<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to S 240.14a-11(c) or S 240.14a-12
DIAMOND ENTERTAINMENT CORPORATION
------------------------------------------------
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transactions:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed.
<PAGE>
DIAMOND ENTERTAINMENT CORPORATION
800 TUCKER LANE
WALNUT, CALIFORNIA 91789
FEBRUARY 14, 2000
Dear Diamond Entertainment Corporation Shareholder:
You are cordially invited to attend the annual meeting (the "Annual
Meeting") of the shareholders of Diamond Entertainment Corporation, a New Jersey
corporation (the "Company") to be held on March 15, 2000 at 3:00 P.M., local
time, at the offices of Diamond Entertainment Corporation, 800 Tucker Lane,
Walnut, California 91789. At the Annual Meeting, you will be asked to consider
and vote upon (I) the election of one (1) Class 1 directors and two (2) Class 2
directors to the Board of Directors of the Company for term of three years; (II)
the ratification of Merdinger, Fruchter, Rosen & Corso, P.C. as the independent
certified public accountants of the Company; (III) the increase of the
authorized common stock of the Company from 100,000,000 shares of common stock,
no par value ("Common Stock"), to 600,000,000 shares; (IV) the approval and
consent giving the Board of Directors of the Company the authority and power to
effectuate a reverse stock split up to a maximum ratio of 10 to 1 of the
authorized shares of the common stock of the Company; and (V) such other
business as may properly come before the Annual Meeting or any adjournments
thereof. Shareholders may abstain from voting by marking the appropriate boxes
on the enclosed Proxy. Abstentions shall be counted separately and shall be used
for purpose of calculating a quorum.
It is important that your shares of capital stock be represented at the
meeting. We therefore ask that you promptly sign, date and return the enclosed
Proxy regardless of the number of shares of capital stock which you own.
Time will be set aside during the meeting to discuss each item of
business describe in the Proxy Statement and for other questions relating to the
Company. Representative members of management will be on hand for this purpose,
including a representative from the auditor.
Accompanying the Proxy Materials is the Company's Annual Report filed
on Form 10-KSB, as amended, for the year ended March 31, 1999. I hope you take
the opportunity to review the enclosed Proxy Materials and Annual Report.
I look forward to seeing you at the Annual Meeting.
Very truly yours,
/s/ James Lu
James Lu
CHAIRMAN OF THE BOARD OF DIRECTORS
<PAGE>
DIAMOND ENTERTAINMENT CORPORATION
800 TUCKER LANE
WALNUT, CALIFORNIA 91789
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 15, 2000
To the shareholders of Diamond Entertainment Corporation:
NOTICE IS HEREBY GIVEN that the annual meeting of shareholders (the
"Annual Meeting") of Diamond Entertainment corporation, a New Jersey corporation
(the "Company"), will be held on March 15, 2000 at 3:00 P.M., local time, at the
offices of Diamond Entertainment Corporation, 800 Tucker Lane, Walnut CA 91789
to consider and vote upon the following proposals and such business as may
properly come before the Annual Meeting:
1. To elect one (1) Class 1 directors and two (2) Class 2
directors to the Board of the Company for term of three years;
2. To ratify the appointment of Merdinger, Fruchter, Rosen &
Corso, P.C.as the Company's independent certified public
accountants;
3. To increase the authorized common stock of the Company from
100,000,000 shares of common stocks no par value ("Common
Stock"), to 600,000,000 shares;
4. To approve and consent in giving the Board of Directors of the
Company the authority and power to effectuate a reverse stock
split up to a maximum ratio of 10 to 1 of the authorized
common stock the Company;
5. To transact such other business as may properly come before
the Annual Meeting or any adjournments thereof.
The Board of Directors has fixed the close of business on January 28,
2000 as the record date (the "Record Date") for the determination of
shareholders entitled to notice and vote at the Annual Meeting, or any
adjournment or postponements thereof.
You are cordially invited to attend the Annual Meeting. Whether or not
you plan to attend the meeting, please sign, date and return your proxy in the
reply envelope provided. Your cooperation in promptly signing and returning your
proxy will help avoid further solicitation expense.
Shareholders are requested to carefully read and review the
accompanying the Proxy Statement before executing and returning the Proxy to the
Company or voting in person at the Annual Meeting.
By Order of the Board of Directors of
DIAMOND ENTERTAINMENT CORPORATION
JAMES LU,
CHAIRMAN OF THE BOARD/CHIEF EXECUTIVE
OFFICER/PRESIDENT AND SECRETARY
Dated: February 14, 2000
<PAGE>
PROXY STATEMENT
DIAMOND ENTERTAINMENT CORPORATION
800 TUCKER LANE
WALNUT, CA 91789
(909) 839-1989
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MARCH 15, 2000
SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
GENERAL
This Proxy Statement is furnished to shareholders of Diamond
Entertainment Corporation, a New Jersey corporation ("Diamond" or the "Company"
or "Diamond"), in connection with the solicitation of proxies by the Board of
Directors for the annual meeting of shareholders to be held at the offices of
Diamond Entertainment Corporation, 800 Tucker Lane, CA. 91789 on March 15, 2000
at 3:00 P.M., local time, and any adjournments or postponements thereof (the
"Annual Meeting"). This Proxy Statement and the attached Notice of Annual
Meetings are first being mailed to shareholders of the Company on or about
February 14, 2000.
At the Annual Meeting, shareholders will be asked to approve and
consent to:
1. The election of one (1) Class 1 directors to the Board of the
Company for a term of three years; The one (1) nominee for the
Board is Jeffrey I. Schillen. The election of two (2) Class 2
directors to the Board of the Company for terms of three
years. The two (2) nominees for the Board are James K. T. Lu,
and Murray T. Scott.
2. Ratify the appointment of Merdinger, Fruchter, Rosen & Corso,
P.C. as the Company's independent certified public
accountants;
3. The increase of the authorized common stock of the Company
from 100,000,000 shares of common stock, no par value ("Common
Stock"), to 600,000,000 shares;
4. The authorization of the Board of Directors to have the
authority and power to effectuate a reverse stock split up to
a maximum ratio of 10 to 1 of the Company's authorized Common
Stock;
5. Transact such other business as may properly come before the
Annual Meeting or any adjournments thereof.
VOTING AT THE ANNUAL MEETING
The Board of Directors of the Company has fixed the close of business
on January 28, 2000 as the record date (the "Record Date") for the determination
of shareholders entitled to notice of and to vote at the Annual Meeting. At the
close of business on the Record Date, there were 62,334,029 shares of the
Company's common stock, no par value (the "Diamond Common Stock"), issued and
outstanding, each of which is entitled to one vote at the Annual Meeting, and
there were 483,251 shares of Diamond preferred stock, no par value (the "Diamond
Preferred Stock"), issued and outstanding, each such share entitling the holder
to one and ninety five one hundreds (1.95) votes at the Annual Meeting. As of
the Record Date there were issued and outstanding shares of voting stock of the
Company representing an aggregate of 63,276,368 votes entitled to vote at the
Annual Meeting.
The Company has approximately 2,434 holders of record. The Diamond
Common Stock and the Diamond Preferred Stock vote as one group on all matters.
<PAGE>
Under the Certificate of Incorporation of the Company and under the New Jersey
Business Corporation Law, the affirmative vote of a majority of the combined
votes cast by the holders of the issued and outstanding shares of the capital
stock of the Company entitled to vote ("Shareholder Approval") is necessary to
approve and consent to the election of the members of the Board of the Company,
the ratification of the auditors of the Company, and the increase of the
authorized Common Stock of the Company and to authorize the Board of Directors
of the Company to have the authority and power to effectuate a reverse stock
split up to a maximum ratio of 10 to 1 of the Company's authorized common stock,
(collectively referred to as the "Four Shareholder Matters"). The Board of
Directors recommends voting FOR the Four Shareholder matters. Unless otherwise
instructed, proxies solicited by the Board of Directors will be voted FOR the
Four Shareholder Matters.
In order to vote in favor of or against any of the Four Shareholder
Matters at the Annual Meeting, shareholders may attend the Annual Meeting or
deliver executed proxies to the Secretary of the Company at 800 Tucker Lane,
Walnut, CA. 91789 on or before the date of the Annual Meeting. Shareholders
attending the meeting may abstain form voting by marking the appropriate boxes
designated as Abstain on the Proxy. Abstentions shall be counted separately and
shall be used for purposed of calculating a quorum.
It is not anticipated that any other matters will be brought before the
Annual Meeting.
PROXY SOLICITATION
The expense of preparing, printing and mailing this Proxy Statement,
exhibits and the proxies solicited hereby will be borne by the Company. In
addition to the use of the mails, proxies may be solicited by officers and
directors and regular employees of the Company, without additional remuneration,
by personal interviews, telephone, telegraph or facsimile transmission. The
Company will also request brokerage firms, nominees, custodians and fiduciaries
to forward proxy material to the beneficial owners of shares of capital stock
held of record and will provide reimbursements for the cost of forwarding the
material in accordance with customary charges.
SECURITY OWNERSHIP OF DIRECTORS, OFFICERS AND PRINCIPAL STOCKHOLDERS OF THE
COMPANY.
The following table sets forth as of January 28, 2000 (the record
date), certain information with respect to the beneficial ownership of the
outstanding shares of the Company's Common Stock and Preferred Stock by (i) each
person known by the Company to be the beneficial owner of 5% or more the Common
Stock or Preferred Stock; (ii) each director of the Company; (iii) each Named
Executive Officer of the Company; and (iv) all directors and executive officers
as a group. Unless otherwise indicated below, such individuals have the sole
power to control the vote and dispose of such shares of capital stock:
2
<PAGE>
<TABLE>
<CAPTION>
Percentage (%) of
Shares of Common Stock
Percentage Shares of Common Stock Assuming
Shares of (%) of Preferred Assuming Conversion
Common Stock Total Stock Conversion of of Preferred
NAME Owned Common Stock Owned (1) Preferred Stock Stock (2)
---- --------------- ------------- -------------- ----------------- --------------
<S> <C> <C> <C> <C> <C>
James K.T. Lu (3)..................... 20,944,960 24.19% 209,287 408,110 24.66%
c/o Diamond Entertainment Corp.
16200 Carmenita Road
Cerritos, CA. 90703
Jeffrey I. Schillan (4)............... 7,005,750 8.09% 36,282 70,750 8.17%
c/o Diamond Entertainment Corp.
4400 Route 9 South
Freehold, NJ. 07728
Murray Scott (5)...................... 1,300,000 1.50% 75,796 147,802 1.67%
c/o Diamond Entertainment Corp.
16200 Carmenita Road
Cerritos, CA. 90703
All directors and officers as a group
(3persons) (6)........................ 29,250,710 33.78% 321,365 626,662 34.50%
</TABLE>
- ------------
(1) The Preferred Stock entitles the holder to 1.95 votes for each share
owned and each share may be converted into 1.95 shares of Common Stock.
(2) Assumes conversion of shares of Preferred Stock beneficially owned.
(3) Mr. Lu is the Chief Executive Officer; Secretary and Director of the
Company. Includes 14,100,000 shares of Common Stock issuable upon
exercise of warrants, options and convertible notes.
(4) Mr. Schillen is the Executive Vice President and a director of the
Company. Includes 4,150,000 shares of Common Stock issuable upon
exercise of warrants, options and convertible notes.
(5) Mr. Scott is a Director of the Company. Includes 250,000 shares of
Common Stock issuable upon exercise of warrants or options.
(6) Represents 10,750,710 shares of Common Stock outstanding and 18,500,000
shares of Common Stock issuable upon exercise of warrants, options and
convertible notes.
1. ELECTIONS OF DIRECTORS
Under the certificate of incorporation of the Company ("Certificate of
Incorporation"), the Board of Directors of the Company is divided into three (3)
classes, with each class to be elected by the shareholders every three years.
The Company's Board presently consists of three (3) directors with one (1) Class
1 director and two (2) Class 2 directors whose terms all expired in 1999, who
continue to serve until their successors have been nominated and elected.
Officers are elected annually by and serve at the discretion of the Board of
Directors.
The Board has nominated one (1) candidate to serve as Class 1 directors
(Jeff Schillen who is currently a Class 1 directors and whose term has now
expired, and two (2) candidates to serve as Class 2 Directors (James Lu and
Murray Scott, who are currently Class 2 Directors and whose terms have now
expired. The names and biographical summaries of the three (3) persons who have
been nominated by the Board of Directors to stand for the election at the Annual
Meeting have been provided below for your information. The Board of Directors
proposed that these persons be elected at the Annual Meeting to serve until
their Class next stands for election. The Proxies will be voted for the election
of the three (3) nominees listed below as directors of the Company unless
otherwise specified on the form provided. The vote of a majority of the capital
stock, present and constituting a quorum at the Annual Meeting, will be
necessary to elect the directors listed below. If, for any reasons, any of the
nominees shall be unable or unwilling to serve, the proxies will be voted for a
substitute nominee who will be designated by the Board of Directors at the
Annual Meeting. Shareholders may abstain from voting by marking the appropriate
boxes on the enclosed Proxy. Abstentions shall be counted separately and shall
be used for purposes of calculating quorum.
3
<PAGE>
BIOGRAPHICAL SUMMARIES
Class 1 Nominees (terms expire 2003)
JEFFREY I. SCHILLEN (Class 1 Director) Mr. Schillen is Executive Vice
President of Sales and Marketing of the Company and has been a Director of the
Company since inception in April of 1986. Prior to the Acquisition, Mr. Schillen
was the President and Treasurer of the company since April 1986. From May 1984
to April 1986, Mr. Schillen was President and Chief Operating Officer of the
Music Corner Inc., a retail record, tape and video chain which he co-founded.
>From 1974 to April 1984, Mr. Schillen founded and served as Vice President in
charge of purchasing, store openings and acquisitions of Platter Puss Records,
Inc., a retail record, tape and video chain. See "EMPLOYMENT AGREEMENT."
Class 2 Nominees (terms expire 2003)
JAMES LU (Class 2 Director) Mr. Lu has been a director of the Company
and Chairman of the Board of Directors since February 28, 1989. Mr. Lu was
elected as Chairman of the Board, Chief Executive Officer and Secretary of the
company as of March 1, 1990. In July 1991, Mr. Lu was appointed to the
additional position of President. In order to involve other executives in the
management of the Company, Mr. Lu resigned in September 1991 as President and
Chief Operating Officer and Mr. Cheng was appointed to such positions. In May of
1995, Mr. Lu assumed the position of President again due to the departure of Mr.
Cheng from the Company. Mr. Lu was President and Chief Executive Officer of the
California Subsidiary from 1985 to 1990. Mr. Lu received his B.S.I.E. degree
from Chung Yuen University Taiwan in 1969, his M.S.I.E. degree from the Illinois
Institute of Technology in 1972 and a Masters of Business Administration
(M.B.A.) from California State University in 1981.
MURRAY T. SCOTT (Class 2 Director) Mr. Scott was appointed as director
by the Board of Directors in November 1993 when the Board was increased to seven
(7) members. Mr. Scott has been President and Chief Executive Officer of Gregg's
Furniture, a custom furniture building business in Victoria, Canada, since 1958.
His involvement with Gregg's Furniture today is currently in a consulting and
advisory capacity.
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are listed below,
followed by a brief description of their business experience during the past
five years.
<TABLE>
<CAPTION>
Name Age Position
<S> <C> <C>
James K.T. Lu............... 53 Chairman of the Board; Chief Executive
Officer; President; Secretary and Director
Jeffrey I. Schillen......... 54 Executive Vice President Sales and
Marketing and Director
Murray T. Scott............. 78 Director
</TABLE>
All directors hold office for terms of three (3) years and until the
next annual meeting of stockholders scheduled to vote on such class of Directors
and the election and qualification of their respective successors. Directors
receive no compensation for serving on the Board, except for reimbursement of
reasonable expenses incurred in attending meetings. Officers are elected
annually by the Board of Directors and, subject to existing employment
agreements, serve at the discretion of the Board.
Under the certificate of incorporation of the Company ("Certificate of
Incorporation"), the Board of Directors of the Company is divided into three (3)
classes, with each class to be elected by the shareholders every three years.
The Company's Board presently consists of three (3) directors: one (1) Class 1
director whose and two (2) Class 2 directors whose terms expired in 1999.
4
<PAGE>
BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS
JEFFREY I. SCHILLEN (Class 1 Director). Mr. Schillen is Executive Vice
President of Sales and Marketing of the Company and has been a Director of the
Company since inception in April of 1986. Prior to the Acquisition, Mr. Schillen
was the President and Treasurer of the Company since 1986. From May 1984 to
April 1986, Mr. Schillen was President and Chief Operating Officer of Music
Corner Inc., a retail record, tape and video chain which he co-founded. From
1974 to April 1984, Mr. Schillen founded and served as Vice President in charge
of purchasing, store openings and acquisitions of Platter Puss Records, Inc., a
retail record, tape and video chain.
JAMES LU (Class 2 Director). Mr. Lu has been a director of the Company
and Chairman of the Board of Directors since February 28, 1989. Mr. Lu was
elected as Chairman of the Board, Chief Executive Officer and Secretary of the
Company as of March 1, 1990. In July 1991, Mr. Lu was appointed to the
additional position of President. In order to involve other executives in the
management of the Company, Mr. Lu resigned in September 1991 as President and
Chief Operating Officer and Mr. Cheng was appointed to such positions. Mr. Lu
was President and Chief Executive Officer of the California Subsidiary from 1985
to 1990. In May 1995, Mr. Lu was appointed as President of the Company upon Mr.
Cheng's departure form the Company. Mr. Lu received his B.S.I.E. degree from
Chung Yuen University Taiwan in 1969, his M.S.I.E. degree from the Illinois
Institute of Technology in 1972 and a Masters of Business Administration
(M.B.A.) from California State University in 1981.
MURRAY T. SCOTT (Class 2 Director). Mr. Scott was appointed as a
director by the Board of Directors in November 1993 when the Board was increased
to seven (7) members. Mr. Scott has been the President and Chief Executive
Officer of Gregg's Furniture, a custom furniture building business in Victoria,
Canada, since 1958. His involvement with Gregg's Furniture today is currently in
a consulting and advisory capacity.
The Company has no standing audit, nominating or compensation
committee, or committees performing similar functions. During the year ended
March 31, 1999, the Company held four (4) Board meetings. No director attended
less than 100% of such meetings. No director of the Company has resigned or
declined to stand for re-election due to a disagreement on any matter relating
to the Company" operations, policies or practices.
The following table sets forth aggregate compensation paid for services
rendered to the Company during the last three fiscal years by the Company to its
Chief Executive Officer ("CEO") and its one most highly compensated executive
officer other than the CEO who served as such at the end of the last fiscal
year.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-term Compensation
-------------------------------------------- -----------------------------------------
Awards Payouts
--------------------------- ---------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
FY Restricted Securities
Name and Principal 3/31 Other Annual Stock Underlying LTIP All Other
POSITION YEAR SALARY BONUS COMPENSATION AWARD OPTIONS/SARS PAYOUTS COMPENSATION
-------- ---- ------ ----- ------------ ----- ------------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
James Lu (1)
President, Chief 1999 $120,000 0 0 0 0 0 $89,983
Executive Officer, 1998 $78,350 0 0 0 0 0 $31,572
And Secretary 1997 $130,500 0 0 0 0 0 $33,742
Jeffrey I. Schillen (2)
Executive Vice 1999 $100,000 0 0 0 0 0 $13,036
President of Sales 1998 $51,500 0 0 0 0 0 $20,792
And Marketing 1997 $93,000 0 0 0 0 0 $12,547
</TABLE>
5
<PAGE>
EMPLOYMENT AGREEMENTS
In 1991 the Company entered into employment agreement with each of
Messrs. Lu and Schillen for annual compensation of $150,000 and $90,000,
respectively; both provide for annual adjustments in accordance with the
consumer price index, however, no price index adjustments have ever been made.
Consequently, contracted salary levels remain at $150,000 for Mr. Lu and
$120,000 for Mr. Schillen. Both employment agreements terminate December 31,
2001. See "Summary Compensation Table" above, and the notes thereto.
On April 23, 1996 the Board of Directors agreed to reserve 1,000,000
shares of common stock for distribution to Messrs. Lu and Schillen. Such shares
can be purchased for $.25 per share, in installment payments with a five year
promissory note with interest at 6% per annum. As of March 31, 1998 such
officers had not purchased any of such shares.
In September 1997 as consideration for each of Messrs. Lu and Schillen
agreeing to defer up to 90% of their salaries through March 31, 1998, the
Company issued 3,000,000 shares of Common Stock and warrants to purchase
3,000,000 shares of Common Stock to Mr. Lu, and issued 750,000 shares of Common
Stock and warrants to purchase 750,000 shares of Common Stock to Mr. Schillen.
All of such warrants have an exercise price of $.10 per share. The warrants are
fully vested and were exercisable until March 31, 1999. In March of 1999, the
Company extended the terms until August 24, 2002.
The Company maintains two life insurance policies on Mr. Lu, one for
the benefit of the Company in the amount of $1,000,000 and one for the benefit
of Mr. Lu's designated beneficiary in the amount of $500,000. The Company
maintains a life insurance policy on Mr. Schillen, for the benefit of Mr.
Schillen's designated beneficiary, in the amount of $500,000.
On September 1, 1997 the Company entered into employment agreements
with nine other employees holding key positions. The agreements provided for the
issuance of an aggregate of 550,000 shares of Common Stock with a fair value of
$11,000, as payment for services, warrants for 550,000 shares with an exercise
price of $.10 per share and the semi-monthly compensation of approximately
$14,000 in the aggregate.
None of the employment agreements which the Company has with any of the
executives, indicated above, provides for any specific compensation to such
individuals should their respective employment agreements be terminated prior to
expiration of their respective terms.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information with respect to the
options granted during the year ended March 31, 1999, for the persons named in
the Summary Compensation Table (the "Named Executive Officers"):
<TABLE>
<CAPTION>
- -------------------------------- --------------------- -------------------- --------------------- --------------------
NUMBER OF PERCENT OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO
OPTIONS/SARS EMPLOYEES IN EXERCISE OR BASE
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH) EXPIRATION DATE
- -------------------------------- --------------------- -------------------- --------------------- --------------------
<S> <C> <C> <C> <C>
James K.T. Lu 6,000,000 86% 0.10 3/31/03
- -------------------------------- --------------------- -------------------- --------------------- --------------------
James K.T. Lu 1,000,000 14% 0.05 3/22/02
- -------------------------------- --------------------- -------------------- --------------------- --------------------
</TABLE>
6
<PAGE>
AGGREGATE OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth certain information with respect to
options exercised during 1999 by the Named Executive Officers and with respect
to unexercised options held by such persons at the end of 1999.
<TABLE>
<CAPTION>
- -------------------------- --------------- -------------- ----------------------------- ------------------------------
NUMBER OF SECURITIES
SHARES UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
ACQUIRED ON VALUE OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
NAME EXERCISE (#) REALIZED ($) AT FY-END (#) AT FY-END ($)
- -------------------------- --------------- -------------- ------------- --------------- -------------- ---------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------- --------------- -------------- ------------- --------------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James K.T. Lu 0 0 5,600,000 4,000,000 (1) 0 0
- -------------------------- --------------- -------------- ------------- --------------- -------------- ---------------
Jeffrey I. Schillen 0 0 1,150,000 0 0 0
- -------------------------- --------------- -------------- ------------- --------------- -------------- ---------------
</TABLE>
(1) Unexercisable options to purchase 4,000,000 shares are exercisable by Mr.
Lu upon the occurrence of the following: (i) 2,000,000 shares upon
successfully selling all real estate under development by the Company's
partner ATRE and (ii) 2,000,000 upon successful completion of a video
duplication and fulfillment opportunity and upon the CineChrome Card
Business reaching profitability.
2. APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors voted to replace, Moore Stephens, P.C., as its
independent certified public accountants ("Moore Stephens"), whom audited and
reported on the consolidated financial statements of the Company for its fiscal
years ended March 31, 1996, 1997, 1998, and 1999. The Board of Directors
recommends the appointment of Merdinger, Fruchter, Rosen & Corso, P.C. as the
auditors. A representative of Merdinger, Fruchter, Rosen & Corso, P.C. is
expected to be present at the annual Meeting.
Management of the Company knows of no past disagreements with the
former accountants on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope, or procedure, which
disagreements, if not resolved to the satisfaction of Moore Stephens, P.C.,
would have caused it to make a reference to the subject matter of the
disagreement in connection with its reports.
Unless otherwise directed by the stockholder giving the proxy, the
proxy will be voted "FOR" the ratification of the selection by the Board of
Directors of Merdinger, Fruchter, Rosen & Corso, P.C. as the Company's
independent certified public accounts for Fiscal 2000.
3. INCREASE AUTHORIZED COMMON STOCK OF THE COMPANY
The Board of Directors has voted to increase the newly authorized
shares of Common Stock from 100,000,000 shares to 600,000,000 shares. The Board
of Directors believes that this increase is desirable for a number of reasons,
including but not limited to facilitating the Company's ability to attract
future merger candidates, effect growth through future acquisitions and future
financing.
To effect this increase in the authorized Common Stock of the Company,
shareholder approval is sought, to amend the Company's Certificate of
Incorporation relating to the authorized capital stock.
The Corporation shall be authorized to issue, the following shares:
CLASS NO. OF SHARES PAR VALUE
- ----- ------------- ---------
Common............................. 600,000,000 None
Preferred.......................... 5,000,000 None
There are no present plans, understandings, arrangements or discussions
for the issuance of the additional shares of Common Stock or Preferred Stock
that would be authorized by the amendment.
The Board of Directors recommends that stockholders vote "FOR" the
foregoing amendment to the Company's Certificate of incorporation to increase
the number of authorized shares of Common Stock from 100,000,000 to 600,000,000.
7
<PAGE>
4. AUTHORIZATION FOR THE BOARD OF DIRECTORS TO INITIATE REVERSE STOCK SPLIT
Subject to the approval and consent by the shareholders of the Company
of the increase in the authorized shares of Common Stock of the Company from
100,000,000 shares to 600,000,000 shares no par value, the Company is seeking
approval and consent from the shareholders of the Company giving the Board of
Directors the authority and power to effectuate a reverse stock split up to a
maximum ratio of 10 to 1 of the number of authorized shares of the Company's
common stock.
The Board of Directors believes that receiving the authority and power
to initiate a reverse stock split will enable the Company to establish a viable
plan and corporate structure to attract future merger candidates and investment
opportunities for the Company in the future.
The Board of Directors recommends that stockholders vote "FOR" the
foregoing pproval and consent giving the Board of Directors of the Company the
authority and power to effectuate a reverse stock split up to a maximum ratio of
10 to 1 of the number of authorized shares of the Company's Common Stock.
MISCELLANEOUS
REVOCATION OF PROXIES
If the Annual Meeting is adjourned, for whatever reason, the Four
Shareholders Matters shall be considered and voted upon by shareholders at the
subsequent "adjourned or postponed meeting," if any.
You may revoke your proxy at any time prior to its exercise by
attending the Annual Meeting and voting in person, although attendance at the
Annual Meeting will not in and of itself constitute revocation of a proxy, by
giving notice of revocation of your proxy at the Annual Meeting, or by
delivering a written notice of revocation or a duly executed proxy relating to
the matters to be considered at the Annual Meeting and bearing a later date to
the Secretary of the Company at 800 Tucker Lane, Walnut, CA 91789. Unless
revoked in the manner set forth above, proxies on the form enclosed will be
voted at the Annual Meeting in accordance with your instructions.
ADDITIONAL AVAILABLE INFORMATION
The Company is subject to the informational filing requirement of the
Securities and Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, the Company files periodic reports, proxy statements and
other information with the Commission under the Exchange Act relating to its
business, financial condition and other matters. The Company is required to
disclose in such proxy statements certain information as of particular dates,
concerning the Company's directors and officers, their remuneration, options
granted to them, the principal holders of the Company's Securities and any
material interests of such persons in transactions with the Company. Such
reports, proxy statements and other information may be inspected at the
Commission's office at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies
may be obtained on payment of the Commission's customary fees by writing to its
principal office at 450 Fifth Street, N.W., Washington, D.C. 20549.
OTHER MATTERS
The Board of Directors of the Company does not intend to bring any
other matters before the Annual Meeting and does not know of any other matter
that may be brought before the Annual Meeting.
STOCKHOLDER PROPOSALS FOR THE 2001 ANNUAL MEETING
The date by which stockholder proposals for inclusion in the proxy
materials relating to the next Annual Meeting of Stockholders must be received
by the Company at its principal executive offices, Attention: James T.K. Lu,
Chairman of the Board, 800 Tucker Lane, Walnut, CA 91789 by December 1, 2000.
By Order of the Board of Directors of
DIAMOND ENTERTAINMENT CORPORATION
JAMES LU,
CHAIRMAN OF THE BOARD/CHIEF
EXECUTIVE OFFICER/PRESIDENT AND SECRETARY
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