UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C.  20549





Form 10-Q





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





For the quarterly period ended June 30, 2009





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




Commission file number 333-149978




DIAMOND INFORMATION INSTITUTE, INC


(Exact name of registrant as specified in its charter)





New Jersey

22-2935867(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)





12 Daniel Road EastFairfield, New Jersey

07004(Address of principal executive offices)

(Zip Code)





(973) 227-3230


(Registrant’s telephone number, including area code)





Copies of Communication to:


Stoecklein Law Group


402 West Broadway


Suite 690


San Diego, CA 92101


(619) 704-1310


(619) 704-1325





Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.


Yes x   No 





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).


Yes    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 Ruble 12b-2 of the Exchange Act.





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





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





The number of shares of Common Stock, $0.001 par value, outstanding on August 10, 2009, was 11,863,100 shares (of the 11,863,100 shares 50,000 were issued in error and are in the process of being cancelled).


2


PART I – FINANCIAL INFORMATION





Item 1. Financial Statements.





DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIOBALANCE SHEETSJune 30,


December 31,2009



2008
*(Unaudited)Assets:Current Assets:Accounts Receivable – Net

$
329,549


$
713,194Inventory


1,458,836



1,326,989Prepaid Expenses


2,899



39,138Total Current Assets


1,791,284



2,079,321Property and Equipment – Net


180,146



160,983Other Assets:Investment in Unconsolidated Affiliate


5,000



5,000Total Assets

$
1,976,430


$
2,245,304*Derived from audited financial statements for the year ended December 31, 2008 (See Form 10-K
Annual Report filed on March 26, 2009 with the Securities and Exchange Commission).See Notes to Financial Statements.








3


DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIOBALANCE SHEETSJune 30,


December 31,2009



2008
*(Unaudited)Liabilities and Stockholders' (Deficit) Equity:Current Liabilities:Cash Overdraft

$
26,925


$
7,345Accounts Payable and Accrued Expenses


434,144



446,892Bank Lines of Credit – Net


922,858



910,449Current Maturities of Notes Payable


80,335



82,015Current Maturities of Capital Leases


21,343



23,402Advances from Stockholder – Net


407,566



394,532Sales Returns and Allowances Reserve


68,920



132,353Total Current Liabilities


1,962,091



1,996,988Long-Term LiabilitiesNotes Payable


138,542



97,270Capital Leases


28,619



39,092Total Long-Term Liabilities


167,161



136,362Commitments and Contingencies


--



--Stockholders' (Deficit) EquityCommon Stock - $.001 Par Value, 25,000,000 Shares Authorized, 11,813,100 and 11,643,100 Shares Issued and Outstanding as of June 30, 2009 and December 31, 2008, respectively


11,814



11,643Additional Paid-In Capital


1,653,535



1,599,707Accumulated Deficit


(1,818,171
)


(1,499,396
)Total Stockholders' (Deficit) Equity


(152,822
)


111,954Total Liabilities and Stockholders' (Deficit) Equity

$
1,976,430


$
2,245,304*Derived from audited financial statements for the year ended December 31, 2008 (See Form 10-K
Annual Report filed on March 26, 2009 with the Securities and Exchange Commission).See Notes to Financial Statements.











4


DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIOSTATEMENTS OF OPERATIONS (Unaudited)Three months ended

Six months endedJune 30,

June 30,2009

2008

2009

2008Sales – Net
$263,581

$362,719

$454,307

$642,883Cost of Sales
181,422

167,016

361,694

302,129Gross Profit
82,159

195,703

92,613

340,754Selling Expenses
82,002

80,741

130,272

143,765General and Administrative ExpensesShare-Based Compensation
5,000

83,750

10,000

267,500Common Stock Issued for Professional Services
2,000

100,000

44,000

250,000Other
84,788

140,633

180,547

278,571Total General and Administrative expenses
91,788

324,383

234,547

796,071Total Operating Expenses
173,790

405,124

364,819

939,836Loss from Operations
(91,631)

(209,421)

(272,206)

(599,082)Other Income [Expense]Interest Expense
(24,128)

(23,103)

(45,647)

(56,249)Other Income
--

829

1,158

1,369Total Other Income [Expense]
(24,128)

(22,274)

(44,489)

(54.880)Loss Before Income Tax Provision [Benefit]
(115,759)

(231,695)

(316,695)

(653,962)Income Tax Provision [Benefit]
1,560

(106,898)

2,080

(168,446)Net Loss
$(117,319)

$(124,797)

$(318,775)

$(485,516)Net Loss Per Common Share - Basic and Diluted
$        (0.01)

$       (0.01)

$        (0.03)

$       (0.04)Weighted Average Common Shares Outstanding -
Basic and Diluted
11,813,100

11,344,199

11,779,564

13,249,460








5


DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIOSTATEMENTS OF CASH FLOWS (Unaudited)Six Months Ended June 30,2009


2008Operating ActivitiesNet Loss

$
(318,775
)

$
(485,516
)Adjustments to Reconcile Net Lossto Net Cash (Used in) Operating Activities:Sales Returns and Allowances Reserve


(63,432
)


9,672Depreciation and Amortization


31,902



30,866Share-Based Compensation


10,000



267,500Services Rendered for Common Stock


44,000



250,000Amortization of Deferred Compensation


--



14,307Deferred Tax Benefit


--



(171,375
)Allowance for Doubtful Accounts


6,000



--Changes in Assets and Liabilities[Increase] Decrease in:Accounts Receivable


377,645



76,096Inventory


(131,847
)


(36,553
)Prepaid Expenses


36,238



23,338Increase [Decrease] in:Accounts Payable and Accrued Expenses


(12,747
)


(155,846
)Total Adjustments


297,759



308,005Net Cash (Used in) Operating Activities


(21,016
)


(177,511
)Investing Activities:Capital Expenditures


(51,065
)


--Financing Activities:Change in Cash Overdraft


19,580



109,451Advances from Bank Lines of Credit – Net


12,409



38,237Proceeds from Note Payable


100,000



--Repayments of Notes Payable


(60,408
)


(53,489
)Advances from Stockholder – Net


13,032



92,361Repayments of Capital Leases


(12,532
)


(9,249
)Proceeds from Private Placements of Common Stock


--



200Net Cash Provided by Financing Activities


72,081



177,511Net Change in Cash


--



--Cash - Beginning of Period


--



--Cash - End of Period

$
--


$
--See Notes to Financial Statements.











6


DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIOSTATEMENTS OF CASH FLOWS (Unaudited)Six Months Ended June 30,2009


2008Supplemental Disclosures of Cash Flow Information:Cash Paid during the years for:Interest

$
38,000


$
59,000Income Taxes

$
2,000


$
4,000Supplemental Disclosures of Non-Cash Investing and Financing Activities:During the first six months of 2008, the Company issued 200,000 shares of common stock to vendors as full settlement for accounts payable balances amounting to $200,000. These shares were issued as consideration for payment of accounts payable balances and pre-payments for services to be rendered.See Notes to Financial Statements.











7
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


[1] Nature of Operations, Basis of Presentation and Business Continuity





Nature of Operations - Diamond Information Institute Inc. d/b/a Designs by Bergio [the "Company"] is engaged in the product design, manufacturing, distribution of fine jewelry throughout the United States and is headquartered from its corporate office in Fairfield,
New Jersey.  Based on the nature of operations, the Company's sales cycle experiences significant seasonal volatility with the first two quarters of the year representing 15% - 25% of annual sales and the remaining two quarters representing the remaining portion of annual sales.





Basis of Presentation- Our accounting policies are set forth in Note 2 of our audited financial statements included in the Diamond Information Institute, Inc. 2008 Form 10-K.





The accompanying unaudited interim financial statements have been prepared in accordance with accounting principles generally accepted for interim financial statement presentation and in accordance with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally
accepted in the United States of America for complete financial statement presentation. In the opinion of management, the financial statements contain all adjustments (consisting only of normal recurring accruals) necessary to present fairly the financial position as of June 30, 2009 and the results of operations for the three and six months ended June 30, 2009 and 2008 and cash flows for the six months ended June 30, 2009 and 2008. The results of operations for the six months ended June 30, 2009 are not necessarily
indicative of the results to be expected for the full year.





The Company has evaluated all subsequent events through August 17, 2009, the date of filing of these unaudited financial statements.





Business Continuity - As shown in the accompanying financial statements, the Company has incurred recurring losses from operations and continues to sustain cash flow deficits.  As of June 30, 2009, the Company’s current liabilities exceeded its current
assets by approximately $171,000 while, its total liabilities exceeded its total assets by $153,000. Further, through the six months ended June 30, 2009, the Company incurred a net loss from operations of approximately $319,000 and a cash flow deficit from current operations of approximately $21,000.  These factors raise substantial doubt about the Company’s ability to continue as a going concern.





The Company’s management has instituted a cost reduction program that included a reduction in labor and payroll taxes, promotional expenses and professional services. In addition, management believes these factors, along with the issuance of additional equity offerings as a form of financing, will contribute toward achieving profitability
and sustaining working capital needs. However, there can be no assurance that the Company will be successful in achieving these objectives.  The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.


8
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


[2] Recently Issued Accounting Standards





In April 2009, the FASB issued FSP No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to
require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. This FSP also amends APB Opinion No. 28, Interim Financial Reporting, to require those disclosures in summarized financial information at interim reporting periods. This FSP shall be effective for interim reporting periods ending after June 15, 2009. The Company does not have any fair value of
financial instruments to disclose.





In April 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments. This FSP amends the other-than-temporary impairment guidance in U.S. GAAP for debt securities to make the guidance more operational and to improve the
presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. The FSP does not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. The FSP shall be effective for interim and annual reporting periods ending after June 15, 2009. The Company currently does not have any financial assets that are other-than-temporarily impaired.





In April 2009, the FASB issued FSP No. FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies, to address some of the application issues under SFAS 141(R). The FSP deals with the initial recognition and measurement
of an asset acquired or a liability assumed in a business combination that arises from a contingency provided the asset or liability’s fair value on the date of acquisition can be determined. When the fair value can-not be determined, the FSP requires using the guidance under SFAS No. 5, Accounting for Contingencies, and FASB Interpretation (FIN) No. 14, Reasonable Estimation of the Amount of a Loss.
This FSP was effective for assets or liabilities arising from contingencies in business combinations for which the acquisition date is on or after January 1, 2009. The adoption of this FSP has not had a material impact on our financial position, results of operations, or cash flows during the six months ended June 30, 2009.





In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140” (“SFAS 166”). The provisions of SFAS 166, in part, amend the derecognition guidance in FASB Statement No. 140, eliminate the exemption from consolidation for qualifying
special-purpose entities and require additional disclosures. SFAS 166 is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. The Company does not expect the provisions of SFAS 166 to have a material effect on the financial position, results of operations or cash flows of the Company.


9
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R) (“SFAS 167”). SFAS 167 amends the consolidation guidance applicable to variable interest entities. The provisions of SFAS 167 significantly affect the overall consolidation analysis under FASB Interpretation No. 46(R).
SFAS 167 is effective as of the beginning of the first fiscal year that begins after November 15, 2009. SFAS 167 will be effective for the Company beginning in 2010. The Company does not expect the provisions of SFAS 167 to have a material effect on the financial position, results of operations or cash flows of the Company.





In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162” (“SFAS No. 168”). Under SFAS No. 168 the “FASB Accounting Standards Codification” (“Codification”)
will become the source of authoritative U. S. GAAP to be applied by nongovernmental entities.  Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009.  On the effective date, the Codification will supersede all then-existing non-SEC
accounting and reporting standards. All other non-grandfathered non-SEC accounting literature not included in the Codification will become non-authoritative. SFAS No. 168 is effective for the Company’s interim quarterly period beginning July 1, 2009. The Company does not expect the adoption of SFAS No. 168 to have an impact on the financial statements.





In June 2009, the Securities and Exchange Commission’s Office of the Chief Accountant and Division of Corporation Finance announced the release of Staff Accounting Bulletin (SAB) No. 112. This staff accounting bulletin amends or rescinds portions of the interpretive guidance included in the Staff Accounting Bulletin Series in order
to make the relevant interpretive guidance consistent with current authoritative accounting and auditing guidance and Securities and Exchange Commission rules and regulations. Specifically, the staff is updating the Series in order to bring existing guidance into conformity with recent pronouncements by the Financial Accounting Standards Board, namely, Statement of Financial Accounting Standards No. 141 (revised 2007), Business Combinations, and Statement of Financial Accounting Standards No. 160, Non-controlling
Interests in Consolidated Financial Statements. The statements in staff accounting bulletins are not rules or interpretations of the Commission, nor are they published as bearing the Commission's official approval. They represent interpretations and practices followed by the Division of Corporation Finance and the Office of the Chief Accountant in administering the disclosure requirements of the Federal securities laws.


10
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


[3] Fair Value Measurements





In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements(SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands the disclosure requirements regarding fair value measurements. SFAS 157 is effective for fiscal years beginning
after November 15, 2007 for financial assets and liabilities as well as for non-financial assets and liabilities that are recognized or disclosed at fair value on a recurring basis in the financial statements. In accordance with FSP No. 157-2, Effective Date of FASB Statement No. 157(FSP 157-2), for all other non-financial assets and liabilities, SFAS 157 is effective for fiscal years beginning after November 15, 2008. In October 2008, the FASB issued
FSP No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active(FSP 157-3), that clarifies the application of SFAS 157 for financial assets in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active.





On January 1, 2009, in accordance with FSP 157-2, we adopted the provisions of SFAS 157 on a prospective basis for our non-financial assets and liabilities that are not recognized or disclosed at fair value on a recurring basis. SFAS 157 requires that we determine the fair value of financial and non-financial assets and liabilities using
the fair value hierarchy established in SFAS 157 and describes three levels of inputs that may be used to measure fair value, as follows:





Level 1 inputs which include quoted prices in active markets for identical assets or liabilities;





Level 2 inputs which include observable inputs other than Level 1 inputs, such as quoted prices for similar assets or liabilities; quoted prices for identical or similar assets or liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term
of the asset or liability; and





Level 3 inputs which include unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the underlying asset or liability.  Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies
or similar valuation techniques, as well as significant management judgment or estimation.





The adoption of SFAS 157 had no effect on our net income for the six months ended June 30, 2009 and 2008 as the Company has no assets or liabilities classified as financial assets or liabilities as defined in accordance with SFAS 157.





In addition, the adoption of SFAS 157 for our non-financial assets and liabilities that are not recognized or disclosed at fair value on a recurring basis had no effect on our net income for the six months ended June 30, 2009.


11
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


[4] Notes Payable





June 30,


December 31,2009


2008(Unaudited)Notes payable due in equal monthly installments, over 36 months,
maturing through May 2009 at interest rates of 7.25%.  The notes
are collateralized by the assets of the Company.

$
--


$
20,965Notes payable due in equal monthly installments, over 60 months,
maturing through May 2011 at interest rates of 7.60%.  The notes
are collateralized by the assets of the Company.


127,518



158,320Notes payable due in equal monthly installments, over 60 months,
maturing through December 2013 at interest rates of 9.47%.
The notes are collateralized by the assets of the Company.


91,359



--Total


218,877



179,285Less: Current Maturities Included in Current Liabilities


80,335



82,015Total Long-Term Portion of Debt

$
138,542


$
97,270





As of June 30, 2009, maturities of long-term debt are as follows:





2010

$80,3352011

82,8942012

20,6452013

22,7622014

12,241Total

$218,877





12
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


[5] Bank Lines of Credit





A summary of these credit facilities is as follows:





June 30,


December 31,2009


2008(Unaudited)Credit Line of $700,000, minimum payment of interest only is due monthly at the bank's prime rate plus .75%. At June 30, 2009 and December 31, 2008, the interest rate was 4.00%. The Credit Line renews annually in May and is collateralized by the assets of the Company.  The Company is in negotiations with the bank to renew the terms
of the credit line and is waiting on funding from other sources.

$
699,999


$
699,999Credit Line of $55,000, minimum payment of interest only is due monthly at the bank's prime rate plus .75%. At June 30, 2009 and December 31, 2008, the interest rate was 4.00% . The Credit Line renews annually in July 2009 and is collateralized by the assets of the Company. The Company is in negotiations with the bank to renew the terms of
the credit line and is waiting on funding from other sources.


44,844



45,793Various unsecured Credit Cards of $188,200 and $178,700, minimum payment of principal and interest are due monthly at the credit card's annual interest rate.  At June 30, 2009 and December 31, 2008, the interest rates ranged from 3.99% to 24.90% and 4.74% to 13.99%, respectively.


178,015



164,656Total Bank Lines of Credit

$
922,858


$
910,449





The Company's CEO and majority shareholder also serves as a guarantor of the Company's debt. The Company is in negotiations with the bank to renew the terms of the credit line and is waiting on funding from other sources.





The Company had approximately $10,000 and $9,000 available under the various credit facilities (not including credit cards) at June 30, 2009 and December 31, 2008, respectively.


13
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


[6] Equipment Held Under Capital Leases





The Company's equipment held under the capital lease obligations is summarized as follows:





June 30,


December 31,2009


2008(Unaudited)Showroom Equipment

$
96,000


$
96,000Less: Accumulated Amortization


45,333



35,733Equipment Held under Capitalized Lease Obligations - Net

$
50,667


$
60,267





[6] Equipment Held Under Capital Leases [Continued]





Amortization related to the equipment held under capital leases for the three months ended June 30, 2009 and 2008 and the six months ended June 30, 2009 and 2008 amounted to approximately $5,000, $5,000, $10,000, and $10,000, respectively.





As of June 30, 2009, the future minimum lease payments under the capital leases are as follows:





2010

$
26,4322011


26,4322012


4,188Total


57,052Less: Amount Representing Imputed Interest


7,090Present Value of Net Minimum Capital Lease Payments


49,962Less: Current Portion of Capitalized Lease Obligations


21,343Non Current Portion of Capitalized Lease Obligations

$
28,619





Interest expense related to capital leases for the three months ended June 30, 2009 and 2008 and six months ended June 30, 2009 and 2008 amounted to approximately $1,000, $2,000, $3,000, and $4,000, respectively.


14
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


[7] Income Taxes





The income tax provision [benefit] is as follows:





Three Months Ended


Six Months EndedJune 30,


June 30,2009


2008


2009


2008(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)Current:Federal

$
--


$
--


$
--


$
--State


1,560



(1,735
)


2,080



2,931Totals


1,560



(1,735
)


2,080



2,931Deferred:Federal


--



(70,717
)


--



(130,201
)State


--



(34,446
)


--



(41,176
)Totals


--



(105,163
)


--



(171,377
)Totals

$
1,560


$
(106,898
)

$
2,080


$
(168,446
)





[7] Income Taxes [Continued]





Deferred income tax assets [liabilities] are as follows:





June 30,


December 31,2009


2008(Unaudited)Deferred Income Tax Assets:Net Operating Loss Carryforwards

$
671,771


$
590,514Allowance for Doubtful Accounts


34,511



32,115Allowance for Sales Returns


27,527



52,862Totals


733,809



675,491Deferred Income Tax Liabilities:Property and Equipment

$
(24,775
)

$
(25,546
)Election to Change from Cash to Accrual Basis of Income Tax Accounting


(312,398
)


(374,879
)Totals


(337,173
)


(400,425
)Gross Deferred Tax Asset


396,636



275,066Valuation Allowance for Deferred Taxes


(396,636
)


(275,066
)Net Deferred Tax Asset [Liability]

$
--


$
--





15
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


Effective with the 2008 tax year, management voluntarily elected a change in its method of tax accounting to the accrual basis as required by Section 481 of the Internal Revenue Code (the "IRC").  In management's opinion, based on provisions of the IRC, a voluntary election to the accrual basis of tax reporting should not subject
the Company to tax examinations for previous years that income tax returns have been filed and prompt an uncertain tax position in accordance with the Financial Accounting Standards Board Interpretation ("FIN") No. 48, Accounting for Uncertainty in Income Taxes.  As a result, no contingent liability has been recorded for the anticipated change in tax reporting.  Further, the resulting tax liability from the change in tax accounting method will be reduced by operating losses previously incurred.





At December 31, 2008, the Company had approximately $1,482,000 of federal net operating tax loss carryforwards expiring at various dates through 2028.  The Tax Reform Act of 1986 enacted a complex set of rules which limits a company's ability to utilize net operating loss carryforwards and tax credit carryforwards in periods following
an ownership change. These rules define an ownership change as a greater than 50 percent point change in stock ownership within a defined testing period which is generally a three-year period. As a result of stock which may be issued by us from time to time and the conversion of warrants, options or the result of other changes in ownership of our outstanding stock, the Company may experience an ownership change and consequently our utilization of net operating loss carryforwards could be significantly limited.





Based upon the net losses historically incurred and, the prospective global economic conditions, management believes that it is not more likely than not that the deferred tax asset will be realized and has provided a valuation allowance of 100% of the deferred tax asset.





[8] Stockholders' (Deficit) Equity





Articles of Incorporation Amendment and Stock Split-The Company's Certificate of Incorporation, as amended, authorizes the issuance of up to 25,000,000 shares of common stock at a par value of $.001 per
share.  Over the course of 2007, the Company's Board of Directors ratified two forward stock splits. The first stock split, for 1.725 to 1 and the second for 10,000 to 1.





This resulted in common stock outstanding increasing from 1,000 to 17,250,000 which were all owned by the Company's founder and CEO. The per share data for all periods presented has been retroactively adjusted due to each of the stock splits.





Subsequent to the forward stock splits, the Company's founder and CEO transferred a total of 2,250,000 shares to the Company's President and an Advisory Panel member.  Upon resignation of the Company’s President and Advisory Panel Member in late 2007, the Company cancelled 2,200,000 of the shares previously issued to those
individuals along with, 5,000,000 shares held by the CEO and principal stockholder.  These shares were cancelled in February 2008.





The share and per share data for all periods presented has been retroactively adjusted to reflect the stock splits.


16
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


Debt Conversions-In April 2007, the Company entered into a Debt Conversion Agreement (the "Agreement") and issued 100,000 shares of common stock at $1 per share to a vendor as full satisfaction for accounts
payable previously due and future services to be rendered.  Of the total $100,000 of common stock issued, $55,000 was to satisfy previous account payable balances and $45,000 was issued as consideration for future services to be rendered and was  reflected in the Deferred Compensation caption of the Stockholders' Equity section of the Balance Sheet, of which approximately $14,000 was expensed in 2008. The shares have a one year restriction from sale or offering.





Restricted Share Issuances-In January 2008, two Advisory Panel members and a Board of Director member received restricted common stock for services to be rendered throughout 2008.  The two Advisory
Panel members received 50,000 and 100,000 shares, respectively, with a fair value of $1.00 per share or $150,000 while the Board of Director member received 50,000 shares with a fair value of $1.00 per share or $50,000.  The share-based compensation expense for the three months ended June 30, 2009 and 2008 and the six months ended June 30, 2009 and 2008 amounted to $0, $25,000, $0 and $150,000, respectively.





Also in January 2008, the Company issued 117,500 shares of restricted common stock with a fair value of $1.00 per share or $117,500 to employees.  Shares issued in connection with the Board of Director consent, were dispersed ratably over the first two quarters of 2008 as authorized in the consent. The Share-based Compensation
expense for the three months ended June 30, 200 2008 and the six months ended June 30, 2008 amounted to $58,750 and $117,500, respectively.





[8] Stockholders' (Deficit) Equity [Continued]





Additionally, in January and February 2008, the Company sold 600 shares of common stock at $1.00 per share to individual investees.





For the year ended December 31, 2008, the Company issued to its SEC counsel, 450,000 shares of restricted common stock with a fair value of $1.00 per share or $450,000 for services in connection with the effective filing of Form S-1 with the SEC.


In January 2009, the Company agreed to issue its SEC counsel, 100,000 shares of restricted common stock with a fair value of $0.40 per share or $40,000 for services in connection with the effective filing of Form 15c-211 and submittal to FINRA through a market maker. The Share-Based Compensation expense for the three and six months ended
June 30, 2009 amounted to  $40,000.





In February 2009, the Company issued to its CEO 50,000 shares of restricted common stock with a fair value of $0.40 per share or $20,000 for services as a Board of Directors member throughout 2009.  The Share-based Compensation expense for the three and six months ended June 30, 2009 and 2009 amounted to $5,000 and $10,000, respectively.


17
 DIAMOND INFORMATION INSTITUTE, INC. D/B/A DESIGNS BY BERGIO
 NOTES TO FINANCIAL STATEMENTS [UNAUDITED]


In February 2009, the Company to issue its SEC counsel 20,000 shares of restricted common stock with a fair value of $0.40 per share or $8,000 for legal services to be provided for the Company’s SEC filings for the 2009 reporting year.  The common stock issued for professional services expense for the three and six months
ended June 30, 2009 and 2009 amounted to $2,000 and $4,000, respectively.





[9] Related Party Transactions





The Company receives periodic advances from its principal stockholder based upon the Company's cash flow needs.  At June 30, 2009 and December 31, 2008, $407,566 and $394,532, respectively was due to the shareholder.  Interest expense is accrued at an average annual market rate of interest which was 3.45% and 4.99% at
June 30, 2009 and December 31, 2008, respectively.  No terms for repayment have been established.  As a result, the amount is classified as a Current Liability.





During 2009, the Company obtained a $100,000 note payable to payoff an Advisory Panel member for IT implementation services.

















18


FORWARD-LOOKING STATEMENTS





This document contains “forward-looking statements”.  All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earnings, revenue or other financial items; any statements
of the plans, strategies and objections of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions or performance; any statements or belief; and any statements of assumptions underlying any of the foregoing.





Forward-looking statements may include the words “may,” “could,” “estimate,” “intend,” “continue,” “believe,” “expect” or “anticipate” or other similar words.  These forward-looking statements present our estimates and assumptions
only as of the date of this report.  Accordingly, readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the dates on which they are made.  Except for our ongoing securities laws, we do not intend, and undertake no obligation, to update any forward-looking statement.  You should, however, consult further disclosures we make in future filings of our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form
8-K.





Although we believe the expectations reflected in any of our forward-looking statements are reasonable, actual results could differ materially from those projected or assumed in any of our forward-looking statements.  Our future financial condition and results of operations, as well as any forward-looking statements, are subject
to change and inherent risks and uncertainties.  The factors impacting these risks and uncertainties include, but are not limited to:





·
our current lack of working capital;


·
increased competitive pressures from existing competitors and new entrants;


·
increases in interest rates or our cost of borrowing or default under any material debt agreements;


·
inability to raise additional financing;


·
deterioration in general or regional economic conditions;


·
adverse state or federal legislation or regulation that increases the costs of compliance, or adverse findings by a regulator with respect to existing operations;


·
changes in U.S. GAAP or in the legal, regulatory and legislative environments in the markets in which we operate;


·
the fact that our accounting policies and methods are fundamental to how we report our financial condition and results of operations, and they may require management to make estimates about matters that are inherently uncertain;


·
inability to efficiently manage our operations;


·
loss of customers or sales weakness;


·
inability to achieve future sales levels or other operating results;


·
key management or other unanticipated personnel changes;


·
the unavailability of funds for capital expenditures; and


·
operational inefficiencies in distribution or other systems.


19





For a detailed description of these and other factors that could cause actual results to differ materially from those expressed in any forward-looking statement, please see Item 1A. Risk Factors in this document and in our Annual Report on Form 10-K for the year ended December 31, 2008.





AVAILABLE INFORMATION





Our securities as of September 8, 2008 are registered under the Securities Act of 1933, and we will file reports and other information with the Securities and Exchange Commission as a result. Additionally, we shall file supplementary and periodic information, documents and reports that are required under section 13(a) and Section 15(d)
of the Exchange Act, as amended.





All of our reports will be able to be reviewed through the SEC’s Electronic Data Gathering Analysis and Retrieval System (EDGAR) which is publicly available through the SEC’s website (http://www.sec.gov) or they can be inspected and copied at the public reference
facility maintained by the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0405. Information regarding the public reference facilities may be obtained from the SEC by telephoning 1-800-SEC-0330. Copies of such materials may also be obtained by mail from the public reference section of the SEC at 100 F Street, N.E., Room 1580, Washington, D.C. 20549-0405 at prescribed rates.





Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation





OVERVIEW





Diamond Information Institute, Inc. was incorporated in the State of New Jersey in October 1988 and had minimal activity until 1995 when it began in the business of jewelry manufacturing under the name Diamond Information Institute (d/b/a “Bergio”).  Since 1995 Diamond has been engaged in the design and manufacture
of upscale jewelry through its trade name of “Bergio” and in 2002 launched its “Bergio Bridal Collection”.  The Company sells to approximately 150 independent jewelry retailers across the United States and has incurred a significant amount of capital resources in creating brand recognition in the jewelry industry.





OVERVIEW OF CURRENT OPERATIONS





Diamond’s products consist of a wide range of unique styles and designs made from precious metals such as, gold, platinum, and Karat gold, as well as diamonds and other precious stones.  Diamond has approximately 50 to 75 product styles in its inventory, with prices ranging from $400 to $200,000.  Additionally,
Diamond has manufacturing control over its line as a result of having a manufacturing facility in New Jersey as well as subcontracts with facilities in Italy and Bangkok.


20


In September of 2008, Diamond’s S-1 registration statement became effective with the SEC.  Diamond believes that in becoming a public company, it will provide the Company increased flexibility in being able to acquire smaller jewelry manufacturers while also being able to consolidate overlapping expenses.  It
is Diamond’s intention to establish itself as a holding company for the purpose of acquiring established jewelry design and manufacturing firms who possess branded product lines.  Branded product lines are products and/or collections whereby the jewelry manufacturers have established their products within the industry through advertising in consumer and trade magazines as well as possibly obtaining federally registered trademarks of their products and collections.  This is in line with
the Company’s strategy and belief that a brand name can create an association with innovation, design and quality which helps add value to the individual products as well as facilitate the introduction of new products.





Diamond intends to acquire, design and manufacturing firms throughout the United States and Europe.  If and when Diamond pursues any potential acquisition candidates, it intends to target the top 10% of the world’s jewelry manufactures that have already created an identity and brand in the jewelry industry.  Diamond
intends to locate potential candidates through its relationships in the industry and expects to structure the acquisition through the payment of cash, which will most likely be provided from third party financing, as well as Diamond’s common stock and not cash generated from Diamond’s operations.  In the event, Diamond obtains financing from third parties for any potential acquisitions; Diamond may agree to issue Diamond’s common stock in exchange for the capital received.  However,
as of the date of this periodic report Diamond does not have any binding agreements with any potential acquisition candidates or arrangements with any third parties for financing.





Diamond’s management believes that the jewelry industry competes in the global marketplace and therefore must be adaptable to ensure a competitive measure.  Recently the U.S. economy has encountered a slowdown and Diamond anticipates the U.S. economy will most likely remain
weak at least through all of 2009.  Consumer spending for discretionary goods such as jewelry is sensitive to changes in consumer confidence and ultimately consumer confidence is affected by general business considerations in the U.S. economy.  Consumer spending for discretionary spending generally decline during times of falling consumer confidence, which may affect Diamond’s retail sale of its products.  U.S. consumer confidence reflected these slowing conditions during the
last quarter of 2007 and has been carried forward throughout the year of 2008.  Therefore, Diamond intends to make strong efforts to maintain its brand in the industry through its focus on the innovation and design of its products as well as being able to consolidate and increase cost efficiency when possible through acquisitions.





Diamond intends to make strong efforts to maintain its brand in the industry through its focus on the innovation and design of its products as well as being able to consolidate and increase cost efficiency when possible through acquisitions.


21


Result of Operations for the Three and Six Months Ended June 30, 2009 and 2008





The following income and operating expenses tables summarize selected items from the statement of operations for the three months ended June 30, 2009 compared to the three months ended June 30, 2008 and six months ended June 30, 2009 compared to the six months ended June 30, 2008.





INCOME:





Three Months Ended
June 30,


Six Months Ended
June 30,2009


2008


2009


2008(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)Sales

$
263,581


$
362,719



454,307


$
642,883Cost of Sales


181,422



167,016



361,694



302,129Gross Profit

$
82,159


$
195,703



92,613


$
340,754Gross Profit Percentage of Revenue


31
%


54
%


20
%


53
%





Sales





Sales for the three months ended June 30, 2009 were $263,581 compared to $362,719 for the three months ended June 30, 2008.  This resulted in a decrease of $99,138 or 27% from the comparable period of 2009 to 2008.  Sales were lower due to the continuing tough economic environment. Sales for the six months ended June
30, 2009 were $454,307 compared to $642,883 for the six months ended June 30, 2008. This resulted in a decrease of $188,576 or 29% from the comparable period of 2009 to 2008. The six month decrease is primarily due to the increase in sales discounts during the first quarter of 2009 as discussed below.





Due to the unfavorable economic environment we increased our sales discounts to our customers during the three months ended March 31, 2009.  Aggregate sales discounts in the three months ended March 31, 2009 and 2008 totaled approximately $75,000 and $14,000.  During the three months ended June 30, 2009 and 2008 our
sales discounts amounted to $3,000 and $0, respectively. The increased sales discounts in 2009 were to move product and increase our liquidity.  We anticipate sales discounts and gross profits to return to historical levels as soon as the economic environment begins to turnaround and sustain growth





Typically, revenues experience significant seasonal volatility in the jewelry industry.  The first two quarters of any given year typically represent approximately 15%-25% of total year revenues, based on historic results.  The holiday buying season during the last two quarters of every year typically account for the
remainder of annual sales.





22


Cost of Sales





Cost of sales for the three months ended June 30, 2009 were $181,422 or 69% of sales compared to $167,016 or 46% of sales for the three months ended June 30, 2008.  Cost of sales for the six months ended June 30, 2009 were $361,694 or 80% of sales compared to $302,129 or 47% of sales for the six months ended June 30, 2008.





Gross Profit:





Goss profit for the three months ended June 30, 2009 were $82,159 or 31% of sales compared to $195,703 or 54% of sales for the three months ended June 30, 2008. Gross profit for the six months ended June 30, 2009 were $92,613 or 20.4% of sales compared to $340,754 or 53% of sales for the six months ended June 30, 2008.  Our decreased
gross profit margin during the year of 2009 was principally due to the increased sales discounts given to our customers in the first quarter of 2009. On a pro forma basis our gross profit margins for the six months ended June 30, 2009 would be approximately 30% versus 53% without the additional sales discounts granted our customers in 2009 versus 2008.





OPERATING EXPENSES:





Three Months Ended
June 30,


Six Months Ended
June 30,2009


2008


2009


2008(Unaudited)


(Unaudited)


(Unaudited)


(Unaudited)Selling Expenses

$
82,002


$
80,741


$
130,272


$
143,765Total General and Administrative Expenses


91,788



324,383



234,547



796,071Total Operating Expenses

$
173,790


$
405,124



364,819



939,836Net Loss

$
(117,319
)

$
(124,797
)

$
(318,775
)

$
(485,516
)





Selling Expenses





Total selling expenses for the three months ended June 30, 2009 were $82,002 compared to $80,741 for the three months ended June 30, 2008. This resulted in an increase of $1,261, or  2%, from the comparable period of 2009 to 2008. Total selling expenses for the six months ended
June 30, 2009 were $130,272 compared to $143,765 for the six months ended June 30, 2008. This resulted in a decrease of $13,493, or 9%, from the comparable period of 2009 to 2008. Selling expenses have remained relatively flat for the three and six months ended June 30, 2009 compared to 2008 principally due to certain cost containment efforts implemented in 2009.








23


General and Administrative Expenses





General and administrative expenses for the three months ended June 30, 2009 were $91,788 compared to $324,383 for the three months ended June 30, 2008 or a decrease of $232,595. 2008. The decrease in general and administrative expenses in 2009 is due primarily to a decrease in non-cash charges related to stock-based compensation of approximately
$177,000.





General and administrative expenses for the six months ended June 30, 2009 were $234,547 compared to $796,071 for the six months ended June 30, 2008. This resulted in a decrease of $561,524 from the comparable period of 2009 to 2008. The decrease in general and administrative expenses in 2009 is due primarily to (i) a decrease in non-cash
charges related to Share-Based compensation of approximately $464,000 and (ii) the implementation of certain cost containment efforts implemented in 2009 in conjunction with lower sales.





Loss from Operations





Loss from operations for the three months ended June 30, 2009 were $91,631 compared to $209,241 for the three months ended June 30, 2008. This resulted in a decrease of $117,610, or 56%, from the comparable period of 2009 to 2008. Loss from operations for the six months ended June 30, 2009 were $272,206 compared to $599,082 for the six
months ended June 30, 2008. This resulted in a decrease of $326,876, or 55%, from the comparable period of 2009 to 2008.





Other Income  (Expense)





Other Income (Expense) for the three months ended June 30, 2009 were ($24,128) compared to ($22,274) for the three months ended June 30, 2008. This resulted in an increase of ($1,854) in 2009 as compared to the same period in 2008.  Other Income (Expense) for the six months ended June 30, 2009 were $44,489 compared to $54,880
for the six months ended June 30, 2008 or a decrease of $10,391 in 2009 as compared to the same period in 2008.  Other Income (Expense) is comprised primarily of interest incurred on bank lines of credit, corporate credit cards, term loans and capital leases in connection with operations related to manufacturing and indirect operating expenses offset by miscellaneous income.  We attribute the decrease in our other (expense) / income during the six months ended June 30, 2009 when compared to
the six months ended June 30, 2008 as a result of a reduction in interest expense of approximately $10,000. Interest expense in 2009 primarily decreased due to lower interest rates on lines of credit and credit cards.


24


Income Tax Provision (Benefit)





We reported an income tax provision of $1,560 for the three months ended June 30, 2009 as compared to an income tax benefit of $106,898 for the three months ended June 30, 2008.  We reported an income tax provision of $2,080 for the six months ended June 30, 2009 as compared to
an income tax benefit of $168,446 for the six months ended June 30, 2008. In 2009, we chose to record a full valuation allowance against our deferred tax assets during the fourth quarter of 2008 as we believe it is not more likely than not, they will not be utilized.





Net Loss





Net loss for the three months ended June 30, 2009 was $117,319 compared to $124,797 for the three months ended June 30, 2008. This resulted in a decrease of $7,478, or 6%, from the comparable period of 2009 to 2008. Net loss for the six months ended June 30, 2009 was $318,775 compared to $485,516 for the six months ended June 30, 2008.
This resulted in a decrease of $166,741, or 34%, from the comparable period of 2009 to 2008.





Liquidity and Capital Resources





The following table summarizes working capital at June 30, 2009 compared to December 31, 2008.





June 30, 2009
December 31, 2008
Increase / (Decrease)$Current Assets
$1,791,284
$2,079,321
$(288,037)Current Liabilities
1,962,091
1,996,988
(34,897)Working Capital
$(170,807)
$82,333
$(253,140)





As of June 30, 2009, we had a cash overdraft of $26,925, compared to a cash overdraft of $7,345 at December 31, 2008.  It is anticipated that we will need to sell additional equity or debt securities or obtain credit facilities from financial institutions to meet our long-term liquidity and capital requirements, which include
strategic growth through mergers and acquisitions.  There is no assurance that we will be able to obtain additional capital or financing in amounts or on terms acceptable to us, if at all or on a timely basis.





Accounts receivable at June 30, 2009 was $329,549 and $713,194 at December 31, 2008, representing a decrease of $383,645 or 54%.  We typically offer our customers 60, 90 or 120 day payment terms on sales, depending upon the product mix purchased.  When setting terms with our customers, we also consider the term of the
relationship with individual customers and management’s assessed credit risk of the respective customer, and may at management’s discretion, increase or decrease payment terms based on those considerations.


25


Inventory at June 30, 2009 was $1,458,836 and $1,326,989 at December 31, 2008. Our management seeks to maintain a very consistent inventory level that it believes is commensurate with current market conditions and manufacturing requirements related to anticipated sales volume.  We
historically have not have an inventory reserve for slow moving or obsolete products due to the nature of our inventory of precious metals and stones.  This allows us to resell or recast these materials into new products and/or designs as the market changes.





Accounts payable and accrued expenses at June 30, 2009 were $434,144 compared to $446,892 at December 31, 2008, which represents a 3% decrease or $12,748 movement.





Bank Lines of Credit and Notes Payable





Our indebtedness is comprised of various bank credit lines, term loans, capital leases and credit cards intended to provide capital for the ongoing manufacturing of our jewelry line, in advance of receipt of the payment from our retail distributors.  As of June 30, 2009, we had
two outstanding term loans.  One of the loans is a $300,000 term loan with JPMorgan Chase, which is payable in monthly installments and matures in May 2011.  The note bears an annual interest rate of 7.60% and as of June 30, 2009 there was an outstanding balance of $127,518.  We also have a $100,000 term loan with Leaf Financial Corporation, which is payable in monthly installments and matures in December 2013.  The note bears an annual interest rate of 9.47% and as of
June 30, 2009 there was an outstanding balance of $91,359.  Both of these notes are collateralized by our assets as well as a personal guarantee by our CEO, Berge Abajian.





In addition to the notes payable, we utilize bank lines of credit to support working capital needs.  As of June 30, 2009, we had two lines of credit.  One bank line of credit is for $700,000 with Columbia Bank and requires minimum monthly payment of interest only.  The interest is calculated at the bank’s
prime rate plus 0.75%.  As of June 30, 2009, we had an outstanding balance of $699,999 at an effective annual interest rate of 4.00%.  Additionally, we have a bank line of credit of $55,000 with JPMorgan Chase Bank, which also requires a monthly payment of interest only.  The interest rate is calculated at the bank’s prime rate plus 0.75%.  As of June 30, 2009, we had an outstanding balance of $44,844 at an effective annual interest rate of 4.00%.  Each
credit line renews annually and is collateralized by our assets as well as a personal guarantee by our CEO, Berge Abajian.  The Company is in negotiations with the bank to renew the terms of the credit line and is waiting on funding from other sources.





In addition to the bank lines of credit and term loans, we have a number of various unsecured credit cards.  These credit cards require minimal monthly payments of interest only and as of June 30, 2009 have interest rates ranging from 3.99% to 24.90%.  As of June 30, 2009, we have outstanding balances of $178,015.


26


Satisfaction of our cash obligations for the next 12 months.





For the six months ended June 30, 2009 and the six months ended June 30, 2008, we have incurred net losses of approximately $319,000  and $486,000  respectively. We have funded our working capital needs primarily from revenues, a private placement equity offering and advances from our CEO and principal stockholder.
Our plan is to acquire design and manufacturing companies throughout the United States and Europe. If and when we pursue any potential business acquisitions, we intend to target the top 10% of the world’s jewelry manufacturers that have already created an identity and brand in the jewelry business. We plan to fund these potential business acquisitions from additional equity and/or debt financing, and joint venture partnerships.  However, we have no binding agreements or understandings with any
potential acquisition targets. There is no assurance that we will be able to obtain additional capital in the amount or, on terms acceptable to us, in the required timeframe.





A critical component of our operating plan impacting our continued existence is to efficiently manage the production of our jewelry lines and successfully develop new lines through our Company or through possible acquisitions and/or mergers. Our ability to obtain capital through additional equity and/or debt financing, and joint venture
partnerships will also be important to our expansion plans. In the event we experience any significant problems assimilating acquired assets into our operations or cannot obtain the necessary capital to pursue our strategic plan, we may have to reduce the planned future growth of our operations.





Over the next twelve months we believe we have the required working capital needs to fund our current operations through revenues.  However, any expansion or future business acquisitions will require us to raise capital through an equity offering.





Summary of product and research and development that we will perform for the term of our plan.





We are not anticipating significant research and development expenditures in the near future.





Expected purchase or sale of plant and significant equipment.





We do not anticipate the purchase or sale of any plant or significant equipment; as such items are not required by us at this time.





Significant changes in the number of employees.





As previously mentioned, we currently have 3 full-time employees and 2 part-time employees.  We do not anticipate a significant change in the number of full time employees over the next 12 months.  None of our employees are subject to any collective bargaining agreements.


27


Off-Balance Sheet Arrangements





We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results or operations, liquidity, capital expenditures or capital resources that is deemed material.





Critical Accounting Policies





The Company prepares its financial statements in accordance with accounting principles generally accepted in the United States of America. Preparing financial statements in accordance with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue and expenses during the reported period.





Accounts Receivable.  Management periodically performs a detailed review of amounts due from customers to determine if accounts receivable balances are impaired based on factors affecting the collectability of those balances.  Management has provided an allowance
for doubtful accounts of approximately $86,000 at June 30, 2009 and $80,000 at December 31, 2008.





Long-Lived Assets.  In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, long-lived tangible assets subject to depreciation or amortization are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  If an asset is determined to be impaired, the loss is measured by the excess of the carrying amount of the asset over its fair value as determined by an estimate of undiscounted future cash flows.  As these factors are difficult to predict and are subject to future events that may alter management’s assumptions, the future cash flows estimated by management in their impairment
analyses may not be achieved.





Revenue Recognition. The Company’s management recognizes revenue when realized or realizable and earned.  In connection with revenue recorded, the Company establishes a sales returns and allowances reserve for anticipated merchandise to be returned.  The
estimated percentage of sales to be returned is based on the Company’s historical experience of returned merchandise. Also, management calculates an estimated gross profit margin on returned merchandise deriving a cost for the anticipated returned merchandise also based on the Company’s historical operations.





The Company’s sole revenue producing activity as a manufacturer and distributor of upscale jewelry is affected by movement in fashion trends and customer desire for new designs, varying economic conditions affecting consumer spending and changing product demand by retailers affecting their desired inventory levels.


28


Therefore, management’s estimation process for merchandise returns can result in actual amounts differing from those estimates.  This estimation process is susceptible to variation and uncertainty due to the challenges faced by management to comprehensively discern all conditions affecting future merchandise returns whether
prompted by fashion, the economy or customer relationships.  Ultimately, management believes historical factors provide the best indicator of future conditions based on the Company’s responsiveness to changes in fashion trends, the cyclical nature of the economy in conjunction with the number of years in business and consistency and longevity of its customer mix.





Item 3. Quantitative and Qualitative Disclosures About Market Risk.





This item in not applicable as we are currently considered a smaller reporting company.





Item 4T. Controls and Procedures.





Evaluation of Disclosure Controls and Procedures





Our Chief Executive Officer and Principal Financial Officer, Berge Abajian, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this Report.  Based on that evaluation, Mr. Abajian concluded
that our disclosure controls and procedures are effective in timely alerting him to material information relating to us required to be included in our periodic SEC filings and in ensuring that information required to be disclosed by us in the reports that we file or submit under the Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.





Changes in Internal Control Over Financial Reporting





There were no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or reasonably likely to materially affect, our internal control over financial reporting.





PART II – OTHER INFORMATION





Item 1. Legal Proceedings.





From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are not presently a party to any material
litigation, nor to the knowledge of management is any litigation threatened against us, which may materially affect us.


29


Item 1A. Risk Factors.





Risks Relating with Our Business and Marketplace





Diamond will need additional capital in the future to finance its operations or any future acquisitions, which it may not be able to raise or it may only be available on terms unfavorable to current non-affiliate shareholders.  This may result in Diamond’s inability to fund its working
capital requirements and ultimately harm its operational results.





Diamond has and expects to continue to have substantial capital expenditure and working capital needs.  For the six months ended June 30, 2009 and 2008, Diamond had sales of $454,307 and $642,883, respectively and net loss of $318,775 and $485,516, respectively.  While management believes that its financial policies
have been prudent, the Company will be reliant on future potential equity and/or debt raises to expand its current business and assist in any future acquisitions, if and when those opportunities occur.





There can be no assurance that Diamond will be successful in continuing to meet its cash requirements from existing operations, or in raising a sufficient amount of additional capital in future finance offerings.  Additional financing might not be available on terms favorable to Diamond, or at all. If adequate funds were not
available or were not available on acceptable terms, Diamond’s ability to fund its operations, take advantage of unanticipated opportunities, develop or enhance its business or otherwise respond to competitive pressures would be significantly limited.





A decline in discretionary consumer spending may adversely affect Diamond’s industry, its operations, and ultimately its profitability.





Luxury products, such as fine jewelry, are discretionary purchases for consumers.  Any reduction in consumer discretionary spending or disposable income may affect the jewelry industry more significantly than other industries.  Many economic factors outside of Diamond’s
control could affect consumer discretionary spending, including the financial markets, consumer credit availability, prevailing interest rates, energy costs, employment levels, salary levels, and tax rates.  Any reduction in discretionary consumer spending could materially adversely affect Diamond’s business and financial condition.





Diamond is highly dependent on its key executive officers for the success of its business plan and may be dependent on the efforts and relationships of the principals of future acquisitions and mergers.  If any of these individuals become unable to continue in their role, the company’s
business could be adversely affected.


30


Diamond believes its success will depend, to a significant extent, on the efforts and abilities of Berge Abajian, its CEO.  If Diamond lost Mr. Abajian, it would be forced to expend significant time and money in the pursuit of a replacement, which would result in both a delay in
the implementation of its business plan and the diversion of limited working capital. Diamond can give you no assurance that it could find a satisfactory replacement for Mr. Abajian at all, or on terms that are not unduly expensive or burdensome.





If Diamond grows and implements its business plan, it will need to add managerial talent to support its business plan.  There is no guarantee that Diamond will be successful in adding such managerial talent.  These professionals are regularly recruited by other companies and may choose to change companies.  Given
Diamond’s relatively small size compared to some of its competitors, the performance of its business may be more adversely affected than its competitors would be if Diamond loses well-performing employees and are unable to attract new ones.





Diamond may acquire assets or other businesses in the future.





We may consider acquisitions of assets or other business. Any acquisition involves a number of risks that could fail to meet our expectations and adversely affect our profitability. For example:





·
The acquired assets or business may not achieve expected results;


·
We may incur substantial, unanticipated costs, delays or other operational or financial problems when integrating the acquired assets;


·
We may not be able to retain key personnel of an acquired business;


·
Our management’s attention may be diverted; or


·
Our management may not be able to manage the acquired assets or combined entity effectively or to make acquisitions and grow our business internally at the same time.





If these problems arise we may not realize the expected benefits of an acquisition.


The jewelry industry in general is affected by fluctuations in the prices of precious metals and precious and semi-precious stones.





The availability and prices of gold, diamonds, and other precious metals and precious and semi-precious stones may be influenced by cartels, political instability in exporting countries and inflation.  Shortages of these materials or sharp changes in their prices could have a material
adverse effect on Diamond’s results of operations or financial condition.  A significant change in prices of key commodities, including gold, could adversely affect its business or reduce operating margins and impact consumer demand if retail prices increased significantly, even though Diamond historically incorporates any increases in the purchase of raw materials to its consumers.  Additionally, a significant disruption in our supply of gold or other commodities could decrease the
production and shipping levels of our products, which may materially increase our operating costs and ultimately affect our profit margins.


31


Diamond depends on its ability to identify and respond to fashion trends.





The jewelry industry is subject to rapidly changing fashion trends and shifting consumer demands.  Accordingly, Diamond’s success may depend on the priority that its target customers place on fashion and its ability to anticipate, identify, and capitalize upon emerging fashion
trends.  If Diamond misjudges fashion trends or are unable to adjust its products in a timely manner, its net sales may decline or fail to meet expectations and any excess inventory may be sold at lower prices.





Diamond’s ability to maintain or increase its revenues could be harmed if Diamond is unable to strengthen and maintain its brand image.





Diamond has spent significant amounts in branding its Bergio and Bergio Bridal lines.  Diamond believes that primary factors in determining customer buying decisions, especially in the jewelry industry, are determined by price, confidence in the merchandise and quality associated
with a brand.  The ability to differentiate products from competitors of Diamond has been a factor in attracting consumers.  However, if Diamond’s ability to promote its brand fails to garner brand recognition, its ability to generate revenues may suffer.  If Diamond fails to differentiate its products, its ability to sell its products wholesale will be adversely affected.  These factors could result in lower selling prices and sales volumes, which could adversely
affect its financial condition and results of operations.





Diamond maintains a relatively large inventory of its raw materials and if this inventory is lost due to theft, its results of operations would be negatively impacted.





We purchase large volumes of precious metals and store significant quantities of raw materials and jewelry products at our facility in New Jersey.  Although we have an insurance policy with Lloyd’s of London, if we were to encounter significant inventory losses due to third
party or employee theft from our facility which required us to implement additional security measures, this would increase our operating costs.  Also such losses of inventory could exceed the limits of, or be subject to an exclusion from, coverage under our current insurance policy.  Claims filed by us under our insurance policies could lead to increases in the insurance premiums payable by us or possible termination of coverage under the relevant policy.





If Diamond were to experience substantial defaults by its customers on accounts receivable, this could have a material adverse affect on Diamond’s liquidity and results of operations.


32


A significant portion of our working capital consists of accounts receivable from customers.  If customers responsible for a large amount of accounts receivable were to become insolvent or otherwise unable to pay for our products, or to make payments in a timely manner, Diamond’s
liquidity and results of operations could be materially adversely affected.  An economic or industry downturn could materially affect the ability to collect these accounts receivable, which could then result in longer payment cycles, increased collections costs and defaults in excess of management’s expectations.  A significant deterioration in the ability to collect on accounts receivable could affect the cash flow and working capital position of Diamond.





Risks Relating to our Common Stock





If we fail to remain current on our reporting requirements, we could be removed from the OTC Bulletin Board which would limit the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.





Companies trading on the OTC Bulletin Board, such as us, must be reporting issuers under Section 12 of the Securities Exchange Act of 1934, as amended, and must be current in their reports under Section 13, in order to maintain price quotation privileges on the OTC Bulletin Board.  More specifically, the Financial Industry Regulatory
Authority (“FINRA”) has enacted Rule 6530, which determines eligibility of issuers quoted on the OTC Bulletin Board by requiring an issuer to be current in its filings with the Commission.  Pursuant to Rule 6530(e), if we file our reports late with the Commission three times in a two-year period or our securities are removed from the OTC Bulletin Board for failure to timely file twice in a two-year period then we will be ineligible for quotation on the OTC Bulletin Board.  As a
result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market.  We have not been late in any of our SEC reports through December 31, 2008.





Our common stock could be deemed a low-priced “Penny” stock which could make it cumbersome for brokers and dealers to trade in our common stock, making the market for our common stock less liquid and negatively affect the price of our stock.





In the event where our securities are accepted for trading in the over-the-counter market, trading of our common stock may be subject to certain provisions of the Securities Exchange act of 1934, commonly referred to as the “penny stock” as defined in Rule 3a51-1.  A penny stock is generally defined to be any equity
security that has a market price less than $5.00 per share, subject to certain exceptions.  If our stock is deemed to be a penny stock, trading will be subject to additional sales practice requirements of broker-dealers.  These require a broker-dealer to:


33





·
Deliver to the customer, and obtain a written receipt for, a disclosure document;


·
Disclose certain price information about the stock;


·
Disclose the amount of compensation received by the broker-dealer or any associated person of the broker-dealer;


·
Send monthly statements to customers with market and price information about the penny stock; and


·
In some circumstances, approve the purchaser’s account under certain standards and deliver written statements to the customer with information specified in the rules.





Consequently, penny stock rules may restrict the ability or willingness of broker-dealers to trade and/or maintain a market in our common stock.  Also, prospective investors may not want to get involved with the additional administrative requirements, which may have a material adverse effect on the trading of our shares.





FINRA sales practice requirements may also limit a stockholder's ability to buy and sell our stock.





In addition to the “penny stock” rules described above, FINRA has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives and other information. Under interpretations of these rules, the FINRA believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell
our stock and have an adverse effect on the market for our shares.





Our current chief executive officer and sole director, Mr. Berge Abajian, owns a significant percentage of our company and will be able to exercise significant influence over our company.





Berge Abajian, our chief executive officer and sole director, beneficially owns approximately 88% of our common stock.  Accordingly, Mr. Abajian will be able to determine the composition of our board of directors, will retain the effective voting power to approve all matters requiring
shareholder approval, will prevail in matters requiring shareholder approval, including, in particular the election and removal of directors, and will continue to have significant influence over our business.  As a result of his ownership and position in the Company, Mr. Abajian is able to influence all matters requiring shareholder action, including significant corporate transactions.  In addition, sales of significant amount of shares held by Mr. Abajian, or the prospect of these sales,
could adversely affect the market price of our common stock.


34





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





During the quarter ended June 30, 2009 and currently, we have no recent sales of unregistered securities.





Issuer Purchases of Equity Securities





We did not repurchase any of our securities during the quarter ended June 30, 2009.





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.





Incorporated by referenceExhibit
Exhibit Description
Filed herewith
Form
Period ending
Exhibit
Filing date3(i)
Certificate of Incorporation, dated October 24, 1988

Form S-1/A

3(i)
08/28/083(i)(b)
Certificate of Trade Name, dated January 31, 1997

Form S-1/A

3(i)(b)
08/28/083(i)(c)
Certificate of Amendment to the Certificate of Incorporation, dated May 31, 2007

Form S-1/A

3(i)(c)
08/28/083(ii)
Bylaws of Diamond Information Institute, Inc.

Form S-1/A

3(ii)
08/28/085
Opinion of Legal Counsel (Stoecklein Law Group) – Dated August 28, 2008

Form S-1/A

5
08/28/0810.1
Sample Subscription Agreement for the $25,000 unit offering

Form S-1/A

10.1
08/28/0831
Certification of Berge Abajian pursuant to Section 302 of the Sarbanes-Oxley Act
X32
Certification of Berge Abajian pursuant to Section 906 of the Sarbanes-Oxley Act
X





35





SIGNATURES





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





DIAMOND INFORMATION INSTITUTE, INC.


(Registrant)











By:/S/ Berge Abajian


Berge Abajian, President &


Chief Executive Officer (On behalf of


the registrant and as principal accounting


officer)





Date: August 18, 2009


36