DIAMOND ENTERTAINMENT CORP, S-8, 1996-07-18

DIAMOND ENTERTAINMENT CORP
S-8, 1996-07-18
MOTION PICTURE & VIDEO TAPE DISTRIBUTION

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As Filed with the Securities and Exchange Commission on
July 18, 1996

Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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DIAMOND ENTERTAINMENT CORPORATION
(Exact name of registrant as specified in its charter)

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New Jersey 22-2748019
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(State or other juris- (I.R.S. Employer
diction of incorpora- identification
tion or organization) number)

16818 Marquardt Avenue
Cerritos, California 90703
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(Address of Principal (Zip Code)
Executive Offices)

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Consulting Agreement dated May 21, 1996, as amended

JAMES K.T. LU
PRESIDENT
DIAMOND ENTERTAINMENT CORPORATION
16818 MARQUARDT AVENUE
CERRITOS, CALIFORNIA 90703
(310) 921-3999
(Name, address and telephone
number, including area code,
of agent for service)

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COPIES TO:

Steven Wasserman, Esq.
Bernstein & Wasserman
950 Third Avenue
New York, New York 10022
(212) 826-0730

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|

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CALCULATION OF REGISTRATION FEE
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Proposed Proposed
maximum maximum
Amount offering aggregate Amount of
Title of securities to be price per offering registration
to be registered registered(1) Share price fee(2)
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Common Stock, 1,000,000 shares $.10 $100,000 $34.48
no par value

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(1) In addition, pursuant to Rule 416 under the Securities Act of 1933, as
amended ("Securities Act"), this registration statement also covers an
indeterminate number of shares as may be required by reason of any stock
dividend, recapitalization, stock split, reorganization, merger,
consolidation, combination or exchange of shares or other similar change
affecting the stock.

(2) Calculated pursuant to Rule 457(h).

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PART I

Item 1. Plan Information

Item 2. Registrant Information and Employee Plan Annual Information

The document(s) containing the information specified in this Part I will be
sent or given to participants in the Plan to which this Registration Statement
relates, as specified by Rule 428(b) promulgated under the Securities Act of
1933, as amended, and are not filed as part of this Registration Statement.

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PROSPECTUS

DIAMOND ENTERTAINMENT CORPORATION
1,000,000 Shares of Common Stock, no par value,
To be sold by the Selling Stockholder

This Prospectus relates to the resale or offer for sale from time to time
of up to 1,000,000 shares (the "Shares") of common stock, no par value (the
"Common Stock"), of Diamond Entertainment Corporation, a New Jersey corporation
(the "Company"), All of the shares are being offered by the Selling Stockholder,
as that term is defined herein. Such Shares were acquired by the Selling
Stockholder pursuant to a Consulting Agreement between the Company and the
Selling Stockholder. The Common Stock is traded on the NASDAQ Over-the-Counter
Bulletin Board ("NASDAQ") under the symbol "DMEC". The Shares may be offered for
sale by the Selling Stockholder from time to time through or to brokers in the
over-the-counter market or otherwise at prices acceptable to the Selling
Stockholder. The Company will not receive any of the proceeds from the sale of
the Shares pursuant to this Prospectus. All costs incurred in connection with
the registration of the Shares are being borne by the Company. See "The
Offering".

AN INVESTMENT IN THE SECURITIES OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK AND IMMEDIATE SUBSTANTIAL DILUTION AND SHOULD BE CONSIDERED ONLY BY PERSONS
WHO CAN AFFORD THE LOSS OF THEIR ENTIRE INVESTMENT. SEE "RISK FACTORS."

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.

No dealer, salesman or other person has been authorized to give any
information or make any representations 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. Neither the delivery of this Prospectus
nor any sale made hereunder shall under any circumstances create any implication
that there has been no change in the affairs of the Company since the date
hereof. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any of the securities offered hereby in any jurisdiction to
any person to make such offer or solicitation in such jurisdiction.

The date of this Prospectus is July 18, 1996

<PAGE>

AVAILABLE INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission"), 450 Fifth Street, N.W., Washington, DC 20549, a Registration

Statement on Form S-8 under the Securities Act of 1933, as amended, with respect
to the securities offered hereby. This Prospectus does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration Statement and
to the exhibits filed as a part thereof. Summaries and reference to the contents
of any contract or other document is not necessarily complete and, in each
instance reference is made to the copy of such contract or document filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference.

The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and in accordance
therewith files reports and other information with the Commission. Such reports,
proxy statements and other information filed by the Company with the Commission
can be inspected and copied at the Public Reference Section of the Commission at
450 Fifth Street, N.W., Washington, DC 20549 and at certain of the Commission's
regional offices, including the offices located at Northwestern Atrium Center,
500 West Madison Street, Suite 1400, Chicago, IL 60661 and 7 World Trade Center,
13th Floor, New York, NY 10048. Copies of such material can also be obtained
from the Commission's Public Reference Section at 450 Fifth Street, N.W.,
Washington, DC 20549, at prescribed rates.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents filed with the Commission are incorporated herein
by reference and made a part hereof:

(1) Annual Report on Form 10-KSB for the year ended March 31, 1996.

(2) Quarterly Report on Form 10-Q/A for the quarter ended December 31,
1995.

(3) Quarterly Report on Form 10-Q/A for the quarter ended September 30,
1995.

(4) Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.

All documents filed by the Company pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Securities Exchange Act of 1934, as amended, subsequent to the
date of this Prospectus and prior to the filing of a post-effective amendment
which indicates that all securities offered have been sold or which deregisters
all securities then remaining unsold, are incorporated by reference in this
Prospectus and are a part hereof from the date of filing such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be

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deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed

document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.

The Company will provide without charge to each person to whom this
Prospectus is delivered, on the request of any such person, a copy of any or all
of the foregoing documents incorporated herein by reference (other than exhibits
to such documents). Written or telephone requests should be directed to James
K.T. Lu, President, Diamond Entertainment Corporation, 16818 Marquardt Avenue,
Cerritos, CA 90703, telephone (310) 921-3999.

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THE COMPANY

General

Diamond Entertainment Corporation (the "Company"), formerly known as
Trans-Atlantic Video, Inc. ("TAV"), was formed under the laws of the State of
New Jersey on April 3, 1986. On July 15, 1991, the Company completed the
acquisition (the "Acquisition") of one hundred percent (100%) of the issued and
outstanding shares of Diamond Entertainment Corporation, a California
corporation. At the Company's annual meeting of July 15, 1991, the shareholders
approved the change of the Company's name to "Diamond Entertainment
Corporation."

As a full-service video product duplicating, manufacturing, packaging and
distribution company, the Company was engaged in several distinct video product
activities. The Multi Level Marketing Division and Custom Video Duplication
Division were considered the Custom Duplication Division. Through its Custom
Duplication Division, the Company duplicated and packaged video cassettes on a
custom-made basis. Customers for this service included companies and individuals
within the multi-level marketing industry, who utilized video cassettes for
product information, business recruitment, training or sales and marketing
purposes. On April 13, 1995, the Board of Directors approved the spin off of the
Custom Duplication Division. (See "Markets and Customers" for additional
disclosure).

The Company's Multi-Media Division (formerly known as the "Entertainment
Division")markets and sells a variety of video cassette titles (the "Programs")
to the budget home video market, principally through the Company's New Jersey
sales office. The Company markets its Programs for sale to national and regional
chain stores, department stores, drug stores, supermarkets and similar types of
retail outlets. These outlets, in turn generally sell the Company's products to
the public at retail prices ranging from $2.99 to $9.99 per video cassette. The
Standard Video Line and the Premier Line are considered the Multi-Media
Division. This division sells products that are either owned by the Company or
licensed to the Company by licensors. Management is committed to acquiring more
licensed video titles and upgrading the quality of its packaging and pre-printed
materials in order to enhance its available products. The customer base for

these products consists predominantly of retail stores and distributors. Sales
for the Multi-Media Division for the years ended March 31, 1996 was
approximately $9,000,000. The Company's present inventory of Programs consists
of 758 titles including children's cartoons, motion pictures, sports highlights,
educational computer and exercise programs, 401 of which are without copyright
protection ("Public Domain Programs") and 357 of which are subject to license
agreements ("Licensed Programs"). The feature motion pictures offered by the
Company include such film classics as "Life With Father" and "The Little
Princess". The Company is continually identifying new titles to add to its
Program inventory and intends to expand its selection of Licensed Programs which
have historically shown a higher profit margin than Public Domain Programs.

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As of March 31, 1996, the Multi-Media Division and the Custom Video
Duplication Division accounted for approximately 98.8% and 1.2%, respectively,
of revenues attributable to video tapes.

For the year ended March 31, 1996 and 1995, the Company had net sales
to one customer that amounted to $3,121,000 and $2,650,000, or 34% and 20% of
net sales, respectively. The significant customer in 1996 and 1995 was Sam's
Club. The Company sells to the non-affiliated entity on a net sixty (60) day
term. The loss of this customer would have a material adverse effect on the
Company.

In July, 1991, the Company entered into a non-exclusive licensing
agreement with the Victor Company of Japan, Ltd. ("JVC"),an unrelated
third party, which provides that the Company may sell and market its
products as JVC licensed VHS Video Cassettes ("JVC Agreement"). The VHS
label is commonly recognized in the video industry as a mark of JVC
licensed high quality tapes, subject to stringent technical evaluation
during the manufacturing and duplication process. In consideration of
the granting of the license to the Company, the Company must pay to JVC
the following licensing fees: (i) an initial evaluation fee of 1,000,000
yen per product (approximately $7,500), (ii) a fee to be paid for each
product using the JVC license which is sold or otherwise disposed of by
the Company, based upon the annual volume of the duplicated cassettes as
follows: (a) under 10,000,000 cassettes, 5 yen (approximately $.035) per
cassette, (b) 10,000,000 to 15,000,000 cassettes at the Company's
option, a flat rate fee of $350,000 per year or 5 yen per cassette
(approximately $.035) per cassette, (c) in excess of 15,000,000
cassettes ($.0233 for each cassette) plus, at the Company's option,
$350,000 per year or 5 yen per cassette (approximately $.035) and (d) in
excess of 50,000,000 cassettes ($1,000,001 per year). Effective April
1993, JVC changed the royalty charges from yen 5 (Yen) per tape to yen 3
(Yen) per tape if the video tape program is less than 30 minutes; and to
yen 4 (Yen) per tape of the video tape program is longer than 30 minutes.
Pursuant to the JVC Agreement, the Company has agreed to undertake to
comply with certain standards and specifications involved in the
manufacturing and duplicating of video tape cassettes. In the event the
Company fails to comply with the strict quality control standards of the

licensor, the license may be revoked and the Company will no longer be
entitled to use the VHS system. The JVC Agreement has a term of 5 years
and expires in July of 1996. On May 12, 1993, JVC filed a lawsuit
against the Company alleging breach of contract. A settlement between
JVC and the Company was reached and the Company agreed to pay JVC
yen 40,950,370 (Yen) for the previous royalty payments plus 10% per annum
interest charges. The Company also agreed to pay JVC $50,000 on October
1, 1993, $50,000 on October 15, 1993, $50,000 on November 15, 1993 and
$50,000 every Quarter afterwards until the previous royalty obligations
are completely satisfied.

On May 23, 1991, the Company and Macrovision Corporation entered into an
agreement whereby the Company has been granted a non-exclusive license to
utilize Macrovision's process to inhibit the unauthorized duplication of
pre-recorded video cassettes. The license was for a term of one (1) year and was
terminable upon sixty (60) days notice by either party. Since May 23, 1991, the
Company and Macrovision continued to operate pursuant to the agreement. In

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consideration for the grant of such non-exclusive license, the Company agreed to
pay Macrovision $28,000. The Company agreed to pay certain additional fees which
are payable dependent upon the revenues derived from the use of Macrovision's
"pirating" protection system. The Company does not believe that the fees which
it paid to Macrovision in connection with the "anti-pirating" protection system
materially impact upon the Company's operating expenses. The Company believed
that as a result of such license, it would be able to obtain higher prices for
the sale of each of its video tapes to customers, who request such protection,
since the "anti-pirating" device is desirable for customers. The contract was
terminated in June, 1995 as a result of the Board's decision to spin off the
Custom Duplication Division in April, 1995.

Markets and Customers

Through its Custom Video Duplication Division, the Company marketed its
services to (i) multi-level marketing companies, (ii) companies which need
production, duplication and post-production services in connection with
producing a corporate or product profile video, and (iii) video production
companies which need duplication of their video tapes. For years ended March 31,
1996 and 1995, the Company derived revenues from the Custom Duplication Division
of approximately $100,000 and $1,000,000, respectively.

On April 13, 1995, the Company's Board of Directors approved the spin-off
of the Custom Duplication business to Central Video, a Mexican company. The
Board believed that this spin off transaction was in the best interest of the
Company since it could not compete effectively in the manufacturing and
duplicating of video tapes. The Company's future focus is product development,
acquisition and distribution of video related products to mass merchandisers and
retailers. Pursuant to this transaction, Thomas Cheng, the Company's former
president and the general manager of Central Video USA operation, surrendered
his employment contract and returned 146,654 shares of the Company's Preferred

Stock back to the Company as treasury stock in exchange for equipment with a
carrying value of approximately $170,000 being transferred from the Company and
Mr. Cheng assuming all remaining obligations on these assets. Management
believes that the terms of this transaction were comparable to those that could
have been reached from sources unrelated to the Company. Mr. Cheng no longer
desired to be an officer of the Company since the Company would no longer be in
the custom duplicating business. Instead, Mr. Cheng would return his shares of
preferred stock to the Company and devote his future efforts in a duplicating
business.

On May 8, 1995, the Company completed the sale of Multi-Media manufacturing
and duplicating equipment and related assets to Central Video for $750,000. The
Company did not sell program inventory, customer lists or accounts receivable.
The consideration for the sale was $750,000 of future duplication services. The
Company has guaranteed Central Video a minimum of $2,500,000 a year of
production orders for a three year period and Central Video has agreed to
provide a maximum of a $3,000,000 ninety (90) day credit line to the Company.
Management believes this ninety (90) day credit line will be beneficial to the
Company since in the industry there is a practice for extending credit for
duplication services of sixty (60) days. The Company

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has agreed to pay Thomas Cheng a 3% commission on order placed with Central
Video. The Company believes this transaction will enable the Company to
concentrate its efforts and resources into product development, marketing and
distribution and at the same time reduce certain overhead costs. The Company
will utilize four contractors who specialize in video tape and CD- Rom
manufacturing and duplication. The Company believes that these arrangements will
enable the Company to meet its sales and distribution needs.

The Company presently markets its Program Inventory to large retail chain
outlets and provides each retail chain operator with brochures, advertising
materials and literature describing and promoting the Company's Program
Inventory. The Company's products are sold through approximately twenty five
(25) national retail chains primarily in the Northeast, the South and the East
Coast. These outlets sell the Company's products to the general public at retail
prices generally ranging from $2.99 to $9.99 per video cassette. For the years
ended March 31, 1996 and 1995, the Company has derived revenues from its Program
Inventory of approximately $9,117,113 and $13,015,759, respectively.

The Company markets certain of its Programs on a non-guaranteed sales
basis, net 30 to 60 days. Non-guaranteed sales entitle the Company to be paid by
the retail outlet regardless of whether the Programs are ultimately sold to the
general public and does not permit returns. The Company also has consignment
arrangements with certain catalog companies to deliver tapes to their facilities
pending their receipt of orders by customers. The Company only books sales after
the catalog company delivers the actual funds from such sales.

The Company's marketing strategy of distributing directly to retail chain
outlets has allowed the Company to market its products at all consumer levels.
In particular, the Company seeks to attract retail customers in department,

drug, discount, electronic, music, toy and book stores as well as supermarkets
and convenience stores. The Company has implemented a new sales method which
seeks to improve the name recognition of the Company as a video company
specializing in educational, children and film classic video titles. In
addition, through its sales program, the Company sought to place increased focus
on the promotion of sales to major mass merchandising which would increase the
delivery of high volume orders. The Company seeks to have sales personnel at
various locations to improve sales which were previously hampered by
geographical differences.

The Company believes the future will hold technological changes,
alternative entertainment sources and distribution channels along with shifting
customer preferences. The Company's plan to enter into different types of
product distribution or different distribution is already underway by having
acquired CD-Rom titles and having introduced these titles in the January 1996
CES Show. The Company also intends to be on line with the Internet and secure a
World Wide Web site for its products in 1996. In addition, the Company plans to
put together a Mail Order operation in 1996 to increase sales of new and
existing products. These plans are to help the Company to handle the
competitiveness in the entertainment marketplace.

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Program Inventory

The Company's Program Inventory consists of a total of 754 titles appealing
to all age groups. The Programs include cartoons, horror films, science fiction,
dramas, adventure stories, mysteries, musicals, comedies, fairy tale
adaptations, educational programs, sports highlights, instructional and exercise
programs. Public Domain Programs account for 60% and Licensed Programs account
for 40% of the Company's Program Inventory.

Motion Pictures in the Public Domain. The Company offers a total of 171
feature motion picture titles including many film classics, such as Life with
Father and The Little Princess, which generally appeal to an adult audience. The
Company also markets its own special collection of favorite performers
"Festivals," including The Three Stooges, Shirley Temple, Bob Hope, Jack Benny
and Milton Berle. The Company has recently added The Our Gang Comedy Festival
and Sherlock Holmes Double Feature, as well as a science fiction category.

Children's Programs - Licensed and/or in the Public Domain. All of the
Company's cartoon programs are in the Public Domain including 21 cartoon
Programs redubbed in Spanish. The Company also recently licensed an animated
version of Beauty and the Beast. These Programs are generally 30 minutes in
length and consist of a series of cartoons selected by the Company. The Company
also markets 15 holiday children's features, including A Christmas Carol. The
Company has recently released eighteen Fabulous Fables which it has licenses for
such as Snow White, Cinderella, Robin Hood and Thumbelina.

In August 1995, the Company signed an agreement with Time Warner
Entertainment Company, L.P. ("Time Warner") to cease any further production or

sales of certain video cassettes and to return the cassettes and materials to
Time Warner for storage up to three (3) years.

Educational Programs - Licensed. The Company has licenses to market a total
of 118 educational videos which instruct preschoolers and school age children on
topics such as learning numbers, telling time, simple mathematics, color
identification and other practical skills. These include 12 Aesop's Fables. In
addition, the Company has just introduced a new series of Adventures in Learning
featuring such animated classics as Johnny Appleseed, Paul Revere's Ride and
King Midas.

Sports Programs - Licensed. The Company has licenses to market five sports
videos Thrilling Moments in Basketball.

Computer Software Learning Tutorial Programs - Licensed. The Company has
licensed to market a total of 28 titles of computer tutorial videos including
titles like Quicken for Windows, etc.

The costs associated with "film masters and artworks" include the purchase
cost of

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masters, initial fee for right to duplicate, shooting costs and developing
costs. During the year ended March 31, 1996, the Company has acquired in excess
of 129 new titles for a cost of $245,078.

As of March 31, 1996, the Company valued its Film Masters and Artwork at
$547,955. The Company's Film Masters and Artwork value decreased since March 31,
1996 by approximately $64,000. The Company believes that its Film Masters and
Artwork is its most significant asset since the Company derives all of its
revenues from their utilization.

Licensed Programs

The licensed programs that the Company have acquired do contain limitations
from the licensors regarding the customer base where the Company can distribute
its products.

Under its licensing agreement with Aims Media, Inc. ("Aims Media"), the
Company may sell educational Programs produced by Aims Media to the home market
but is limited in its distribution so as not to sell to schools, public
libraries or government agencies. This license agreement expired on October 1,
1995 and is exclusive in the United States and "non-exclusive" in Canada. The
Company obtained an extension of its Licensing Agreement to October 1, 1997 and
has acquired thirteen new titles for distribution such as The Life of Lou
Gehrig, The Life of Louis Armstrong, The Life of Knute Rockne, plus two all star
sports videos featuring Babe Ruth, Jackie Robinson and Joe Louis. The Company
has also just released four Music Video Programs starring such internationally
known artists as Victor Borge, Nat King Cole, Count Basie and Spike Jones.

Pursuant to the terms of the licensing agreement, the Company pays Aims
Media a fee based on both the length of the Programs and the cost of producing
the master delivered to the Company. This fee is paid fifty (50%) percent upon
selection of the Program and the balance upon receipt of the master. The Company
credits this fee and production costs against a royalty fee payable to Aims
Media equal to ten (10%) percent of gross revenues generated from the sale of
the Licensed Programs.

The Company has entered into a perpetual license agreement with Imageway,
Inc. ("Imageway") dated February 10, 1990 to market twelve (12) Aesop's Fables
films on an exclusive basis throughout the United States. The Agreement provides
for payment of $44,100 to be paid in installments upon performance of
obligations of Imageway.

The Company is also committed to meet the increasing demand for Spanish
language video programs. In furtherance of that goal, the Company has obtained
an exclusive right to produce and distribute the Spanish language versions of
certain action adventure films, including Wanted Dead or Alive, starring Rutger
Hauer, Death Before Dishonor, starring Fred Dryer and Black

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Moon Rising, starring Tommy Lee Jones. A second licensing agreement gives the
Company exclusive video and distribution rights to Spanish Language Classic
Films featuring international stars such as Cantinflas, Pedro Infante and Maria
Felix.

The Company has also expanded its foothold in the Spanish language music
video segment of the industry by entering into a license agreement with
Producciones Tulum, Inc. on November 8, 1991 which gives the Company exclusive
video and distribution rights to nine music videos featuring international
artists Juan Gabriel, Roberto Carlos and XUXA.

The various licensing agreements provide for an advance payments ranging
from $1,500 to $15,000 and subsequent royalty payments based upon either a per
video sold fee or a percentage of wholesale price fee. As of March 31, 1996, the
Company expended $213,342 on the various licensing agreements.

Operations and Production

The Company continuously seeks to expand its Program inventory by
identifying titles which appeal to children and those which include popular
performers, characters or themes. The Company also identifies videos which are
classic films, are educational or instructional videos or which have been
requested by distributors. The Company enters into a licensing agreement with
respect to those Programs that are subject to copyright protection or obtains
documentation confirming public domain status from various unaffiliated Program
suppliers.

Raw Materials

The Company imports certain of the raw materials for its products.
Accordingly, the Company is vulnerable to the possibility of stoppage, delays or
interruptions of supplies due to foreign conditions, such as shipping delays,
acts of war, political instability or restrictions on foreign trade over which
the Company has no control. The Company's operations have not previously been
affected by foreign or political unrest.

Competition

Both the Company competes with many other companies which are better
established, have broader public and industry recognition, have financial
resources substantially greater than those of the Company, and have
manufacturing and advanced distribution facilities than those which now or in
the foreseeable future will become available to the Company. The Company
competes with all distributors of video tapes, including the major film studios
and independent production companies. The Company competed with many custom
duplication companies, including Cassette Duplicating Co., Celebrity Duplicating
and VCA Technicolor. In order to more effectively compete in the marketplace the
Company has implemented better quality control procedures to ensure its standard
quality. A cost

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reduction plan has also been established to reduce its raw material cost in
order to be more competitive in price. In June of 1995, the Company spun off its
Custom Duplication Division and sold its manufacturing equipment to Central
Video. The Company continues its efforts to acquire and license and better
quality titles and thus improve the performance of the Company's products in
retail stores. The Company, has acquired a series of computer software learning
videos and a series of animal related tapes to further provide products with
strength to penetrate additional markets. The Company also acquired CD-ROM
titles and introduced these titles in the January 1996 CES Show.

Lines of Credit

The Company had a receivables and asset-based line of credit of up to
$4,300,000 with General Bank. Approximately $1,600,000 was outstanding at March
31, 1995 collateralized by the Company's $600,000 certificate of deposit.
However, as of March 31, 1995, the Company had not been granted an extension
beyond the due date of February 28, 1995, and the Company was not in compliance
with various financial requirements under the line of credit. In May 1995, the
Company reacted an agreement with the bank to pledge $1,300,000 of sales
invoices to offset the remaining bank liability. As of March 31, 1996, there is
no balance owed to General Bank.

On August 31, 1995, the Company received a revolving line of credit with an
investor for up to a maximum of $1,250,000 with a commitment to borrow a minimum
of $2,000,000 during a one year period. This loan is made in amounts which is
equal to 70% of the pledged invoice's amount and it is secured by a first
security interest in certain accounts receivable and personally guaranteed by an

officer of the Company. Repayment is to be made upon receipt of any payment of
pledged invoices, with interest rates 3% for within 30 days, 6% for within 60
days, and 9% for after 60 days. As of March 31, 1996, the outstanding loan
balance was $1,447,050.

In April 1996, the Company commenced negotiations for a new financing
agreement to provide the Company with ongoing working capital. The credit line
is for $2,500,000 of which $500,000 will be guaranteed by the Company's
President. The Company will assign their accounts receivable and inventory and
will pay interest at 3% per annum plus the lenders prime rate. Fees and charges
may be charged in addition to interest. In July of 1996, the Company received a
final commitment letter.

American Top Real Estate, Inc. ("ATRE")

ATRE was formed in March 1989 for the purposes of acquiring, owning and
holding real property for commercial development. ATRE does not engage in any
other business operations. Since its organization, ATRE has acquired two (2)
parcels of land as hereinafter described ("Parcel 1" and "Parcel 2,"
respectively). ATRE is owned fifty percent (50%) by the Company and twenty five
percent (25%) by each of Mr. Steven Chen and Mr. Henry Kuo. Mr. Chen and Mr. Kuo
are not related or affiliated with the Company. The Company has a balance due
from ATRE in the amount of $1,519,838 and $1,110,656 on March 31, 1996 and 1995,
respectively

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(exclusive of an initial $50,000 investment). In May 1995, ATRE entered into a
sales agreement for one acres of land for approximately $470,000. In December
1995, the sale for one parcel of land was closed and the Company received their
portion from ATRE of $48,475, which was used to reduce the receivable from ATRE.
The closing for the other parcel of land for approximately $550,000 is
anticipated to be July of 1996 with proceeds to be reinvested into property
improvements. It is anticipated that in 1997 monies will be received by the
Company for reimbursement of monies reinvested from the proceeds of sales of
property. There are two additional parcels of property to be sold.

Parcel 1 consists of 20 acres of undeveloped land in Clark County in the
State of Washington (83rd Street and I-205) and is owned seventy percent (70%)
by ATRE and thirty percent (30%) by unrelated third parties. Parcel 1 was
purchased for $1,280,086 in 1989, of which $720,477 has been paid as of March
31, 1995 and a balance of $559,609 remains outstanding. Over the last five years
the Company has contributed 50% of the $720,477 or $360,238 for Parcel I and the
remaining 50% was contributed by four private investors. The Company has
guaranteed up to $325,396 on the outstanding balance and two of the other
investors are obligated for the balance. The outstanding balance owed to the
unrelated sellers of Parcel 1 is evidenced by promissory notes bearing interest
at the approximate average annual rate of 9.5%. The promissory notes are secured
by Parcel 1 and have terms expiring in 1995 and 1996.

Parcel 2 consists of 5 1/2 acres of undeveloped property also in the County

of Clark, State of Washington. Parcel 2 is owned twenty five percent (25%) by
ATRE, twenty-five percent (25%) by Addie Soo and fifty percent (50%) by One
Pacific Corp. Ms. Soo and One Pacific Corp. are unaffiliated with the Company.
The property was purchased for a total of approximately $729,000 in 1989 of
which $568,551 of the principal has been paid as of March 31, 1995 and $162,030
remains outstanding. ATRE is obligated for $65,415 on the outstanding balance of
which the Company has guaranteed payment of $65,415. The outstanding balance
owed to the unrelated sellers of Parcel 2 is evidenced by promissory note
bearing interest at the approximate average annual rate of 9.5%. The promissory
note is secured by Parcel 2 and has terms which expired April 1, 1995. As of
July, 1996, one parcel was sold in December 1995 for $470,000 and another parcel
for $280,000 to be closed in October 1996.

The Promissory Note maturity dates and original land owners are as follows:

(a) Kasma $121,445.43 scheduled for
7/23/96 Parcel 1
(b) Swanson $110,000.00 Extended Parcel 1
(c) Knable $204,000.00 Extended Parcel 1
(d) Fisher $ 53,316.00 01/01/97 Parcel 1

Upon the sale or development of the land, the proceeds will be repaid to
all the lenders that loaned ATRE money for land acquisition costs and advances
based on their ownership percentage. The remaining balance will be distributed
among all the shareholders of ATRE based on their

<PAGE>

ownership percentage.

The partnership agreement requires that all partners contribute capital or
loans according to the shareholders' percentages required by ATRE whenever they
are due either for land acquisition, principal, interest, property taxes or
other expenses. As of March 31, 1996, Mr. Kuo has contributed a balance of
$479,075, Mr. Chen has contributed $459,863 and DEC is owed $1,519,838,
including accrued interest. The source of the Company's contributions have been
primarily from the financing activities of the Company.

Presently, the 20 acres of land, located at I-205 & 83rd Street, Vancouver,
Washington, have a completed design by an Architecture firm to sub-divide the
land into 25 parcels for commercial buildings for development. The sales
brochure is completed in both English and Chinese. This will provide the
conceptual idea in order to sell to an Investor/developer to purchase the
property outright and develop it. The plan is to sell the property in the next
12 months to recover investment and realize a profit for DEC. On the second
parcel of 6.5 acres, the Company has asked a Real Estate Brokerage firm to
handle the sale. Presently, a major Hotel operator has shown an interest in this
property. The Pacific N.W. region's economy is better than Southern California
and therefore the Company believes it has an opportunity to sell this land
within the next 12 months. On January 19, 1994, ATRE entered into an agreement
to sell Parcel 1 for $4,400,000 to a non-affiliate. In August of 1994, this

agreement was canceled due to the final user's request for a two year delay.
ATRE will now market this land on a sub-division concept and believes this can
be completed and approved by the authorities in 1995. The Company believes that
the sales of the ATRE parcels will be accomplished in 1996 and 50% of the
proceeds will be utilized to repay the Company in 1996 based upon the Company's
percentage of investment of 50%. The Company intends to use the funds it
receives from the consummation of the sale to improve the Company's cash flow
for use in the Company's operations.

Employees

As of March 31, 1996, the Company employed 26 people, 3 executives; 10 in
warehousing and related activities; and 13 in administration, sales and related
activities. During the peak season the Company has employed an additional 80
individuals in operations to help with the surge for Christmas sales orders. The
Company reduces its force after the peak season to improve the profitability of
the operations when sales orders decline. None of the Company's employees are
unionized. Management believes that it has good working relations with its
employees.

<PAGE>

RECENT DEVELOPMENTS

On March 31, 1990, in consideration for the issuance of 60,000 shares of
common stock of the California Subsidiary, certain individuals including Messrs.
Lu, Cheng and Winters issued unsecured promissory notes to the California
Subsidiary for $1,380,000. The promissory notes carried interest at the annual
rate of 9% and are due March 31, 1995. Pursuant to such transaction, the
following individuals issued promissory notes to the California Subsidiary:
James Lu, who is Chairman, Chief Executive Officer and Secretary of the Company
- - $529,000; Thomas Cheng who is President and Director of the Company -
$368,000; Edward Winters who is a Vice President and Director of the Company;
Sam Chang and Murray Scott - $161,000 each. On March 31, 1994, the Company
canceled the promissory notes with an aggregate principal balance of $865,836
and recorded compensation expense for the same amount. On December 20, 1994, the
Board of Directors revoked its June 23, 1994 election to forgive the receivable
and reduced the price on the unpaid shares of stock to $.125 per share. In
March, 1995, the Company forgave the accrued interest receivable of $274,115 on
the stock subscription receivable.

On July 15, 1991 as a part of a business combination with Trans-Atlantic
Video, Inc., the Company issued 1,000,000 shares of voting preferred stock which
were convertible into 1,950,000 shares of voting common stock.

The Company has advanced approximately $1,200,000 to ATRE in order to
enable American Top Real Estate to meet the obligations and thereby protecting
the Company's 50% owned investment. The Company paid $50,000 for a 50% interest
in ATRE. This investment is accounted for on the equity method. The investee has
not incurred any significant earnings or losses to date, therefore, this
investment does not reflect any adjustments for earning and losses. On January

19, 1994, ATRE entered into an amended agreement to sell a parcel of land for
$4,400,000. ATRE has a 70% interest in his land. In August of 1994, the escrow
agreement for $4,400,000 was canceled on this contract due to the final user's
request for a two year delay. ATRE declined to accommodate this request.

In May 1995, ATRE entered into a sales agreement for two acres of land for
approximately $940,000. In December of 1995, the sale for one parcel of land was
closed and the Company received their portion of the proceeds from ATRE of
$48,475, which was used to reduce the accounts receivables from ATRE. The
closing for the other parcel of land is anticipated to be July of 1996 with
proceeds to be reinvested into property improvements. It is anticipated that in
1997 monies will be received by the Company for reimbursement of monies
reinvested from the proceeds of sales of proceeds of sales of property. There
are two additional parcels of property to be sold.

The Company has loaned money to its officers in the form of note receivable
totaling $13,561 at an annual interest rate of 10% for the year ended March 31,
1996. Interest income if $7,952.

On July 15, 1992, the Company signed a promissory note for $510,000 with a
former

<PAGE>

Underwriter. The interest rate for the note was ten (10%) percent per annum. The
former Underwriter received a total of 25,500 shares of common stock purchase
warrant exercisable at $15 per share, for a term of three (3) years in
consideration for the entire amount. On August 28, 1992, the former Underwriter
voluntarily surrendered to the Company these warrants and the warrants were
canceled. The total indebtedness of $676,031 was due April 1, 1995 and on June
15, 1995, this obligation was purchased by an unaffiliated company. On June 2,
1995, an agreement was reached to issue 2,538,446 shares of the Company's common
stock for this obligation. The conversion is effectuated at .26 per share of
common stock. The market value at the time of conversion was .10 per share of
common stock.

On August 12, 1992, the Company obtained two lines of credit from a private
investor. Interest is 12% per annum. As additional consideration for the line of
credit, the Company issued a total of 25,000 warrants tp purchase 25,000 shares
of common stock at $30 per share on or before August 12, 1997. The lines of
credit are collateralized by (i) a first security interest (subordinate to the
bank) in certain accounts receivable, inventory, and equipment and (ii) a
security interest in the Company's shares of ATRE. These loans are personally
guaranteed by two (2) of the officers of the Company. On October 27, 1993, the
Company was granted an extension on the total indebtedness of $752,042 to the
private investor until April 15, 1995 or from the net proceeds of a public
offering, whichever is earlier. On March 31, 1995, the Company owed a total of
$812,455 of which $752,042 was principal and $60,413 was accrued interest
payable. The Company was in default on the due date, however these obligations
were assigned to the Company's Chief Executive Officer in May 1995. In July
1995, this obligation of $752,042 was converted to shares of common stock and

the $60,413 of accrued interest was expended.

On August 31, 1995, the Company renewed a revolving line of credit with an
investor. The revolving line of credit is for up to a maximum of $1,250,000 with
a commitment to borrow a minimum of $2,000,000 during a one year period. This
loan is made in amounts which is equal to 70% of the pledged invoice's amount
and it is secured by a first security interest in certain accounts receivable
and personally guaranteed by an officer of the Company. Repayment is to be made
upon receipt of nay payment of pledged invoices, with interest rates of 3% for
within 30 days, 6% for within 60 days, and 9% after 60 days. As of March 31,
1996, the outstanding loan balance was $1,447,050.

November 10, 1993, the Company obtained an additional revolving line of
credit up to a maximum of $400,000 from another private investor. This loan is
made in amounts equal to 92.75% of the pledged invoices amount and is secured by
(i) a first interest in certain accounts receivable from five specific
customers, (ii) personal guarantee by two of the officers of the Company. As of
March 31, 1994, the Company owed $414,475 including accrued loan fee of 7.25%
from pledged invoice amounts. Interest rate shall be 18% per annum for repayment
not made within 90 days. As of March 31, 1996 and 1995, the Company owned $-0-
and $115,000, respectively.

At March 31, 1995, the Company had not been granted an extension beyond its
extended due date with General Bank of February 28, 1995 and not in compliance
with various financial

<PAGE>

requirements under the bank line of credit. On July 14, 1995, the Company paid
off the bank line of credit in its entirety. The certificates of deposit, the
accounts receivables and inventory at March 31, 1995 were pledged as collateral
against the bank loans of $1,598,973 for the year ended March 31, 1995. The
notes were secured by personal assets of two of the Company's officers who also
gave personal guarantees.

In March 1993, a loan was renegotiated for the sum of $292,058 with
principal payments of $5,000 per month with interest of 10% per annum until
November 14, 1999. The balance due at March 31, 1996 was $181,538.

On November 18, 1995, the Company entered into a loan agreement for
$200,000 with an individual and a Company with interest at a rate of 50%.
Principal and interest were due on February 18, 1996. At March 31, 1996, the
outstanding balance on this loan was $150,000. The Company was in default on the
loan agreement. As of July 10, 1996, this loan was paid off.

Louis Chase, the former Senior Vice President and a Director of the Company
is an owner of National Media, Inc. ("National Media"). On January 8, 1990, the
Company entered into a ten year agreement with national Media, whereby the
Company agreed to manage all phases of National Media's production equipment.
The Company had been paying National Media $88,032.26 annually for the use of
all production equipment. In addition, on January 6, 1992, the Company signed an

agreement with Sony Corp. Of America to guarantee an equipment lease that Sony
extended to National Media, Inc. In the event National Media, Inc, fails to pay
Sony, the Company will be responsible for the payments. The monthly lease
payment was $8,285 and expired on December 31, 1993. For the year ended March
31, 1994, the Company has paid $99,420 to Sony on behalf of NMI. The Company
treated this payment as equipment rental expense. Commencing April 1, 1994, the
Company pays NMI $161,999.76 annually for the use of all their equipment.
National Media has also agreed to replace any equipment which becomes obsolete,
based on industry standards. The Company also had an option to purchase the
production equipment during the length of the agreement at an agreed upon fair
market value. On December 21, 1995, Louis Chase resigned and terminated his
employment agreement with the Company as part of a settlement agreement.
Effective January 1, 1996 and ending December 31, 1996, the Company entered into
a monthly $10,000 consulting agreement with this individual. The individual
agreed to surrender 30,769 shares of preferred stock and 10,000 shares of common
stock upon execution of the settlement agreement in consideration for 5% of net
profits of the Company for the fiscal years ended March 31, 1997 and 1998.

On April 13, 1995, the Company's Board of Directors approved the spin-off
of the Custom Duplication business to Central Video, a Mexican company. Pursuant
to this transaction, Thomas Cheng, the Company's former President and the
General Manager of Central Video, USA operations surrendered his employment
contract and returned 146,654 shares of the Company's Preferred Stock back to
the Company as treasury stock. The consideration for the sale was $750,000 of
future duplication services. The Company has agreed Central Video a minimum of
$2,500,000 a year of production orders for a three year period and also agreed
to pay Thomas Cheng a 3% commission on orders placed with Central Video.

<PAGE>

In 1991, the Company had entered into employment agreements with four
officers of the Company for annual compensation totaling $442,500 plus bonuses
and expenses. These agreements terminate in the year 2001 and are adjusted
annually in accordance with the Consumer Price Index. As of March 31, 1996,
there are two employment agreements in effect of annual compensation totaling
$240,000. The Board of Directors agreed in April 23, 1996 to reserve 1,000,000
shares of common stock for distribution to two officers of the Company. The
common stock can be purchased in installment payments with a five year
promissory note with interest at 6% per annum.

In connection with a settlement agreement and cancellation of an employment
agreement reached in July of 1994, the Company has agreed to cancel a loan
receivable for $56,226 from Edward Winter, a former employee and director of the
Company. In consideration for its agent, Mr. Winter has agreed to return 26,269
shares of convertible preferred stock to the Company. The Company agreed to pay
to Mr. Winter one month severance pay and one months vacation pay for $22,500.
The Company paid a total of $75,000 as a settlement on a ten year employment
agreement in various payments through September 1994.

On April 13, 1995, the Board of Directors approved the spin-off of its
customer duplication business. Pursuant to this transaction, the Company's

former President surrendered his employment contract and returned 146,654 shares
of the Company's preferred stock back to the Company as treasury stock.
Equipment with a carrying value of approximately $170,000 was transferred from
the Company and the Company's former President assumed all remaining obligations
on these assets of approximately $75,000. The Company agreed to a non-compete
agreement with this new custom duplication venture by the Company's former
President.

On May 8, 1995, the Company closed the sales agreement with a Mexican
company, Central Video, for $750,000 by allowing credit to the Company for
future duplication services. The President of Central Video is a former
President of the Company. The Company is receiving $750,000 of future
duplication services and is giving up equipment with a value of approximately
$630,000. In addition, Central Video entered into a sublease for the remaining
thirteen month lease. The Company has guaranteed the Company's former President
a minimum of $2,500,000 a year production order for the next three years.
Central Video has agreed to provide a maximum of $3,000,000 90 day credit line
to the Company. The Company has agreed to pay the Company's former President a
3% commission on orders the Company places with Central Video.

In May of 1995, three debt obligations totaling $1,131,434 were assigned to
the Company's Chief Executive Officer. The officer issued promissory notes to
the three entities. On July 19, 1995, the Chief Executive Officer of the Company
converted the three debt obligations totaling $1,131,434 into 8,212,785 shares
of the Company's common stock. The conversion was effectuated at a 38% premium
rate of .138 per share of common stock. The market value at the time of
conversion was .10 per share of common stock.

On June 20, 1995, the Company accepted an offer by an unaffiliated Company
to convert an outstanding obligation for 2,538,446 shares of the Company's
common stock. The conversion

17
<PAGE>

is effectuated at $.26 per share of common stock. The market value at the time
of conversion was $.10 per share of common stock.

On April 23, 1996, the Board of Directors agreed to cancel the existing
$86,636 stock subscription receivable.

The Board of Directors agreed on April 23, 1996 to propose at its next
annual meeting to increase its authorized shares to 100,000,000 shares of common
stock and to increase its authorized shares to 5,000,000 shares of preferred
stock.

The Board of Directors agreed on April 23, 1996 to reserve 1,000,000 shares
of common stock for distribution to two officers of the Company. The common
stock can be purchased in installment payments with a five year promissory note
with interest at 6% per annum.

On April 23, 1996, the Company engaged Arden Ltd. To arrange either debt or
equity financing for the Company and agreed to grant a total of 1,000,000

options exercisable within three years of grant at $.10 per share.

The Company engaged Wharton Capital for three months commencing April 1,
1996 to arrange a line of credit of $2,000,000 or more for a 2% commission at
closing.

In May and June of 1996, the Company engaged three consultants for total
fees of $11,000 monthly for a period of six months. In addition to the monthly
compensation, the Company will repay the consultant for business expenses and
the consultants received 400,000 options with an exercise price of $.25 per
share. All parties agreed that the total expenses will not exceed $5,000 per
month. Another financial consultant received options for 25,000 shares per month
for 24 months exercisable at $.25 per share for three years.

The Company accepted a $1,250,000 convertible debenture in May, 1996, with
10% interest and a 7% commission. If the shares are converted they will be
purchased by an off shore Company under Regulation S and the company will gant
options based upon a formula for one year and will have a four month lock up
period. As of July 16, 1996, the Company has received approximately $1,200,000
on these debentures.

The Company entered into an agreement with a financial consulting firm
for a total of 1,000,000 options at $.25 per share exercisable for three years
for financial services.

The Company believes each of the foregoing transactions are on terms no
less favorable than could be obtained from unaffiliated third parties.

<PAGE>

RISK FACTORS

An investment in the securities of the Company is speculative and involves
a high degree of risk and substantial dilution and should only be considered by
persons who can afford the loss of their entire investment. Investors should
carefully consider all of the information contained in this Prospectus,
including the following factors:

1. Fluctuation In Net Revenues and Operating Losses. Net revenues for the
fiscal year ended March 31, 1996 were $9,117,113 compared to net revenues of
$13,105,750 for the fiscal year ended March 31, 1995, representing a decrease
of $3,988,637 or a decrease of 30%. For the year ended March 31, 1996 and March
31, 1995 the operating losses were $571,303 and $1,652,546 respectively. This
reflects a decrease of $1,081,243 or 65% decrease over 1995. The decrease in the
operating losses was primarily the result of a reduction in overhead and
elimination of manufacturing operations. There can be no assurance that the
factors responsible for the decrease in operating losses during the year ended
March 31, 1996, or other factors, will continue for the balance of the fiscal
year ending March 31, 1997 or thereafter. Management believes that the net
decrease in operating expenses during fiscal 1996 as compared to fiscal 1995 was
the result of the changes in management, improvement of production equipment and

quality which provide better strength to compete in the market-place and an
agreement with a company which has proprietary anti-pirating technology. See
"BUSINESS."

2. Ease of Entry into Competitive Business; Lack of Copyright Protection,
Potential Copyright Claims. Approximately 53% of the Company's program inventory
are Public Domain Programs and therefore, are not the exclusive property of the
Company. Any competitor of the Company may easily enter the Company's business
by reproducing and distributing Public Domain Programs, including those marketed
by the Company. In addition, the Company is presently and in the future may be
subject to legal action by third-parties claiming that the Company's duplication
and marketing of a Program is violating the claimant's rights in the Program.

3. Dependence on Key Employee. The Company is significantly dependent upon
the continued availability of James K.T. Lu, its Chairman, Chief Executive
Officer and Secretary. The loss or unavailability of Mr. Lu to the Company for
an extended period of time would have a material adverse effect on the Company's
business operations and prospects. In the event of the loss of his services,
there can be no assurances that the Company would be able to locate or employ
qualified replacement personnel on acceptable terms. Mr. Lu has executed an
employment agreement for a term of ten (10) years, expiring December 31, 2000,
which provides that he will receive $150,000 a year subject to increases and
certain other incentives.

<PAGE>

4. Amounts Relating to Litigation. The Company has been named as defendant
in various pending legal actions.

Curtis Saj, individually and as Parent and Natural Guardian of Melissa Saj,
An Infant v. Trans-Atlantic Video, Inc., Revco D.S., Inc., and Odd Lot Trading,
Inc. (Supreme Court of New York, County of Montgomery, Index No. 91-43). This
action was commenced on December 12, 1990. This case is a products liability
case wherein the plaintiffs allege that they purchased a children's videotape
which contained pornographic material. The parties have agreed to a settlement
of this matter for $21,000, which is subject to court approval.

PPX Enterprises, Inc. v. Trans-Atlantic Corp. and Diamond Entertainment
Corp., (United States District Court, Southern District of New York, Civil
Action No. 92 Civ. 1749). In this action commenced on March 11, 1992 the
plaintiff alleges that it is the owner of various copyrights for dramatic and
musical compositions of a number of children's stories including Rapunzel,
Sleeping Beauty and Alice in Wonderland and that the defendants infringed upon
plaintiff's copyrights. The complaint demands monetary damages flowing from the
alleged copyright infringement, an award of statutory damages, a preliminary and
permanent injunction enjoining the defendants from any further distribution of
the alleged infringing materials and legal fees. The Company has answered the
complaint and denied many of the allegations and asserted a number of

affirmative defenses to the action. The litigation was settled for $99,000.00.

Marshalls, Inc. v. Transatlantic Video, Inc. (Massachusetts Superior Court,
Civ. Action No. 94-7329) This action was commenced on December 19, 1994 by
Marshalls, Inc. ("Plaintiff") against the Company. Plaintiff alleges breach of
contract by the Company Marshalls, Inc. ("Plaintiff") returned video tapes to
Transatlantic Video, Inc. for which Marshalls did not receive a refund. The
Company and Marshalls have been engaged in discussions to settle this matter,
however, Marshalls has not provided the Company with any documentation that
supports its claim for a refund. It is the Company's belief that the Plaintiff
was given credit or replacement merchandise for any returned merchandise.
Plaintiff is seeking $42,350.30, treble damages, attorney's fees and costs. No
discovery has been taken in this case by either party. Subsequently the case was
settled and dismissed.

Michael Agee Productions and Michael Lee Agee v. A.T.I. Mark V, Inc. and
its successor in interest, Diamond Entertainment Corporation. (California
Superior Court, Index No. 735099) In this action, commenced on August 31, 1994,
the Plaintiff alleges breach of contract and fraud. The complaint seeks
compensatory damages according to proof plus interest, the value of converted
property plus interest, attorneys fees, costs and such other relief as the court
deems appropriate. The Company has filed and answer denying Plaintiff's
allegations and a cross- compliant alleging breach of contract, fraud, deceit
and negligent representation. The Company believed that the Plaintiff had
received all monies to which they are entitled and that the lawsuit is without
merit. On May 3, 1995, Plaintiff Michael Lee Agee filed a voluntary petition for
bankruptcy and the court was notified that Plaintiff's counsel that the civil
action was stayed.

<PAGE>

Mr. Agee represented himself in the bankruptcy. On May 26, 1995, the bankruptcy
court dismissed the bankruptcy petition because Plaintiff has failed to file
certain required schedules. On June 16, 1995, the notice of stay in the civil
action was considered moot by the Court and the Court set a trial date. The
Company has attempted to take some discovery, however, Plaintiff has not
cooperated. A trial date was originally scheduled for November 20, 1995, and
prior thereto the parties reached a verbal agreement to settle the case. The
settlement provided for no payment by the Company and the dismissal of the
complaint and cross-complaint. On September 19, 1995, plaintiff filed a notice
of settlement with the court which caused the postponement of the trial date.
The plaintiff has refused to sign a settlement agreement to date and the trial
date has been rescheduled to April 15, 1996. This case was settled under the
condition that the Company return all the original masters to Michael Agee
Productions.

Desktop Images, Inc. v. Diamond Entertainment Corporation, et al. (United
States District Court, District of Colorado). On August 29, 1995, Desktop
Images, Inc. filed a civil action against eight defendants including the Company
alleging infringement of Plaintiff's federally registered copyright, unfair and
false advertising under federal law, and fraudulent misrepresentation under

Colorado common law. The complaint involves one video tutorial product that was
licensed to the Company. The license agreement contains an indemnification of
the Company in the event that the licensor did not own the rights to the
product. On or about October 5, 1995, one of the defendants filed a motion to
dismiss the complaint or in the alternative to stay the proceedings and to
compel arbitration. The Company joined the pending motion. On June 18, 1996, the
Court denied the pending motion to dismiss and denied the alternative motion to
stay the proceedings and compel arbitration. On June 20, 1996, the Company filed
its answer denying that the Company intentionally infringed or intentionally
unfairly competed. On June 28, 1996, the Company filed an appeal of the District
Court's order and a motion to stay the proceedings in the District Court until
the appeal can be heard by the Appellate Court. The Company is not distributing
the product which is the subject of the lawsuit. Plaintiff is seeking to enjoin
the Company from infringing Plaintiff's copyright, using Plaintiff's tradename,
and claiming rights in the subject product; damages including the Company's
profits or statutory damages; an increase of damages due to alleged willful
infringement; damages for unfair competition and fraudulent misrepresentation
including exemplary and punitive damages; attorney fees; costs; interest; treble
damages and punitive damages. No discovery has been taken in this case by either
party.

Superior Fast Freight, Inc. v. Diamond Entertainment Corporation (United
States Bankruptcy Court, Central District of California). On or about March 21,
1996, a default judgment was entered against the Company, awarding damages in
the amount of $65,286.63. The suit was filed on behalf of Superior Fast Freight,
Inc., a carrier that is no longer in existence, against the Company. The Company
was not properly served, and has filed a motion to set aside default which was
granted by the court. The Company does not believe that Plaintiff is entitled to
any monies. The case arises out of a carrier bankruptcy and involves claims that
the carrier undercharged a number of companies, including the Company, for
freight services. The Company has been advised by special counsel that the judge
has written an opinion that would wipe out all the undercharge actions filed by
the Plaintiff in this bankruptcy case, and the judge has entered

<PAGE>

a blanket stay on the further prosecution on all those cases.

The Company does not believe that an adverse decision in any one lawsuit would
have a material adverse impact on the Company however, the aggregate affect of
an adverse decision in a majority of the lawsuits outstanding could have a
material adverse impact on the Company.

5. Significant Customers. For the year ended March 31, 1996 the Company had
net sales to one customer in its last fiscal quarter that amounted to
approximately $3,121,000 or 34% of net annual sales. For the year ended March
31, 1995, the Company had net sales to one customer that amounted to $2,650,000,
or 20% of net sales.

6. Competition. The Company competes with many companies which are better
established, have broader public and industry recognition, have financial

resources substantially greater than the Company, and have more extensive
facilities and distribution than those which now are, or in the foreseeable
future will become, available to the Company. There can be no assurances the
Company will be able to compete with such companies.

7. Retention of Control by Principal Stockholders. As a consequence of the
Acquisition of the Company's California Subsidiary, the Company issued 1,000,000
shares of Preferred Stock to the exchanging shareholders of the California
Subsidiary, who included Mr. Lu, Mr. Cheng, Mr. Schillen and Mr. Winters (the
"Exchanging Shareholders"). Each share of Preferred Stock entitles its holder to
one and ninety five one hundreds (1.95) votes and entitles the holders to
convert each such share into one and ninety five one hundreds (1.95) shares of
Common Stock. Shares of Common Stock and Preferred Stock vote together on all
matters. Subsequently, Messrs. Cheng and Winters returned their Preferred Stock
to the Company upon the surrender of their respective employment contracts.

In the event that the Exchanging Shareholders are deemed to be acting as a
group, the Exchanging Shareholders will control 54% after the Offering.
Accordingly, the Exchanging Shareholders, if they act in concert, may be able
without the concurrence of any other stockholder, to elect all the directors of
the Company, and thereby control its management and business policies. The
Exchanging Shareholders expressly disclaim that they are acting in concert or as
a group. Mr. Lu is the beneficial owner of 209,287 shares of Preferred Stock,
which when combined with his Common Stock holdings, represents 33% of the voting
stock of the Company. Mr. Schillen is the beneficial owner of 36,282 shares of
Preferred Stock, which when combined with his Common Stock holdings, represents
21% of the voting stock. Therefore, as a consequence of such ownership and their
respective positions as Chairman and Chief Executive Officer and Executive Vice
President, they are deemed to control the management and business policies of
the Company.

8. Dividends. The Company has not paid any dividends, nor does it
anticipate paying any dividends in the foreseeable future. The Company intends
to use any earnings which it may generate to finance the growth of its business.
In addition, in accordance with the terms of its

22
<PAGE>

existing Line of Credit, the Company has agreed, among other things, not to pay
dividends without the Lender's approval. There can be no assurance that the
Company will ever be in the position to pay dividends.

9. Future of Public Market. The Common Stock commenced public trading on
November 8, 1989 in the over-the-counter market and is quoted on the NASDAQ
inter-dealer automated quotation system. There can be no assurance that a public
market can be sustained.

10. "Penny Stock" Regulations May Impose Certain Restrictions on
Marketability of Securities. The Securities and Exchange Commission
("Commission") has adopted regulations which generally define"penny stock" to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. The Company's securities may become subject to rules that impose

additional sales practice requirements on broker-dealers who sell such
securities to persons other than established customers and accredited investors
(generally those with assets in excess of $1,000,000 or annual income exceeding
$200,000, or $300,000 together with their spouse). For transactions covered by
these rules, the broker-dealer must make a special suitability determination for
the purchase of such securities and have received the purchaser's written
consent to the transaction prior to the purchase. Additionally, for any
transaction involving a penny stock, unless exempt, the rules require the
delivery, prior to the transaction, of a risk disclosure document mandated by
the Commission relating to the penny stock market. The broker-dealer must also
disclose the commission payable to both the broker-dealer and the registered
representative, current quotations for the securities and, if the broker-dealer
is the sole market-maker, the broker-dealer must disclose this fact and the
broker-dealer's presumed control over the market. Finally, monthly statements
must be sent disclosing recent price information for the penny stock held in the
account and information on the limited market in penny stocks. Consequently, the
"penny stock" rules may restrict the ability of broker-dealers to sell the
Company's securities and may affect the ability of purchasers in this Offering
to sell the Company's securities in the secondary market.

12. Vulnerability to Foreign Conditions. The Company imports certain of the
raw materials for its products. Accordingly, the Company is vulnerable to the
possibility of stoppage, delays or interruptions of supplies due to foreign
conditions, such as shipping delays, acts of war, political instability or
restrictions on foreign trade over which the Company has no control.

23
<PAGE>

THE OFFERING

<TABLE>
<CAPTION>
Shares % of
Shares beneficially outstanding
Shares % of Covered owned after shares after
Name of Selling Beneficially Outstanding by this completion of completion of
Stockholder Owned Shares Prospectus Offering Offering
- ----------- ----- ------ ---------- -------- --------
<S> <C> <C> <C> <C> <C>
Anthony Cappazi 1,000,000(1) 7.2% 1,000,000 -0- -0-
</TABLE>

- ---------------------

(1) Includes 1,000,000 shares of Common Stock issued in accordance with the May
21, 1996, Consulting Agreement between the Company and Anthony Cappazi.

The securities offered hereby may be sold from time to time directly by the
Selling Stockholder. Alternatively, the Selling Stockholder may from time to
time offer such securities through underwriters, dealers or agents. The
distribution of securities by the Selling Stockholder may be effected in one or
more transactions that may take place on the over-the-counter market, including
ordinary broker's transactions, privately-negotiated transactions or through
sales to one or more broker-dealers for resale of such shares as principals, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. Usual and customary or
specifically negotiated brokerage fees or commissions may be paid by the Selling
Stockholder in connection with such sales of securities. The securities offered
by the Selling Stockholder may be sold by one or more of the following methods,
without limitations: (a) a block trade in which a broker or dealer so engaged
will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction; (b) purchases by a
broker or dealer as principal and resale by such broker or dealer for its
account pursuant to this Prospectus; (c) ordinary brokerage transactions and
transactions in which the broker solicits purchasers, and (d) face-to-face
transactions between sellers and purchasers without a broker-dealer. In
effecting sales, brokers or dealers engaged by the Selling Stockholder may
arrange for other brokers or dealers to participate. The Selling Stockholder and
intermediaries through whom such securities are sold may be deemed
"underwriters" within the meaning of the Act with respect to the securities
offered, and any profits realized or commissions received may be deemed
underwriting compensation.

At the time a particular offer of securities is made by or on behalf of the
Selling Stockholder, to the extent required, a Prospectus will be distributed
which will set forth the

24
<PAGE>

number of shares being offered and the terms of the Offering, including the name
or names of any underwriters, dealers or agents, if any, the purchase price paid
by any underwriter for sales purchased from the Selling Stockholder and any
discounts, commissions or concessions allowed or reallowed or paid to dealers
and the proposed selling price to the public.

Under applicable rule and regulations promulgated under the Exchange Act,
any person engaged in a distribution of securities may not simultaneously bid
for or purchase securities of the same class or a period of two business days
prior to the commencement of such distribution. In addition and without limiting
the foregoing, the Company will be subject to applicable provisions of the
Exchange Act and the rules and regulations thereunder, including without
limitation Rules 10b-5, 10b-6 and 10b-7, in connection with transactions in the
Share during the effectiveness of the Registration Statement of which the
Prospectus is a part. All of the foregoing may affect the marketability of the
Shares.

The Company will pay all of the fees and expenses incident to the

registration of the Shares (other than any fees or expenses of any counsel
retained by the Selling Stockholder and any out-of-pocket expenses incurred by
the Selling Stockholder or any person retained by the Selling Stockholder in
connection with the registration of the Shares) and fees and expenses of
compliance with state securities or blue sky laws and commissions. The expenses
payable by the Company are estimated to be approximately $10,000.

25
<PAGE>

DESCRIPTION OF SECURITIES

Common Stock

The Company is authorized to issue up to 15,000,000 shares of Common Stock,
of which 12,894,941 shares were issued and outstanding as of March 31, 1996. The
Company held its annual meeting of shareholders on February 16, 1994 at which an
amendment to the Company's certificate of incorporation to increase the
authorized shares of common stock to 15,000,000 was approved. On April 23, 1996,
the Board of Directors agreed to propose at its next annual meeting to increase
its authorized shares to 100,000,000 shares of Common Stock. All of the issued
and outstanding shares of Common Stock are fully paid, validly issued and
non-assessable.

Subject to the rights of holders of Preferred Stock, if any, holders of
shares of Common Stock of the Company are entitled to share equally on a per
share basis in such dividends as may be declared by the Board of Directors out
of funds legally available therefor. There are presently no plans to pay
dividends with respect to the shares of Common Stock. See "Dividend Policy."
Upon liquidation, dissolution or winding up of the Company, after payment of
creditors and the holders of any senior securities of the Company, including
Preferred Stock, if any, the assets of the Company will be divided pro rata on a
per share basis among the holders of the shares of Common Stock. The Common
Stock is not subject to any liability for further assessments. There are no
conversion or redemption privileges nor any sinking fund provisions with respect
to the Common Stock and the Common Stock is not subject to call. The holders of
Common Stock do not have any preemptive or other subscription rights.

Holders of shares of Common Stock are entitled to cast one vote for each
share held at all stockholders' meetings for all purposes, including the
election of directors. The Common Stock does not have cumulative voting rights.

Preferred Stock

The Company is authorized to issue up to 1,000,000 shares of Preferred
Stock, no par value, of which 483,251 shares are issued and outstanding as of
the date of this Prospectus (of which 172,923 are held in Treasury), as a result
of the Acquisition. The Board of Directors is authorized to determine the
rights, preferences, privileges and restrictions, including the dividend rights,
conversion rights, voting rights, terms of redemption (including sinking fund
provisions, if any) and liquidation preferences, of any series of Preferred
Stock and to fix the number of shares of any such series without any further
vote or action by stockholders. The Board of Directors filed a Certificate of
Designation with the New Jersey Department of State, designating that the

1,000,000 authorized shares of Preferred Stock entitle the holder to one and
ninety five one hundreds (1.95) votes and that each such share may be
immediately converted to one and ninety five one hundreds (1.95) shares of
Common Stock. The Preferred Stock and Common Stock vote together on all matters.
On April 23, 1996, the Board of Directors agreed to propose at its next annual
meeting to increase its authorized shares to 5,000,000 shares of Preferred
Stock.

The Preferred Stock has no (i) dividend rights, (ii) sinking fund
provisions, (iii) rights of

26
<PAGE>

redemption, (iv) classification provisions for voting, (vi) preemptive rights,
(vi) liability to further calls or to assessments by the Company, or (vii) any
provision discriminating against any existing or prospective holder. Holders of
shares of Preferred Stock are not entitled to any dividend preference. In the
event of liquidation, holders of shares of Preferred Stock shall be entitled to
a preference of $.01 per share, and any other remaining proceeds of liquidation
shall be distributed share and share alike to holders of all capital stock.

The issued and outstanding Preferred Stock are restricted securities which
have not been registered under the Act, and consequently bear a restrictive
legend and therefore may not be offered, sold, transferred, pledged or
hypothecated in the absence of such registration, or the availability of an
exemption from registration under applicable federal or state securities laws.

Anti-Takeover Provisions

The provisions in the Certificate of Incorporation relating to a staggered
Board of Directors and issuance of the Company's Preferred Stock may have the
effect not only of discouraging tender offers or other stock acquisitions but
also of impeding management changes sought by existing shareholders. A
classified board, while promoting stability in board membership and management,
also moderates the pace of any change in control of the Board of Directors by
extending the time required to elect a majority, effectively requiring action at
a minimum of two consecutive annual meetings. All directors may be removed from
office, with cause, upon the vote of holders of a majority of shares entitled to
vote in the election of directors.

These provisions enhance the possibility that a potential bidder for
control of the Company will be required to act through arm's-length negotiation
with respect to a major transaction, such as a merger, consolidation or purchase
of substantially all of the assets of the Company. Such provisions may also have
the effect of discouraging tender offers or other stock acquisitions, giving
management of the Company power to reject certain transactions which might be
desired by the owners of a majority of the Company's voting securities. These
provisions could also be deemed to benefit incumbent management to the extent
they deter such offers by persons who would wish to make changes in management
or exercise control over management. The Board of Directors of the Company does
not presently know of a third party that plans to make an offer to acquire the
Company through a tender offer, merger or purchase of all or substantially all
of the assets of the Company.

Registrar, Transfer Agent and Warrant Agent

The Registrar, Transfer Agent and Warrant Agent for the Common Stock and
Warrants of the Company is Continental Stock Transfer & Trust Company, 2
Broadway, New York, NY 10004.

27
<PAGE>

LEGAL MATTERS

Certain legal matters in connection with the shares of Common Stock offered
hereby are being passed upon the Company by Bernstein & Wasserman, LLP, 950
Third Avenue, New York, NY 10022.

EXPERTS

The financial statements incorporated by reference in the Prospectus and
Registration Statement have been incorporated in reliance upon the report of
Moore Stephens, P.C. (formerly known as Mortenson & Associates, P.C.),
independent certified public accountants and upon the authority of said firm as
experts in accounting and auditing.

<PAGE>

1,000,000 shares
of
Common Stock

DIAMOND ENTERTAINMENT
CORPORATION

TABLE OF CONTENTS

Page ___________________________
----
PROSPECTUS
Available Information ........ ___________________________
Documents Incorporated........
By Reference..................
The Company...................
Recent Developments...........
Risk Factors..................
The Offering..................
Description of Securities.....
Legal Matters................. July 18, 1996

<PAGE>

PART II

INFORMATION REQUIRED IN THE REGISTRATION STATEMENT

Item 3. Incorporation of Documents By Reference

The following documents or portions thereof, as filed with the Securities
and Exchange Commission by Diamond Entertainment Corporation, a New Jersey
Corporation (the "Corporation"), are incorporated herein by reference:

(1) Annual Report on Form 10-KSB for the year ended March 31, 1996.

(2) Quarterly Report on Form 10-Q/A for the quarter ended December 31,
1995.

(3) Quarterly Report on Form 10-Q/A for the quarter ended September 30,
1995.

(4) Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.

(5) The description of the Common Stock, no par value per share ("Common
Stock"), of the Corporation contained in the Corporation registration statement
filed under Section 12 of the Exchange Act, including any amendment or report
filed for the purpose of updating such description.

All documents filed by the Corporation pursuant to Section 13(a), 13(c), 14
or 15(d) of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
subsequent to the effective date of this Registration Statement and prior to the
filing of a post-effective amendment which indicate that all securities offered
have been sold or which registers all securities then remaining unsold, shall be
deemed to be incorporated by reference in the Registration Statement and to be
part thereof from the date of filing such documents. Any statement contained in
a document incorporated or deemed to be incorporated by reference herein shall
be deemed to be modified or superseded for purposes of this registration
statement to the extent that a statement contained herein or in any other
subsequently filed document which also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this registration statement.

Item 4. Description of Securities.

Not Applicable.

II-1

<PAGE>

Item 5. Interests of Named Experts and Counsel

Not Applicable.

Item 6. Indemnification of Directors and Officers.

Section 14A:3-5 of the New Jersey Business Corporation Act (the "Statute")
empowers a corporation as follows:

"Any corporation organized for any purpose under any general or special
law of this State shall have the power to indemnify a corporate agent against
his expense and liabilities in connection with any proceeding involving the
corporate agent by reason of his being or having been such a corporate agent,
other than a proceeding by or in the right of the corporation, if (a) such
corporate agent acted in good faith and in a manner he reasonably believed to be
in or not opposed to the best interests of the corporation; and (b) with respect
to any criminal proceeding, such corporate agent had no reasonable cause to
believe his conduct was unlawful. The termination of any proceeding by judgment,
order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not of itself create a presumption that such corporate agent
did not meet the applicable standards of conduct set forth elsewhere in this
Statute.

Certificate of Incorporation

The Company's Certificate of Incorporation provides that the Company shall
indemnify those persons entitled to be indemnified, to the fullest extent
permitted by Section 14 A:3-5 of the Statute.

Commission Policy

Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers or persons controlling the Company, the Company
has been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.

Item 7. Exemption from Registration Claimed

None applicable

Item 8. Exhibits

The following is a complete list of exhibits filed as a part of this
registration statement:

Exhibit No. Document
----------- ---------

4.1 Certificate of Incorporation of the Corporation, as amended
(Incorporated by reference to Corporation's Registration Statement
on Form S-18 Registration No.33-33997)

4.2 By-Laws of the Corporation, as amended (Incorporated by reference
to the Corporation's Registration Statement on Form S-18
Registration No.33-33997).

4.3 Consulting Agreement dated as of May 21, 1996 between the
Corporation and Anthony Cappazi.

5.1 Opinion of Bernstein & Wasserman, LLP.

23.1 Consent of Bernstein & Wasserman, LLP (included in Exhibit 5.1).

23.2 Consent of Moore Stephens, P.C. (formerly Mortenson & Associates,
P.C.)

Item 9. Undertakings

A. 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 10(a)(3) of the
Securities Act of

II-2
<PAGE>

1933;

(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;

(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;

provided, however, the paragraphs (1)(i) and (1)(ii) do not apply if the
information is required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or 15(d) of the Exchange Act that are incorporated
by reference 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 be deemed to be the initial bona fide
offering thereof; and;

(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

B. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities

Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

C. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described in item 6, 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
Securities 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 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.

II-3

<PAGE>

SIGNATURE

Pursuant to the requirement of the Securities Act of 1933, as amended, the
Registrant, certifies that it has reasonable grounds to believe that it meets
all the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in Cerritos, California, on the 16 day of July, 1996.

DIAMOND ENTERTAINMENT CORP.

By:/s/ James. K.T. Lu
------------------------
James K.T. Lu
Chairman of the Board, Chief Executive
Officer; President; Secretary and Director

By:/s/ Thomas Sung
------------------------
Thomas Sung
Principal Financial Officer and
Treasurer

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.

Signature Title Date
- --------- ----- ----

/s/ James K.T. Lu Chairman of the Board July 16, 1996
- ------------------------ Chief Executive Officer;
James K.T. Lu President; Secretary and Director

/s/Jeffrey I. Schillen Executive Vice President Sales July 16, 1996
- ------------------------ and Marketing and Director
Jeffrey I. Schillen

/s/Murray T. Scott Director July 16, 1996
- ------------------
Murray T. Scott

II-4

<PAGE>

DIAMOND ENTERTAINMENT CORPORATION

EXHIBITS

REGISTRATION STATEMENT ON FORM S-8

II-5

<PAGE>

INDEX TO EXHIBITS

Exhibit No. Document
----------- --------

4.1 Certificate of Incorporation of the Corporation, as amended
(Incorporated by reference to Corporation's Registration Statement
on Form S-18 Registration No.33-33997)

4.2 By-Laws of the Corporation, as amended (Incorporated by reference
to the Corporation's Registration Statement on Form S-18
Registration No. 33- 33997).

4.3 Consulting Agreement dated as of May 21, 1996 between the
Corporation and Anthony Cappazi.

5.1 Opinion of Bernstein & Wasserman, LLP.

23.1 Consent of Bernstein & Wasserman, LLP (included in Exhibit 5.1).

23.2 Consent of Moore Stephens, P.C. (formerly Mortenson & Associates,
P.C.)

II-6

<PAGE>
CONSULTING AGREEMENT

AGREEMENT, made and entered into this 21st day of May, 1996,
between ANTHONY CAPPAZI of ______________________________ (the "Consultant"),
and DIAMOND ENTERTAINMENT CORPORATION having an office at 16818 Marquardt
Avenue, Cerritos, CA 90703 (the "Company").

WHEREAS, the Company desires to obtain the benefit of the
services of the Consultant, and the Consultant desires to render such services
on the terms and conditions hereinafter set forth;

NOW, THEREFORE, the parties hereto, in consideration of the
premises and the mutual covenants herein contained, hereby agree as follows:

1. Term: Subject to the provisions hereinafter set forth, the
Company hereby retains the Consultant and the consultant hereby accepts
its retention for a term commencing as of the date hereof and
terminating June 1, 1998 (the "Term")

2. Scope: During the Term, the Consultant shall consult with
and render advice to the Company specifically concerning strategic
planning.

All final decisions with respect to areas as to which the
Consultant has rendered advice to the Company are decisions of the
Company and the Consultant shall have no liability or responsibility
therefore. The Consultant shall render such services to the best of its
ability and shall use its best efforts to promote the interests of the
Company.

3. Compensation: As compensation for the services to be
rendered by Consultant during the Term, the Company agrees to issue to
the Consultant options to purchase 1,000,000 shares of common stock of
the Company for $.10 per share. The options are exercisable for the
period commencing the date of this agreement ending on June 1, 1998.
The Company agrees to use its best efforts to file a Registration
Statement on Form S-8 covering the exercise of the options.

<PAGE>

IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.

/s/ Anthony Cappazi
---------------------------------
Anthony Cappazi

DIAMOND ENTERTAINMENT CORPORATION

By: /s/ James Lu
-----------------------------
President

<PAGE>

[LETTERHEAD OF BERNSTEIN & WASSERMAN, LLP]

July 17, 1996

Diamond Entertainment Corporation
16818 Marquardt Avenue
Cerritos, California 90703

Ladies and Gentlemen:

We have acted as counsel for Diamond Entertainment Corporation, a New
Jersey corporation ("Company"), in connection with a Registration Statement on
Form S-8 ("Registration Statement") being filed contemporaneously herewith by
the Company with the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the "Securities Act"), covering 1,000,000 shares of the
Company's Common Stock, no par value (the "Shares"), heretofore granted pursuant
to a Consulting Agreement, dated May 21, 1996, between the Company and Anthony
Cappazi.

In that connection, we have examined the Certificate of Incorporation,
as amended, and the By-Laws of the Company, the Registration Statement, the
Consulting Agreement between the Company and Anthony Cappazi, corporate
proceedings of the Company relating to the issuance of the Shares and such other
instruments and documents as we have deemed relevant under the circumstances.

In making the aforesaid examinations, we have assumed the genuineness
of all signatures and the conformity to original documents of all copies
furnished to us as original or photostatic copies. We have also assumed that the
corporate records of the Company include all corporate proceedings taken by the
Company to date.

Based upon and subject to the foregoing, we are of the opinion the
Shares issued in accordance with the terms of the Consulting Agreement are duly
and validly authorized and issued and fully paid and non-assessable.

<PAGE>

We hereby consent to the use of this opinion as herein set forth as an
exhibit to the Registration Statement.

Very truly yours,

BERNSTEIN & WASSERMAN, LLP

<PAGE>

CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The Board of Directors and Stockholders of
Diamond Entertainment Corporation

We hereby consent to the incorporation by reference in this Registration
Statement on Form S-8 of our report dated June 6, 1996, which appears on page 16
of the 1996 Annual Report on Form 10-KSB, and to the reference to our Firm under
the caption "Experts" in the Prospectus.

MOORE STEPHENS, P.C.
Certified Public Accountants

Cranford, New Jersey
July 18, 1996