Diamant Art (DIAAF) 20-F 2006 FY Annual report (foreign)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF

THE SECURITIES EXCHANGE ACT OF 1934

OR

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

[X] For the fiscal year ended November 30, 2006

Commission file number 000-16008

DIAMANT ART CORPORATION
[formerly ART INTERNATIONAL CORPORATION]

  Ontario, Canada.       98-0082514

5-7100 Warden Avenue, Markham, Ontario, L3R 8B5 Canada (905) 477-0252  

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class Name of each exchange on which Registered

– NONE –

_____________________________________________________________________________________

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Common Shares, without par value

_____________________________________________________________________________________

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

– NONE –

_____________________________________________________________________________________

(Title of Class)
 

As of November 30, 2006, the number of shares of Common Stock outstanding was 910,610,914.

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

Yes [X] / No

Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 [X] / Item 18

 

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes [X] / No

TABLE OF CONTENTS

			Page
PART I
Item	1	Identity of Directors, Senior Management and Advisors	4
Item	2	Offer Statistics and Expected Timetable	4
Item	3	Key Information	4
Item	4	Information on the Company	7
Item	5	Operating and Financial Review and Prospects	16
Item	6	Directors, Senior Management and Employees	26
Item	7	Major Shareholders and Related Party Transactions	29
Item	8	Financial Information	29
Item	9	The Offer and Listing	30
Item	10	Additional Information	31
Item	11	Qualitative and Quantitative Disclosures about Market Risk	37
Item	12	Description of Securities Other than Equity Securities	38
PART II
Item	13	Defaults, Dividends Arrearages and Delinquencies	39
Item	14	Material Modifications to the Rights of Security Holders and Use of Proceeds	39
Item	15	Controls and Procedures	39
Item	16	[Reserved]	39
Item	16A	Audit Committee Financial Expert	40
Item	16B	Code of Ethics	40
Item	16C	Principal Accountant Fees and Services	40
Item	16D	Exemptions from the Listing Standards for Audit Committees	40
Item	16E	Purchase of Equity Securities by the Issuer and Affiliated Purchasers	40
PART III
Item	17	Financial Statements	41
Item	18	Financial Statements	41
Item	19	Exhibits	42

2

EXPLANATORY NOTES

In this annual report, the terms the “Company”, “Corporation”, “we”, “our” or “us” mean Diamant ART Corporation, an Ontario corporation, and includes, unless the context otherwise requires, all consolidated subsidiaries.

FORWARD-LOOKING STATEMENTS

This annual report on Form 20-F contains statements that constitute forward-looking statements within the meaning of the U.S. federal securities laws under "Item 3: Key Information", "Item 4: Information about the Company" and "Item 5: Operating and Financial Review and Prospects". The words "estimate", "project", "plan", "expect", "believe", “anticipate” and similar expressions are intended to identify forward-looking statements. These statements are based on certain assumptions made by the Company. However, whether actual results and developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, including the factors set forth in other filings the United States Securities and Exchange Commission (the &quo t;SEC") and the risk factors found in this annual report. These risk factors, among others, in some cases have affected and in the future could affect the Company's financial performance and actual results and could cause actual results to differ materially from those projected results expressed in any such forward-looking statements. Consequently, these cautionary statements qualify all of the forward-looking statements made in this annual report. In addition, the Company may, from time to time, make oral forward-looking statements. United States securities laws provide a safe harbor from liability with respect to oral forward-looking statements if certain conditions are satisfied, including if the oral forward-looking statements are accompanied by an oral statement that additional information concerning factors that could cause actual results to materially differ from those in the oral forward-looking statements is contained in a written document filed with the SEC. To take advantage of the safe harbo r with respect to oral forward-looking statements that the Company may make from time to time, you will find under "Item 3: Key Information - Risk Factors" a list of risk factors which could cause actual results of the Company to materially differ from those in the oral forward-looking statements.

The Company disclaims any obligation to update or revise any oral or written forward-looking statements whether as a result of new information, future events or otherwise.

3

PART I

Item 1. Identity of Directors, Senior Management and Advisers

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 1.

Item 2. Offer Statistics and Expected Timetable

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 2.

Item 3. Key Information

A. Selected financial data.

The following presents selected financial data for the Company in Canadian dollars and in accordance with Canadian Generally Accepted Accounting Principles (“CDN-GAAP”). It should be read in conjunction with the separate financial statements of the Company and related notes included elsewhere herein, which were prepared under CDN-GAAP. This financial data should be compared to the Company’s Audited Financial Statements and the reconciliation of the financial information presented between CDN-GAAP and US-GAAP. The financial data as of November 30, 2006 and for the four previous fiscal years has been derived from financial statements of the Company that have been examined by independent chartered accountants in Canada.

Extracts from audited financial statements.	November 30	November 30	November 30	November 30	November 30
	2006	2005	2004	2003	2002
Summary of operations:
Sales	12,167	31,932	62,066	83,450	191,820
Cost of goods sold	289,339	261,432	209,353	218,956	327,566
Gross profit / (loss)	(277,172)	(229,500)	(147,288)	(135,506)	(135,746)
Depreciation and amortization	15,058	24,375	4,493	5,616	10,724
Selling, general and administrative expenses	227,448	223,218	211,813	274,829	312,734
Interest and finance expense	35,979	40,955	41,045	40,921	49,455
Operating loss	(555,657)	(518,048)	(404,638)	(456,872)	(508,659)
Foreign Exchange Gain (4)	10,238	19,175	75,761	165,546	9,380
Net loss	(545,419)	(498,873)	(328,877)	(291,326)	(499,279)
Net loss per common share (1)	(0.001)	(0.003)	(0.020)	(0.169)	(1.957)
Weighted ave. number common shares o/s (5)(6)	698,687,695	171,894,325	16,623,078	1,720,778	510,336
Summary of balance sheet data:
Current assets	108,695	181,774	53,904	76,580	129,290
Total assets	114,465	202,602	71,876	99,045	157,371
Current liabilities	1,190,881	1,205,599	1,334,000	1,472,792	1,560,792
Total liabilities	1,190,881	1,205,599	1,334,000	1,472,792	1,560,792
Share capital	12,940,719	12,468,719	11,710,719	11,270,218	10,949,218
Contributed surplus (7)	11,775,000	11,775,000	11,775,000	11,775,000	11,775,000
Accumulated deficit	(25,792,135)	(25,246,716)	(24,747,843)	(24,418,965)	(24,127,639)
Shareholders’ (Deficit) Equity	(1,076,416)	(1,002,997)	(1,262,124)	(1,373,747)	(1,403,421)
Under U.S. GAAP
Net loss	(555,657)	(518,048)	(404,638)	(456,872)	(508,659)
Net loss per common share	(0.001)	(0.003)	(0.024)	(0.266)	(0.997)
Share capital (2)	14,982,262	13,852,262	12,636,761	13,311,761	12,636,761
Accumulated deficit (2)	(27,833,678)	(27,288,259)	(26,789,386)	(26,460,508)	(26,169,182)
Comprehensive income – Cum exch.gain (4)	280,100	269,862	250,687	174,926	9,380
Shareholders’ (Deficit) Equity	(1,076,416)	(1,002,997)	(1,262,124)	(1,373,747)	(1,403,421)
Ave. annual exch.rates $1US = Canadian $ (3)	1.1341	1.2116	1.3015	1.4015	1.5704

4

(1)

As the Company is in a loss position, it does not reflect the fully diluted earnings per share, as the effect would be anti-dilutive.

(2)

Under Canadian GAAP share capital is reported net of issuance costs, in the aggregate of $2,041,543, whereas under U.S. GAAP such costs were charged against the operating income as a period expense in the year of stock issuance; thus under U.S. GAAP the reported share capital amount was greater by the amount of the issuance costs. Consequently, under the respective Canadian GAAP the corporation’s reported accumulated deficit was lower by the same dollar amount.

(3)

The above noted summary financial data is prepared in the currency of the Corporation’s Home country, in Canadian dollars.  The above noted exchange rates represent the average annual exchange for 1 United States dollar expressed in Canadian dollars.  The following table of exchange rates is the monthly high and low exchange rate for 1 United States dollar expressed in Canadian dollars, and is provided for information purposes:

Month	Dec	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov
	05	06	06	06	06	06	06	06	06	06	06	06
High	1.1646	1.1621	1.1521	1.1606	1.1476	1.1233	1.1180	1.1324	1.1221	1.1191	1.1317	1.1386
Low	1.1583	1.1536	1.1461	1.1545	1.1413	1.0990	1.1100	1.1251	1.1157	1.1131	1.1260	1.1337

The closing daily exchange rate for 1 United States dollar expressed in Canadian dollars for April 30, 2007 was 1.1343.

(4)

Under Canadian GAAP exchange gains or losses are charged against the operating income as a period gain or loss, whereas under U.S. GAAP they are reported as a cumulative net adjustment “comprehensive income” in the Statement of Shareholders’ Retained Earnings or Deficiency.

(5)

Effective May 2003, the shareholders of the Corporation voted unanimously to consolidate the common shares on the basis of 100:1; the prior years’ numbers have been adjusted to reflect this consolidation.

(6)

Effective October 29, 2004 the Corporation declared a 2-for-1 stock-dividend (which had the equivalent impact on the number of outstanding common shares as a 2:1 stock split); the prior years’ numbers have been adjusted to reflect this split.

(7)

There is a difference between U.S. GAAP and Canadian GAAP for contributed surplus with respect to terminology.  Under U.S. GAAP, contributed surplus is called “additional paid in capital”.

(8)

The significant differences between U.S. GAAP and Canadian GAAP in the accounting for future income taxes relate to the treatment of proposed changes in income tax rates and terminology.  Under Canadian GAAP, future income tax assets and liabilities are measured using substantively enacted tax rates and laws expected to apply when the differences between the accounting basis and tax basis of assets and liabilities reverse.  Under U.S. GAAP, future income tax assets and liabilities are called deferred income tax assets and liabilities and are measured using only currently enacted tax rates and laws.  As at November 30, 2006, 2005, 2004, 2003 and 2002, the difference in rate determination did not result in any adjustment from Canadian to U.S. GAAP since any deferred tax assets were not considered more likely than not to be realized and, accordingly, a full valuation allowance was recorded on such assets.

B. Capitalization and indebtedness.

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 3.B.

C. Reasons for the offer and use of proceeds.

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 3.C.

5

D. Risk factors.

1)

THERE IS SIGNIFICANT DOUBT THAT THE COMPANY IS A GOING CONCERN– As reported by our independent chartered accountants in the accompanying audited financial statements have been prepared on the basis of accounting principles applicable to a going concern, meaning that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations.  However, the use of generally accepted accounting principles that are applicable to a going concern is potentially inappropriate because there is significant doubt about the appropriateness of the going concern assumption.  Given the accumulation of operating losses $25,792,135 and the deficiency of working capital, $1,082,186 at November 30, 2006 the Company’s ability to realize its assets and discharge its lia bilities is dependent upon the attainment of profitable operations, the efforts of its directors and principal shareholders in providing financial support in the short term, the success of the Company raising additional long-term financing either from its own resources or from third parties, and the continued cooperative support of its creditors. The financial statements do not reflect adjustments that might be necessary should profits not be attained, or should their be a failure of short term and long term efforts to raise capital, or should the cooperative support not be continued. See Note 1 to the audited consolidated financial statements “DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND GOING CONCERN” attached as Exhibit 3 hereto.

2)

THE SECURED NOTE HOLDERS OF THE COMPANY MAY NOT RENEW AND EXTEND REPAYMENT TERMS.  –The Company is in default under its extended repayment terms. In addition, one Note Holder commenced proceedings against the Company, in 1999 and 2000 in the State of New York and Province of Ontario, respectively. In both cases the Company had counter-claimed, and in both cases the plaintiff has filed for discontinuance without prejudice. We cannot be assured that the Note Holders will agree to further credit extensions, or that the Company would be able to pay them or in the case of further actions by the Note Holder(s) to enforce payment, that the Company could mount a successful defense. Currently, there is no formal supplementary agreement for credit extension or waiver of the Note Holders& #146; remedies under the security agreement between the Note Holders and the Company. The balance owed to note holders that is overdue is $739,843 at November 30, 2006.

3)

WE RELY UPON THE CONTINUING SUPPORT OF TRADE CREDITORS.  –There is no assurance that the trade creditors will continue to cooperate with the Company, which could jeopardize its future ability to obtain products and services and negatively impact operations in a material way. The overdue balance owed to trade creditors that is not current is $397,725 at November 30, 2006.

4)

THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL BE SUCCESSFUL ITS NEW VENTURE IN THE PACKAGING BUSINESS – The Company, through its wholly owned subsidiary, Diamant Film Inc., acquired the exclusive distribution rights for certain  territories in North & Central America markets and Asia / Far Eastern markets for a clear stretch film food wrapping. Which product is trade marked and marketed under the brand name “DIAMANT™”. The Company is uniquely positioned because the DIAMANT™ Brand presents the food wrapping industry and markets with an alternative environmentally “healthy” product, which has no PVC, and that can be mass produced and competitively priced. Notwithstanding, our ability to succeed in the food packaging business is dependant o n our ability to:

i)

Meet minimum purchase commitments for DIAMANT™ - increasing to 18,000,000 LBS annual minimum quantity by year five, ending June 2009. The Company is in default of its minimum purchase commitments to date, which it has been able to mitigate due to on-going requirements to modify Diamant film to meet North American mechanized packaging specifications.

ii)

Raise external capital – to finance the purchase of DIAMANT™ product, and cover marketing and selling and distribution costs, and working capital, until the operations of its subsidiary are self (internally) financed by profits and cash flows.

iii)

Manage our launch of DIAMANT™ product – There can be no assurances that the Company will successfully manage all its challenges in launching its new packaging business.

During the year ended November 30, 2006, the Corporation achieved nominal sales of the DIAMANT™ product.

5)

IF WE ARE UNABLE TO PROCURE ON-GOING SUPPLIES OF FILM PACKAGING FROM OUR EUROPEAN SUPPLIERS, WE WILL FAIL TO COMMERCIALIZE OUR OPPORTUNITIES IN OUR FILM PACKAGING BUSINESSES– The Company is totally reliant on its European suppliers for Diamant film and Bio-degradable pallet wrap. In the first six months of Fiscal 2007, the Company has secured initial commercial orders for Diamant film and Bio-degradable pallet-wrap of approximately $250,000. In both cases the Company was required to prepay deposits to its suppliers, and the production and supply of materials was subject to constraints on production capacities by its suppliers. Failure by the Company to obtain consistent and timely supply form European sources to fill orders by its North American customers will jeopardize its future chances of success in its packaging businesses.

6

6)

IF WE ARE UNABLE TO ACHIEVE PROFITABILITY, WE WILL CONTINUE TO RELY ON EXTERNAL FINANCING– the Company operates at a loss. During the year ended November 30, 2006 the Company was able obtain external financing under Regulation “S” offerings, which totaled $472,000 (see “Note 6, Notes to the Consolidated Financial Statements” attached hereto as part of Exhibit 3).  In future, our inability to raise new capital or achieve profitability could have a material adverse effect on the ability of the Company to continue operations.

7)

CERTAIN STOCKHOLDERS CAN EXERCISE SIGNIFICANT INFLUENCE OVER OUR BUSINESS AND AFFAIRS AND MAY HAVE INTERESTS THAT ARE DIFFERENT FROM THE COMMON SHAREHOLDERS. – The Company had 12,580,000 Class “C” Common shares issued and outstanding at November 30, 2006.  During fiscal 2005 holders of 3,670,000 Class “C” Common share converted to 367,000,000 common shares. Each Class “C” Common share entitles the holder to 100 votes.  Subsequent to the year-end, under Regulation “S” offerings, 16,000,000 Class “C” Common shares were issued for consideration totaling $160,000. Subsequent to the year end, holders of 8,380,000 Class “C” Common shares converted to 838,000,000 common  shares. The balance of un-converted Class  7;C” Common shares, which totals 20,200,000, represents 2,020,000,000 common shares on a fully diluted (converted) basis. Therefore the Class “C” Common shares have a total of 2,020,000,000 votes, which gives them control over the Board of Directors and operations of the Company. The Class “C” Common Shares are not publicly listed or traded.

8)

THERE CAN BE NO ASSURANCE THAT WE WILL SUCCEED IN THE ART REPRODUCTION MARKETS OR THAT COMPETITORS WILL NOT PROVIDE SUCCESSFUL RIVAL PRODUCTS. -- The Company reproductions must compete with a variety of decorative art products, including products from other companies, which replicate fine art as well as original artwork from local artists and others. Small vendors can compete effectively within the marketplace while larger vendors can benefit from volume discounts. Company must competitively price its products against both the large and the small vendors to successfully build sales volume. Many companies have processes for reproducing oil paintings, including other methods of texturing their reproductions, and there are also many companies, which market art reproductions such as giclee, l ithographs and serigraphs. Nevertheless, we believe that no other known reproduction processes compare in quality with the Company processes in accurately reproducing brush strokes and texture; and the color intensity and other reproduction characteristics are believed to be at least equal to any other known reproduction process.  Company’s success in the marketplace will depend upon creating greater awareness of its products, as well as its pricing and delivery policies.

9)

FLUCTUATIONS IN CONVERSION RATE BETWEEN THE CANADIAN AND UNITED STATES DOLLARS COULD HAVE A NEGATIVE IMPACT ON OUR FINANCIAL RESULTS –The majority of Company’s revenues are exports and its invoicing is in United States dollars. The Company has experienced a strong Canadian dollar in relation to the US dollar during the current year, which negatively impacted gross margins. However, the Company benefited from the stronger Canadian dollar, during the last 5 years, as its total US liabilities as reported in Canadian dollars, have trended downward by approximately $150,000 – 200,000 because of unrealized exchange gains.However the reverse situation, of a weakening Canadian dollar would improve gross profit but result in more onerous US liabilities.

10)

OUR STOCK PRICE HAS BEEN VOLATILE. –The market price of our common stock has been volatile, for example between December 2005 and May 2007, the trading prices for our common shares varied between a high of $US0.0148 and a low of $US0.0005. Ignoring the month of December 2005, price fluctuations have been flatter – varying between  a high of US$0.0058 and $US0.0005; generally the trend of the Company’s common share prices has been downward. Fluctuations in trading price of our common stock may continue in response to a number of events and factors, which may adversely impact our ability to obtain further equity financing.

11)

FAILURE TO MAINTAIN EFFECTIVE INTERNAL CONTROLS COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR ABILITY TO REPORT OUR FINANCIAL RESULTS TIMELY AND ACCURATELY.

If we fail to maintain the adequacy of our internal controls, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial reporting. Failure to achieve and maintain an effective internal control system could have a material adverse effect on our ability to report our financial results timely and accurately, which would impact the ease of our access to the capital markets.

Item 4.Information on the Company

A. History and development of the Company.

7

The Corporation operates as Diamant Art Corporation, which name was adopted and approved, November 22, 2004, by shareholders through an amendment to the Articles of Incorporation of the Company (formerly ART International Corporation (from May 2003), ART International Inc. (from July 1998); hereinafter also referred to as “Company” or “Corporation” .)  

The Company was incorporated in Canada on January 24, 1986 under The Ontario Business Corporations Act.  

The Corporate offices and operations are located at 7100 - 5 Warden Avenue, Markham, Ontario, Canada. Telephone: 905 477 0252.

During the last three fiscal years, DIAMANT operated in two different business sectors:

Art Reproduction – Artagraph™

Historically, the Company's primary business was the production, distribution and marketing of replications of original paintings that incorporated brushwork texture including but not limited to oil, acrylic and other textured pigment-mediums “Textured ART”. The Company’s reproductions on canvas are marketed using the registered trademark of Artagraph® Editions, (sometimes referred to as “Artagraph®” or Artagraphs®”).  The principle component of the Company’s product line is PVC-based plastic sheet & coating that is moulded to produce the brushstrokes.

Generally, over the last 10 years, the Company has been reliant on one or a few major customers. Prior to the past four fiscal years the Company’s major customer was Museum, a specialty retailer operating in the United States, whereby the Corporation’s sales revenues from that source had represented in the range of 40 - 60% of its total revenues.

The ever dwindling sales are generated by small numbers of independent galleries.

Final chapter on the Museum Company - On January 10, 2002, Museum went into Chapter 11; at which date Museum owed the Company approximately $100,000 of trade receivables. The Company had purchased export insurance for its US customers including the Museum, which lowered the bad-debt loss on its trade-receivables (owed by Museum) to approximately $30,000. In the period from December 1, 2001 to January 10, 2002, the Corporation sold $65,000 of Artagraph images to Museum.

During the period in Chapter 11, from January through April 2002, Museum operated as The Museum Company, D.I.P. (“Museum”) and continued to purchase products from the Company. Total sales revenues reported in the Chapter 11 period were approximately $21,000.

In May 2002, Museum emerged from Chapter 11, whereby the continuing business assets were sold to a third party company, “The Museum Company Acquisition Corp” (hereinafter also referred to as “Museum”). During the Chapter 11 proceedings Trustee/Receiver-manager had closed approximately 50 – 60% of its stores. Consequently, a reduction of sales revenues from this retail store-chain was anticipated because of: first, the closed stores; second, the Company’s inability to finance additional images and point-of-sale materials; and, third, the Company placed Museum on 15-day payment terms that reduced the Museum’s ability to finance its inventory and consequently Museum purchased only made-to-order framed images that the Company drop-shipped directly to the customer.

From May 2002 through November 2002, the Company sold Museum approximately $30,000 of Artagraph products.

In the first six months of fiscal year 2003, sales to the Museum Company declined significantly; reported sales revenues were approximately $14,000. Thereafter, following the first NSF payment, the Company placed Museum on “cash-on-order” basis exclusively, and following this the Company received no further orders from the Museum. Management believes Museum may have reorganized its business affairs a second time and that its new operations focus on an internet-based business model and lower-priced merchandise product.

The Company did not sell to the Museum Company during Fiscal 2006, and there is no expectation that the Corporation will resume sales to the Museum in the foreseeable future.

Diamant Film Inc. & Bio-Plastics Inc.  -- Operating in the food wrap and pallet wrap “flexible” packaging businesses respectively.

On April 22, 2004, the Company formed a wholly owned subsidiary, Diamant Film Inc. (“FILM”), under articles of incorporation in Ontario, Canada. The subsidiary was formed to execute ongoing negotiations and implementation of the food packaging business.

8

Effective June 14, 2004, FILM finalized an agreement with Diamant Plastics Corp. a private company incorporated in Ontario, Canada  (“PLASTICS”) for the exclusive distribution rights in Canada, to market and distribute a new non-PVC based plastic utilized in the stretch-film food packaging industry, name branded  DIAMANT ™. The agreement has a term of five years (hereinafter referred to as the “June 14, 2004 Agreement”), renewable for a further five years at the FILM’s option.

 Effective June 28, 2004, FILM finalized an agreement with PLASTICS for the exclusive distribution rights in the United States Of America, to market and distribute DIAMANT™ film, by amendment to the June 14, 2004 Agreement.

On October 8, 2004, DIAMANT ART CORPORATION (as ART International Corporation) filed a Form 8-K detailing its subsidiary’s ongoing business developments, including:

•

September 15, 2004, FILM concluded a successful 90-day test of its DIAMANT™ film with a national Canadian food retailer.

•

September 21, 2004, FILM reached an agreement with a second national supermarket retailer to test DIAMANT™ film.

•

September 28, 2004, the Company was authorized to use Canada’s Environmental Choice Program (“ECP”); a North American leading benchmark of environmentally responsible products and services. DIAMANT™ film successfully met criteria for both environmental and performance standards.

Effective November 15, 2004, FILM finalized an agreement with PLASTICS for the exclusive distribution rights in Mexico, to market and distribute DIAMANT™ film, by amendment to the June 14, 2004 Agreement.

On March 10, 2005, FILM signed an exclusive agreement with Presidential Holdings, Inc. (“PRESIDENTIAL”), giving PRESIDENTIAL the exclusive right to sell, market and distribute DIAMANT™ film to the United States military market. PRESIDENTIAL comprises professional military and private sector consultants whom assist companies to develop supply contracts with the US military. In addition, former Vice Admiral, U.S. Navy, Commander, Giffin, who is a senior strategic consultant with PRESIDENTIAL became a member of FILM’s Advisory Board.

Effective March 23, 2005, FILM finalized an agreement with PLASTICS for the exclusive distribution rights in the Bahamas, to market and distribute DIAMANT™ film, by amendment to the June 14, 2004 Agreement.

On March 29, 2005, FILM executed a five-year agreement, effective March 1, 2005, with Victory Packaging of Houston, Texas (“VICTORY”) giving VICTORY exclusive sales and distribution rights to DIAMANT™ film in North America for industrial and supermarket applications. VICTORY has approximately $350 million in annual revenues and operates 50 warehouses across North America. Under the terms of the agreement, VICTORY agreed to purchase minimum quantities of DIAMANT™ film from 135 million feet, in year one, to 4.2 billion feet by year five. If fully delivered, the five-year contract represents an estimated $120 million in sales revenues.

On April 18, 2005, FILM executed an out-sourcing agreement with Astron Bulk Packaging Limited (“ASTRON”), whereby ASTRON will provide operation services including, receiving bulk imports and repackaging and delivery to customers.

On 12 September, 2005 the Company formed a wholly owned subsidiary “Bio-Plastics Inc.” (Herein after also referred to as “BIO-PLASTICS”). BIO-PLASTICS was formed to develop and acquire new products and technologies in totally bio-degradable products, including the right(s) for manufacturing and distributing such products.

On September 30, 2005 BIO-PLASTICS executed a non-disclosure agreement with EPI Environment Products Inc. related to its “Totally Degradable Plastic Additive”.  

On October 31, 2005, FILM secured an agreement with PLASTICS for the exclusive marketing and distribution rights to the Territory of The Peoples Republic of China for DIAMANT™ film, by amendment to the June 14, 2004 Agreement.

On December 2, 2005, FILM secured an agreement with PLASTICS for the exclusive marketing and distribution rights to South Korea for DIAMANT™ film, by amendment to the June 14, 2004 Agreement.

In 2006 the FILM added Thailand by amendment to the July 14, 2004 Agreement.

9

During fiscal 2006 the Company’s exclusive rights in the South Korean, Thailand and the Territory of The Peoples Republic of China were allowed to lapse, owing to the limited success in developing these markets. Despite earlier expectations these markets proved less interested in the non-PVC cling film.

In the first six months of fiscal 2007, the Company received its first commercial orders for DIAMANT film and Bio-degradable pallet wrap of approximately $250,000.

Summary Table

The following table shows comparatives of gross revenues between the two business segments of the Corporation.

Business Segment	2006	2005	2004
Geographic Operations
One Corporate Offices & Warehouse	Ontario, Canada
Revenues
Artagraph	9,803	31,932	62,086
DIAMANT (1)	2,364	-	-
BIO-PLASTICS (1)	-	-	-
% Ownership - Subsidiary
FILM  -- Year End Nov. 30	100%	100%	-
BIO-PLASTICS  -- Year End Nov. 30	100%	100%	-

(1)Subsequent to the year end the Company recorded $US54,948 sales revenues of Diamant Film product; and, $US168,829 sales revenues from its bio-degradable pallet wrap product. At this time, the Company cannot forecast sales for Fiscal 2006, due to start-up variables, including limited access to working capital and its reliance on European sources to manufacture and deliver such orders on a timely basis. Although the Company believes it has developed two promising prospective customers that have significant national sales and distribution in the United States, its above noted sales are characterized as exploratory commercial orders by those customers.

Information concerning the principal expenditures and financing

The Company continued to face severe liquidity problems during fiscal 2006, which was due to ongoing losses and falling revenues in its Artagraph business, combined with the start-up losses of FILM and BIO-PLASTICS. The ongoing business viability of the Company is in serious jeopardy, while the Company continued to rely on its creditors for ongoing support.

During fiscal 2006 the Company financed general-operational cash flow short falls and the cash requirements for launching, testing and pre-marketing of its new packaging business from external sources of approximately $472,000 (see “Note 6, Notes to the Consolidated Financial Statements” attached hereto as part of Exhibit 3) (2005 -$758,000).  These funds were raised through advances related to Regulation “S” offerings.

During fiscal 2006, the Company completed three Regulation “S” offerings. On December 19, 2005 the Company closed a Regulation “S” offering, under which the Company had sold 5,000,000 restricted shares of Class “C” common stock.  The consideration received by the Company for the sale of the shares was a total of $500,000 (or $0.10 per Class “C” common share). On February 23, 2006 the Company closed a second Regulation “S” offering, under which the Company had sold 3,000,000 restricted shares of Class “C” common shares.  The consideration received for the sale of these shares was a total of $300,000 (or $0.10 per Class “C” common share).  On November 30, 2006 the Company closed a third Regulation “S” offering, under which the Company had sold 8,250,000 restricte d shares of Class “C” common shares.  The consideration received for the sale of these shares was a total of $330,000 (or $0.04 per Class “C” common share).

Subsequent to the year end, on March 29 2007, the company closed a Regulation “S” offering, under which the Company had sold 16,000,000 million Class “C” common shares. The consideration received for these shares was a total of $160,000(or $0.01 per Class “C” common share).

The Class “C” common shares are convertible, at the owners option into one hundred (100) restricted, subject to the Regulation “S” hold period, common shares per one (1) Class “C” common share.

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During the year ended November 30 2006, holders of 3,670,000 Class “C” common shares converted to 367,000,000 common shares. And subsequent to the year end, November 30 2006, holders of 8,380,000 converted to 838,000,000 common shares.

Approximately, $300,000 of cash has been raised in advance subscriptions subsequent to the year-end and utilized to fund ongoing general working capital requirements of  $150,000 and the balance to finance purchases of packaging materials from the Company’s European sources for Diamant and bio-degradable flexible packaging businesses.

There were capital expenditures of $27,000, for the year ended November 30, 2005 (2004 - $NIL) relating to development of a commercial website. In addition, the Corporation contracted outsourcing relationships (such as the ASTRON agreement) in order to smooth cash expenditure and match them to future revenues, which are anticipated from the food packaging business. By out-sourcing to ASTRON, FILM and the Company avoided capital expenditures of approximately $50-70,000.

In order to meet minimum obligations, both purchasing from PLASTICS and sales to PRESIDENTIAL and VICTORY, in the food packaging business, the Corporation is purchasing its entire product from Switzerland. The maximum amount the Company can purchase and import is dependant on the capacity limitations that the Swiss corporation may place from time to time on exports, which may be impacted by demands in the European market.

If the Company successfully negotiates manufacturing rights, it may plan to set-up production for DIAMANT™ film in the United States. Each production line would cost approximately $3 million. This would necessitate significant additional financing for start-up capital, which the Company might not successfully accomplish.

B. Business overview.

Artagraph Division -Artagraph -- replicates both the color and brush stroke texture, so that the resulting works of art are almost indistinguishable, by the average person, from original paintings. The Artagraph® Editions include signed and numbered limited editions by contemporary artists, as well as editions of works by the great masters, and have a suggested retail price of between US$75 and US$300. Some limited edition reproductions of contemporary artists have retailed considerably higher, but this is solely due to the Artist’s reputation.

During Fiscal 2006, the Artagraph division and product line was the major source of the declining sales revenue for the Corporation.

The majority of the Company’s sales represent exports, principally to the United States. The following table shows the Company’s sales to its principal geographic markets for the last four fiscal years.

	Year Ended Nov 30
	2006	2005	2004	2003
Canada	4,489	6,625	19,225	20,233
United States	5,314	25,307	42,841	63,217
			62,066	83,450

Many of the works reproduced by the Company are in the public domain.  Works, which are not in the public domain, are reproduced pursuant to agreements with various copyright holders.

The Company manufactures reproductions of Impressionist and Post-Impressionist paintings as well as paintings by contemporary artists. The Company does not always create a replication directly from an original painting.  A professional artist, who is engaged to replicate the texture and brush strokes of the original artist’s style, also creates semi-originals (a copy of the original art work’s texture rendered by the professional artist in an oil or acrylic medium).

In the past, the Company has contracted with art publishers, to produce replications of contemporary works of art for a fixed price, which are then distributed by the publisher.

The Company has a library of approximately 80 different Artagraph® titles, of which the majority are Impressionist or Post-Impressionist paintings, some being limited edition reproductions. These reproductions are of paintings by such artists as Monet, Manet, Van Gogh, Degas, Renoir, Turner and other well-known artists. Once the Company has a reproduced title in its library, it can manufacture as many reproductions from that title as the market will bear, subject only to limitations imposed by contracts with third parties that limit the availability of certain Artagraph® Editions.

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The replication process is a two-stage process.  The first stage is replication of the painting’s color. The second stage, which directly involves the Company’s patented process, is the reproduction of texture and brush strokes. The Company works from transparencies of the original art, preparing color separations and then printing the image on a specially designed “paper” called a litho, a PVC-based plastic. The Company subcontracts with third parties to produce the transparencies and printed lithos in accordance with the Company’s proprietary specifications. In the second stage, the Company produces a bass relief mold from either the original oil painting or, in cases where the original oil painting is not available, from the semi-original of the painting.

The final stage of processing involves precise application of heat and pressure to the bass relief mold, the printed litho and to a special PVC-coated canvas to create the finished product.

During 1998, the Company’s Artagraph Product won two Benny awards for Best-of-Category in the Latest Technology Pieces category for its submission of the limited edition reproduction of Howard Terpning’s “Crow Pipe Ceremony”, and in the Poster and Art Prints category for the “Holy Man of the Blackfoot”.  The Bennys Awards are the “oldest and largest international printing competition”, which was held in Chicago during October 1998. The Company faced competition from 874 companies that submitted 4,990 printed products.

Currently it is primarily engaged in supplying retail art gallery customers with its catalogue products. In the past, the Company has marketed through specialty retail; overseas distributors, including Japan and Spain; direct mail with American Express Card Members programs; and, carried out contract printing for publishers.

In the past, the Company has tried to use foreign distributors.  Due to the Company’s lack of financial resources these distributors had to provide their own point-of-sale materials, framing products and other promotional materials to their businesses. Consequently, all these agreements were on a best efforts basis and, like all the Company’s distributor agreements; there has been no assurance of future revenues or profits from the efforts of any of these distributors.

There are many publishers who represent contemporary artists engaged in publishing art reproductions, such as lithographs, serigraphs and posters. The Company believes that its products offer a unique alternative to these publishers to add an important new and more accurate reproduction medium to their existing product lines.

The Company has produced custom pieces under fixed price contracts for art publishers and agents, with product development costs paid by the publisher. Prices charged vary depending upon the size of the product, the number of colors and the size of the edition. Pricing for textured canvas (sold without framing, which is the responsibility of the customer) ranges from $US50 through $200 per canvas print. Currently, the Company has no publishing contracts, and nor is it actively promoting this business owing to its limited financial resources; the last year that the Company had and significant publishing business was in 1999 when revenues from that segment accounted for 25% (approximately $250,000) of total sales.

The process for manufacturing Artagraph® Editions was patented in Canada and the United States. An application for improvements to the Artagraph® replication process resulted in the issuance of a new United States patent in November 1990, which patent would have expired in 2008. Currently, the Company is delinquent in paying its periodic patent fees and there no likelihood that the Company could reinstate its patents. Consequently the Company’s enjoyment of patent protection is lost, which could have negative consequences for the Company’ ability to raise capital.

The main business of the Company, which is in the retail sector, has seasonality and follows the traditional retail experience with the strongest sales period through the Thanksgiving and Christmas holidays, however, the absence of promotional materials, which the Company would normally utilize to maximize its potential for sales growth, results in a flatter sales peaks. The seasonality impact is significantly softened because overall promotional activity is entirely reliant on the customers’ own efforts and because total gross sales revenues are at an all-time low.

Raw materials utilized in the manufacturing process are commodities that can be purchased from alternative suppliers. A principal component of the raw material inventoried by the Company is sheet PVC, which is utilized in the printed lithos, and a PVC coated canvas. The PVC is the key component enabling the Company to mold the texture and promote molecular bonding of the laminated litho and canvas. Raw materials have an indefinite shelf life and do not spoil or become obsolete. Components such as frames are not inventoried; rather they are purchased to fill custom orders on a just-in-time basis.  Raw materials are all sourced locally and although there has been a steady increase in raw material prices over the past five years, the Company has no volatile pricing to contend with. As discussed above, the Company predominantly exports and consequently pr ices in United States Dollars.

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The Company prints and inventories quantities of individual images from 500 to 1,000 units to achieve economical print costs. Printed lithos also have an indefinite shelf life and are sold through variety programs over a number of years. Printer lithos are stored pending orders from customers then completed through the texturing, stretching and framing phases to ship on a just-in-time basis. Framing and printing are out sourced to other third parties, and there are many alternative suppliers available for both in the general locality of the Company’s production facility.

The Company transfers out-sourced products and services through to its customers at cost plus a modest mark-up. The Company charges a significant mark-up on its patented texturing process, which contributes more than 80 % of its gross profit.

The Company has accumulated excessive inventories of printed images from earlier years through 1994. Approximately 75% of its current inventory of images has only been printed once and that pre-dates 1994. All inventories have not turned more than once in the past three years and consequently have been fully written-off.

DIAMANT™ Film Subsidiary

In the future, the Company intends to manufacture a non-PVC (poly vinyl chloride) food packaging stretch film, under license from PLASTICS and under the trade name DIAMANT™. The owner and inventor of DIAMANT™ film, a Swiss-based company, first achieved commercial status in 2001 after an extensive, 10-year development on resin formulations and equipment design. The major difference between the commercial markets in Europe versus the markets in North America is the mass production aspects typical of the North American industry. Consumers in the North American market prefer to purchase their food groceries in greater bulk than their European counterparts who purchase their food groceries on an almost daily basis. Acceptance by the North American mass-produced food packagers was dependant on modifying the resin formula to allow automated mass packa ging. Since April 2004, the Company, with the aid of the Swiss corporation, has largely achieved this initial transfer of technology to the North American markets and accommodating its market-characteristics.  

Initially the Company has acquired the distribution rights from PLASTICS, and pending further negotiations through PLASTICS with the Swiss corporation may acquire manufacturing rights. The market channels to be pursued are the existing PVC stretch film business in North America, comprising:

•

The packaging of meat, poultry, seafood and vegetables at super markets and food processors, which operate on automated production lines;

•

The packaging of food at institutional establishments such as restaurants and catering operations, which operate on single machine or manual stations;

•

The wrapping of foods in individual homes, which involves only hand based wrapping from a boxed roll with cutter.

Currently the North American Industry is mature and is dominated by PVC stretch film producers. DIAMANT™ film offers a comparable competitively priced alternative that provides branding differential by promising an environmental responsible product. As reported numerously on internet websites, PVC contains plasticizers called DEHP that reportedly renders the following undesirable characteristics:

•

Leaching of plasticizer into the foods being packaged and attendant health concerns;

•

Extreme health risks in disposal via incineration due to the production of dioxins;

•

Release during production of monomer, which is a carcinogen and corrosive vapor;

•

Release of harmful vapors at the end-users locations during heat sealing, including supermarkets and food processors.

DIAMANT™ film offers additional beneficial characteristics:

•

Upto 30% reduction in packaging waste due to lower density and gauge;

•

Can be recycled or safely incinerated;

•

Higher tensile strength per unit, allowing extrusion of thinner layers;

•

Equal to 20% greater shelf life for perishable products, cutting customers costs;

•

Can be printed on, which opens branding opportunities – such as “fresh obsessed” for supermarkets;

•

Addresses increased consumer concern and awareness of environmental responsibility

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The Company hopes to capitalize on the advantages DIAMANT™ film affords it to provide the foundation for a rapid expansion in North America. The keys to success for the Company include:

•

Successful transfer and adaptation to North American markets, which has largely been achieved by May 2005;

•

Reduction of raw material costs by switching from a limited volume importer and licensed distributor to a licensed manufacturer and mass producer of  DIAMANT™ film, which  the Company believes it can negotiate;

•

Roll-out and market access of the North American stretch film packaging industry, which the Company believes it is successfully positioning itself through its strategic partnerships with established logistic, distribution and warehouse companies and strategic marketing consultants.

•

Acquiring external capital and working capital financing to support its desire to achieve expansion, including access to the public markets, equipment leasing and secured debt financing, which  the Company is actively exploring.

Stretch film packaging is a commodity and is not sensitive to seasonality or economic recessions because foods are necessities.

The Company is wholly reliant on the single source manufacturer located in Switzerland, for product supplies. In addition, the same party is the only manufacturing source for the specialized extruder production units and associated technical knowledge. The composition of the resin is a strictly secrete formulation that is highly complex. In addition, the Swiss had to modify the formulations for the North American market to allow for automated packaging lines.  The Swiss company has purposely not filed for patent protection, which is not uncommon in the industry. Oftentimes filing for patent protection reveals too much technical information that might enable competitors to re-engineer the product and process.  Under current configurations of the production facilities operated by the Swiss, their maximum current capacity is significantly lower than future contractual supply minimums to the Company and its distributors.  Total annual volume capacity in Switzerland is approximately 4.4 million LBS.

The Company has signed two downstream distribution agreements with two corporations for the major markets in the United States of America and is actively pursuing other options in Canada, Mexico, China, South Korea and Bahamas. In addition, the Company has outsourced its repackaging of bulk product imports. While the Company has taken every precaution to ensure its business partners can support its business and has jointly participated in field testing the product, there are no assurances that these companies will purchase the minimum quantities.  Conversely, the combined minimum purchase commitments of VICTORY and PRESIDENTIAL in year-three of their five year distribution agreements are approximately twice the Swiss company’s current annual capacity. The Company believes the Swiss will respond to the “projected” increase in demands for DIAMANT™ by increasing their production or licensing other third parties to manufacture DIAMANT™ film.

The Company operates in a highly regulated industry. DIAMANT™ film has been approved by Canadian Health Protection Branch for food contact and qualifies for U.S. Food and Drug Administration non-objection status. Recently, DIAMANT™ film was passed stringent EU guidelines and applicable laws regarding food hygiene for contact with aqueous, acidic, alcohol, oily and fatty food types. Its product is well positioned to enable the Company to parade its advantages over competing PVC stretch film packaging. The potential advantages claimed include: longer food shelf life; less food contamination; less waste – benefiting land fill sites; recycling and safe incineration, which will support its customers’ desire to minimize garbage disposal costs and further underlines its competitive price when considering the complete spectrum of costs associ ated with PVC.

Despite significant marketing efforts by the Company, achieving commercial sales has proved frustratingly challenging. In part the Company believes this is due to the industry’s maturity and inertia; changing brands involves significant investment of resources. Progress is happening very slowly. Some customers’ mechanized wrapping systems require extensive testing; and in some instances the physical characteristics of the film need minor adjustments. These have to be done in Switzerland.  Contribution from the two exclusive distributors in North America, PRESIDENTIAL and VICTORY has proved disappointing. The first anniversaries (March 2006) of the distribution contracts with the two distributors have past without any sales. Consequently, Company has taken more active role approaching prospective customers. The Company believed that there wer e excellent prospects for an initial sale break-through with producers and retailers of natural and organic foods. This niche was where the Company focused its efforts during 2006.

Ultimately, the Company’s lack of capital frustrated its success. One prospective organic retail-customer, with national distribution through North America, was sufficiently impressed by the absence of PVC in the DIAMANT film to explore its other chemical characteristics. It required the Company to finance a number of laboratory tests to determine the level of other chemical components present in its film. The tests, which had to repeated several times due to contamination issues, proved somewhat inconclusive as they offered no finite proof that other undesired chemical levels were present or not, in less or greater levels than generally experience in other plastic-based film wrap. In part, the Company’s Swiss supplier was reluctant to divulge its formulae or pay for the production of samples to conclusively isolate and then eliminate certain und esired trace chemicals. The venture was eventually suspended as estimates of developmental costs to lead to a successful solution were projected by the laboratory in excess of $US100,000, which the Company would have had to carry 100% of the financial costs and uncertainty risks. The prospective customer would not provide a conditional guarantee of purchase orders in advance of a successful outcome.

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During 2006 the Company unsuccessfully test-marketed DIAMANT films to consumers through a web-based distribution channel. The Company had no capital at its disposal to actively promote this channel and the Company faced logistical challenge of collecting federal ID numbers, required under food packaging regulations, from prospective customers. Consequently, this sales channel yielded very disappointing sales levels.

By the end of Fiscal 2006 the Company had failed to parlay its investment in DIAMANT film into commercial success. As a result the Company has written-down its inventories of DIAMANT film by 50%. Since the year-end the Company did secure purchase orders of DIAMANT film product, however 80% of theses orders contained a minor reformulation and consequently had to be ordered directly from the Swiss supplier.

BIO-PLASTICS.

Was formed to explore and develop opportunities in Bio-degradable products.  On September 30, 2005 BIO-PLASTICS executed a non-disclosure agreement with EPI Environment Products Inc. EPI licenses its “Bio-degradable Plastic Additive” technology (“EPI technology”) to approved manufactures of plastic products.  During October 2005, preliminary discussions were held at the corporation’s head office in Markham, Ontario including representative from the Swiss corporation that manufactures the DIAMANT™ film product; the Swiss corporation and FILM have had preliminary discussion to jointly develop bio-degradable cling film.

During 2006, through cooperative efforts with its contacts in the industry, the Company negotiated a limited exclusive arrangement, to market any products developed by an Italian corporation, including products with EPI technology, within North America. Following the year end, the Company secured an initial purchase order from Sigma Supply to purchase bio-degradable pallet wrap film that was manufactured by the Italian corporation.

Sigma Supply is a national distributor of packaging equipment and supplies.  It supplies pallet-wrap stretch film to major distributors and retailers in North America.

The Company anticipates additional orders from Sigma Supply, and subject to a successful introduction by Sigma to its customers of the bio-degradable pallet wrap, BIO-PLASTICS has a first right to negotiate an exclusive long-term distribution agreement for the North American market for the Italian corporation’s product line

All manufactured sources of the Companies plastic food and pallet wrap packaging are directly impacted by world oil prices that effect base-costs of polystyrene and polyethylene raw materials. In addition, the purchase pricing is sensitive to currency fluctuations between the Canadian and United States dollars and Swiss Francs and Euro currencies. Currently the Company is effectively purchasing its product based on spot prices in both oil and currency markets. Pricing has been volatile. From January to April 2007 the purchase price for the pallet wrap product spiked by approximately 20%. In the short term, the Company can only lock into fixed purchase prices for a maximum of six months, and that is dependent on its ability to forecast in terms of timing and quantities. Based on its current ad hoc purchasing methodology the Company is at risk to losses aris ing from supply prices driven by adverse oil and currency volatility. If however the Company becomes satisfied there is a sustainable commercial market in North America for its stretch film packaging, the Company will be in a position to plan its purchasing cycles including the acquisition of applicable hedging instruments to minimize its exposure to the aforementioned risks posed by volatile markets.

C. Organizational structure.

Currently the Company has two wholly-owned subsidiaries, Diamant Film Inc and Bio-Plastics Inc.

D. Property, plants and equipment.

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The Company’s executive offices, Artagraph production facility and gallery are located at 7100 Warden Avenue, Markham, Ontario, Canada L3R 8B5, occupying 12,000 square feet of space leased through January 31, 2009. The lease provides for a fixed annual net rental of $84,107, 88,024, and 14,585 (partial only) for fiscal 2007,  2008 and 2009 respectively, excluding it’s pro rata share of taxes, insurance, building maintenance and occupancy costs (“TMI”). The gross rental cost including an estimate for TMI is approximately $130,000 per annum.

The Company believes its leased facilities are in good operating condition and adequate for its present requirements.

Currently, the Company has three sets of equipment available for the production of Artagraphs®. This equipment has an annual capacity of approximately 60,000 to 75,000 units. In the Company’s most prolific years the maximum through put was approximately 20,000 units. In the last couple of years the production has dwindled down to less than 200 units. The three sets of equipment were acquired from a supplier in the UK, and are customized hydraulic press-machines typical of the lamination industry. The customization incorporates a cooling cycle between each heating cycle. Local service operators readily maintain the machines and spare parts are also attainable in the local vicinity.  To bring the three machines to fully maintained running order, the Company would have to spend approximately $35,000 for parts, particularly on new cooling equipm ent, and to a lesser extent on cost of out-sourced servicing on its hydraulic presses.

There are no plans to acquire additional Artagraph-machines as the Company operates well within current expectations of capacity.

The Company has no formal plan to provide new facilities for the packaging businesses. In the event the Company successfully negotiated exclusive manufacturing rights for North America, thereafter it would have approximately nine to twelve months to implement manufacturing operations in the United States. The Company believes current capacity requirements for customers and business partners can be sufficiently handled through imports from Switzerland and or Italy in the foreseeable future.

Item 4A. Unresolved Staff Comments

Not applicable.

Item 5.Operating and Financial Review and Prospects

The following should be read in conjunction with our audited financial statements and the notes thereto, and other financial information contained elsewhere and incorporated by reference in this Annual Report. In the following discussions “Company” “we” “us” and “our” refer to Diamant ART Corporation and its wholly-owned subsidiaries Diamant Film Inc. (also referred to as “FILM”), and subsidiary Bio-Plastics Inc. (also referred to as “BIO-PLASTICS”) unless the context otherwise dictates.

In addition to historical information, the discussions in this section may contain certain forward-looking statements that involve risks and uncertainties. The forward-looking statements relate to, among other things, operating results, trends in sales, gross profit, operating expenses, anticipated expenses and liquidity and capital resources. Our actual results could differ materially from those anticipated by forwarded-looking statements due to factors including, without limitation, those set forth in this Form 20-F under “Item 3. Key Information - D. Risk Factors”.

A. Operating results.

(i) Accounting policies critical to the reported financial results

Going Concern –as reported in the Company’s “Notes to the Consolidated Financial Statements – November 30 ,2006” the financial statements of the Company have been prepared on a going concern basis that contemplates the realization of assets and discharge of obligations in the normal course of business as they come due. The Company’s continuance as a going concern is dependent on the success of the efforts of its directors and principal shareholders in providing financial support short term, the success of the Company in raising additional long-term financing either from its own resources or from third parties, and the Company achieving profitable operations. In the event that such resources are not secured, the assets may not be realized or liabilities discharged at their carrying amounts, as reported in the Company ’s financial statements, and the differences could be material.

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Inventories

Artagraph – Fine art reproductions

In the past, the Corporation has reported significant inventory levels on its balance sheets of several $100,000’s. The reported value of inventory in the balance sheet for November 30, 2006 is $NIL, which is consistent with its reporting on fiscal 2005, for the reason that the on-hand inventory has been written off, because of very low to zero sales experienced by the Company for virtually all its images.

For the Company to compete successfully in the market place it must carry inventories of many images to accommodate wide ranges of consumer tastes for different subject matter and imagery. In addition, consumer tastes are always changing and wall-décor trends are influenced by many factors: such as colour, subject matter, perceived value to price and individual choice for framing materials (i.e. modern simple lines, classical ornate patterns as well as colour and finish-style, and so forth).  Owing to economies of scale the Company must print a minimum of 500 pieces for each item in its catalogue. Other than the frame cost the printing represents the most significant investment by the Company.  Five hundred printed lithos represents an approximate cost of $3 – 5,000 per lot.

To mitigate carrying significant investment of inventory for multiple images and framing materials, the Company only processes minimum quantities, although the top-most 20 popular images may be at higher quantities, through to the textured phase; and then only completes the production of finished-goods inventory through the stretching and framing stages once customers’ orders are in the pipeline.

The Company's policy is to periodically evaluate the inventory levels of each product in its inventory on an image-by-image basis, both in light of past sales and estimated future sales of each product and similar products.  In addition, when the Company determines that a product line or market should be discontinued, the inventory relating to that product line or market is written down to net realizable value.  The purpose of these policies is to ensure that the Company's inventory balance, net of reserves, exclude slow-moving and obsolete inventory and are valued at the lower of cost and market value.  The Company uses annual physical inventory counts combined with an analysis of each product's preceding three year's (or for such shorter period that a particular product may have been in existence) sales and a review of the Company's sales expectations for each product to determine whether the level and value of the Company's inventory of a particular product at a given time is excessive. This three-year period has been deemed to be an appropriate period for evaluating the historical sales of the Company’s products since such products are not perishable and tends to be marketed over multi-year periods through intermittent and recurring sales programs.

Inventories of newly selected images, that have less than stellar sales, involve significant judgement by management in the application of its valuation policy. Future circumstances might radically change the performance characteristics of any given catalogue image and in aggregate with other failures result in material write-downs.  This has happened in the Company’s history, although not recently as the Company has not had capital to invest in new images.

Inventory of DIAMANT stretch film –food packaging and advent of Bio-degradable flexible packaging.  During the start-up phase the Company secured an inventory of DIAMANT products, in an endeavour to minimize delivery lead times. The Company had anticipated certain requirements to supply product samples and initial orders of DIAMANT film.

Additionally, mechanized food wrapping lines operated by food packers have varying configurations of packaging equipment and operating characteristics. Consequently, when the Company acquired its initial commercial orders subsequent to the year-end, the DIAMANT film for one meat packer had to be modified to conform to that customer’s operation specifications, and the modified DIAMANT film had to be ordered from the Swiss manufacturer.

The new formulation will likely operate on a wider variety of mechanized production lines and will definitely be suitable to all known hand-wrap applications. This will help the Company minimize its future investment in inventory of DIAMANT film, with different characteristics, and hence reduce the future likelihood of valuation adjustments to its carried inventory

With the advent of the Company’s new Bio-degradable flexible packaging, the Company faces additional challenges in the management of inventory products with finite shelf life characteristics. Management anticipates that future inventories of DIAMANT and Bio-degradable packaging will involve significant judgement by management in the application of its applicable valuation policies.

Further, the Company’s reliance on European manufactures and the inherent currency risks associated with purchasing and selling its products in a variety of currencies, the susceptibility of these products to oil-price volatility will necessitate utilizing hedging techniques to reduce exposure and risk to losses, which will likely entail significant judgement by management in forecasting and valuation techniques.

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(ii) Operating Results

Year ended November 30, 2006, compared with year ended November 30, 2005

General & Summary

Financial results in fiscal 2006 were similar to fiscal 2005 levels. Notwithstanding the similarity of overall results comparing fiscal years 2006 and 2005, there were some significant differences in reported financial results that partly off-set each other.

Like the prior year, the Company’s main source of revenues in fiscal 2006 was its declining sales of Artagraph reproductions.  The Company’s launch of an on-line sales channel for DIAMANT film was unsuccessful and only generated $2,400 of sales revenues.  Consolidated sales revenues fell in fiscal 2006, compared to fiscal 2005, by approximately $20,000.

COGS increased in fiscal 2006 by a margin of $28,000 over the previous fiscal year that mainly resulted from the difference in inventory valuation losses comparing year over year. In 2006, the Company recorded a loss allowance on its DIAMANT product line of $70,000; whereas in fiscal 2005 the Company had reported a write-off on its Artagraph inventory of $35,000.

Therefore the decline in sales revenues combined with the increase inventory valuation losses negatively impacted the gross loss, which increased by $48,000.

In fiscal 2006, marginal increases in selling, general and administration expenses were offset by similar decreases in amounts of other expenses. Within sales general and administration expenses, a significant decrease in spending in the DIAMANT division in consulting fees, travel and entertainment, and a decrease in corporate spending on investor relations activities, in fiscal 2006 over fiscal 2005 was directly off-set by the onetime gain in fiscal 2005 resulting from adjustments to accrued capital tax expenses.

The increase in gross loss was directly transferred to the increase in net losses, from $498,873 (2005) to $545,419 in fiscal 2006.

The loss per share improve from $0.003 in fiscal 2005 to $0.001 in fiscal 2006, however this was solely due to the increase in the weighted average number of common shares that increase from 171,894,325 to 689,687,695 year over year.

Cash used in operations was $461,257 (2005 – 720,493) that was finance through Regulation “S” offerings of $472,000 (2005 – 758,000).

Sales revenues

Artagraph – Fine art reproductions

In 2006, the majority of the limited sales revenues were attributable to the Artagraph product line. In fiscal 2005 all sales revenues were from the Artagraph line.

	2006	%	2005	%	2004	%
Total Sales revenues	9,803	100%	$31,932	100%	$  62,066	100%
Sales to top ranked Customer	2,900	30%	$12,420	39%	$  16,950	27%

Sales revenues fell 62% from fiscal 2005 levels. Future sales of Artagraphs will likely decline as inventories of finished goods are depleted. Until the Company can allocated approximately $20,000 – 35,000 from its limited cash flows to purchase new cooling equipment and perform maintenance on its production line it cannot manufacture additional finished goods.

Historically the Company has operated with a two-tier sales price list for its Artagraph products. The Company’s sales price lists are based in United States Dollars and have not been modified for over five years. The two-tier price system was originally designed to accommodate distributors and dealers, national retail chains and individual / regional gallery operators respectively. In recent years the distinction between distributor and dealer has become blurred. In part, this was because the Company’s only national customer has reduced the number of stores it operated through by over 60%. Related to this, major galleries that the Company sells to are able to command distributor-level prices because of intense pricing competition from competitor-suppliers of fine-art printed images. Competitive initiatives focus on brand differentiation, consume r-buying patterns due to trends in colour, and image-subject and framing products. In the last three years the Company has sold its catalogue product at the distributor’s price-level. The distributor sales price lists maintained by the Company range from $US75 to $US300, which represents the range from an unframed image to the highest priced frame image. The average selling price in the last five years has consistently been in the region of $US210.  The pricing of specific catalogue images (framed or unframed) has remained constant within this time frame. Sales revenue declines are entirely due to falling unit sales.

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Flexible Packaging - DIAMANT – non-PVC stretch food wrap, & Bio-degradable – pallet wrap.

The Company sold $2,364 of DIAMANT product in fiscal 2006. All sales were made through its on-line sales channel that was launch during 2006. The disappointing sales results through this channel are attributable to the complete lack of capital available to promote the product line and website-portal to potential customers.

The DIAMANT film is sold to mechanized food packers in 5,000ft rolls in a variety of widths from 12 through 24 inches. The hand wrap DIAMANT film is sold in 2,000ft rolls in 12 and 18 inch widths. In addition there are a number of different gauges offered in the 5000ft rolls. Prices have varied depending largely on what the market can bare.  Sales prices for 5000ft rolls range from $50 upward to $75. Sales prices in the hand wrap rolls vary from a low of $18 through to a maximum of $28 per roll.

During fiscal 2005 the Company awarded two exclusive “Distribution Agreements” to U.S. based distributors, PRESIDENTIAL and VICTORY, however neither distributor has been able to generate orders to date.  Under the Distribution Agreements the distributor must purchase minimum quantities of DIAMANT™ film to retain exclusivity rights. Accordingly, following the failure of either distributor to sell any DIAMANT product through 2007, the Company has exercised its right to negotiate with other food distributors, wholesalers or retailers in U.S. markets. Although the Company is pursuing several opportunities, there can be no guarantee that the Company will successful launch its sales of DIAMANT™ film.

There were no sales of bio-degradable flexible packaging during fiscal 2006. Towards the latter part of fiscal 2005 the Company received enquires about a Bio-degradable pallet wrap product.

Subsequent to the year end the Company secured an order for approximately 22,000,000ft of pallet wrap. The order was from Sigma Supply Inc. In addition, the Company received its first commercial orders for its DIAMANT film. The Company sold approximately 500 rolls of DIAMANT hand wrap film from its inventory. A second order, of 5000ft rolls, from another customer in the meat packing business had to be ordered from the Swiss corporation as the film characteristics required modification. In total, these three orders were approximately $250.000 of sales revenues.

Gross Loss

In fiscal 2006 the principal reason for the gross loss was that fixed overheads, mainly occupancy costs including rent of $125,000 and plant salaries and benefits of $86,000, exceeded total sales revenues by several multiples.

Gross margin on Artagraph product in 2006 is artificially high as the underlying carried cost of finished goods, not including frames that are only purchased for confirmed orders, was written off in 2005. Generally, gross margins have been declining as sales revenues are mainly in US dollars, and US sales prices have not been changed in five years or more, so the strengthening Canadian dollar has reduced margin by 50%.  Other than frames that are ordered on a just in time basis to fill confirmed orders, the principal components purchased by the company are printing services, PVC and canvas. These principal products and services have not been purchased for several years; the Company has completed all orders from on-hand raw materials and work in process inventories. Current pricing for new supplies of raw materials and printing are likely to have incre ased; PVC is an oil-based product. The likelihood is that the gross margin, which exceeded 60% and that was enjoyed by the Company in the past, is not attainable in the future.

Gross margins on the flexible packaging have varied because the Company has attempted to price close to its competition and has had to purchase supplies from European sources on an ad hoc basis. Management have not been able to forecast sales and COGS has been negatively impacted by rising oil prices and a weakening US dollar against other major currencies. The Company’s expectation is that gross margins will likely range around 15% although this will improve if the product is manufactured in North America.

Subsequent to the year end, in an effort to conserve cash flow, the Company has implemented a temporary lay-off of the production employees. Under Canadian labour, employment insurance regulations, the Company can temporarily lay-off “qualifying” employees for a maximum of 35 weeks in a 52 week period, provided the Company continues to cover the Company portion of group insurance premiums. The employees are covered under the employment insurance on an expedited basis. The Company is conserving approximately $5 – 6,000 of wages on a monthly basis.

Selling, General & Administration Expenses

19

During fiscal 2006 selling, general and administration expenses declined compared to fiscal 2005 in several areas, particularly discretionary expenses. Thus a year over year comparison or these expenses highlights that investor relation, travel meals and entertainment, and consulting expenses declined by approximately $135,000 in fiscal 2006 versus fiscal 2005.

Offsetting these higher operating expenses in fiscal 2005 over fiscal 2006 was a one-time gain, in fiscal 2005, resulting from the write-off of capital tax liability of $134,983. In December 2005, the Company filed delinquent provincial corporate tax returns from the years 1994 through 2004. In the past the Company had accrued for the estimated capital tax, late filing penalties and interest based on its reported financial results for accounting purposes. At November 30, 2004 the total accrual for capital taxes, penalties and interest recorded by the Company was $140,000. When completing the actual corporate tax returns the Company elected to accelerate certain write-offs for tax purposes and the actual liability for capital taxes was only $5,017. In turn the significantly lower base of capital tax liability resulted in appreciably lower interest expenses and no penalty costs.

Other Income and Expenses

Other income and expenses declined $5,000 in fiscal 2006 over 2005. A decrease in exchange gains of $10,000 was more than offset by decreases in loan interest of $5,000 and a decrease in depreciation expense  of $10,000.  The loan interest is the interest on the 10% Notes which is a fixed rate of interest expressed in US dollars, but the stronger Canadian dollar reduced the reported Canadian equivalent expense.

Differences between Canadian and U.S. GAAP

The consolidated financial statements of the Company for the years ended November 30, 2006, 2005 and 2004 have been prepared in accordance with generally accepted accounting principles as applied in Canada (“Canadian GAAP”).  In the following respects, generally accepted accounting principles as applied in the United States (“U.S. GAAP”) differ from those applied in Canada.

The significant adjustments which are described below would be required in a consolidated financial statement to comply with U.S. GAAP.

a) In prior years, issue costs of the shares following Canadian GAAP were treated as a reduction of capital.  These principles differ from U.S. GAAP following SFAS7, which states that the share issue costs can be treated as an expense in the period.

a) For the last three years, there have been foreign exchange gains which following Canadian GAAP are treated as a recovery of expenses in the period it is incurred.  Following U.S. GAAP, the foreign exchange gain (loss) would be recorded through comprehensive income in the equity section.

The effect of such differences on the Company’s balance sheet and statement of loss would be as follows:

	2006	2005	2004
a)    Capital stock – Canadian GAAP	12,940,719	$11,810,719	$10,595,218
Share issue cost	2,041,543	2,041,543	2,041,543
Capital stock – U.S. GAAP	14,982,262	$13,852,262	$12,636,761
b)    Accumulated deficit – Canadian GAAP	(25,792,136)	$25,246,716	$24,747,843
Share issue cost	2,041,543	2,041,543	2,041,543
Accumulated deficit – U.S. GAAP	(27,833,679)	$27,288,259	$26,789,386
c)    Comprehensive income – U.S. GAAP	269,862	250,687	174,926
Comprehensive income – Canadian GAAP	-	$           -	$           -
Foreign exchange gain	10,238	19,175	75,761
Comprehensive income – U.S. GAAP	280,100	$     269,862	$     250,687

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Statement of Loss	2006	2005	2004
Net loss – Canadian GAAP	(545,419)	$498,873	$328,877
Foreign exchange gain	10,238	19,175	75,761
Net loss – U.S. GAAP	(555,657)	$518,048	$404,638
Net loss per share – U.S. GAAP	(0.001)	($    0.003)	($   0.024)

Accounting For Future (Deferred) Income Taxes

The significant differences between U.S. GAAP and Canadian GAAP in the accounting for future income taxes relate to the treatment of proposed changes in income tax rates and terminology.  Under Canadian GAAP, future income tax assets and liabilities are measured using substantively enacted tax rates and laws expected to apply when the differences between the accounting basis and tax basis of assets and liabilities reverse.  Under U.S. GAAP, future income tax assets and liabilities are called deferred income tax assets and liabilities and are measured using only currently enacted tax rates and laws.  As at November 30, 2006, 2005 and 2004, the difference in rate determination did not result in any adjustment from Canadian to U.S. GAAP since any deferred tax assets were not considered more likely than not to be realized and, accordingly, a ful l valuation allowance was recorded on such assets.

Year ended November 30, 2005, compared with year ended November 30, 2004

General & Summary

The Company’s only source of revenues is the declining sales of the Artagraph fine art reproductions. Fixed overhead costs, including occupancy costs, which are reported in the COGS line item on the consolidated statement of loss, exceed reported revenues by a substantial amount, and as revenues declined the gross loss increased in 2005.

Net loss for the year ended 30 November, 2005 was $498,873, an increased by approximately $170,000 over 2004. Which was due to the increase in gross loss of approximately $82,000, the lower foreign exchange gain by approximately $55,000, and overall increases in recorded amortization and selling, general and administrative expenses accounted for the balance of the increase in net loss.

Included in the operating costs and expenses were amounts for the FILM business totalling approximately $190,000 (2004 - $93,000) for pre-marketing, and product testing and samples.

Loss per share was $0.003 for the year ended November 30, 2005, compared to a loss per share of $0.02 reported for fiscal 2004. However the decrease, in loss per share, was attributable to the significant increase in the weighted average number of common shares at November 30, 2005, to 171,894,325 from 16,623,078 in the prior year. During the year ended November 30, 2005 holders of 4,631,000 Class “C” common shares converted into 463,100,000 common shares.

Operating cash flow shortfall for the year ended November 30, 2005 was $720,493 which was financed through Regulation “S” offerings; during the year the Company received advanced share subscriptions totalling $758,000 (see “Note 6, Notes to the Consolidated Financial Statements” attached hereto as part of Exhibit 3) relating to the Company’s Regulation “S” offerings.

Included in the operating cash flow shortfall was cash utilised by the FILM business totalling approximately $355,000 (2004 - $93,000). Contributing to the cash flow shortfall were: the operating losses of $190,000; inventory purchases of DIAMANT™ totalling approximately $134,000, the design and build cost of  a dedicated website for FILM and pre paid expenses accounted for the balance.

Sales revenues

Artagraph – Fine art reproductions

All reported sales revenues for the year ended 30 November 2005 and 2004 were derived from the Artagraph product.

	2005	%	2004	%
Total Sales revenues	$31,932	100%	$  62,066	100%
Sales to top ranked Customer	$12,420	39%	$  16,950	27%

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Annual sales revenues declined approximately 50% from 2004 to 2005. The reduction is attributable to the non-existent sales and marketing activities. The unit sales prices have not changed and the reduction is due to lower sales volumes. In both years the largest customer, this was not the same customer, represented a significant percentage of total sales. New customers who find the Company tend to purchase a larger opening order in the initial year, and then due to the fact that there are no new products, the orders dwindle down rapidly in the following year(s).

Diamant film – non-PVC stretch food wrap

The Company has not achieved any sales to prospective Canadian or United States food packaging customers as of November 30, 2005 or in the subsequent period ended May 2006. During the year ended November 30, 2005, the Company purchased four containers of DIAMANT™ film for on hand inventory; the inventory represents approximately $200,000 of sales revenues. This reflects anticipated unit selling prices at a 10-15% premium over comparable PVC based product currently dominant in this market. Notwithstanding, the Company may sell the initial product at a discount to promote initial orders.

Gross Loss

Total gross loss increased in the year ended November 30, 2005 to $229,500 compared to 2004 of $147,287.

The decline in sales revenues of approximately $31,000 contributed directly to a portion of the increase in gross loss overall.

Approximately $29,000 (2004 - $NIL) related to the FILM segment, and included product sample material costs and freight costs related to the acquisition of DIAMANT film inventories.

In the Artagraph segment, inventory write-downs contributed to the balance of the increased gross loss.

The cost of goods sold of $261,432 (2004 - $209,353) reported in the consolidated statement of loss includes $124,000 (2004 – $120,000) of rent expense.

Selling, General & Administration Expenses

Although overall selling, general and administrative expenses increased marginally from $211,813 in 2004 to $223,218 in 2005, there were some off-setting factors.

Diamant Film’s marketing expenses increased by approximately $67,000, from $93,165 in 2004 to $159,757 in 2005.

Corporate professional, investor media, press releases, and transfer agent expenses were higher in the year ended November 2005 by $59,000 in the aggregate compared to fiscal 2004.

Offsetting these increases in operating expenses was a one-time gain resulting from the write-off of capital tax liability of $134,983. In December 2005, the Company filed delinquent provincial corporate tax returns from the years 1994 through 2004. In the past the Company had accrued for the estimated capital tax, late filing penalties and interest based on its reported financial results for accounting purposes. At November 30, 2004 the total accrual for capital taxes, penalties and interest recorded by the Company was $140,000. When completing the actual corporate tax returns the Company elected to accelerate certain write-offs for tax purposes and the actual liability for capital taxes was only $5,017. In turn the significantly lower base of capital tax liability resulted in appreciably lower interest and no penalty costs.

Other Income and Expenses

The Canadian dollar continued its trend of strengthening against the U.S. dollar in fiscal 2005 but at a decreased rate. Consequently the reported foreign exchange gain on the revaluation of U.S. dollar denominated liabilities at November 30, 2005 was $19,175 compared to the foreign exchange gain of $75,761 in fiscal 2004.

Differences between Canadian and U.S. GAAP

For the last three years, there have been foreign exchange gains which following Canadian GAAP is treated as a recovery of expenses in the period it is occurred. Following U.S. GAAP, the foreign exchange gains would have been recorded through comprehensive income in the equity section.  The reported net loss under Canadian GAAP for the year ended November 2005 of $498,873 (2004 – $328,877) compares to the net loss under U.S. GAAP for the year ended November 2005 of $518,048 (2004 - $404,638). (See “Note 12 DIFFERENCES BETWEEN CANADIAN AND UNITED STATES ACCOUNTING PRINCIPLES” in the “Notes to the Consolidated Financial Statements” attached hereto as an Exhibit.)

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B. Liquidity and capital resources.

Year ended November 30, 2006, compared with year ended November 30, 2005

As noted in the auditors report attached with the consolidated financial statements of the Company, as at November 30, 2006 and described in the Notes to the Consolidated Financial Statements, Note 1. “Going Concern”:

The Company has incurred several years of losses and, during 2006, utilized $461,257 (2005 - $720,493) of cash in operations. At November 30, 2006, the Company reported a deficit of $25,792,136 (2005 - 25,246,716) and continues to expend cash amounts that significantly exceed revenues.  These conditions cast substantial doubt as to the ability of the Company to continue in business and meet its obligations as they come due.

The Company’s continuance as a going concern is dependent on the success of the efforts of its directors and principal shareholders in providing financial support in the short term, the success of the Company in raising additional long-term financing either from its own resources or from other third parties, and the Company achieving profitable operations. In the event that such resources are not secured, the assets may not be realized or liabilities discharged at their carrying amounts, and differences from the carrying amounts reported in the Companies Consolidated Financial Statements for the year ended November 30, 2006, could be material.
 

The Company can provide no assurance that it will be able to obtain additional working capital from the sale of its equity, or borrow funds from traditional lending sources or from any person who has advanced, or may be interested in advancing funds to the Company. If the Company is able to raise additional funds from the sale of its equity, substantial dilution to the interests and voting rights of current equity holders may occur. If the Company is unable to substantially increase sales from the level experienced in 2006, or obtain additional working capital from loans or from the sale of its equity, this could have a material adverse effect on the ability of the Company to continue its operations. In this event, we may have to re-evaluate all aspects of our business.

The outstanding common shares at November 30, 2006 was 910,610,914 (2005 – 543,610,914); and, the outstanding Class “C” common shares at November 30, 2006 was 12,580,000 (2005 – NIL). Subsequent to the year end the Company issued 16,000,000 Class “C” common shares. Each Class “C” common share can convert 100 common shares. Therefore on a fully diluted basis the number of outstanding common shares is 3,768,610, 914.

On December 19, 2005 the Company closed a Regulation “S” offering, under which the Company had sold 5,000,000 restricted shares of Class “C” common stock.  The consideration received by the Company for the sale of the shares was a total of $500,000.

On February 23, 2006 the Company closed a second Regulation “S” offering, under which the Company had sold 3,000,000 restricted shares of Class “C” common shares.  The consideration received for the sale of these shares was a total of $300,000.

On November 30, 2006 the Company closed a third Regulation “S” offering, under which the Company had sold 8,250,000 restricted shares of Class “C” common shares.  The consideration received for the sale of these shares was a total of $330,000.

Subsequent to the year end, on March 29 2007, the company closed a Regulation “S” offering, under which the Company had sold 16,000,000 million Class “C” common shares. The consideration received for these shares was a total of $160,000.
 

During the period ending November 30, 2006, shareholders of 3,670,000 Class “C” common shares converted their holdings into 367,000,000 common shares.
 

During the succeeding period through May 15, 2007, shareholders of 8,380,000 Class “C” common shares converted their holdings into 838,000,000 common shares.

The Company accumulates advances of share subscriptions received under its Regulation “S” offerings until the subject offerings are closed.  Under the subscription agreement terms, cash proceeds received are not subject to escrow pending receipt of any minimum proceeds.  All cash received by the Company is immediately available for use by the Company.  Any subscriptions advanced to the Company are reported as advance share subscriptions until such time as the Company closes off subscriptions and issues the shares.

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During fiscal 2006 cash advances of share subscriptions totaled $472,000 that was utilized for general working capital purposes. Subsequent to the year end the Company has received approximately $300,000 of advanced share subscriptions, of which approximately half was used to purchase DIAMANT cling film and Bio-degradable stretch-film packaging from its European sources to fill sales orders from United States customers.

Year ended November 30, 2005, compared with year ended November 30, 2004
 

As in the prior year, the Company had minimal cash and possessed a substantial working capital deficit.  At November 30, 2005 the Company reported a working capital deficit of $1,023,825 (2004 deficit – 1,280,096).
 

As noted in the auditors report attached with the consolidated financial statements of the Company, as at November 30, 2005 and described in the Notes to the Consolidated Financial Statements, Note 1. “Going Concern”:
 

“The Company has incurred several years of losses and during 2005, utilized $ 746,092 of cash in operations. At November 30, 2005, the Company reported a deficit of $25,246,716 and continues to expend cash amounts that significantly exceed revenues.  These conditions cast substantial doubt as to the ability of the Company to continue in business and meet its obligations as they come due.”
 

For the year ended at November 30, 2005, the Company was able to sustain its operations primarily from a series of advance subscriptions for Class “C” common shares totaling $758,000 (see “Note 6, Notes to the Consolidated Financial Statements” attached hereto as part of Exhibit 3) (2004 – $440,500).

During fiscal 2005, the Company completed two Regulation S offerings.
 

The first Regulation “S” offering closed on January 5, 2005 and was for 231,000 restricted Class “C” common shares for consideration totaling $115,500 (or $0.50 per Class “C” common share).
 

A second Regulation S offering closed on February 21, 2005 and was for 4,400,000 restricted Class “C” common shares for consideration totaling $1,100,000 (or $0.25 per Class “C” common share).
 

The Class “C” common shares are convertible, at the owners option into one hundred (100) restricted, subject to the Regulation “S” hold period, common shares per one (1) Class “C” common share. From March 31 through to November 30, 2005 the holders of 4,631,000 Class “C” common shares converted to 463,100,000 common shares of the Corporation.
 

The restricted Class “C” common shares, which are convertible, at the owners option into one hundred (100) restricted, subject to the Regulation “S” hold period, common shares per one (1) Class “C” common share, are not publicly traded and are the equivalent, on a fully converted basis, to 800,000,000 common shares. Therefore the Class “C” shareholders control the board of directors and operations of the Company.
 

During the year ended November 30, 2005, FILM purchased inventory for samples and in anticipation of initial commercial orders from its customers. Total purchases were approximately $140,000 including $118,600 of purchased DIAMANT™ film, and third party costs for repackaging, storage and distribution, and packaging materials of $21,400. At November 30 2005 FILM reported inventory at cost of $ 134,000; the balance of purchased inventories of $6,000 was charged as a period expense to samples.
 

FILM paid $27,000 for the design and build of a dedicated website to promote itself and the non-PVC stretch film product.

3. Information regarding the company’s material commitments for capital expenditures.

None.

C. Research and development, patents and licenses, etc.

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The Corporation does not expend capital on research and development. As reported herein the Company has been unable to pay patent fees with respect to maintenance payments on its US patents for Artagraph. During fiscal 2002 the 11.5-year maintenance fee for approximately $3,000 was not paid. There is the likelihood that the Company has lost its US Artagraph patents.

D. Trend information.

Artagraph – Art Reproduction Market
 

The Company's future success in the marketplace will depend upon raising additional capital, creating greater awareness of its products through advertising, participation at trade shows, as well as updating and expanding its library of images and providing new point-of-sale materials. Owing to the Company's inability to finance new initiatives, or to actively participate in trade shows, or to hire dedicated sales personnel to sell to its markets, the Company continues to achieve limited success in developing new opportunities, with new or existing customers and markets.
 

Management believes that a minimum level of capital of $US 500,000 to 750,000 and lead-time of three to six months would be required to rollout an initial market strategy. Including capital to acquire new images, print a catalogue, attend trade shows, and hire marketing and sales staff
 

Recent trends in the ART Market include new reproduction processes that minimize capital investment in inventory and equipment such as the giclee reproduction process. In addition, limited edition art is trending to smaller edition sizes to address consumer demand for value.  Publishers of fine art are primarily cost driven, and emphasis is placed on quality and originality from reproduction methods.  There is anticipation of growth in single or artists-publishers cooperatives, due to the affordability and “user-friendly” high-end digital wide-carriage printers. Market will remain highly fractionized because nationals and small scale shops can both compete effectively and thrive in a business with multi-medium reproduction methods and finishes.
 

DIAMANT™ FILM – BIO-PLASTICS  Packaging Stretch Film Packaging.
 

Owing to the recent entry  and start-up of the Company in the Food Packaging business in North American Markets, and because the Company is offering an alternative non-PVC stretch film, the Company can not provide meaningful analysis on the  impact of trends.

The Freedonia Group Incorporated, a leading international industry study database company provided a report covering the “PVC Food Packaging Film” industry in the US. The report concluded that demand for PVC film in food packaging uses will grow two percent annually; also projected that PVC film demand would total 465 million pounds by 2009.  

The U.S. packaging market is currently the largest and most stable market for packaging products globally, and is expected to experience growth of 3% annually. The market is generally unaffected by economic cycles and grows through product innovation and expansion into geographic markets.

The market also produces a considerable amount of refuse. Because we as consumers use so much packaging for our food and drink, manufacturers of packaging and its contents are conscious of the impact it can have on the environment. Using “sustainable” components, in whole or part, for packaging has become a real opportunity for manufacturers to showcase their awareness of environmental issues, and win points with consumers who are concerned with the impact packaging has on the ecosystem.

US demand for flexible bulk packaging will decelerate to 3.4 per cent per year, according to a forecast by Freedonia, a market researcher.

The predicted growth will create a $US7bn market in the US, with a demand for 6.2bn lbs of raw materials. About 60 per cent of the raw material demand will be for plastic, Freedonia forecasts.

However growth will decelerate from the rate achieved in the five years to 2004 as price increases due to raw material costs level off.

Meanwhile Freedonia forecasts the fastest growth will be in the film wrap and flexible intermediate bulk containers (“FIBCs”) market. Demand for plastic shipping sacks and plastic strapping will outpace the industry average, with expansion coming at the expense of paper and steel packaging producers.

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Plastic shipping sack demand will be driven by the agricultural and horticultural market. Film wrap, which accounted for 30 per cent of total flexible bulk packaging demand in 2004, will remain a growth segment of the industry.

The gains will be supported by heightened manufacturing activity as well as the growing requirements for the bundling and protection of goods during warehousing and distribution, Freedonia forecasts.

Demand will also be influenced by retail trends, particularly the popularity of home centers, club stores and other mass retailers. FIBC demand is expected to expand 5.6 per cent annually through 2009. Growth in that market will be supported by increased manufacturing activity.

E.    Off-balance sheet arrangements.
 

None.
 

F.    Tabular disclosure of contractual obligations.
 

Under a long-term lease expiring January 31, 2009, the Company is obligated for minimum future lease payments, net of   occupancy costs, for office, showroom and factory premises as follows:

FISCALYEAR ENDING	AMOUNT
2007	84,107
2008	88,024
2009	14,585

The gross rent paid in fiscal 2006 was $124,455 [2005 - $124,024]; [2004 - $120,608].
 

	Payments due by period
Contractual Obligations	Total	Less than 1 year	1-3 years	3-5 years	More than 5 years
Long-Term Debt(1) - Principle - Interest	$  360,395 $  379,448	$  360,395 $  379,448	-	-	-
Capital Lease	-	-	-	-	-
Operating Lease	$  186,716	$    84,107	$  102,609	-	-
Other Long-term Liabilities	-	-	-	-	-
Total	$  926,559	$  823,950	$  102,609

Item 6. Directors, Senior Management and Employees.
 

A. Directors and senior management.
 

Simon P. Meredith, President & COO -- Was elected a director of the Company and President and Chief Operating Officer in November 1994.  Mr. Meredith is a Chartered Accountant and was Vice President, Finance and Administration of Gormont Group Limited from April 1991 through December 1994.  He was a consultant for Helix Investments Limited (a private investment group) from October 1990 through March 1991 and Vice President, Finance and Administration of The Diecut Group, Inc from June 1987 through September 1990.

Michel van Herreweghe, Chairman & CEO -- President of Telephony Communications International Inc. from 1985 through 1987; Was Director of Nickeldale Resources Inc. from 1988 through 1996.  He was a Director of Aronos Multinational Inc. From 1991 though 1992; Director of Xxpert Rental Tool Inc. from 1993 through 1994; CEO Oxford Securities Corporation (Bahamas) 1993 to 2000; Director Commonwealth Asset Managers Limited (Bahamas) 1994 to Present.  He was appointed State of Florida Commissioner of Deeds 1994 to March 1998;

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Roger Kirby, Director. -- Is President of Enviro-Lite International Inc; General Manager of Can-Am Teck Inc. 1991; Vice-President Sales for Demax Inc. 1990; President of Telephony Communications International Inc. from 1987 through 1990; President of Nickeldale Resources Inc. to November 1996.
 

Stefan Gudmundsson, Director – President Technopac since 1991; President Trinity Plastics Inc. 1989 – 1991. Over thirty (30) years experience working in plastic packaging.
 

B.   Compensation.

The following table sets forth the aggregate cash compensation paid for services rendered to the Company during the last three fiscal years by all individuals who served as the Company’s Officers and Directors during each fiscal year.
 

      (In Canadian Dollars)

	Annual Compensation				Long-Term Compensation Awards
Name and Principal Position	Year	Salary($)	Bonus($)	Other Annual Compensation($)	Restricted        Stock Awards ($)	Securities Underlying Options (#)	All Other Compensation ($)
Simon Meredith President(1)	2006 2005 2004	-- -- --	-- -- --	39,000 39,000 39,000	-- -- --	-- -- --	-- -- --
Michel van Herreweghe, Chairman	2006 2005 2004	-- -- --	-- -- --	-- -- --	-- -- --	-- -- --	-- -- --
Roger Kirby, Director	2006 2005 2004	-- -- --	-- -- --	-- -- --	-- -- --	-- -- --	-- -- --
Stefan Gudmundsson, President Diamant Film Inc., Director(2)	2006 2005 2004	-- -- --	-- -- --	-- 60,000 40,000	-- -- --	-- --   --	-- -- --

(1)

Represents the fees paid in Canadian dollars to a consulting company owned by Mr. Meredith (See “Consulting Agreements”). Under the terms of the month to month contract, Mr. Meredith provides management services to the Company for up to 100 hours per month as President and Chief Operating Officer.

(2)

Represents the fees paid in Canadian dollars to a consulting company owned by Mr. Gudmundsson (See “Consulting Agreements”). The Company’s wholly-owned subsidiary, Diamant Film Inc., has a month-to-month agreement with Technopac 2000 Inc. Under the terms of the agreement, the President provides marketing services. Approved out-of-pocket costs incurred by the President, relating to travel and marketing, are reimbursed by the subsidiary.

C. Board practices.

1.  Date of expiration of the current term of office, if applicable, and the period during which the person has served in that office.

On November 19, 2004, the Company held an Annual, General and Special Meeting of Shareholders at the Corporation’s offices located at 5-7100 Warden Avenue, Markham, Ontario, Canada L3R 8B5. At that meeting Simon Meredith, Michel Van Herreweghe, Roger Kirby, Stephan Gudmundsson were elected as Directors of the Corporation to hold office until the next Annual Meeting or until their successors are elected or appointed
 

2.  Details of directors service contracts with the company or any of its subsidiaries providing for benefits upon termination of employment or an appropriate negative statement.

Consulting Agreement – The Company has a month-to-month arrangement with its President. Under the terms of the contract, Mr. Meredith provides management services to the Company for up to 100 hours per month as President and Chief Operating Officer.

Consulting Agreement -- The Company’s wholly-owned subsidiary, Diamant Film Inc., has a month-to-month agreement with Technopac 2000 Inc. Under the terms of the agreement, the President provides marketing services. Approved out-of-pocket costs incurred by the President, relating to travel and marketing, are reimbursed by the subsidiary.

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3.  Details relating to the company’s audit committee and remuneration committee, including the names of committee members and a summary of the terms of reference under which the committee operates.
 

The Audit Committee.
 

The Company has a separately designated standing Audit Committee established in accordance with Section 3(a) (58) (A) of the Securities Exchange Act of 1934. The members of the Audit Committee are Michel Van Herreweghe, Simon Meredith and Roger Kirby. The Company's Board of Directors has determined that Simon Meredith is an audit committee financial expert as defined by Item 401(h) of Regulation S-K of the Securities Exchange Act of 1934.
 

The Audit Committee meets two times during a fiscal year. The Corporation has not adopted a written charter for the audit committee.  This committee is primarily concerned with assisting the Board in fulfilling its fiduciary responsibilities relating to accounting policies and auditing and reporting practices and insuring that all Canadian standards of practice comport with standards adopted and required by the SEC and other appropriate regulatory authorities.  The committee also is tasked with assuring the independence of the Company’s public accountants, the integrity of management and the adequacy of the Company’s financial disclosure.  Its duties include recommending the selection of independent accountants, reviewing the scope of the audits and the results thereof, and reviewing the organization and scope of the Company’s internal systems of financial control and accounting policies.  

D. Employees.

We believe that the Company has satisfactory relations with our employees.
 

Category	2006 Total	2006 ART	2006 FILM	2005	2004	2003
Management	3	2	1	3	3	2
Administration / Sales	2	1	1	2	2	1
Manufacturing	3	2	1	3	3	2
Part Time	1	1	0	1	1	1
Totals	9	6	3	9	9	6

The Corporation has no unionized employees. Several employees have worked for the Corporation between 10 and 15 years.

Subsequent to the year end, in an effort to conserve cash flow, the Company has implemented a temporary lay-off of the production employees. Under Canadian labour, employment insurance regulations, the Company can temporarily lay-off “qualifying” employees for a maximum of 35 weeks in a 52 week period, provided the Company continues to cover the Company portion of group insurance premiums. The employees are covered under the employment insurance on an expedited basis.

E. Share ownership.

The following table shows, as of May 31, 2005, the number of shares of our common stock beneficially owned by each director, any shareholder beneficially owning 5% [Nil] of the outstanding shares of our common stock, and all directors and executive officers as a group.

Name	Aggregate number Common Shares  Beneficially Owned	Percentage of Outstanding Common Stock (1)
Simon Meredith President	4,000	Neg %
Michel van Herreweghe Chairman	7,200	Neg %
Stefan Gudmundsson President, FILM	0	0 %
Roger Kirby Director	200	Neg %
Directors & Officers As a group (3)	11,400	Neg %

(1)

Based on the number of shares outstanding Nov 30, 2006.

(2)

Percentage of shares beneficially owned does not exceed one percent of the outstanding shares of the common stock of the Company.

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At the November 19, 2004, Annual, General and Special Meeting of Shareholders, a Stock Option Plan (the “Plan”) was approved by the Shareholders. The Plan was designed to provide an added incentive for effective service and performance to participating key employees (including officers) and directors of the Company by affording them an opportunity to increase their proprietary interest in the Company’s success through increased stock ownership. z
 

The Plan may be administered by either the Board of Directors or a Stock Option Committee consisting of three members who shall be appointed by the Board of Directors (the “Committee”). The Board of Directors or, if acting, the Committee has the authority to select optionees, to establish the number of shares and other terms applicable to each option and to construe the provisions of the Plan. The Plan may be amended or terminated at any time by the Board of Directors of the Company without further approval of the shareholders.
 

The Board of Directors or the Committee determines the option price per share with respect to each option and fixes the period of each option, but in no event may the option period be longer than 10 years. Options granted under the Plan are nontransferable. As at May 31, 2006 no options have been awarded under the current plan.

Item 7.Major Shareholders and Related Party Transactions

A. Major shareholders.
 

The outstanding common shares at November 30, 2006 was 910,610,914 (2005 – 543,610,914); and, the outstanding Class “C” common shares at November 30, 2006 was 12,580,000 (2005 – NIL). Subsequent to the year end the Company issued 16,000,000 Class “C” common shares. Each Class “C” common share can convert 100 common shares. During the succeeding period through May 15, 2007, shareholders of 8,380,000 Class “C” common shares converted their holdings into 838,000,000 common shares. Therefore as of May 15, 2007 there were shareholders of 20,470,000 Class “C” common shares, which represents 2,047,000,000 votes. The Class “C” common shareholders effectively control the operations of the Company, and the composition of the board of directors.

B. Related party transactions.
 

It is the Company’s policy that transactions between the Company and persons or entities affiliated with the officers, directors, employees, or shareholders of the Company, which relate to the operations of the Company, will be on terms no less favorable to the Company than could have reasonably been obtained in arm’s-length transactions with independent third parties.

See “Executive Compensation - Consulting Agreements” for a description of certain employment and consulting arrangements with an officer and director of the Company.

C. Interests of experts and counsel.

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 7.C.
 

Item 8.Financial Information

A.  Financial Statements and Other Financial Information

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Exhibited hereto are the following audited consolidated financial statements prepared as at the last fiscal year-end,  November 30, 2006, with comparative figures shown as of  November 30, 2004  and 2003, with attached audit report;
 

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 8.A.5.
 

To be legally entitled to issue a stock dividend the corporation must not impair its ability to meet its liabilities. The Corporation’s stock dividend, in November 2004, does not impair its ability to meet its liabilities. The stock dividend functions in substance as a stock split and the dividend is therefore valued on a nominal basis of one (1) dollar. (Under Ontario law, stock dividends can be declared and paid by the Directors, whereas a stock split requires the authorization of 2/3^rd’s of the shareholders.)
 

The payment of dividends on the Common Shares will depend on the Company’s future earnings and financial condition and such other factors, as the Board of Directors of the Company may then consider relevant.
 

B. Significant Changes.
 

No significant changes have occurred since the various dates of the financial statements which are exhibited.
 

Item 9.The Offer and Listing.

A. Offer and listing details.
 

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 9.A.1 & .2 & .3

9. A. 4. Information regarding the price history of the stock  
 

As of November 30, 2006 the Company had approximately 1000 holders of record of the Common Shares.

The following table sets forth the high and low bid quotations for the Company’s securities, as reported by The OTC Bulletin Board monthly trade and quote summary The quotations are reported quotations without retail markup, markdown or commission and may not represent actual transactions.
 

	Common Shares
Fiscal Year	High	Low
2002(1)
1st Quarter	--	--
2nd Quarter	--	--
3rd Quarter	--	--
4th Quarter	--	--
2003(1)
1st Quarter	--	--
2nd Quarter	1.5	0.6
3rd Quarter	1.1	0.8
4th Quarter	1.1	0.3
2004
1st Quarter	0.15	0.38
2nd Quarter	0.88	0.35
3rd Quarter	0.68	0.13
4th Quarter	0.42	0.09
2005
1st Quarter	0.1600	0.0300
2nd Quarter	0.0800	0.0300
3rd Quarter	0.1400	0.0300
4th Quarter	0.0140	0.0070
2006
1st Quarter	0.0140	0.0040
2nd Quarter	0.0058	0.0046
3rd Quarter	0.0029	0.0026
4th Quarter	0.0011	0.0008
2007
1st Quarter	0.0008	0.0005
2nd Quarter	0.0012	0.0010

Note (1) the reverse stock split of 100:1 has adjusted the common share prices for 1999 through the 2^nd Qtr 2003

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On October 19, 2004, the Company declared a stock dividend of one common share for each one common share held. As a result of the stock dividend the issued and outstanding shares were increased by 40,255,457 common shares.

On November 19, 2004, at the annual shareholders meeting, the Company adopted and approved: the cancellation of the Class “A” and Class “B” preference shares, for which no shares of either class were then issued and outstanding.

At the Annual General and Special Meeting of Shareholders of the Corporation held on May 7, 2003, the shareholders unanimously approved an amendment to the articles of the Corporation to consolidate the issued and outstanding common shares on a basis of one (1) new common share for each hundred (100) old common shares; so that the 25,516,780 issued and outstanding common shares were consolidated into 255,457 new common shares (no fractional shares were issued and the number of consolidated shares includes shares rounded up to the nearest whole number).

At the Annual General and Special Meeting of Shareholders of the Corporation held on May 7, 2003, the shareholders unanimously approved an amendment to the articles of the Corporation to attach certain conversion rights to the class C common shares. The holders of the class C common shares shall henceforth from May 7, 2003 be entitled at their option to convert into common shares on the basis of a hundred (100) new common shares for each one class C common.

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 9.A.5 & .6 & .7

B. Plan of distribution.

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 9.B.

C. Markets.

The Company’s securities are now listed on the NASDAQ sponsored OTC Bulletin Board (symbol DIAAF), and also listed on the Frankfurt Stock Exchange, Deutsche Börse Xetra (symbol WKN)

D. Selling shareholders

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 9.D.

E. Dilution.

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 9.E.

F. Expenses of the issue.

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 9.F.

Item 10. Additional Information.

A. Share capital.

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The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 10.A.

B. Memorandum and articles of association.

1. Indicate the register and the entry number therein, if applicable, and describe the company’s objects and purposes and where they can be found in the memorandum and articles.

The Articles of Incorporation of the Corporation were registered on January 24, 1986.

There are no restrictions on the business may carry on or powers the Corporation may exercise.

2. With respect to directors, provide a summary of any provisions of the company’s articles of association or charter and bylaws with respect to:

(a) A director’s power to vote on a proposal, arrangement or contract in which the director is materially interested;

Article 3.11 of Bylaw No. 1A.  Every director or officer of the Corporation who is a party to a material contract or proposed material contract with the Corporation, or is a director or officer or has a material interest in any corporation which is a party to a material contract or proposed material contract with the Corporation shall disclose in writing to the Corporation or request to have entered in the minutes of the meeting of directors the nature and extent of his interest as required by section 132 of the Act.

Conflicted Directors are not to vote except in certain limited circumstances (132(5)) of the Ontario Business Corporations Act (“OBCA”).

(b) The directors’ power, in the absence of an independent quorum, to vote compensation to themselves or any members of their body;

Bylaw 1A Article 4.01.  The board may fix the remuneration of the directors.  Such remuneration shall be in addition to any salary or professional fees payable to a director who serves the Corporation in any other capacity.  In addition, directors shall be paid such sums in respect of their out-of-pocket expenses incurred in attending board, committee or shareholders’ meetings or otherwise in respect of the performance by them of their duties as the board may from time to time determine.

(c) Borrowing powers exercisable by the directors and how such borrowing powers can be varied;

Bylaw No. 2 establishes Directors Borrowing Powers, as follows:

The Directors may, without authorization from the shareholders:

(a)

borrow money upon the credit of the Corporation;

(b)

issue, re-issue, sell or pledge debt obligations of the Corporation, including without limitation, bonds, debentures, notes or other similar obligations of the Corporation whether secured or unsecured;

(c)

subject to Section 20 of the Act, give on behalf of the Corporation to secure of any present or future indebtedness, or obligation of any person; and

(a)

charge, mortgage, hypothecate, pledge or otherwise create a security interest in all or any currently owned or subsequently acquired, real or personal, movable or immovable, property of the Corporation, including without limitation, hook debts, rights, powers, franchises and undertakings, to secure any present or future indebtedness, liabilities or other obligations of the Corporation.

Only the shareholders of the Corporation are able to amend the provisions of Bylaw No. 2 which may be authorized by a majority vote of shareholders at a duly convened meeting of shareholders.

(d) Retirement or non-retirement of directors under an age limit requirement; and

There is no age limit requirement for retirement or non-retirement of directors.

(e) Number of shares, if any, required for director’s qualification.

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No shares are required for director’s qualification.

3. Describe the rights, preferences and restrictions attaching to each class of the shares, including:

(a) Dividend rights, including the time limit after which dividend entitlement lapses and an indication of the party in whose favor this entitlement operates;

Unlimited Number of Common Shares authorized

Unlimited Number of Class C Common Shares authorized

1.

DIVIDENDS

1.1

The holders of the Class C Common shares, in priority to the common shares shall be entitled to receive and the Corporation shall pay thereon as and when declared by the Board of Directors of the Corporation, out of the monies of the

Corporation properly applicable to the payment of dividends fixed preferential non-cumulative cash dividends at the rate of $0.01 per share per annum. No dividends shall at any time be declared or paid or set aside for payment for or on the Class C Common shares unless all dividends up to and including the dividend payable on the last preceding dividend payment date on the Class B Preference shares then issued and outstanding shall have been declared and paid or provided for at the date of such declaration or payment or setting apart for payment. Subject to payment of the Class B Preference shares divided, the Board of Directors of the Corporation shall be entitled from time to time to declare part of the fixed preferential, non-cumulative Class C Common share cash dividend for any fiscal year notwithstanding that such dividend for such fiscal year shall not be declared in full. If within four months after the expiration of any fiscal year of the Corporation, the Board of Directors in its discretion, shall not declare the said dividend or any part thereof on the Class C Common shares for such fiscal year than the rights of the holders of the Class C Common shares to such dividend or any undeclared part thereof for such fiscal year shall be forever extinguished. The holders of the Class C Common shares shall not be entitled to any dividends other than or in excess of the non-cumulative cash dividends herein before provided for.

There are no longer any Class B Preference Shares outstanding.

1.2

Cheques of the Corporation payable at par at any branch of the Corporation’s bankers for the time being in Canada shall be issued in respect of the dividends the preference shares (less any tax required to be withheld by the Corporation) and payment thereof shall satisfy such dividends. Dividends which are represented by a cheque which has not been presented to the Corporation’s bankers for payment or that otherwise remain unclaimed for a period of six (6) years from the date on which they were declared to be payable shall be forfeited to the Corporation.

2.

DISSOLUTION

2.1

In the event of the dissolution, liquidation or winding-up of the Corporation or other distribution of assets of the Corporation among shareholders for the purpose of winding up its affairs, the holders of the Class C Common shares shall be entitled to receive from the assets and property of the Corporation for each Class C Common share held by them respectively the sum of $0.10 together with all declared and unpaid preferential non-cumulative cash dividends thereon or a sum equivalent to the result obtained when the amount in the stated capital account for the Class C Common share is divided by the number of issued and outstanding Class C Common shares together with all declared and unpaid preferential non-cumulative cash dividends thereon (whichever is the greater), before any amount shall be paid or any property or assets of the Corporation distributed to the holders of any common shares or shares of any other class ranking junior to the Class C Common shares. After payment to the holders of the Class C Common shares of the amount so payable to them as provided in this Article 2.1, they shall not be entitled to share in any further distribution of the property or assets of the Corporation.

3.

VOTING RIGHTS

3.1

The holders of the Class C Common shares shall be entitled to receive notice and to attend all meetings of the shareholders of the Corporation and shall have one hundred votes for each Class C Common share held at all meetings of the shareholders of the Corporation except for meetings at which only holders of another specified Class or Series of shares of the Corporation are entitled to vote separately as a Class or Series.

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3.2 The Class C Common shares shall rank junior to the common shares and Class A Preference shares and to the Class B Preference shares.
 

4.        CONVERSION PRIVILEGE

4.1

Any Holder of Class C Common Shares shall be entitled at his option at any time (subject as hereinafter provided) to have all or any of the Class C Common Shares held by him converted into Common Shares as the same shall be constituted at the time of conversion upon the basis of one hundred (100) “New Common” Shares for each Class C Common Share in respect of which the Conversion Right is exercised (“New Common” Shares); provided that on conversion of any Class C Common Shares, the Holders thereof will not be entitled to any adjustment of dividends on such Class C Common Shares or on the “New Common” Shares issuable on conversion.  The Conversion Right provided for herein may be exercised by Notice in Writing given to the registered office of the Corporation or to any Transfer Agent or Registrar for the Common Shares accompanied by the Certificate or Certificates representing the Class C Common Shares in respect of which the Holder thereof desires to exercise such right of Conversion and such Notice shall be executed by the person registered on the books of the Corporation as the Holder of the Class C Common Shares in respect of which such Right is being exercised or by his duly authorized attorney and specify the number of such shares which the Holder desires to have converted.  The Holder shall also pay any governmental, transfer or other tax imposed in respect of such transaction.  Upon receipt of such Notice the Corporation shall issue Certificates representing the Common Shares upon the basis above prescribed and in accordance with the provisions hereof to the registered holder of the Class C Common Shares represented by the Certificate accompanying such Notice.   

(b) Voting rights, including whether directors stand for reelection at staggered intervals and the impact of that arrangement where cumulative voting is permitted or required;

Each Class C or Common Share carries the right to one vote.  There is no staggered reelection of directors.  Cumulative voting is not permitted.

(c) Rights to share in the company’s profits;

Class C Common Shares have $0.01 per share annual non-cumulative dividend.  

Common Shares share in the company’s profits as determined by the directors.

(d) Rights to share in any surplus in the event of liquidation;

On dissolution, Class C Common Shares will receive $0.10 per share together with all declared and unpaid dividends. Class C Common Shares rank junior to the Common Shares.  Common Shareholders receive the balance.

(e) Redemption provisions;

There are no redemption or sinking fund provisions.

(f) Sinking fund provisions;

There are no redemption or sinking fund provisions.

(g) Liability to further capital calls by the company; and

There is no liability for further capital calls by the company on the issued and outstanding shares.

(h) Any provision discriminating against any existing or prospective holder of such securities as a result of such shareholder owning a substantial number of shares.

There are no provision discriminating against any existing or prospective shareholder of Common or Class C Common as a result of a number of shares held by a particular shareholder.

4. Describe what action is necessary to change the rights of holders of the stock, indicating where the conditions are more significant than is required by law.

34

A two-thirds majority of shareholders at a duly convened shareholders meeting is required to change the rights of holders of the stock.

5. Describe the conditions governing the manner in which annual general meetings and extraordinary general meetings of shareholders are convoked, including the conditions of admission.

The calling of an annual or special meeting is determined by the board of directors at duly-convened meetings of directors or 5% of the shareholders may requisition the holding of a special or general meeting of shareholders.  Admission is restricted to shareholders or invitees of the Board.

6. Describe any limitations on the rights to own securities, including the rights of non-resident or foreign shareholders to hold or exercise voting rights on the securities imposed by foreign law or by the charter or other constituent document of the company or state that there are no such limitations if that is the case.

There are no limitations on the rights to own securities for non-resident or foreign shareholders.  

7. Describe briefly any provision of the company’s articles of association, charter or bylaws that would have an effect of delaying, deferring or preventing a change in control of the company and that would operate only with respect to a merger, acquisition or corporate restructuring involving the company (or any of its subsidiaries).

There are no such provisions.  

8. Indicate the bylaw provisions, if any, governing the ownership threshold above which shareholder ownership must be disclosed.

There are no bylaw provisions governing the ownership threshold above which shareholder ownership must be disclosed.

9. With respect to items 2 through 8 above, if the law applicable to the company in these areas is significantly different from that in the host country, the effect of the law in these areas should be explained.

The Corporation believes there are no areas of significantly different applicable law between the host and home jurisdictions.

10. Describe the conditions imposed by the memorandum and articles of association governing changes in the capital, where such conditions are more stringent than is required by law.

There are no conditions imposed by the articles of the corporation or a memorandum of association governing changes in capital other than those required by law, which is a two-thirds vote of shareholders at a duly convened meeting.

C. Material contracts.

There are no material contracts except for the contracts listed herein below, as previously reported by Company on Form 8-K and incorporated by reference. Copies of the subject-contracts below are attached as Exhibits to Form 20-F for the year ended November 30, 2004 and included herein by reference.

•

Press release, dated June 14, 2004 – The Company, through its wholly owned subsidiary, Diamant Film Inc., acquires exclusive marketing and distribution for DIAMANT™ film in Canada.

•

Press release, dated June 28, 2004 – The Company, through its wholly owned subsidiary, Diamant Film Inc., acquires exclusive marketing and distribution for DIAMANT™ film in United States, by amendment to the June 14 2005 Agreement.

•

In addition, the territories of Mexico and Bahamas, China, South Korea and Thailand were added to the June 14 2004 Agreement by amendments.

Note: During fiscal 2006 the Company’s exclusive rights in the South Korean, Thailand and the Territory of The Peoples Republic of China were allowed to lapse, owing to the limited success in developing these markets. Despite earlier expectations these markets proved less interested in the non-PVC cling film.

35

D. Exchange controls.

There are no Canadian laws, decrees, regulations or exchange controls which would affect the import or export of capital or the availability of cash for use by the Company, nor the remittance of dividends, interest or other payments to non-resident holders of the Company’s securities.

E. Taxation.

The following information concerning taxation matters is general and non-specific to particular shareholder-individuals. It should not be construed as directly relevant to any shareholder’s taxation status, which is dependant on many other variables and factors.

(i)  Canadian Federal Income Tax Considerations

The following summary of the material Canadian federal income tax consequences is based upon the provisions of the Income Tax Act of Canada and the regulations thereunder (the “Tax Act”) and the Canada-United States Tax Convention (the “Tax Convention”)) as at the date of this Statement.  The summary is restricted to the case of a holder (a “Holder”) of one or more common shares of the Company (“Common Shares”) who for the purposes of the Tax Act is a non-resident of Canada, is a United States person, holds his Common Shares as capital property and deals at arm’s length with the Company.

Dividends.  A holder will be subject to Canadian withholding tax (“Part XIII Tax”) equal to 25%, or such lower rates as may be applicable, of the gross amount of any dividend paid or deemed to be paid on his Common Shares.  Under the Tax Convention, the rate of Part XIII Tax applicable to a dividend on Common Shares paid to a Holder who is a resident of the United States is, if the Holder is a company that beneficially owns at least 10% of the voting stock of the Company, 5% and, in any other case, 15% of the gross amount of the dividend.  The Company will be required to withhold the applicable amount of Tax from each dividend paid and remit it to the Receiver General for Canada for the account of the Holder.

Disposition of Common Shares.  A Holder, who disposes of Common Shares, including by deemed disposition on death, will not be subject to Canadian tax on any capital gain thereby realized unless the Common Shares constituted “taxable Canadian property” as defined by the Tax Act.  Generally, a common share of a public corporation will not constitute taxable Canadian property of a Holder unless he held the common share as capital property used by him carrying on a business in Canada, or he or persons with whom he did not deal at arm’s length alone or together held or held options to acquire, at any time within the 60 months preceding the disposition, 25% or more of the issued shares of any class of the capital stock of the company.

A Holder who is a resident of the United States and realizes a capital gain on disposition of Common Shares that was taxable Canadian property will nevertheless, by virtue of the Treaty, generally be exempt from Canadian tax unless (a) more than 50% of the value of the Common Shares is derived from, or from an interest in, Canadian real estate, including Canadian mineral resources properties, (b) the Common Shares formed part of the business property of a permanent establishment that the Holder has or had in Canada within the 12 months preceding disposition, or (c) the Holder (i) was a resident of Canada at any time within the 10 years immediately preceding the disposition, and for a total of 120 months during any period of 20 consecutive years, preceding the disposition, and (ii) owned the Common Shares when he ceased to be resident in Canada.

A Holder who is subject to Canadian tax in respect of a capital gain realized on disposition of Common Shares must include one-half of the capital gain (“taxable capital gain”) in computing his taxable income earned in Canada, subject to the deduction of certain capital losses that may have been sustained by the Holder.

(ii)  United States Taxation

For federal income tax purposes, an individual who is a citizen or resident of the United States or a domestic corporation (“U.S. Taxpayer”) will recognize a gain or loss on the sale of the Company’s shares equal to the difference between the proceeds from such sale and the adjusted tax basis of the shares.  The gain or loss will be a capital gain or capital loss if the Company’s shares are a capital asset in the hands of the U.S. Taxpayer.

For federal income tax purposes, a U.S. Taxpayer will be required to include in gross income dividends received on the Company’s shares.  A U.S. Taxpayer who pays Canadian tax on a dividend on shares will be entitled, subject to certain limitations, to a credit (or alternatively, a deduction) against federal income tax liability.  A domestic corporation that owns at least 10% of the voting shares of the Company should consult its tax advisor as to applicability of the deemed paid foreign tax credit with respect to dividends paid on the Company’s shares.

36

Under a number of circumstances, a U.S. Taxpayer acquiring shares of the Company may be required to file an information return with the Internal Revenue Service Centre where they are required to file their tax returns with a duplicate copy to the Internal Revenue Service Centre, Philadelphia, PA 19255.  In particular, any United States Taxpayer who becomes the owner, directly or indirectly, of 10% or more of the shares of the Company will be required to file such a return.  Other filing requirements may apply.  Holders and prospective holders should therefore consult their own tax advisors with respect to their particular circumstances and the requirements applicable to them.

There may be a possibility of the Company being deemed, for United States tax purposes, a Foreign Personal Holding Company, a Foreign Investment Company, a Passive Foreign Investment Company or a Controlled Foreign Corporation.  If that should happen U.S. Taxpayers holding or selling Company Shares, or receiving dividends on Company Shares, will be subject to U.S. taxation at possibly adverse or higher rates and under a system that may be complicated and unfamiliar to them.

F. Dividends and paying agents.

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 10.F.

G. Statement by experts.

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 10.G.

H. Documents on display.

Any of the documents referred to above can be viewed at the Company’s Registered Office, which is located at 7100 Warden Avenue, Unit 5, Markham, Ontario, Canada. All the documents are in English.

I. Subsidiary Information.

Not Applicable.

Item 11. Quantitative and Qualitative Disclosures About Market Risk.

(a) Quantitative information about market risk.

The Corporation has exposure to exchange risk from its United States dollar debt and trade liabilities. The table below summarizes the principle USD$ debt arising from its notes and trade payables. In addition the Corporation has not paid any interest on its USD$ notes, which accrues annually at 10%. The total exposure to USD$ debt has increased from $559,000 to $783,000, from 2000 to 2006 respectively. The exchange rate between CAD / USD $’s has been somewhat volatile ranging from a high to low of 1.60 / 1.00 to 1.14 / 1.00. In the current fiscal year ended November 30, 2006, the Canadian dollar has continued to strengthened against the US dollar, generating the reported  unrealized exchange gain of approximately $10,000 (2005 - $19,000). Currently the Corporation’s USD$ assets are negligible, its sales revenues, which are mainly USD$ have dived in recent years, resulting in only minor USD$ trade receivables. In the past five years the Corporation had a maximum trade receivable in USD$ of approximately $30,000.

	Nov 30 06	Nov 30 05	Nov 30 04	Nov 30 03	Nov 30 02
Fixed Interest
10% USD Notes
Principle (USD $)	315,000	315,000	315,000	315,000	315,000
Accrued Interest (USD $)	332,208	300,708	269,208	237,708	206,208
Total US debt & unpaid interest	647,208	615,708	584,208	552,708	521,208
US$ Trade Payables	135,840	142,114	134,611	149,823	132,750
Total US liabilities	783,048	757,822	718,819	702,531	653,958
Exchange Rate USD:CAD $*	1.1422	1.1669	1.186	1.299	1.565
Total Canadian liabilities	894,398	884,302	852,519	912,588	1,023,444
*Exch.Rate Increase (Decrease)	(2.12)%	(1.6)%	(8.7)%	(17.0)%	(0.5)%

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Conversely, a strengthening Canadian dollar has a detrimental impact on the Corporation’s profitability. The table below illustrates the impact based on the previous table’s actual exchange rates.

	2006	2005	2004	2003	2002
Assumed sales revenues in USD	100,000	100,000	100,000	100,000	100,000
Canadian equivalents per $US 100,000	114,220	116,690	118,600	129,900	156,500
COGS, apprx. (annual 2.5% RM price-inc.)	53,500	52,200	50,900	49,700	48,500
Gross Profit (GP)	60,720	64,490	67,700	80,200	108,000
(Loss) contribution vs highest GP	(49,280)	(45,510)	(42,300)	(29,800)	(2,000)

During fiscal 2005, monthly average translation rates between Canadian and United States dollars have ranged from a low of: $CAD1.10: $US1.0 to a high of $CAD1.17: $US1.0. Approximately $7,000 (58%) (2005 - $25,000 (68%)) of the Company’s sales revenues was transacted in US dollars.

We are exposed to variety of risks, indirectly by changes in interest rates affecting consumer-purchasing habits and directly affected by currency fluctuations between the Canadian and US dollars. The Company does not purchase forward foreign exchange contracts. The Company has no debt or credit subject to variable interest rates. The exchange gains and losses that the Company may be impacted by from time to time will depend on the levels of US dollar monetary assets and liabilities as well as their corresponding collection and payment events. Long term trends of a weakening of the Canadian dollar relative the United Sates dollar would likely have permanent negative impact from the balance sheet perspective, as the Corporation would become increasingly exposed to its net USD liabilities. Conversely, a strengthening Canadian dollar reduces the gross profits of the Corporation.

Item 12. Description of Securities Other than Equity Securities.

A. Debt Securities.

The Corporation is filing Form 20-F as an annual report under the Exchange Act; accordingly it does not have to provide the information called for by Item 12.

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PART II

Item 13. Defaults, Dividend Arrearages and Delinquencies.

While the Company is not currently involved as defendant in any litigation, in the last 5 years certain note holders have commenced litigations in two jurisdictions. The underlying default, that the Company has failed to make payments of principal or interest, remains ongoing and therefore there is very real possibility that one or more of the Note holders may commence action against the Company, including the petitioning of the Corporation into bankruptcy. Recent developments in the last 5 years are summarized below.

The notes payable bear interest at 10% and are secured by a general security agreement over all the assets of the Company. As the Company has not made timely principal or interest payments, the notes are considered to be in default.  Under the terms of the original security agreement, the notes payable shall, at the option of the lenders, become immediately due and payable with notice or demand.

In December 2000, one Note Holder commenced proceedings in Ontario court for payment of US $45,000, interest and costs, whereby they brought a motion for the appointment of a private receiver-manager. The Company brought a cross-motion to dismiss the action for lack of legal capacity to commence the proceedings. In February 2001 the counsel for the plaintiff delivered a notice of discontinuance. The same Note Holder had commenced proceedings in New York State in 1999; however the complaint was also discontinued in September 2000.

During 1999 certain of the Company’s 10% note holders demanded full repayment of principal and interest, and commenced legal proceedings to enforce their demands including an attempt to appoint a receiver. The Company successfully negotiated with the majority of the note holders, being 2/3rds, to extend the repayment terms an additional year.

The Company and the note holders did not negotiate any further extensions from fiscal 2001 through fiscal 2005; however, the note holders have made no payment demands.

Item 14. Material Modifications to the Rights of Security Holders and Use of

Proceeds.

Nil - during period since December 1, 2005 to May 31, 2007.

Item 15. Controls and Procedures. (a)Disclosure Controls and Procedures.

(a) Evaluation of disclosure controls and procedures.  Our chief executive officer and principal financial “officer” have evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Exchange Act), as of the year end of November 30, 2005.  Based on such evaluation, they have concluded that as of such date, our  disclosure controls and procedures are effective and designated to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in applicable SEC rules and forms.

(b)  Management’s annual report on internal control over financial reporting.  Not required as the Registrant is a Foreign Private Issuer.

(c)  Attestation Report of registered public accounting firm.  Not required as the Registrant is a Foreign Private Issuer.

(d) Changes in internal controls over financial reporting.  There were no significant changes in our internal controls over financial reporting identified in connection with the evaluation required by paragraph (d) of 17 CFR 240.13a-15 or 240.15d-15 that occurred during the period covered by this annual report that has effected, or is reasonably likely to materially affect, the issuer’s internal control over financial reporting.

Item 16. [Reserved]

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Item 16A. Audit committee financial expert.

The Company has a separately designated standing Audit Committee established in accordance with Section 3(a) (58) (A) of the Securities Exchange Act of 1934. The members of the Audit Committee are Michel Van Herreweghe, Simon Meredith and Roger Kirby. The Company's Board of Directors has determined that Simon Meredith is an audit committee financial expert as defined by Item 401(h) of Regulation S-K of the Securities Exchange Act of 1934.

Item 16B. Code of Ethics.

The Company has adopted a Code of Ethics that applies to its principal executive and financial officers and the persons performing similar functions. The Company will provide a copy of its Code of Ethics, without charge, to any investor that requests it. Requests should be addressed in writing to ART International Corporation, Attn.: Simon Meredith, 7100 Warden Avenue, Markham, Ontario, Canada L3R 8B5.

Item 16C. Principal Accountant Fees and Services.

The following expenses represent the cost of the Corporation’s annual audit services.

Details / service	2006 $	2005 $	2004 $
Audit	30,000	36,000	36,000
Taxation	--	--	--
All Other Fees	--	--	--
Total	30,000	36,000	36,000

Prior to the start of the audit process, the Company’s audit committee receives an estimate of the costs from its auditors and reviews such costs for their reasonableness.  After their review and pre-approval of the fees, the audit committee recommend to the board of directors to accept the estimated audit fees given by the auditors.

Item 16D. Exemptions from the Listing Standards for Audit Committees.

Not applicable.

Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers.

The Company has never repurchased any of its issued securities.

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PART III

Item 17. Financial Statements.

The financial statements of the Company which are furnished and attached hereto are prepared according to Canadian Generally Accepted Accounting Principles and in the Accountant’s Report attached thereto, and in the Notes thereto, reference is made to the material variations in accounting principles, practices and methods used in preparing financial statements pursuant to Canadian Generally Accepted Accounting Principles in comparison to United States Generally Accepted Accounting Principles as applicable.

Item 18. Financial Statements.

See Items 17 & 19

Index of Exhibits attached:   Financial Statements audited as at November 30, 2006 - with comparative figures for 2005 and 2004 attached.  The Statements include U.S. oriented Comments by the Auditors and Note dealing with U.S. Generally Accepted Accounting Principles.

Item 19. Exhibits.

Index of Exhibits attached:    

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

Diamant ART Corporation:

/s/ Simon Meredith

/s/ Michel van Herreweghe

Simon Meredith

Michel van Herreweghe

President

Chairman

May 29 , 2007

May 29 , 2007

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The following exhibits are attached to and form part of this Annual Report

Exhibit Index

Exhibit #	Item	Description
1	Exhibit	Certifications By Company Chief Executive Officer And Chief Operating Officer
2	Exhibit	Certifications Pursuant To Sarbanes-Oxley Act Of 2002
3	Exhibit	Annual Financial Statements For The Years Ending November 30, 2005, 2004 & 2003 Audit Opinion, Danziger & Hochman – 2005 & 2004 Audit Opinion, Armstrong Szewczyk Goodman Tobias – 2003
Exhibits attached to Annual Report dated November 30, 2004, and included herein by reference.
6	Exhibit	Articles of Incorporation – 01.24.86 • Xerart Corporation
7	Exhibit	Articles of Amendment   – 11.18.86
8	Exhibit	Articles of Amendment   – 02.27.87
9	Exhibit	Articles of Amendment   – 10.08.87 • Name Change Artagraph Reproduction Technology Incorporated
10	Exhibit	Articles of Amendment   – 08.09.89 • To Articles of Amendment   – 10.08.87
11	Exhibit	Articles of Amendment   – 07.24.92 • Creation of Class “A” Preference Shares
12	Exhibit	Articles of Amendment   – 09.01.92 • Class “A” Preference Shares
13	Exhibit	Articles Of Amendment   – 09.08.92 • Fix Class “A” Preference Series 1 At 875,000 Shares And Conversion Rights To Common Shares
14	Exhibit	Articles Of Amendment   – 07.14.98 • Name Change A.R.T. International Inc. • Consolidation Of Common Shares 250:1 • New Class “B” Preference Shares • New Class “A” Common Shares
15	Exhibit	Articles Of Amendment   – 07.17.00 • Conversion Of Class “A” Preference Shares, Series 1 & 2
16	Exhibit	Articles Of Amendment   – 05.26.03 • Name Change Art International Corporation • 100:1 Consolidation Of Common Shares • Conversion Right Of Class “C” Common To 100 Common Shares
17	Exhibit	Articles Of Amendment   – 11.22.04 • Name Change Diamant Art Corporation • Deleting Class “A” Preference Shares • Deleting Class “B” Preference Shares
18	Exhibit	Distribution Agreement With Presidential Holdings, Dated March 8, 2005
19	Exhibit	Distribution Agreement With Victory Packaging, Dated March 1, 2005
20	Exhibit	Distribution Agreements From Diamant Plastics Corp., Dated June 24, 2004 • Canada
21	Exhibit	Distribution Agreements From Diamant Plastics Corp., Dated June 28, 2004 • United States
22	Exhibit	Distribution Agreements From Diamant Plastics Corp., Dated November 15, 2004 • Mexico
23	Exhibit	Distribution Agreements From Diamant Plastics Corp., Dated March 23, 2005 • Bahamas

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