Form 10KSB for DIAMOND ENTERTAINMENT CORP

We believe we have adequate cash resources to sustain our operations through thefourth quarter of fiscal 2005. We are continuing to negotiate with severalreliable investors to provide us with debt and equity financing for workingcapital purposes. We are likely to require cash resources and also are seekingpotential merger or acquisition candidates that will help increase our revenuesand cash liquidity. Our principal objective is to implement the above items inthe remaining quarters in fiscal 2005, which the Company expects will lead to aprofitable operation if the items are successfully implemented, subject tomarket and other conditions. Although we believe that the outlook is favorable,there can be no assurance that market conditions will continue in a directionfavorable to our Company or that we will be able to attain these objectivesduring fiscal 2005 or at all. Moreover, we may find it difficult or impossibleto raise additional equity financing or effect any potential merger oracquisition until we increase the number of our authorized number of commonstock. The Company as of June 15, 2004 has only approximately 3,000,000authorized shares of common stock available for issuance in any such equityfinancing and we may be unable to effect any equity financing until we haveincreased our authorized shares of common stock and/or effected a restructuringof our equity capital, such as by means of a reverse stock split, combination orrestructuring. There is no assurance that we will be able to obtain stockholderapproval for any such increase or restructuring.