**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**


**FORM
      10-QSB**


(Mark
      One)





[X]
      QUARTERLY REPORT UNDER SECTION 13 OR 15(d)


OF
      THE
      SECURITIES EXCHANGE ACT OF 1934


For
      six
      months ended June 30, 2006


OR





[ 
]
      TRANSITION REPORT PURSUANT TO SECTION 13 OR


15(d)
      OF
      THE SECURITIES EXCHANGE ACT OF 1934





For
      the
      transition period from ___________ to __________





Commission
      file number 000-3078





**CAMELOT
      ENTERTAINMENT GROUP, INC.**


(Exact
      name of registrant as specified in its charter)






Delaware        52-2195605





(State
      or other jurisdiction of    (I.R.S.
      Employer


incorporation
      or organization)    Identification No.)








2020
      Main
      Street #990


Irvine,
      CA 92614


(Address
      of principal executive offices (zip code))





(949)
      777-1090


(Registrant's
      telephone number, including area code)





Indicate
      by check mark whether the registrant (1) filed all reports required to be filed
      by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the last
      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 o








As
      of
      June 30, 2006, the Registrant had outstanding 93,649,589 shares of Common Stock,
      $0.001 par value.









**Page
          - 1**







**CAMELOT
      ENTERTAINMENT GROUP, INC.**


**INDEX
      TO FORM 10-QSB**





**PART
                I. FINANCIAL INFORMATION**Item
                1. Financial Statements (Unaudited)Balance
                Sheet as of June 30, 2006Statements
                of Operation for the six months ended June
                30, 2006 and 2005Statements
                of Cash Flows for the six months ended, June
                30, 2006 and 2005Statements
                of Changes in Stockholders’ Equity for the six
                months ended June 30, 2006Notes
                to Financial StatementsItem
                2. Management’s Discussion and Analysis of Financial Condition and Results
                of OperationsItem
                3. Controls and Procedures**PART
                II. OTHER INFORMATION**Item
                1. Legal ProceedingsItem
                2. Changes in Securities and Use of ProceedsItem
                3. Defaults Upon Senior SecuritiesItem
                4. Submissions of Matters to a Vote of Security HoldersItem
                5. Other InformationItem
                6. Exhibits and Reports on Form 8-KSignatures:











**Page
          - 2**





**THIS
      REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
      OF
      SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND WITHIN THE MEANING
      OF
      SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE
      SUBJECT TO THE "SAFE HARBOR" CREATED BY THOSE SECTIONS. THESE FORWARD-LOOKING
      STATEMENTS INCLUDE BUT ARE NOT LIMITED TO STATEMENTS CONCERNING OUR BUSINESS
      OUTLOOK OR FUTURE ECONOMIC PERFORMANCE; ANTICIPATED PROFITABILITY, REVENUES,
      EXPENSES OR OTHER FINANCIAL ITEMS; AND STATEMENTS CONCERNING ASSUMPTIONS MADE
      OR
      EXCEPTIONS AS TO ANY FUTURE EVENTS, CONDITIONS, PERFORMANCE OR OTHER MATTERS
      WHICH ARE "FORWARD-LOOKING STATEMENTS" AS THAT TERM IS DEFINED UNDER THE FEDERAL
      SECURITIES LAWS. ALL STATEMENTS, OTHER THAN HISTORICAL FINANCIAL INFORMATION,
      MAY BE MARKET TO BE FORWARD-LOOKING STATEMENTS. THE WORDS "BELIEVES", "PLANS",
      "ANTICIPATES", "EXPECTS", AND SIMILAR EXPRESSIONS HEREIN ARE INTENDED TO
      IDENTIFY FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS ARE SUBJECT
      TO
      RISKS, UNCERTAINTIES, AND OTHER FACTORS, WHICH WOULD CAUSE ACTUAL RESULTS TO
      DIFFER MATERIALLY FROM THOSE STATED IN SUCH STATEMENTS. FORWARD-LOOKING
      STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "FACTORS THAT
      MAY
      AFFECT FUTURE RESULTS," AND ELSEWHERE IN THIS REPORT, AND THE RISKS DISCUSSED
      IN
      THE COMPANY'S OTHER SEC FILINGS.**












**Page
          - 3**






**PART
      I. FINANCIAL INFORMATION**




Item
      1.
      Financial Statements (Unaudited)




**Camelot
      Entertainment Group, Inc.**


Balance
      Sheet




June
                  30,2006Unaudited**ASSETS**Current
                  AssetsCash
              $
              3,779Prepaid
                  Expenses
              
              27,049Total
                  Current Assets
              
              30,828InvestmentsScripts
                  Costs
              
              78,800Subtotal
              
              78,800Total
                  Assets
              $
              109,628**LIABILITIES
                  AND STOCKHOLDERS' EQUITY (DEFICIT)**Current
                  LiabilitiesAccounts
                  Payable and accured liabilities
              $
              264,549Stockholder
                  advances
              
              294,292Total
                  Current Liabilities
              
              558,841Total
                  Liablilities
              
              558,841Stockholders'
                  EquityCommon
                  Stock; Par Value $.001 Per Share; Authorized150,000,000
                  Shares; 93,649,589 SharesIssued
                  and Outstanding.
              
              93,649Class
                  A Convertible Preferred Stock; Par Value $.001 per share
              
              5,100Authorized,
                  issued and outstanding 5,100,000 sharesClass
                  B Convertible Preferred Stock; Par Value $.001 per share
              
              5,100Authorized,
                  issued and outstanding 5,100,000 sharesSubscription
                  Receivable
              
              (258,072
              )Capital
                  in Excess of Par Value
              
              11,923,586Deficit
                  Accumulated During the Development Stage
              
              (12,218,576
              )Total
                  Stockholders' Equity (Deficit)
              
              (449,213
              )Total
                  Liabilities and Stockholders' Equity
              $
              109,628




The
      accompanying notes are an integal part of theses financial
      statements.




**Page
          - 4**




**Camelot
      Entertainment Group, Inc.**


Statements
      of Operations


(Unaudited)


FromInception
                  onApril
                  21, 1999For
                  the Three Months Ended,
              
              
              For
                  Six Months Ended,
              
              
              throughJune
                  30,
              
              
              June
                  30,
              
              
              June
                  30,
              
              
              June
                  30,
              
              
              June
                  30,2006
              
              
              2005
              
              
              2006
              
              
              2005
              
              
              2006REVENUE
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              58,568Total
                  Revenue
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              -
              
              $
              58,568EXPENSESCosts
                  of services
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              95,700Sales
                  and Marketing
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              53,959Research
                  & Development
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              252,550General
                  & Administrative
              
              
              202,956
              
              
              486,174
              
              
              393,716
              
              
              603,270
              
              
              8,986,284Impairment
                  of assets
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,402,338Impairment
                  of investments inother
                  companies
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              710,868Total
                  Expenses
              
              
              202,956
              
              
              486,174
              
              
              393,716
              
              
              603,270
              
              
              12,501,699NET
                  OPERATING LOSS
              
              
              (202,956
              )
              
              (486,174
              )
              
              (393,716
              )
              
              (603,270
              )
              
              (12,443,131
              )OTHER
                  INCOME (EXPENSES)Interest
                  (Expense)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (9,294
              )Other
                  income (expense)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (21,652
              )Gain
                  on extinguishment of debt
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              255,500Total
                  Other Income (Expenses)
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              224,554NET
                  LOSS
              
              $
              (202,956
              )
              $
              (486,174
              )
              $
              (393,716
              )
              $
              (603,270
              )
              $
              (12,218,576
              )BASIC
                  LOSS PER COMMON SHARE
              
              
              (0.0022
              )
              
              (0.0062
              )
              
              (0.0042
              )
              
              (0.0081
              )
              $
              (0.29
              )WEIGHTED
                  AVERAGE NUMBER OFSHARES
                  OUTSTANDING
              
              
              93,649,589
              
              
              79,013,587
              
              
              93,649,589
              
              
              74,582,002
              
              
              42,178,165





The
      accompanying notes are an integral part of these financial
      statements.







**Page
          - 5**





**Camelot
      Entertainment Group, Inc.**


Statements
      of Cash Flows


(Unaudited)


FromInception
                  onApril
                  21, 1999For
                  Six Months Ended,
              
              
              throughJune
                  30,
              
              
              June
                  30,
              
              
              30-Jun2006
              
              
              2005
              
              
              2006OPERATING
                  ACTIVITIESNet
                  (loss) income for the period
              
              $
              (393,716
              )
              $
              (603,270
              )
              $
              (12,218,576
              )Adjustments
                  to reconcile net (loss) to cash provided (used) by operating
                  activities:Value
                  of options expensed
              
              
              -
              
              
              
              
              
              351,000Gain
                  on extinguishment of debt
              
              
              -
              
              
              
              
              
              (255,500
              )Depreciation
              
              
              
              
              
              
              
              
              3,997Amortization
                  of deferred compensation
              
              
              -
              
              
              
              
              
              1,538,927Common
                  Stock issued for debt
              
              
              
              
              
              
              
              
              194,171Common
                  Stock issued for services
              
              
              -
              
              
              384,843
              
              
              1,939,732Common
                  Stock issued for expense reimbursement
              
              
              -
              
              
              55,462
              
              
              354,788Common
                  Stock issued for technology
              
              
              
              
              
              
              
              
              19,167Impairment
                  of investments in other companies
              
              
              -
              
              
              
              
              
              710,868Impairment
                  of assets
              
              
              
              
              
              
              
              
              2,628,360Prepaid
                  services expensed
              
              
              2,392
              
              
              
              
              
              531,429Expenses
                  paid through notes payable proceeds
              
              
              
              
              
              
              
              
              66,489Loss
                  on disposal of property and equipment
              
              
              
              
              
              
              
              
              5,854Preferred
                  Stock issued to shareholder
              
              
              
              
              
              
              
              
              3,366,000Change
                  in assets and liabilities:(increase)
                  decrease in other current assets
              
              
              (20,626
              )
              
              (9,615
              )
              
              (22,622
              )Increase
                  (decrease) in accounts payable & other a/p
              
              
              182,891
              
              
              (27,825
              )
              
              301,358Increase
                  (decrease) in due to officers
              
              
              -
              
              
              -
              
              
              -**Net
                  Cash provided (used) by operating activities**
              
              
              **(229,059**
              )
              
              **(200,405**
              **)**
              
              **(484,558**
              **)**Cash
                  flows from investing activities:Purchase
                  of fixed assets
              
              
              
              
              
              
              
              $
              (6,689
              )Purchase
                  of assets-Script Costs
              
              
              (60,000
              )
              
              
              
              
              (78,800
              )Cash
                  provided (used) from investing activities
              
              
              (60,000
              )
              
              
              
              $
              (85,489
              )Cash
                  flows from financing activities:Contributed
                  capital
              
              
              
              
              
              
              
              
              25,500Advanced
                  from affiliate/shareholder loans for cash flow
              
              
              294,292
              
              
              200,013
              
              
              521,968Proceeds
                  from issuance of common stock
              
              
              
              
              
              
              
              
              30,835Incease
                  (decrease) in notes payable
              
              
              (4,477
              )
              
              
              
              
              (4,477
              )**Cash
                  provided (used) in financing activities**
              
              
              289,815
              
              
              200,013
              
              
              573,826Increase
                  (decrease) in cash
              
              
              756
              
              
              (392
              )
              
              3,779Cash
                  at beginning of period
              
              
              3,023
              
              
              1,140
              
              
              0Cash
                  at the end of the period
              
              $
              3,779
              
              $
              748
              
              $
              3,779





The
      accompanying notes are an integal part of theses financial
      statements.







**Page
          - 6**




**Camelot
        Entertainment Group, Inc.**
 Statements
        of Cash Flows
 (Unaudited)
 (continued)
 FromInception
                    onApril
                    21, 1999For
                    the Year Ended
                
                
                throughJune
                    30,
                
                
                June
                    30,
                
                
                30-Jun2005
                
                
                2004
                
                
                2006Supplemental
                    Cash Flow InformationInterest
                    Paid
                
                
                0
                
                
                0
                
                $
                31,000Supplemental
                    Disclosure of Non Cash Investing and Financing Activities:Issuance
                    of common stock forproperty
                    and equipment
                
                
                0
                
                
                0
                
                $
                1,153,162Issuance
                    of common stockfor
                    licensed technology
                
                
                0
                
                
                0
                
                
                938,000Purchase
                    of Treasury Stock
                
                
                0
                
                
                0
                
                
                2,400Issuance
                    of common stockfor
                    debt
                
                
                0
                
                
                0
                
                
                40,000Purchase
                    of licensed technologyfor
                    debt to seller
                
                
                0
                
                
                0
                
                
                250,000Issuance
                    of common stock for prepaidand
                    other assets
                
                
                0
                
                
                0
                
                
                1,726Prepayment
                    of services forcommon
                    stock
                
                
                0
                
                
                0
                
                
                2,046,000Investments
                    in othercompanies
                
                
                0
                
                
                0
                
                
                710,000Conversion
                    of debt tocommon
                    stock
                
                
                0
                
                
                0
                
                
                225,500Forgiveness
                    of debt bystockholder
                
                
                0
                
                
                0
                
                
                31,489


The
        accompanying notes are an integral part of these financial
        statements








**Page
          - 7**







**Camelot
      Entertainment Group, Inc.**


Statements
      of Stockholders' Equity (Deficit)


(Unaudited)


(Deficit)AccumulatedCommon
                  Stock
              
              
              Preferred
                  Stock
              
              
              
              
              
              Additional
              
              
              DuringPaid-In
              
              
              Development
              
              
              Subscription
              
              
              DeferredShares
              
              
              Amount
              
              
              Shares
              
              
              Amount
              
              
              Capital
              
              
              Stage
              
              
              Receivable
              
              
              Compensation
              
              
              TotalBalance
                  at January 1, 2004
              
              
              33,856,433
              
              
              33,857
              
              
              0
              
              
              0
              
              
              5,464,539
              
              
              -6,059,442
              
              
              0
              
              
              0
              
              
              -561,046Shares
                  issued for services
              
              
              100,000
              
              
              100
              
              
              
              
              
              
              
              
              2,900
              
              
              
              
              
              
              
              
              
              
              
              3,000Shares
                  issued for financing
              
              
              6,791,287
              
              
              6,791
              
              
              
              
              
              
              
              
              196,948
              
              
              
              
              
              
              
              
              
              
              
              203,739Subscriptions
                  receivable for financing agreement
              
              
              0
              
              
              0
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              -116,069
              
              
              
              
              
              -116,069Net
                  (loss) for the three months ended March 31, 2004
              
              
              0
              
              
              0
              
              
              
              
              
              
              
              
              
              
              
              -131,681
              
              
              
              
              
              
              
              
              -131,681Balance
                  at March 31, 2004
              
              
              40,747,720
              
              $
              40,748
              
              $
              0
              
              $
              0
              
              $
              5,664,387
              
              
              (6,191,123.00
              )
              
              ($116,069
              )
              $
              0
              
              
              ($602,057
              )Share
                  issued for services
              
              
              24,009,000
              
              
              24,009
              
              
              
              
              
              
              
              
              1,085,500
              
              
              
              
              
              
              
              
              
              
              
              1,109,509Share
                  issued for financing
              
              
              7,604,562
              
              
              7,605
              
              
              0
              
              
              0
              
              
              221,460
              
              
              
              
              
              (316,003
              )
              
              
              
              
              (86,938
              )Advances
                  offset sub a/r
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              174,000
              
              
              
              
              
              174,000Shares
                  issued for debt
              
              
              1,000,000
              
              
              1,000
              
              
              0
              
              
              0
              
              
              39,000
              
              
              
              
              
              
              
              
              
              
              
              40,000Shares
                  issued for amt due
              
              
              1,589,927
              
              
              1,590
              
              
              0
              
              
              0
              
              
              47,000
              
              
              
              
              
              
              
              
              
              
              
              48,590Value
                  of option exercised
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              351,000
              
              
              
              
              
              
              
              
              
              
              
              351,000Net
                  (loss)
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (1,161,756
              )
              
              
              
              
              
              
              
              (1,161,756
              )Balance
                  as of December 31, 2004
              
              
              74,951,209
              
              
              74952
              
              
              0
              
              
              0
              
              
              7408347
              
              
              (7,324,719
              )
              
              
              
              
              
              
              
              158,580Net
                  (loss) 1st quarter
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (117,096
              )
              
              
              
              
              
              
              
              (117,096
              )**Balance
                  at March 31, 2005**
              
              
              **74,951,209**
              
              
              **74,952**
              
              **$**
              **0**
              
              **$**
              **0**
              
              
              **7,408,347**
              
              
              **(7,441,815**
              **)**
              
              **(258,072**
              **)**
              **$**
              **0**
              
              
              **(216,588**
              **)**Shares
                  issued for
              
              
              4,000,000
              
              
              4,000
              
              
              0
              
              
              0
              
              
              216,000
              
              
              0
              
              
              
              
              
              
              
              
              220,000consulting
                  servicesShares
                  issued for
              
              
              2,276,033
              
              
              2,276
              
              
              0
              
              
              0
              
              
              187,568
              
              
              0
              
              
              
              
              
              
              
              
              189,844officers
                  salariesShares
                  issued to
              
              
              1,848,723
              
              
              1,849
              
              
              0
              
              
              0
              
              
              79,078
              
              
              0
              
              
              
              
              
              
              
              
              80,927Eagle
                  for expenses paidNet
                  Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (486,174
              )
              
              
              
              
              
              
              
              (486,174
              )Subtotals
                  for 2nd quarter
              
              
              8,124,756
              
              
              8,125
              
              
              0
              
              
              0
              
              
              482,646
              
              
              0
              
              
              
              
              
              
              
              
              4,597**Balance
                  at June 30, 2005**
              
              
              **83,075,965**
              
              
              **83,076**
              
              
              **0**
              
              
              **0**
              
              
              **7,890,993**
              
              
              **(7,927,989**
              **)**
              
              **(258,072**
              **)**
              
              
              
              
              **(211,991**
              **)**Net
                  Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (127,024
              )
              
              
              
              
              
              
              $
              (127,024
              )**Balance
                  at Sept 30, 2005**
              
              
              83,075,965
              
              
              83,076
              
              
              0
              
              
              0
              
              
              7,890,993
              
              $
              (8,055,013
              )
              
              ($258,072
              )
              
              
              
              
              (339,015
              )Shares
                  issued for
              
              
              233,547
              
              
              233
              
              
              0
              
              
              0
              
              
              9,767
              
              
              
              
              
              
              
              
              
              
              
              10,000consulting
                  servicesShares
                  issued for
              
              
              3,538,263
              
              
              3,538
              
              
              0
              
              
              0
              
              
              171,462
              
              
              
              
              
              
              
              
              
              
              
              175,000officers
                  salariesShares
                  issued to
              
              
              1,452,662
              
              
              1,453
              
              
              0
              
              
              0
              
              
              118,219
              
              
              
              
              
              
              
              
              
              
              
              119,672Eagle
                  for expenses paidShares
                  issued to Eagle
              
              
              1,762,271
              
              
              1,762
              
              
              
              
              
              
              
              
              120,991
              
              
              
              
              
              
              
              
              
              
              
              122,75320%
                  of shares issuedShares
                  issued for
              
              
              3,586,881
              
              
              3,587
              
              
              
              
              
              
              
              
              256,354
              
              
              
              
              
              
              
              
              
              
              
              259,943Shareholder
                  loans 2005Net
                  Loss 4th Quarter
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              $
              (3,769,845
              )
              
              
              
              
              
              
              
              (3,769,845
              )Class
                  A Preferred Stock issued
              
              
              
              
              
              
              
              
              5,100,000
              
              
              5,100
              
              
              555,900
              
              
              
              
              
              
              
              
              
              
              
              561,000Class
                  B Preferred Stock issued
              
              
              
              
              
              
              
              
              5,100,000
              
              
              5,100
              
              
              2,799,900
              
              
              
              
              
              
              
              
              
              
              
              2,805,000**Balance
                  at Dec 31, 2005**
              
              
              **93,649,589**
              
              
              **93,649**
              
              
              **10,200,000**
              
              
              **10,200**
              
              
              **11,923,586**
              
              
              **(11,824,858**
              **)**
              
              **-258,072**
              
              
              
              
              
              (55,496
              )Net
                  Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (190,762
              )**Balance
                  at March 31, 2006**
              
              
              **93,649,589**
              
              
              **93,649**
              
              
              **10,200,000**
              
              
              **10,200**
              
              
              **11,923,586**
              
              
              **(12,010,620**
              **)**
              
              **-258,072**
              
              
              
              
              
              (241,259
              )Net
                  Loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (202,956
              )Balance
                  at June 30, 2006
              
              
              93,649,589
              
              
              93,649
              
              
              10,200,000
              
              
              10,200
              
              
              11,923,586
              
              
              (12,218,576
              )
              
              -258,072
              
              
              
              
              
              (449,213
              )




The
      accompanying notes are an integal part of theses financial
      statements.




**Page
          - 8**




**CAMELOT
      ENTERTAINMENT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED, JUNE 30,
      2006**







1.
            ORGANIZATION
                AND BASIS OF PRESENTATION





Camelot
      Entertainment Group, Inc. (the *Company* ),
      a
      Delaware corporation, is comprised of three divisions: Camelot Film Group,
      which develops, produces, markets and distributes motion pictures; Camelot
      Studio Group, which is currently proceeding with a major studio development;
      and
      Camelot Production Services Group, which is involved with a number of various
      motion picture related projects, including technology, consulting and bridge
      financing, was originally incorporated under a different name with the intention
      of providing services and resources to entrepreneurs looking to launch novel
      products and ventures worldwide in exchange for an interest in the startup
      ventures. The Company brought in new management and was restructured in 2003
      prior to changing its name to Camelot Entertainment Group in 2004.




The
      Company’s original activities from inception through its restructuring in 2003
      consisted of raising capital, recruiting a management team and entering into
      ventures and alliances with Affiliates. The Company substantially relied on
      issuing stock to officers, directors, professional service providers and other
      parties in exchange for services and technology. As of December 31, 2002, the
      Company had written-off all of its investments due to impairments in the
      carrying value of the assets. Since inception, impairment of investments in
      other companies and of long-lived assets accounts for approximately 65% of
      the
      Company’s net losses. Since March of 2003, the Company’s activities have
      consisted of developing and implementing its business model, recruiting
      executives and staff, entering into various contracts with producers, writers
      and directors of motion pictures, establishing its distribution company,
      negotiating potential acquisitions, developing its studio project and taking
      steps to raise additional capital.





The
      accompanying financial statements have been prepared assuming that the Company
      will continue as a going concern. The Company has had minimal revenues, has
      experienced material operating losses and has a stockholders’ deficit. Unless
      rectified in the next year, these conditions, combined with failing to secure
      a
      successful source of additional financial resources, could raise substantial
      doubt about the Company’s ability to continue as a going concern. The financial
      statements do not include any adjustments to reflect the possible future effects
      on the classification of liabilities that may result from the outcome of this
      uncertainty.





Management’s
      plans with respect to the current financial situation consist of seeking
      additional financial resources from existing investors or others in implementing
      its new business model. However, instability in the stock price may make it
      difficult to find parties willing to accept the Company’s restricted shares of
      common stock in exchange for cash and or services required to execute its Plan
      of Operation. There is no assurance that such resources would be made available
      to the Company, or that they would be on financially viable terms.





2.
            SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES





Cash
      and Cash Equivalents





The
      Company considers all investment instruments purchased with maturities of three
      months or less to be cash equivalents.





Basis
      Of Presentation





The
      unaudited financial statements included herein were prepared from the records
      of
      the Company in accordance with Generally Accepted Accounting Principles and
      in
      accordance with current securities regulations. These unaudited financial
      statements have been reviewed by our independent auditors. These financial
      statements reflect all adjustments, which are, in the opinion of management,
      necessary to provide a fair statement of the results of operations and financial
      position for the interim periods. Such financial statements generally conform
      to
      the presentation reflected in the Company's Form 10-KSB filed with the
      Securities and Exchange Commission for the year ended December 31, 2005. The
      current interim period reported herein should be read in conjunction with the
      Company's Form 10-KSB subject to independent audit at the end of the year.







**Page
          - 9**




**CAMELOT
      ENTERTAINMENT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED, JUNE 30,
      2006**


**(continued)**





Use
      of
      Estimates





The
      preparation of financial statements in conformity with generally accepted
      accounting principles in the United States requires management to make estimates
      and assumptions that affect the reported amounts of assets and liabilities
      and
      the disclosure of contingent assets and liabilities at the date of the financial
      statements and the reported amounts of revenues and expenses during the
      reporting period. Actual results could differ materially from those estimates.





Income
      taxes





The
      Company provides for income taxes based on the provisions of Statement of
      Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income
      Taxes *,* which,
      among other things, requires that recognition of deferred income taxes be
      measured by the provisions of enacted tax laws in effect at the date of
      financial statements.




Financial
      Instruments





Financial
      instruments consist primarily of obligations under accounts payable and accrued
      expenses, notes payable and capital lease obligations. The carrying amounts
      of
      accounts payable and accrued expenses approximate fair value because of the
      short maturity of those instruments. The carrying value of notes payable and
      capitalized lease obligations approximate fair value because they contain market
      value interest rates and have specified repayment terms. The Company has applied
      certain assumptions in estimating these fair values. The use of different
      assumptions or methodologies may have a material effect on the estimates of
      fair
      values.





Impairment
      of Long-Lived Assets





Impairment
      of long-lived assets is assessed by the Company whenever there is an indication
      that the carrying amount of the asset may not be recoverable. Recoverability
      of
      these assets is determined by comparing the forecasted undiscounted cash flows
      generated by those assets to the assets’ net carrying value. The amount of
      impairment loss, if any, is measured as the difference between the net book
      value of the assets and the estimated fair value of the related assets.





Loss
      Per Common Share





The
      Company has adopted SFAS No. 128, *Earnings
      per Share,* which
      supercedes APB No. 15. Basic EPS differs from primary EPS calculation in that
      basic EPS does not include any potentially dilutive securities. Diluted EPS
      must
      be disclosed regardless of the dilutive impact to basic EPS. There were no
      potentially dilutive securities outstanding at June 30, 2006.





Revenue
      Recognition





Revenue
      consists of professional services. Revenues for services are recognized when
      the
      services are rendered. The amounts of such revenues are recorded based on the
      value of compensation received for the services. In the Company's current
      operations, compensation to the Company has consisted of stock in start up
      companies to whom the services were rendered.






**Page
          - 10**




**CAMELOT
      ENTERTAINMENT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED, JUNE 30,
      2006**


**(continued)**







3. GOING
      CONCERN UNCERTAINTIES ****





The
      accompanying financial statements have been prepared in conformity with
      generally accepted accounting principles, which contemplate continuation of
      the
      Company as a going concern. However, the Company has experienced recurring
      operating losses and negative cash flows from operations, which raise
      substantial doubt about its ability to continue as a going concern. The
      Company's continued existence is dependent upon its ability to increase
      operating revenues and/or obtain additional equity financing. In view of these
      matters, the Company has undergone a series of negotiations to obtain additional
      equity financing to enable it to achieve its strategic objectives. The Company
      has an agreement with Eagle Consulting Group, Inc., a Nevada corporation
      ("Eagle"), to provide equity financing. While Eagle has advanced the Company
      $294,292 during the first and second quarter of 2006, it appears unlikely that
      such funding will be enough to implement the Company's Plan of Operation beyond
      the current fiscal year unless that agreement is extended. As a result, the
      Company may be in a position where it will need to find additional sources
      of
      financing in order to remain a going concern in the future. The financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.




4. COMMITMENTS
      AND CONTINGENCIES





The
      Company believes it has identified and accrued for all valid claims from
      creditors, consultants, stock option adjustments and vendors. Although there
      have been no specific disputes over these matters and related amounts, these
      third parties may assert additional claims as the Company attempts to settle
      all
      past due obligations.





The
      Company also has a non-dilution commitment with an Affiliate to issue 20% of
      all
      newly issued common shares to the Affiliate in exchange for funding cash flow
      deficits over the period specified in the agreement. The Company has not
      issued shares this quarter to this Affiliate.









**Page
          - 11**




**CAMELOT
      ENTERTAINMENT GROUP, INC.**


**NOTES
      TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED, JUNE 30,
      2006**


**(continued)**





5. ADVANCES
      FROM AFFILIATE





During
      the first and second quarter of 2006, the Company had not issued common shares
      to Affiliate. The Affiliate’s cash advances for the first and second quarter of
      $294,292 were covered under an agreement in which the Affiliate must fund the
      Company’s cash flow deficits over the period specified in the agreement. These
      advances were for general and administrative costs, cost of screenplays, prepaid
      exhibitors space for the quarter, and studio development costs.





6.
      DUE
      TO OFFICERS





As
      of
      June 30, 2006, $225,000 was due to officers for salaries during the first and
      second quarter. No other amounts are currently due.





7.
      COMMON STOCK





No
      common
      stock was issued during the first or second quarter of 2006.





8.
      RELATED PARTY TRANSACTIONS





On
      March
      30, 2003, the Company entered into an agreement with an Affiliate whereby the
      Company will issue 20% of its outstanding common shares in exchange for services
      and advances. No shares were issued during the first or second quarter of 2006.
      The Affiliate paid $294,292 in expenses on behalf of the Company during the
      first and second quarter of 2006.




8.
      SUBSEQUENT EVENTS





During
        the second quarter, Camelot Entertainment Group, Inc. entered into an agreement
        with Elemental Pictures (a South African film company) to potentially purchase
        the company. The company expects to make a formal announcement regarding
        the
        transaction in September 2006.


**Page
          - 12**




**ITEM
      2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
      OPERATION**





The
      matters discussed in this report contain forward-looking statements within
      the
      meaning of Section 27A of the Securities Act of 1933, as amended, and within
      the
      meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
      which
      are subject to the "safe harbor" created by those sections. These
      forward-looking statements include but are not limited to statements concerning
      our business outlook or future economic performance; anticipated profitability,
      revenues, expenses or other financial items; and statements concerning
      assumptions made or exceptions as to any future events, conditions, performance
      or other matters which are "forward-looking statements" as that term is defined
      under the Federal Securities Laws. All statements, other than historical
      financial information, may be deemed to be forward-looking statements. The
      words
      "believes", "plans", "anticipates", "expects", and similar expressions herein
      are intended to identify forward-looking statements. Forward-looking statements
      are subject to risks, uncertainties, and other factors, which would cause actual
      results to differ materially from those stated in such statements.
      Forward-looking statements include, but are not limited to, those discussed
      in
      "Factors That May Affect Future Results," and elsewhere in this report, and
      the
      risks discussed in the Company's other SEC filings.





**Critical
      Accounting Estimates**





The
      preparation of our financial statements in conformity with accounting principles
      generally accepted in the United States of America requires our management
      to
      make certain estimates and assumptions that affect the reported amounts of
      assets and liabilities and disclosure of contingent assets and liabilities
      at
      the date of the financial statements and the reported amounts of revenues and
      expenses during the reporting period. As such, in accordance with the use of
      accounting principles generally accepted in the United States of America, our
      actual realized results may differ from management’s initial estimates as
      reported. A summary of our significant accounting policies is detailed in the
      notes to the financial statements, which are an integral component of this
      filing.




Management
      evaluates the probability of the utilization of the deferred income tax asset
      related to the net operating loss carry forwards. The Company has estimated
      a
      $2,450,000 deferred income tax asset related to net operating loss carry
      forwards and other book/tax differences at September 30, 2005. Management
      determined that because the Company has yet to generate taxable income, and
      that
      the generation of taxable income in the short term is uncertain, it was
      appropriate to provide a valuation allowance for the total deferred income tax
      asset.




The
      Company has acquired certain technology and licenses. Prior to January 1, 2004,
      the Company determined that the value of these acquired assets was impaired
      and
      has provided an impairment allowance for the full purchase price of these
      assets. The impairment amount charged to operations in prior years was
      $3,113,206.





**Critical
      Accounting Policies**





The
      Company has defined a critical accounting policy as one that is both important
      to the portrayal of the Company's financial condition and results of operations,
      and requires the management of the Company to make difficult, subjective or
      complex judgments. Estimates and assumptions about future events and their
      effects cannot be perceived with certainty. The Company bases its estimates
      on
      historical experience and on various other assumptions that are believed to
      be
      reasonable under the circumstances, the results of which form the basis for
      making judgments. These estimates may change as new events occur, as more
      experience is acquired, as additional information is obtained and as the
      Company's operating environment changes.






**Page
          - 13**




We
      have
      identified the policies below as critical to our business operations and the
      understanding of our results of operations. The impact and any associated risks
      related to these policies on our business operations is discussed throughout
      Management's Discussion and Analysis of Financial Condition and Results of
      Operations, where such policies affect our reported and expected financial
      results. In the ordinary course of business, we have made a number of estimates
      and assumptions relating to the reporting of results of operations and financial
      condition in the preparation of our financial statements in conformity with
      accounting principles generally accepted in the United States of America. Actual
      results could differ significantly from those estimates under different
      assumptions and conditions. We believe that the following discussion addresses
      our most critical accounting policies, which are those that are most important
      to the portrayal of our financial condition and results of operations and
      require our most difficult, subjective, and complex judgments, often as a result
      of the need to make estimates about the effect of matters that are inherently
      uncertain.





*Significant
      Accounting Practices*




Beginning
      January 1, 2004 we adopted new accounting rules which were effective January
      1,
      2001, which require, among other changes, that exploitation costs, including
      advertising and marketing costs, be expensed as incurred. Theatrical print
      costs
      are amortized over the periods of theatrical release of the respective
      territories. Under accounting rules in effect for periods prior to January
      1,
      2001, such costs were capitalized as a part of film costs and amortized over
      the
      life of the film using the individual-film-forecast method. The current practice
      dramatically increases the likelihood of reporting losses upon a film’s
      theatrical release, but should provide for increased returns when a film is
      released in the ancillary markets of home video and television, when we incur
      a
      much lower proportion of advertising costs. Additional provisions under the
      new
      accounting rules include changes in revenue recognition and accounting for
      development costs and overhead, and reduced amortization periods for film costs.




*Accounting
      for Motion Picture Costs*





In
      accordance with accounting principles generally accepted in the United States
      and industry practice, we amortize the costs of production, including
      capitalized interest and overhead, as well as participations and talent
      residuals, for feature films using the individual-film-forecast method under
      which such costs are amortized for each film in the ratio that revenue earned
      in
      the current period for such title bears to management’s estimate of the total
      revenues to be realized from all media and markets for such title. All
      exploitation costs, including advertising and marketing costs, are expensed
      as
      incurred. Theatrical print costs are amortized over the periods of theatrical
      release of the respective territories.




Management
      plans to regularly review, and revise when necessary, our total revenue
      estimates on a title-by-title basis, which may result in a change in the rate
      of
      amortization and/or a write-down of the film asset to estimated fair value.
      These revisions can result in significant quarter-to-quarter and year-to-year
      fluctuations in film write-downs and amortization. A typical film recognizes
      a
      substantial portion of its ultimate revenues within the first two years of
      release. By then, a film has been exploited in the domestic and international
      theatrical markets and the domestic and international home video markets, as
      well as the domestic and international pay television and pay-per-view markets.
      A similar portion of the film’s capitalized costs should be expected to be
      amortized accordingly, assuming the film or television program is profitable.




The
      commercial potential of individual motion pictures varies dramatically, and
      is
      not directly correlated with production or acquisition costs. Therefore, it
      is
      difficult to predict or project a trend of our income or loss. However, the
      likelihood that we would report losses, particularly in the year of a motion
      picture’s release, is increased by the industry’s method of accounting, which
      requires the immediate recognition of the entire loss (through increased
      amortization) in instances where it is estimated the ultimate revenues of a
      motion picture could not recover our capitalized costs. On the other hand,
      the
      profit of a profitable motion picture must be deferred and recognized over
      the
      entire revenue stream generated by that motion picture. This method of
      accounting may also result in significant fluctuations in reported income or
      loss, particularly on a quarterly basis, depending on our release schedule,
      the
      timing of advertising campaigns and the relative performance of individual
      motion pictures.






**Page
          - 14**




*Accounting
      for Films*





In
      June
      2000, the Accounting Standards Executive Committee of the American Institute
      of
      Certified Public Accountants issued Statement of Position 00-2 “Accounting by
      Producers or Distributors of Films” (“SoP 00-2”). SoP 00-2 establishes new
      accounting standards for producers or distributors of films, including changes
      in revenue recognition, capitalization and amortization of costs of acquiring
      films and accounting for exploitation costs, including advertising and marketing
      expenses. We elected adoption of SoP 00-2 effective as of April 1, 2004.





The
      principal changes as a result of applying SoP 00-2 are as follows:





Advertising
      and marketing costs, which were previously capitalized to investment in films
      on
      the balance sheet and amortized using the individual film forecast method,
      are
      now expensed the first time the advertising takes place.





We
      capitalize costs of production, including financing costs, to investment in
      motion pictures. These costs are amortized to direct operating expenses in
      accordance with SoP 00-2. These costs are stated at the lower of unamortized
      motion picture costs or fair value (net present value). These costs for an
      individual motion picture or television program are amortized in the proportion
      that current period actual revenues bear to management’s estimates of the total
      revenue expected to be received from such motion picture over a period not
      to
      exceed ten years from the date of delivery.





Management
      plans to regularly review, and revise when necessary, its total revenue
      estimates, which may result in a change in the rate of amortization and/or
      write-down of all or a portion of the unamortized costs of the motion picture
      to
      its fair value. No assurance can be given that unfavorable changes to revenue
      estimates will not occur, which may result in significant write-downs affecting
      our results of operations and financial condition.





*Revenue
      Recognition*





Revenue
      from the sale or licensing of motion pictures is recognized upon meeting all
      recognition requirements of SoP 00-2. Revenue from the theatrical release of
      motion pictures is recognized at the time of exhibition based on the company’s
      participation in box office receipts. Revenue from the sale of DVDs in the
      retail market, net of an allowance for estimated returns, is recognized on
      the
      latter of shipment to the customer or “street date” (when it is available for
      sale by the customer). Under revenue sharing arrangements, rental revenue is
      recognized when we are entitled to receipts and such receipts are determinable.





Revenues
      from television licensing are recognized when the motion picture is available
      to
      the licensee for telecast. For television licenses that include separate
      availability “windows” during the license period, revenue is allocated over the
“windows.” Revenue from sales of international territories are recognized when
      the feature film is available to the distributor for exploitation and no
      conditions for delivery exist, which under most sales contracts requires that
      full payment has been received from the distributor.





For
      contracts that provide for rights to exploit a program on multiple media (i.e.
      theatrical, video, television) with a fee for a single motion picture where
      the
      contract specifies the permissible timing of release to various media, the
      fee
      is allocated to the various media based on management’s assessment of the
      relative fair value of the rights to exploit each media and is recognized as
      the
      program is released to each media. For multiple-title contracts with a fee,
      the
      fee is allocated on a title-by-title basis, based on management’s assessment of
      the relative fair value of each title. Cash payments received are recorded
      as
      deferred revenue until all the conditions of revenue recognition have been
      met.






**Page
          - 15**




*Income
      Taxes*





The
      Company recognizes future income tax assets and liabilities for the expected
      future income tax consequences of transactions that have been included in the
      financial statements or income tax returns. Future income taxes are provided
      for
      using the liability method. Under the liability method, future income taxes
      are
      recognized for all significant temporary differences between the tax and
      financial statement bases of assets and liabilities.




*Capital
      Structure*




The
      Company has adopted Statement of Financial Accounting Standards No. 129,
      "Disclosure of Information about Capital Structure" ("SFAS 129"), which requires
      companies to disclose all relevant information regarding their capital
      structure. The Company reached an agreement with Eagle Consulting Group, Inc.
      on
      March 28, 2003 to provide operational funding for the Company. In exchange
      for
      twenty percent (20%)of the Company’s outstanding common stock on an
      anti-dilutive, continuing basis until the Company could secure additional
      financing from another source, Eagle agreed to provide funding for the Company’s
      annual audit, quarterly filings, accounts payable and other ongoing expenses
      including office, phones, business development, legal and accounting fees.
      Eagle
      advances from January 1, 2005 to September 30, 2005 total $264,512 including
      interest. In accordance with the anti-dilutive provision, the amount of stock
      due Eagle is calculated on a quarterly basis. This anti-dilution provision
      to
      the agreement could have a material adverse effect on our shareholders as it
      might continue for a substantial period of time and as a result the dilutive
      effect to the shareholders cannot be fully determined until the funding from
      Eagle ceases.





*Going
      Concern Uncertainties*





The
      accompanying financial statements have been prepared in conformity with
      generally accepted accounting principles, which contemplate continuation of
      the
      Company as a going concern. However, the Company has experienced recurring
      operating losses and negative cash flows from operations.





The
      Company's continued existence is dependent upon its ability to increase
      operating revenues and/or obtain additional equity financing.





The
      Company has an agreement with Eagle Consulting Group, Inc., a Nevada corporation
      ("Eagle"), to provide equity financing. While Eagle has advanced the Company
      $294,292 during the first and second quarter of 2006, it appears unlikely that
      such funding will be enough to implement the Company's Plan of Operation beyond
      the current fiscal year unless that agreement is extended. As a result, the
      Company may be in a position where it will need to find additional sources
      of
      financing in order to remain a going concern in the future. The financial
      statements do not include any adjustments that might result from the outcome
      of
      this uncertainty.










**Page
          - 16**







**PLAN
      OF OPERATION**





**OVERVIEW**





The
      Company was incorporated in Delaware on October 12, 1999. In March, 2003, the
      Company underwent a restructuring which resulted in a new management team and
      a
      new business model. During May 2004, we changed our name to Camelot
      Entertainment Group, Inc. (“CMEG”), and changed our business model from pursuing
      a new approach to venture formation to pursuing a new approach to developing,
      producing, marketing and distributing motion pictures.





CMEG
      is
      comprised of three divisions: Camelot Film Group, Camelot Studio Group, and
      Camelot Production Services Group.





**CAMELOT
      FILM GROUP**





*Camelot
      Film Group* is also
      comprised of three divisions, Camelot Films, Camelot Features and Camelot
      Distribution.





*Camelot
      Films’* business
      model embraces the Camelot Studio Model (or "CSM"), which provides for the
      development, production, marketing and distribution of motion pictures utilizing
      a unique financial and operational structure. The CSM attempts to combine the
      efficiencies realized by studios of the early 1900s, with the artistic focus
      and
      diversity of today's independent productions. Using this approach, the Company
      believes the risk-reward relationship facing the typical film project can be
      dramatically shifted. For example, whereas a typical film pushes artists and
      directors to rush development and production in hopes of conserving cash, the
      CSM extends the pre-production cycle substantially, increases the amount of
      time
      allocated for principal photography and begins the post production process
      from
      the start to reduce costs while simultaneously increasing quality. Add in other
      features such as financial transparency, annualized employment and the
      utilization of CMEG common stock and the entire process begins to run
      efficiently, minimizing expenses while giving CMEG the potential to generate
      maximum revenues.





Similarly,
      whereas a low-budget picture is severely limited by the types of postproduction
      technology used, due to budget constraints, we intend to invest directly in
      top
      of the line technology, spreading the costs over a targeted minimum of 12
      original motion pictures each year as part of a three year slate which should
      produce a minimum of 36 films per slate. The ultimate goal of the CSM is to
      develop the ability to consistently produce films with the look, feel and
      artistic content of multi-million dollar pictures, for a fraction of the cost.
      The term frequently used by CMEG is “films with a budget.” All of the CSM
      product should be distributed by our distribution division.





*Camelot
      Features’* business
      model inherits many of Camelot Film’s main points, including financial
      transparency, the utilization of CMEG common stock, utilization of technology
      and increased pre-production time while focusing on motion pictures in all
      budget ranges. Many of the projects developed and or acquired by CMEG may not
      fit into the CSM. These types of projects might include documentaries, special
      effect based films, movies with major stars and other productions which require
      larger budgets due to subject matter, market requirements and genres.





Camelot
      Features operations will in many ways mirror the typical current day production
      company, which either develops or acquires a property, packages the project
      by
      adding director and cast, and then funds the film by using a wide assortment
      of
      funding techniques, including equity, loans, bridge financing, gap financing,
      pre-sales and incentives. Whenever possible, product produced under this
      division should be distributed by our distribution company. In some cases,
      certain films will require a major distributor due to the size of release,
      marketing and advertising requirements. In other cases, some or all of the
      financing may come from another distributor, necessitating alternate
      distribution.






**Page
          - 17**




*Camelot
      Distribution* is
      comprised of two divisions, Camelot Domestic and Camelot International. Our
      distribution company will handle all aspects of distribution for films produced
      under the Camelot Films banner, and whenever possible for films produced under
      the Camelot Features banner. Camelot Domestic will be responsible for United
      States and Canada theatrical and ancillary market releases, including DVD,
      television, cable, satellite, hand held devices, internet, PPV, VOD and other
      domestic distribution outlets. Camelot International will be responsible for
      international theatrical and ancillary market releases, focusing primarily
      on
      foreign theatrical, television and DVD. In certain circumstances, cable,
      satellite, hand held devices, internet, PPV, VOD and other international
      distribution outlets will be serviced through this division, depending upon
      release dates and patterns, contractual obligations and market
      conditions.





**CAMELOT
      STUDIO GROUP**





*Camelot
      Studio Group* is
      solely focused on the development, design, planning, building, completion and
      operation of our major production studio, which we are currently developing
      in
      the Western United States. The studio, when completed, will be the permanent
      home for CMEG, with all production emanating from the facility. In addition
      to
      at least 12 sound stages and support buildings, the studio complex will include
      office buildings and other amenities designed to make the site a home for
      current and future filmmakers “Where Filmmaking Dreams Come True.” A formal
      announcement is expected during the third quarter of 2006.





**CAMELOT
      PRODUCTION SERVICES GROUP**





*Camelot
      Production Services Group* is
      comprised of three divisions, technology, consulting and financial services.
      Our
      technology division is focused on enabling CMEG to utilize the best and most
      up-to-date technology available in order to enable our production team to
      produce the highest quality product achievable under our business model. In
      addition, our technology team is directly involved in future technology
      encompassing all aspects of production and distribution. Our consulting division
      is designed to assist producers, writers, directors, cast, crew members,
      distributors and other production companies in various aspects of the filmmaking
      process, including assistance in all phases of physical production, delivery
      and
      collection. Our financial services division is currently focusing on late stage
      bridge financing. An announcement on this program is expected during the fourth
      quarter of 2006.





*Note
      on Historical Operations*





Our
      historical operations prior to becoming a motion picture company consisted
      primarily of attempting to provide support, organization and restructuring
      services to other development stage companies. Due to the complete and drastic
      change in our business focus, from seeking to aid development stage companies
      to
      our current focus of producing, distributing and marketing original motion
      pictures, we believe that period-to-period comparisons of our operating results
      are not necessarily meaningful and should not be relied on as an indication
      of
      future performance. However, it is still important that you read the discussion
      in connection with the audited financial statements, the unaudited interim
      financials and the related notes included elsewhere in this quarterly report
      in
      addition to thoroughly reading our current plan of operations.





*Camelot
      Films: Our View of the Steps Required for Motion Picture
      Commercialization*





We
      view
      the motion picture commercialization process as involving three major steps,
      each of which bears a symbiotic relationship to the costs, creative value and
      profitability of any planned film to be released by us. These three steps are
      development, production and distribution. Under our planned model, development
      should include not only screenplay acquisition and development, but also a
      carefully constructed and unusually elongated pre-production phase. This process
      was developed as a result of the direct experience and observations of our
      management.






**Page
          - 18**




By
      viewing the development phase as a distinct and major component of the motion
      picture creation process, we hope that we can create a culture that encourages
      producers, writers and directors associated with our projects to focus their
      efforts and expertise on creating world-class pictures before the first day
      of
      shooting begins. We believe that creating such a culture could potentially
      result in a substantial reduction of the cost of our film projects, as compared
      to the film projects of our competitors. When combined with what we believe
      is a
      unique method of attracting, compensating and retaining talent that would
      otherwise not be involved in an active motion picture project, it is expected
      that the opportunity for a cost advantage could emerge.





President
      and Chief Executive Officer Robert P. Atwell, has worked extensively in
      financing, producing and directing original motion pictures and television
      programs. This experience led our management to a number of beliefs upon which
      our planned business model should be founded. These key views are:




·
            The
                manner in which development and pre-production activities are managed
                can
                have the largest impact on both the quality, or creative content,
                and the
                cost of creating a motion picture.





·
            There
                are a number of factors that make it difficult for most motion pictures
                to
                invest large amounts of time and a proportionally large share of
                a motion
                picture’s overall budget into development and pre-production activities.





·
            The
                factors that make it difficult for many motion picture projects to
                invest
                a major share of a film’s time and financial resources into development
                and pre-production activities may have created a pervasive business
                culture that emphasizes moving projects towards principal photography
                too
                quickly.





·
            A
                very small percentage of all writers that want to have their screenplays
                become completed motion picture projects will ever realize this
                ambition.





·
            A
                very small percentage of all directors will participate in principal
                photography in any given year.





·
            The
                percentage of qualified actors that never have the opportunity to
                participate in a completed original motion picture that is released
                commercially is substantial.





·
            There
                are large periods of unemployment for many individuals involved in
                motion
                picture production.





We
      believe that these observations suggest that the capacity to create motions
      pictures, in terms of employable professionals, is far higher than the current
      demand of existing film production companies for these services. However, we
      also believe that growth in motion picture consumption worldwide has created
      increased demand for original motion pictures in general. As a result, we
      anticipate that the underemployed, or unemployed, directors, writers and other
      film professionals could help fill a void for low cost, quality original motion
      picture production, given the right mix of incentives and business structure.
      There can be no assurance that such benefits, advantages or capacity will ever
      materialize.





Successfully
      creating such low cost, but relatively high quality pictures should result
      in a
      higher per picture financial return and a lower breakeven point for each film
      produced. Also, by distributing these pictures primarily through in-house
      distribution professionals, the per picture return might be increased even
      further, enabling more motion pictures to be produced by us annually and thereby
      diversifying the risk associated with any single film project. These beliefs
      form the foundation for our planned business model and expected
      strategy.






**Page
          - 19**




*Our
      Strategy of Emphasizing the Pre-Production Phase of Motion Picture
      Commercialization*





As
      noted
      previously, we believe that a very small percentage of all writers that want
      to
      have their screenplays become completed motion picture projects will ever
      realize this ambition. We believe that this assertion speaks to the opportunity
      we envision to cost effectively acquire writing, directing producing and other
      motion picture production talent that would otherwise exceed demand for these
      services.




This
      perceived opportunity is critical to our strategy, because without a great
      script, we believe it is either incredibly expensive or simply impossible to
      produce a great motion picture. However, we also believe that few great scripts
      begin as great scripts, but most evolve from a great idea to a substandard
      script and so forth. Matching great script ideas with tried and true expertise
      of professionals that know character development, genre formulas and how to
      convert words into pictures that create passion are expected to allow us to
      realize our vision.




We
      believe that many small and medium sized production companies can rarely afford
      to invest their time into unproven writers, much less even consider going with
      unproven directing talent. Moreover, we believe that the investors and
      distributors they are aligned with often play a major role in which projects
      get
      approved for production, or “green-lighted.”




Similarly,
      we believe that major studios have even more reasons for steering clear from
      these unproven sources of product. If these assertions are correct, then a
      large
      pool of untapped creative talent available for use in motion picture production
      exists. It is our intention to engage this pool to commercialize motion pictures
      in accordance with our strategy. To accomplish this objective, we intend to
      do
      the following:




·
            *Obtain
                Complete And Outright Ownership Of Scripts And Other Literary
                Works***:**We
                anticipate that by offering the proper incentives to screenwriters
                and
                other authors of compelling literary works well suited for a film
                project,
                we should be able to acquire complete and outright ownership of these
                copyrights for a fraction of what many producers would pay simply
                to get
                an option on a script. As mentioned, such writers have an incentive
                that
                fewer than 10% of Screenwriters Guild members expect to experience
                in a
                given year the true opportunity to have their vision become a theatrically
                released motion picture. In addition, our plan calls for participating
                writers to share in the success of their script, through profit
                participation and indirectly in the success of other film projects
                we
                complete, through restricted shares of or common stock. This same
                formula
                is expected to allow us to attract directors, producers and other
                creative
                personnel with a passion for making pictures that the public wants
                to see.





·
            *A
                Recurring 6-Month Cycle Of Pre-Production Activities***:**Our plans for the pre-production phase for each motion picture project
                we
                initiate is to utilize a recurring 6-month cycle that starts every
                month
                for a new film, enabling us to create a rolling pipeline of product.
                Unlike our perception of pure independents and small production companies,
                we don’t anticipate that our pre-production phase could consume creative
                resources by having producers, writers and directors hunt for additional
                film financing. Instead, we anticipate that each film should have
                a set
                and fixed budget. We expect the additional time that should emerge,
                if we
                are successful, to allow the production designer, producers, director
                of
                photography and other personnel adequate time to find ways to increase
                quality and reduce costs through skillful planning.





·
            *Relatively
                Firm Scheduling Of Film Projects***:**Another feature we expect to emerge as a result of our planned approach
                is
                that it should allow relatively firm scheduling of the cast at a
                very
                early stage, something that we believe is rare in the world of pure
                independent productions. During this same time, we expect the production
                team to benefit from a mentoring environment that insures the creative
                spark sought in each of our productions does not become an increasing
                collection of unrealistic ambitions, leading to missed production
                schedules. With these elements firmly in place, we would typically
                expect
                principal photography to begin in the fifth month of each project.






**Page
          - 20**




*Our
      Strategy of Achieving Higher Quality and Lower Costs During the Production
      Phase
      of Motion Picture Commercialization*





Four
      key
      elements following development and pre-production are expected to enable us
      to
      create quality pictures for a fraction of the cost experienced by our
      competitors. These four elements are:





1. *Digital Photography*





Like
      the
      model we plan to pursue, we believe that purely independent productions can
      realize costs savings by using digital film technology due to the lower cost
      of
      processing, stock, dailies and certain editing costs. We also believe that
      major
      studios benefit from using digital technology in certain genres, but not so
      much
      from a cost standpoint.





Instead,
      we think that the heavy special effects used by major studios’ high-budget
      action and science-fiction pictures are increasingly enhanced as a result of
      using digital photography. While, if true, this would negate some of the cost
      benefits of using digital photography, the overall value in terms of
      entertainment quality would still be enhanced, in general. One party that we
      believe has found the benefits of digital photography rather elusive is the
      small and mid-sized production company.





We
      believe that this is generally because when such companies convince a director
      to use digital photography, the director and director of photography (or “DP”)
      are likely to specify additional camera setups. We also believe that the
      increased, low-cost coverage available, along with real-time video monitoring,
      often results in issues between directors and directors of photography on
      projects of these companies, as they analyze and debate each shot during
      precious shooting time. As a result, the mixed use of digital photography by
      small and medium sized production companies generally has a neutral impact
      on
      overall value, in our opinion.





2. *Profit Participation*





We
      believe that it is very common for purely independent productions to offer
      profit participation, or points, as a means of getting parties they could
      otherwise not afford to hire (for cash) to work on the production. If this
      is in
      fact a standard method of simply getting a picture made for these types of
      productions, we believe the effects on value are neutral. That is, if every
      competitive production is offering this same type of compensation, the potential
      impact of the incentive is reduced.





Similarly,
      in the case of major studios, we believe that all of the parties involved in
      such productions have access to sophisticated negotiators and advocates that
      can
      reasonably weigh the potential market value of such incentives. If so, we
      believe that such incentives rarely offer a competitive advantage to the
      production. However, for small and medium sized independents, our model assumes
      that the added incentive of points can be the extra incentive needed to attract
      certain parties that would otherwise not participate on a given project.





We
      intend
      to use profit participation in a manner that we think is precedent setting
      in
      the industry. Firstly, under our model, every member of the production stands
      to
      participate in the financial success of our film projects, thereby reversing
      a
      industry tradition whereby the phrase “net” has had little or no meaning or
      substance. Similarly, since the same types of writers and directors that would
      be otherwise willing to work on a picture with little or no compensation are
      being pursued under our model, albeit at very low cash rates, the added
      incentive of profit participation is expected to be a meaningful bonus in the
      eyes of these parties.





3. *Production Management*





We
      believe that the largest full-time employers of motion picture production
      management, and also the entities with the most developed production management
      infrastructures, are major studios. However, we believe that these large
      bureaucracies, while essential to the management of a relatively large volume
      of
      high budget pictures, also create an environment that often pits creative talent
      against management. If true, then to a certain degree, this may offset some
      of
      the potential advantages of their production management systems. The production
      management systems of one-picture only, pure independent productions tend to
      be
      ad hoc systems that find their way into the process through the producer,
      director and other personnel that are assembled to create a one-time
      organization, in our opinion. This leaves the small and medium sized production
      companies, who benefit from their ambitions of creating multiple motion
      pictures. Unfortunately, as their staffs of full-time production and development
      personnel grow, we believe their budgets grow accordingly, in general, creating
      little competitive value over time.






**Page
          - 21**




4. *Common Stock Incentives*





To
      the
      best of our knowledge, no other publicly traded film company has ever utilized
      common stock to incentive all of its creative, production and management
      resources. There are two specific reasons why this option is not generally
      available to competitors. Firstly, most of the companies making lower budget
      pictures do not have business models that justify becoming a publicly traded
      company. Secondly, for companies that do have the scale to offer publicly traded
      stock as a form of production compensation, we believe that doing so would
      be at
      odds with their fundamental business cultures and, in many cases, at odds with
      the wishes of their shareholders.





With
      the
      exception of using common stock, we believe that each of these value enhancement
      tools is used to varying degrees, with varying success, by other motion picture
      productions. However, we are not aware of any other Company that uses the
      systematic and flawless integration of these elements into each of their
      productions the way that we intend to. If this is correct, we believe it may
      explain why few if any motion picture companies can consistently realize the
      reduction in cash production expenditures combined with the increase of quality
      that we expect to be a key element of our business model.





*Our
      Strategy of Developing and Utilizing In-house Distribution
      Expertise*





A
      number
      of new distribution channels have increased the means by which motion picture
      product can be consumed and, therefore, the potential channels for revenue.
      These channels include theatrical or box office, video cassette, DVD,
      pay-per-view television, cable television, network television, television
      syndication, hand held devices, internet, PPV, VOD, IPTV, non-theatrical
      outlets, such as in-flight movies, and international channels. With so many
      new
      distribution channels available, it my seem surprising that pictures with
      smaller budgets still find it so difficult to get their films in front of
      audiences. Our management believes this pervasive problem is primarily due
      to
      two difficult obstacles to overcome.





Firstly,
      we believe that the very reliance on a distributor places a small independent
      production at the mercy of a party they have limited bargaining power with
      and
      virtually no control over: the distributor. Under such a scenario, we believe
      that even if revenues and expenses are fairly and properly accounted for by
      the
      distributor, cash must flow through many hands before revenue makes it way
      back
      to investors and other profit participants.





Secondly,
      and perhaps equally important, we believe that without a large volume of product
      in the pipeline, the alternatives to using an outside distributor are few,
      and
      rarely result in large, predictable inflows of cash. For instance, if an
      independent producer has a single picture budgeted at $5 million; it is
      generally economically impractical to establish an in-house distribution
      department with the limited mission of directly marketing that one film. At
      the
      same time, we believe that volume purchasers of motion picture product,
      including studios, cable outlets, home video companies and other buyers with
      large needs for product, require a dependable source of multiple pictures.
      The
      one-picture or two-picture production company simply can’t meet these needs,
      making it more efficient for buyers to deal with an agent or sub-distributor,
      in
      our opinion. Our planned combination of high-volume and high-quality motion
      pictures stands to change these economics, making in-house distribution an
      essential element of our strategy.






**Page
          - 22**




*Motion
      Picture Library*





A
      potential benefit of our business model is the planned ownership of an expansive
      library of feature films that should be, for the most part, unencumbered. If
      we
      are successful in implementing our business plan, we could have 12 films or
      more
      going into our library annually that could have an extended shelf life in
      ancillary markets, including, but not limited to, cable, satellite and
      television syndication, both domestically and internationally, extended DVD’s,
      special edition DVD’s and other areas of repurposing.








**RESULTS
      OF OPERATIONS**





*General*





Our
      historical operations consisted primarily of attempting to provide support,
      organization and restructuring services to other development stage companies.
      Due to the complete and drastic change in our business focus, from seeking
      to
      aid development stage companies to our current focus of producing, distributing
      and marketing original motion pictures, we believe that period-to-period
      comparisons of our operating results are not necessarily meaningful and should
      not be relied on as an indication of future performance. However, it is still
      important that you read the discussion in connection with the audited financial
      statements, the unaudited interim financial and the related notes included
      elsewhere in this quarterly report.





**SIX
      MONTHS ENDED JUNE 30, 2006, COMPARED TO SIX MONTHS ENDED JUNE 30,
      2005:**




The
      Company did not generate any revenue during the six months ended, June 30,
      2006 and June 30, 2005.





All
      expenses incurred during the comparative periods were general and administrative
      in nature.





The
      Company has incurred $ 8,987,093 of general and administrative expenses since
      its inception. General and administrative expenses were $ 394,525 for
      the six months ended June 30, 2006, respectively, compared to $603,270 for
      the six months ended June 30, 2005. Decreases during this period are due
      mainly to reduction in the costs at the Cannes Film Festival. In May 2005 costs
      related to this film festival of $195,000 for professional services, $86,752
      for
      marketing costs and $37,666 for travel costs compared to $8,170 in Marketing
      costs and $24,107 in travel costs for May 2006.




The
      general and administrative expenses for the six months ended June 30, 2006
      were
      primarily comprised of $285,000 for officers compensation, professional fees
      of
      $45,927, marketing costs of $8,170, travel and lodging costs for industry trade
      shows of $24,107, corporate and stock fees of $8,343 and other expenses of
      $22,978. Additionally, $60,000 in screenplay costs, which were capitalized.
      These expenses were related to the pursuit of the Company’s plan of operation to
      produce and distribute motion pictures.




Total
      General and Administrative expenses of $394,525 are for the six months
      ended June 30, 2006.





Professional
      services rendered by financial, film directors, screenplay fees, producers
      and
      distributors and costs related to the studio development were incurred during
      the six month ended, June 30, 2006 and were incurred during the same period
      of
      2005. The expenses were incurred as a result of the Company’s efforts to develop
      a working management team to assist in completing the operation plan for the
      company.







**Page
          - 23**





**LIQUIDITY
      AND CAPITAL RESOURCES**





We
      have a
      limited history of operations as a film production and distribution company.
      We
      believe that, due to the complete and drastic change in our business focus,
      period-to-period comparisons of our operating results are not necessarily
      meaningful and should not be relied on as an indication of future performance.





Our
      current liquidity and capital resources are provided principally through our
      financing agreement with Eagle Consulting Group, Inc. (“Eagle”). We entered into
      an agreement with Eagle on March 28, 2003, to provide operational funding for
      the Company. In exchange for twenty percent (20%)of the Company’s outstanding
      common stock on a non-dilutive, continuing basis until the Company can secure
      additional financing from another source, Eagle has agreed to provide funding
      for the Company’s annual audit, quarterly filings, accounts payable and other
      ongoing expenses including office, phones, business development, legal and
      accounting fees. This quarter, Eagle has advanced the Company a total, including
      interest, of $294,292. The funding commitment from Eagle should cover all of
      our
      operating expenses for the remaining six months of 2006.




Further,
      we are in the process of preparing various financial offerings as we gear up
      all
      three divisions of CMEG, including a 506 offering for operating overhead, an
      SB-2 registration statement for the purpose of funding our initial slate of
      pictures and a major funding offering in connection with the studio project.
      If
      the anticipated slate funding is successful, it is our goal to have between
      10
      and 12 motion pictures in various stages of development or production within
      12
      months. In the event we are unable to complete the funding, we could have to
      delay our slate until such time as the necessary funding is acquired.





Like
      all
      motion picture production companies, our revenues and results of operations
      could be significantly dependent upon the timing of releases and the commercial
      success of the motion pictures we distribute, none of which can be predicted
      with certainty. Accordingly, our revenues and results of operations may
      fluctuate significantly from period to period, and the results of any one period
      may not be indicative of the results for any future periods. Similarly, the
      efficiencies we aim to realize through our model may not materialize. Failure
      of
      the efficiencies to materialize, along with other risks germane to the picture
      production, may cause us to produce fewer films than our plan calls for.





**FACTORS
      THAT MAY AFFECT FUTURE RESULTS**





*We
      have an Accumulated Deficit and we have a Limited History of Operations as
      a
      Motion Picture Company*





We
      have incurred losses in each operating period since our inception on October
      12,
      1999. Operating losses may continue, which could adversely affect financial
      results from operations and stockholder value, and there is a risk that we
      may
      never become profitable.





As
      of June 30, 2006, we have an accumulated deficit of $12,219,385, the majority
      of
      which related to our previous activities as a business development organization,
      and some of which relates to our current activities as a motion picture
      production, marketing and distribution entity. There can be no assurance that
      our management will be successful in managing the Company as a motion picture
      production, distribution and marketing concern.





*We
      expect to have a need for Additional Financing*





As
      of June 30, 2006 we had a working capital deficit of $450,022. Our history
      of recurring losses from operations raises a substantial doubt about our ability
      to continue as a going concern. There can be no assurance that we will have
      adequate capital resources to fund planned operations or that any additional
      funds will be available to us when needed, or if available, will be available
      on
      favorable terms or in amounts required by us. If we are unable to obtain
      adequate capital resources to fund our motion picture operations, it may be
      required to delay, scale back or eliminate some or all of our operations, which
      may have a material adverse effect on our business, results of operations and
      ability to operate as a going concern.






**Page
          - 24**




Our
      business requires a substantial investment of capital. The production,
      acquisition and distribution of motion pictures require a significant amount
      of
      capital. A significant amount of time may elapse between our expenditure of
      funds and the receipt of commercial revenues from our motion pictures, if any.
      This time lapse requires us to fund a significant portion of our capital
      requirements from private parties, institutions, and other sources. Although
      we
      intend to reduce the risks of our production exposure through strict financial
      guidelines and financial contributions from broadcasters, sub-distributors,
      tax
      shelters, government and industry programs and studios, we cannot assure you
      that we will be able to implement successfully these arrangements or that we
      will not be subject to substantial financial risks relating to the production,
      acquisition, completion and release of future motion pictures. If we increase
      our production slate or our production budgets, we may be required to increase
      overhead, make larger up-front payments to talent and consequently bear greater
      financial risks. Any of the foregoing could have a material adverse effect
      on
      our business, results of operations or financial condition.





*Competition
      is Severe in the Motion Picture Industry*





The
      motion picture industry is highly competitive. Our management believes that
      a
      motion picture's theatrical success is dependent upon general public acceptance,
      marketing technology, advertising and the quality of the production. We intend
      to produce motion picture productions that normally should compete with numerous
      independent and foreign productions as well as productions produced and
      distributed by a number of major domestic companies, many of which are units
      of
      conglomerate corporations with assets and resources substantially greater than
      ours.





Our
      management believes that in recent years there has been an increase in
      competition in virtually all facets of the motion picture industry. With
      increased alternative distribution channels for many types of entertainment,
      the
      motion picture business competes more intensely than previously with all other
      types of entertainment activities as well as television. While increased use
      of
      pay per view television, pay television channels, and home video products are
      potentially beneficial, there is no guarantee that we will be able to
      successfully penetrate these markets. Failure to penetrate these potential
      distribution channels would have a material adverse impact on our results of
      operations.




*Substantial
      Risks Germane to the Motion Picture Industry*





The
      success of a single motion picture project is fraught with an unusually high
      degree of uncertainty and risk. Similarly, the probability of successfully
      completing a motion picture project is also laden with an unusually high degree
      of uncertainty and risks. A studio or independent producer’s ability to finance
      a project, execute a successful distribution strategy, obtain favorable press
      and compete with an unknown quantity of competing releases are just some of
      the
      factors that impact the commercial success or failure of a film project. Our
      strategy involves producing a minimum of 12 motion pictures per year. While
      the
      intent is to reduce production risk through this strategy, our plan has the
      potential to compound risks germane to the industry.





Movie
      producers are often involved in several projects at the same time and an active
      film director is often presented with opportunities to direct many movies.
      In
      addition, independent contractors needed to produce the film often have
      commitments to more than one movie project. Because we may decide to replace
      key
      members of our production team if they are unable to perform their duties within
      our schedule, the marketing appeal of our film may be reduced.






**Page
          - 25**







If
      we do
      not complete a film on schedule or within budget, our ability to generate
      revenue may be diminished or delayed. Our success depends on our ability to
      complete the film on schedule and within budget.





Each
      film we produce and distribute should appeal to a given segment of society
      to
      achieve acceptance. Although our intent to target niche markets that should
      require less than broad market acceptance to achieve commercial success, there
      can be no assurance that this strategy will succeed.





Motion
      picture production and distribution is highly speculative and inherently risky.
      There can be no assurance of the economic success of any motion picture since
      the revenues derived from the production and distribution of a motion picture
      (which do not necessarily bear a direct correlation to the production or
      distribution costs incurred) depend primarily upon its acceptance by the public,
      which cannot be predicted. The commercial success of a motion picture also
      depends upon the acceptance of competing films released into the marketplace
      at
      or near the same time, the availability of alternative forms of entertainment
      and leisure time activities, general economic conditions and other tangible
      and
      intangible factors, all of which can change and cannot be predicted with
      certainty. Further, the theatrical success of a motion picture is generally
      a
      key factor in generating revenues from other distribution channels. There is
      a
      substantial risk that some or all of our motion pictures will not be
      commercially successful, resulting in costs not being recouped or anticipated
      profits not being realized.




Theaters
      are more likely to exhibit feature films with substantial studio marketing
      budgets. Even if we are able to complete the films and obtain distribution,
      it
      is unclear how much should be spent on marketing to promote each film by our
      distributors.




All
      of
      these factors cannot be predicted with certainty. In addition, motion picture
      attendance is seasonal, with the greatest attendance typically occurring during
      the summer and holidays. The release of a film during a period of relatively
      low
      theater attendance is likely to affect the film’s box office receipts adversely.




*Distribution
      in Foreign Countries*





We
      plan to license motion picture and television programming in foreign countries
      to sub-distributors. If we are at all successful in this regard, a portion
      of
      our revenues should be derived from foreign sources. Because of this, our
      business is subject to certain risks inherent in international trade, many
      of
      which are beyond our control. Such risks include, but are not limited to,
      changes in laws and policies affecting trade, investment and taxes (including
      laws and policies relating to the repatriation of funds and to withholding
      taxes), differing degrees of protection for intellectual property, the
      instability of foreign economies and governments and in some cases an adverse
      acceptance to a film may occur, resulting in a demand to renegotiate the license
      agreement’s terms and conditions. In addition, fluctuations in foreign exchange
      rates may affect our results of operations.





*Piracy
      of Original Motion Pictures we Plan to Produce may Reduce our Revenues and
      Potential Earnings*




According
      to industry sources, piracy losses in the motion picture industry have increased
      substantially, from an estimated $2.2 billion in 1997 to an estimated $3.5
      billion in 2002. In certain regions such Asia, the former Soviet Union and
      South
      America, motion picture piracy has been a major issue for some time. With the
      proliferation of DVD format around the globe, along with other digital recording
      and playback devices, losses from piracy have spread more rapidly in North
      America and Europe. Piracy of original motion pictures we produce and distribute
      may adversely impact the gross receipts received from the exploitation of these
      films, which could have a material adverse effect on our business, results
      of
      operations or financial condition.






**Page
          - 26**




*Fluctuation
      of Operating Results*





Like
      all motion picture production companies, our revenues and results of operations
      could be significantly dependent upon the timing of releases and the commercial
      success of the motion pictures we distribute, none of which can be predicted
      with certainty. Accordingly, our revenues and results of operations may
      fluctuate significantly from period to period, and the results of any one period
      may not be indicative of the results for any future periods.




In
      accordance with generally accepted accounting principles and industry practice,
      we intend to amortize film costs using the individual-film-forecast method
      under
      which such costs are amortized for each film in the ratio that revenue earned
      in
      the current period for such title bears to management's estimate of the total
      revenues to be realized from all media and markets for such title. To comply
      with this accounting principal, our management plans to regularly review, and
      revise when necessary, our total revenue estimates on a title-by-title basis,
      which may result in a change in the rate of amortization and/or a write-down
      of
      the film asset to net realizable value. Results of operations in future years
      should be dependent upon our amortization of film costs and may be significantly
      affected by periodic adjustments in amortization rates. The likelihood of the
      Company's reporting of losses is increased because the industry's accounting
      method requires the immediate recognition of the entire loss in instances where
      it is expected that a motion picture should not recover the Company's
      investment.





Similarly,
      should any of our films be profitable in a given period, we should have to
      recognize that profit over the entire revenue stream expected to be generated
      by
      the individual film.




*Film
      Production Budgets may Increase and Film Production Spending may Exceed such
      Budgets*




Our
      future film budgets may increase due to factors including, but not limited
      to,
      (1) escalation in compensation rates of people required to work on our projects,
      (2) number of personnel required to work on our projects, (3) equipment needs,
      (4) the enhancement of existing or the development of new proprietary technology
      and (5) the addition of facilities to accommodate the growth of a studio. Due
      to
      production exigencies, which are often difficult to predict, it is not uncommon
      for film production spending to exceed film production budgets, and our projects
      may not be completed within the budgeted amounts. In addition, when production
      of each film is completed, we may incur significant carrying costs associated
      with transitioning personnel on creative and development teams from one project
      to another. These carrying costs increase overall production budgets and could
      have a material adverse effect on our results of operations and financial
      condition.




*Our
      Anticipated Successive Releases of Films could Place a Significant Strain on
      our
      Limited Resources*




We
      anticipate establishing parallel creative teams so that we can develop more
      than
      one film at a time. These teams are expected to work on future projects, as
      we
      move towards producing 12 films per year. Due to the anticipated strain on
      our
      personnel from the effort required for the release of an upcoming film and
      the
      time required for creative development of future films, it is possible that
      we
      would be unable to release twelve new films in the first year and in subsequent
      years. We may be required to expand our employee base, increase capital
      expenditures and procure additional resources and facilities in order to
      accomplish the scheduled releases of our films. This growth and expansion may
      place a significant strain on our resources. We cannot provide any assurances
      that any future film will be released as targeted or that this strain on
      resources will not have a material adverse effect on our business, financial
      condition or results of operations. As we move towards achieving 12 films a
      year, there will likely be additional demands placed on the availability of
      key
      people. A lack of availability of key people may adversely impact the success
      and timing of our future films.




We
      may
      implement a variety of new and upgraded operational and financial systems,
      procedures and controls, including improvement and maintenance of our accounting
      system, other internal management systems and backup systems. Our growth and
      these diversification activities, along with the corresponding increase in
      the
      number of our employees and our rapidly increasing costs, may result in
      increased responsibility for our management team. We may need to improve our
      operational, financial and management information systems, to hire, train,
      motivate and manage our employees, and to provide adequate facilities and other
      resources for them. We cannot provide any assurance we will be successful in
      accomplishing all of these activities on a timely and cost-effective basis.
      Any
      failure to accomplish one or more of these activities on a timely and
      cost-effective basis would have a material adverse effect on our business,
      financial condition and results of operations.






**Page
          - 27**




The
      decisions regarding the timing of theatrical releases and related products,
      the
      marketing and distribution strategy, and the extent of promotional support
      are
      important factors in determining the success of our motion pictures and related
      products. We may enter into agreements with third-parties to assist us in the
      marketing and distribution of our films, and we may require the marketers and
      distributors to consult with us with respect to all major marketing and
      distribution decisions. Said agreements may or may not include: (1) the manner
      in which distributors may distribute our films and related products; (2) the
      number of theaters to which our films are distributed; (3) the specific timing
      of release of our films and related products; or (4) the specific amount or
      quality of marketing and promotional support of the films and related products
      as well as the associated promotional and marketing budgets.




*Terrorist
      Activities and Resulting Military and other Actions could Adversely Affect
      our
      Business*




The
      continued threat of terrorism within the United States and abroad, military
      action and heightened security measures in response to such threats, as well
      as
      other socioeconomic and political events, may cause significant disruption
      to
      commerce, including the entertainment industry, throughout the world. For
      example, the terrorist attacks in New York and Washington, D.C. on September
      11,
      2001 disrupted commerce throughout the United States and Europe. Such disruption
      in the future could have a material adverse effect on our business and results
      of operations.




*We
      are Smaller and Less Diversified than Many of our Competitors.*





Although
      we plan to be an independent distributor and producer, we expect to constantly
      compete with major U.S. and international studios. Most of the major U.S.
      studios are part of large diversified corporate groups with a variety of other
      operations, including television networks and cable channels that can provide
      both means of distributing their products and stable sources of earnings that
      may allow them better to offset fluctuations in the financial performance of
      their motion picture and television operations. In addition, the major studios
      have more resources with which to compete for ideas, storylines and scripts
      created by third parties as well as for actors, directors and other personnel
      required for production. The resources of the major studios may also give them
      an advantage in acquiring other businesses or assets, including film libraries,
      that we might also be interested in acquiring. The foregoing could have a
      material adverse effect on our business, results of operations and financial
      condition.





*The
      Motion Picture Industry is Highly Competitive and at Times may Create an
      Oversupply of Motion Pictures in the Market* .





The
      number of motion pictures released by our competitors, particularly the major
      U.S. studios, may create an oversupply of product in the market, reduce our
      share of box office receipts and make it more difficult for our films to succeed
      commercially once we begin to produce, market and distribute our films.
      Oversupply may become most pronounced during peak release times, such as school
      holidays and national holidays, when theater attendance is expected to be
      highest. For this reason, and because of our more limited production and
      advertising budgets, we plan to not release our films during peak release times,
      which may also reduce our potential revenues for a particular release. Moreover,
      we cannot guarantee that we can release all of our films when they are otherwise
      scheduled. In addition to production or other delays that might cause us to
      alter our release schedule, a change in the schedule of a major studio may
      force
      us to alter the release date of a film because we cannot always compete with
      a
      major studio’s larger promotion campaign. Any such change could adversely impact
      a film’s financial performance. In addition, if we cannot change our schedule
      after such a change by a major studio because we are too close to the release
      date, the major studio’s release and its typically larger promotion budget may
      adversely impact the financial performance of our film. The foregoing could
      have
      a material adverse effect on our business, results of operations and financial
      condition.






**Page
          - 28**







The
      limited supply of motion picture screens compounds this product oversupply
      problem. Currently, a substantial majority of the motion picture screens in
      the
      U.S. typically are committed at any one time to only ten to 15 films distributed
      nationally by major studio distributors. In addition, as a result of changes
      in
      the theatrical exhibition industry, including reorganizations and consolidations
      and the fact that major studio releases occupy more screens, the number of
      screens available to us when we want to release a picture may decrease. If
      the
      number of motion picture screens decreases, box office receipts, and the
      correlating future revenue streams, such as from home video and pay and free
      television, of our motion pictures may also decrease, which could have a
      material adverse effect on our business, results of operations or financial
      condition.





*We
      May Not be Able to Obtain Additional Funding to Meet our Requirements*





Our
      ability to grow our company through acquisitions, business combinations and
      joint ventures, to maintain and expand our development, production and
      distribution of motion pictures and to fund our operating expenses will depend
      upon our ability to obtain funds through equity financing, debt financing
      (including credit facilities) or the sale or syndication of some or all of
      our
      interests in certain projects or other assets. If we do not have access to
      such
      financing arrangements, and if other funding does not become available on terms
      acceptable to us, there could be a material adverse effect on our business,
      results of operations or financial condition.





*We
      Face Risks from Doing Business Internationally*





We
      may
      distribute motion picture productions outside the United States through third
      party licensees and derive revenues from these sources. As a result, our
      business is subject to certain risks inherent in international business, many
      of
      which are beyond our control. These risks include changes in local regulatory
      requirements, including restrictions on content; changes in the laws and
      policies affecting trade, investment and taxes (including laws and policies
      relating to the repatriation of funds and to withholding taxes); differing
      degrees of protection for intellectual property; instability of foreign
      economies and governments; cultural barriers; wars and acts of terrorism. Any
      of
      these factors could have a material adverse effect on our business, results
      of
      operations or financial condition.





*Leverage
      Risks*





The
      degree to which we might become leveraged may require us to dedicate a
      substantial portion of our cash flow to the payment of principal of, and
      interest on, our indebtedness, reducing the amount of cash flow available to
      fund film production costs and other operating expenses. Additionally, the
      degree to which we might become leveraged may adversely affect our ability
      to
      obtain additional financing, if necessary, for such operating expenses, to
      compete effectively against competitors with greater financial resources, to
      withstand downturns in our business or the economy generally and to pursue
      strategic acquisitions and other business opportunities that may be in the
      best
      interests of us and our stockholders.





**ITEM
      3. CONTROLS AND PROCEDURES**





Within
      the 90 days prior to the date of this quarterly report, we carried out an
      evaluation, under the supervision and with the participation of our management
      of the effectiveness of the design and operation of our disclosure controls
      and
      procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
      our
      management concluded that our disclosure controls and procedures are effective
      and timely alerting them to material information relating to the Company
      required to be included in our periodic SEC filings.





There
      were no significant changes in our internal controls over financial reporting
      or
      other factors that could significantly affect these controls subsequent to
      the
      date of their evaluation and there were no corrective actions with regard to
      significant deficiencies or material weaknesses.







**Page
          - 29**








**PART
      II. OTHER INFORMATION**





**ITEM
      1. LEGAL PROCEEDINGS**





None.





**ITEM
      2. CHANGE IN SECURITIES**





On
      January 5, 2005, at 1:30 p.m. PST, via telephone conference a special meeting
      of
      the board of directors was held to Establish Series A and Series B Preferred
      Stock, with such voting powers, designations, preferences and rights or
      qualifications, limitations or restrictions as detailed in the Preferred Stock
      designations.





It
      was
      Resolved that Series A Preferred Stock shall be reserved for employees,
      consultants and other professionals retained by the Company.





It
      was
      further Resolved that Series B Preferred Stock shall be reserved for the Board
      of Directors of the Company.





The
      Chairman next stated that, in accordance with the agreements, letters of intent
      and other assurances between the Company and Robert P. Atwell, including
      companies controlled and or owned by Mr. Atwell or his affiliates, collectively
      (“Atwell”), the Company shall need to issue to Atwell 5,100,000 shares of Series
      A Preferred Stock at a par value of $.001 per share and 5,100,000 shares of
      Series B Preferred Stock at a par value of $.001 per share. Upon a motion duly
      made and seconded, and following a discussion, the following resolutions were
      unanimously passed.





On
      June
      29, 2005, at 1:30pm PST, via telephone conference a special meeting of the
      board
      of directors was held to issue shares of common stock for accrued officer
      compensation, issue shares of common stock to various consultants performing
      services for the company and to Eagle Consulting Group for providing capital
      for
      continuing operations of the company.





It
      was
      Resolved that the company owed its officers $191,666 in accrued compensation.
      First quarter accrued compensation of $87,500 and second quarter accrued
      compensation of $104,166. The company issued a total of 911,459 restricted
      common shares at a market value of $87,500 for the first quarter of 2005
      services and a total of 1,364,575 restricted common shares at a market value
      of
      $102,343 for second quarter 2005 services. The total shares issued for
      compensation of officers for the first and second quarter of 2005 was 2,276,034
      shares.





It
      was
      Resolved that the Board authorized the company to issue 651,042 shares of the
      Company’s $.001 par value common stock to Robert Atwell for services during the
      first quarter of 2005.





It
      was
      Resolved that the Board authorized the company to issue 833,333 shares of the
      Company’s $.001 par value common stock to Robert Atwell for services during the
      second quarter of 2005.






**Page
          - 30**







It
      was
      Resolved that the Board authorized the company to issue 260,417 shares of the
      Company’s $.001 par value common stock to Jane Olmstead for services during the
      first quarter of 2005.





It
      was
      Resolved that the Board authorized the company to issue 86,602 shares of the
      Company’s $.001 par value common stock to Jane Olmstead for services during the
      second quarter of 2005.





It
      was
      Resolved that the Board authorized the company to issue 444,440 shares of the
      Company’s $.001 par value common stock to George Jackson for services during the
      second quarter of 2005.





In
      the
      efforts to build a management team the company issued stock to the new
      management team.





It
      was
      Resolved that George Jackson, H K Dyal, Chris Davis and Craig Kitchens would
      each receive 1,000,000 shares of the Company’s $.001 par value common stock for
      consulting services provided during the second quarter of 2005.





The
      Chairman next stated that in accordance with the agreement with Eagle Consulting
      Group, Inc. and the Company, upon issuance of the above shares, there will
      be a
      total of 81,227,243 shares outstanding, resulting in 16,245,449 total shares
      due
      to Eagle Consulting Group, Inc. as of June 30, 2005. Eagle Consulting Group,
      Inc. had previously been issued 14,396,727 shares, leaving a balance of
      1,848,722 shares to be issued. The Company determined that the price per share
      in connection herewith would be .03, based upon the original agreed upon price.
      With this issuance of shares to Eagle Consulting Group, Inc., there will be
      a
      total common stock of 83,075,964 shares, issued, and outstanding. Upon a motion
      duly made and seconded, and following a discussion of other business matters,
      and the above June 29, 2005 resolutions were unanimously passed.





On
      December 30, 2005 the company issued the following shares, 3,538,263 to officers
      for services performed during 2005, 1,452,662 to Eagle Consulting Group, Inc.
      for expenses paid on behalf of the company during the third and fourth quarter
      of 2005, 3,586,881 shares to Eagle Consulting Group for loans made to the
      company for expenses paid on behalf of the company during 2005 and 1,452,662
      shares to Eagle Consulting Group, Inc. in according with their agreement to
      pay
      for all operational expenses during the year 2005.





Shares
      issued as of June 30, 2006, common shares 93,649,589, Class A preferred stock
      5,100,000 and Class B preferred stock 5,100,000. No shares have been issued
      during the first or second quarter of 2006.








**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**





NONE





**ITEM
      4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS**





NONE




**ITEM
      5. OTHER INFORMATION**





NONE







**Page
          - 31**




**ITEM
      6. EXHIBITS AND REPORTS ON FORM 8-K**





a.
      Exhibits





31.1
      Certification Pursuant to the 18 U.S.C. section 1350, as Adopted Pursuant to
      Section 906 of the Sarbanes- Oxley Act of 2002





31.2
      Certification Pursuant to the 18 U.S.C. section 1350, as Adopted Pursuant to
      Section 906 of the Sarbanes- Oxley Act of 2002





32.1
      Certification Pursuant to the 18 U.S.C. section 1350, as Adopted Pursuant to
      Section 906 of the Sarbanes- Oxley Act of 2002





b.
      Reports on Form 8-K





NONE





**SIGNATURES**





In
      accordance with the requirements of the Securities Exchange Act of 1934, the
      registrant has caused this report on Form 10-QSB to be signed on its behalf
      by
      the undersigned, thereunto duly authorized.





CAMELOT
      ENTERTAINMENT GROUP, INC.


(Registrant)








/S/ ROBERT
      P. ATWELL


Robert
      P.
      Atwell


Chief
      Executive Officer








/S/ GEORGE
      JACKSON


George
      Jackson


Chief
      Financial Officer







August
      15, 2006











**Page
          - 32**










**Exhibit
      31**


**CAMELOT
      ENTERTAINMENT GROUP, INC.**


**CERTIFICATIONS
      PURSUANT TO**


**SECTION
      302 OF THE SARBANES-OXLEY ACT OF 2002**


**CERTIFICATION**




I,
      Robert
      P. Atwell, certify that:




1.
 
      I have reviewed this quarterly report on Form 10-QSB of Camelot Entertainment
      Group, Inc.;




2.
      Based
      on my knowledge, this quarterly report does not contain any untrue statement
      of
      a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were
      made, not misleading with respect to the period covered by this report;




3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the small business issuer
      as
      of, and for, the periods presented in this report;




4.
      The
      small business issuer’s other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as defined
      in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
      reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
      small business issuer and have:




(a)
      Designed such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure that
      material information relating to the small business issuer, including its
      consolidated subsidiaries, is made known to us by others within those entities,
      particularly during the period in which this report is being prepared;




(b)
      Designed such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles;




(c)
      Evaluated the effectiveness of the small business issuer’s disclosure controls
      and procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of the
      period covered by this report based on such evaluation; and




(d)
      Disclosed in this report any change in the small business issuer’s internal
      control over financial reporting that occurred during the small business
      issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal
      quarter in the case of an annual report) that has materially affected, or is
      reasonably likely to materially affect, the small business issuer’s internal
      control over financial reporting; and




5.
      The
      small business issuer’s other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial reporting,
      to
      the small business issuer’s auditors and the audit committee of the small
      business issuer’s board of directors (or persons performing the equivalent
      functions):




(a)
      All
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the small business issuer’s ability to record, process,
      summarize and report financial information; and




(b)
      Any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the small business issuer’s internal control over
      financial reporting.




Date:
      August 15, 2006


*/s/
      Robert P. Atwell*


Robert
      P.
      Atwell


Chief
      Executive Officer







**Page
          - 33**








**CAMELOT
      ENTERTAINMENT GROUP, INC.**


**CERTIFICATIONS
      PURSUANT TO**


**SECTION
      302 OF THE SARBANES-OXLEY ACT OF 2002**


**** **CERTIFICATION** ****




I,
      George
      Jackson, certify that:




1.
 
      I have reviewed this quarterly report on Form 10-QSB of Camelot Entertainment
      Group, Inc.;




2.
      Based
      on my knowledge, this quarterly report does not contain any untrue statement
      of
      a material fact or omit to state a material fact necessary to make the
      statements made, in light of the circumstances under which such statements
      were
      made, not misleading with respect to the period covered by this report;




3.
      Based
      on my knowledge, the financial statements, and other financial information
      included in this report, fairly present in all material respects the financial
      condition, results of operations and cash flows of the small business issuer
      as
      of, and for, the periods presented in this report;




4.
      The
      small business issuer’s other certifying officer(s) and I are responsible for
      establishing and maintaining disclosure controls and procedures (as defined
      in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
      reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
      small business issuer and have:




(a)
      Designed such disclosure controls and procedures, or caused such disclosure
      controls and procedures to be designed under our supervision, to ensure that
      material information relating to the small business issuer, including its
      consolidated subsidiaries, is made known to us by others within those entities,
      particularly during the period in which this report is being prepared;




(b)
      Designed such internal control over financial reporting, or caused such internal
      control over financial reporting to be designed under our supervision, to
      provide reasonable assurance regarding the reliability of financial reporting
      and the preparation of financial statements for external purposes in accordance
      with generally accepted accounting principles;




(c)
      Evaluated the effectiveness of the small business issuer’s disclosure controls
      and procedures and presented in this report our conclusions about the
      effectiveness of the disclosure controls and procedures, as of the end of the
      period covered by this report based on such evaluation; and




(d)
      Disclosed in this report any change in the small business issuer’s internal
      control over financial reporting that occurred during the small business
      issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal
      quarter in the case of an annual report) that has materially affected, or is
      reasonably likely to materially affect, the small business issuer’s internal
      control over financial reporting; and




5.
      The
      small business issuer’s other certifying officer(s) and I have disclosed, based
      on our most recent evaluation of internal control over financial reporting,
      to
      the small business issuer’s auditors and the audit committee of the small
      business issuer’s board of directors (or persons performing the equivalent
      functions):




(a)
      All
      significant deficiencies and material weaknesses in the design or operation
      of
      internal control over financial reporting which are reasonably likely to
      adversely affect the small business issuer’s ability to record, process,
      summarize and report financial information; and




(b)
      Any
      fraud, whether or not material, that involves management or other employees
      who
      have a significant role in the small business issuer’s internal control over
      financial reporting.




August
      15, 2006





*/s/George
      Jackson*


George
      Jackson


Chief
      Financial Officer






**Page
          - 34**












**Exhibit
      32**





**CERTIFICATION
      PURSUANT TO**


**18
      U.S.C. SECTION 1350,**


**AS
      ADOPTED PURSUANT TO**


**SECTION
      906 OF THE SARBANES-OXLEY ACT OF 2002**




In
      connection with the Quarterly Report of Camelot Entertainment Group, Inc.
      (“Camelot”) on Form 10-Q for the period ending June 30, 2006 as filed with the
      Securities and Exchange Commission on the date hereof (the “Report”), I, Robert
      P. Atwell, President and Chief Executive Officer of Camelot Entertainment Group,
      Inc. and a member of the Board of Directors, certify, pursuant to s.906 of
      the
      Sarbanes-Oxley Act of 2002, that:






(1)
        The Report fully complies with the requirements of section 13(a) or 15(d)
      of the Securities Exchange Act of 1934; and




(2)
        The information contained in the Report fairly represents, the financial
      condition and result of operations of Camelot Entertainment Group, Inc..













*/s/
      Robert P. Atwell*


Robert
      P.
      Atwell


Chief
      Executive Officer






August
      15, 2006







**Page
          - 35**












**CERTIFICATION
      PURSUANT TO**


**18
      U.S.C. SECTION 1350,**


**AS
      ADOPTED PURSUANT TO**


**SECTION
      906 OF THE SARBANES-OXLEY ACT OF 2002**




In
      connection with the Quarterly Report of Camelot Entertainment Group, Inc.
      (“Camelot”) on Form 10-Q for the period ending June 30, 2006 as filed with the
      Securities and Exchange Commission on the date hereof (the “Report”), I, George
      Jackson, President and Chief Financial Officer of Camelot Entertainment Group,
      Inc. and a member of the Board of Directors, certify, pursuant to s.906 of
      the
      Sarbanes-Oxley Act of 2002, that:






(1)
        The Report fully complies with the requirements of section 13(a) or 15(d)
      of the Securities Exchange Act of 1934; and




(2)
        The information contained in the Report fairly represents, the financial
      condition and result of operations of Camelot Entertainment Group, Inc..











*/s/George
      Jackson*


George
      Jackson


Chief
      Financial Officer


August
      15, 2006










**Page
          - 36**