UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-QSB

   (Mark One)

X     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934

      For the quarterly period ended September 30, 2006

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

      For the transition period from _________________ to ______________________

                 Commission file number ________________________________________

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

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

                          Suite 504, 2 Berkeley Street,
                        Toronto, Ontario, Canada, M5A 2W3
                                 (416) 364-2282

        (Address and telephone number of principal executive offices and
                          principal place of business)

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

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

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

                                  Common Shares
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes X   No___

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

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date: As of November 9, 2006, the issuer
had 39,213,699 Common Shares outstanding.

Transitional Small Business Disclosure Format (check one): Yes ___   No X


<PAGE>

                                TABLE OF CONTENTS

PART I FINANCIAL INFORMATION

Item 1.   Financial Statements

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

Item 3.   Controls and Procedures

PART II OTHER INFORMATION

Item 1.   Legal Proceedings

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

Item 3.   Defaults Upon Senior Securities

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

Item 5.   Other Information

Item 6.   Exhibits and Reports on Form 8-K

Signatures


<PAGE>

                          PART I FINANCIAL INFORMATION

Item 1. Financial Statements

                        DEVINE ENTERTAINMENT CORPORATION

                    INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                      (Unaudited - Prepared by Management)

                               September 30, 2006

                         (expressed in Canadian dollars)


<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

                               September 30, 2006

                                    CONTENTS

                                                                       PAGE

CONSOLIDATED FINANCIAL STATEMENTS

Balance Sheet                                                            5

Statement of Shareholders' Equity                                        6

Statement of Operations                                                  7

Statement of Cash Flows                                                  8

Notes to Financial Statements                                         9 - 29

<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

                       INTERIM CONSOLIDATED BALANCE SHEET
                      (Unaudited - Prepared by Management)

<TABLE>
<CAPTION>
                                                           ASSETS

                                                                                           September 30               Dec  31
                                                                                                   2006                  2005
                                                                                           ------------          ------------
Current
-------
<S>                                                                                        <C>                   <C>
Cash                                                                                       $    719,263          $    239,990
Accounts receivable                                                                             108,452               229,581
Inventory                                                                                        70,721                88,140
Prepaid and sundry assets                                                                       337,095                26,312
                                                                                           ------------          ------------

                                                                                              1,235,531               584,023

Advances receivable (Note4)                                                                     494,550               494,550
Investment in film, television programs and recordings (Note 5)                               8,532,439             6,848,108
Property and equipment (Note 6)                                                                  21,919                23,872
                                                                                           ------------          ------------
                                                                                           $(10,284,439)         $ (7,950,553)
                                                                                           ============          ============
                                                         LIABILITIES

Current
-------

Accounts payable and accrued liabilities                                                      1,420,404             1,259,239
Convertible debentures (Note 7)                                                               1,519,290             1,519,290
Deferred revenue                                                                              2,137,786                    --
                                                                                           ------------          ------------
                                                                                             (5,077,480)           (2,778,529)
                                                                                           ------------          ------------

                                                    SHAREHOLDERS' EQUITY

Capital Stock (Note 9b)                                                                    $ 12,299,119          $ 11,745,545
Preferred Shares (Note 9c)                                                                      494,550               494,550
Contributed surplus (Note 10)                                                                 1,018,351             1,007,376
Deficit                                                                                      (8,605,061)           (8,075,447)
                                                                                           ------------          ------------

                                                                                             (5,206,959)           (5,172,024)
                                                                                           ------------          ------------

                                                                                           $ 10,284,439          $  7,950,553
                                                                                           ============          ============

</TABLE>

See accompanying notes to interim consolidated financial statements.


                                       1
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

          FOR THE PERIOD ENDED SEPTEMBER 30, 2006 AND DECEMBER 31, 2005

<TABLE>
<CAPTION>
                                                                      Stock                                 Contributed
                              Common Shares           Warrants       Options           Preferred Shares        Surplus      Deficit
                              -------------           --------       -------           ----------------        -------      -------
                              #           $              #              #              #              $           $            $
                                                                                                              (Note 10)

                         -----------------------------------------------------------------------------------------------------------
<S>                      <C>           <C>            <C>           <C>             <C>          <C>        <C>          <C>
BALANCE,
December 31, 2004        32,251,088    11,208,887     5,459,950     3,440,000       494,550      494,550    1,051,886    (7,797,034)

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

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

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

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

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

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

- issuance of stock
  Options                        --            --            --       100,000            --           --        3,600            --
- on settlement for
  services rendered
  and accounts
  payable                   339,660        43,074            --       750,000            --           --        7,875            --


-issuance of
 Private Placement        3,383,331       507,500     1,691,666            --            --           --           --            --
- on exercise of
  stock options              25,000         3,000                     (25,000)                                   (500)
                         -----------------------------------------------------------------------------------------------------------
NET LOSS                         --            --            --            --            --           --           --      (529,614)
                         -----------------------------------------------------------------------------------------------------------

BALANCE,
September 30, 2006       39,101,499    12,299,119     6,569,116     4,005,000       494,550      494,550    1,018,351    (8,605,061)
                         ===========================================================================================================
</TABLE>

See accompanying notes to interim consolidated financial statements.


                                       2
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

                  INTERIM CONSOLIDATED STATEMENT OF OPERATIONS
                      (Unaudited - Prepared by Management)

<TABLE>
<CAPTION>
                                                   Three months ended                      Nine months ended
                                                   September 30,                           September 30,

                                                        2006                 2005               2006               2005
                                                        ----                 ----               ----               ----
<S>                                                <C>                  <C>                <C>                <C>
REVENUE                                            $     84,255         $    180,899       $    363,529       $  3,551,396
                                                   ------------         ------------       ------------       ------------
EXPENSES
 Operating                                              287,420              192,765            675,995            582,600
 Stock-based compensation                                    --                   --             26,784                 --
Amortization
- film, television programs and recordings               28,426              290,907            199,508          2,277,745
- equipment                                               1,687                1,895              5,058              6,122
Interest                                                 (1,880)              18,498            (14,202)            52,568
                                                   ------------         ------------       ------------       ------------
                                                        315,653              504,065            893,143          2,919,035
                                                   ------------         ------------       ------------       ------------
INCOME (LOSS) BEFORE INCOME TAXES                      (231,398)            (323,166)          (529,614)           632,361

Provision for Income Taxes                                   --                   --                 --             12,189
                                                   ------------         ------------       ------------       ------------

NET INCOME (LOSS) for the period                       (231,398)            (323,166)          (529,614)           620,172
                                                   ------------         ------------       ------------       ------------

DEFICIT, beginning of period                         (8,373,663)          (6,853,696)        (8,075,447)        (7,797,034)
                                                   ------------         ------------       ------------       ------------

DEFICIT, end of period                             $ (8,605,061)        $ (7,176,862)      $ (8,605,061)      $ (7,176,862)
                                                   ============         ============       ============       ============

EARNINGS (LOSS) PER SHARE (Note 12)

Basic                                              $      (0.01)        $      (0.01)      $      (0.01)      $       0.02
                                                   ============         ============       ============       ============
Fully Diluted                                      $      (0.01)        $      (0.01)      $      (0.01)      $       0.02
                                                   ============         ============       ============       ============

WEIGHTED AVERAGE
SHARES - BASIC                                       39,076,771           35,353,508         37,003,668         35,080,761
                                                   ============         ============       ============       ============
       - FULLY DILUTED                               39,076,771           35,353,508         37,003,668         36,959,342
                                                   ============         ============       ============       ============
</TABLE>

See accompanying notes to interim consolidated financial statements.


                                       3
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

                  INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
                      (Unaudited - Prepared by Management)

<TABLE>
<CAPTION>
                                                                          Three months ended                   Nine months ended
                                                                          September 30,                        September 30,

                                                                       2006              2005              2006             2005
<S>                                                               <C>               <C>               <C>               <C>
OPERATING ACTIVITIES
Net income for the period                                         $  (231,398)      $  (323,166)      $  (529,614)      $   620,172
Shares issued to settle accounts payable                                   --                --                --                --
Stock based compensation                                                   --                --            26,784                --
Shares issued for services rendered                                        --                --                --                --
Amortization - film, television programs
               and recordings                                          28,426           290,907           199,508         2,277,745
               - Equipment                                              1,687             1,895             5,058             6,121
               - financing charges                                         --             4,250                --            31,873
Operating expenses paid in common shares                                                                                     18,400
Change in non-cash components of
     working capital (Note 17)                                      1,761,550           (68,629)        2,126,716        (1,838,199)
                                                                  -----------       -----------       -----------       -----------
                                                                    1,560,265           (94,743)        1,828,452         1,116,112
                                                                  -----------       -----------       -----------       -----------
FINANCING ACTIVITIES
Repayment of bank loans                                                    --                --                --          (919,664)
Issuance of shares on conversion of warrants                               --                --                --           382,500
Issuance of shares for services                                                                            27,765
Issuance of shares on exercise of the options                           2,500                --             2,500            12,500
                                                                  -----------       -----------       -----------       -----------
                                                                        2,500                --            30,265          (524,664)
                                                                  -----------       -----------       -----------       -----------
INVESTING ACTIVITIES
Investment in film, television
 programs and recordings                                           (1,503,200)          (35,928)       (1,883,839)         (534,136)
Shares issued on Private Placement                                         --                             507,500
Purchase of property and equipment                                     (1,067)               --            (3,105)               --
                                                                  -----------       -----------       -----------       -----------

                                                                   (1,504,267)          (35,928)       (1,379,444)         (534,136)
                                                                  -----------       -----------       -----------       -----------

CHANGE IN CASH                                                         58,498           130,671           479,273            57,312

CASH, Beginning of period                                             660,765           292,710           239,990           104,727
                                                                  -----------       -----------       -----------       -----------

CASH, End of period                                                   719,263           162,039           719,263           162,039
                                                                  ===========       ===========       ===========       ===========

SUPPLEMENTARY CASH FLOW INFORMATION
     Interest paid                                                $        --       $        --       $        --       $    18,423
     Income taxes paid                                            $        --       $        --       $        --       $    12,189
</TABLE>

See accompanying notes to interim consolidated financial statements.


                                       4
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

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,  which are
      currently in default.  Management  is in constant  communication  with the
      debenture  holders and expects that the Company will be able to settle the
      debentures in the normal course of operations.

      If the going concern  assumption  were not appropriate for these financial
      statements,  then adjustments would be necessary 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  inter-company
      balances and transactions  have been eliminated.  These unaudited  interim
      consolidated  financial statements and supplemental  information should be
      read in  conjunction  with the Company's  audited  consolidated  financial
      statements  as at and for the year ended  December 31, 2005, as set out in
      the December 2005 Annual Report.

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


                                       5
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

      (a)   Basis of Consolidation

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

            The September  30, 2006 interim  consolidated  financial  statements
            include  the  accounts  of  Devine  Entertainment  Corporation  (the
            "Company") with Variable Interest  Entities  ("VIE").  The September
            30,  2006  interim  consolidated  financial  statements  include the
            accounts of the Company and all of its wholly-owned subsidiaries and
            VIE's.

      (b)   Revenue Recognition

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

      (c)   Investment in Film, Television Programs and Recordings

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

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


                                       6
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

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

      (d)   Stock-Based Compensation

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

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

      (e)   Earnings Per Share

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


                                       7
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      (f)   Impairment of Long-Lived Assets

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

      (g)   Recent Accounting Pronouncements

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

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


                                       8
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

3.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

      (g)   Recent Accounting Pronouncements (Continued)

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

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

4.    ADVANCES RECEIVABLE

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

5.    INVESTMENT IN FILM, TELEVISION PROGRAMS AND RECORDINGS

<TABLE>
<CAPTION>
                                                                     September 30, 2006                   December 31, 2005
                                                                     ------------------                   -----------------
                                                                        Accumulated
                                                          Cost          Amortization           Net               Net
                                                          ----          ------------           ---               ---
<S>                                                    <C>               <C>               <C>               <C>
Completed television programs and recordings           $15,999,530       $14,455,977       $ 1,543,553       $ 1,723,043
Completed Motion picture - Bailey's Billion$             6,972,580         3,763,932         3,208,648         3,241,219

Projects in progress                                     3,780,238                --         3,780,238         1,883,846
                                                       -----------       -----------       -----------       -----------

                                                       $26,752,348       $18,219,909       $ 8,532,439       $ 6,848,108
                                                       ===========       ===========       ===========       ===========
</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.


                                       9
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

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

      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 one to eight years at December 31, 2005.

6.    PROPERTY AND EQUIPMENT

                                 September 30, 2006            December 31, 2005
                                 ------------------            -----------------
                                   Accumulated
                        Cost       Amortization        Net           Net
                        ----       ------------        ---           ---
Computer and
 editing equipment    $181,028      $164,302        $ 16,726      $ 17,810
Furniture and
 fixtures               58,193        53,000           5,193         6,062
                      --------      --------        --------      --------

                      $239,221      $217,302        $ 21,919      $ 23,872
                      ========      ========        ========      ========


7.    CONVERTIBLE DEBENTURES

                                             September 30         December 31
                                                2006                 2005
                                                ----                 ----

      Principal
        Issued

      - February 1996 (i)                   $   75,000           $   75,000
      - December 2000 (ii)                     550,000              550,000
      - December 2000 (iii)                    835,800              835,800
      - Capitalized interest (iv)              240,000              240,000
                                            ----------           ----------
                                             1,700,800            1,700,800
      Less - equity component                 (181,510)            (181,510)
                                            ----------           ----------

                                            $1,519,290           $1,519,290
                                            ==========           ==========


                                       10
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

7.    CONVERTIBLE DEBENTURES (Continued)

      (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  instalment was
      made in April 2001.  The Company is still in default on the second,  third
      and  fourth  instalments.  As at  September  30,  2006,  there  remains an
      outstanding  balance of $75,000 plus $43,125 (December 31, 2005 - $37,500)
      in accrued  interest on this  debenture.  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.

      (ii)  The Company  issued  550,000  units of  debentures  and  warrants in
            December 2000 for $550,000 less costs of $85,000 for net proceeds to
            the Company of $465,000. Each unit consists of a $1.00 debenture and
            1  immediately   separable  warrant.   The  redeemable   convertible
            subordinated  debentures matured on December 31, 2005, bear interest
            at 10.5% per annum,  and are payable  semi-annually.  The debentures
            are  convertible  at the holders'  option into common  shares at any
            time prior to  maturity  on the basis of one common  share per $0.50
            principal  amount of debenture.  The debentures are  subordinated to
            certain senior indebtedness of the Company. As at September 30, 2006
            the  Company  is in default of an  outstanding  balance of  $208,774
            (December  31,  2005  -  $165,463)  in  accrued  interest  on  these
            debentures.  As a result of the default, the debenture is classified
            as a  current  liability  on the  balance  sheet.  Management  is in
            constant  communication  with the debenture holders and expects that
            the  Company  will be able to settle  the  debentures  in the normal
            course of operations.


      (iii) On December  19,  2000,  the Company  obtained  the  approval of the
            holders of the 7.5% debentures issued December,  1995 to: (i) extend
            the maturity date to December 31, 2002;  (ii) reduce the  conversion
            rate to $0.50 per common share;  (iii) increase the rate of interest
            applicable  to 10.5% per  annum;  (iv)  issue to the  holders of the
            debentures one warrant for each $1.00 principal  amount held by such
            holder;  and (v) to secure the 7.5%  debentures by way of a floating
            charge over all of the Company's assets,  such floating charge to be
            subordinated  to all existing and future "Senior  Indebtedness"  and
            "Permitted  Encumbrances"  and to rank  pari  passu  with  identical
            security  to be granted to  holders  of up to  $1,000,000  principal
            amount of convertible  debentures  issued by the Company on December
            21,  2000.  The  Company  is in  default  on  the  repayment  of the
            debentures.  As at September 30, 2006,  there remains an outstanding
            balance  of  $315,148  (December  31,  2005 -  $249,328)  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 September 30, 2006 there
            is an outstanding  amount of 56,700 (December 31, 2005 - $37,800) in
            accrued  interest.  As a result of the  default,  the  debenture  is
            classified as current liability on the balance sheet.  Management is
            in constant communication with the


                                       11
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

      debenture  holders and expects that the Company will be able to settle the
      debentures in the normal course of operations.

8.    PRIVATE PLACEMENT

      On May 31, 2006,  the Company  completed a private  placement of 3,383,331
      units,  each consisting of one common share and one-half  purchase warrant
      at $0.15 per unit. Each warrant is exercisable, at any time on or prior to
      May 31, 2007,  to acquire one common  share at an exercise  price of $0.30
      per share. Net proceeds totaled $507,500.

9.    CAPITAL STOCK

      (a)   Authorized

            An  unlimited  number of common  shares and an  unlimited  number of
            preferred shares issuable in series.

      (b)   Issued - common shares

                                                      Number           Amount
                                                      ------           ------

            Balance, December 31, 2005 and
              March 31, 2006                        35,353,508       $11,745,545

            Common shares issued on
              Private Placement                      3,383,331           507,500

            Common shares issued for
              services rendered                        185,100            43,074

            Common shares issued for
              stock-based compensation                 154,560                --

            Common shares issued for
              options exercised                         25,000             3,000
                                                    ==========       ===========

            Balance, September 30, 2006             39,101,499       $12,299,119

            In September  2006, the Company issued 25,000 common shares to
            employees  who  exercised   their  stock  options,   for  cash
            consideration of $2,500.

      (c)   Issued - Series 1 preferred shares

                                                      Number           Amount
                                                      ------           ------

                  Balance, December 31, 2005 and
                    September 30, 2006                 494,550        $  494,550
                                                       =======        ==========

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


                                       12
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

9.    CAPITAL STOCK (Continued)

      (d)   Stock Option Plan

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

      The outstanding and exercisable stock options are as follows:


                                                                        Weighted
                                                                         Average
                                                 Number     Allocated   Exercise
      Outstanding and Exercisable              of Options     Value      Price
      --------------------------------------------------------------------------
      Balance, December 31, 2005               3,180,000     96,100       0.10

      Issued pursuant to stock option plan       100,000      3,600       0.10
                                               ---------    -------       ----

      Balance, March 31, 2006                  3,280,000     99,700       0.10

      Issued pursuant to services agreement      375,000      5,250       0.15

      Issued pursuant to services agreement      375,000      2,625       0.17
                                               ---------    -------       ----

      Balance, June 30, 2006                   4,030,000    107,575       0.11

      Options exercised                          (25,000)      (500)      0.10

      Balance, September 30, 2006              4,005,000    107,075       0.11
                                               =========    =======       ====

      The Company has granted stock options as follows:

                                                                        Weighted
                                                          Outstanding   Average
                                      Number    Exercise      and      Remaining
Expiry Date        Grant Date      of Options     Price   Exercisable    Life
--------------------------------------------------------------------------------

Sept. 30,2007     June 25, 2004     155,000       0.10      155,000      1.00
June 25, 2009     June 25, 2004   3,000,000       0.10    3,000,000      2.75
April 25, 2009   April 25, 2006     100,000       0.10      100,000      2.55
Jan. 11, 2007     June 11, 2006     375,000       0.15      375,000      0.25
Jan. 11, 2007     June 11, 2006     375,000       0.17      375,000      0.25
                                  ---------               ---------      ----
                                  4,005,000               4,005,000      2.22
                                  =========               =========      ====


                                       13
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

9.    CAPITAL STOCK (Continued)

      The Board of  Directors  of the Company has  approved an  extention to the
      date of expiry of options as follows:  180,000  options  granted  June 25,
      2004 expiry extended to September 30, 2007.

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

            Issue date                          April 25,2006      June 11, 2006
            --------------------------------------------------------------------
            Number of options                      100,000            750,000
            Expected life                          5 years          0.5 years
            Price volatility                          30%                 30%
            Dividend yield                             --                  --
            Risk-free interest rate of return          5%                  5%
            Amount recorded                        $3,600              $7,875

      (e)   Warrants

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

Outstanding and Exercisable          # of Warrants         Value         Price
-------------------------------------------------------------------------------
Balance, December 31, 2004              5,459,950         113,900         0.37

   Converted to common shares          (2,547,500)        (50,950)        0.15
   Issuance of step up warrants         2,547,500          10,190         0.30
   Expired                               (582,500)             --         0.48
                                        ---------          ------       ------
Balance, December 31, 2005              4,877,450          73,140       $ 0.36

Issued on Private Placement             1,691,666              --         0.30
                                        ---------          ------       ------

Balance, September 30, 2006             6,569,116          73,140         0.34
                                        =========          ======       ======

The Company has granted warrants as follows:

<TABLE>
<CAPTION>
                                                                                   Weighted
                                                                   Outstanding     Average
                                         Number       Exercise         and        Remaining
Expiry Date           Grant Date      of Warrants      Price       Exercisable      Life
--------------------------------------------------------------------------------------------
<S>                 <C>               <C>           <C>             <C>              <C>
December 31, 2006   June 30, 2004       499,950     0.15 - 0.20       499,950        0.25
February 26, 2007   June 30, 2004     1,830,000            0.50     1,830,000        0.35
April 7, 2007       April 7, 2005     2,547,500            0.30     2,547,500        0.50
May, 31, 2007        May 31, 2006     1,691,666            0.30     1,691,666        0.55
                                      ---------                     ---------        ----
                                      6,569,116                     6,569,116        0.45
                                      =========                     =========        ====
</TABLE>

      The Board of  Directors  of the Company has  approved an  extention to the
      date of expiry of warrants as follows:  499,950  warrants  granted on June
      30, 2004 expiry extended to December 31, 2006.


                                       14
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

10.   CONTRIBUTED SURPLUS

      Balance, December 31, 2004                   $  1,051,886
      Less:   Stock Options exercised (Note 9(d))        (3,750)
      Less:  Warrants converted into
        common shares (Note 9(e))                      (50,950)
      Add: Step up warrants granted                      10,190
                                                   ------------
      Balance, December 31, 2005                      1,007,376
      Add: Stock options granted                          3,600
      Balance, March 31, 2006                         1,010,976
      Add: Stock options granted                          7,875
                                                   ------------
      Balance, June 30, 2006                          1,018,851

      Less: Stock Options exercised (Note 9(d))            (500)
                                                   ------------

      Balance September 30, 2006                      1,018,351
                                                   ============

                                                      Sept. 30,     Dec. 31,
                                                        2006          2005
                                                     ----------   ----------
      Settlement of debt instruments                 $  656,626   $  656,626
      Equity portion of long-term debt (Note 7(a))      181,510      181,510
      Stock Options(Note 9 (d))                         107,075       96,100

      Warrants (Note 9(e))                               73,140       73,140
                                                     ----------   ----------

                                                     $1,018,351   $1,007,376
                                                     ==========   ==========

11.   INTEREST EXPENSE (INCOME)

<TABLE>
<CAPTION>
                                                        Three months ended Sept. 30,      Nine months ended Sept. 30,

                                                             2006         2005                 2006         2005
                                                             ----         ----                 ----         ----
<S>                                                       <C>          <C>                  <C>          <C>
      Interest on convertible debentures                  $  44,552    $  44,552            $ 133,656    $ 168,245
                                                          ---------    ---------            ---------    ---------
      Other interest                                          1,512        4,658                1,512       18,423
                                                          ---------    ---------            ---------    ---------
                                                             46,064       49,210              135,168      186,668
      Interest income                                        (8,640)      (8,615)             (25,070)     (34,362)
      Adjustment to prior period estimates                     --                               --
                                                          ---------    ---------            ---------    ---------
                                                             37,424       40,595              110,098      152,306
      Less: amounts capitalized to projects in progress     (39,304)     (22,097)            (124,300)     (99,738)
                                                          ---------    ---------            ---------    ---------

                                                             (1,880)      18,498              (14,202)      52,568
                                                          ---------    ---------            ---------    ---------
</TABLE>


                                       15
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

12.   EARNINGS (LOSS) PER COMMON SHARE

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

            Period                                                  Outstanding
            ------                                                  -----------

            September 30, 2006                                       39,101,499
            September 30, 2005                                       35,353,508

<TABLE>
<CAPTION>
                                                 Three months ended Sept. 30,    Nine months ended Sept. 30,
                                                      2006            2005             2006            2005
<S>                                              <C>             <C>             <C>             <C>
      Numerator:
      ----------
      Net income (loss) as reported for basic
      EPS                                        $   (231,398)   $   (323,166)   $   (529,614)   $    620,172

      Less: Preferred share dividends paid
      and in arrears                                  (11,251)        (11,251)        (33,753)        (33,753)
                                                 ------------    ------------    ------------    ------------

      Net Income (Loss)                          $   (242,649)   $   (334,417)   $   (563,367)   $    586,419
                                                 ------------    ------------    ------------    ------------
      Denominator:
      ------------
      Weighted average shares for basic EPS        39,076,771      35,353,508      37,003,668      35,080,761

      Basic income (loss) per share              $      (0.01)   $      (0.01)   $      (0.02)   $       0.02
                                                 ============    ============    ============    ============
</TABLE>

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


                                       16
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

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

<TABLE>
<CAPTION>
                                                 Three months ended Sept. 30,    Nine months ended Sept. 30,
                                                      2006           2005             2006            2005
<S>                                              <C>             <C>             <C>             <C>
      Numerator:
      ----------
      Net income (loss) as reported for basic
      EPS                                        $   (231,398)   $   (323,166)   $   (529,614)   $    620,172
      Less: Preferred share dividends paid and
      in arrears                                      (11,251)        (11,251)        (33,753)        (33,753)
                                                 ------------    ------------    ------------    ------------
      Net Income (Loss)                          $   (242,649)   $   (334,417)   $   (563,367)   $    586,419
                                                 ------------    ------------    ------------    ------------

      Denominator:
      ------------
      Weighted average shares for basic
      EPS                                          39,076,771      35,353,508      37,003,668      35,080,761
      Effect of dilutive securities:
      Stock options                                                                                 1,400,585
      Warrants                                                                                        477,996
      Adjusted weighted average shares
      and assumed conversions for
      dilutive securities                          39,076,771      35,353,508      37,003,668      36,959,342

      Basic income (loss) per share              $      (0.01)   $      (0.01)   $      (0.02)   $       0.02
                                                 ============    ============    ============    ============
</TABLE>

      (c)   Anti-dilutive:  For the three  months ended  September  30, 2006 and
            2005,  4,005,000  and nil  options  to  purchase  common  shares and
            warrants of 6,569,116 and 2,380,000, respectively, were not included
            in the computation of diluted earnings per share because of the loss
            position in 2006 and the warrant  exercise  prices were greater than
            the average market price of the common shares in 2005.

            For the nine months ended September 30, 2006 and 2005, 4,005,000 and
            nil options to purchase  common shares and warrants of 6,569,116 and
            2,380,000,  respectively,  were not included in the  computation  of
            diluted  earnings per share because of the loss position in 2006 and
            the warrant  exercise  prices were greater  than the average  market
            price of the common shares in 2005.

13.   FINANCIAL INSTRUMENTS

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

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


                                       17
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

13.   FINANCIAL INSTRUMENTS (Continued)

      (i)   Fair Value

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

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

            The fair value of the convertible debentures issued in December 2000
            has been  estimated by first  calculating  the present  value of the
            liability  component  using a discount  factor and then assigning to
            the equity  component  the  difference  between the  proceeds of the
            debenture  and  the  fair  value  of the  liability  component.  The
            estimated  discount  factor used  approximated  the market  interest
            rates at  September  30, 2006 and 2005.  Accordingly,  the  carrying
            amounts of the convertible debentures approximate fair value.

      (ii)  Credit Risk

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

         (iii)    Currency Risk

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

            The Company does not actively use  derivative  instruments to reduce
            its exposure to foreign  currency  risk.  However,  dependent on the
            nature, amount and timing of foreign currency receipts and payments,
            the Company may enter into  forward  exchange  contracts to mitigate
            the  associated  risks.  There  were no forward  exchange  contracts
            outstanding at September 30, 2006.


                                       18
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

14.   COMMITMENTS AND CONTINGENCIES

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

                         2006                                     6,750
                         2007                                    28,000
                         2008                                    29,000
                         2009                                    13,000
                                                                -------
                                                                $76,750

      (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.

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

15.   RELATED PARTY TRANSACTIONS .

      During the three month period ended September 30, 2006, $73,749 (September
      30,2005, $73,749) and nine month period ended September 30, 2006, $221,247
      (September 30, 2005 $285,211) 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.


                                       19
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

16.      VARIABLE INTEREST ENTITIES

            In December  2005,  The Devine  Entertainment  Film Library  Limited
            Partnership ("DEFLLP"),  a limited partnership formed and registered
            under the  Limited  Partnerships  Act  (Ontario)  on March 8,  2004,
            acquired Devine  Entertainment  Corporation's  interest in a defined
            part of the Company's  proprietary film library for $7.0 million, as
            valued by an outside  valuator.  The Company has provided  financing
            for the transaction,  and has entered into a financing agreement and
            will  enter  into a  management  agreement  with  DEFLLP in order to
            manage  the   exploitation   and  expand  the  distribution  of  the
            properties.   Under  these   agreements  the  Company  will  receive
            management fees and interest revenue and the Company will maintain a
            call right for between a minimum of 70% and a maximum 100%  interest
            in the library assets. The accounts of this variable interest entity
            have been included in the interim consolidated  financial statements
            of the Company.

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

<TABLE>
<CAPTION>
                                                 Three months ended Sept. 30,   Nine months ended Sept. 30,

                                                      2006           2005          2006            2005
                                                      ----           ----          ----            ----
<S>                                              <C>            <C>            <C>            <C>
Change in non-cash working capital
Accounts receivable                              $   105,682    $    86,884    $   121,129    $   585,781
Tax credits receivable                                    --             --             --        299,097
Inventory                                             16,485         15,911         17,419        (47,170)
Prepaids and sundry receivable                      (307,689)       (45,232)      (310,783)       (97,516)
Accounts payable and accrued liabilities             281,786       (126,192)       161,165         80,580
Deferred revenue                                   1,665,286             --      2,137,786     (2,658,971)
                                                 -----------    -----------    -----------    -----------
                                                   1,761,550        (68,629)     2,126,716     (1,838,199)
                                                 -----------    -----------    -----------    -----------

Non-cash transactions
Shares issued on settlement of payables                   --             --         27,765         78,748
Stock-based compensation                                  --             --         23,184         18,400
Shares issued on settlement of long-term debts            --             --             --             --
</TABLE>


                                       20
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

18.   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 Sept. 30,   Nine months ended Sept. 30,

                           2006           2005           2006             2005
                           ----           ----           ----             ----

Canada                 $   19,344     $   66,000     $   38,219       $  359,000
United States              64,911        115,000        203,684          240,000
France                         --             --         68,723           99,000
United Kingdom                 --             --             --        2,659,000
Other foreign                  --             --         52,903          194,000
                       ----------     ----------     ----------       ----------
                           84,255        181,000        363,529        3,551,000
                       ==========     ==========     ==========       ==========

19.   RECONCILIATION TO UNITED STATES GAAP

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

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

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

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

      (d)   Financial   Accounting   Standards   Board  Statement  of  Financial
            Accounting Standards No. 130


                                       21
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

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

19.   RECONCILIATION TO UNITED STATES GAAP (Continued)

      September 30, 2006                          CDN GAAP        U.S. GAAP
      ------------------                          --------        ---------
                                                     $                $
      Balance Sheet
      -------------

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

      Contributed Surplus                        1,018,351         552,038

      Deficit                                    8,605,061       8,286,382

      Other liabilities                                 --         528,426

      Preferred shares                             494,550

      Income Statement
      ----------------

                                       Three Months           Nine Months
                                      Ended Sept. 30,        Ended Sept. 30,
                                  CDN GAAP    U.S. GAAP  CDN GAAP    U.S. GAAP
                                  --------    ---------  --------    ---------

      Interest expense (income)   $ (1,880)   $ 18,498   $(14,202)   $ 52,568

      December 31, 2005                          CDN GAAP        U.S. GAAP
      -----------------                          --------        ---------
                                                    $                $
      Balance Sheet
      -------------

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

      Contributed Surplus                       1,007,376          541,063

      Deficit                                   8,075,447        7,790,767

      Other liabilities                                --          494,673

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

      Income Statement

      Interest expense                             50,832           95,836


                                       22
<PAGE>

                        DEVINE ENTERTAINMENT CORPORATION

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

                               SEPTEMBER 30, 2006

19.   RECONCILIATION TO UNITED STATES GAAP (Continued)

      Impact of Newly Issued United States Accounting Standards

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

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

20.   COMPARATIVE FIGURES

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


                                       23
<PAGE>

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

                      MANAGEMENT'S DISCUSSION AND ANALYSIS

The  following  management's  discussion  and analysis  has been  prepared as of
November 10, 2006 to provide a review of current  activities and a comparison of
the  performance  and  financial  position of Devine  Entertainment  Corporation
("Devine" or the "Company") for the three and nine month periods ended September
30,  2006 and  2005.  It  should be read in  conjunction  with the  accompanying
unaudited  interim  consolidated  financial  statements  and the notes  therein.
Additional  information  related  to  the  Company  is  available  on  Sedar  at
www.sedar.com  . The  financial  data in this  document  have been  prepared  in
accordance with Canadian GAAP.  References to Canadian dollars, Cdn$ or $ are to
the currency of Canada and references to U.S. dollars or US$ are to the currency
of the United States.

OVERVIEW

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

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

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

FORWARD-LOOKING STATEMENTS

Readers are cautioned that actual results may differ materially from the results
projected in any  "forward-looking"  statements  included in this discussion and
analysis,  which  involve a number of risks and  uncertainties.  Forward-looking
statements are statements  that are not historical  facts,  and include (but are
not limited to) statements  regarding the Company's planned production slate and
development activities, anticipated future


                                       24
<PAGE>

profitability,  losses,  revenues,  expected future expenditures,  the Company's
intention to raise new financing,  sufficiency of working  capital for continued
operations,  and other statements  regarding  anticipated  future events and the
Company's anticipated future performance.  Forward-looking  statements generally
can be identified by the words "expected",  "intends",  "anticipates",  "feels",
"continues",  "planned",  "plans",  "potential",  "with a view to",  and similar
expressions or variations thereon,  or that events or conditions "will",  "may",
"could" or "should" occur, or comparable  terminology referring to future events
or results.

The Company's actual results could differ  materially from those  anticipated in
these  forward-looking  statements  as a result of numerous  factors,  including
those listed under  "Risks and  Uncertainties",  any of which could cause actual
results to vary  materially  from current  results or the Company's  anticipated
future results.  The Company assumes no responsibility to update the information
contained herein.

THIRD QUARTER HIGHLIGHTS

The Company's activities in the third quarter 2006 were focused on two important
events,  the  positive  financial  impact of which the Company  expects  will be
reflected  in its  financial  statements  in the next six to twelve  months  and
beyond.

The Company  completed the $8.1 million  financing of its new primetime  mystery
series for Chum Television, Across the River to Motor City and started principal
photography  on the  series.  As at the end of the quarter and as at the date of
this  reporting,  production of the initial six episode season was proceeding on
budget and on  schedule  and the Company  expects  that the  production  will be
completed on time and on budget. Canadian broadcast license agreements currently
agreed to will generate  initial  revenues from the series of  approximately  $4
million in the first six months of 2007 when the episodes  will be completed and
delivered.  The Company is  optimistic  about the success of Across the River to
Motor City and the  possibility  of new episodes of the series being  ordered by
Chum Television for 2007-2008. The Company is also pleased to announce that Chum
Television recently committed  additional funding for new scripts for the second
season of Across the River to Motor City.

The Company delivered master duplication and sales materials to Carrere Group of
France (Paris Stock Exchange EPA: CAR) in August.  The Company  expects that the
multi-year  agreement  announced  July 11, 2006 with Carrere Group will start to
generate revenue from sales of the Company's film library as early as the fourth
quarter  of this  year.  In  addition,  the  Company  is  working  closely  with
co-producer  Carrere  Group to bring its new six  episode  series  The  Writers'
Specials, budgeted at approximately $7.5 million, into production in 2007.


                                       25
<PAGE>

      o     Overall revenues from the Company's  proprietary library of $84, 255
            were lower than for the same period 2005, as expected, and reflected
            that the Company's feature film,  Bailey's  Billion$,  has completed
            its first sales cycle  generating  over $6.1  million in revenues in
            2004  and  2005 as  well  as the  fact  that  the  new  distribution
            agreement  with Carrere  Group is not  expected to start  generating
            sales and revenues until the fourth quarter and into next year.

      o     The Company's  third quarter  adjusted net loss for EPS decreased by
            $91,768 or approximately 28% to $231,398 or ($0.01) per common share
            (basic),  as  compared  with an  adjusted  net loss of  $323,166  or
            ($0.01) per common share for the same period in 2005.  These results
            reflect that the  Company's  third  quarter  activities in 2006 were
            focused  on  producing  its new  primetime  mystery  series for Chum
            Television, Across the River to Motor City.

      o     The Company's cash on hand increased by $58,498 or  approximately 9%
            to $719,263  as  compared to $660,765 in the quarter  ended June 30,
            2006,  primarily  as a result  of cash flow  from  payments  for the
            production  of Across  the River to Motor  City.  Cash on hand as at
            September 30, 2006 increased  approximately  300% since December 31,
            2005  reflecting both the production cash flow from Across the River
            to Motor City and the  proceeds of a  successful  private  placement
            that closed May 31, 2006.

RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND NINE MONTHS
ENDED SEPTEMBER 30, 2006 AND 2005

Revenues

The Company's third quarter  revenues in 2006 decreased by $96,644 to $84,255 as
compared  to  $180,899  for the same  period in 2005.  All of the revenue in the
quarter was derived  from DVD,  video and  ancillary  publishing  sales in North
America,  reflecting the fact that the multi-year  agreement  announced July 11.
2006 with Carrere Group has not yet had the time to generate  sales and revenue.
The Company  expects that the new  agreement  with  Carrere  Group will start to
generate  revenue from foreign sales of the  Company's  film library as early as
the fourth quarter of this year.


                                       26
<PAGE>

Reflecting the fact that the film library revenues in the third quarter 2006 are
derived  solely  from  sales in the  United  States and  Canada,  the  Company's
revenues by  geographic  location,  based on the location of  customers  were as
follows:

                                   Three months                Nine months
                                  ended Sept. 30,             ended Sept. 30,

                                2006          2005          2006          2005
                                ----          ----          ----          ----

Canada                      $   19,344    $   66,000    $   38,219    $  359,000
United States                   64,911       115,000       203,684       240,000
France                              --            --        68,723        99,000
United Kingdom                      --            --            --     2,659,000

Other foreign                       --            --        52,903       194,000
                            ----------    ----------    ----------    ----------
                                84,255       181,000       363,529     3,551,000
                            ==========    ==========    ==========    ==========

Earnings (loss) per Common Share (EPS)

In the third quarter of 2006, the Company's  adjusted net loss for EPS decreased
by $91,768 or approximately 28% to $231,398 or ($0.01) per common share (basic),
as compared  with an adjusted  net loss of $323,166 or ($0.01) per common  share
for the same period in 2005.  These  results  reflect that the  Company's  third
quarter  activities in 2006 were focused on producing its new primetime  mystery
series for Chum  Television,  Across the River to Motor City.  The Company's net
loss  in the  nine  month  period  ended  September  30,  2006  was  529,614  or
approximately  (0.01) per share as compared to net  earnings of $620,172 or 0.02
per share for the same nine month period in 2005.

Shareholders' Equity

Shareholder's equity increased by $34,937 in the nine months ended September 30,
2006 to $5,206,959 from $5,172,024 as at December 31, 2005.

EBITDA

EBITDA, defined as earnings before interest, taxes,  depreciation,  amortization
and gains on  settlement  of debt was in a modest loss position at ($203,165) in
the third  quarter of 2006,  as  compared  to a loss of  ($11,866)  for the same
period in 2005.


                                       27
<PAGE>

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

SUMMARY OF QUARTERLY RESULTS:

<TABLE>
<CAPTION>
                                  Sept. 30,    June 30,     Mar. 31,     Dec. 31,    Sept. 30,     June 31,     Mar. 31,   Dec. 31,
                                    2006         2006         2006         2005         2005         2005         2005       2004
                                    ----         ----         ----         ----         ----         ----         ----       ----
<S>                               <C>          <C>          <C>          <C>          <C>           <C>           <C>        <C>
Revenues                            84,255      115,414      163,860      468,348      180,899    2,892,261      478,236     384,281

Operating                          287,420      156,200      232,377      268,418      192,765      214,791      175,044     395,176
Expenses
                                  (231,398)    (147,639)    (150,577)    (865,770)   (323,166`)     933,050       22,477     156,458
Earnings (loss) before
income taxes

Special Write Downs                     --           --           --           --           --           --           --          --

Special Gains                           --           --           --           --           --           --           --          --

Income taxes                            --           --           --       12,189           --      (12,189)          --     306,000

Net earnings (loss)               (231,398)    (147,639)    (150,577)    (853,581)    (323,166)     920,861       22,477     614,296

Basic  earnings (loss)               (0.01)       (0.00)       (0.00)       (0.02)       (0.01)        0.03         0.00        0.02
per common share
</TABLE>

Operating expenses

The Company's  operating expenses for the three month period ended September 30,
2006  increased  by $94,655 or  approximately  49% to  $287,420,  as compared to
$192,765 in the same period in 2005.  In the nine month period  ended  September
30, 2006 the Company's operating expenses increased by $93,395, or approximately
16% to $675,995 as compared to $582,600  for the same nine month period in 2005,
reflecting the Company's expanded financing and reporting  activities related to
its new OTCBB listing,  its clearance by the SEC as a fully reporting  issuer in
the US and the private placement completed in May of 2006.


                                       28
<PAGE>

Production and Development Activity

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

Principal  photography  of Across the River to Motor  City,  a new $8.1  million
primetime  mystery  series began in the third quarter of 2006 and the Company is
now focusing on  developing a second  season of 13 new episodes of the series it
hopes will to go into  production in 2007/2008.  The Company  expects that sales
currently contracted will generate revenues of approximately $3.9 million in the
first six months of 2007 when the initial  episodes of the series are  delivered
and related revenues are recognized.

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

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

Investment in Film and Television Programs and Recordings

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

Amortization  expenses as at  September  30, 2006 for the  Company's  library of
completed   television  programs  and  recordings  and  motion  picture  totaled
$179,490.  As at September 30, 2006, the Company's investment in its proprietary
film library of completed  television  programs and  recordings was estimated as
$1,543,553  after  accumulated  amortization.  The  Company's  investment in its
motion picture Bailey's  Billion$ was estimated at $3,208,648 after  accumulated
amortization  and the Company's  investment  in projects in progress,  including
Across the River to Motor City, was estimated as $3,780,238 as per the following
table:


                                       29
<PAGE>

<TABLE>
<CAPTION>
                                                                     September 30, 2006                    Dec. 31, 2005
                                                                     ------------------                    -------------
                                                                        Accumulated
                                                           Cost         Amortization           Net                Net
                                                           ----         ------------           ---                ---
<S>                                                    <C>               <C>               <C>               <C>
Completed television programs and recordings           $15,999,530       $14,445,977       $ 1,543,553       $ 1,723,043
Completed Motion picture - Bailey's Billion$             6,972,580         3,763,932         3,208,648         3,241,219
Projects in progress                                     3,780,238                --         3,780,238         1,883,846
                                                       -----------       -----------       -----------       -----------

                                                       $26,752,348       $18,219,909       $ 8,532,439       $ 6,848,108
                                                       ===========       ===========       ===========       ===========
</TABLE>

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

In the  United  States,  management  has  used  the  Company's  twenty  years of
experience with broadcasters in conjunction with the United States distributor's
estimates  for three windows over ten years as a basis of its  television  sales
estimates.  With regard to DVD/video sales  estimates,  the Company has reviewed
distributors' estimates and compared them to the Company's historical sales. P&L
models based on these sales estimates and  incorporating  the distribution  fees
and expenses defined in the Company's  distribution  agreements assuming between
500,000 to  1,000,000  units  sales over ten years with  average  net revenue of
$4.26 (U.S.) per unit were discounted and support what  management  believes are
conservative ultimate revenue estimates.  The estimates were based on an initial
release at a retail pricing of $24.98 (U.S.) for rental and initial sell through
release and  subsequent  drops in pricing to $14.98  (U.S.) and $12.98 (U.S.) as
the DVD  release  migrates  to  distribution  in mass  market  sell-through  and
discount  markets over the ten-year  period.  The Company compared and supported
this figure with industry  standards and  published  unit sales for  comparative
family feature films and then  discounted  them  conservatively  and modeled the
estimates to incorporate the  distribution  fees and expense  limitations in its
various  distribution  agreements.  The models provided net revenue estimates of
approximately $5 million (U.S.),  which the Company then discounted to less than
fifty percent (50%),  which in effect reflects 750,000 unit sales over ten years
at the lowest price and margin.

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


                                       30
<PAGE>

ultimate  revenue  estimates,  conservatively  assuming  that  all of the  other
territories  around  the world  would not exceed  the  revenues  from the United
States market.

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

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

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

The Company  estimates average annual ultimate revenue for the Artists' Specials
at  $438,333  per year for the next three  years and  estimates  average  annual
ultimate revenue for the Inventors'  Specials at $380,000 per year for 2006. The
Company believes that its current  ultimate  revenue  estimates for the Artists'
Specials  and  Inventors'  Specials  are  reasonable  and  realizable  given the
multi-year nature of television contracts and that annual revenue can fluctuate.
The Company's new  agreements  recently  concluded with sales agents in Germany,
France,  Italy, Spain, Japan and Korea, point both to the renewed  opportunities
resulting from the Company's improved financial position and also to an industry
wide renewal of sales of broadcast licenses in international  markets.  As well,
the Company's experience supports the fact that when a new series of its branded
proprietary library of award-winning films is produced, sales for the previously
produced library of films are concluded  concurrent with commitments for the new
production  on a  territory-per-territory  basis.  The Company  expects to begin
production  of a new series  based on landmark  authors  entitled  The  Writers'
Specials in 2007 and has already  begun to pre-sell the  broadcast  licenses for
the Writers  Specials  and, in  conjunction,  license  the  Company's  completed
television programs as well.


                                       31
<PAGE>

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

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

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

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

   % increase 2005/2004            150%                272%                78%              29%
</TABLE>

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

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

Year                                           2006
                                               ----

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


                                       32
<PAGE>

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

Year                                         2006          2007         2008
                                             ----          ----         ----

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

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

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

                                                        Amount          Year
                                                        ------          ----

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


                                       33
<PAGE>

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

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

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

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

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

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

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

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

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

Annually,  management  reviews the estimate of total remaining  ultimate revenue
and the fair value of the capitalized film costs. As a result of the review, the
Company  reduced the carrying value of its completed film,  television  programs
and recordings by $1,373,356  (2004 - $1,393,826) and reduced the carrying value
of its completed motion picture by $1,979,997


                                       34
<PAGE>

(2004 - $1,744,151).  The Company expects to amortize approximately $770,000 for
completed  television  programs and recordings  costs and $353,000 for completed
motion picture costs during the next fiscal year.

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

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

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

Capital stock

On September 29, 2006,  the Company issued 25,000 shares to a consultant who had
provided  production services pursuant to a previously approved option agreement
with an exercise price of $0.10.

Related Party Transactions

During the three month  period  ended  September  30, 2006 - $73,749  (September
30,2005 - $73,749)  and nine month period  ended  September  30, 2006 - $221,247
(September  30,  2005 - $285,211)  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.

Limited Partnerships

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

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

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

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

      o     Administrative services

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


                                       35
<PAGE>

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

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

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

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

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

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

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

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

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

      o     Administrative services; and

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

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

In December 2005, The Devine Entertainment Film Library Limited  Partnership,  a
limited  partnership  formed and registered  under the Limited  Partnerships Act
(Ontario) on March 8, 2004, acquired Devine Entertainment Corporation's interest
in a defined part of the Company's proprietary film library for $7.0 million, as
valued by an outside  valuator.  The  Company  has  provided  financing  for the
transaction,  and has entered into a financing  agreement  and will enter into a
management  agreement  with the  Limited  Partnership  in order  to  manage  the
exploitation and expand the distribution of the properties. Under these


                                       36
<PAGE>

agreements the Company will receive management fees and interest revenue and the
Company  will  maintain a call right for  between a minimum of 70% and a maximum
100%  interest in the library  assets.  The accounts of this  variable  interest
entity  have been  included  in the  consolidated  financial  statements  of the
Company.

Liquidity and Capital Resources

The Company's cash on hand increased by $58,498 or  approximately 9% to $719,263
as compared to $660,765 in the quarter ended June,  2006,  primarily as a result
of cash flow from payments for the production of Across the River to Motor City.
Cash on  hand as at  September  30,  2006  increased  approximately  300%  since
December 31, 2005 reflecting both the production cash flow from Across the River
to Motor City and the proceeds of a successful private placement that closed May
31, 2006.

The Company has no bank debt.

The Company  expects to  maintain  renewed  profitability  from  operations  and
expects that  proceeds from sales of its film library and new  production  slate
will generate  additional revenues and positive cash flow through the balance of
2006 and 2007.

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

Nonetheless,  the Company remains unable to service its convertible debt and the
Company will require additional  working capital from its production  activities
or  corporate  financing  in 2006.  On May 31,  2006,  the Company  successfully
completed a private placement and issued 3,383,331 units, each consisting of one
common share and one-half  purchase  warrant at $0.15 per unit for cash proceeds
of $507,500.

The Company  intends to actively  seek  additional  funding in calendar 2006 and
2007.

OUTLOOK

The Company is optimistic about its renewed production for 2006 and 2007.

With  commitments  in hand  from CHUM  Television  and  other  Canadian  funding
sources,  the Company has  commenced  production  in  September of the first six
episodes of the new primetime series,  Across the River to Motor City,  budgeted
at  $8,100,000.  As at the  end of the  quarter  and  as at  the  date  of  this
reporting, production of the initial six episode


                                       37
<PAGE>

season was proceeding on budget and on schedule and the Company expects that the
production will be completed on time and on budget.  Canadian  broadcast license
agreements  currently  agreed will generate  initial revenues from the series of
approximately  $4 million in the first six months of 2007 when the episodes will
be  completed  and  delivered.  The Company is  optimistic  about the success of
Across the River to Motor City and the possibility of a new 13 episode season of
the series being ordered by Chum  Television for 2007-2008.  The Company is also
pleased to announce  that  subsequent  to September  30, 2006,  Chum  Television
committed  additional funding for new scripts of the second season of Across the
River to Motor City.

The Company delivered master duplication and sales materials to Carrere Group of
France (Paris Stock Exchange EPA: CAR) in August.  The Company  expects that the
multi-year  agreement  announced  July 11. 2006 with Carrere Group will start to
generate revenue from sales of the Company's film library as early as the fourth
quarter of this year. The Company is working  closely with  co-producer  Carrere
Group to bring its new six episode  series The  Writers'  Specials,  budgeted at
approximately  $7.5 million,  into  production  in 2007.  In addition,  pre-sale
commitments from  broadcasters  France 5, TPS Jeunesse,  TVOntario and Knowledge
network for the Company's  new Writers'  Specials  series  support the Company's
expectations  that at least one other major production will commence in the next
12 months.

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

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

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

OTHER INFORMATION

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


                                       38
<PAGE>

Disclosure of outstanding share data

As of  November  10,  2006  the  Company  has the  following  voting  or  equity
securities  or  securities  convertible  or  exercisable  into  voting or equity
securities, issued and outstanding:

Common shares issued & outstanding: 39,213,699
Series 1 preferred shares issued and outstanding: 494,550
Options: 4,005,000 outstanding options to purchase 4,005,000 common shares
Warrants: 6,569,116 outstanding to purchase 6,569,116 common shares
Debentures:  1,519,290 convertible into 3,301,600 common shares

Item 3. Controls and Procedures

CONTROLS AND PROCEDURES

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


                                       39
<PAGE>

                            PART II OTHER INFORMATION

Item 1. Legal Proceedings.

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

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

            (a)   Not applicable

            (b)   In  December  2004,  the  Company  issued  494,550  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.

                  On September 29, 2006, the Company issued 25,000 common shares
                  to a consultant  in  consideration  for  production  services.
                  These    shares    were    issued    upon    exercise   of   a
                  previously-approved  option having an exercise  price of $0.10
                  per share.  Such shares  were  offered and sold in reliance on
                  the exemption  from  registration  afforded by Section 4(2) of
                  the Securities Act of 1933, as amended.

            (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, 2006 filed  herewith  is  incorporated
                  herein by reference.

            (b)   Not applicable

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

            (a)   Not applicable

            (b)   Not applicable

            (c)   Not applicable


                                       40
<PAGE>

            (d)   Not applicable

Item 5. Other Information

            (a)   Not applicable

            (b)   Not applicable

Item 6. Exhibits and Reports on Form 8-K

            (a)   Exhibits

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

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

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

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

            (c)   Reports on Form 8-K

                  (i)   The  Company  filed a  current  report on Form 8-K dated
                        July 11, 2006.  Under ITEM 8.01 of that 8-K, the Company
                        announced  that  it  had  entered  into  new  multi-year
                        distribution and co-production financing agreements with
                        Carrere Group DA.

                  (ii)  The  Company  filed a  current  report on Form 8-K dated
                        September  22,  2006.  Under ITEM 8.01 of that 8-K,  the
                        Company   announced   that   it  had   begun   principal
                        photography on Devine's new mystery  series  licensed by
                        CHUM  Television  entitled  "Across  the  River to Motor
                        City."


                                       41
<PAGE>

                                   SIGNATURES

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

                                        DEVINE ENTERTAINMENT CORPORATION

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

Dated: November 9, 2006

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

Signature                      Title                                 Date
--------------------------------------------------------------------------------
/s/ David Devine     Director, Chairman of the Board            November 9, 2006
                     President and Chief Executive Officer

/s/ Richard Mozer    Director, Vice-Chairman of the             November 9, 2006
                     Board, Chief Financial Officer,
                     Treasurer and Secretary


                                       42