**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 the
quarterly period ended March 31, 2005
 
 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
 
 
 
 As of
March 31, 2005, the Registrant had outstanding 74,951,902 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 March 31, 2005Statements
      of Operation for the three months ended March 31, 2005 and
      2004Statements
      of Changes in Stockholders’ Equity for the
      three
      months ended March 31, 2005 and 2004Statements
      of Cash Flows for the three months ended
      March
      31, 2005 and 2004Notes
      to Financial StatementsItem
      2. Management’s Discussion and Analysis of
      Financial
      Condition and Results of OperationsItem
      3. Quantitative and Qualitative Disclosures
      About
      Market RiskItem
      4. 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**
  **Camelot
      Entertainment Group, Inc.****BALANCE
      SHEET********31-Mar-05****(Unaudited)**
 
 **31-Dec-04******
    
    **(Unaudited)**ASSETSCURRENT
      ASSETS:Cash
    
    1,139.65OTHER
      ASSETS:InvestmentsLicensing
      Agreements and TechnologiesPatentsTotal
      assets
    
    $
    1,139.65LIABILITIESCURRENTAccounts
      payable and accrued liabilities
    
    $
    100,632Due
      to officers
    
    
    0Total
      current liabilities
    
    
    100,632STOCKHOLDERS'
      EQUITYCommon
      stock, $.001 par value, 150,000,000 shares authorized
    
    
    74,95274,591,209
      issued and outstandingSubscription
      receivable
    
    
    (258,072
    )Additional
      paid-in capital
    
    
    7,408,347(Deficit)
      Accumulated during Development stage
    
    
    (7,324,719
    )Net
      Income (Loss) current periodTotal
      stockholders' equity
    
    
    (99,492
    )Total
      liabilities and stockholders' equity
    
    $
    1,139.65
 
 
 notes are
an integral part of these financial statements.
 ***Page
- 4***
  **Camelot
      Entertainment Group, Inc.****STATEMENTS
      OF OPERATIONS****(Unaudited)**
  Cummulative
      fromOctober
      12, 1999For
      the 3 months ended
    
    
    (Inception
      ) to31-Mar-05
    
    
    31-Mar-04
    
    
    March
      31,2005Revenue:Professional
      services
    
    $
    -
    
    
    
    
    $
    58,567Expenses:Cost
      of services
    
    
    -
    
    
    
    
    
    95,700Sales
      and marketing
    
    
    -
    
    
    
    
    
    53,959Research
      and development
    
    
    -
    
    
    
    
    
    252,550General
      and administrative
    
    
    117,121
    
    
    131,681
    
    
    4,209,520Impairment
      of assets
    
    
    -
    
    
    
    
    
    2,402,338Impairment
      of investments in
    
    
    -
    
    
    
    
    
    710,868other
      companiesTotal
      expenses
    
    
    117,121
    
    
    131,681
    
    
    7,724,935Income
      (loss) from operations
    
    
    (117,121
    )
    
    (131,681
    )
    
    (7,666,368
    )Interest
      (expense)
    
    
    
    
    
    -
    
    
    (9,294
    )Other
      income (expense), net
    
    
    25
    
    
    
    
    
    (21,652
    )Gain
      on extinguishment of debt
    
    
    
    
    
    -
    
    
    255,500Net
      (loss)
    
    $
    (117,096
    )
    $
    (131,681
    )
    $
    (7,441,814
    )Net
      (loss) per share:Basic
      & diluted
    
    $
    (0.0016
    )
    $
    (0.003
    )WEIGHTED
      AVERAGE SHARES OUTSTANDING:Basic
      & diluted
    
    
    74,951,209
    
    
    38,297,485
 The
accompanying notes are an integral part of these financial
statements.
 ***Page
- 5***
  **Camelot
      Entertainment Group, Inc.****STATEMENTS
      OF CASH FLOW****(Unaudited)**
  For the three months
    
    Cummulative
      from
      12-Oct-99ended
      March 31,
    
    
    (Inception
      ) to2005
    
    
    2004
    
    
    31-Mar-05**OPERATING
      ACTIVITIES**Net
      (loss) income for the period
    $
    (117,096
    )
    $
    (131,681
    )
    $
    (7,441,814
    )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
    
    
    
    
    
    
    
    40,000Common
      stock issued for services
    
    
    
    
    3,000
    
    
    1,288,000Common
      stock issued for expense reimbursement
    
    
    
    
    
    
    
    22,051Common
      stock issued for technology
    
    
    
    
    
    
    
    19,167Impairment
      of investments in other companies
    
    
    
    
    
    
    
    710,868Impairment
      of assets
    
    
    
    
    
    
    
    2,628,360Revenue
      paid in common stock
    
    
    
    
    
    
    
    (1,068
    )Prepaid
      services expensed
    
    
    
    
    
    
    
    530,104Expenses
      paid through notes payable proceeds
    
    
    
    
    
    
    
    66,489Loss
      on disposal of property and equipment
    
    
    
    
    
    
    
    5,854Change
      in assets and liabilities:(Increase)
      decrease in other current assets
    
    (10,000
    )
    
    
    
    
    (10,000
    )Increase
      (decrease) in accrued liabilities
    
    (7,475
    )
    
    
    
    
    188,524Increase
      in due to officers
    
    87,500
    
    
    87,500
    
    
    87,500Net
      Cash provided (used) by operating activities
    
    (47,071
    )
    
    (41,181
    )
    
    (227,541
    )Cash
      flows from investing activities:Purchase
      of fixed assets
    
    
    
    
    
    
    
    (6,689
    )Cash
      provided (used) from investing activities
    
    0
    
    
    0
    
    
    (6,689
    )Cash
      flows from financing activities:Contributed
      capital
    
    
    
    
    
    
    
    25,500Advances
      from affiliate /Shareholder loans
    
    46,546
    
    
    41,181
    
    
    174,033Proceeds
      from issuance of common stock
    
    
    
    
    
    
    
    30,835Increase
      (decrease) in notes payable
    
    
    
    
    
    
    
    4,477Cash
      provided (used) in financing activities
    
    (525
    )
    
    -
    
    
    615Increase
      in cash
    
    0
    
    
    0
    
    
    615Cash
      at beginning of period
    
    1,140
    
    
    0
    
    
    0Cash
      at end of period
    
    615
    
    
    0
    
    
    615
 ***Page
- 6***
 
 **CAMELOT
ENTERTAINMENT GROUP, INC.**
 
 **NOTES
TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED** **MARCH
31, 2005**
 
 1.
    ORGANIZATION
      AND BASIS OF PRESENTATION
 
 Camelot
Entertainment Group, Inc. (the *Company* ), a
Delaware corporation,  which
develops, produces, markets and distributes motion pictures , was
originally incorporated 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’s activities since inception have consisted of raising capital,
recruiting a management team and entering into ventures and alliances with
Affiliates. The Company has 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 51% of the Company’s net losses.
 
 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. These
conditions, the loss of financial support from Affiliates, and the failure to
secure a successful source of additional financial resources 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 situation consist of restructuring the
Company’s debt and 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.
 
 
 ***Page
- 7***
 
 
 
 
 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, 2004. 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.
 
 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.
  ***Page
- 8***
 
 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 March 31, 2005.
 
 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.
 
 Stock
Based Compensation
 
 Statement
of Financial Accounting Standards No. 148, Accounting for Stock-Based
Compensation-Transition and Disclosure ( *SFAS
148* ). SFAS
148 provides alternative methods of transition for a voluntary change to the
fair value based method of accounting for stock-based employee compensation.
SFAS 148 also amends the disclosure requirements of SFAS 123 to require more
prominent disclosures in annual and interim financial statements with regard to
the method of accounting for stock-based employee compensation and the impact of
the method used on reported results. The Company has elected to adopt the
recognition provisions of SFAS 148 for stock-based compensation recorded for
fiscal years beginning after December 15, 2002. The interim disclosure
requirements of SFAS 148 are effective for financial reports containing
financial statements for interim periods beginning after December 15, 2002.
 
 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
$46,546 during the first three months of 2005, it appears unlikely that such
funding will be enough to implement the Company's Plan of Operation during the
remaining nine months of 2005 and beyond. As a result, the Company must 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
- 9***
 
 
 4. COMMITMENTS
AND CONTINGENCIES
 
 The
Company is delinquent on obligations to various vendors. Accounts payable and
accrued expenses balances over 90 days past due as of March 31, 2005 was
$87,158. 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 any common shares to the Affiliate during 2005 under the
agreement.
 
 5. ADVANCES
FROM AFFILIATE
 
 During
the first quarter of 2005, the Company did not issue any common shares to
Affiliate for $46,546 under an agreement in which the Affiliate must fund the
Company’s cash flow deficits over the period specified in the agreement. The
agreement requires the Company to issue 20% of all newly issued common shares to
the Affiliate until the Company obtains financing sufficient to implement its
plan of operation.
 
 
 6. DUE TO
OFFICERS
 
 As of
March 31, 2005, the Company owed its officers $87,500 of accrued compensation
for services provided during the quarter ended March 31, 2005.
 
 7. COMMON
STOCK
 
 No common
stock has been issued in 2005.
 
 8. STOCK
OPTIONS
 
 The
Company has an agreement with Corporate Awareness Professionals, Inc. (“CAP”), which in part provides for the
ini tial
purchase of 1,675,000 shares of its $.001 par value common stock, through
options priced at $0.15 per share, for $251,250. CAP also has the option to
purchase an additional 1,000,000 shares at $.50 per share for $500,000. Upon
purchasing those shares, CAP will have the right to purchase up to a maximum of
10% more shares, or 100,000 shares, at $.50 per share. If CAP exercises all its
options, it will have purchased 2,775,000 total shares for $801,250. All of the
options are exercisable until the expiration of the term of the CAP agreement. All
options have expired as of March 30, 2005.
 
 ***Page
- 10***
 
  9.
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 quarter of 2005 for
principal advances of $46,546. The Affiliate paid $46,546 in expenses on behalf
of the Company during the first quarter of 2005.
 
 **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 are 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 March 31, 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.
  ***Page
- 11***
 
 **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.
 
 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.
 
 ***Page
- 12***
 
 *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.
 
 *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.
  ***Page
- 13***
 
 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
- 14***
 
 *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*
  ***Page
- 15***
   **
 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 March 31, 2005 total $46,546 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 entered into an agreement with Eagle Consulting Group, Inc., a Nevada
corporation ("Eagle"), to provide equity financing. Eagle has advanced the
Company a limited amount of funds in the first quarter of 2005, and it appears
unlikely that such funding should be enough to meet all of the Company's cash
requirements for the remaining quarters in 2005. However, the Company must 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.
 
 
 **PLAN
OF OPERATION**
 
 
 **OVERVIEW**
 
 The
Company was incorporated in Delaware on October 12, 1999. During May 2004 we
changed our name to Camelot Entertainment Group, Inc. and changed our business
model from pursuing a new approach to venture formation (the Dstage.com Model)
to the Camelot Studio Model (or "CSM"), which provides for the development,
production, marketing and distribution of motion pictures. 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 to
reduce costs while simultaneously increasing quality. 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. The 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.
  ***Page
- 16***
 
 Our
historical operations, as Dstage.com, Inc., 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.
 
 
 *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.
  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.
 
 ***Page
- 17***
 
 Two
members of our management team, President and Chief Executive Officer Robert P.
Atwell, and H. Kaye Dyal, of our film production division, have worked
extensively in financing, producing and directing original motion pictures and
television programs with a combined 50 years experience in the motion picture
and related businesses. This combined 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
- 18***
 
 *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.
 
 
 
 ***Page
- 19***
 
 
 ·
    *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.
 
 *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.
  ***Page
- 20***
 
 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, 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.
 
 
 **QUARTER
ENDED MARCH** **31,
2005** **COMPARED TO QUARTER ENDED MARCH** **31, 2004** **AND THREE MONTHS ENDED MARCH** **31, 2005** **COMPARED TO THREE MONTHS ENDED MARCH 30, 2004.**
 
 
 **RESULTS
OF OPERATIONS**
 
 The
Company did not generate any revenue during the three months ended March 31,
2005 or the three months ended March 31, 2004.
 
 All
expenses incurred during the comparative periods were general and administrative
in nature.
 
 The
Company has incurred $4,209,520 of general and administrative expenses since its
inception. General and administrative expenses were $117,131  for the
three months ended March 31, 2005, respectively, compared to $131,681 for the
three months ended March 31, 2004..
 
 The
general and administrative expenses for the three months ended March 31, 2005
were primarily comprised of $87,500  of
officer compensation, $3,423 in shareholder relation expenses which included
stock transfer fees, $11,853 of accounting, legal expenses and compliance
expenses, $6,261 in travel expenses and trade show seminars and $2,192 in dues
and subscriptions and other expenses of $2,495 for design of Ferris Wheel Films
logo, office expenses of $3,140 and miscellaneous General and Administrative
expenses of $256. 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 $117,121 for the three months ended March
31, 2005.
 
 Travel
expenses and fees for dues and subscriptions to professional entertainment
business organizations were incurred during the three months ended March 31,
2005 and were not incurred during the same period ended 2004. The expenses were
incurred as a result of the Company’s assertive efforts to network with
entertainment professionals that could assist in further developing the progress
of the plan of operation. (Trip to ShoWest, NAB, and planning for trip to Cannes
Film Festival)
 
 ***Page
- 23***
 
 **LIQUIDITY
AND CAPITAL RESOURCES**
 
 We have
no 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 $46,546. The funding commitment from Eagle should cover all of our
operating expenses for the remaining nine months of 2005.
 
 In
addition, we have entered into an agreement with Corporate Awareness
Professionals, Inc. (“CAP”), which in part provides for the initial purchase of
1,675,000 shares of our $.001 par value common stock through options priced at
$0.15 per share for $251,250. In addition, CAP has the option to purchase an
additional 1,000,000 shares at $.50 per share for $500,000. Upon purchasing
those shares, CAP has the right to purchase up to a maximum of 10% more shares,
or 100,000 shares, at $.50 per share. If CAP exercises all its options, it
should have purchased 2,775,000 total shares for $801,250. As of the date of
this quarterly report, CAP has not exercised any of its options. All options
have expired as of March 30, 2005.
 
 Further,
we are in the process of preparing an SB-2 registration statement for the
purpose of funding our initial slate of pictures. If the anticipated 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.
  ***Page
- 24***
 
 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 no 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
March 31, 2005, we have an accumulated deficit of $7,441,814 all of
which related to our previous activities as a business
development organization, Dstage.com, and none of which relate 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
March 31, 2005, we had a working capital deficit of $216,588.  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.
 
 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.
  ***Page
- 25***
 
 *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.
 
 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.
  ***Page
- 26***
 
 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
- 27***
 
 *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.
  ***Page
- 28***
   *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.
   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.
  ***Page
- 29***
  *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
- 30***
 
 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.
 
 ***Page
- 31***
 
 **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.
 
 **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
of 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.
 
 
 **ITEM
3. DEFAULTS UPON SENIOR SECURITIES**
 
 NONE
 
 **ITEM
4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS**
 
 NONE
 
 
 ***Page
- 32***
 
 **ITEM
5. OTHER INFORMATION**
 
 NONE
 
 **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
 
 
 May 15,
2005
  ***Page
- 33***
   Exhibit
31.1
 **Certifications**
 
 I, Robert
P. Atwell, certify that:
 
 1. I have
reviewed this quarterly report on Form 10-QSB 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 quarterly
report;
 
 3. Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
 
 4. The
registrant's other certifying officers and I am responsible for establishing and
maintaining disclosure controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
 
 a)
designed such disclosure controls and procedures to ensure that material
information relating to the registrant is made known to us by others within
those entities, particularly during the period in which this quarterly report is
being prepared;
 
 b)
evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
 
 c)
presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
 
 5. The
registrant's other certifying officers and I have disclosed, based on our most
recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
 
 a) all
significant deficiencies in the design or operation of internal controls which
could adversely affect the registrant's ability to record, process, summarize
and report financial data and have identified for the registrant's auditors any
material weaknesses in internal controls; and
 
 b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls; and
 
 6. The
registrant's other certifying officers and I have indicated in this quarterly
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
 
 Date: May
16, 2005
 
 /s/
ROBERT P. ATWELL
 Robert P.
Atwell
 President
and Chief Executive Officer
 
 ***Page
- 34***
 Exhibit
31.2
 **Certifications**
 
 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 quarterly
report;
 
 3. Based
on my knowledge, the financial statements, and other financial information
included in this quarterly report, fairly present in all material respects the
financial condition, results of operations and cash flows of the registrant as
of, and for, the periods presented in this quarterly report;
 
 4. The
registrant's other certifying officers and I, are responsible for establishing
and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and we have:
 
 a)
designed such disclosure controls and procedures to ensure that material
information relating to the registrant, is made known to us by others within
those entities, particularly during the period in which this quarterly report is
being prepared;
 
 b)
evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
 
 c)
presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
 
 5. The
registrant's other certifying officers and I have disclosed, based on our most
recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
 
 a) all
significant deficiencies in the design or operation of internal controls which
could adversely affect the registrant's ability to record, process, summarize
and report financial data and have identified for the registrant's auditors any
material weaknesses in internal controls; and
 
 b) any
fraud, whether or not material, that involves management or other employees who
have a significant role in the registrant's internal controls; and
 
 6. The
registrant's other certifying officers and I have indicated in this quarterly
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
 
 Date: May
15, 2005
 
 /s/
GEORGE JACKSON
 George
Jackson
 Chief
Financial Officer
 
 
 ***Page
- 35***
 
 
 **EXHIBIT
32.1**
 
 **CERTIFICATION
PURSUANT TO**
 **SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002**
 **(18
U.S.C. SECTION 1350)**
 
 In
connection with the Quarterly Report of Camelot Entertainment Group,Inc , a
Delaware corporation (the "Company"), on Form 10-QSB for the quarter ending
March 31, 2005 as filed with the Securities and Exchange Commission (the
"Report"), we, Robert P. Atwell, Chief Executive Officer of the Company and
George Jackson, Chief Financial Officer of the Company, respectively certify,
pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss.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 presents, in all material respects,
the financial condition and result of operations of the Company.
 
 
 /s/
ROBERT P. ATWELL
 **Robert
P. Atwell**
 **President
and Chief Executive Officer**
 May 15,
2005
 
 
 
 
 /s/
GEORGE JACKSON
 **George
Jackson**
 **Chief
Financial Officer**
 May 15,
2005
  
  ***Page
- 36***