which would subject us to the numerous risks inherent in such
companies and businesses.
We have not identified any business combination target and we have not, nor
has anyone on our behalf, initiated any substantive discussions with respect to
identifying any business combination target. From the date of this prospectus,
there have been no communications or discussions between any of our officers or
directors and any of their potential contacts or relationships regarding a
potential business combination. Additionally, we have not engaged or retained
any agent or other representative to identify or locate any suitable acquisition
candidate, to conduct any research or take any measures, directly or indirectly,
to locate or contact a target business. Accordingly, there is no current basis
for investors in this offering to evaluate the possible merits or risks of the
target business with which we may ultimately complete our business combination.
Although our management will assess the risks inherent in a particular target
business with which we may combine, we cannot assure you that this assessment
will result in our identifying all risks that a target business may encounter.
Furthermore, some of those risks may be outside of our control, meaning that we
can do nothing to control or reduce the chances that those risks will adversely
impact a target business.
We may seek to raise additional funds through a private offering of debt or
equity securities in connection with the completion of a business combination.
There are no prohibitions on our ability to raise funds privately or through
loans in connection with our business combination. At this time, we are not a
party to any arrangement or understanding with any third party with respect to
15
raising any additional funds through the sale of securities or otherwise.
Sources of target businesses
We anticipate that target business candidates will be brought to our
attention from various unaffiliated sources, including investment bankers,
private investment funds. Target businesses may be brought to our attention by
such unaffiliated sources as a result of being solicited by us through calls or
mailings. These sources may also introduce us to target businesses in which they
think we may be interested on an unsolicited basis, since many of these sources
will have read this prospectus and know what types of businesses we are
targeting. Our officers and directors, as well as their affiliates, may also
bring to our attention target business candidates that they become aware of
through their business contacts as a result of formal or informal inquiries.
While we do not presently anticipate engaging the services of professional firms
or other individuals that specialize in business acquisitions on any formal
basis, we may engage these firms or other individuals in the future, in which
event we may pay a finder's fee, consulting fee or other compensation to be
determined in an arm's length negotiation based on the terms of the transaction.
We will engage a finder only to the extent our management determines that the
use of a finder may bring opportunities to us that may not otherwise be
available to us or if finders approach us on an unsolicited basis with a
potential transaction that our management determines is in our best interest to
pursue. Payment of finder's fees is customarily tied to completion of a
transaction, in which case any such fee will be paid out of the funds held in
the trust account. In no event, however, will our sponsor or any of our existing
officers or directors, or any entity with which they are affiliated, be paid any
finder's fee, consulting fee or other compensation prior to, or for any services
they render in order to effectuate, the completion of our business combination
(regardless of the type of transaction that it is). None of our sponsor,
executive officers or directors, or any of their respective affiliates, will be
allowed to receive any compensation, finder's fees or consulting fees from a
prospective business combination target in connection with a contemplated
acquisition of such target by us. Although some of our officers and directors
may enter into employment or consulting agreements with the post-transaction
company following our business combination, the presence or absence of any such
arrangements will not be used as a criterion in our selection process of an
acquisition candidate.
We are not prohibited from pursuing a business combination with a business
combination target that is affiliated with our officers or directors, or making
the acquisition through a joint venture or other form of shared ownership with
our officers or directors. In the event we seek to complete our business
combination with a business combination target that is affiliated with our
executive officers or directors, we, or a committee of independent directors,
would obtain an opinion from an independent investment banking firm which is a
member of FINRA, that such an business combination is fair to our company from a
financial point of view. We are not required to obtain such an opinion in any
other context.
In evaluating a prospective target business, we expect to conduct an
extensive due diligence review which will encompass, among other things,
16
meetings with incumbent management and employees, document reviews, interviews
of customers and suppliers, inspection of facilities, as well as a review of
financial and other information which will be made available to us.
We will determine the value of any business we acquire based upon:
o the value of the assets less the liabilities of the business;
o the anticipated earnings of the business, or
o a combination of the foregoing.
Prior to completing an acquisition we will file an 8-K report with the
Securities and Exchange Commission disclosing:
o the name and principal operations of the business we propose to
acquire;
o the number of shares we propose to issue in connection with the
acquisition; and
o the method we used to determine the value of such business.
Michel Atlidakis, our sole officer and director, does not have any
experience with transactions involving blank check companies.
The time required to select and evaluate a target business and to structure
and complete our business combination, and the costs associated with this
process, are not currently ascertainable with any degree of certainty. Any costs
incurred with respect to the identification and evaluation of a prospective
target business with which our business combination is not ultimately completed
will result in our incurring losses and will reduce the funds we can use to
complete another business combination. We will not pay any finders or consulting
fees to members of our management team, or any of their respective affiliates,
for services rendered to or in connection with our business combination.
Limited ability to evaluate the target's management team
Although we intend to closely scrutinize the management of a prospective
target business when evaluating the desirability of effecting our business
combination with that business, our assessment of the target business'
management may not prove to be correct. In addition, the future management may
not have the necessary skills, qualifications or abilities to manage a public
company. Furthermore, the future role of members of our management team, if any,
in the target business cannot presently be stated with any certainty. While it
is possible that one or more of our directors will remain associated in some
capacity with us following our business combination, it is unlikely that any of
them will devote their full efforts to our affairs subsequent to our business
combination. Moreover, we cannot assure you that members of our management team
will have significant experience or knowledge relating to the operations of the
particular target business.
We cannot assure you that any of our key personnel will remain in senior
management or advisory positions with the combined company. The determination as
17
to whether any of our key personnel will remain with the combined company will
be made at the time of our business combination.
Following a business combination, we may seek to recruit additional
managers to supplement the incumbent management of the target business. We
cannot assure you that we will have the ability to recruit additional managers,
or that additional managers will have the requisite skills, knowledge or
experience necessary to enhance the incumbent management.
Competition
In identifying, evaluating and selecting a target business for our business
combination, we may encounter intense competition from other entities having a
business objective similar to ours, including other blank check companies,
private equity groups and leveraged buyout funds, and operating businesses
seeking strategic acquisitions. Many of these entities are well established and
have extensive experience identifying and effecting business combinations
directly or through affiliates. Moreover, many of these competitors possess
greater financial, technical, human and other resources than us. Our ability to
acquire larger target businesses will be limited by our available financial
resources. This inherent limitation gives others an advantage in pursuing the
acquisition of a target business.
Periodic Reporting and Financial Information
Following the date of this prospectus, we will have reporting obligations,
including the requirement that we file annual, quarterly and current reports
with the SEC. In accordance with the requirements of the Exchange Act, our
annual reports will contain financial statements audited and reported on by our
independent registered public accountants.
We will provide stockholders with audited financial statements of the
prospective target business as part of the proxy solicitation materials sent to
stockholders to assist them in assessing the target business. In all likelihood,
these financial statements will need to be prepared in accordance with GAAP. We
cannot assure you that any particular target business identified by us as a
potential acquisition candidate will have financial statements prepared in
accordance with GAAP or that the potential target business will be able to
prepare its financial statements in accordance with GAAP. To the extent that
this requirement cannot be met, we may not be able to acquire the proposed
target business. While this may limit the pool of potential acquisition
candidates, we do not believe that this limitation will be material.
We may be required to evaluate our internal control procedures for the
fiscal year ending April 30, 2018 as required by the Sarbanes-Oxley Act. Only in
the event we are deemed to be a large accelerated filer or an accelerated filer
will we be required to have our internal control procedures audited. A target
18
company may not be in compliance with the provisions of the Sarbanes-Oxley Act
regarding adequacy of their internal controls. The development of the internal
controls of any such entity to achieve compliance with the Sarbanes-Oxley Act
may increase the time and costs necessary to complete any such acquisition.
MANAGEMENT
Name Age Position
Michel Atlidakis 51 Chief Executive, Financial and
Accounting Officer and a Director
The following is a brief summary of the background of our officer and
director including his principal occupation during the five preceding years.
Directors serve until their successors are elected and qualified or until they
are removed.
Mr. Atlidakis has been our officer and director since August 2005. Mr.
Atlidakis has also been a director of Go Beyond Promotions, Inc. since 2014, a
director of Revive Kitchen, Inc. between December 2013 and January 2015 and a
director of Tasty Twists, Inc. between December 2013 and January 2015. Between
January 2009 and December 2013 Mr. Atlidakis was an independent consultant
providing services in the areas of business planning, financing, marketing, and
workforce development.
We believe that Mr. Atlidakis is qualified to serve as a director due to
his experience with development stage companies.
Our director is not independent as that term is defined in section 803 of
the listing standards of the NYSE MKT. Our director does not qualify as a
financial expert as that term is defined by the Securities and Exchange
Commission. We do not believe a financial expert is necessary since we did not
have any revenues for the year ended April 30, 2016, or the six months ended
October 31, 2016.
We have not adopted a Code of Ethics applicable to our principal executive,
financial, and accounting officers and persons performing similar functions. We
do not believe a Code of Ethics is needed at this time since we have only one
officer.
We do not have a compensation committee. Our director serves as our audit
committee.
Directors are elected to hold office until the next annual meeting of
shareholders and until their successors have been elected and qualified.
Executive officers are elected by the directors and hold office until their
resignation or removal by directors.
19
Executive Compensation
The following table sets forth in summary form the compensation paid to our
officer during the two years ended April 30, 2016.
Stock Option All Other
Name and Principal Salary Bonus Awards Awards Compensation
Position Period (1) (2) (3) (4) (5) Total
------------------ ------ ------ ----- ------ ----- ------------ ------
Michel Atlidakis 2016 $ -- -- -- -- -- --
Chief Executive, 2015 $ -- -- -- -- -- --
Financial and
Accounting Officer
We do not have any consulting or employment agreements with any of our
officers or directors. None of the proceeds from this offering will be used to
pay our officers for compensation which is accrued but unpaid as of the date of
this prospectus. As of the date of this prospectus, we have no immediate plans
to pay compensation for past services.
Our board of directors may increase the compensation paid to our officers
depending upon a variety of factors, including the results of our future
operations.
The following table shows the amount which we expect to pay to our
executive officers during the twelve months ending April 30, 2018 and the amount
of time these officers expect to devote to our business.
Percentage of Time
Projected to be Devoted
Name Compensation to Our Operations
---- ------------ ------------------
Michel Atlidakis -- 10%
Stock Options. We have not granted any stock options as of the date of this
prospectus. In the future, we may grant stock options to our officers,
directors, employees or consultants.
Long-Term Incentive Plans. We do not provide our officers or employees with
pension, stock appreciation rights, long-term incentive or other plans and have
no intention of implementing any of these plans for the foreseeable future.
Employee Pension, Profit Sharing or other Retirement Plans. We do not have a
defined benefit, pension plan, profit sharing or other retirement plan, although
we may adopt one or more of such plans in the future.
Compensation of Directors. Our directors do not receive any compensation
pursuant to any standard arrangement for their services as directors. Although
our bylaws permit us to pay our directors for attending meetings, we do not
compensate our directors for attending meetings.
20
PRINCIPAL SHAREHOLDERS
The following table shows the ownership, as of the date of this prospectus,
of those persons owning beneficially 5% or more of the Company's common stock
and the number and percentage of outstanding shares owned by each of the
Company's directors and officers and by all officers and directors as a group.
Each owner has sole voting and investment power over their shares of common
stock.
Name Shares Owned % of Outstanding Shares
---- ------------ -----------------------
Michel Atlidakis 556,625 62%
All officers and directors 556,625 62%
as a group (1 person)
DESCRIPTION OF SECURITIES
Common Stock
We are authorized to issue 200,000,000 shares of common stock. Holders of
common stock are each entitled to cast one vote for each share held of record on
all matters presented to shareholders. Cumulative voting is not allowed; hence,
the holders of a majority of our outstanding shares of common stock can elect
all directors.
Holders of common stock are entitled to receive such dividends as may be
declared by the Board out of funds legally available and, in the event of
liquidation, to share pro rata in any distribution of our assets after payment
of liabilities. Our directors are not obligated to declare a dividend. It is not
anticipated that dividends will be paid in the foreseeable future.
Holders of common stock do not have pre-emptive rights to subscribe to any
additional shares which may be issued in the future. There are no conversion,
redemption, sinking fund or similar provisions regarding the common stock. All
outstanding shares of common stock are fully paid and non-assessable.
Preferred Stock
We are authorized to issue 1,000,000 shares of preferred stock. Shares of
preferred stock may be issued from time to time in one or more series as may be
determined by the Board of Directors. The voting powers and preferences, the
relative rights of each such series and the qualifications, limitations and
restrictions of each series will be established by the Board of Directors. Our
directors may issue preferred stock with multiple votes per share and dividend
rights which would have priority over any dividends paid with respect to the
holders of our common stock. The issuance of preferred stock with these rights
may make the removal of management difficult even if the removal would be
considered beneficial to shareholders generally, and will have the effect of
limiting shareholder participation in transactions such as mergers or tender
offers if these transactions are not favored by management. As of the date of
this prospectus we had not issued any shares of preferred stock.
21
LEGAL PROCEEDINGS
We are not involved in any legal proceedings and we do not know of any
legal proceedings which are threatened or contemplated.
INDEMNIFICATION
Our Bylaws authorize indemnification of a director, officer, employee or
agent of us against expenses incurred by him in connection with any action,
suit, or proceeding to which he is named a party by reason of his having acted
or served in such capacity, except for liabilities arising from his own
misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent who was found liable for misconduct or
negligence in the performance of his duty may obtain such indemnification if, in
view of all the circumstances in the case, a court of competent jurisdiction
determines such person is fairly and reasonably entitled to indemnification.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers, or persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the
Securities Act with respect to the securities we are offering by this
prospectus. This prospectus does not contain all of the information included in
the registration statement. For further information about us and our securities,
you should refer to the registration statement and the exhibits and schedules
filed with the registration statement. Whenever we make reference in this
prospectus to any of our contracts, agreements or other documents, the
references are materially complete but may not include a description of all
aspects of such contracts, agreements or other documents, and you should refer
to the exhibits attached to the registration statement for copies of the actual
contract, agreement or other document.
22
The Diamond Cartel Inc.
April 30, 2016
Index
Report of Independent Registered Public Accounting Firm....................F-1
Balance Sheets.............................................................F-2
Statements of Operations...................................................F-3
Statements of Shareholders' Deficit........................................F-4
Statements of Cash Flows...................................................F-5
Notes to the Financial Statements..........................................F-6
25
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders
The Diamond Cartel, Inc.
Willmington, Delaware
We have audited the accompanying balance sheets of The Diamond Cartel, Inc.,
(the "Company") as of April 30, 2016 and 2015 and the related statements of
operations, changes in stockholders' deficit, and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States of America).Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Diamond Cartel,
Inc. and its subsidiaries as of April 30, 2016 and 2015 and the results of their
operations, and their cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States of America.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
financial statements, the Company has recurring losses and has not generated
revenues from its planned principal operations. These factors raise substantial
doubt that the Company will be able to continue as a going concern. Management's
plans regarding those matters also are described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
/s/ MALONE BAILEY, LLP
www.malonebailey.com
Houston, Texas
February 2, 2017
F-1
The Diamond Cartel, Inc.
Balance Sheets
April 30, April 30,
2016 2015
$ $
ASSETS
Total Assets - -
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Due to related party 4,922 3,488
--------- ------------
Total Liabilities 4,922 3,488
--------- ------------
Stockholders' Deficit
Preferred Stock, 946,000 shares authorized,
$0.001 par value; no shares issued and
outstanding (April 30, 2015 - no shares) - -
Preferred stock - Series A, 54,000 shares
authorized, $0.001 par value, 0.48 shares
issued and outstanding (April 30, 2015 -
0.48 share) - -
Common stock, 200,000,000 shares authorized,
$0.0001 par value; 895,750 shares issued
and outstanding (April 30, 2015 895,750 shares) 90 90
Additional paid-in capital 454,126 454,125
Accumulated deficit (459,138) (457,704)
---------- ----------
Total Stockholders' Deficit (4,922) (3,488)
---------- ----------
Total Liabilities and Stockholders' Deficit - -
========== ==========
(The accompanying notes are an integral part of these financial statements)
F-2
The Diamond Cartel, Inc.
Statements of Operations
Year Ended Year Ended
April 30, 2016 April 30, 2015
$ $
Expenses
General and administrative 1,434 -
------------ -----------
Net Loss (1,434) -
============ ===========
Net Loss Per Common Share - Basic
and Diluted (0.00) (0.00)
============ ===========
Weighted Average Number of Common Shares
Outstanding 895,750 895,750
============ ===========
(The accompanying notes are an integral part of these financial statements)
F-3
The Diamond Cartel, Inc.
Statements of Shareholders' Deficit
<c>
Additional
Preferred Preferred Common Common Paid-In Accumulated
Stock Stock Stock Stock Capital Deficit Total
# $ # # $ $ $
Balance - April 30, 2014 0.48 - 895,750 90 454,126 (457,704) (3,488)
Net loss for the year - - - - - - -
------ ---- ------- ---- ------- -------- ------
Balance - April 30, 2015 0.48 - 895,750 90 454,126 (457,704) (3,488)
Net loss for the year - - - - - (1,434) (1,434)
------ ---- ------- ---- ------- -------- ------
Balance - April 30, 2016 0.48 - 895,750 90 454,126 (459,138) (4,922)
====== ==== ======= ==== ======= ======== ======
(The accompanying notes are an integral part of these financial statements)
F-4
The Diamond Cartel, Inc.
Statements of Cash Flows
Year Ended Year Ended
April 30, 2016 April 30, 2015
Operating Activities
Net loss (1,434) -
Adjustments for non-cash items: - -
Changes in operating assets and liabilities:
Due to related party 1,434 -
------- ------
Net Cash Used in Operating Activities - -
------- ------
Change in Cash - -
Cash - Beginning of Period - -
------- ------
Cash - End of Period - -
======= ======
Supplemental Disclosures:
Interest paid - -
Income taxes paid - -
======= ======
(The accompanying notes are an integral part of these financial statements)
F-5
The Diamond Cartel, Inc.
Notes to the Financial Statements
April 30, 2016
1. Nature of Operations
The Diamond Cartel Inc. (the "Company") was incorporated in the State of
Delaware on August 17, 2005. The Company is a newly organized Special Purpose
Acquisition Company ("SPAC") which plans to effect a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar
business with one or more businesses. The Company has not identified any
business combination target and the Company has not, nor has anyone on its
behalf, initiated any substantive discussions, directly or indirectly, with
any business combination target.
2. Going Concern
These financial statements have been prepared on a going concern basis, which
implies the Company will continue to realize its assets and discharge its
liabilities in the normal course of business. The Company has never generated
revenue and has never paid any dividends and is unlikely to pay dividends or
generate earnings in the immediate or foreseeable future. The continuation of
the Company as a going concern is dependent upon the continued financial
support from its stockholders, the ability of the Company to obtain necessary
equity financing to continue operations. As at April 30, 2016, the Company
has a working capital deficiency of $4,922 and has accumulated losses of
$459,138 since inception. These factors raise substantial doubt regarding the
Company's ability to continue as a going concern. These financial statements
do not include any adjustments to the recoverability and classification of
recorded asset amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company intends to fund its activities through debt and equity financing
arrangements. There is no assurance that the Company will obtain the
necessary financing to complete its objectives.
3. Summary of Significant Accounting Policies
a) Basis of Accounting
The Company's financial statements are prepared in accordance with
accounting principles generally accepted in the United States. The Company
has an April 30 year-end.
b) Use of Estimates
The preparation of financial statements in accordance with United States
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses in the reporting period. The Company
regularly evaluates estimates and assumptions related to deferred income
tax asset valuations. The Company bases its estimates and assumptions on
current facts, historical experience and various other factors that it
believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets
and liabilities and the accrual of costs and expenses that are not readily
apparent from other sources. The actual results experienced by the Company
may differ materially and adversely from the Company's estimates. To the
extent there are material differences between the estimates and the actual
results, future results of operations will be affected.
F-6
c) Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments with maturity of three months or less at the
time of issuance to be cash equivalents.
d) Basic and Diluted Net Income (Loss) Per Share
The Company computes net income (loss) per share in accordance with ASC
260, Earnings per Share which requires presentation of both basic and
diluted earnings per share (EPS) on the face of the income statement.
Basic EPS is computed by dividing net income (loss) available to common
shareholders (numerator) by the weighted average number of shares
outstanding (denominator) during the period. Diluted EPS gives effect to
all dilutive potential common shares outstanding during the period
including convertible debt, stock options, and warrants, using the
treasury stock method, and convertible securities, using the if-converted
method. In computing diluted EPS, the average stock price for the period
is used in determining the number of shares assumed to be purchased from
the exercise of stock options or warrants. Diluted EPS excludes all
dilutive potential shares if their effect is anti-dilutive.
e) Financial Instruments
The Company's financial instruments consist of amounts due to related
party. Pursuant to ASC 820, Fair Value Measurements and Disclosures and
ASC 825, Financial Instruments, the Company believes that the recorded
values of all financial instruments approximate their current fair values
because of their nature and respective maturity dates or durations.
f) Related Parties
The Company follows ASC 850, Related Party Disclosures, for the
identification of related parties and disclosure of related party
transactions. See Note 4.
g) Comprehensive Loss
ASC 220, Comprehensive Income establishes standards for the reporting and
display of comprehensive loss and its components in the financial
statements. As at April 30, 2016 and 2015, the Company has no items that
represent comprehensive loss and, therefore, has not included a schedule
of comprehensive loss in the financial statements.
h) Income Taxes
Potential benefits of income tax losses are not recognized in the accounts
until realization is more likely than not. The Company has adopted ASC
740, Income Taxes as of its inception. Pursuant to ASC 740, the Company is
required to compute tax asset benefits for net operating losses carried
forward. The potential benefits of net operating losses have not been
recognized in these financial statements because the Company cannot be
assured it is more likely than not it will utilize the net operating
losses carried forward in future years.
F-7
i) Fair value
Accounting standards regarding fair value of financial instruments define
fair value, establish a three-level hierarchy which prioritizes and
defines the types of inputs used to measure fair value, and establish
disclosure requirements for assets and liabilities presented at fair value
on the balance sheets. Fair value is the amount that would be received
from the sale of an asset or paid for the transfer of a liability in an
orderly transaction between market participants. A liability is quantified
at the price it would take to transfer the liability to a new obligor, not
at the amount that would be paid to settle the liability with the
creditor. The three-level hierarchy is as follows:
o Level 1 inputs consist of unadjusted quoted prices for identical
instruments in active markets.
o Level 2 inputs consist of quoted prices for similar instruments.
o Level 3 valuations are derived from inputs which are significant and
unobservable and have the lowest priority.
j) Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in
effect and that may impact its financial statements and does not believe
that there are any other new accounting pronouncements that have been
issued that might have a material impact on its financial position or
results of operations.
4. Related Party Transactions and Balances
As at April 30, 2016, the Company is indebted to the President of the
Company for $4,922 (2015 - $3,488) for expenses incurred on behalf of the
Company. The amount is non-interest bearing, unsecured, and due on demand.
5. Income Taxes
Pursuant to ASC 740, the Company is required to compute tax asset benefits
for non-capital losses carried forward. Potential benefit of non-capital
losses has not been recognized in these financial statements because the
Company cannot be assured it is more likely than not it will utilize the
losses carried forward in future years.
F-8
Significant components of the Company's deferred tax assets and
liabilities, after applying enacted corporate income tax rates of 35%, are
as follows:
2016 2015
---- ----
Net losses carried forward $ 459,138 $ 457,705
---------- ---------
Deferred income tax assets 160,699 160,197
Valuation allowance (160,699) (160,197)
---------- ---------
Net deferred income tax asset $ - $ -
========== =========
The valuation allowance reflects the Company's estimate that the tax assets,
more likely than not, will not be realized and consequently have not been
recorded in these financial statements.
6. Subsequent Events
In accordance with ASC 855-10, the Company has analyzed its operations
through the date these financial statements were available for issuance or
February 2, 2017, and has determined that it does not have any material
subsequent events to disclose in these financial statements.
F-9
INTERIM FINANCIAL STATEMENTS
SIX MONTHS ENDED OCTOBER 31, 2016
F-10
The Diamond Cartel Inc.
October 31, 2016
Index
Unaudited Balance Sheets..................................................F-12
Unaudited Statements of Operations........................................F-13
Unaudited Statements of Cash Flows........................................F-14
Unaudited Notes to the Financial Statements...............................F-15
F-11
The Diamond Cartel Inc.
Unaudited Balance Sheets
October 31, April 30,
2016 2016
$ $
ASSETS
Current Assets
Prepaid expense 1,119 -
---------- ----------
Total Assets 1,119 -
---------- ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
Accrued liabilities 3,842 -
Due to related party 18,041 4,922
------------- -----------
Total Liabilities 21,883 4,922
------------- -----------
Stockholders' Deficit
Preferred Stock, 946,000 shares
authorized, $0.001 par value; no shares
issued and outstanding (April 30, 2016
- no shares) - -
Preferred stock - Series A, 54,000 shares
authorized, $0.001 par value, 0.48 shares
issued and outstanding (April 30, 2016 -
0.48 share) - -
Common stock, 200,000,000 shares authorized,
$0.0001 par value; 895,750 shares issued
and outstanding (April 30, 2016 - 895,750
shares) 90 90
Additional paid-in capital 454,126 454,126
Accumulated deficit (474,980) (459,138)
------------- -----------
Total Stockholders' Deficit (20,764) (4,922)
------------- -----------
Total Liabilities and Stockholders' Deficit 1,119 -
============= ===========
(The accompanying notes are an integral part of these financial statements)
F-12
The Diamond Cartel Inc.
Unaudited Statements of Operations
Six Months
Six Months Ended Ended October 31,
October 31, 2016 2015
$ $
Expenses
General and administrative 15,842 -
----------- ---------
Net Loss (15,842) -
=========== =========
Net Loss Per Common Share - Basic and Diluted (0.00) (0.00)
=========== =========
Weighted Average Number of Common Shares
Outstanding 895,750 895,750
=========== =========
(The accompanying notes are an integral part of these financial statements)
F-13
The Diamond Cartel Inc.
Unaudited Statements of Cash Flows
Six Months
Six Months Ended Ended
October 31, 2016 October 31, 2015
$ $
Operating Activities
Net loss (15,842) -
Changes in operating assets and liabilities:
Prepaid expense (1,119) -
Accounts payable and accrued liabilities 3,842 -
Due to related party 13,119 -
---------- --------
Net Cash Used in Operating Activities - -
---------- --------
Change in Cash - -
Cash - Beginning of Period - -
---------- --------
Cash - End of Period - -
========== ========
Supplemental Disclosures:
Interest paid - -
========== ========
Income taxes paid - -
========== ========
(The accompanying notes are an integral part of these financial statements)
F-14
The Diamond Cartel Inc.
Unaudited Notes to the Financial Statements
October 31, 2016
1. Nature of Operations
The Diamond Cartel Inc. (the "Company") was incorporated in the State of
Delaware on August 17, 2005. The Company is a newly organized Special Purpose
Acquisition Company ("SPAC") which plans to effect a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar
business with one or more businesses. The Company has not identified any
business combination target and the Company has not, nor has anyone on its
behalf, initiated any substantive discussions, directly or indirectly, with
any business combination target.
2. Going Concern
These financial statements have been prepared on a going concern basis, which
implies the Company will continue to realize its assets and discharge its
liabilities in the normal course of business. The Company has never generated
revenue and has never paid any dividends and is unlikely to pay dividends or
generate earnings in the immediate or foreseeable future. The continuation of
the Company as a going concern is dependent upon the continued financial
support from its stockholders, the ability of the Company to obtain necessary
equity financing to continue operations. As at October 31, 2016, the Company
has a working capital deficiency of $20,764 and has accumulated losses of
$474,980 since inception. These factors raise substantial doubt regarding the
Company's ability to continue as a going concern. These financial statements
do not include any adjustments to the recoverability and classification of
recorded asset amounts and classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The
Company intends to fund its activities through debt and equity financing
arrangements. There is no assurance that the Company will obtain the
necessary financing to complete its objectives.
3. Summary of Significant Accounting Policies
a) Basis of Accounting
The Company's financial statements are prepared in accordance with
accounting principles generally accepted in the United States. The Company
has an April 30 year-end.
b) Use of Estimates
The preparation of financial statements in accordance with United States
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses in the reporting period. The Company
regularly evaluates estimates and assumptions related to deferred income
tax asset valuations. The Company bases its estimates and assumptions on
current facts, historical experience and various other factors that it
believes to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets
and liabilities and the accrual of costs and expenses that are not readily
apparent from other sources. The actual results experienced by the Company
may differ materially and adversely from the Company's estimates. To the
extent there are material differences between the estimates and the actual
results, future results of operations will be affected.
F-15
4. Related Party Transactions and Balances
As at October 31, 2016, the Company is indebted to the President of the
Company for $18,041 (April 30, 2016 - $4,922) for expenses incurred on
behalf of the Company. The amount is non-interest bearing, unsecured, and
due on demand.
5. Subsequent Events
In accordance with ASC 855-10, the Company has analyzed its operations
through the date these financial statements were available for issuance or
December 27, 2016, and has determined that it does not have any material
subsequent events to disclose in these financial statements.
F-16
[PG NUMBER]
25
TABLE OF CONTENTS
Page
PROSPECTUS SUMMARY ........................................ 4
RISK FACTORS .............................................. 6
MARKET FOR OUR COMMON STOCK ............................... 10
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...................... 11
BUSINESS.................................................... 13
MANAGEMENT ................................................. 18
PRINCIPAL SHAREHOLDERS...................................... 20
DESCRIPTION OF SECURITIES................................... 23
LEGAL PROCEEDINGS........................................... 23
INDEMNIFICATION ............................................ 23
AVAILABLE INFORMATION....................................... 24
FINANCIAL STATEMENTS........................................ 25
No dealer, salesperson or other person has been authorized to give any
information or to make any representation not contained in this prospectus, and
if given or made, such information or representations must not be relied upon as
having been authorized by the Company. This prospectus does not constitute an
offer to sell, or a solicitation of an offer to buy, any of the securities
offered in any jurisdiction to any person to whom it is unlawful to make an
offer by means of this prospectus.
Until ______________, ____, all dealers effecting transactions in the
registered securities, whether or not participating in this distribution, may be
required to deliver a prospectus. This is in addition to the obligation of
dealers to deliver a prospectus when acting as underwriters and with respect to
their unsold allotments or subscriptions.
23
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses payable by us in
connection with the issuance and distribution of the securities being
registered.
SEC Filing Fee $ 6
Blue Sky Fees and Expenses 1,000
Legal Fees and Expenses 35,000
Accounting Fees and Expenses 15,000
Miscellaneous 3,994
---------
TOTAL $55,000
=======
All expenses other than the SEC filing fee are estimated.
Item 14. Indemnification of Directors and Officers.
Our bylaws provide that we may indemnify any and all of our officers,
directors, employees or agents or former officers, directors, employees or
agents, against expenses actually and necessarily incurred by them, in
connection with the defense of any legal proceeding or threatened legal
proceeding, except as to matters in which such persons shall be determined to
not have acted in good faith and in our best interest.
Item 15. Recent Sales of Unregistered Securities.
None.
Item 16. Exhibits and Financial Statement Schedules.
Exhibit No. Description
3.1 Certificate of Incorporation, as amended.
3.2 By-laws.
4.1 Designation of Series A Preferred Stock.
5 Form of Opinion of Hart & Hart
23.1 Consent of Attorneys.
23.2 Consent of Accountants.
24
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section l0 (a)(3) of the
Securities Act:
(ii) To reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the information in
the registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any deviation
from the low or high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more
than a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration statement;
and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities that remain unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of l933 (the "Act") may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
25
(4) That, for the purpose of determining liability under the Securities
Act of 1933 to any purchaser:
(i) If the registrant is relying on Rule 430B:
(A) Each prospectus filed by the registrant pursuant to Rule 424(b)(3)
shall be deemed to be part of the registration statement as of the date
the filed prospectus was deemed part of and included in the registration
statement; and
(B) Each prospectus required to be filed pursuant to Rule
424(b)(2), (b)(5), or (b)(7) as part of a registration statement in
reliance on Rule 430B relating to an offering made pursuant to Rule
415(a)(1)(i), (vii), or (x) for the purpose of providing the information
required by section 10(a) of the Securities Act of 1933 shall be deemed to
be part of and included in the registration statement as of the earlier of
the date such form of prospectus is first used after effectiveness or the
date of the first contract of sale of securities in the offering described
in the prospectus. As provided in Rule 430B, for liability purposes of the
issuer and any person that is at that date an underwriter, such date shall
be deemed to be a new effective date of the registration statement
relating to the securities in the registration statement to which that
prospectus relates, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof. Provided, however,
that no statement made in a registration statement or prospectus that is
part of the registration statement or made in a document incorporated or
deemed incorporated by reference into the registration statement or
prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such effective date,
supersede or modify any statement that was made in the registration
statement or prospectus that was part of the registration statement or
made in any such document immediately prior to such effective date; or
(ii) If the registrant is subject to Rule 430C, each prospectus
filed pursuant to Rule 424(b) as part of a registration statement relating to an
offering, other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and
included in the registration statement as of the date it is first used after
effectiveness. Provided, however, that no statement made in a registration
statement or prospectus that is part of the registration statement or made in a
document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a
purchaser with a time of contract of sale prior to such first use, supersede or
modify any statement that was made in the registration statement or prospectus
that was part of the registration statement or made in any such document
immediately prior to such date of first use.
(5) That, for the purpose of determining liability of the registrant under
the Securities Act of 1933 to any purchaser in the initial distribution of the
securities:
The undersigned registrant undertakes that in a primary offering of
securities of the undersigned registrant pursuant to this registration
statement, regardless of the underwriting method used to sell the securities to
the purchaser, if the securities are offered or sold to such purchaser by means
26
of any of the following communications, the undersigned registrant will be a
seller to the purchaser and will be considered to offer or sell such securities
to such purchaser:
(i) Any preliminary prospectus or prospectus of the undersigned
registrant relating to the offering required to be filed pursuant to Rule 424;
(ii) Any free writing prospectus relating to the offering prepared
by or on behalf of the undersigned registrant or used or referred to by the
undersigned registrant;
(iii) The portion of any other free writing prospectus relating to
the offering containing material information about the undersigned registrant or
its securities provided by or on behalf of the undersigned registrant; and
(iv) Any other communication that is an offer in the offering made
by the undersigned registrant to the purchaser.
27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in London, Ontario,
Canada, on the 19th day of April, 2017.
THE DIAMOND CARTEL, INC.
By: /s/ Michel Atlidakis
---------------------------------
Michel Atlidakis
Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated.
Name Position Date
/s/ Michel Atlidakis Principal Executive, April 19, 2017
------------------------
Michel Atlidakis Financial and Accounting
Officer and a Director
28