If at first you don't succeed.....
On August 10, 2015, we purchased our first set of colored diamonds from Kashif Khan, our officer and director, with a wholesale value of US$4 Million, in exchange for issuing to him three secured demand convertible promissory notes totaling US$4 Million. On July 15, 2016, however, Khan demanded payment on his convertible notes. Because we had not raised $5 million in debt or equity financing and no portion of the notes had been converted, we elected to return the diamonds to Khan in lieu of payment, as provided for in the notes.
Since our initial purchase of diamonds, we have continued to acquire colored diamonds to build our inventory. At year end, we issued 4,880,215 shares of common stock related to various Diamond Purchase Agreements for colored diamonds with a liquidation value of approximately $1.3 million.
We plan to manage a portfolio of rare colored diamonds that are selected for price potential. Our officer and director, Kashif Khan, has established a worldwide reputation as a purveyor of exquisite, extraordinary fine quality colored diamonds that are sold at competitively reasonable prices. Through Mr. Khan’s reputation and long standing close business ties to the diamond wholesale market, we plan to have direct access to acquiring an unsurpassed collection of the highest investment grade colored diamonds that are released on a wholesale basis to auction houses, investors and jewelry wholesalers and retailers throughout Toronto and Vancouver, Canada. We also intend to move our business into the United States, and thereafter internationally as funds permit and if our growth sustains the effort.
On April 25, 2016, we signed an Acquisition of Shares Agreement (the “Agreement”) with Karrah Inc., an Ontario corporation (“Karrah”), and the sole shareholder of Karrah, Farrah Khan (“Khan”). Khan is the wife of our director, Kashif Khan. Pursuant to the Agreement, we agreed to acquire all of the issued and outstanding shares of stock in Karrah, resulting in a parent subsidiary relationship. In consideration for the acquisition of Karrah, we agreed to issue to Khan a three year promissory note (the “Note”) in the amount of $1,500,000, with interest at 6% per annum and secured by the assets of Karrah.
In addition, we agreed to assume 100% of all account receivables currently outstanding by Karrah as of the date of the Agreement. In exchange for the outstanding receivable, we issued to Khan a three year promissory note (the “AR Note”) in the amount of $293,275.67, with interest at 6% per annum, also secured by the assets of Karrah.
On October 26, 2016, however, we learned that it was not possible to obtain an audit of Karrah that we were required to file with the SEC in connection with the acquisition as a result of the nature of the company’s jewelry inventory. Because we were unable to obtain an audit of Karrah, on October 28, 2016, we have restructured the entire transaction by entering into a Termination and Restructure Agreement. First, we and Khan have mutually agreed to cancel the Agreement to acquire the issue and outstanding shares of stock in Karrah. Second, we agreed to purchase from Karrah its customer list in exchange for a revised promissory note (the “New Note”). The New Note will be in favor of Karrah (and not Khan), valued at $1,500,000 with interest at 6% per annum, and will not be secured by the assets of Karrah. The customer list has been invaluable in establishing our current colored diamond inventory. Third, we have acquired some of the inventory from Karrah, and the value of the New Note reflects that consideration as well. Finally, we will not be acquiring the accounts receivable of Karrah so the AR Note will be terminated.
On December 5, 2016, we entered into an Asset Purchase Agreement (the “Purchase Agreement”) with Cornerstone United Capital, LLC (“Cornerstone”). Pursuant to the Purchase Agreement, we were to acquire from Cornerstone colored diamonds with a wholesale value of $105,000,000 (the “Assets”).
In consideration for the Assets, we issued to Cornerstone and its nominees a total of 214,000,000 shares of our common stock. In addition, Kashif Khan, our prior officer and director, agreed to transfer his 16,000,000 shares of common stock as part of the Purchase Agreement in exchange for 9,457,931 shares of our Series B Preferred Stock.
On December 21, 2016, however, we were informed that Cornerstone could not fulfill its obligations under the Purchase Agreement. As a result, Cornerstone and its nominees are required to return all shares issued under the Purchase Agreement.
We intend to continue to search out and acquire colored diamonds to expand our inventory.
AI
