UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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, 2006

|_|   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

For the transition period from______________________to__________________________
      Commission file number____________________________________________________

                        DEVINE ENTERTAINMENT CORPORATION
                 (Name of small business issuer in its charter)

        Ontario, Canada                                    Not Applicable
     (State or jurisdiction of                            (I.R.S. Employer
   incorporation or organization)                      Identification Number)

                          Suite 504, 2 Berkeley Street,
                        Toronto, Ontario, Canada, M5A 2W3
                                 (416) 364-2282
          (Address and telephone number of principal executive offices
                        and principal place of business)

Securities registered under Section 12 (b) of the Exchange Act:

Title of each class                    Name of each exchange on which registered
  Not Applicable                                     Not Applicable

Securities registered under Section 12 (g) of the Exchange Act:

                                  Common Shares
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes |X| No |_|

Indicate by check mark whether the  registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes |_| No |X|

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date: As of May 11, 2006, the issuer had
35,353,508 Common Shares outstanding.

Transitional Small Business Disclosure Format (check one): Yes |_|  No |X|
<PAGE>

                                TABLE OF CONTENTS

PART  I   FINANCIAL INFORMATION

Item 1.   Financial Statements

Item 2.   Management's Discussion and Analysis or Plan of Operation

Item 3.   Controls and Procedures

PART II   OTHER INFORMATION

Item 1.   Legal Proceedings

Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.   Defaults Upon Senior Securities

Item 4.   Submission of Matters to a Vote of Security Holders

Item 5.   Other Information

Item 6.   Exhibits and Reports on Form 8-K

Signatures


                                      -2-
<PAGE>

                         PART 1 - FINANCIAL INFORMATION

Item 1. Financial Statements.

                        DEVINE ENTERTAINMENT CORPORATION

                    INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                 March 31, 2006

                         (expressed in Canadian dollars)


                                      -3-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

                                 MARCH 31, 2006

                                    CONTENTS

                                                                            PAGE
                                                                            ----
CONSOLIDATED FINANCIAL STATEMENTS

      Balance Sheet                                                            5

      Statement of Shareholders' Equity                                        6

      Statement of Operations                                                  7

      Statement of Cash Flows                                                  8

      Notes to Financial Statements                                        9- 29


                                      -4-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

                       INTERIM CONSOLIDATED BALANCE SHEET
                      (Unaudited - Prepared by Management)
                         (expressed in Canadian dollars)

                                 MARCH 31, 2006

                                     ASSETS

                                                      March 31     December 31
                                                          2006            2005
                                                      --------     -----------
Current
-------
Cash                                               $   189,688      $   239,990
Accounts receivable                                    173,087          229,581
Inventory                                               79,594           88,140
Prepaid and sundry assets                               35,783           26,312
                                                   -----------      -----------
                                                       478,152          584,023

Advances receivable (Note 4)                           494,550          494,550
Investment in film, television programs
  and recordings (Note 5)                            6,953,439        6,848,108
Property and equipment (Note 6)                         22,228           23,872
                                                   -----------      -----------
                                                   $ 7,948,369      $ 7,950,553
                                                   ===========      ===========

                                   LIABILITIES

Current
-------
Accounts payable and accrued liabilities           $ 1,222,032      $ 1,259,239
Convertible debentures (Note 7)                      1,519,290        1,519,290
Advances (Note 8)                                      182,000               --
                                                   -----------      -----------
                                                     2,923,322        2,778,529

                              SHAREHOLDERS' EQUITY

Capital stock (Note 9)                              12,240,095       12,240,095
Contributed surplus (Note 10)                        1,010,976        1,007,376
Deficit                                             (8,226,024)      (8,075,447)
                                                   -----------      -----------
                                                     5,025,047        5,172,024
                                                   -----------      -----------
                                                   $ 7,948,369      $ 7,950,553
                                                   ===========      ===========

See accompanying notes to interim consolidated financial statements.


                                      -5-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

             INTERIM CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                      (Unaudited - Prepared by Management)
                         (expressed in Canadian dollars)

  FOR THE PERIOD ENDED MARCH 31, 2006 AND FOR THE YEAR ENDED DECEMBER 31, 2005

<TABLE>
<CAPTION>
                                                                      Stock                             Contributed
                                Common Shares         Warrants       Options      Preferred Shares        Surplus       Deficit
                               #             $            #             #           #         $              $             $
                                                                                                         (Note 10)
                          ----------------------------------------------------------------------------------------------------------
<S>                         <C>         <C>            <C>          <C>           <C>        <C>         <C>           <C>
BALANCE,
December 31, 2004          32,251,008   11,208,887    5,459,950     3,440,000     494,550    494,550     1,051,886     (7,797,034)

- on conversion of
  warrants                  2,547,500      433,450   (2,547,500)           --          --         --       (50,950)            --

- on issuance of step
  up warrants                      --      (10,190)   2,547,500            --          --         --        10,190             --

- on exercise of
  stock options               125,000       16,250           --      (125,000)         --         --        (3,750)            --

- on settlement for
  services rendered
  and accounts
  payable                     430,000       97,148           --            --          --         --            --             --

- expired
  options/warrants                 --           --     (582,500)     (135,000)         --         --            --             --

- dividend distribution       (45,004)
NET LOSS                           --           --           --            --          --         --            --       (233,409)
                          ----------------------------------------------------------------------------------------------------------
BALANCE,
December 31, 2005          35,353,508   11,745,545    4,877,450     3,180,000     494,550    494,550     1,007,376     (8,075,447)

- issuance of stock
  options                          --           --           --       100,000          --         --         3,600             --
NET LOSS                           --           --           --            --          --         --            --       (150,577)
                          ----------------------------------------------------------------------------------------------------------
BALANCE,
March 31, 2006             35,353,508   11,745,545    4,877,450     3,280,000     494,550    494,550     1,010,976     (8,226,024)
                          ==========================================================================================================
</TABLE>

See accompanying notes to interim consolidated financial statements.


                                      -6-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

                  INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
                      (Unaudited - Prepared by Management)
                         (expressed in Canadian dollars)

                     FOR THE 3 MONTH PERIOD ENDED MARCH 31,

                                                           2006           2005
                                                           ----           ----

REVENUE                                                 $ 163,860      $ 478,236
                                                        ---------      ---------
EXPENSES
  Operating                                               232,377        175,044
  Amortization - film, television
                 programs and recordings                   84,742        257,036
               - equipment
                                                            1,644          2,188
  Stock-based compensation                                  3,600             --
  Interest (Note 11)                                       (7,926)        21,491
                                                        ---------      ---------
                                                          314,437        455,759
                                                        ---------      ---------
NET INCOME (LOSS) FOR THE PERIOD                        $(150,577)     $  22,477
                                                        =========      =========

EARNINGS (LOSS) PER COMMON SHARE (Note 12)

BASIC                                                   $    0.00      $    0.00
                                                        =========      =========
FULLY DILUTED                                           $    0.00      $    0.00
                                                        =========      =========

See accompanying notes to interim consolidated financial statements.


                                      -7-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

                  INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
                      (Unaudited - Prepared by Management)
                         (expressed in Canadian dollars)

                      FOR THE 3 MONTH PERIOD ENDED MARCH 31

                                                          2006           2005
                                                          ----           ----

OPERATING ACTIVITIES
 Net income (loss) for the period                      $(150,577)     $  22,477
  Amortization - film, television programs
                   and recordings                         84,742        257,036
               - property and equipment                    1,644          2,188
               - financing charges                            --         23,373
 Stock-based compensation                                  3,600         18,400
 Change in non-cash components of
   working capital (Note 17)                              18,362        331,678
                                                        --------      ---------
                                                         (42,229)       655,152
                                                        --------      ---------
FINANCING ACTIVITIES
  Decrease in bank loans                                      --       (557,825)
  Advances                                               182,000             --
  Issuance of shares on conversion
    of warrants                                               --        204,375
  Issuance of shares on stock
    options exercised                                         --         12,500
                                                       ---------      ---------
                                                         182,000       (340,950)
                                                       ---------      ---------
INVESTING ACTIVITY
Investment in film, television
  programs and recordings                               (190,073)      (164,885)
                                                       ---------      ---------

CHANGE IN CASH                                           (50,302)       149,317

CASH, BEGINNING OF PERIOD                                239,990        104,727
                                                       ---------      ---------
CASH, END OF PERIOD                                    $ 189,688      $ 254,044
                                                       =========      =========
SUPPLEMENTAL CASH FLOW INFORMATION

Interest paid                                          $      --      $   8,721

See accompanying notes to interim consolidated financial statements.


                                      -8-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

1.    NATURE OF BUSINESS AND GOING CONCERN

      Devine   Entertainment   Corporation  (the  "Company")  is  an  integrated
      developer  and producer of  children's  and family  programs for worldwide
      television and film broadcast and home video markets.

      Television and film production and distribution is highly  speculative and
      inherently  risky.  There can be no assurance  of the economic  success of
      such television and film  programming  since the revenues derived from the
      production  and  distribution  (which  do not  necessarily  bear a  direct
      correlation  to the  production or  distribution  costs  incurred)  depend
      primarily upon their acceptance by the public.

      The success of the Company's  television and film  programming also may be
      impacted by, among other factors,  prevailing advertising rates, which are
      subject to fluctuation.  Therefore,  there is a substantial risk that some
      or all of the  Company's  television  projects  will  not be  commercially
      successful,  resulting in costs not being recouped or anticipated  profits
      not being realized.

      These  financial  statements have been prepared on the basis of accounting
      principles  applicable to a going concern,  which presumes the realization
      of assets and settlement of liabilities in the normal course of operations
      in the foreseeable future.

      The Company has a significant working capital deficiency and its continued
      existence is dependent upon its ability to restore and maintain profitable
      operations and to successfully convert convertible  debentures,  which are
      currently in default.  Management  is in constant  communication  with the
      debenture  holders and expects that the Company will be able to settle the
      debentures in the normal course of operations.

      If the going concern  assumption  were not appropriate for these financial
      statements,  then adjustments would be necessary to the carrying values of
      assets and liabilities and the reported net income.

2.    BASIS OF PRESENTATION

      The accompanying  unaudited interim consolidated financial statements have
      been  prepared  in  accordance  with  the  requirements  of  the  Canadian
      Institute  of  Chartered   Accountants  ("CICA")  Handbook  Section  1751,
      "Interim  Financial  Statements."  Accordingly,  certain  information  and
      footnote  disclosure  normally  included  in annual  financial  statements
      prepared  in  accordance  with  Canadian  generally  accepted   accounting
      principles  ("GAAP")  have  been  omitted  or  condensed.   These  interim
      consolidated financial statements include the accounts of the Company, its
      subsidiaries and variable  interest  entities.  All material  intercompany
      balances and transactions  have been eliminated.  These unaudited  interim
      consolidated  financial statements and supplemental  information should be
      read in  conjunction  with the Company's  audited  consolidated  financial
      statements  as at and for the year ended  December 31, 2005, as set out in
      the December 2005 Annual Report.

      In the opinion of management,  these  statements  include all  adjustments
      (consisting  of  normal  recurring  accruals)   considered   necessary  by
      management  to present a fair  statement  of the  results  of  operations,
      financial  position and cash flows.  The  unaudited  interim  consolidated
      financial  statements were prepared using the same accounting policies and
      methods  as those used in the  Company's  audited  consolidated  financial
      statements for the year ended December 31, 2005.


                                      -9-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      These  interim  consolidated  financial  statements  have been prepared in
      accordance with accounting  principles  generally  accepted in Canada that
      conform in all material  respects,  with U.S. GAAP, except as described in
      the financial statements.

      (a)   Basis of Consolidation (Note 20)

            In October 2005, the Company  amalgamated  its  operations  with its
            wholly-owned subsidiaries.

            The March 31, 2006 interim consolidated financial statements include
            the accounts of Devine  Entertainment  Corporation  (the  "Company")
            with Variable Interest Entities ("VIE").  The March 31, 2005 interim
            consolidated  financial  statements  include  the  accounts  of  the
            Company and all of its wholly-owned subsidiaries and VIE's.

      (b)   Revenue Recognition

            Revenue is derived from broadcast licensing  agreements,  royalties,
            distribution  fees,  the  sale  of  distribution   rights,  sale  of
            copyright  interests  and the sale of home  videos.  All  revenue is
            recognized  upon meeting all  recognition  requirements of SOP 00-2.
            Revenue from broadcast licensing  agreements,  together with related
            costs,  and  revenue  from  the  sale  of  copyright  interests  are
            recognized once the licensing  periods have commenced,  the programs
            are delivered and  collection  is reasonably  assured.  Revenue from
            royalties and distribution fees is recognized when received. Revenue
            from the sale of distribution  rights is recognized when the film or
            television programs are substantially  complete,  the investors have
            irrevocably  committed to acquire  distribution  rights and there is
            reasonable assurance of collectibility of proceeds. Revenue from the
            sale of home videos and DVDs is  recognized at the time of shipment.
            Amounts  received  and not  recognized  as revenue  are  recorded as
            deferred revenue.

      (c)   Investment in Film, Television Programs and Recordings

            Investment in film,  television  programs and  recordings  represent
            projects in progress and the unamortized  costs of film,  television
            programs and recordings,  net of anticipated  federal and provincial
            film production tax credits, which have been produced by the Company
            or for which the  Company has  acquired a copyright  interest or the
            rights  to  future  revenue.  Such  costs  include  development  and
            production  expenditures,  capitalized  overhead and financing costs
            and other costs, which are expected to benefit future periods. Under
            SOP 00-2  exploitation  costs,  including  advertising and marketing
            costs,  are being  expensed as  incurred.  The  Company  also has an
            interest in programs, which have been fully amortized in prior years
            and have no carrying value in these financial statements.

            Projects in progress  include the costs of acquiring  film rights to
            original  screenplays  and costs to adapt such projects.  Such costs
            are capitalized and, upon  commencement of production,  are added to
            investment in film, television programs, and recordings. Advances or
            contributions  received from third parties to assist in  development
            are deducted from these costs.  Projects in progress are written off
            at the earlier of the date  determined not to be recoverable or when
            projects in progress are abandoned, and three years from the date of
            the initial investment.


                                      -10-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      (c)   Investment in Film, Television Programs and Recordings (Continued)

            Amortization  is  determined  based on the ratio that current  gross
            film  revenues  bear to  management's  estimate  of total  remaining
            ultimate  gross film  revenue  as of the  beginning  of the  current
            fiscal  year on a program by program  basis  (the  "individual  film
            forecast method").  Revenue and film costs are continually  reviewed
            by  management  and revised when  warranted by changing  conditions.
            When  estimates of total  revenues and costs indicate that a feature
            film or  television  program  will  result in an  ultimate  loss,  a
            reduction in the carrying  value of the  investment is recognized to
            the extent that  capitalized film costs exceed estimated fair value.
            Such  adjustments  could  have a material  effect on the  results of
            operations in future periods. Production financing provided by third
            parties that acquire substantive equity participation is recorded as
            a reduction of costs of the production.

            Capitalized  film costs are stated at the lower of unamortized  cost
            or estimated  fair value on an  individual  film basis.  Fair market
            value is based  on the  discounted  projected  net cash  flows.  The
            determination of the projected net cash flows and discount rates are
            subjective  in nature  and  involve  uncertainties  and  matters  of
            significant judgement by management.

      (d)   Stock-Based Compensation

            The Company  accounts for all  stock-based  payments  using the fair
            value based  method.  The Company  grants stock  options for a fixed
            number of shares to employees and consultants with an exercise price
            equal to the fair  value of the  shares  at the date of  grant.  The
            Company   recognizes   compensation   expense  for  the  stock-based
            compensation  plan  when  stock  or  stock  options  are  issued  to
            employees.  Any consideration paid by employees on exercise of stock
            options or purchase of stock is credited to share capital.

            If  stock  or  stock  options  are  repurchased  from  employees  or
            consultants,  the excess of the consideration paid over the carrying
            amount of the stock or stock option cancelled is charged to retained
            earnings.

      (e)   Earnings Per Share

            Basic earnings per share is computed by dividing earnings  available
            to common  shareholders  by the  weighted  average  number of common
            shares  outstanding  during the period. The treasury stock method is
            used to calculate  diluted earnings per share.  Diluted earnings per
            share is  similar  to basic  earnings  per  share,  except  that the
            denominator is increased to include the number of additional  common
            shares that would have been  outstanding  assuming  that options and
            warrants  with an average  market price for the period  greater than
            their  exercise  price  are  exercised  and  the  proceeds  used  to
            repurchase common shares.


                                      -11-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      (f)   Impairment of Long-Lived Assets

            Long-Lived Assets, including property and equipment,  investments in
            films,   television   programs  and   recordings  are  reviewed  for
            impairment when significant  events or  circumstances  indicate that
            the carrying amount of an asset may not be  recoverable.  Impairment
            exists  when the  carrying  value of the assets is greater  than the
            future undiscounted cash flows expected to be provided by the asset.
            The amount of  impairment  loss,  if any,  which is in excess of net
            carrying value over fair value, is charged to income for the period.
            Fair  value is  generally  measured  equal to the  estimated  future
            discounted net cash from the asset.

      (g)   Recent Accounting Pronouncements

            (i)   Effective  December 1, 2004, the Company was required to adopt
                  the  Canadian  Institute  of  Chartered   Accountants'  (CICA)
                  Accounting  Guideline  15(AcG-15),  "Consolidation of Variable
                  Interest  Entities"  ("VIE").  AcG-15  provides  guidance that
                  addresses when a company  should  consolidate in its financial
                  statements the assets,  liabilities  and operating  results of
                  another entity.  Under previous guidance,  a company generally
                  included   another  entity  in  its   consolidated   financial
                  statements  only  if  the  entity  is  controlled   through  a
                  controlling  voting  interest.  AcG-15  requires  a VIE  to be
                  consolidated  by the  company if that  company is the  primary
                  beneficiary  of that entity.  In January 2003, the FASB issued
                  Interpretation  No.  ("FIN")  46,  "Consolidation  of Variable
                  Interest   Entities",   which  is  effective   for   financial
                  statements  of  public  companies  that have  special  purpose
                  entities for periods  ending  after  December 15, 2003 and for
                  public companies  without special purpose entities for periods
                  ending  after  March 15,  2004.  Accordingly,  the Company has
                  included the results of operations of the Devine Entertainment
                  Limited  Partnership  and the QCF 2005 Limited  Partnership in
                  its consolidated operations.

            (ii)  In  January  2005,  the CICA  issued  Handbook  Section  3855,
                  "Financial  Instruments - Recognition  and  Measurement".  The
                  section  prescribes  when  a  financial  instrument  is  to be
                  recognized  on the balance  sheet and at what amount.  It also
                  specifies how financial  instrument gains and losses are to be
                  presented. This new standard will be effective for interim and
                  annual   financial   statements   relating  to  fiscal   years
                  commencing  on or  after  October  1,  2006.  The  Company  is
                  assessing the impact of this new standard on its  consolidated
                  financial statements.


                                      -12-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 MARCH 31, 2006

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      (g)   Recent Accounting Pronouncements (Continued)

            (iii) In  January  2005,  the CICA  issued  Handbook  Section  3865,
                  "Hedges".  The  Section  provides  alternative  treatments  to
                  Section 3855 for entities which choose to designate qualifying
                  transactions  as hedges for accounting  purposes.  It replaces
                  and   expands  on   Accounting   Guideline   AcG-13   "Hedging
                  Relationships",  and the  hedging  guidance  in  Section  1650
                  "Foreign   Currency   Translation"  by  specifying  how  hedge
                  accounting is applied and what  disclosures are necessary when
                  it is applied. This new standard will be effective for interim
                  and  annual  financial  statements  relating  to fiscal  years
                  commencing  on or  after  October  1,  2006.  The  Company  is
                  assessing  the  impact  of this new  standard  on its  interim
                  consolidated financial statements.

            (iv)  In  January  2005,  the CICA  issued  Handbook  Section  1530,
                  "Comprehensive   Income".   The  section   introduces   a  new
                  requirement  to temporarily  present  certain gains and losses
                  from  changes  in fair  value  outside  net  income,  but in a
                  transparent  manner.  This new standard  will be effective for
                  interim  and annual  financial  statements  relating to fiscal
                  years  commencing on or after October 1, 2006.  The Company is
                  assessing  the  impact  of this new  standard  on its  interim
                  consolidated financial statements.

4.    ADVANCES RECEIVABLE

      Advances to an unrelated  company bear  interest at 6.5% per annum and are
      due December 16, 2014.

5.    INVESTMENT IN FILM, TELEVISION PROGRAMS AND RECORDINGS

<TABLE>
<CAPTION>
                                                                               March 31,                     December 31,
                                                                                    2006                            2005
                                                                             ------------                    ------------
                                                                             Accumulated
                                                                Cost         Amortization          Net            Net
                                                                ----         ------------          ---            ---

<S>                                                         <C>              <C>              <C>            <C>
      Completed television programs and recordings          $ 16,008,627     $ 14,365,957     $ 1,642,670    $ 1,723,043
      Completed Motion picture - Bailey's Billion$             6,969,564        3,739,187       3,230,377      3,241,219
      Projects in progress                                     2,080,392           -            2,080,392      1,883,846
                                                            ------------     ------------     -----------    -----------
                                                            $ 25,058,583     $ 18,105,144     $ 6,953,439    $ 6,848,108
                                                            ============     ============     ===========    ===========
</TABLE>


                                      -13-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

5.    INVESTMENT IN FILM, TELEVISION PROGRAMS AND RECORDINGS (Continued)

      Annually,  management  reviews the  estimate of total  remaining  ultimate
      revenue and the fair value of the capitalized film costs.

      The  Company  expects to amortize  approximately  $770,000  for  completed
      television  programs and recording costs and $353,000 for completed motion
      picture costs during 2006.

      The Company expects 100% of completed  television  programs and recordings
      and 70% of completed  motion  picture  costs will be amortized by December
      31, 2008.

      As at December 2010,  over 80% of the completed  motion picture costs will
      be amortized.

      The remaining  period of  amortization  for the completed  projects ranges
      from one to eight years at December 31, 2005.

6.    PROPERTY AND EQUIPMENT

<TABLE>
<CAPTION>
                                                      March 31,             December 31,
                                                          2006                      2005
                                                    ------------            ------------
                                                    Accumulated
                                          Cost      Amortization      Net        Net
                                          ----      ------------      ---        ---
<S>                                     <C>          <C>          <C>         <C>
      Computer and editing equipment    $ 177,922    $ 161,448    $ 16,474    $ 17,810
      Furniture and fixtures               58,193       52,439       5,754       6,062
                                        ---------    ---------    --------    --------
                                        $ 236,115    $ 213,887    $ 22,228    $ 23,872
                                        =========    =========    ========    ========
</TABLE>


                                      -14-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

7.    CONVERTIBLE DEBENTURES

                                                    March 31,       December 31,
                                                         2006               2005
                                                    ---------       ------------
      Principal
        Issued
        - February 1996 (i)                      $    75,000        $    75,000
        - December 2000 (ii)                         550,000            550,000
        - December 2000 (iii)                        835,800            835,800
        - Capitalized interest (iv)                  240,000            240,000
                                                 -----------        -----------
                                                   1,700,800          1,700,800
      Less - equity component                       (181,510)          (181,510)
                                                 -----------        -----------
                                                 $ 1,519,290        $ 1,519,290
                                                 ===========        ===========

      (i)   The  Company   issued  a  7.5%   $100,000   redeemable   convertible
            subordinated  debenture  in February  1996.  This  debenture  was to
            mature on December 31, 2000.  The debenture was  convertible  at the
            holder's  option into common shares at any time prior to maturity at
            a conversion rate of $1.50 per share.

            Management  renegotiated  repayment  terms of this  debenture  at an
            increased  interest  rate  of  10%  per  annum.  The  principal  was
            repayable  in four  quarterly  payments  during 2001 of $25,000 plus
            interest.  The first  instalment was made in April 2001. The Company
            is still in default on the second, third and fourth instalments.  As
            at March 31, 2006,  there remains an outstanding  balance of $75,000
            plus $39,375  (December  31, 2005 - $37,500) in accrued  interest on
            this  debenture.  As a  result  of the  default,  the  debenture  is
            classified as a current  liability on the balance sheet.  Management
            is in constant  communication  with the debenture holder and expects
            that the Company will be able to settle the  debenture in the normal
            course of operations.


                                      -15-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

7.    CONVERTIBLE DEBENTURES (Continued)

      (ii)  The Company  issued  550,000  units of  debentures  and  warrants in
            December 2000 for $550,000 less costs of $85,000 for net proceeds to
            the Company of $465,000. Each unit consists of a $1.00 debenture and
            1  immediately   separable  warrant.   The  redeemable   convertible
            subordinated  debentures matured on December 31, 2005, bear interest
            at 10.5% per annum,  and are payable  semi-annually.  The debentures
            are  convertible  at the holders'  option into common  shares at any
            time prior to  maturity  on the basis of one common  share per $0.50
            principal  amount of debenture.  The debentures are  subordinated to
            certain senior indebtedness of the Company. As at March 31, 2006 the
            Company  is  in  default  of  an  outstanding  balance  of  $179,900
            (December  31,  2005  -  $165,463)  in  accrued  interest  on  these
            debentures.   As  a  result  of  the  default,  the  debentures  are
            classified as a current  liability on the balance sheet.  Management
            is in constant  communication with the debenture holders and expects
            that the Company will be able to settle the debentures in the normal
            course of operations.

      (iii) On December  19,  2000,  the Company  obtained  the  approval of the
            holders of the 7.5% debentures issued December,  1995 to: (i) extend
            the maturity date to December 31, 2002;  (ii) reduce the  conversion
            rate to $0.50 per common share;  (iii) increase the rate of interest
            applicable  to 10.5% per  annum;  (iv)  issue to the  holders of the
            debentures one warrant for each $1.00 principal  amount held by such
            holder;  and (v) to secure the 7.5%  debentures by way of a floating
            charge over all of the Company's assets,  such floating charge to be
            subordinated  to all existing and future "Senior  Indebtedness"  and
            "Permitted  Encumbrances"  and to rank  pari  passu  with  identical
            security  to be granted to  holders  of up to  $1,000,000  principal
            amount of convertible  debentures  issued by the Company on December
            21,  2000.  The  Company  is in  default  on  the  repayment  of the
            debentures.  As at March 31,  2006,  there  remains  an  outstanding
            balance  of  $271,268  (December  31,  2005 -  $249,328)  in accrued
            interest  on these  debentures.  As a  result  of the  default,  the
            debentures  are  classified  as a current  liability  on the balance
            sheet.  Management is in constant  communication  with the debenture
            holders  and  expects  that the  Company  will be able to settle the
            debentures in the normal course of operations.

      (iv)  As part of the  settlement  of the  long-term  debt the  Company has
            granted the same  conversion  privileges to the $240,000  portion of
            the interest accrued on the debentures  described in notes 7(ii) and
            7(iii) and as on the related debentures. As at March 31, 2006, there
            is an outstanding amount of $44,100 (December 31, 2005 - $37,800) in
            accrued interest.


                                      -16-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

8.    ADVANCES

      The  Company  expects  to  complete a private  placement  for a maximum of
      3,500,000 units, each consisting of one common share and one-half purchase
      warrant at $0.15 per unit.  Each warrant would be  exercisable  at anytime
      prior to 1 year after  closing to  acquire  one common  share at $0.30 per
      unit.

      As at March 31, 2006, $182,000 has been advanced to the Company. No shares
      or warrants have been issued as of March 31, 2006.

9.    CAPITAL STOCK

      (a)   Authorized

            An unlimited number of common shares and Class "A" shares 494,550 of
            Series 1 preferred shares.

      (b)   Issued - common shares
                                                      Number           Amount
                                                      ------           ------
            Balance, December 31, 2005
              and March 31, 2006                    35,353,508      $ 11,745,545
                                                    ==========      ============

      (c)   Issued - Series 1 preferred shares
                                                      Number           Amount
                                                      ------           ------
            Balance, December 31, 2005
              and March 31, 2006                       494,550        $  494,550
                                                       =======        ==========


            The  Series  1   preferred   shares  are   non-voting,   cumulative,
            non-participating,  $1 redeemable  and  retractable.  The shares pay
            dividends  at  the  rate  of  9.1%  per  annum   payable  in  annual
            instalments  on the  15th day of  December  in each  year and  shall
            accrue  and be  cumulative  from the date of issue.  As at March 31,
            2006 dividends in arrears amounted to $11,220.


                                      -17-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

9.    CAPITAL STOCK (Continued)

      (d)   Stock Option Plan

            Under the terms of a stock option plan approved by the shareholders,
            the Company is authorized to grant  directors,  officers,  employees
            and others, options to purchase common shares at prices based on the
            market price of shares as determined on the date of grant.

            The outstanding and exercisable stock options are as follows:

                                                                        Weighted
                                                                         Average
                                               Number       Allocated   Exercise
             Outstanding and Exercisable     of Options       Value       Price
             -------------------------------------------------------------------
             Balance, December 31, 2005       3,180,000       96,100      0.10
             Issued in January 2006             100,000        3,600      0.10
                                              ---------       ------      ----
             Balance, March 31, 2006          3,280,000       99,700      0.10
                                              =========       ======      ====

            The Company has granted stock options as follows:

<TABLE>
<CAPTION>
                                                                                      Weighted
                                                                       Outstanding    Average
                                                 Number    Exercise        and       Remaining
            Expiry Date       Grant Date      of Options     Price     Exercisable      Life
            ----------------------------------------------------------------------------------
<S>                          <C>                <C>           <C>        <C>           <C>
            June 25, 2006    June 25, 2004      180,000       0.10       180,000       0.25
            June 25, 2009    June 25, 2004    3,125,000       0.10     3,000,000       3.25
            April 25, 2009   April 25, 2005     100,000       0.10       100,000       3.08
                                              ---------                ---------       ----

                                              3,405,000                3,280,000       3.09
                                              =========                =========       ====
</TABLE>

            The  Company  has  recorded  the fair  value of  options  using  the
            Black-Scholes options pricing model with the following assumptions.

            Issue date                              April 25,2005
            Number of options                             100,000
            Expected life                                 5 years
            Price volatility                                  30%
            Dividend yield                                     --
            Risk-free interest                                 5%
            Rate of return
            Amount recorded                                $3,600


                                      -18-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

9.    CAPITAL STOCK (Continued)

      (e)   Warrants

            Common  shares have been  reserved  for  warrants  on the  following
            basis:

            Outstanding and Exercisable        # of Warrants    Value      Price
            --------------------------------------------------------------------
            Balance, December 31, 2004           5,459,950     113,900     0.37
               Converted to common shares       (2,547,500)    (50,950)    0.15
               Issuance of step up warrants      2,547,500      10,190     0.30
               Expired                            (582,500)         --     0.48
                                                 ---------     -------     -----
            Balance, December 31, 2005
            and March 31, 2006                   4,877,450      73,140   $ 0.36
                                                 =========     =======     ====

            The Company has granted warrants as follows:

<TABLE>
<CAPTION>
                                                                                             Weighted
                                                                              Outstanding     Average
                                                    Number         Exercise       and        Remaining
            Expiry Date             Grant Date    of Options        Price      Exercisable     Life
            ------------------------------------------------------------------------------------------
<S>                               <C>                <C>        <C>    <C>        <C>            <C>
            September 26, 2006    June 30, 2004      499,950    0.15 - 0.20       180,000        0.72
            February 29, 2006     June 30, 2004    1,830,000           0.50     1,830,000        0.27
            April7, 2007          April 7, 2005    2,547,500           0.30     2,547,500        1.17
                                                   ---------                    ---------        ----

                                                   4,877,450                    4,877,450        0.65
                                                   =========                    =========        ====
</TABLE>

10.   CONTRIBUTED SURPLUS

         Balance, December 31, 2004                              $1,051,886
         Less:  Stock Options exercised                              (3,750)
         Less:  Warrants converted into common shares               (50,950)
         Add:    Step up warrants issued                             10,190
                                                                 ----------
         Balance, December 31, 2005                               1,007,376
         Add:    Stock options issued                                 3,600
                                                                 ----------
         Balance, March 31, 2006                                 $1,010,976



                                      -19-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

10.   CONTRIBUTED SURPLUS (Continued)

                                                      March 31,     December 31,
                                                           2006            2005
                                                      ---------     ------------
      Settlement of debt instruments                 $  656,626       $  656,626
      Equity portion of long-term debt                  181,510          181,510
      Stock options (Note 9(d)                           99,700           96,100
      Warrants (Note 9(e))                               73,140           73,140
                                                     ----------       ----------
                                                     $1,010,976       $1,007,376
                                                     ==========       ==========

11.   INTEREST EXPENSE (INCOME)

                                                      March 31,        March 31,
                                                          2006             2005
                                                      ---------       ---------
      Interest on convertible debentures               $ 44,552        $ 67,925
      Interest on bank loan                                  --           8,721
                                                       --------        --------
                                                         44,552          76,646
      Interest income                                    (7,926)        (13,375)
                                                       --------        --------
                                                         36,626          63,271
      Less: amounts capitalized to projects             (44,552)        (41,780)
                                                       --------        --------
                                                       $ (7,926)       $ 21,491
                                                       ========        ========


                                      -20-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

12.   EARNINGS (LOSS) PER COMMON SHARE

      (a)   Basic:  Earnings per share are calculated using the weighted average
            number of shares outstanding during each of the periods presented in
            the interim consolidated  financial statements.  The following table
            sets forth the weighted average number of common shares  outstanding
            for each of those periods.

            Period                                                   Outstanding
            ------                                                   -----------
            March 31, 2006 (Note 9)                                   35,353,508
            March 31, 2005                                            32,789,008

                                                    March 31,         March 31,
                                                         2006              2005
                                                    ---------         ---------
            Numerator:
            Net income (loss) as reported
              for basic EPS                       $   (150,577)    $     22,477
            Less: Preferred share dividends
              paid and in arrears                      (11,220)         (11,200)
                                                  ------------     ------------
            Net Income (Loss)                     $   (161,797)    $     11,257
                                                  ------------     ------------
            Denominator:
            Weighted average shares
              for basic EPS                         35,353,508       32,785,008
                                                  ============     ============
            Basic income (loss) per share             $ (0.00) $          (0.00)
                                                  ============     ============

      (b)   Fully  Diluted:  The Company  follows CICA  Handbook  Section  3500,
            "Earnings  per Share",  effective  January 31, 2003.  The  statement
            requires the  presentation of both basic and diluted earnings (loss)
            per  share  ("EPS")  in  the  statement  of  operations,  using  the
            "treasury  stock"  method to compute  the  dilutive  effect of stock
            options and warrants and the "if converted"  method for the dilutive
            effect of convertible instruments.  For the years ended December 31,
            2005 and 2004 the assumed exercise of outstanding  stock options and
            warrants  would have a dilutive  effect on EPS. The following  table
            sets forth the weighted average number of common shares  outstanding
            for the  computation of dilutive EPS for each of the years presented
            in the consolidated financial statements.


                                      -21-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

12.   EARNINGS (LOSS) PER COMMON SHARE (Continued)

                                                      March 31,        March 31,
                                                           2006             2005
                                                      ---------        ---------
            Numerator:
            Net income (loss) as
              reported for basic EPS                $  (150,577)    $    22,477
            Less: Preferred share dividends
              paid and in arrears                       (11,220)        (11,220)
                                                    -----------     -----------
            Net Income (loss)                       $  (161,797)    $    11,257
                                                    -----------     -----------
            Denominator:
            Weighted average shares
              for basic EPS                          35,353,508      32,785,008
            Effect of dilutive securities:
                Stock options                                --         134,350
                Warrants                                     --         444,674
                                                    -----------     -----------
            Adjusted weighted average
              shares and assumed conversions
              for dilutive EPS                       35,353,508      33,364,032
                                                    ===========     ===========

            Fully diluted income (loss) per share   $     (0.00)    $     (0.00)
                                                    ===========     ===========

      (c)   Anti-dilutive:  Options to purchase  3,280,000 and nil common shares
            and warrants of 4,877,450  and 5,459,950 for the quarter ended March
            31,  2006  and  2005,   respectively,   were  not  included  in  the
            computation  of  diluted  earnings  per  share  because  of the loss
            position  in 2006 and the option and  warrant  exercise  prices were
            greater than the average market price of the common shares in 2005.

13.   FINANCIAL INSTRUMENTS

      Fair values  approximate  amounts at which financial  instruments could be
      exchanged   between  willing   parties,   based  on  current  markets  for
      instruments  of the same risk,  principal and remaining  maturities.  Fair
      values  are  based on  estimates  using  valuation  techniques,  which are
      significantly  affected by the assumptions  used concerning the amount and
      timing of estimated  future cash flows,  which reflect  varying degrees of
      risk.

      Therefore,  due to the use of subjective judgement and uncertainties,  the
      aggregate fair value amount should not be interpreted as being  realizable
      in an immediate settlement of the instruments.


                                      -22-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

13.   FINANCIAL INSTRUMENTS (Continued)

      (i)   Fair Value

            The  carrying  values  of  cash,  accounts  receivable,  convertible
            debenture  issued in February 1996 (Note 7(i)) and accounts  payable
            and  accrued  liabilities   approximate  fair  value  due  to  their
            short-term maturity and normal credit terms.

            The carrying value of advances  receivable  approximates  their fair
            value because the interest rate charged is at market rate.

            The fair value of the convertible debentures issued in December 2000
            has been  estimated by first  calculating  the present  value of the
            liability  component  using a discount  factor and then assigning to
            the equity  component  the  difference  between the  proceeds of the
            debenture  and  the  fair  value  of the  liability  component.  The
            estimated  discount  factor used  approximated  the market  interest
            rates at March 31, 2006 and 2005. Accordingly,  the carrying amounts
            of the convertible debentures approximate fair value.

      (ii)  Credit Risk

            The Company's  accounts  receivable  are subject to credit risk. The
            Company  continually  monitors its positions with and credit quality
            of  the  organizations,   which  are  counterpart  to  its  accounts
            receivable and does not anticipate non-performance.  The majority of
            the  accounts  receivable  are  amounts  due from  sales of  foreign
            distribution   rights  and  a  limited   number  of   licenses   and
            distributors of video cassettes and DVDs.

      (iii) Currency Risk

            The Company is subject to currency  risk through its  activities  in
            the United States and other countries.  Unfavourable  changes in the
            exchange rate may affect the operating results of the Company.

            The Company does not actively use  derivative  instruments to reduce
            its exposure to foreign  currency  risk.  However,  dependent on the
            nature, amount and timing of foreign currency receipts and payments,
            the Company may enter into  forward  exchange  contracts to mitigate
            the  associated  risks.  There  were no forward  exchange  contracts
            outstanding at March 31, 2006.


                                      -23-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

14.   COMMITMENTS AND CONTINGENCIES

      (a)   In February  2004,  the Company  renewed the lease for its premises.
            The agreement expires May 31, 2009.  Minimum annual rent commitments
            excluding occupancy costs are as follows:

            2006                                                      $ 20,250
            2007                                                        28,000
            2008                                                        29,000
            2009                                                        13,000
                                                                      --------
                                                                      $ 90,250
                                                                      ========

      (b)   The  Company  has  employment   agreements  with  various  principal
            officers and employees.  The  agreements  provide for minimum salary
            levels.

      (c)   The Company has entered  into  contractual  agreements  for creative
            talent related to future film production.

      (d)   The purchasers of the copyright  interest are entitled to a priority
            distribution  of the future  revenue  earned from the motion picture
            "Bailey's  Billion$" up to the original amount of the purchase price
            of  $2,477,500 up to 42%.  Subsequent to the priority  distribution,
            all the amounts would be distributed  pari passu in accordance  with
            the percentage ownership acquired.

      (e)   The distributors of the film are entitled to a priority distribution
            of the  future  revenue  earned  from the motion  picture  "Bailey's
            Billion$"  up to the original  amount of the  purchase  price in the
            amount of $2,908,971.  Subsequent to the priority distribution,  all
            the amounts would be distributed in accordance  with the contractual
            agreements.

      (f)   In the  normal  course of  operations  the  Company is  involved  in
            negotiations,  grievances  and  arbitrations  with guilds and unions
            related to the film production  industry.  Management estimates that
            the  grievances  will not  result in any future  material  financial
            obligation.  No amount has been recorded in the interim consolidated
            financial statements with regard to this matter.


                                      -24-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

15.   RELATED PARTY TRANSACTIONS

      During the 3 month period  ended March 31, 2006 $73,749  (March 31, 2005 -
      $53,427) of fees were paid or accrued to corporations controlled by two of
      the  directors  for  writing,  directing  and  producing  services.  These
      transactions have been measured at exchange amount, which is the amount of
      consideration  established  and agreed to by the related parties and which
      management believes reflect prevailing market rates.

16.   VARIABLE INTEREST ENTITIES

      In  December  2005,  The  Devine   Entertainment   Film  Library   Limited
      Partnership ("DEFLLP"),  a limited partnership formed and registered under
      the Limited  Partnerships Act (Ontario) on March 8, 2004,  acquired Devine
      Entertainment  Corporation's  interest in a defined part of the  Company's
      proprietary  film  library  for $6.8  million,  as  valued  by an  outside
      valuator. The Company has provided financing for the transaction,  and has
      entered  into a  financing  agreement  and will  enter  into a  management
      agreement with DEFLLP in order to manage the  exploitation  and expand the
      distribution  of the properties.  Under these  agreements the Company will
      receive management fees and interest revenue and the Company will maintain
      a call right for between a minimum of 70% and a maximum  100%  interest in
      the library  assets.  The accounts of this variable  interest  entity have
      been  included in the interim  consolidated  financial  statements  of the
      Company.

17.   CHANGE  IN  NON-CASH   COMPONENTS  OF  WORKING  CAPITAL  AND  SUPPLEMENTAL
      INFORMATION

                                                      March 31,       March 31,
                                                          2006            2005
                                                      ---------       ---------
          Accounts receivable                         $  56,494      $ 308,191
          Inventory                                       8,546         12,492
          Prepaid and sundry assets                      (9,471)       (24,503)
          Accounts payable and accrued liabilities      (37,207)        35,498
                                                      ---------      ---------
                                                      $  18,362      $ 331,678
                                                      =========      =========


                                      -25-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

17.   CHANGE  IN  NON-CASH   COMPONENTS  OF  WORKING  CAPITAL  AND  SUPPLEMENTAL
      INFORMATION (Continued)

      The supplemental cash flow information is as follows:

                                                     March 31,         March 31,
                                                          2006              2005
                                                     ---------         ---------
      Non-cash transactions
           Stock options issued                         3,600                 --
           Settlement of accounts payable
             by share issuance                             --             18,400

18.   SEGMENTED INFORMATION

      The  Company  is  considered  to  operate  in one  industry  segment,  and
      generates  revenue  from film  productions  and film  library.  Revenue by
      geographic location, based on the location of customers, is as follows:

                                                        March 31,      March 31,
                                                             2006           2005
                                                        ---------      ---------
      Canada                                           $   6,856      $ 116,000
      United States                                       72,148         69,000
      France                                              68,723         99,000
      Europe - Other                                         769        188,000
      Other foreign                                       15,364          6,000
                                                       ---------      ---------
                                                       $ 163,860      $ 478,000
                                                       =========      =========

19.   RECONCILIATION TO UNITED STATES GAAP

      The interim  consolidated  financial  statements  of the Company have been
      prepared in  accordance  with  Canadian  GAAP.  The  material  differences
      between the  accounting  policies used by the Company under  Canadian GAAP
      and U.S. GAAP are disclosed below in accordance with the provisions of the
      Securities and Exchange Commission.

      (a)   Under  Canadian  GAAP,  the  conversion  feature on the  convertible
            debentures  (Note 7), is valued at $181,510 and has been  classified
            as contributed  surplus.  Under U.S. GAAP the conversion  feature is
            not accounted separately and thus would not flow through contributed
            surplus. This transaction occurred in 2000.


                                      -26-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

19.   RECONCILIATION TO UNITED STATES GAAP (Continued)

      (b)   Under Canadian GAAP, the exchange of convertible  debentures for new
            convertible  debentures and subsequent gain on settlement of the new
            convertible   debentures   was  valued  at  $284,803  and  has  been
            classified as  contributed  surplus.  Under U.S. GAAP the conversion
            and subsequent  settlement is not accounted for through  contributed
            surplus and would be recorded  through the  statement of  operations
            thus reducing the deficit. This transaction occurred in 2000.

      (c)   Under  Canadian  GAAP,  the  Company's  preferred  shares  have been
            included  in  shareholders'  equity as the  Company  considered  the
            likelihood  of  redemption  by the holders to be remote.  Under U.S.
            GAAP,  the preferred  shares would be classified as a liability.  In
            addition,  cumulative  dividends  are part of the  liability for the
            shares.

      (d)   Financial   Accounting   Standards   Board  Statement  of  Financial
            Accounting Standards No. 130 "Reporting  Comprehensive Income" (SFAS
            130) requires the disclosure of comprehensive income, which includes
            reported net earnings adjusted for other comprehensive income. Other
            comprehensive  income  is  defined  as the  change  in  equity  of a
            business  enterprise  during a period  from  transactions  and other
            events and  circumstances  from non-owner  sources.  During 2006 and
            2005, there was no other comprehensive income.

            March 31, 2006                          CDN GAAP        U.S. GAAP
            --------------                          --------        ---------
                                                        $               $

            Convertible Debentures                  1,519,290       1,700,800

            Contributed Surplus                     1,010,976         544,663

            Deficit                                 8,226,024       7,941,221

            Other liabilities                               0         505,770

            Capital stock                          12,240,095      11,745,545

            Interest expense (income)                  (7,926)          3,294


                                      -27-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

19.   RECONCILIATION TO UNITED STATES GAAP (Continued)

            March 31, 2006                            CDN GAAP        U.S. GAAP
            --------------                            --------        ---------
                                                         $                 $

            Convertible Debentures                    1,519,290       1,700,800

            Contributed Surplus                       1,007,376         541,063

            Deficit                                   8,075,447       7,790,644

            Other liabilities                                 0         494,673

            Capital stock                            12,240,095      11,745,545

            Interest expense                             50,832          95,836

      Impact of Newly Issued United States Accounting Standards

      i)    Effective   January  1,  2006,  the  Company  will  adopt  a  recent
            accounting pronouncement of the Financial Accounting Standards Board
            ("FASB"), SFAS No. 123R, "Share-Based Payments" ("SFAS 123R"), which
            requires  companies to measure and recognize  compensation  expenses
            for all share based  payments at a fair value.  The Company does not
            expect the  adoption  of SFAS 123R to have a material  impact on its
            interim consolidated financial statements.

      ii)   In May 2005, the FASB issued SFAS No. 154,  "Accounting  Changes and
            Error  Corrections"  ("SFAS No. 154), which is providing guidance on
            the accounting for, and reporting of,  accounting  changes and error
            corrections.  This Statement replaces APB Opinion No. 20, Accounting
            Changes,  and FASB Statement No. 3, Reporting  Accounting Changes in
            Interim Financial  Statements,  and changes the requirements for the
            accounting  for and reporting of a change in  accounting  principle.
            This  Statement  applies  to all  voluntary  changes  in  accounting
            principle.  It also  applies to changes  required  by an  accounting
            pronouncement  in the unusual instance that the  pronouncement  does
            not include  specific  transition  provisions.  When a pronouncement
            includes specific transition provisions,  those provisions should be
            followed.  The  provisions of SFAS 154 are effective for  accounting
            changes and corrections of error made in the period  beginning after
            December 31, 2005. We do not expect the adoption of SFAS 154 to have
            a  material   impact  on  our  financial   position  or  results  of
            operations.


                                      -28-
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                       (Unaudited- Prepared by Management)
                         (expressed in Canadian dollars)

                                 March 31, 2006

20.   COMPARATIVE FIGURES

      Certain of the comparative  figures have been reclassified to conform with
            the current period's presentation.


                                      -29-
<PAGE>

Item 2. Management's Discussion and Analysis or Plan of Operation.

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

The following  management's  discussion and analysis has been prepared as of May
11,  2006 to  provide a review of current  activities  and a  comparison  of the
performance and financial position of Devine Entertainment Corporation ("Devine"
or the  "Company") for the three month periods ended March 31, 2006 and 2005. It
should  be  read  in  conjunction  with  the  accompanying   unaudited   interim
consolidated financial statements and the notes therein.  Additional information
related to the Company is available  on Sedar at  www.sedar.com.  The  financial
data in this  document have been  prepared in  accordance  with  Canadian  GAAP.
References  to  Canadian  dollars,  Cdn$ or $ are to the  currency of Canada and
references to U.S. dollars or US$ are to the currency of the United States.

OVERVIEW

Devine is an integrated  developer and producer of high quality  children's  and
family films designed for the world-wide  theatrical motion picture,  television
broadcast and cable markets and the international home video and DVD markets.

The Company's  primary focus is the production of quality  children's and family
films,  including  broadly marketed  commercial  family films for the theatrical
release and broadcast internationally as well as specialty video and DVD markets
worldwide. Devine's library of films include 19 hours of award-winning broadcast
programs based on the lives of important  international  historical  figures and
other classic family stories,  which permit it access to sales in a wide variety
of outlets encompassing both the entertainment and educational markets. In 2004,
the Company completed and delivered  Bailey's  Billion$,  its first feature film
targeted at a family audience for release in theatres worldwide.

The  Company's  business  strategy  is to:  (i) focus on the  production  of its
high-quality  children's  and family  films in order to  continue  building  its
library of original  programs and (ii) increase its production and  distribution
through strategic alliances with major international distributors,  broadcasters
and co-producers.

FORWARD-LOOKING STATEMENTS

Readers are cautioned that actual results may differ materially from the results
projected in any  "forward-looking"  statements  included in this discussion and
analysis,  which  involve a number of risks and  uncertainties.  Forward-looking
statements are statements


                                      -30-
<PAGE>

that are not historical  facts,  and include (but are not limited to) statements
regarding the Company's  planned  production  slate and development  activities,
anticipated   future   profitability,    losses,   revenues,   expected   future
expenditures,  the Company's  intention to raise new  financing,  sufficiency of
working  capital  for  continued  operations,  and  other  statements  regarding
anticipated  future events and the  Company's  anticipated  future  performance.
Forward-looking  statements generally can be identified by the words "expected",
"intends", "anticipates", "feels", "continues", "planned", "plans", "potential",
"with a view to", and similar  expressions or variations thereon, or that events
or  conditions  "will",   "may",   "could"  or  "should"  occur,  or  comparable
terminology referring to future events or results.

The Company's actual results could differ  materially from those  anticipated in
these  forward-looking  statements as a result of numerous factors.  The Company
assumes no responsibility to update the information contained herein.

FIRST QUARTER HIGHLIGHTS

The Company's first quarter activities in 2006 were focused on preparing its new
production  slate  for 2006 and 2007,  specifically  the new  primetime  mystery
series  for  ChumCity,  Across  the  River to Motor  City and the  Canada-France
co-production  of The Writers'  Specials.  Overall  revenues  from the Company's
proprietary  library of $163,860  were lower than for the same period  2005,  as
expected,  and reflected that the Company's feature film, Bailey's Billion$, has
completed its first sales cycle generating over $6.1 million in revenues in 2004
and 2005.

      o     The Company's  proprietary film library continued to perform well in
            the three  months  ended  March 31,  2006,  generating  $163,860  in
            revenues.

      o     The  Company  reported a modest net loss of  $150,577or  ($0.00) per
            share in the three  months  ended March 31, 2006 that  reflected  an
            increased  operating costs due to the initial  expenses  incurred to
            prepare its new production slate for 2006 and 2007.

RESULTS OF OPERATIONS FOR THE FIRST QUARTER ENDED MARCH 31, 2006 AND 2005

Revenues

The  Company's  first quarter  revenues in 2006  decreased by $314,376 or 66% to
$163,860 as compared to $478,236 for the same period in 2005.


                                      -31-
<PAGE>

The Company's  proprietary  film library  continued to perform well in the three
months ended March 31,  2006,  generating  $163,860 in revenues.  $79,004 of the
revenue was derived  from DVD,  video and  ancillary  publishing  sales in North
America,  $68,723  from a broadcast  sale to France 5 and $16,133  from sales of
distribution rights in the former Yugoslavia and Brazil of Bailey's Billion$.

DVD, video and ancillary  publishing revenues generated by the Company's library
of  proprietary  films  decreased by  approximately  47% to $79,004 in the three
months ended March 31, 2006 as compared to $150,299 for the same period in 2005.

The most dramatic, but expected change came as the Company's first feature film,
Bailey's  Billion$  completed its first sales cycle in 2005. In the three months
ended  March 31,  2006  revenues  from  Bailey's  Billion$  distribution  rights
decreased by 94% to $16,133 as compared to $293,000 for the same period in 2005.

Reflecting the fact that the film library revenues in the first quarter 2006 are
derived  primarily  from sales in France,  the United  States and Canada and the
revenues  from the  sales  of  Bailey's  Billion$  came  from a sale of  foreign
distribution rights outside North America,  the Company's revenues by geographic
location, based on the location of customers were as follows:

                                                   Mar. 31 2006     Mar. 31 2005
                                                   ------------     ------------
                                                        $                $
Revenue
      Canada                                           6,900             116,000
      United States                                   72,100              69,000
      France                                          68,700              99,000
      Italy                                          188,000
      Other foreign                                   15,400                  --
      Europe - Other                                     800               6,000
                                                     -------             -------

                                                     163,900             478,000
                                                     =======             =======

Earnings (loss) per Common Share (EPS)

In the  first  quarter  of  2006,  the  Company's  adjusted  net loss for EPS is
$150,577 or ($0.00) per common  share  (basic),  as compared  with  adjusted net
income of $22,477 or ($0.00) per common share for the same period in 2005. These
results  reflect that the first quarter is generally the most modest quarter for
the Company's sales and that the Company's first quarter activities in 2006 were
focused on preparing its new  production  slate for 2006 and 2007,  specifically
the new primetime  mystery  series for ChumCity,  Across the River to Motor City
and the Canada-France co-production of The Writers' Specials.


                                      -32-
<PAGE>

Shareholders' Equity

Shareholders'  equity was  $5,025,047  reflecting  a decrease of  $146,977  from
$5,172,024 as at December 31, 2005.

EBITDA

EBITDA, defined as earning before interest,  taxes,  depreciation,  amortization
and gains on settlement of debt  decreased by $375,309 to ($72,117) in the first
quarter of 2006, as compared to $303,192 for the same period in 2005.

EBITDA is a  non-GAAP  financial  measure.  Management  believes  EBITDA to be a
meaningful   indicator  of  the  Company's   performance  that  provides  useful
information to investors regarding the Company's financial condition and results
of  operations.  EBITDA is a non-GAAP  financial  measure  commonly  used in the
entertainment  industry  and by  financial  analysts  and  others who follow the
industry to measure operating performance.  While management considers EBITDA to
be an  important  measure of  comparative  operating  performance,  it should be
considered  in addition  to, but not as a  substitute  for, net income and other
measures of financial  performance reported in accordance with GAAP. EBITDA does
not  reflect  cash  available  to fund  cash  requirements.  Not  all  companies
calculate  EBITDA in the same  manner and the  measure as  presented  may not be
comparable to similarly-titled measures presented by other companies.


                                      -33-
<PAGE>

Operating expenses

The Company's operating expenses for the three month period ended March 31, 2006
increased by $57,333 or approximately  33% to $232,377,  as compared to $175,044
in the  same  period  in  2005,  reflecting  that the  Company's  first  quarter
activities in 2006 were focused on preparing its new  production  slate for 2006
and 2007, specifically the new primetime mystery series for ChumCity, Across the
River  to  Motor  City  and  the  Canada-France  co-production  of The  Writers'
Specials.

Production and Development Activity

The Company  continues to develop new projects in order to secure new production
activity.

Primary  among them is a new primetime  television  series in  association  with
Jonsworth  Productions and CHUM  Television,  entitled Across the River to Motor
City,  with  commitments  from CHUM and other Canadian  funding sources that the
Company  expects will commence  pre-production  in the second  quarter and begin
principal photography in the fall of 2006.

The Company has also entered into an initial  agreement to co-develop,  with the
intent of co-producing in the future,  a new series of Writers'  Specials with a
co-producer  in France.  Pre-sale  commitments  from  France 5 and TPS  Jeunesse
support the Company's  expectation  that production on the new series will begin
within approximately 12 months

Projects which include initial  participation and support of funds from Telefilm
Canada,  Astral  Communications and Corus Entertainment are feature films and TV
movies entitled Red, Miracle Journey,  and October 7, 1944. The Company has also
acquired  the  rights and is  actively  developing  additional  films and series
projects  targeted to the worldwide  family audience  including  Revolving Door,
Quarterback, Fat Camp and Humchucker.

Investment in Film and Television Programs and Recordings

The  Company  reviews  and  revises  the  estimated  fair  market  value  of its
investment in film,  television programs and recordings as required on a regular
basis.  Capitalized  film costs are stated at the lower of  unamortized  cost or
estimated fair value on an individual  film basis.  For the  proprietary  films,
television  programs and recordings produced by the company, a maximum period of
ten years after the delivery of the  production is used in  accordance  with SOP
00-2 to estimate  fair value.  Development  costs which are  expected to benefit
future periods are also  capitalized.  If the property under development has not
been set for  production  within three  years,  the costs  associated  with such
property are written off to income.


                                      -34-
<PAGE>

Amortization  expenses  as at  March  31,  2006  for the  Company's  library  of
completed television programs and recordings and motion picture totaled $84,742.
As at March 31, 2006, the Company's  investment in its proprietary  film library
of completed  television  programs and  recordings  was  estimated as $1,642,670
after accumulated  amortization.  The Company's investment in its motion picture
Bailey's Billion$ was estimated as $3,230,377 after accumulated amortization and
the Company's  investment in projects in development was estimated as $2,080,392
as per the following table:

<TABLE>
<CAPTION>
                                                                                              March 31, 2006    Dec. 31, 2005
                                                                            Accumulated       --------------    -------------
                                                              Cost          Amortization            Net              Net
                                                              ----          ------------      --------------    -------------

<S>                                                        <C>               <C>               <C>               <C>
Completed television programs and recordings               $16,008,627       $14,365,957       $ 1,642,670       $ 1,723,043
Completed Motion picture - Bailey's Billion$                 6,969,564         3,739,187         3,230,377         3,241,219
Projects in progress                                         2,080,392              --           2,080,392         1,883,846
                                                           -----------       -----------       -----------       -----------
                                                           $25,058,583       $18,105,144       $ 6,953,439       $ 6,848,108
                                                           ===========       ===========       ===========       ===========
</TABLE>

Ultimate revenue estimates for the Company's  completed motion picture are based
on in-depth  discussions with and estimates provided by experienced  third-party
distributors and sales agents,  including the contracted foreign sales agent and
United States distributor.  Each of these distributors has well over 20 years of
experience  in its  area of  sales  and  distribution.  The  third  party  sales
estimates  and the  agreements  have  been  reviewed  and  approved  the  motion
picture's  co-producers,  copyright  purchasers and production  lending bank and
them  discounted  by the  Company  in an  effort  to  provide  conservative  and
realizable ultimate revenue estimates.

In the  United  States,  management  has  used  the  Company's  twenty  years of
experience with broadcasters in conjunction with the United States distributor's
estimates  for three windows over ten years as a basis of its  television  sales
estimates.  With regard to DVD/video sales  estimates,  the Company has reviewed
distributors' estimates and compared them to the Company's historical sales. P&L
models based on these sales estimates and  incorporating  the distribution  fees
and expenses defined in the Company's  distribution  agreements assuming between
500,000 to  1,000,000  units  sales over ten years with  average  net revenue of
$4.26 (U.S.) per unit were discounted and support what  management  believes are
conservative ultimate revenue estimates.  The estimates were based on an initial
release at a retail pricing of $24.98 (U.S.) for rental and initial sell through
release and  subsequent  drops in pricing to $14.98  (U.S.) and $12.98 (U.S.) as
the DVD  release  migrates  to  distribution  in mass  market  sell-through  and
discount  markets over the ten-year  period.  The Company compared and supported
this figure with industry  standards and  published  unit sales for  comparative
family feature films and then  discounted  them  conservatively  and modeled the
estimates to incorporate the  distribution  fees and expense  limitations in its
various  distribution  agreements.  The models provided net revenue estimates of
approximately $5 million (U.S.),  which the Company then


                                      -35-
<PAGE>

discounted to less than fifty percent (50%),  which in effect  reflects  750,000
unit sales over ten years at the lowest price and margin.

For  estimates in the foreign  territories,  the Company has relied on its sales
agents  estimates on an all rights basis per territory.  The Company's  ultimate
revenue  estimates  were based on bank  approved  estimates  of initial  advance
payments  per  territory  which do not  take  into  account  any  second  window
television  license values and longer term  DVD/video  royalty  payments.  These
estimates were then  discounted to match the discounted  United States  ultimate
revenue  estimates,  conservatively  assuming that all of the other  territories
around the world would not exceed the revenues from the United States market.

The Company believes that ultimate revenue  estimates for Bailey's  Billion$ are
conservative and realizable,  notwithstanding  the fact that management  reviews
the estimates on a regular basis and may adjust them down  depending on changing
results and market  conditions  over the ten year period that  started  with the
delivery of the film in 2004.

In the  nine-year  period from 1997 to 2005,  The  Inventors'  Specials  revenue
totaled approximately $6,120,000 or $680,000 per annum. For the most recent five
years,  Inventors'  Specials revenue  averaged  $280,000 per annum. The Artists'
Specials generated  approximately  $5,543,000 in its first eight years after the
original  release,  which is an average of $693,000 per annum. For the last five
years,  Artists'  Specials revenue averaged  $249,000.  The Composers'  Specials
continues to generate significant revenues with $632,333 in 2005, but given that
the ten year period  since its delivery  has  expired,  the value of  Composers'
Specials is not  reflected as an asset as part of the  Company's  investment  in
film and television programs and recordings.

The Company  believes that these lower results for the  Inventors'  and Artists'
Specials in the most recent years reflect the  challenging  conditions  industry
wide in the  international  markets  resulting  from the collapse of  investment
markets that had fuelled high valuations for content, the overestimated benefits
for the models of media  convergence  and the promise of media  deregulation  in
Europe that proved challenging in the context of 9/11, as well as the challenges
associated  with the  Company's  debt,  equity and capital  position  which were
respectively settled resulting in significant gains, improved  significantly and
successfully reorganized in 2004.

The Company  estimates average annual ultimate revenue for the Artists' Specials
at  $438,333  per year for the next three  years and  estimates  average  annual
ultimate revenue for the Inventors'  Specials at $380,000 per year for 2006. The
Company believes that its current  ultimate  revenue  estimates for the Artists'
Specials  and  Inventors'  Specials  are  reasonable  and  realizable  given the
multi-year nature of television contracts and that annual revenue can fluctuate.
The Company's new  agreements  recently  concluded with sales agents in Germany,
France,  Italy, Spain, Japan and Korea, point both to the renewed  opportunities
resulting from the Company's improved financial position and also to an industry
wide renewal of sales of broadcast licenses in international  markets.  As well,
the Company's experience supports the fact that when a new series of its branded
proprietary


                                      -36-
<PAGE>

library of award-winning  films is produced,  sales for the previously  produced
library  of  films  are  concluded  concurrent  with  commitments  for  the  new
production  on a  territory-per-territory  basis.  The Company  expects to begin
production  of a new series  based on landmark  authors  entitled  The  Writers'
Specials in 2006 and has already  begun to pre-sell the  broadcast  licenses for
the Writers  Specials  and, in  conjunction,  license  the  Company's  completed
television programs as well.

While the  specific  revenues  for each series vary from year to year,  over the
long term, the Company's DVD and ancillary  product sales have averaged  between
$195,000 and $250,000 per series, per year.

DEVINE LIBRARY DVD/Video, publishing and Ancillary sales
(includes dvd and video sales, music publishing royalties, teachers guides,
stock footage rights, rentals of props etc.)

                                                       Inventors
                                    Composers - DVD       DVD        Artists DVD
                         Yr TOTAL      Ancillary       Ancillary      Ancillary
                         --------   ---------------    ---------     -----------
                2000     $731,837      $145,590         $397,147      $189,100
                2001     $748,178      $ 37,880         $354,253      $356,045
                2002     $602,443      $166,427         $241,577      $194,439
                2003     $623,918      $187,603         $230,907      $205,408
                2004     $346,712      $153,977         $ 94,566      $ 98,169
                2005     $868,574      $573,533         $168,610      $126,431

      6 year average     $653,610      $210,835         $247,843      $194,932
                         --------      --------         --------      --------

% increase 2005/2004         150%         272.%              78%           29%

There have been  significant  increases in the  Inventors (up 78% from 2004) and
Artists (up 29% from 2004) DVD sales in 2005,  but the most  dramatic  increases
have come in Composers  sales (up 272% from 2004) primarily as a result if a new
agreement in 2005 with a major educational publisher through our existing client
Hal  Leonard  for the  inclusion  of our series in their  Music  Catalogue.  The
Company is pursuing new DVD sales agreements with the same educational publisher
for the Inventors, for inclusion starting in their Social Sciences Catalogue and
for the Artists in their Arts  Catalogue  starting in 2006 and 2007. The Company
estimates  that  this  distribution  arrangement  should  result  in the  annual
increase  in  sales  of each  series  of about  $125,000,  based on the  results
achieved by Composers. In addition, the Company is negotiating with a Utah based
telemarketer who has had great success with the Company's titles in 2000 through
2002, and a new VOD agreement in Italy as well as a DVD kiosk distributor in the
Balkans that the Company believes will be finalized in 2006.

The table below details  Inventors  DVD/ancillary  sales currently being pursued
and the  estimated  values - in addition to  existing  DVD  accounts in 2005 and
2006:


                                      -37-
<PAGE>

Year                                           2006
----                                           ----
Educational Science Catalogue                125,000
Utah telemarketer                             45,000
Italy VOD                                     90,000
Balkan DVD Kiosks                             90,000
New Foreign DVD sales                         25,000
                                             -------
Total additional expected                    375,000
Expected base                                200,000
Anticipated Annual DVD sales                 575,000

The table below details Artists  DVD/ancillary sales currently being pursued and
the estimated values - in addition to existing DVD accounts through 2008:

Year                                             2006         2007         2008
                                               -------      -------      -------
Educational Art Catalogue                      125,000      125,000      125,000
Utah Telemarketer                               45,000       45,000       45,000
Italy VOD                                       90,000            0            0
Balkan DVD Kiosks                               90,000       90,000       90,000
New Foreign DVD sales                           25,000       25,000       25,000
                                               -------      -------      -------
Total additional expected                      375,000      285,000      285,000
Expected base                                  150,000      150,000      150,000
                                               -------      -------      -------
Anticipated Annual DVD sales                   525,000      435,000      435,000

In addition to the new DVD sales and agreements  currently  estimated above, the
Company is pursuing new broadcast  licenses that it expects will be finalized in
2006.  They  include a new sale in France being  concluded by the  co-production
company  we are  working  with on our new series on Writers as well as a license
for all three series in the US, a license for French Canada,  Holland,  the U.K.
and licenses in the territories of Japan, Korea, Spain, Italy, and Germany noted
in our  previous  responses.  Note the  estimates  and  timing per series in the
following tables:

Expected  Inventors  Broadcast  sales  and  estimated  values - in  addition  to
existing DVD accounts in 2005 and 2006:

                                                         Amount            Year
                                                         ------            ----
US Broadcast                                             90,000            2006
French Canada Broadcast                                  90,000            2006
France Broadcast                                         67,500            2006
German Broadcast                                        120,000            2006
UK Broadcast                                            150,000            2006
Spain, Japan, Korea, Holland Italy Broadcast            150,000            2006
Other ex-North America Broadcast                         25,000            2006
                                                        -------
Anticipated total in 2006                               692,500


                                      -38-
<PAGE>

Expected Artists  Broadcast sales and estimated values - in addition to existing
DVD accounts in 2006 through 2008:

Years                                              2006-2007           2008
-----                                              ---------           ----
US Broadcast                                          90,000          60,000
English and French Canada Broadcast                   90,000          60.000
France Broadcast                                      67,500          75,000
German Broadcast                                     120,000               0
UK Broadcast                                         150,000          75,000
Spain, Japan, Korea, Holland Broadcast               150,000          75,000
Other ex-North America Broadcast                     175,000          75,000
                                                     -------         -------
Anticipated total over 3 years                       842,500         345,000

For Inventors,  at the end of 2005, the Company used the following  estimates to
arrive at Ultimate Revenue:

---------------------------------------------------------------------------
 Year               Total          Dvd sales       Broadcast licenses
---------------------------------------------------------------------------
 2006             1,200,000         550,000              650,000
                  ---------         -------              -------
---------------------------------------------------------------------------

Due to the short period  available to derive the  revenue,  the Company  further
discounted Total Revenue to $380,000.

For Artists,  at the  beginning of fiscal 2005,  the Company used the  following
estimates to arrive at our Ultimate Revenue:

--------------------------------------------------------------------------------
       YEAR              Total           Dvd sales        Broadcast licenses
--------------------------------------------------------------------------------
       2006            1,025,000          500,000               525,000
--------------------------------------------------------------------------------
       2007             700,000           400,000               300,000
--------------------------------------------------------------------------------
       2008             725,000           400,000               325,000
                        -------           -------               -------
--------------------------------------------------------------------------------
       Total           2,450,000         1,300,000             1,150,000
--------------------------------------------------------------------------------

As in prior  periods,  the Company used 75% to arrive at an Ultimate  Revenue of
$1,500,000.  The Company has further  discounted  Total Revenues and anticipates
using Ultimate Revenues  Estimates of $1,315,000 for the Artists through the end
of 2008.

The  Company  believes  that  specific   broadcast   licenses  and  distribution
agreements currently in place and negotiations for the Company to commence a new
production  of The Writers'  Specials in 2006 will support the renewed  sales of
the  Company's  film library in the near future.  Nonetheless,  if sales are not
concluded at the value and within the time period anticipated,  the Company will
revise  and  disclose  accordingly  the  ultimate  revenue  calculation  and the
corresponding amortization of the applicable programs.

Annually,  management  reviews the estimate of total remaining  ultimate revenue
and the fair value of the capitalized film costs. As a result of the review, the
Company  reduced the carrying value of its completed film,  television  programs
and recordings by $1,373,356


                                      -39-
<PAGE>

(2004 -  $1,393,826)  and reduced the  carrying  value of its  completed  motion
picture by  $1,979,997  (2004 -  $1,744,151).  The  Company  expects to amortize
approximately  $770,000 for completed  television  programs and recordings costs
and $353,000 for completed motion picture costs during the next fiscal year.

As at year end 2005, 89% of competed  television programs and recordings and 53%
of completed motion picture costs have been amortized.

The Company expects 100% of completed television programs and recordings and 70%
of completed motion picture costs will be amortized by December 31, 2008.

As at December  2010,  over 80% of the  completed  motion  picture costs will be
amortized.  The remaining  period of  amortization  for the  completed  projects
ranges from one to eight years at December 31, 2005.

Capital stock

The Company  issued no shares in the three month period ended March 31, 2006. At
December 31, 2005, the Company had 35,353,508 common shares and 494,550 Series 1
Class A preferred shares outstanding.

Related Party Transactions

During the three month period ended March 31,  2006,  $73,749  (March 31, 2005 -
$53,247) of fees were paid or accrued to  corporations  controlled by two of the
directors for writing, directing and producing services. These transactions have
been  measured  at  exchange  amount,  which  is  the  amount  of  consideration
established and agreed to by the related parties and which  management  believes
reflect  prevailing  market  rates.  Included  in  accounts  payable and accrued
liabilities at March 31, 2006 was $52,608 (December 31, 2005 $26,304).

Limited Partnerships

During  2004  the  Company  entered  into  a  services   agreement  with  Devine
Entertainment  Limited  Partnership  ("Partnership").  Under  the  terms  of the
agreement,  the Partnership incurred certain expenses,  until December 31, 2004,
relating to the following  services  required in connection  with the conduct of
business of the Company:

      o     Labour, employment and all other "direct" services;

      o     Marketing  services,  including  production  and  placement  of  all
            required advertising;

      o     The incurring of other operating  expenses,  excluding  payments for
            the purchase of real property,

      o     Administrative services

      o     Certain  development   services  required  in  connection  with  new
            projects of the business


                                      -40-
<PAGE>

In return,  the  Partnership  is entitled to royalty  payments  equal to 0.8% of
gross  revenue of the Company for calendar  years from 2004 to 2014,  payable 60
days after the completion of each calendar year in connection  with the expenses
incurred during such year.

Under  the  terms  of the  services  agreement,  the 2004  Partnership  advanced
$846,350 to the Company for the 2004 services,  which was  originally  accounted
for as royalty interest payable. Included in the $846,350 was $494,550 which was
initially  loaned from the Company to an unrelated  company  which  subsequently
loaned these funds to the limited partners.

The 2004  Partnership  was also  granted  the right and option to  exchange  its
rights (including the 2004 royalties) under the services  agreement,  at anytime
until December 31, 2004, for 380,450 common shares and 494,550  preferred shares
of the Company.

On December 22, 2004,  the  Partnership  exercised  its right under the services
agreement and the royalty interest payable was reclassified to capital stock.

Included  in the cash,  as a  reduction,  is bank  indebtedness  of $Nil (2004 -
$94,665)  and in accounts  payable and accrued  liabilities  is $35,501  (2004 -
$108,151) of the Limited Partnership.

During the first quarter of 2005, the Company entered into a services  agreement
with  the QCF  2005  Limited  Partnership  ("QCF"),  which to date has not been
finalized.  Under the terms of the  agreement,  QCF incurred  certain  expenses,
until  December  31,  2005,  relating  to the  following  services  required  in
connection with the conduct of business of the Company.

      o     Labour, employment and all other "direct" services;

      o     Marketing  services,  including  production  and  placement  of  all
            required advertising;

      o     The incurring of other operating  expenses,  excluding  payments for
            the purchase of real property,

      o     Administrative services

      o     Certain  development   services  required  in  connection  with  new
            projects of the business

In return,  the Partnership would be entitled to a royalty equal to a percentage
of gross revenue of the Company in connection with the expenses  incurred during
such year. The accounts of this variable  interest  entity have been included in
the consolidated financial statements of the Company.

In December 2005, The Devine Entertainment Film Library Limited  Partnership,  a
limited  partnership  formed and registered  under the Limited  Partnerships Act
(Ontario) on March 8, 2004, acquired Devine Entertainment Corporation's interest
in a defined part of the Company's proprietary film library for $6.8 million, as
valued by an outside  valuator.  The  Company  has  provided  financing  for the
transaction,  and has entered into a


                                      -41-
<PAGE>

financing agreement and will enter into a management  agreement with the Limited
Partnership in order to manage the  exploitation  and expand the distribution of
the properties.  Under these agreements the Company will receive management fees
and interest  revenue and the Company  will  maintain a call right for between a
minimum of 70% and a maximum 100% interest in the library  assets.  The accounts
of  this  variable  interest  entity  have  been  included  in the  consolidated
financial statements of the Company.

Liquidity and Capital Resources

The  Company's  cash on hand as at March 31,  2006 was  $189,688  as compared to
$239,990 as at December 31, 2005, a decrease in cash position of $50,302.

The Company has no bank debt.

The Company  expects to  maintain  renewed  profitability  from  operations  and
expects that  proceeds from sales of its film library and new  production  slate
will generate  additional revenues and positive cash flow through the balance of
2006.

The Company's working capital deficiency,  although reduced, remains significant
but is  mitigated by the fact that the Company is working  towards  successfully
converting  its  $1,519,290 of outstanding  convertible  debentures  into common
shares in 2005 and 2006.

Nonetheless,  the Company remains unable to service its convertible debt and the
Company will require additional  working capital from its production  activities
or corporate  financing in 2006. The Company intends to actively seek additional
funding in calendar 2006.

OUTLOOK

The Company is optimistic  about its renewed  production for 2006 and 2007. With
commitments in hand from CHUM Television and other Canadian funding sources, the
Company  expects  to begin  production  of the  first  six  episodes  of the new
primetime series,  Across the River to Motor City,  budgeted at $8,100,000 later
this year. In addition,  pre-sale  commitments from  broadcasters  France 5, TPS
Jeunesse,  TVOntario  and  Knowledge  network  for the  Company's  new  Writers'
Specials series support the Company's expectations that at least one other major
production will commence in the next 12 months.

In  addition,   the  Company  is  optimistic  about  the  successful  commercial
exploitation  of  Bailey's  Billion$,  which was  released  in DVD in the United
States and Canada in April 2006 as well as the continued revenues generated from
the Company's proprietary film library.


                                      -42-
<PAGE>

The Company  expects that the  successful  settlement and  restructuring  of the
majority of the Company's debt and the successful  financings  completed in 2004
and 2005 will bring new  opportunities  for  additional  corporate  and  limited
partnership financings in 2006 and the Company is actively pursuing financing to
produce new films,  develop its marketing and  distribution  activities in North
America and abroad and for its general working capital requirements.

The Company is now moving forward with a  significantly  improved  balance sheet
and the  opportunity to attract new capital  resources for its ongoing  business
objectives. While many business risks remain and the success of these strategies
cannot be guaranteed,  the Company expects that the successful completion of all
or some of these strategic  objectives will assist with the continued renewal of
the Company's growth and profitability through 2006 and into the future.

OTHER INFORMATION

Additional information relating to Devine Entertainment  Corporation is on SEDAR
at www.sedar.com

Disclosure of outstanding share data

As of May 11, 2006 the Company has the following voting or equity  securities or
securities  convertible or exercisable into voting or equity securities,  issued
and outstanding:

Common shares issued & outstanding: 35,353,508
Series 1 preferred shares issued and outstanding: 494,550
Options: 3,280,000 outstanding options to purchase 3,280,000 common shares
Warrants: 4,877,450 outstanding to purchase 4,877,450 common shares
Debentures:  1,519,290 convertible into 3,301,600 common shares


                                      -43-
<PAGE>

Item 3. Controls and Procedures.

      The  Company's  Chief  Executive   Officer  and  Chief  Financial  Officer
(collectively,  the "Certifying  Officers") are responsible for establishing and
maintaining  disclosure  controls and procedures for the Company.  Such officers
have concluded  (based upon their evaluation of these controls and procedures as
of a date within 90 days of filing of this report) that the Company's disclosure
controls and procedures are effective to ensure that information  required to be
disclosed by the Company in this report is accumulated  and  communicated to the
Company's management, including its Certifying Officers as appropriate, to allow
timely decisions  regarding required  disclosure.  The Certifying  Officers also
have indicated that there were no significant  changes in the Company's internal
controls  or  other  factors  that  could  significantly  affect  such  controls
subsequent to the date of their evaluation, and there were no corrective actions
with regard to significant deficiencies and material weaknesses.

                           PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

      Neither the Company nor any of its property is the subject of any material
pending legal proceeding.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

      (a)   Not applicable.

      (b)   In December  2004,  the Company  issued  494,500 shares of preferred
            stock designated as Series 1 Preferred Shares.  The holders of these
            shares,  in  priority  to the  holders  of the  Common  Shares,  are
            entitled to receive a  cumulative  annual  dividend of 9.1 cents per
            share.  Absent  the  consent  of all of the  holders of the Series 1
            Preferred Shares,  dividends may not be paid on the Common Shares if
            dividends are then due and owing on the Series 1 Preferred Shares.

      (c)   Not applicable.

      (d)   Not applicable.

Item 3. Defaults Upon Senior Securities.

      (a)   Note 7 to  the  interim  consolidated  financial  statements  of the
            Company dated March 31, 2006 filed herewith is  incorporated  herein
            by reference.

      (b)   Not applicable


                                      -44-
<PAGE>

Item 4. Submission of Matters to a Vote of Security Holders.

      (a)   Not applicable.

      (b)   Not applicable.

      (c)   Not applicable.

      (d)   Not applicable.

Item 5. Other Information.

      (a)   Not applicable.

      (b)   Not applicable.

Item 6. Exhibits and Reports on Form 8-K.

      (a)   Exhibits

            i.    99.1 Certification of Chief Executive Officer pursuant to Rule
                  13a-14 (a)

            ii.   99.2 Certification of Chief Financial Officer pursuant to Rule
                  13a-14 (a)

            iii.  A-1  Certification  of Chief Executive  Officer pursuant to 18
                  U.S.C.  Section 1350 as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601 (b)
                  (32) (ii) of Regulation S-K).

            iv.   A-2  Certification  of Chief Financial  Officer pursuant to 18
                  U.S.C.  Section 1350 as adopted pursuant to Section 906 of the
                  Sarbanes-Oxley Act of 2002 (furnished pursuant to Item 601 (b)
                  (32) (ii) of Regulation S-K).

      (b)   Reports on Form 8-K

            None.


                                      -45-
<PAGE>

                                   SIGNATURES

      Pursuant  to the  requirements  of Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                        DEVINE ENTERTAINMENT CORPORATION

                                        By          /s/ David Devine
                                           -------------------------------------
                                                      David Devine
                                           Director, Chairman of the Board
                                           President and Chief Executive Officer

Dated: May 11, 2006

      Pursuant to the  requirements of the Securities  Exchange Act, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the dates indicated.

Signature               Title                                          Date
---------               -----                                          ----

/s/ David Devine        Director, Chairman of the Board             May 11, 2006
                        President and Chief Executive Officer

/s/ Richard Mozer       Director, Vice-Chairman of the              May 11, 2006
                        Board, Chief Financial Officer,
                        Treasurer and Secretary


                                      -46-