UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

(Mark One)

|X|   Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
      of 1934

      For the quarterly period ended June 30, 2005

|_|   Transition report under Section 13 or 15(d) of the Exchange Act

      For the transition period from _____________ to _____________

                         Commission File Number 0-51168

                        Devine Entertainment Corporation
        (Exact Name of Small Business Issuer as Specified in Its Charter)

              Ontario, Canada                           Not Applicable
      (State or other Jurisdiction of                  (I.R.S. Employer
       Incorporation or Organization)                 Identification No.)

         Suite 504, 2 Berkeley Street, Toronto, Ontario, Canada M5A 2W3
                     (Address of Principal Executive Office)

                                 (416) 364-2282
                           (Issuer's Telephone Number)

                                 Not Applicable
              ----------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

      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 November 11, 2005, the issuer had 33,353,508 Common Shares
outstanding. Transitional Small Business Disclosure Format (check one): Yes |_|
No |X|


<PAGE>

                          PART I--FINANCIAL INFORMATION

Item 1. Financial Statements.

                        DEVINE ENTERTAINMENT CORPORATION

                    INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  June 30, 2005


                         (Expressed in Canadian Dollars)

<PAGE>
                                                                         PAGE II


                        DEVINE ENTERTAINMENT CORPORATION

                       INTERIM CONSOLIDATED BALANCE SHEET
                      (Unaudited - Prepared by Management)
                         (Expressed in Canadian Dollars)

                                     ASSETS

                                                      June 30         Dec  31
                                                       2005             2004
                                                   ------------    ------------
Current

Cash                                               $    292,710    $    104,727
Accounts receivable                                     156,585         655,482
Inventory                                                89,094          26,013
Tax credits receivable                                       --         299,097
Prepaid and sundry assets                                94,350          42,066
                                                   ------------    ------------

                                                        632,739       1,127,385

Advances receivable                                     494,550         494,550
Investment in film, television
 programs and recordings (Note 4)                     7,918,946       9,407,576
Deferred financing charges                                8,500          36,123
Property and equipment (Note 5)                          27,501          31,727
                                                   ------------    ------------
                                                   $  9,082,236    $ 11,097,361
                                                   ============    ============

                                  LIABILITIES

Current

Bank film production loan (Note 6)                 $         --    $    919,664
Accounts payable and accrued liabilities              1,169,171       1,041,147
Convertible debentures (Note 7)                       1,519,290       1,519,290
Deferred revenue                                             --       2,658,971
                                                   ------------    ------------
                                                      2,688,461       6,139,072
                                                   ------------    ------------

Contingency and commitments (Notes 9 and 18)

                              SHAREHOLDERS' EQUITY

Capital stock (Note 10)                            $ 12,250,285    $ 11,703,437
Contributed surplus (Note 12)                           997,186       1,051,886
Deficit                                              (6,853,696)     (7,797,034)
                                                   ------------    ------------
                                                      6,393,775       4,958,289
                                                   ------------    ------------
                                                   $  9,082,236    $ 11,097,361
                                                   ============    ============

See accompanying notes to interim consolidated financial statements.

<PAGE>
                                                                        PAGE III

                        DEVINE ENTERTAINMENT CORPORATION

             INTERIM CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                      (Unaudited - Prepared by Management)

            FOR THE PERIOD ENDED JUNE 30, 2005 AND DECEMBER 31, 2004
                         (Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
                                                                         Stock                           Contributed
                                   Common Shares          Warrants      Options      Preferred Shares      Surplus        Deficit
                              ------------------------   ----------    ---------    -----------------     ---------     -----------
                                  #              $           #             #           #         $            $               $
                                                                                                          (Note 12)
<S>                           <C>           <C>          <C>           <C>          <C>       <C>         <C>           <C>
BALANCE,
January 1, 2004               14,261,838     9,393,316      550,000           --         --        --       466,313     (12,095,951)

ISSUED
- on settlement of
  bank loans                     100,000        10,000           --           --         --        --            --              --
- on settlement
  of long-term debt            2,042,054       204,205    1,830,000           --         --        --        18,300              --
- pursuant to private
  placement                    1,100,000       121,000      866,616           --         --        --        99,000              --
- pursuant to
  private placement            5,160,000       464,400    2,580,000           --         --        --        51,600              --
- for cash consideration         100,000        10,000           --           --         --        --            --              --
- on settlement of
  advances from
  related parties              4,717,082       471,708           --           --         --        --            --              --
- on settlements of
  accounts payable and
  accruals                     4,022,918       461,569           --           --         --        --       371,823              --
Less: share issuance
  costs                               --       (28,111)          --           --         --        --            --              --
- on conversion of
  warrants                       366,666        55,000     (366,666)          --         --        --       (55,000)             --
- issued to Devine
  Limited Partnership            380,450       351,800           --           --    494,550   494,550            --              --
- tax benefits utilized
  by limited
  partnership                         --      (306,000)          --           --         --        --            --              --
- on issuance of stock
  options                             --            --           --    3,435,000         --        --        99,850              --

NET INCOME                            --            --           --           --         --        --            --       4,298,917
                              ----------   -----------   ----------    ---------    -------   -------     ---------     -----------
BALANCE,
December 31, 2004             32,251,008    11,208,887    5,459,950    3,435,000    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 exercise  of
  stock options                  125,000        16,250           --     (125,000)        --        --        (3,750)             --
- issued for services
  rendered                       430,000        97,148           --           --         --        --            --              --
- expired
  options/warrants                    --            --      (32,500)     (10,000)        --        --            --              --

NET INCOME                            --            --           --           --         --        --            --         943,338
                              ----------   -----------   ----------    ---------    -------   -------     ---------     -----------
BALANCE,
June 30, 2005                 35,353,508    11,755,735    2,879,950    3,300,000    494,550   494,550       997,186      (6,853,696)
                              ==========    ==========   ==========    =========    =======   =======     =========     ===========

</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE>
                                                                         PAGE IV

                        DEVINE ENTERTAINMENT CORPORATION

                  INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
                      (Unaudited - Prepared by Management)
                         (Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
                                                 Three months ended June 30,      Six months ended June 30,
                                                     2005            2004            2005            2004
                                                     ----            ----            ----            ----
<S>                                              <C>             <C>             <C>             <C>
REVENUE                                          $ 2,892,261     $   357,305     $ 3,370,497     $   434,772
                                                 -----------     -----------     -----------     -----------
EXPENSES
Operating                                            214,791         275,648         389,835         352,576
Amortization
- film, television programs and recordings         1,729,802         169,901       1,986,838         229,997
- equipment                                            2,039           1,729           4,227           3,505
Write down of investment in film, television
      programs and recordings                             --       1,000,000              --       1,000,000
Gain on settlement of debt                                --      (4,039,825)             --      (4,039,825)
Interest                                              12,579        (155,280)         34,070        (114,961)
                                                 -----------     -----------     -----------     -----------
                                                   1,959,211      (2,747,827)      2,414,970      (2,568,708)
                                                 -----------     -----------     -----------     -----------

INCOME before income taxes                           933,050       3,105,132         955,527       3,003,480
                                                 -----------     -----------     -----------     -----------
Income taxes                                         334,804       1,400,000         334,804       1,400,000
Benefit of losses carried forward                   (322,615)     (1,400,000)       (322,615)      1,400,000
                                                 -----------     -----------     -----------     -----------
Provision for income taxes                            12,189              --          12,189              --
                                                 -----------     -----------     -----------     -----------

NET INCOME for the period                            920,861       3,105,132         943,338       3,003,480

DEFICIT, beginning of period                      (7,774,557)    (12,145,103)     (7,797,034)    (12,095,951)
                                                 -----------     -----------     -----------     -----------
DEFICIT, end of period                           $(6,853,696)    $(9,039,971)    $(6,853,696)    $(9,092,471)
                                                 ===========     ===========     ===========     ===========
EARNINGS PER SHARE (Note 11)
Basic                                            $      0.03     $      0.16     $      0.03     $      0.18
Fully Diluted                                          $0.02     $      0.16     $      0.03     $      0.18

THE WEIGHTED AVERAGE
SHARES - BASIC                                    35,103,783      19,188,014      33,950,801      16,724,926
       - FULLY DILUTED                            36,978,745      19,192,044      35,825,763      16,726,941

</TABLE>

See accompanying notes to interim consolidated financial statements.


<PAGE>
                                                                          PAGE V

                        DEVINE ENTERTAINMENT CORPORATION

                  INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
                      (Unaudited - Prepared by Management)
                         (Expressed in Canadian Dollars)
<TABLE>
<CAPTION>
                                                         Three months ended June 30,    Six months ended June 30,
                                                            2005            2004           2005           2004
                                                            ----            ----           ----           ----
<S>                                                      <C>            <C>            <C>            <C>
OPERATING ACTIVITIES
Net income for the period                                $   920,861    $ 3,105,132    $   943,338    $ 3,003,480
Gain on settlement of debt                                        --     (4,039,825)            --     (4,039,825)
Shares issued to settle accounts payable                      78,748             --         78,748             --
Shares issued for services rendered                               --             --         18,400             --
Investment in film, television programs and recordings      (333,323)    (2,235,185)      (498,208)    (3,151,165)
Write down of film library                                        --      1,000,000             --      1,000,000
Amortization - film, television programs
               and recordings                              1,729,802        169,901      1,986,838        229,997
             - Equipment                                       2,039          1,729          4,226          3,505
             - financing charges                               4,250          7,990         27,623         15,980
Change in non-cash components of
     working capital (Note 14)                            (2,179,997)     1,183,903     (1,848,318)     1,082,326
                                                         -----------    -----------    -----------    -----------
                                                             222,380       (806,355)       712,647     (1,855,702)
                                                         -----------    -----------    -----------    -----------
FINANCING ACTIVITIES
Increase in bank loans                                            --        107,961             --        658,253
Repayment of bank loans                                     (361,839)      (125,000)      (919,664)      (125,000)
Issuance of shares on conversion of warrants                 178,125        573,000        382,500        746,000
Issuance of shares on exercise of the options                     --             --         12,500             --
Repayment of long term debt                                       --       (445,000)            --       (445,000)
Increase in advances from related parties                         --        467,883             --        467,883
                                                         -----------    -----------    -----------    -----------
                                                            (183,714)       578,844       (524,664)     1,302,136
                                                         -----------    -----------    -----------    -----------
INVESTING ACTIVITIES
Decrease in investment in film, television
     programs and recordings                                      --             --             --         52,500
Purchase of property and equipment                                --             --             --         (3,750)
                                                         -----------    -----------    -----------    -----------
                                                                  --             --             --         48,750
                                                         -----------    -----------    -----------    -----------
CHANGE IN CASH                                                38,666       (227,511)       187,983       (504,816)

CASH, Beginning of period                                    254,044        465,126        104,727        742,431
                                                         -----------    -----------    -----------    -----------
CASH, End of period                                          292,710        237,615        292,710        237,615
                                                         ===========    ===========    ===========    ===========
SUPPLEMENTARY CASH FLOW INFORMATION
     Interest paid                                       $     9,702    $       173    $    18,423    $    41,119
     Income taxes paid                                        12,189             --         12,189             --
</TABLE>

See accompanying notes to interim consolidated financial statements.

<PAGE>
                                                                         PAGE VI

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005
                         (Expressed in Canadian Dollars)

1.    NATURE OF BUSINESS

      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.

      If the going concern  assumption  were not appropriate for these financial
      statements,  then adjustments would be necessary in 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, 2004, as set out in
      the December 2004 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  consolidated  financial statements
      for the year ended December 31, 2004.

      These  interim  consolidated  financial  statements  have been prepared in
      accordance with accounting  principles  generally  accepted in Canada that
      conforms, in all material respects, with U.S. GAAP, except as described in
      Note 16 to the interim financial statements.

<PAGE>
                                                                        PAGE VII

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005

3.    ADVANCES FROM LIMITED PARTNERSHIP

      During the first  quarter of 2005,  the  Company  entered  into a services
      agreement with the QCF 2005 Limited Partnership ("Partnership"). Under the
      terms of the agreement, the Partnership will incur 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 for the  calendar  years from
      2005 to 2015,  payable 60 days after the  completion of each calendar year
      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.

4.    INVESTMENT IN FILM, TELEVISION PROGRAMS AND RECORDINGS

<TABLE>
<CAPTION>
                                                              June 30, 2005       December 31, 2004
                                                              -------------       -----------------
                                                               Accumulated
                                                  Cost        Amortization        Net          Net
                                                  ----        ------------        ---          ---
<S>                                            <C>             <C>             <C>          <C>
Completed television programs and recordings   $16,030,809     $ 13,04,659     $2,956,150   $3,096,399
Completed Motion picture - Bailey's Billion$     7,146,016       3,607,531      3,538,485    5,407,622
Projects in progress                             1,424,311              --      1,424,311      903,555
                                               -----------     -----------     ----------   ----------
                                               $24,601,136     $16,682,190     $7,918,946   $9,407,576
                                               ===========     ===========     ==========   ==========
</TABLE>

      The Company  expects to amortize  approximately  $1,100,000  for completed
      television  programs and  recording  costs and  $1,900,000  for  completed
      motion picture costs during the current fiscal year.

      The Company  expects 98% of completed  television  programs and recordings
      and 62% of completed  motion  picture  costs will be amortized by December
      31, 2007.

      As at December 2011 over 80% of the completed motion picture costs will be
      amortized.

      The remaining  period of  amortization  for the completed  projects ranges
      from two to nine years at December 31, 2004.


<PAGE>
                                                                       PAGE VIII

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005

5.    PROPERTY AND EQUIPMENT

                                               June 30, 2005   December 31, 2004
                                               -------------   -----------------
                                                Accumulated
                                       Cost     Amortization     Net       Net
                                       ----     ------------     ---       ---
Computer and editing equipment       $177,922     $157,135     $20,787   $24,284
Furniture and fixtures                 58,193       51,479       6,714     7,443
                                     --------     --------     -------   -------
                                     $236,115     $208,614     $27,501   $31,727
                                     ========     ========     =======   =======

6.    BANK FILM PRODUCTION LOAN

                                                           June 30   December 31
                                                             2005       2004
                                                             ----      -----
      Term loan bearing interest at a fluctuating per
      annum rate equal to 1.25% plus the Base Rate of
      the Comerica Bank, repayable on November 30,
      2004, secured by a general security agreement
      against all the assets of one of the 100% owned
      subsidiaries of Devine Entertainment Corporation.
      On December 10, 2004, the loan was extended to
      April 4, 2005. This loan was used for the
      financing of the motion picture "Bailey's
      Billion$". The loan was repaid on May 24, 2005.      $    --   $   919,664
                                                           =======   ===========

      Interest on the above bank film  production  loan for the six month period
      ended June 30, 2005 totalled $18,423 (June 30, 2004 - $55,032).


<PAGE>
                                                                         PAGE IX

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005

7.    CONVERTIBLE DEBENTURES

      Convertible Debentures
                                                     June 30,       December 31,
                                                      2005              2004
                                                      ----              ----
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%. The principal was re-payable in four
            quarterly  payments during 2001 of $25,000 plus interest.  The first
            installment  was made in April 2001. The Company is still in default
            on the second, third and fourth  installments.  As at June 30, 2005,
            there  remains  an  outstanding  balance  of  $75,000  plus  $33,750
            (December 31, 2004 - $30,000) in accrued interest on this debenture.
            As a result of the default,  the  debenture is classified as current
            liability on the balance sheet.

      (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  mature 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 June 30, 2005 the
            Company  is  in  default  of  an  outstanding  balance  of  $136,589
            (December  31,  2004  -  $107,713)  in  accrued  interest  on  these
            debentures.  As a result of the default, the debenture is classified
            as current liability on the balance sheet.

<PAGE>
                                                                          PAGE X

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005

7.    CONVERTIBLE DEBENTURES (Continued)

      (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 June  30,  2005,  there  remains  an  outstanding
            balance  of  $205,449  (December  31,  2004 -  $161,569)  in accrued
            interest  on these  debentures.  As a  result  of the  default,  the
            debenture is classified as 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 $240,000  portion of the
            interest  accrued on the  debentures  described  in notes  7(ii) and
            7(iii) as on the related debentures. As at June 30, 2005 there is an
            outstanding  amount of $25,200  (December  31,  2004 -  $12,600)  in
            accrued  interest.  As a result of the  default,  the  debenture  is
            classified as current liability on the balance sheet.


8.    INTEREST EXPENSE

<TABLE>
<CAPTION>
                                                  Three months ended June 30,   Six months ended June 30,
                                                      2005          2004             2005         2004
                                                      ----          ----             ----         ----
<S>                                                 <C>          <C>              <C>          <C>
Interest on convertible debentures                  $  51,110    $  38,425        $ 119,035    $ 115,248
Other interest                                          9,702        7,990           18,423       60,560
                                                    ---------    ---------        ---------    ---------
                                                       60,812       46,415          137,458      175,808
Interest income                                       (12,372)          --          (25,747)          --
Adjustment to prior period estimates                       --     (164,076)              --     (164,076)
                                                    ---------    ---------        ---------    ---------
                                                       48,440     (117,661)         111,711       11,732
Less: amounts capitalized to projects in progress     (35,861)     (37,619)         (77,641)    (126,693)
                                                    ---------    ---------        ---------    ---------
                                                       12,579     (155,280)          34,070     (114,961)
                                                    ---------    ---------        ---------    ---------
</TABLE>

<PAGE>
                                                                         PAGE XI

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005

9.    COMMITMENTS

      (a)   The Company has a rental  lease  commitment  for its  premises.  The
            agreement  expires May 31,  2009.  Minimum  annual rent  commitments
            excluding occupancy costs are as follows:

                2005                             $ 19,500
                2006                               27,000
                2007                               28,000
                2008                               29,000
                2009                               13,000

      (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
            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  at a  rate  ranging  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.

10.   CAPITAL STOCK

      (a)   Authorized

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

      (b)   Issued - common shares

                                                           Number       Amount
                                                           ------       ------
      Balance, December 31, 2004                        32,251,008   $11,208,887
      Common shares issued for services rendered            80,000        18,400
      Common shares issued on conversion of warrants     2,547,500       433,450
      Common shares issued for settlement of payables      350,000        78,748
      Stock options exercised into common shares           125,000        16,250
                                                        ----------   -----------
      Balance, June 30, 2005                            35,353,508   $11,755,735
                                                        ==========   ===========


<PAGE>
                                                                        PAGE XII

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005

10.      CAPITAL STOCK (Continued)

      (c)   Issued - Series 1 Class A preferred shares

                                                               Number    Amount
                                                               ------    ------
            Balance, December 31, 2004 and June 30, 2005      494,550   $494,550
                                                              -------   --------

            The   Series   1   Class  A   preferred   shares   are   non-voting,
            non-participating,  $1  redeemable  and  retractable  The shares pay
            dividends  at  the  rate  of  9.1%  per  annum   payable  in  annual
            installments  on the 15th day of  December  in each  year and  shall
            accrue and be cumulative from the date of issue. As at June 30, 2005
            dividends in arrears amounted to $22,500.


      (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, 2004           3,435,000     99,850    $0.10
               Exercised                          (125,000)    (3,750)    0.10
                Expired                            (10,000)        --
                                                 ---------     ------    -----
            Balance, June 30, 2005               3,300,000     96,100    $0.10
                                                 =========     ======    =====

                                                          Number     Exercise
             Expiry Date            Grant Date         of Options     Price
            --------------------------------------------------------------------
            June 25, 2006         June 25, 2004           300,000     $0.10
            June 25, 2009         June 25, 2004         3,000,000      0.10
                                                        ---------
                                                        3,300,000
                                                        =========

<PAGE>
                                                                       PAGE XIII

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005

10.   CAPITAL STOCK (Continued)

      (e)   Warrants

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

                                                                        Average
                                                Number     Allocated    Exercise
            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
              Expired                           (32,500)
                                             ----------     -------      -----
            Balance, June 30, 2005            2,879,950      62,950      $0.36
                                             ==========     =======      =====

                                                          Number       Exercise
            Expiry Date              Grant Date        of Warrants       Price
            --------------------------------------------------------------------
            December 31, 2005     December 31, 2000       550,000           0.50
            September 26, 2006    June 30, 2004           499,950    0.15 - 0.20
            February 26, 2007     June 30, 2004         1,830,000           0.50
                                                        ---------
                                                        2,879,950
                                                        =========

11.   EARNINGS PER COMMON SHARE

      (a)   Basic:  For the three month period ended June 30, 2005, the weighted
            average  number of common  shares was  35,103,783  (June 30,  2004 -
            19,188,014).

      (b)   Fully  Diluted:  For the three month period ended June 30, 2005, the
            diluted  weighted  average  number of common  shares was  36,978,745
            (June 30, 2004 - 19,192,044).  For the three month period ended June
            30, 2005, 2,380,000 (June 30, 2004 - 550,000) warrants and Nil (June
            30, 2004, - 1,927,000)  options to purchase common were not included
            in the  calculation  of fully diluted  earnings per share because of
            their anti-dilutive effect.

      (c)   Basic:  For the six month period  ended June 30, 2005,  the weighted
            average  number of common  shares was  33,950,801  (June 30,  2004 -
            16,724,926).

      (d)   Fully  Diluted:  For the six month period  ended June 30, 2005,  the
            diluted  weighted  average  number of common  shares was  35,825,763
            (June 30, 2004 -  16,726,941).  For the six month  period ended June
            30, 2005, 2,380,000 (June 30, 2004 - 550,000) warrants and Nil (June
            30, 2004 - 1,927,000)  options to purchase  common were not included
            in the  calculation  of fully diluted  earnings per share because of
            their anti-dilutive effect.

<PAGE>
                                                                        PAGE XIV

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005

12.   CONTRIBUTED SURPLUS

      Balance, December 31, 2004                    $  1,051,886
      Less:   Stock Options exercised (Note 10(d))        (3,750)
      Less:  Warrants converted into common
              shares (Note 10(e))                        (50,950)
                                                    ------------
                                                    $    997,186
                                                    ============

                                                    June 30, 2005  Dec. 31, 2004
                                                    -------------  -------------
      Settlement of debt instruments                   $656,626       $656,626
      Equity portion of long-term debt (Note 7(a))      181,510        181,510
      Stock Options (Note 10 (d))                        96,100         99,850
      Warrants (Note 10(e))                              62,950        113,900
                                                       --------     ----------
                                                       $997,186     $1,051,886
                                                       ========     ==========


13.   RELATED PARTY TRANSACTIONS.

      During the six month period ended June 30, 2005 $181,077  (June 30, 2004 -
      $Nil) 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 prepaid and sundry  assets is an amount of $26,304  (December
      31, 2004 - $Nil) representing advances to a corporation  controlled by two
      of the directors for management fees.

14.   SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>
                                                 Three months ended June 30,    Six months ended June 30,
                                                    2005            2004           2005           2004
                                                    ----            ----           ----           ----
<S>                                               <C>             <C>           <C>            <C>
Change in non-cash working capital
Accounts receivable                              $   190,706    $   (98,953)   $   498,897    $   (19,725)
Tax credits receivable                               299,097     (1,500,000)       299,097     (1,500,000)
Inventory                                            (75,573)            --        (63,081)            --
Prepaids and sundry receivable                       (27,781)       139,984        (52,284)       125,407
Accounts payable and accrued liabilities              92,525       (516,437)       128,024       (682,325)
Deferred revenue                                  (2,658,971)     3,159,309     (2,658,971)     3,158,969
                                                 -----------    -----------    -----------    -----------
                                                  (2,179,997)     1,183,903     (1,848,318)     1,082,326
                                                 -----------    -----------    -----------    -----------
Non-cash transactions
Shares issued on settlement of payables               78,748             --         78,748             --
Stock-based compensation                                  --             --         18,400             --
Shares issued on settlement of long-term debts            --        232,505             --        232,505
</TABLE>

<PAGE>
                                                                         PAGE XV

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005

15.   SEGMENTED INFORMATION

      The Company conducts its operations in one business segment:  distribution
      of internally produced films and television programs.


      Revenue by geographic location,  based on the location of customers, is as
      follows:

                        Three months ended June 30,    Six months ended June 30,
                           2005          2004             2005         2004
                           ----          ----             ----         ----
Canada                 $   80,000     $  7,000        $  196,000     $ 20,000
United States             153,000       63,000           222,000      180,000
France                          0      287,000            99,000      287,000
United Kingdom          2,659,000            0         2,659,000            0
Other foreign                   0            0           194,000            0

16.   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  9(a)),  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.

      (b)   Under Canadian GAAP, the exchange of convertible  debentures for new
            convertible  debentures and subsequent gain on settlement of the new
            convertible   debentures  were  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.

<PAGE>
                                                                        PAGE XVI

                        DEVINE ENTERTAINMENT CORPORATION

               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                                  JUNE 30, 2005

16.   RECONCILIATION TO UNITED STATES GAAP (continued)


            June 30, 2005                             CDN GAAP        U.S. GAAP
            -------------                             ---------       ---------
            Convertible Debentures                    1,519,290        1,700,800
            Contributed Surplus                         997,186          530,873
            Deficit                                   6,853,696        6,591,393
            Other liabilities                                 0          517,050
            Capital stock                            12,250,285       11,755,735

            December 31, 2004
            -----------------
            Convertible Debentures                    1,519,290        1,700,800
            Contributed Surplus                       1,051,886          585,573
            Deficit                                   7,797,034        7,512,354
            Other liabilities                                 0          494,673
            Capital stock                            11,703,437       11,208,887

17.   COMPARATIVE FIGURES

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


18.   CONTINGENCY

      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.
<PAGE>

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

General


      The discussion and analysis of the Company's results of operations for the
calendar quarter ended June 30, 2005 set forth below should be read in
conjunction with the Company's unaudited interim consolidated financial
statements and the notes thereto appearing elsewhere in this report. Such
discussion and analysis contains forward-looking statements. Forward-looking
statements are statements that are not historical facts. The Company's actual
results may differ significantly from those projected in the forward-looking
statements. The Company does not intend to update the forward-looking statements
to reflect actual results or changes in factors affecting such forward-looking
statements.


      The  Company's  consolidated  financial  statements  have been prepared in
accordance with Canadian generally  accepted  accounting  principles  ("Canadian
GAAP") and  include  the  accounts  of Devine  Entertainment  and the  following
wholly-owned  subsidiaries of Devine  Entertainment:  Devine  Productions  Ltd.,
Devine New Media Corporation,  Devine Productions  (Artists) Ltd., Devine (Fairy
Tale)  Productions  Ltd.  and  Devine  Bailey  Productions  Ltd.  The  Company's
consolidated financial statements conform, in all material respects, with United
States  generally  accepted  accounting  principles  ("U.S.  GAAP"),  except  as
described below under "-- Reconciliation to U.S. GAAP."

Revenue Recognition

      The  Company's  revenue is derived from  broadcast  licensing  agreements,
royalties,  distribution  fees, the sale of distribution  rights and the sale of
home videos. All revenue is recognized upon meeting all recognition requirements
of the American Institute of Certified Public Accountants' Statement of Position
00-2 ("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
<PAGE>

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.

      The Company does not  anticipate any trends that will impact its revenues.
As the Company further executes its business strategy,  the Company expects that
its revenue will increase  primarily  from its expanded  operations  and product
line additions.

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 the
Company's consolidated 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 (3)
years from the date of the initial investment.

      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.

Government and Other Assistance

      The Company has access to various government programs that are designed to
assist film, television programs and recordings production and distribution in
<PAGE>

Canada.  Effective January 1, 2004,  amounts receivable in respect of production
assistance  are recorded as a reduction  of  investment  in film and  television
programs.   Government  assistance  towards  current  expenses  is  included  in
earnings.  Investment  tax credits are recorded as a reduction to  investment in
film,  television  programs and recordings,  when the ultimate collection of the
credits are assured.

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.

Future Income Taxes

      The  Company  provides  for  income  taxes  using the asset and  liability
method.  The asset and liability  method  requires that income taxes reflect the
expected future tax consequences of temporary  differences  between the carrying
amounts of assets or liabilities  and their tax bases.  Future income tax assets
and  liabilities are determined for each temporary  difference  based on the tax
rates,  which are expected to be in effect when the  underlying  items of income
and expenses are expected to be realized.

Reconciliation to U.S. GAAP

      The 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 set forth
below.

      o Under Canadian GAAP, the conversion feature on the Company's convertible
debentures is valued at $181,510 and had 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.

      o  Under  Canadian  GAAP,  the  exchange  of  the  Company's   convertible
debentures for new  convertible  debentures and subsequent gain on settlement of
the new  convertible  debentures  were  valued at  $284,803  and  classified  as
contributed surplus.  Under U.S. GAAP, the conversion and subsequent  settlement
were not accounted for through contributed surplus and would be recorded through
the statement of operations thus reducing the deficit. This transaction occurred
in 2000.

      o Under Canadian GAAP, the Company's  preferred  shares have been included
in stockholders' equity as the Company considered the likelihood of redemption
<PAGE>

by the holders to be remote.  Under U.S.  GAAP,  the  preferred  shares would be
presented outside the stockholders' equity and classified as a liability.

June 30, 2005                                       Canadian GAAP      U.S. GAAP
-------------                                       -------------      ---------
Convertible Debentures                              1,519,290          1,700,800
Contributed Surplus                                   997,186            530,873
Deficit                                             6,853,696          6,591,393

December 31, 2004
-----------------
Convertible Debentures                              1,519,290          1,700,800
Contributed Surplus                                 1,051,886            585,573
Deficit                                             7,797,034          7,512,354

Recent Accounting Pronouncements

      In 2003,  the Canadian  Institute of  Chartered  Accountants  (the "CICA")
issued new Handbook Section 1100,  "Generally Accepted  Accounting  Principles."
This  section   clarifies   that  an  enterprise  is  required  to  account  for
transactions  in accordance with the specific  recommendations  in the handbook,
basic financial statement concepts and, if appropriate, other relevant
authoritative literature. Consequently, the Company may no longer use historical
industry practice as a source of authority, and accordingly,  the recognition of
government  financing and assistance will prospectively change from revenue to a
reduction of the related  production  costs. The Company has adopted this policy
as of January 1, 2004. The adoption of these standards had no material impact on
the Company's results of operations or financial position.

      In December 2003, the Emerging Issues Committee of the CICA released EIC -
141,  "Revenue  Recognition"  and EIC-142  "Revenue  Arrangements  with Multiple
Deliverable."  EIC-141 provides interpretive guidance on the application of CICA
Handbook Section 3400, "Revenue."  Specifically,  this EIC presents the criteria
to be met for revenue recognition to be considered  achieved.  EIC-142 addresses
certain  aspects of the accounting by a vendor for  arrangements  under which it
will perform multiple  revenue-generating  activities for a given customer.  The
adoption of these standards had no material  impact on the Company's  results of
operations or financial position.

      In June  2003,  the  CICA  released  AcG-15,  "Consolidation  of  Variable
Interest  Entities," to be applied by companies for the periods  beginning on or
after November 1, 2004.  Under this release,  the CICA  established  criteria to
identify variable interest entities ("VIE") and the primary  beneficiary of such
entities.  An entity that qualifies as a VIE must be consolidated by its primary
beneficiary.  In January 2003, the Financial  Accounting  Standards Board issued
Interpretation No. 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
Partnership  (as  hereinafter  defined)  and  QCF  Partnership  (as  hereinafter
defined) in its consolidated  operations.  See "-- Devine Entertainment  Limited
Partnership" and "-- QCF Partnership."

      In  January  2005,  the CICA  issued  Handbook  Section  3855,  "Financial
Instruments -  Recognition  and  Measurement."  This 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.

      In January 2005,  the CICA issued  Handbook  Section 3865,  "Hedges." This
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,"
<PAGE>

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
consolidated financial statements.

      In January 2005,  the CICA issued  Handbook  Section 1530,  "Comprehensive
Income."  This  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
consolidated financial statements.

Potential Capital Reorganization

      The Company has sought and received  approval  from its board of directors
to effect a capital  reorganization of the Company at such time in the future as
may be  required  in order to  maintain  the  Company's  eligibility  to receive
certain  financial  incentives  and  assistance  or  any  required  licenses  or
approvals  from Canadian  federal or provincial  governments  and agencies.  The
Company will lose its  eligibility if the ownership of the equity  securities of
the Company by Canadian residents fails to meet certain specified  requirements.
If such  reorganization  is effected,  each Common  Share will be exchanged  for
one-half of a newly-created  voting common share and one-half of a newly-created
non-voting  common share.  This exchange will treat  stockholders of the Company
uniformly.

      The Company believes that the benefit of remaining eligible to receive the
aforesaid  financial  incentives  and  assistance,  licenses and  approvals,  by
effecting  the  reorganization,  will greatly  outweigh  any  possible  negative
effects which may temporarily result in the then-existing trading market for the
Company's  securities as a result of the Company's  new capital  structure.  The
Company's  belief in this  regard is  buttressed  by the fact that  transactions
similar to the Company's  proposed  reorganization  are familiar to investors in
other  Canadian  public  entertainment   companies  such  as  Alliance  Atlantis
Communications  Inc. and Corus Entertainment Inc. A review of the public filings
made by each of these  companies does not indicate that such  company's  capital
structure  has  impaired  its ability to access  capital  markets for funding or
otherwise attract investors.

      The  stockholders of the Company  initially  approved the proposed capital
reorganization on June 25, 2004. The stockholders of the Company  reapproved the
capital  reorganization  on June 16, 2005. The Company will, on an annual basis,
continue to seek  reapproval  of the  capital  reorganization  at the  Company's
annual meeting of  stockholders.  The failure of the Company's  stockholders  to
continue  approving  the capital  reorganization  could have a material  adverse
effect  upon the  Company's  business  in the  future if the  Company  no longer
remains eligible to receive the aforesaid  financial  incentives and assistance,
licenses and approvals by reason of not being able to effect the reorganization.

      The   Company   does  not  expect  to  have  to   implement   the  capital
reorganization for the foreseeable future.


<PAGE>

Additional Information

      Additional  information  regarding  the Company is  available  on SEDAR at
www.sedar.com and EDGAR at www.sec.gov.

Results of Operations

      Calendar Quarter Ended June 30, 2005 Compared to Calendar Quarter Ended
June 30, 2004

      Overview

      The positive changes experienced by the Company in 2004 continued into the
second quarter of 2005. These changes included the following:

o     The Company's revenues in the second quarter of 2005 increased by 709% to
      $2,892,261 as compared to $357,305 for the same period in 2004.

o     The Company's first feature film, Bailey's Billion$, generated revenues of
      $2,658,970 in the second quarter of 2005 from the sale of distribution
      rights in territories outside North America.

o     The Company's proprietary film library generated $233,291 from a license
      to the regional public broadcaster, Knowledge Network, in British Columbia
      for $36,000 and $197,291 from DVD and video sales in North America.

o     The Company reported net income from operations of $933,050 or $0.03 per
      share in the quarter of 2005, a 1,329% increase as compared to net income
      of $65,307 or $0.00 per share for the same period in 2004.

o     The Company realized $177,750 from the exercise of 1,185,000 warrants
      issued in connection with a private placement in April 2004.

o     The second quarter of 2005 is the fifth consecutive quarter the Company
      has posted positive net income and an increase in stockholders' equity.
      Net income in the second quarter of 2005, which was derived solely from
      operating activities, was $920,861, or $0.03 per share (basic), as
      compared with $3,105,132, or $0.16 per share, for the same period in 2004.
      Net income for the second quarter of 2004 included a non-recurring gain on
      settlement of debt of $4,039,825 and a write down of the Company's
      investment on its film library of $1,000,000. Stockholders' equity
      increased by $1,435,486 to $6,393,775 from $4,958,289 as at December 31,
      2004.

      The Company will  continue to focus on new  production,  and the marketing
and  distribution of its proprietary  film library in an effort to drive revenue
growth.  Since 2004, the Company made significant progress in turning around its
business.  Although there can be no assurance, the Company expects this trend to
continue for the foreseeable future.

      Revenues

      The Company's revenues during the second quarter of 2005 increased by 709%
to $2,892,261 as compared to $357,305 for the same period in 2004. Revenues for
the six-month period ended June 30, 2005 increased by 675% to $3,370,497 as
compared to $434,772 for the same period in 2004.


<PAGE>

      Of the Company's total revenues in the second quarter of 2005, $2,658,970
was derived from the sale of distribution rights to Bailey's Billion$ in
territories outside North America.

      Revenues from sales from the Company's proprietary film library decreased
by 33% to $233,291 in the second quarter of 2005 as compared to $357,305 for the
same period in 2004, reflecting the timing of a broadcast license of $288,000 to
TPS in France in the second quarter of 2004. Overall, the Company's library
revenues for the six months ended June 30, 2005 decreased by $16,245 to $418,527
as compared to $434,772 for the six months ended June 30, 2004.

      Reflecting the fact that the film library revenues in the first quarter
2005 are derived primarily from sales in 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 to a United Kingdom-based distributor,
the Company's revenues by geographic location, based on the location of
customers were as follows:

                                        Three Months            Six Months
                                       Ended June 30           Ended June 30
                                       -------------           -------------
                                     2005        2004          2005      2004
                                     ----        ----          ----      ----
Canada                            $   80,000   $  7,000    $  196,000   $ 20,000
United States                        153,000     63,000       222,000    180,000
France                                    --    287,000        99,000    287,000
United Kingdom                     2,659,000         --     2,659,000         --
Other Foreign                             --         --       194,000         --


      Earnings per Share

      In the second quarter of 2005, the Company reported its fifth consecutive
profitable quarter with net income of $920,861, or $0.03 per share (basic), as
compared with $3,105,132 or $0.16 per share for the same period in 2004. Net
income for the quarter ended June 30, 2004 included a non-recurring gain on
settlement of debt of $4,039,825 and a write down of the Company's investment on
its film library of $1,000,000. Net income for the six months ended June 30,
2005 was $943,338 or $0.03 per share (basic), as compared with $3,003,480 or
$0.18 for the same period in 2004.

      Stockholders' Equity

      Stockholders' equity increased by $1,435,486 to $6,393,775 from $4,958,289
as at December 31, 2004.

      Operating expenses

      The Company's operating expenses for the second quarter of 2005 decreased
by $60,857 or approximately 22% to $214,791, as compared to $275,648 for the
same period in 2004. Operating expenses for the six months ended June 30, 2005
increased by $37,259 to $389,835 as compared to $352,576 for the same period in
2004, reflecting an increase in professional fees and expenses related to the
Company's registration statement filings for its Common Shares made with the
United States Securities and Exchange Commission.


<PAGE>

      Production and Development Activity

      The  Company  continues  to develop  new  projects  in order to secure new
production activity. 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.  In addition, the Company
has  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.

      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.

      As at June 30, 2005,  the Company's  investment in its  proprietary  film
library  was  estimated  as  $2,956,150  after  accumulated  amortization.   The
Company's  investment in Bailey's  Billion$ was  estimated as  $3,538,485  after
accumulated amortization and the Company's investment in projects in development
was estimated as $1,424,311 as per the following table:

<TABLE>
<CAPTION>
                                                                  June 30, 2005                  December 31, 2004
                                                                  -------------                  -----------------
                                                                          Accumulated
                                                              Cost        Amortization           Net             Net
                                                              ----        ------------           ---             ---

<S>                                                       <C>              <C>               <C>              <C>
Completed television programs and recordings              $16,030,809      $13,074,659       $2,956,150       $3,096,399
Completed Motion picture - Bailey's Billion$                7,146,016        3,607,531        3,538,485        5,407,622
Projects in progress                                        1,424,311               --        1,424,311          903,555
                                                          -----------      -----------       ----------       ----------
                                                          $24,601,136      $16,682,190       $7,918,946       $9,407,576
</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 by
motion picture's co-producers,  copyright purchasers and production lending bank
and then  discounted  by the  Company to ensure  conservative  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 our  television  sales
estimates.  With regard to DVD/video sales  estimates,  the Company has reviewed
the distributor's estimates and compared them to the Company's historical sales.
P&L models based on these estimates and  incorporating the distribution fees and
expenses  defined in the Company's  distribution  agreements  assuming between a
500,000  and 1 million  units sales over ten years were  discounted  and support
what management believes are conservative ultimate revenue estimates.


<PAGE>

      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.

      The Company expects to amortize approximately $1,100,000 for completed
television programs and recordings costs and $1,900,000 for completed motion
picture costs during 2005.

      The Company  expects 98% of completed  television  programs and recordings
and 62% of  completed  motion  picture  costs will be  amortized by December 31,
2007. As at December 2011,  over 80% of the completed  motion picture costs will
be amortized.  The remaining period of amortization  for the completed  projects
ranges from two to nine years at March 31, 2005.

      Capital Stock

      The Company issued 1,535,500 Common Shares during the second quarter of
2005 as follows:

(i) In April 2005, 1,185,000 Common Shares were issued for cash consideration of
$177,750. These Common Shares were issued upon the exercise of warrants issued
in connection with a unit offering effected by the Company in April 2004.

(ii) In May 2005, 350,000 Common Shares were issued to the Company's outside
Canadian legal counsel to settle accounts payable for professional fees in the
amount of $78,552.13.


      Related Party Transactions

      During the six-month period ended June 30, 2005, $181,077 (June 30, 2004 -
$Nil) of fees were paid or accrued to corporations controlled by two of the
directors of the Company 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 the
management believes reflect prevailing market rates. Included in prepaid and
sundry assets is $26,304 (December 31, 2004 - $Nil) representing advances to a
corporation controlled by two directors of the Company for management fees. See
"Item 6. Executive Compensation -- Executive Services Agreement."

      Liquidity and Capital Resources

      The Company's cash on hand as at June 30, 2005 was $292,710 as compared to
$104,727 as at December 31, 2004, an increase in cash position of $187,983.


<PAGE>

      The Company's bank film production loan for Bailey's Billion$ which was
$361,839 as at March 31, 2005 and $919,664 as at December 31, 2004 was repaid in
full on May 24, 2005. As a result, the Company no longer has any bank debt.

      The Company expects to maintain renewed  profitability from operations and
expects that proceeds from sales of Bailey's  Billion$ and its film library will
generate additional revenues and positive cash flow through the balance of 2005.

      The Company's working capital deficiency, although reduced, remains
significant but it 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. 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 2005. The Company
intends to actively seek additional funding in calendar 2005.


<PAGE>

Devine Entertainment Limited Partnership

      During 2004,  the Company  entered into a services  agreement  with Devine
Entertainment  Limited Partnership (the "Partnership").  None of the partners of
the   Partnership  is  a  director,   officer  or  other   affiliate  of  Devine
Entertainment.  Under  the  terms of the  services  agreement,  the  Partnership
assumed certain expenses of the Company up through December 31, 2004 relating to
the  following:  (i) labor,  employment and all other  "direct"  services;  (ii)
marketing services, including


<PAGE>

production  and  placement of all required  advertising;  (iii) other  operating
expenses,  excluding  payments for the purchase of real property,  equipment and
expenses of a capital  nature;  (iv)  administrative  services;  and (v) certain
development  services  required  in  connection  with new  Devine  Entertainment
projects.  In  return,  the  Partnership  was paid a royalty  based on the gross
revenue of the Company.  The Company paid such royalty by issuing 380,450 Common
Shares and 494,550 Series 1 Preferred Shares.

QCF Partnership

      During the first  quarter of 2005,  the  Company  entered  into a services
agreement with QCF 2005 Limited  Partnership  ("QCF  Partnership").  None of the
partners of QCF Partnership is a director,  officer or other affiliate of Devine
Entertainment.  Under the terms of the services agreement,  QCF Partnership will
assume certain expenses, until December 31, 2005, relating to the following: (i)
labor,  employment and all other  "direct"  services;  (ii) marketing  services,
including  production  and  placement of all required  advertising;  (iii) other
operating expenses,  excluding payments for the purchase of real property;  (iv)
administrative  services;  and (v)  certain  development  services  required  in
connection with new Devine Entertainment projects. In return, QCF Partnership is
entitled to receive  royalty  payments equal to a percentage of gross revenue of
the Company for the calendar years 2005 through 2015.

Off-Balance Sheet Arrangements

      The Company,  as part of its ongoing  business,  does not  participate  in
transactions  that  generate  relationships  with  unconsolidated   entities  or
financial partnerships, such as entities often referred to as structured finance
or special purpose entities ("SPEs"),  which would have been established for the
purpose of facilitating  off-balance sheet  arrangements or other  contractually
narrow or limited purposes. As of December 1, 2005, the Company was not involved
in any material unconsolidated SPE transaction.


<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 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)   In May 2005,  the Company issued 350,000 Common Shares to the Canadian law
      firm, Wildeboer Dellecle LLP, in partial  consideration for legal services
      rendered to the  Company  from March 27, 2001  through May 31,  2005.  The
      aforesaid  Common  Shares  were  offered  and  sold  in  reliance  on  the
      exemptions from registration  afforded by Section 4(2) and Regulation S of
      the Securities Act of 1933, as amended (the "Securities Act").

      The  exemption   claimed  above  from  compliance  with  the  registration
      provisions  of the  Securities  Act  by  reason  of  Section  4(2)  of the
      Securities  Act is based on the  grounds  that the  offer and sale did not
      involve any public offering,  the purchaser was sophisticated  with access
      to the kind of  information  registration  would  provide  and  that  such
      purchaser  acquired  the  securities  at  issue  without  a  view  towards
      distribution thereof.

      The  exemption   claimed  above  from  compliance  with  the  registration
      provisions  of the  Securities  Act by  reason of  Regulation  S under the
      Securities  Act is  based on the  grounds  that the  offer  and sale  were
      effected by means of an offshore transaction  involving a non-U.S.  person
      in  accordance  with  all  applicable   conditions  and   restrictions  of
      Regulation S under the Securities Act.

(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 June 30, 2005 filed herewith is incorporated herein by reference.

(b)   Not applicable.


<PAGE>

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

(a)   On June 16, 2005,  an annual and special  meeting (the  "Meeting")  of the
      Company's stockholders was held in Toronto, Canada.

(b)   At the Meeting, the following  individuals were re-elected as directors of
      the Company:  David Devine,  Richard Mozer, Kenneth Taylor, Bryson Farrill
      and Ron Feddersen.

(c)   At the Meeting,  four (4) items were submitted for a vote of the Company's
      stockholders.  A total of 18,802,015  votes were present or represented by
      proxy at the Meeting. Each nominee for director received 18,802,015 votes.
      The  second  item  appointing   auditors  and  authorizing  the  Company's
      directors to fix the auditors'  remuneration  received 18,802,015 votes in
      favor of such item. The third item regarding a potential  consolidation of
      the Company's Common Shares received 18,193,550 votes in favor thereof and
      305,665  votes  against.  The fourth item  regarding  a potential  capital
      reorganization  received  4,904,600  votes in favor  thereof and 1,119,465
      against.  Common Shares representing 10,981,990 votes were not eligible to
      vote  on  this  item  and  Common  Shares  representing   1,493,160  votes
      abstained.

(d)   Not applicable.

Item 5. Other Information.

(a)   Not applicable.

(b)   Not applicable.

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

      (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.

                                   SIGNATURES

      In accordance  with the  requirements of the Exchange Act, ther registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                           Devine Entertainment Corporation
                                                     (Registrant)

Date December 19, 2005                     /s/ David Devine
                                           -------------------------------------
                                           President and Chief Executive Officer
                                                       (Signature)*

Date December 19, 2005                     /s/ Richard Mozer
                                           -------------------------------------
                                           Chief Financial Officer and Chief
                                           Accounting Officer
                                                       (Signature)*

*Print the name and title of each signing officer under his signature.