qsb
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-QSB
(Mark
One)
[X]
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF
THE
SECURITIES EXCHANGE ACT OF 1934
For
six
months ended June 30, 2006
OR
[
]
TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d)
OF
THE SECURITIES EXCHANGE ACT OF 1934
For
the
transition period from ___________ to __________
Commission
file number 000-3078
CAMELOT
ENTERTAINMENT GROUP, INC.
(Exact
name of registrant as specified in its charter)
Delaware 52-2195605
(State
or other jurisdiction of (I.R.S.
Employer
incorporation
or organization)
Identification No.)
2020
Main
Street #990
Irvine,
CA 92614
(Address
of principal executive offices (zip code))
(949)
777-1090
(Registrant's
telephone number, including area code)
Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the last
12
months (or for such shorter period that the registrant was required to file
such
reports), and (2) has been subject to such filing requirements for the past
90
days.
Yes x
No o
As
of
June 30, 2006, the Registrant had outstanding 93,649,589 shares of Common Stock,
$0.001 par value.
CAMELOT
ENTERTAINMENT GROUP, INC.
INDEX
TO FORM 10-QSB
|
PART
I. FINANCIAL INFORMATION
|
|
Item
1. Financial Statements (Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
|
|
Item
3. Controls and Procedures
|
|
|
Item
1. Legal Proceedings
|
|
Item
2. Changes in Securities and Use of Proceeds
|
|
Item
3. Defaults Upon Senior Securities
|
|
Item
4. Submissions of Matters to a Vote of Security Holders
|
|
Item
5. Other Information
|
|
Item
6. Exhibits and Reports on Form 8-K
|
|
|
THIS
REPORT ON FORM 10-QSB CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANING
OF
SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND WITHIN THE MEANING
OF
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, WHICH ARE
SUBJECT TO THE "SAFE HARBOR" CREATED BY THOSE SECTIONS. THESE FORWARD-LOOKING
STATEMENTS INCLUDE BUT ARE NOT LIMITED TO STATEMENTS CONCERNING OUR BUSINESS
OUTLOOK OR FUTURE ECONOMIC PERFORMANCE; ANTICIPATED PROFITABILITY, REVENUES,
EXPENSES OR OTHER FINANCIAL ITEMS; AND STATEMENTS CONCERNING ASSUMPTIONS MADE
OR
EXCEPTIONS AS TO ANY FUTURE EVENTS, CONDITIONS, PERFORMANCE OR OTHER MATTERS
WHICH ARE "FORWARD-LOOKING STATEMENTS" AS THAT TERM IS DEFINED UNDER THE FEDERAL
SECURITIES LAWS. ALL STATEMENTS, OTHER THAN HISTORICAL FINANCIAL INFORMATION,
MAY BE MARKET TO BE FORWARD-LOOKING STATEMENTS. THE WORDS "BELIEVES", "PLANS",
"ANTICIPATES", "EXPECTS", AND SIMILAR EXPRESSIONS HEREIN ARE INTENDED TO
IDENTIFY FORWARD-LOOKING STATEMENTS. FORWARD-LOOKING STATEMENTS ARE SUBJECT
TO
RISKS, UNCERTAINTIES, AND OTHER FACTORS, WHICH WOULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE STATED IN SUCH STATEMENTS. FORWARD-LOOKING
STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "FACTORS THAT
MAY
AFFECT FUTURE RESULTS," AND ELSEWHERE IN THIS REPORT, AND THE RISKS DISCUSSED
IN
THE COMPANY'S OTHER SEC FILINGS.
Item
1.
Financial Statements (Unaudited)
Camelot
Entertainment Group, Inc.
|
|
June
30,
|
|
|
|
2006
|
|
|
|
Unaudited
|
|
|
|
|
|
ASSETS
|
|
|
|
Current
Assets
|
|
|
|
Cash
|
$
|
3,779
|
|
Prepaid
Expenses
|
|
27,049
|
|
|
|
|
|
Total
Current Assets
|
|
30,828
|
|
|
|
|
|
Investments
|
|
|
|
|
|
|
|
Scripts
Costs
|
|
78,800
|
|
|
|
|
|
Subtotal
|
|
78,800
|
|
|
|
|
|
Total
Assets
|
$
|
109,628
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|
|
|
|
|
|
|
Current
Liabilities
|
|
|
|
Accounts
Payable and accured liabilities
|
$
|
264,549
|
|
|
|
|
|
Stockholder
advances
|
|
294,292
|
|
|
|
|
|
Total
Current Liabilities
|
|
558,841
|
|
|
|
|
|
Total
Liablilities
|
|
558,841
|
|
|
|
|
|
|
|
|
|
Stockholders'
Equity
|
|
|
|
Common
Stock; Par Value $.001 Per Share; Authorized
|
|
|
|
150,000,000
Shares; 93,649,589 Shares
|
|
|
|
Issued
and Outstanding.
|
|
93,649
|
|
|
|
|
|
Class
A Convertible Preferred Stock; Par Value $.001 per share
|
|
5,100
|
|
Authorized,
issued and outstanding 5,100,000 shares
|
|
|
|
|
|
|
|
Class
B Convertible Preferred Stock; Par Value $.001 per share
|
|
5,100
|
|
Authorized,
issued and outstanding 5,100,000 shares
|
|
|
|
|
|
|
|
Subscription
Receivable
|
|
(258,072
|
)
|
|
|
|
|
Capital
in Excess of Par Value
|
|
11,923,586
|
|
Deficit
Accumulated During the Development Stage
|
|
(12,218,576
|
)
|
|
|
|
|
|
|
|
|
Total
Stockholders' Equity (Deficit)
|
|
(449,213
|
)
|
|
|
|
|
Total
Liabilities and Stockholders' Equity
|
$
|
109,628
|
|
|
|
|
|
The
accompanying notes are an integal part of theses financial
statements.
Camelot
Entertainment Group, Inc.
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inception
on
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
April
21, 1999
|
|
|
|
|
For
the Three Months Ended,
|
|
|
For
Six Months Ended,
|
|
|
through
|
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
June
30,
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
REVENUE
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
58,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenue
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
-
|
|
$
|
58,568
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs
of services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
95,700
|
|
Sales
and Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
53,959
|
|
Research
& Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
252,550
|
|
General
& Administrative
|
|
|
202,956
|
|
|
486,174
|
|
|
393,716
|
|
|
603,270
|
|
|
8,986,284
|
|
Impairment
of assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,402,338
|
|
Impairment
of investments in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
other
companies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
710,868
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Expenses
|
|
|
202,956
|
|
|
486,174
|
|
|
393,716
|
|
|
603,270
|
|
|
12,501,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
OPERATING LOSS
|
|
|
(202,956
|
)
|
|
(486,174
|
)
|
|
(393,716
|
)
|
|
(603,270
|
)
|
|
(12,443,131
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTHER
INCOME (EXPENSES)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
(Expense)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(9,294
|
)
|
Other
income (expense)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(21,652
|
)
|
Gain
on extinguishment of debt
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
255,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Other Income (Expenses)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
224,554
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET
LOSS
|
|
$
|
(202,956
|
)
|
$
|
(486,174
|
)
|
$
|
|
)
|
$
|
(603,270
|
)
|
$
|
(12,218,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
LOSS PER COMMON SHARE
|
|
|
(0.0022
|
)
|
|
(0.0062
|
)
|
|
(0.0042
|
)
|
|
(0.0081
|
)
|
$
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
WEIGHTED
AVERAGE NUMBER OF
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SHARES
OUTSTANDING
|
|
|
93,649,589
|
|
|
79,013,587
|
|
|
93,649,589
|
|
|
74,582,002
|
|
|
42,178,165
|
|
The
accompanying notes are an integral part of these financial
statements.
Camelot
Entertainment Group, Inc.
(Unaudited)
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
|
|
|
Inception
on
|
|
|
|
|
|
|
|
|
|
|
April
21, 1999
|
|
|
|
|
For
Six Months Ended,
|
|
|
through
|
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
30-Jun
|
|
|
|
|
2006
|
|
|
2005
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income for the period
|
|
$
|
(393,716
|
)
|
$
|
(603,270
|
)
|
$
|
(12,218,576
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to reconcile net (loss) to cash provided (used) by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
Value
of options expensed
|
|
|
-
|
|
|
|
|
|
351,000
|
|
Gain
on extinguishment of debt
|
|
|
-
|
|
|
|
|
|
(255,500
|
)
|
Depreciation
|
|
|
|
|
|
|
|
|
3,997
|
|
Amortization
of deferred compensation
|
|
|
-
|
|
|
|
|
|
1,538,927
|
|
Common
Stock issued for debt
|
|
|
|
|
|
|
|
|
194,171
|
|
Common
Stock issued for services
|
|
|
-
|
|
|
384,843
|
|
|
1,939,732
|
|
Common
Stock issued for expense reimbursement
|
|
|
-
|
|
|
55,462
|
|
|
354,788
|
|
Common
Stock issued for technology
|
|
|
|
|
|
|
|
|
19,167
|
|
Impairment
of investments in other companies
|
|
|
-
|
|
|
|
|
|
710,868
|
|
Impairment
of assets
|
|
|
|
|
|
|
|
|
2,628,360
|
|
Prepaid
services expensed
|
|
|
2,392
|
|
|
|
|
|
531,429
|
|
Expenses
paid through notes payable proceeds
|
|
|
|
|
|
|
|
|
66,489
|
|
Loss
on disposal of property and equipment
|
|
|
|
|
|
|
|
|
5,854
|
|
Preferred
Stock issued to shareholder
|
|
|
|
|
|
|
|
|
3,366,000
|
|
Change
in assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
(increase)
decrease in other current assets
|
|
|
(20,626
|
)
|
|
(9,615
|
)
|
|
(22,622
|
)
|
Increase
(decrease) in accounts payable & other a/p
|
|
|
182,891
|
|
|
(27,825
|
)
|
|
301,358
|
|
Increase
(decrease) in due to officers
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Net
Cash provided (used) by operating activities
|
|
|
(229,059
|
) |
|
(200,405
|
)
|
|
(484,558
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
Purchase
of fixed assets
|
|
|
|
|
|
|
|
$
|
(6,689
|
)
|
Purchase
of assets-Script Costs
|
|
|
(60,000
|
)
|
|
|
|
|
(78,800
|
)
|
Cash
provided (used) from investing activities
|
|
|
(60,000
|
)
|
|
|
|
$
|
(85,489
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
Contributed
capital
|
|
|
|
|
|
|
|
|
25,500
|
|
Advanced
from affiliate/shareholder loans for cash flow
|
|
|
294,292
|
|
|
200,013
|
|
|
521,968
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issuance of common stock
|
|
|
|
|
|
|
|
|
30,835
|
|
Incease
(decrease) in notes payable
|
|
|
(4,477
|
)
|
|
|
|
|
(4,477
|
) |
|
|
|
|
|
|
|
|
|
|
|
Cash
provided (used) in financing activities
|
|
|
289,815
|
|
|
200,013
|
|
|
573,826
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase
(decrease) in cash
|
|
|
756
|
|
|
(392
|
)
|
|
3,779
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at beginning of period
|
|
|
3,023
|
|
|
1,140
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
at the end of the period
|
|
$
|
3,779
|
|
$
|
748
|
|
$
|
3,779
|
|
The
accompanying notes are an integal part of theses financial
statements.
Camelot
Entertainment Group, Inc.
(Unaudited)
(continued)
|
|
|
|
|
|
From
|
|
|
|
|
|
|
|
Inception
on
|
|
|
|
|
|
|
|
|
|
|
April
21, 1999
|
|
|
|
|
For
the Year Ended
|
|
|
through
|
|
|
|
|
June
30,
|
|
|
June
30,
|
|
|
30-Jun
|
|
|
|
|
2005
|
|
|
2004
|
|
|
2006
|
|
Supplemental
Cash Flow Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
Paid
|
|
|
0
|
|
|
0
|
|
$
|
31,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
Disclosure of Non Cash Investing and Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for
|
|
|
|
|
|
|
|
|
|
|
property
and equipment
|
|
|
0
|
|
|
0
|
|
$
|
1,153,162
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
|
|
|
|
|
|
|
|
for
licensed technology
|
|
|
0
|
|
|
0
|
|
|
938,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of Treasury Stock
|
|
|
0
|
|
|
0
|
|
|
2,400
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock
|
|
|
|
|
|
|
|
|
|
|
for
debt
|
|
|
0
|
|
|
0
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase
of licensed technology
|
|
|
|
|
|
|
|
|
|
|
for
debt to seller
|
|
|
0
|
|
|
0
|
|
|
250,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance
of common stock for prepaid
|
|
|
|
|
|
|
|
|
|
|
and
other assets
|
|
|
0
|
|
|
0
|
|
|
1,726
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment
of services for
|
|
|
|
|
|
|
|
|
|
|
common
stock
|
|
|
0
|
|
|
0
|
|
|
2,046,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
in other
|
|
|
|
|
|
|
|
|
|
|
companies
|
|
|
0
|
|
|
0
|
|
|
710,000
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion
of debt to
|
|
|
|
|
|
|
|
|
|
|
common
stock
|
|
|
0
|
|
|
0
|
|
|
225,500
|
|
|
|
|
|
|
|
|
|
|
|
|
Forgiveness
of debt by
|
|
|
|
|
|
|
|
|
|
|
stockholder
|
|
|
0
|
|
|
0
|
|
|
31,489
|
|
The
accompanying notes are an integral part of these financial
statements
Camelot
Entertainment Group, Inc.
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
Stock
|
|
|
Preferred
Stock
|
|
|
|
|
|
Additional
|
|
|
During
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid-In
|
|
|
Development
|
|
|
Subscription
|
|
|
Deferred
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Stage
|
|
|
Receivable
|
|
|
Compensation
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at January 1, 2004
|
|
|
33,856,433
|
|
|
33,857
|
|
|
0
|
|
|
0
|
|
|
5,464,539
|
|
|
-6,059,442
|
|
|
0
|
|
|
0
|
|
|
-561,046
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for services
|
|
|
100,000
|
|
|
100
|
|
|
|
|
|
|
|
|
2,900
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
Shares
issued for financing
|
|
|
6,791,287
|
|
|
6,791
|
|
|
|
|
|
|
|
|
196,948
|
|
|
|
|
|
|
|
|
|
|
|
203,739
|
|
Subscriptions
receivable for financing agreement
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-116,069
|
|
|
|
|
|
-116,069
|
|
Net
(loss) for the three months ended March 31, 2004
|
|
|
0
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
-131,681
|
|
|
|
|
|
|
|
|
-131,681
|
|
Balance
at March 31, 2004
|
|
|
40,747,720
|
|
$
|
40,748
|
|
$
|
0
|
|
$
|
0
|
|
$
|
5,664,387
|
|
|
(6,191,123.00
|
)
|
|
($116,069
|
)
|
$
|
0
|
|
|
($602,057
|
)
|
Share
issued for services
|
|
|
24,009,000
|
|
|
24,009
|
|
|
|
|
|
|
|
|
1,085,500
|
|
|
|
|
|
|
|
|
|
|
|
1,109,509
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
issued for financing
|
|
|
7,604,562
|
|
|
7,605
|
|
|
0
|
|
|
0
|
|
|
221,460
|
|
|
|
|
|
(316,003
|
)
|
|
|
|
|
(86,938
|
)
|
Advances
offset sub a/r
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
174,000
|
|
|
|
|
|
174,000
|
|
Shares
issued for debt
|
|
|
1,000,000
|
|
|
1,000
|
|
|
0
|
|
|
0
|
|
|
39,000
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for amt due
|
|
|
1,589,927
|
|
|
1,590
|
|
|
0
|
|
|
0
|
|
|
47,000
|
|
|
|
|
|
|
|
|
|
|
|
48,590
|
|
Value
of option exercised
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
351,000
|
|
|
|
|
|
|
|
|
|
|
|
351,000
|
|
Net
(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,161,756
|
)
|
|
|
|
|
|
|
|
(1,161,756
|
)
|
Balance
as of December 31, 2004
|
|
|
74,951,209
|
|
|
74952
|
|
|
0
|
|
|
0
|
|
|
7408347
|
|
|
(7,324,719
|
)
|
|
|
|
|
|
|
|
158,580 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) 1st quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(117,096
|
)
|
|
|
|
|
|
|
|
(117,096 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2005
|
|
|
74,951,209
|
|
|
74,952
|
|
$
|
0
|
|
$
|
0
|
|
|
7,408,347
|
|
|
(7,441,815
|
)
|
|
(258,072
|
)
|
$
|
0
|
|
|
(216,588
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for
|
|
|
4,000,000
|
|
|
4,000
|
|
|
0
|
|
|
0
|
|
|
216,000
|
|
|
0
|
|
|
|
|
|
|
|
|
220,000 |
|
consulting
services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for
|
|
|
2,276,033
|
|
|
2,276
|
|
|
0
|
|
|
0
|
|
|
187,568
|
|
|
0
|
|
|
|
|
|
|
|
|
189,844 |
|
officers
salaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to
|
|
|
1,848,723
|
|
|
1,849
|
|
|
0
|
|
|
0
|
|
|
79,078
|
|
|
0
|
|
|
|
|
|
|
|
|
80,927 |
|
Eagle
for expenses paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(486,174
|
)
|
|
|
|
|
|
|
|
(486,174 |
) |
Subtotals
for 2nd quarter
|
|
|
8,124,756
|
|
|
8,125
|
|
|
0
|
|
|
0
|
|
|
482,646
|
|
|
0
|
|
|
|
|
|
|
|
|
4,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2005
|
|
|
83,075,965
|
|
|
83,076
|
|
|
0
|
|
|
0
|
|
|
7,890,993
|
|
|
(7,927,989
|
)
|
|
(258,072
|
)
|
|
|
|
|
(211,991
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(127,024
|
)
|
|
|
|
|
|
|
$ |
(127,024 |
) |
Balance
at Sept 30, 2005
|
|
|
83,075,965
|
|
|
83,076
|
|
|
0
|
|
|
0
|
|
|
7,890,993
|
|
$
|
(8,055,013
|
)
|
|
($258,072
|
)
|
|
|
|
|
(339,015
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for
|
|
|
233,547
|
|
|
233
|
|
|
0
|
|
|
0
|
|
|
9,767
|
|
|
|
|
|
|
|
|
|
|
|
10,000 |
|
consulting
services
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for
|
|
|
3,538,263
|
|
|
3,538
|
|
|
0
|
|
|
0
|
|
|
171,462
|
|
|
|
|
|
|
|
|
|
|
|
175,000 |
|
officers
salaries
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to
|
|
|
1,452,662
|
|
|
1,453
|
|
|
0
|
|
|
0
|
|
|
118,219
|
|
|
|
|
|
|
|
|
|
|
|
119,672 |
|
Eagle
for expenses paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued to Eagle
|
|
|
1,762,271
|
|
|
1,762
|
|
|
|
|
|
|
|
|
120,991
|
|
|
|
|
|
|
|
|
|
|
|
122,753 |
|
20%
of shares issued
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
issued for
|
|
|
3,586,881
|
|
|
3,587
|
|
|
|
|
|
|
|
|
256,354
|
|
|
|
|
|
|
|
|
|
|
|
259,943 |
|
Shareholder
loans 2005
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss 4th Quarter
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(3,769,845
|
)
|
|
|
|
|
|
|
|
(3,769,845 |
) |
Class
A Preferred Stock issued
|
|
|
|
|
|
|
|
|
5,100,000
|
|
|
5,100
|
|
|
555,900
|
|
|
|
|
|
|
|
|
|
|
|
561,000 |
|
Class
B Preferred Stock issued
|
|
|
|
|
|
|
|
|
5,100,000
|
|
|
5,100
|
|
|
2,799,900
|
|
|
|
|
|
|
|
|
|
|
|
2,805,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at Dec 31, 2005
|
|
|
93,649,589
|
|
|
93,649
|
|
|
10,200,000
|
|
|
10,200
|
|
|
11,923,586
|
|
|
(11,824,858
|
)
|
|
-258,072
|
|
|
|
|
|
(55,496 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(190,762
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at March 31, 2006
|
|
|
93,649,589
|
|
|
93,649
|
|
|
10,200,000
|
|
|
10,200
|
|
|
11,923,586
|
|
|
(12,010,620
|
)
|
|
-258,072
|
|
|
|
|
|
(241,259 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(202,956
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
at June 30, 2006
|
|
|
93,649,589
|
|
|
93,649
|
|
|
10,200,000
|
|
|
10,200
|
|
|
11,923,586
|
|
|
(12,218,576
|
)
|
|
-258,072
|
|
|
|
|
|
(449,213 |
) |
The
accompanying notes are an integal part of theses financial
statements.
CAMELOT
ENTERTAINMENT GROUP, INC.
1.
|
ORGANIZATION
AND BASIS OF PRESENTATION
|
Camelot
Entertainment Group, Inc. (the Company),
a
Delaware corporation, is comprised of three divisions: Camelot Film Group,
which develops, produces, markets and distributes motion pictures; Camelot
Studio Group, which is currently proceeding with a major studio development;
and
Camelot Production Services Group, which is involved with a number of various
motion picture related projects, including technology, consulting and bridge
financing, was originally incorporated under a different name with the intention
of providing services and resources to entrepreneurs looking to launch novel
products and ventures worldwide in exchange for an interest in the startup
ventures. The Company brought in new management and was restructured in 2003
prior to changing its name to Camelot Entertainment Group in 2004.
The
Company’s original activities from inception through its restructuring in 2003
consisted of raising capital, recruiting a management team and entering into
ventures and alliances with Affiliates. The Company substantially relied on
issuing stock to officers, directors, professional service providers and other
parties in exchange for services and technology. As of December 31, 2002, the
Company had written-off all of its investments due to impairments in the
carrying value of the assets. Since inception, impairment of investments in
other companies and of long-lived assets accounts for approximately 65% of
the
Company’s net losses. Since March of 2003, the Company’s activities have
consisted of developing and implementing its business model, recruiting
executives and staff, entering into various contracts with producers, writers
and directors of motion pictures, establishing its distribution company,
negotiating potential acquisitions, developing its studio project and taking
steps to raise additional capital.
The
accompanying financial statements have been prepared assuming that the Company
will continue as a going concern. The Company has had minimal revenues, has
experienced material operating losses and has a stockholders’ deficit. Unless
rectified in the next year, these conditions, combined with failing to secure
a
successful source of additional financial resources, could raise substantial
doubt about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future effects
on the classification of liabilities that may result from the outcome of this
uncertainty.
Management’s
plans with respect to the current financial situation consist of seeking
additional financial resources from existing investors or others in implementing
its new business model. However, instability in the stock price may make it
difficult to find parties willing to accept the Company’s restricted shares of
common stock in exchange for cash and or services required to execute its Plan
of Operation. There is no assurance that such resources would be made available
to the Company, or that they would be on financially viable terms.
2.
|
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
Cash
and Cash Equivalents
The
Company considers all investment instruments purchased with maturities of three
months or less to be cash equivalents.
Basis
Of Presentation
The
unaudited financial statements included herein were prepared from the records
of
the Company in accordance with Generally Accepted Accounting Principles and
in
accordance with current securities regulations. These unaudited financial
statements have been reviewed by our independent auditors. These financial
statements reflect all adjustments, which are, in the opinion of management,
necessary to provide a fair statement of the results of operations and financial
position for the interim periods. Such financial statements generally conform
to
the presentation reflected in the Company's Form 10-KSB filed with the
Securities and Exchange Commission for the year ended December 31, 2005. The
current interim period reported herein should be read in conjunction with the
Company's Form 10-KSB subject to independent audit at the end of the year.
CAMELOT
ENTERTAINMENT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED, JUNE 30,
2006
(continued)
Use
of
Estimates
The
preparation of financial statements in conformity with generally accepted
accounting principles in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
and
the disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ materially from those estimates.
Income
taxes
The
Company provides for income taxes based on the provisions of Statement of
Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income
Taxes,
which,
among other things, requires that recognition of deferred income taxes be
measured by the provisions of enacted tax laws in effect at the date of
financial statements.
Financial
Instruments
Financial
instruments consist primarily of obligations under accounts payable and accrued
expenses, notes payable and capital lease obligations. The carrying amounts
of
accounts payable and accrued expenses approximate fair value because of the
short maturity of those instruments. The carrying value of notes payable and
capitalized lease obligations approximate fair value because they contain market
value interest rates and have specified repayment terms. The Company has applied
certain assumptions in estimating these fair values. The use of different
assumptions or methodologies may have a material effect on the estimates of
fair
values.
Impairment
of Long-Lived Assets
Impairment
of long-lived assets is assessed by the Company whenever there is an indication
that the carrying amount of the asset may not be recoverable. Recoverability
of
these assets is determined by comparing the forecasted undiscounted cash flows
generated by those assets to the assets’ net carrying value. The amount of
impairment loss, if any, is measured as the difference between the net book
value of the assets and the estimated fair value of the related assets.
Loss
Per Common Share
The
Company has adopted SFAS No. 128, Earnings
per Share,
which
supercedes APB No. 15. Basic EPS differs from primary EPS calculation in that
basic EPS does not include any potentially dilutive securities. Diluted EPS
must
be disclosed regardless of the dilutive impact to basic EPS. There were no
potentially dilutive securities outstanding at June 30, 2006.
Revenue
Recognition
Revenue
consists of professional services. Revenues for services are recognized when
the
services are rendered. The amounts of such revenues are recorded based on the
value of compensation received for the services. In the Company's current
operations, compensation to the Company has consisted of stock in start up
companies to whom the services were rendered.
CAMELOT
ENTERTAINMENT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED, JUNE 30,
2006
(continued)
3.
GOING
CONCERN UNCERTAINTIES
The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the
Company as a going concern. However, the Company has experienced recurring
operating losses and negative cash flows from operations, which raise
substantial doubt about its ability to continue as a going concern. The
Company's continued existence is dependent upon its ability to increase
operating revenues and/or obtain additional equity financing. In view of these
matters, the Company has undergone a series of negotiations to obtain additional
equity financing to enable it to achieve its strategic objectives. The Company
has an agreement with Eagle Consulting Group, Inc., a Nevada corporation
("Eagle"), to provide equity financing. While Eagle has advanced the Company
$294,292 during the first and second quarter of 2006, it appears unlikely that
such funding will be enough to implement the Company's Plan of Operation beyond
the current fiscal year unless that agreement is extended. As a result, the
Company may be in a position where it will need to find additional sources
of
financing in order to remain a going concern in the future. The financial
statements do not include any adjustments that might result from the outcome
of
this uncertainty.
4.
COMMITMENTS
AND CONTINGENCIES
The
Company believes it has identified and accrued for all valid claims from
creditors, consultants, stock option adjustments and vendors. Although there
have been no specific disputes over these matters and related amounts, these
third parties may assert additional claims as the Company attempts to settle
all
past due obligations.
The
Company also has a non-dilution commitment with an Affiliate to issue 20% of
all
newly issued common shares to the Affiliate in exchange for funding cash flow
deficits over the period specified in the agreement. The Company has not
issued shares this quarter to this Affiliate.
CAMELOT
ENTERTAINMENT GROUP, INC.
NOTES
TO FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED, JUNE 30,
2006
(continued)
5.
ADVANCES
FROM AFFILIATE
During
the first and second quarter of 2006, the Company had not issued common shares
to Affiliate. The Affiliate’s cash advances for the first and second quarter of
$294,292 were covered under an agreement in which the Affiliate must fund the
Company’s cash flow deficits over the period specified in the agreement. These
advances were for general and administrative costs, cost of screenplays, prepaid
exhibitors space for the quarter, and studio development costs.
6.
DUE
TO OFFICERS
As
of
June 30, 2006, $225,000 was due to officers for salaries during the first and
second quarter. No other amounts are currently due.
7.
COMMON STOCK
No
common
stock was issued during the first or second quarter of 2006.
8.
RELATED PARTY TRANSACTIONS
On
March
30, 2003, the Company entered into an agreement with an Affiliate whereby the
Company will issue 20% of its outstanding common shares in exchange for services
and advances. No shares were issued during the first or second quarter of 2006.
The Affiliate paid $294,292 in expenses on behalf of the Company during the
first and second quarter of 2006.
8.
SUBSEQUENT EVENTS
During
the second quarter, Camelot Entertainment Group, Inc. entered into an agreement
with Elemental Pictures (a South African film company) to potentially purchase
the company. The company expects to make a formal announcement regarding
the
transaction in September 2006.
ITEM
2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The
matters discussed in this report contain forward-looking statements within
the
meaning of Section 27A of the Securities Act of 1933, as amended, and within
the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
which
are subject to the "safe harbor" created by those sections. These
forward-looking statements include but are not limited to statements concerning
our business outlook or future economic performance; anticipated profitability,
revenues, expenses or other financial items; and statements concerning
assumptions made or exceptions as to any future events, conditions, performance
or other matters which are "forward-looking statements" as that term is defined
under the Federal Securities Laws. All statements, other than historical
financial information, may be deemed to be forward-looking statements. The
words
"believes", "plans", "anticipates", "expects", and similar expressions herein
are intended to identify forward-looking statements. Forward-looking statements
are subject to risks, uncertainties, and other factors, which would cause actual
results to differ materially from those stated in such statements.
Forward-looking statements include, but are not limited to, those discussed
in
"Factors That May Affect Future Results," and elsewhere in this report, and
the
risks discussed in the Company's other SEC filings.
Critical
Accounting Estimates
The
preparation of our financial statements in conformity with accounting principles
generally accepted in the United States of America requires our management
to
make certain estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities
at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. As such, in accordance with the use of
accounting principles generally accepted in the United States of America, our
actual realized results may differ from management’s initial estimates as
reported. A summary of our significant accounting policies is detailed in the
notes to the financial statements, which are an integral component of this
filing.
Management
evaluates the probability of the utilization of the deferred income tax asset
related to the net operating loss carry forwards. The Company has estimated
a
$2,450,000 deferred income tax asset related to net operating loss carry
forwards and other book/tax differences at September 30, 2005. Management
determined that because the Company has yet to generate taxable income, and
that
the generation of taxable income in the short term is uncertain, it was
appropriate to provide a valuation allowance for the total deferred income tax
asset.
The
Company has acquired certain technology and licenses. Prior to January 1, 2004,
the Company determined that the value of these acquired assets was impaired
and
has provided an impairment allowance for the full purchase price of these
assets. The impairment amount charged to operations in prior years was
$3,113,206.
Critical
Accounting Policies
The
Company has defined a critical accounting policy as one that is both important
to the portrayal of the Company's financial condition and results of operations,
and requires the management of the Company to make difficult, subjective or
complex judgments. Estimates and assumptions about future events and their
effects cannot be perceived with certainty. The Company bases its estimates
on
historical experience and on various other assumptions that are believed to
be
reasonable under the circumstances, the results of which form the basis for
making judgments. These estimates may change as new events occur, as more
experience is acquired, as additional information is obtained and as the
Company's operating environment changes.
We
have
identified the policies below as critical to our business operations and the
understanding of our results of operations. The impact and any associated risks
related to these policies on our business operations is discussed throughout
Management's Discussion and Analysis of Financial Condition and Results of
Operations, where such policies affect our reported and expected financial
results. In the ordinary course of business, we have made a number of estimates
and assumptions relating to the reporting of results of operations and financial
condition in the preparation of our financial statements in conformity with
accounting principles generally accepted in the United States of America. Actual
results could differ significantly from those estimates under different
assumptions and conditions. We believe that the following discussion addresses
our most critical accounting policies, which are those that are most important
to the portrayal of our financial condition and results of operations and
require our most difficult, subjective, and complex judgments, often as a result
of the need to make estimates about the effect of matters that are inherently
uncertain.
Significant
Accounting Practices
Beginning
January 1, 2004 we adopted new accounting rules which were effective January
1,
2001, which require, among other changes, that exploitation costs, including
advertising and marketing costs, be expensed as incurred. Theatrical print
costs
are amortized over the periods of theatrical release of the respective
territories. Under accounting rules in effect for periods prior to January
1,
2001, such costs were capitalized as a part of film costs and amortized over
the
life of the film using the individual-film-forecast method. The current practice
dramatically increases the likelihood of reporting losses upon a film’s
theatrical release, but should provide for increased returns when a film is
released in the ancillary markets of home video and television, when we incur
a
much lower proportion of advertising costs. Additional provisions under the
new
accounting rules include changes in revenue recognition and accounting for
development costs and overhead, and reduced amortization periods for film costs.
Accounting
for Motion Picture Costs
In
accordance with accounting principles generally accepted in the United States
and industry practice, we amortize the costs of production, including
capitalized interest and overhead, as well as participations and talent
residuals, for feature films using the individual-film-forecast method under
which such costs are amortized for each film in the ratio that revenue earned
in
the current period for such title bears to management’s estimate of the total
revenues to be realized from all media and markets for such title. All
exploitation costs, including advertising and marketing costs, are expensed
as
incurred. Theatrical print costs are amortized over the periods of theatrical
release of the respective territories.
Management
plans to regularly review, and revise when necessary, our total revenue
estimates on a title-by-title basis, which may result in a change in the rate
of
amortization and/or a write-down of the film asset to estimated fair value.
These revisions can result in significant quarter-to-quarter and year-to-year
fluctuations in film write-downs and amortization. A typical film recognizes
a
substantial portion of its ultimate revenues within the first two years of
release. By then, a film has been exploited in the domestic and international
theatrical markets and the domestic and international home video markets, as
well as the domestic and international pay television and pay-per-view markets.
A similar portion of the film’s capitalized costs should be expected to be
amortized accordingly, assuming the film or television program is profitable.
The
commercial potential of individual motion pictures varies dramatically, and
is
not directly correlated with production or acquisition costs. Therefore, it
is
difficult to predict or project a trend of our income or loss. However, the
likelihood that we would report losses, particularly in the year of a motion
picture’s release, is increased by the industry’s method of accounting, which
requires the immediate recognition of the entire loss (through increased
amortization) in instances where it is estimated the ultimate revenues of a
motion picture could not recover our capitalized costs. On the other hand,
the
profit of a profitable motion picture must be deferred and recognized over
the
entire revenue stream generated by that motion picture. This method of
accounting may also result in significant fluctuations in reported income or
loss, particularly on a quarterly basis, depending on our release schedule,
the
timing of advertising campaigns and the relative performance of individual
motion pictures.
Accounting
for Films
In
June
2000, the Accounting Standards Executive Committee of the American Institute
of
Certified Public Accountants issued Statement of Position 00-2 “Accounting by
Producers or Distributors of Films” (“SoP 00-2”). SoP 00-2 establishes new
accounting standards for producers or distributors of films, including changes
in revenue recognition, capitalization and amortization of costs of acquiring
films and accounting for exploitation costs, including advertising and marketing
expenses. We elected adoption of SoP 00-2 effective as of April 1, 2004.
The
principal changes as a result of applying SoP 00-2 are as follows:
Advertising
and marketing costs, which were previously capitalized to investment in films
on
the balance sheet and amortized using the individual film forecast method,
are
now expensed the first time the advertising takes place.
We
capitalize costs of production, including financing costs, to investment in
motion pictures. These costs are amortized to direct operating expenses in
accordance with SoP 00-2. These costs are stated at the lower of unamortized
motion picture costs or fair value (net present value). These costs for an
individual motion picture or television program are amortized in the proportion
that current period actual revenues bear to management’s estimates of the total
revenue expected to be received from such motion picture over a period not
to
exceed ten years from the date of delivery.
Management
plans to regularly review, and revise when necessary, its total revenue
estimates, which may result in a change in the rate of amortization and/or
write-down of all or a portion of the unamortized costs of the motion picture
to
its fair value. No assurance can be given that unfavorable changes to revenue
estimates will not occur, which may result in significant write-downs affecting
our results of operations and financial condition.
Revenue
Recognition
Revenue
from the sale or licensing of motion pictures is recognized upon meeting all
recognition requirements of SoP 00-2. Revenue from the theatrical release of
motion pictures is recognized at the time of exhibition based on the company’s
participation in box office receipts. Revenue from the sale of DVDs in the
retail market, net of an allowance for estimated returns, is recognized on
the
latter of shipment to the customer or “street date” (when it is available for
sale by the customer). Under revenue sharing arrangements, rental revenue is
recognized when we are entitled to receipts and such receipts are determinable.
Revenues
from television licensing are recognized when the motion picture is available
to
the licensee for telecast. For television licenses that include separate
availability “windows” during the license period, revenue is allocated over the
“windows.” Revenue from sales of international territories are recognized when
the feature film is available to the distributor for exploitation and no
conditions for delivery exist, which under most sales contracts requires that
full payment has been received from the distributor.
For
contracts that provide for rights to exploit a program on multiple media (i.e.
theatrical, video, television) with a fee for a single motion picture where
the
contract specifies the permissible timing of release to various media, the
fee
is allocated to the various media based on management’s assessment of the
relative fair value of the rights to exploit each media and is recognized as
the
program is released to each media. For multiple-title contracts with a fee,
the
fee is allocated on a title-by-title basis, based on management’s assessment of
the relative fair value of each title. Cash payments received are recorded
as
deferred revenue until all the conditions of revenue recognition have been
met.
Income
Taxes
The
Company recognizes future income tax assets and liabilities for the expected
future income tax consequences of transactions that have been included in the
financial statements or income tax returns. Future income taxes are provided
for
using the liability method. Under the liability method, future income taxes
are
recognized for all significant temporary differences between the tax and
financial statement bases of assets and liabilities.
Capital
Structure
The
Company has adopted Statement of Financial Accounting Standards No. 129,
"Disclosure of Information about Capital Structure" ("SFAS 129"), which requires
companies to disclose all relevant information regarding their capital
structure. The Company reached an agreement with Eagle Consulting Group, Inc.
on
March 28, 2003 to provide operational funding for the Company. In exchange
for
twenty percent (20%)of the Company’s outstanding common stock on an
anti-dilutive, continuing basis until the Company could secure additional
financing from another source, Eagle agreed to provide funding for the Company’s
annual audit, quarterly filings, accounts payable and other ongoing expenses
including office, phones, business development, legal and accounting fees.
Eagle
advances from January 1, 2005 to September 30, 2005 total $264,512 including
interest. In accordance with the anti-dilutive provision, the amount of stock
due Eagle is calculated on a quarterly basis. This anti-dilution provision
to
the agreement could have a material adverse effect on our shareholders as it
might continue for a substantial period of time and as a result the dilutive
effect to the shareholders cannot be fully determined until the funding from
Eagle ceases.
Going
Concern Uncertainties
The
accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplate continuation of
the
Company as a going concern. However, the Company has experienced recurring
operating losses and negative cash flows from operations.
The
Company's continued existence is dependent upon its ability to increase
operating revenues and/or obtain additional equity financing.
The
Company has an agreement with Eagle Consulting Group, Inc., a Nevada corporation
("Eagle"), to provide equity financing. While Eagle has advanced the Company
$294,292 during the first and second quarter of 2006, it appears unlikely that
such funding will be enough to implement the Company's Plan of Operation beyond
the current fiscal year unless that agreement is extended. As a result, the
Company may be in a position where it will need to find additional sources
of
financing in order to remain a going concern in the future. The financial
statements do not include any adjustments that might result from the outcome
of
this uncertainty.
PLAN
OF OPERATION
OVERVIEW
The
Company was incorporated in Delaware on October 12, 1999. In March, 2003, the
Company underwent a restructuring which resulted in a new management team and
a
new business model. During May 2004, we changed our name to Camelot
Entertainment Group, Inc. (“CMEG”), and changed our business model from pursuing
a new approach to venture formation to pursuing a new approach to developing,
producing, marketing and distributing motion pictures.
CMEG
is
comprised of three divisions: Camelot Film Group, Camelot Studio Group, and
Camelot Production Services Group.
CAMELOT
FILM GROUP
Camelot
Film Group
is also
comprised of three divisions, Camelot Films, Camelot Features and Camelot
Distribution.
Camelot
Films’
business
model embraces the Camelot Studio Model (or "CSM"), which provides for the
development, production, marketing and distribution of motion pictures utilizing
a unique financial and operational structure. The CSM attempts to combine the
efficiencies realized by studios of the early 1900s, with the artistic focus
and
diversity of today's independent productions. Using this approach, the Company
believes the risk-reward relationship facing the typical film project can be
dramatically shifted. For example, whereas a typical film pushes artists and
directors to rush development and production in hopes of conserving cash, the
CSM extends the pre-production cycle substantially, increases the amount of
time
allocated for principal photography and begins the post production process
from
the start to reduce costs while simultaneously increasing quality. Add in other
features such as financial transparency, annualized employment and the
utilization of CMEG common stock and the entire process begins to run
efficiently, minimizing expenses while giving CMEG the potential to generate
maximum revenues.
Similarly,
whereas a low-budget picture is severely limited by the types of postproduction
technology used, due to budget constraints, we intend to invest directly in
top
of the line technology, spreading the costs over a targeted minimum of 12
original motion pictures each year as part of a three year slate which should
produce a minimum of 36 films per slate. The ultimate goal of the CSM is to
develop the ability to consistently produce films with the look, feel and
artistic content of multi-million dollar pictures, for a fraction of the cost.
The term frequently used by CMEG is “films with a budget.” All of the CSM
product should be distributed by our distribution division.
Camelot
Features’
business
model inherits many of Camelot Film’s main points, including financial
transparency, the utilization of CMEG common stock, utilization of technology
and increased pre-production time while focusing on motion pictures in all
budget ranges. Many of the projects developed and or acquired by CMEG may not
fit into the CSM. These types of projects might include documentaries, special
effect based films, movies with major stars and other productions which require
larger budgets due to subject matter, market requirements and genres.
Camelot
Features operations will in many ways mirror the typical current day production
company, which either develops or acquires a property, packages the project
by
adding director and cast, and then funds the film by using a wide assortment
of
funding techniques, including equity, loans, bridge financing, gap financing,
pre-sales and incentives. Whenever possible, product produced under this
division should be distributed by our distribution company. In some cases,
certain films will require a major distributor due to the size of release,
marketing and advertising requirements. In other cases, some or all of the
financing may come from another distributor, necessitating alternate
distribution.
Camelot
Distribution
is
comprised of two divisions, Camelot Domestic and Camelot International. Our
distribution company will handle all aspects of distribution for films produced
under the Camelot Films banner, and whenever possible for films produced under
the Camelot Features banner. Camelot Domestic will be responsible for United
States and Canada theatrical and ancillary market releases, including DVD,
television, cable, satellite, hand held devices, internet, PPV, VOD and other
domestic distribution outlets. Camelot International will be responsible for
international theatrical and ancillary market releases, focusing primarily
on
foreign theatrical, television and DVD. In certain circumstances, cable,
satellite, hand held devices, internet, PPV, VOD and other international
distribution outlets will be serviced through this division, depending upon
release dates and patterns, contractual obligations and market
conditions.
CAMELOT
STUDIO GROUP
Camelot
Studio Group
is
solely focused on the development, design, planning, building, completion and
operation of our major production studio, which we are currently developing
in
the Western United States. The studio, when completed, will be the permanent
home for CMEG, with all production emanating from the facility. In addition
to
at least 12 sound stages and support buildings, the studio complex will include
office buildings and other amenities designed to make the site a home for
current and future filmmakers “Where Filmmaking Dreams Come True.” A formal
announcement is expected during the third quarter of 2006.
CAMELOT
PRODUCTION SERVICES GROUP
Camelot
Production Services Group
is
comprised of three divisions, technology, consulting and financial services.
Our
technology division is focused on enabling CMEG to utilize the best and most
up-to-date technology available in order to enable our production team to
produce the highest quality product achievable under our business model. In
addition, our technology team is directly involved in future technology
encompassing all aspects of production and distribution. Our consulting division
is designed to assist producers, writers, directors, cast, crew members,
distributors and other production companies in various aspects of the filmmaking
process, including assistance in all phases of physical production, delivery
and
collection. Our financial services division is currently focusing on late stage
bridge financing. An announcement on this program is expected during the fourth
quarter of 2006.
Note
on Historical Operations
Our
historical operations prior to becoming a motion picture company consisted
primarily of attempting to provide support, organization and restructuring
services to other development stage companies. Due to the complete and drastic
change in our business focus, from seeking to aid development stage companies
to
our current focus of producing, distributing and marketing original motion
pictures, we believe that period-to-period comparisons of our operating results
are not necessarily meaningful and should not be relied on as an indication
of
future performance. However, it is still important that you read the discussion
in connection with the audited financial statements, the unaudited interim
financials and the related notes included elsewhere in this quarterly report
in
addition to thoroughly reading our current plan of operations.
Camelot
Films: Our View of the Steps Required for Motion Picture
Commercialization
We
view
the motion picture commercialization process as involving three major steps,
each of which bears a symbiotic relationship to the costs, creative value and
profitability of any planned film to be released by us. These three steps are
development, production and distribution. Under our planned model, development
should include not only screenplay acquisition and development, but also a
carefully constructed and unusually elongated pre-production phase. This process
was developed as a result of the direct experience and observations of our
management.
By
viewing the development phase as a distinct and major component of the motion
picture creation process, we hope that we can create a culture that encourages
producers, writers and directors associated with our projects to focus their
efforts and expertise on creating world-class pictures before the first day
of
shooting begins. We believe that creating such a culture could potentially
result in a substantial reduction of the cost of our film projects, as compared
to the film projects of our competitors. When combined with what we believe
is a
unique method of attracting, compensating and retaining talent that would
otherwise not be involved in an active motion picture project, it is expected
that the opportunity for a cost advantage could emerge.
President
and Chief Executive Officer Robert P. Atwell, has worked extensively in
financing, producing and directing original motion pictures and television
programs. This experience led our management to a number of beliefs upon which
our planned business model should be founded. These key views are:
·
|
The
manner in which development and pre-production activities are managed
can
have the largest impact on both the quality, or creative content,
and the
cost of creating a motion picture.
|
·
|
There
are a number of factors that make it difficult for most motion pictures
to
invest large amounts of time and a proportionally large share of
a motion
picture’s overall budget into development and pre-production activities.
|
·
|
The
factors that make it difficult for many motion picture projects to
invest
a major share of a film’s time and financial resources into development
and pre-production activities may have created a pervasive business
culture that emphasizes moving projects towards principal photography
too
quickly.
|
·
|
A
very small percentage of all writers that want to have their screenplays
become completed motion picture projects will ever realize this
ambition.
|
·
|
A
very small percentage of all directors will participate in principal
photography in any given year.
|
·
|
The
percentage of qualified actors that never have the opportunity to
participate in a completed original motion picture that is released
commercially is substantial.
|
·
|
There
are large periods of unemployment for many individuals involved in
motion
picture production.
|
We
believe that these observations suggest that the capacity to create motions
pictures, in terms of employable professionals, is far higher than the current
demand of existing film production companies for these services. However, we
also believe that growth in motion picture consumption worldwide has created
increased demand for original motion pictures in general. As a result, we
anticipate that the underemployed, or unemployed, directors, writers and other
film professionals could help fill a void for low cost, quality original motion
picture production, given the right mix of incentives and business structure.
There can be no assurance that such benefits, advantages or capacity will ever
materialize.
Successfully
creating such low cost, but relatively high quality pictures should result
in a
higher per picture financial return and a lower breakeven point for each film
produced. Also, by distributing these pictures primarily through in-house
distribution professionals, the per picture return might be increased even
further, enabling more motion pictures to be produced by us annually and thereby
diversifying the risk associated with any single film project. These beliefs
form the foundation for our planned business model and expected
strategy.
Our
Strategy of Emphasizing the Pre-Production Phase of Motion Picture
Commercialization
As
noted
previously, we believe that a very small percentage of all writers that want
to
have their screenplays become completed motion picture projects will ever
realize this ambition. We believe that this assertion speaks to the opportunity
we envision to cost effectively acquire writing, directing producing and other
motion picture production talent that would otherwise exceed demand for these
services.
This
perceived opportunity is critical to our strategy, because without a great
script, we believe it is either incredibly expensive or simply impossible to
produce a great motion picture. However, we also believe that few great scripts
begin as great scripts, but most evolve from a great idea to a substandard
script and so forth. Matching great script ideas with tried and true expertise
of professionals that know character development, genre formulas and how to
convert words into pictures that create passion are expected to allow us to
realize our vision.
We
believe that many small and medium sized production companies can rarely afford
to invest their time into unproven writers, much less even consider going with
unproven directing talent. Moreover, we believe that the investors and
distributors they are aligned with often play a major role in which projects
get
approved for production, or “green-lighted.”
Similarly,
we believe that major studios have even more reasons for steering clear from
these unproven sources of product. If these assertions are correct, then a
large
pool of untapped creative talent available for use in motion picture production
exists. It is our intention to engage this pool to commercialize motion pictures
in accordance with our strategy. To accomplish this objective, we intend to
do
the following:
·
|
Obtain
Complete And Outright Ownership Of Scripts And Other Literary
Works:
We
anticipate that by offering the proper incentives to screenwriters
and
other authors of compelling literary works well suited for a film
project,
we should be able to acquire complete and outright ownership of these
copyrights for a fraction of what many producers would pay simply
to get
an option on a script. As mentioned, such writers have an incentive
that
fewer than 10% of Screenwriters Guild members expect to experience
in a
given year the true opportunity to have their vision become a theatrically
released motion picture. In addition, our plan calls for participating
writers to share in the success of their script, through profit
participation and indirectly in the success of other film projects
we
complete, through restricted shares of or common stock. This same
formula
is expected to allow us to attract directors, producers and other
creative
personnel with a passion for making pictures that the public wants
to see.
|
·
|
A
Recurring 6-Month Cycle Of Pre-Production Activities:
Our plans for the pre-production phase for each motion picture project
we
initiate is to utilize a recurring 6-month cycle that starts every
month
for a new film, enabling us to create a rolling pipeline of product.
Unlike our perception of pure independents and small production companies,
we don’t anticipate that our pre-production phase could consume creative
resources by having producers, writers and directors hunt for additional
film financing. Instead, we anticipate that each film should have
a set
and fixed budget. We expect the additional time that should emerge,
if we
are successful, to allow the production designer, producers, director
of
photography and other personnel adequate time to find ways to increase
quality and reduce costs through skillful planning.
|
·
|
Relatively
Firm Scheduling Of Film Projects:
Another feature we expect to emerge as a result of our planned approach
is
that it should allow relatively firm scheduling of the cast at a
very
early stage, something that we believe is rare in the world of pure
independent productions. During this same time, we expect the production
team to benefit from a mentoring environment that insures the creative
spark sought in each of our productions does not become an increasing
collection of unrealistic ambitions, leading to missed production
schedules. With these elements firmly in place, we would typically
expect
principal photography to begin in the fifth month of each project.
|
Our
Strategy of Achieving Higher Quality and Lower Costs During the Production
Phase
of Motion Picture Commercialization
Four
key
elements following development and pre-production are expected to enable us
to
create quality pictures for a fraction of the cost experienced by our
competitors. These four elements are:
1.
Digital Photography
Like
the
model we plan to pursue, we believe that purely independent productions can
realize costs savings by using digital film technology due to the lower cost
of
processing, stock, dailies and certain editing costs. We also believe that
major
studios benefit from using digital technology in certain genres, but not so
much
from a cost standpoint.
Instead,
we think that the heavy special effects used by major studios’ high-budget
action and science-fiction pictures are increasingly enhanced as a result of
using digital photography. While, if true, this would negate some of the cost
benefits of using digital photography, the overall value in terms of
entertainment quality would still be enhanced, in general. One party that we
believe has found the benefits of digital photography rather elusive is the
small and mid-sized production company.
We
believe that this is generally because when such companies convince a director
to use digital photography, the director and director of photography (or “DP”)
are likely to specify additional camera setups. We also believe that the
increased, low-cost coverage available, along with real-time video monitoring,
often results in issues between directors and directors of photography on
projects of these companies, as they analyze and debate each shot during
precious shooting time. As a result, the mixed use of digital photography by
small and medium sized production companies generally has a neutral impact
on
overall value, in our opinion.
2.
Profit Participation
We
believe that it is very common for purely independent productions to offer
profit participation, or points, as a means of getting parties they could
otherwise not afford to hire (for cash) to work on the production. If this
is in
fact a standard method of simply getting a picture made for these types of
productions, we believe the effects on value are neutral. That is, if every
competitive production is offering this same type of compensation, the potential
impact of the incentive is reduced.
Similarly,
in the case of major studios, we believe that all of the parties involved in
such productions have access to sophisticated negotiators and advocates that
can
reasonably weigh the potential market value of such incentives. If so, we
believe that such incentives rarely offer a competitive advantage to the
production. However, for small and medium sized independents, our model assumes
that the added incentive of points can be the extra incentive needed to attract
certain parties that would otherwise not participate on a given project.
We
intend
to use profit participation in a manner that we think is precedent setting
in
the industry. Firstly, under our model, every member of the production stands
to
participate in the financial success of our film projects, thereby reversing
a
industry tradition whereby the phrase “net” has had little or no meaning or
substance. Similarly, since the same types of writers and directors that would
be otherwise willing to work on a picture with little or no compensation are
being pursued under our model, albeit at very low cash rates, the added
incentive of profit participation is expected to be a meaningful bonus in the
eyes of these parties.
3.
Production Management
We
believe that the largest full-time employers of motion picture production
management, and also the entities with the most developed production management
infrastructures, are major studios. However, we believe that these large
bureaucracies, while essential to the management of a relatively large volume
of
high budget pictures, also create an environment that often pits creative talent
against management. If true, then to a certain degree, this may offset some
of
the potential advantages of their production management systems. The production
management systems of one-picture only, pure independent productions tend to
be
ad hoc systems that find their way into the process through the producer,
director and other personnel that are assembled to create a one-time
organization, in our opinion. This leaves the small and medium sized production
companies, who benefit from their ambitions of creating multiple motion
pictures. Unfortunately, as their staffs of full-time production and development
personnel grow, we believe their budgets grow accordingly, in general, creating
little competitive value over time.
4.
Common Stock Incentives
To
the
best of our knowledge, no other publicly traded film company has ever utilized
common stock to incentive all of its creative, production and management
resources. There are two specific reasons why this option is not generally
available to competitors. Firstly, most of the companies making lower budget
pictures do not have business models that justify becoming a publicly traded
company. Secondly, for companies that do have the scale to offer publicly traded
stock as a form of production compensation, we believe that doing so would
be at
odds with their fundamental business cultures and, in many cases, at odds with
the wishes of their shareholders.
With
the
exception of using common stock, we believe that each of these value enhancement
tools is used to varying degrees, with varying success, by other motion picture
productions. However, we are not aware of any other Company that uses the
systematic and flawless integration of these elements into each of their
productions the way that we intend to. If this is correct, we believe it may
explain why few if any motion picture companies can consistently realize the
reduction in cash production expenditures combined with the increase of quality
that we expect to be a key element of our business model.
Our
Strategy of Developing and Utilizing In-house Distribution
Expertise
A
number
of new distribution channels have increased the means by which motion picture
product can be consumed and, therefore, the potential channels for revenue.
These channels include theatrical or box office, video cassette, DVD,
pay-per-view television, cable television, network television, television
syndication, hand held devices, internet, PPV, VOD, IPTV, non-theatrical
outlets, such as in-flight movies, and international channels. With so many
new
distribution channels available, it my seem surprising that pictures with
smaller budgets still find it so difficult to get their films in front of
audiences. Our management believes this pervasive problem is primarily due
to
two difficult obstacles to overcome.
Firstly,
we believe that the very reliance on a distributor places a small independent
production at the mercy of a party they have limited bargaining power with
and
virtually no control over: the distributor. Under such a scenario, we believe
that even if revenues and expenses are fairly and properly accounted for by
the
distributor, cash must flow through many hands before revenue makes it way
back
to investors and other profit participants.
Secondly,
and perhaps equally important, we believe that without a large volume of product
in the pipeline, the alternatives to using an outside distributor are few,
and
rarely result in large, predictable inflows of cash. For instance, if an
independent producer has a single picture budgeted at $5 million; it is
generally economically impractical to establish an in-house distribution
department with the limited mission of directly marketing that one film. At
the
same time, we believe that volume purchasers of motion picture product,
including studios, cable outlets, home video companies and other buyers with
large needs for product, require a dependable source of multiple pictures.
The
one-picture or two-picture production company simply can’t meet these needs,
making it more efficient for buyers to deal with an agent or sub-distributor,
in
our opinion. Our planned combination of high-volume and high-quality motion
pictures stands to change these economics, making in-house distribution an
essential element of our strategy.
Motion
Picture Library
A
potential benefit of our business model is the planned ownership of an expansive
library of feature films that should be, for the most part, unencumbered. If
we
are successful in implementing our business plan, we could have 12 films or
more
going into our library annually that could have an extended shelf life in
ancillary markets, including, but not limited to, cable, satellite and
television syndication, both domestically and internationally, extended DVD’s,
special edition DVD’s and other areas of repurposing.
RESULTS
OF OPERATIONS
General
Our
historical operations consisted primarily of attempting to provide support,
organization and restructuring services to other development stage companies.
Due to the complete and drastic change in our business focus, from seeking
to
aid development stage companies to our current focus of producing, distributing
and marketing original motion pictures, we believe that period-to-period
comparisons of our operating results are not necessarily meaningful and should
not be relied on as an indication of future performance. However, it is still
important that you read the discussion in connection with the audited financial
statements, the unaudited interim financial and the related notes included
elsewhere in this quarterly report.
SIX
MONTHS ENDED JUNE 30, 2006, COMPARED TO SIX MONTHS ENDED JUNE 30,
2005:
The
Company did not generate any revenue during the six months ended, June 30,
2006 and June 30, 2005.
All
expenses incurred during the comparative periods were general and administrative
in nature.
The
Company has incurred $ 8,987,093 of general and administrative expenses since
its inception. General and administrative expenses were $ 394,525 for
the six months ended June 30, 2006, respectively, compared to $603,270 for
the six months ended June 30, 2005. Decreases during this period are due
mainly to reduction in the costs at the Cannes Film Festival. In May 2005 costs
related to this film festival of $195,000 for professional services, $86,752
for
marketing costs and $37,666 for travel costs compared to $8,170 in Marketing
costs and $24,107 in travel costs for May 2006.
The
general and administrative expenses for the six months ended June 30, 2006
were
primarily comprised of $285,000 for officers compensation, professional fees
of
$45,927, marketing costs of $8,170, travel and lodging costs for industry trade
shows of $24,107, corporate and stock fees of $8,343 and other expenses of
$22,978. Additionally, $60,000 in screenplay costs, which were capitalized.
These expenses were related to the pursuit of the Company’s plan of operation to
produce and distribute motion pictures.
Total
General and Administrative expenses of $394,525 are for the six months
ended June 30, 2006.
Professional
services rendered by financial, film directors, screenplay fees, producers
and
distributors and costs related to the studio development were incurred during
the six month ended, June 30, 2006 and were incurred during the same period
of
2005. The expenses were incurred as a result of the Company’s efforts to develop
a working management team to assist in completing the operation plan for the
company.
LIQUIDITY
AND CAPITAL RESOURCES
We
have a
limited history of operations as a film production and distribution company.
We
believe that, due to the complete and drastic change in our business focus,
period-to-period comparisons of our operating results are not necessarily
meaningful and should not be relied on as an indication of future performance.
Our
current liquidity and capital resources are provided principally through our
financing agreement with Eagle Consulting Group, Inc. (“Eagle”). We entered into
an agreement with Eagle on March 28, 2003, to provide operational funding for
the Company. In exchange for twenty percent (20%)of the Company’s outstanding
common stock on a non-dilutive, continuing basis until the Company can secure
additional financing from another source, Eagle has agreed to provide funding
for the Company’s annual audit, quarterly filings, accounts payable and other
ongoing expenses including office, phones, business development, legal and
accounting fees. This quarter, Eagle has advanced the Company a total, including
interest, of $294,292. The funding commitment from Eagle should cover all of
our
operating expenses for the remaining six months of 2006.
Further,
we are in the process of preparing various financial offerings as we gear up
all
three divisions of CMEG, including a 506 offering for operating overhead, an
SB-2 registration statement for the purpose of funding our initial slate of
pictures and a major funding offering in connection with the studio project.
If
the anticipated slate funding is successful, it is our goal to have between
10
and 12 motion pictures in various stages of development or production within
12
months. In the event we are unable to complete the funding, we could have to
delay our slate until such time as the necessary funding is acquired.
Like
all
motion picture production companies, our revenues and results of operations
could be significantly dependent upon the timing of releases and the commercial
success of the motion pictures we distribute, none of which can be predicted
with certainty. Accordingly, our revenues and results of operations may
fluctuate significantly from period to period, and the results of any one period
may not be indicative of the results for any future periods. Similarly, the
efficiencies we aim to realize through our model may not materialize. Failure
of
the efficiencies to materialize, along with other risks germane to the picture
production, may cause us to produce fewer films than our plan calls for.
FACTORS
THAT MAY AFFECT FUTURE RESULTS
We
have an Accumulated Deficit and we have a Limited History of Operations as
a
Motion Picture Company
We
have incurred losses in each operating period since our inception on October
12,
1999. Operating losses may continue, which could adversely affect financial
results from operations and stockholder value, and there is a risk that we
may
never become profitable.
As
of June 30, 2006, we have an accumulated deficit of $12,219,385, the majority
of
which related to our previous activities as a business development organization,
and some of which relates to our current activities as a motion picture
production, marketing and distribution entity. There can be no assurance that
our management will be successful in managing the Company as a motion picture
production, distribution and marketing concern.
We
expect to have a need for Additional Financing
As
of June 30, 2006 we had a working capital deficit of $450,022. Our history
of recurring losses from operations raises a substantial doubt about our ability
to continue as a going concern. There can be no assurance that we will have
adequate capital resources to fund planned operations or that any additional
funds will be available to us when needed, or if available, will be available
on
favorable terms or in amounts required by us. If we are unable to obtain
adequate capital resources to fund our motion picture operations, it may be
required to delay, scale back or eliminate some or all of our operations, which
may have a material adverse effect on our business, results of operations and
ability to operate as a going concern.
Our
business requires a substantial investment of capital. The production,
acquisition and distribution of motion pictures require a significant amount
of
capital. A significant amount of time may elapse between our expenditure of
funds and the receipt of commercial revenues from our motion pictures, if any.
This time lapse requires us to fund a significant portion of our capital
requirements from private parties, institutions, and other sources. Although
we
intend to reduce the risks of our production exposure through strict financial
guidelines and financial contributions from broadcasters, sub-distributors,
tax
shelters, government and industry programs and studios, we cannot assure you
that we will be able to implement successfully these arrangements or that we
will not be subject to substantial financial risks relating to the production,
acquisition, completion and release of future motion pictures. If we increase
our production slate or our production budgets, we may be required to increase
overhead, make larger up-front payments to talent and consequently bear greater
financial risks. Any of the foregoing could have a material adverse effect
on
our business, results of operations or financial condition.
Competition
is Severe in the Motion Picture Industry
The
motion picture industry is highly competitive. Our management believes that
a
motion picture's theatrical success is dependent upon general public acceptance,
marketing technology, advertising and the quality of the production. We intend
to produce motion picture productions that normally should compete with numerous
independent and foreign productions as well as productions produced and
distributed by a number of major domestic companies, many of which are units
of
conglomerate corporations with assets and resources substantially greater than
ours.
Our
management believes that in recent years there has been an increase in
competition in virtually all facets of the motion picture industry. With
increased alternative distribution channels for many types of entertainment,
the
motion picture business competes more intensely than previously with all other
types of entertainment activities as well as television. While increased use
of
pay per view television, pay television channels, and home video products are
potentially beneficial, there is no guarantee that we will be able to
successfully penetrate these markets. Failure to penetrate these potential
distribution channels would have a material adverse impact on our results of
operations.
Substantial
Risks Germane to the Motion Picture Industry
The
success of a single motion picture project is fraught with an unusually high
degree of uncertainty and risk. Similarly, the probability of successfully
completing a motion picture project is also laden with an unusually high degree
of uncertainty and risks. A studio or independent producer’s ability to finance
a project, execute a successful distribution strategy, obtain favorable press
and compete with an unknown quantity of competing releases are just some of
the
factors that impact the commercial success or failure of a film project. Our
strategy involves producing a minimum of 12 motion pictures per year. While
the
intent is to reduce production risk through this strategy, our plan has the
potential to compound risks germane to the industry.
Movie
producers are often involved in several projects at the same time and an active
film director is often presented with opportunities to direct many movies.
In
addition, independent contractors needed to produce the film often have
commitments to more than one movie project. Because we may decide to replace
key
members of our production team if they are unable to perform their duties within
our schedule, the marketing appeal of our film may be reduced.
If
we do
not complete a film on schedule or within budget, our ability to generate
revenue may be diminished or delayed. Our success depends on our ability to
complete the film on schedule and within budget.
Each
film we produce and distribute should appeal to a given segment of society
to
achieve acceptance. Although our intent to target niche markets that should
require less than broad market acceptance to achieve commercial success, there
can be no assurance that this strategy will succeed.
Motion
picture production and distribution is highly speculative and inherently risky.
There can be no assurance of the economic success of any motion picture since
the revenues derived from the production and distribution of a motion picture
(which do not necessarily bear a direct correlation to the production or
distribution costs incurred) depend primarily upon its acceptance by the public,
which cannot be predicted. The commercial success of a motion picture also
depends upon the acceptance of competing films released into the marketplace
at
or near the same time, the availability of alternative forms of entertainment
and leisure time activities, general economic conditions and other tangible
and
intangible factors, all of which can change and cannot be predicted with
certainty. Further, the theatrical success of a motion picture is generally
a
key factor in generating revenues from other distribution channels. There is
a
substantial risk that some or all of our motion pictures will not be
commercially successful, resulting in costs not being recouped or anticipated
profits not being realized.
Theaters
are more likely to exhibit feature films with substantial studio marketing
budgets. Even if we are able to complete the films and obtain distribution,
it
is unclear how much should be spent on marketing to promote each film by our
distributors.
All
of
these factors cannot be predicted with certainty. In addition, motion picture
attendance is seasonal, with the greatest attendance typically occurring during
the summer and holidays. The release of a film during a period of relatively
low
theater attendance is likely to affect the film’s box office receipts adversely.
Distribution
in Foreign Countries
We
plan to license motion picture and television programming in foreign countries
to sub-distributors. If we are at all successful in this regard, a portion
of
our revenues should be derived from foreign sources. Because of this, our
business is subject to certain risks inherent in international trade, many
of
which are beyond our control. Such risks include, but are not limited to,
changes in laws and policies affecting trade, investment and taxes (including
laws and policies relating to the repatriation of funds and to withholding
taxes), differing degrees of protection for intellectual property, the
instability of foreign economies and governments and in some cases an adverse
acceptance to a film may occur, resulting in a demand to renegotiate the license
agreement’s terms and conditions. In addition, fluctuations in foreign exchange
rates may affect our results of operations.
Piracy
of Original Motion Pictures we Plan to Produce may Reduce our Revenues and
Potential Earnings
According
to industry sources, piracy losses in the motion picture industry have increased
substantially, from an estimated $2.2 billion in 1997 to an estimated $3.5
billion in 2002. In certain regions such Asia, the former Soviet Union and
South
America, motion picture piracy has been a major issue for some time. With the
proliferation of DVD format around the globe, along with other digital recording
and playback devices, losses from piracy have spread more rapidly in North
America and Europe. Piracy of original motion pictures we produce and distribute
may adversely impact the gross receipts received from the exploitation of these
films, which could have a material adverse effect on our business, results
of
operations or financial condition.
Fluctuation
of Operating Results
Like
all motion picture production companies, our revenues and results of operations
could be significantly dependent upon the timing of releases and the commercial
success of the motion pictures we distribute, none of which can be predicted
with certainty. Accordingly, our revenues and results of operations may
fluctuate significantly from period to period, and the results of any one period
may not be indicative of the results for any future periods.
In
accordance with generally accepted accounting principles and industry practice,
we intend to amortize film costs using the individual-film-forecast method
under
which such costs are amortized for each film in the ratio that revenue earned
in
the current period for such title bears to management's estimate of the total
revenues to be realized from all media and markets for such title. To comply
with this accounting principal, our management plans to regularly review, and
revise when necessary, our total revenue estimates on a title-by-title basis,
which may result in a change in the rate of amortization and/or a write-down
of
the film asset to net realizable value. Results of operations in future years
should be dependent upon our amortization of film costs and may be significantly
affected by periodic adjustments in amortization rates. The likelihood of the
Company's reporting of losses is increased because the industry's accounting
method requires the immediate recognition of the entire loss in instances where
it is expected that a motion picture should not recover the Company's
investment.
Similarly,
should any of our films be profitable in a given period, we should have to
recognize that profit over the entire revenue stream expected to be generated
by
the individual film.
Film
Production Budgets may Increase and Film Production Spending may Exceed such
Budgets
Our
future film budgets may increase due to factors including, but not limited
to,
(1) escalation in compensation rates of people required to work on our projects,
(2) number of personnel required to work on our projects, (3) equipment needs,
(4) the enhancement of existing or the development of new proprietary technology
and (5) the addition of facilities to accommodate the growth of a studio. Due
to
production exigencies, which are often difficult to predict, it is not uncommon
for film production spending to exceed film production budgets, and our projects
may not be completed within the budgeted amounts. In addition, when production
of each film is completed, we may incur significant carrying costs associated
with transitioning personnel on creative and development teams from one project
to another. These carrying costs increase overall production budgets and could
have a material adverse effect on our results of operations and financial
condition.
Our
Anticipated Successive Releases of Films could Place a Significant Strain on
our
Limited Resources
We
anticipate establishing parallel creative teams so that we can develop more
than
one film at a time. These teams are expected to work on future projects, as
we
move towards producing 12 films per year. Due to the anticipated strain on
our
personnel from the effort required for the release of an upcoming film and
the
time required for creative development of future films, it is possible that
we
would be unable to release twelve new films in the first year and in subsequent
years. We may be required to expand our employee base, increase capital
expenditures and procure additional resources and facilities in order to
accomplish the scheduled releases of our films. This growth and expansion may
place a significant strain on our resources. We cannot provide any assurances
that any future film will be released as targeted or that this strain on
resources will not have a material adverse effect on our business, financial
condition or results of operations. As we move towards achieving 12 films a
year, there will likely be additional demands placed on the availability of
key
people. A lack of availability of key people may adversely impact the success
and timing of our future films.
We
may
implement a variety of new and upgraded operational and financial systems,
procedures and controls, including improvement and maintenance of our accounting
system, other internal management systems and backup systems. Our growth and
these diversification activities, along with the corresponding increase in
the
number of our employees and our rapidly increasing costs, may result in
increased responsibility for our management team. We may need to improve our
operational, financial and management information systems, to hire, train,
motivate and manage our employees, and to provide adequate facilities and other
resources for them. We cannot provide any assurance we will be successful in
accomplishing all of these activities on a timely and cost-effective basis.
Any
failure to accomplish one or more of these activities on a timely and
cost-effective basis would have a material adverse effect on our business,
financial condition and results of operations.
The
decisions regarding the timing of theatrical releases and related products,
the
marketing and distribution strategy, and the extent of promotional support
are
important factors in determining the success of our motion pictures and related
products. We may enter into agreements with third-parties to assist us in the
marketing and distribution of our films, and we may require the marketers and
distributors to consult with us with respect to all major marketing and
distribution decisions. Said agreements may or may not include: (1) the manner
in which distributors may distribute our films and related products; (2) the
number of theaters to which our films are distributed; (3) the specific timing
of release of our films and related products; or (4) the specific amount or
quality of marketing and promotional support of the films and related products
as well as the associated promotional and marketing budgets.
Terrorist
Activities and Resulting Military and other Actions could Adversely Affect
our
Business
The
continued threat of terrorism within the United States and abroad, military
action and heightened security measures in response to such threats, as well
as
other socioeconomic and political events, may cause significant disruption
to
commerce, including the entertainment industry, throughout the world. For
example, the terrorist attacks in New York and Washington, D.C. on September
11,
2001 disrupted commerce throughout the United States and Europe. Such disruption
in the future could have a material adverse effect on our business and results
of operations.
We
are Smaller and Less Diversified than Many of our Competitors.
Although
we plan to be an independent distributor and producer, we expect to constantly
compete with major U.S. and international studios. Most of the major U.S.
studios are part of large diversified corporate groups with a variety of other
operations, including television networks and cable channels that can provide
both means of distributing their products and stable sources of earnings that
may allow them better to offset fluctuations in the financial performance of
their motion picture and television operations. In addition, the major studios
have more resources with which to compete for ideas, storylines and scripts
created by third parties as well as for actors, directors and other personnel
required for production. The resources of the major studios may also give them
an advantage in acquiring other businesses or assets, including film libraries,
that we might also be interested in acquiring. The foregoing could have a
material adverse effect on our business, results of operations and financial
condition.
The
Motion Picture Industry is Highly Competitive and at Times may Create an
Oversupply of Motion Pictures in the Market.
The
number of motion pictures released by our competitors, particularly the major
U.S. studios, may create an oversupply of product in the market, reduce our
share of box office receipts and make it more difficult for our films to succeed
commercially once we begin to produce, market and distribute our films.
Oversupply may become most pronounced during peak release times, such as school
holidays and national holidays, when theater attendance is expected to be
highest. For this reason, and because of our more limited production and
advertising budgets, we plan to not release our films during peak release times,
which may also reduce our potential revenues for a particular release. Moreover,
we cannot guarantee that we can release all of our films when they are otherwise
scheduled. In addition to production or other delays that might cause us to
alter our release schedule, a change in the schedule of a major studio may
force
us to alter the release date of a film because we cannot always compete with
a
major studio’s larger promotion campaign. Any such change could adversely impact
a film’s financial performance. In addition, if we cannot change our schedule
after such a change by a major studio because we are too close to the release
date, the major studio’s release and its typically larger promotion budget may
adversely impact the financial performance of our film. The foregoing could
have
a material adverse effect on our business, results of operations and financial
condition.
The
limited supply of motion picture screens compounds this product oversupply
problem. Currently, a substantial majority of the motion picture screens in
the
U.S. typically are committed at any one time to only ten to 15 films distributed
nationally by major studio distributors. In addition, as a result of changes
in
the theatrical exhibition industry, including reorganizations and consolidations
and the fact that major studio releases occupy more screens, the number of
screens available to us when we want to release a picture may decrease. If
the
number of motion picture screens decreases, box office receipts, and the
correlating future revenue streams, such as from home video and pay and free
television, of our motion pictures may also decrease, which could have a
material adverse effect on our business, results of operations or financial
condition.
We
May Not be Able to Obtain Additional Funding to Meet our Requirements
Our
ability to grow our company through acquisitions, business combinations and
joint ventures, to maintain and expand our development, production and
distribution of motion pictures and to fund our operating expenses will depend
upon our ability to obtain funds through equity financing, debt financing
(including credit facilities) or the sale or syndication of some or all of
our
interests in certain projects or other assets. If we do not have access to
such
financing arrangements, and if other funding does not become available on terms
acceptable to us, there could be a material adverse effect on our business,
results of operations or financial condition.
We
Face Risks from Doing Business Internationally
We
may
distribute motion picture productions outside the United States through third
party licensees and derive revenues from these sources. As a result, our
business is subject to certain risks inherent in international business, many
of
which are beyond our control. These risks include changes in local regulatory
requirements, including restrictions on content; changes in the laws and
policies affecting trade, investment and taxes (including laws and policies
relating to the repatriation of funds and to withholding taxes); differing
degrees of protection for intellectual property; instability of foreign
economies and governments; cultural barriers; wars and acts of terrorism. Any
of
these factors could have a material adverse effect on our business, results
of
operations or financial condition.
Leverage
Risks
The
degree to which we might become leveraged may require us to dedicate a
substantial portion of our cash flow to the payment of principal of, and
interest on, our indebtedness, reducing the amount of cash flow available to
fund film production costs and other operating expenses. Additionally, the
degree to which we might become leveraged may adversely affect our ability
to
obtain additional financing, if necessary, for such operating expenses, to
compete effectively against competitors with greater financial resources, to
withstand downturns in our business or the economy generally and to pursue
strategic acquisitions and other business opportunities that may be in the
best
interests of us and our stockholders.
ITEM
3. CONTROLS AND PROCEDURES
Within
the 90 days prior to the date of this quarterly report, we carried out an
evaluation, under the supervision and with the participation of our management
of the effectiveness of the design and operation of our disclosure controls
and
procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation,
our
management concluded that our disclosure controls and procedures are effective
and timely alerting them to material information relating to the Company
required to be included in our periodic SEC filings.
There
were no significant changes in our internal controls over financial reporting
or
other factors that could significantly affect these controls subsequent to
the
date of their evaluation and there were no corrective actions with regard to
significant deficiencies or material weaknesses.
ITEM
1. LEGAL PROCEEDINGS
None.
ITEM
2. CHANGE IN SECURITIES
On
January 5, 2005, at 1:30 p.m. PST, via telephone conference a special meeting
of
the board of directors was held to Establish Series A and Series B Preferred
Stock, with such voting powers, designations, preferences and rights or
qualifications, limitations or restrictions as detailed in the Preferred Stock
designations.
It
was
Resolved that Series A Preferred Stock shall be reserved for employees,
consultants and other professionals retained by the Company.
It
was
further Resolved that Series B Preferred Stock shall be reserved for the Board
of Directors of the Company.
The
Chairman next stated that, in accordance with the agreements, letters of intent
and other assurances between the Company and Robert P. Atwell, including
companies controlled and or owned by Mr. Atwell or his affiliates, collectively
(“Atwell”), the Company shall need to issue to Atwell 5,100,000 shares of Series
A Preferred Stock at a par value of $.001 per share and 5,100,000 shares of
Series B Preferred Stock at a par value of $.001 per share. Upon a motion duly
made and seconded, and following a discussion, the following resolutions were
unanimously passed.
On
June
29, 2005, at 1:30pm PST, via telephone conference a special meeting of the
board
of directors was held to issue shares of common stock for accrued officer
compensation, issue shares of common stock to various consultants performing
services for the company and to Eagle Consulting Group for providing capital
for
continuing operations of the company.
It
was
Resolved that the company owed its officers $191,666 in accrued compensation.
First quarter accrued compensation of $87,500 and second quarter accrued
compensation of $104,166. The company issued a total of 911,459 restricted
common shares at a market value of $87,500 for the first quarter of 2005
services and a total of 1,364,575 restricted common shares at a market value
of
$102,343 for second quarter 2005 services. The total shares issued for
compensation of officers for the first and second quarter of 2005 was 2,276,034
shares.
It
was
Resolved that the Board authorized the company to issue 651,042 shares of the
Company’s $.001 par value common stock to Robert Atwell for services during the
first quarter of 2005.
It
was
Resolved that the Board authorized the company to issue 833,333 shares of the
Company’s $.001 par value common stock to Robert Atwell for services during the
second quarter of 2005.
It
was
Resolved that the Board authorized the company to issue 260,417 shares of the
Company’s $.001 par value common stock to Jane Olmstead for services during the
first quarter of 2005.
It
was
Resolved that the Board authorized the company to issue 86,602 shares of the
Company’s $.001 par value common stock to Jane Olmstead for services during the
second quarter of 2005.
It
was
Resolved that the Board authorized the company to issue 444,440 shares of the
Company’s $.001 par value common stock to George Jackson for services during the
second quarter of 2005.
In
the
efforts to build a management team the company issued stock to the new
management team.
It
was
Resolved that George Jackson, H K Dyal, Chris Davis and Craig Kitchens would
each receive 1,000,000 shares of the Company’s $.001 par value common stock for
consulting services provided during the second quarter of 2005.
The
Chairman next stated that in accordance with the agreement with Eagle Consulting
Group, Inc. and the Company, upon issuance of the above shares, there will
be a
total of 81,227,243 shares outstanding, resulting in 16,245,449 total shares
due
to Eagle Consulting Group, Inc. as of June 30, 2005. Eagle Consulting Group,
Inc. had previously been issued 14,396,727 shares, leaving a balance of
1,848,722 shares to be issued. The Company determined that the price per share
in connection herewith would be .03, based upon the original agreed upon price.
With this issuance of shares to Eagle Consulting Group, Inc., there will be
a
total common stock of 83,075,964 shares, issued, and outstanding. Upon a motion
duly made and seconded, and following a discussion of other business matters,
and the above June 29, 2005 resolutions were unanimously passed.
On
December 30, 2005 the company issued the following shares, 3,538,263 to officers
for services performed during 2005, 1,452,662 to Eagle Consulting Group, Inc.
for expenses paid on behalf of the company during the third and fourth quarter
of 2005, 3,586,881 shares to Eagle Consulting Group for loans made to the
company for expenses paid on behalf of the company during 2005 and 1,452,662
shares to Eagle Consulting Group, Inc. in according with their agreement to
pay
for all operational expenses during the year 2005.
Shares
issued as of June 30, 2006, common shares 93,649,589, Class A preferred stock
5,100,000 and Class B preferred stock 5,100,000. No shares have been issued
during the first or second quarter of 2006.
ITEM
3. DEFAULTS UPON SENIOR SECURITIES
NONE
ITEM
4. SUBMISSION OF MATTERS TO VOTE OF SECURITIES HOLDERS
NONE
ITEM
5. OTHER INFORMATION
NONE
ITEM
6. EXHIBITS AND REPORTS ON FORM 8-K
a.
Exhibits
31.1
Certification Pursuant to the 18 U.S.C. section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes- Oxley Act of 2002
31.2
Certification Pursuant to the 18 U.S.C. section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes- Oxley Act of 2002
32.1
Certification Pursuant to the 18 U.S.C. section 1350, as Adopted Pursuant to
Section 906 of the Sarbanes- Oxley Act of 2002
b.
Reports on Form 8-K
NONE
In
accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report on Form 10-QSB to be signed on its behalf
by
the undersigned, thereunto duly authorized.
CAMELOT
ENTERTAINMENT GROUP, INC.
(Registrant)
/S/
ROBERT
P. ATWELL
Robert
P.
Atwell
Chief
Executive Officer
/S/
GEORGE
JACKSON
George
Jackson
Chief
Financial Officer
August
15, 2006
Exhibit
31
CAMELOT
ENTERTAINMENT GROUP, INC.
CERTIFICATIONS
PURSUANT TO
SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I,
Robert
P. Atwell, certify that:
1.
I have reviewed this quarterly report on Form 10-QSB of Camelot Entertainment
Group, Inc.;
2.
Based
on my knowledge, this quarterly report does not contain any untrue statement
of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were
made, not misleading with respect to the period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the small business issuer
as
of, and for, the periods presented in this report;
4.
The
small business issuer’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
small business issuer and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the small business issuer’s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the small business issuer’s internal
control over financial reporting that occurred during the small business
issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the small business issuer’s internal
control over financial reporting; and
5.
The
small business issuer’s other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to
the small business issuer’s auditors and the audit committee of the small
business issuer’s board of directors (or persons performing the equivalent
functions):
(a)
All
significant deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer’s ability to record, process,
summarize and report financial information; and
(b)
Any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the small business issuer’s internal control over
financial reporting.
Date:
August 15, 2006
/s/
Robert P. Atwell
Robert
P.
Atwell
Chief
Executive Officer
CAMELOT
ENTERTAINMENT GROUP, INC.
CERTIFICATIONS
PURSUANT TO
SECTION
302 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
I,
George
Jackson, certify that:
1.
I have reviewed this quarterly report on Form 10-QSB of Camelot Entertainment
Group, Inc.;
2.
Based
on my knowledge, this quarterly report does not contain any untrue statement
of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were
made, not misleading with respect to the period covered by this report;
3.
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the small business issuer
as
of, and for, the periods presented in this report;
4.
The
small business issuer’s other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in
Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial
reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the
small business issuer and have:
(a)
Designed such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure that
material information relating to the small business issuer, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b)
Designed such internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our supervision, to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the small business issuer’s disclosure controls
and procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the end of the
period covered by this report based on such evaluation; and
(d)
Disclosed in this report any change in the small business issuer’s internal
control over financial reporting that occurred during the small business
issuer’s most recent fiscal quarter (the small business issuer’s fourth fiscal
quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the small business issuer’s internal
control over financial reporting; and
5.
The
small business issuer’s other certifying officer(s) and I have disclosed, based
on our most recent evaluation of internal control over financial reporting,
to
the small business issuer’s auditors and the audit committee of the small
business issuer’s board of directors (or persons performing the equivalent
functions):
(a)
All
significant deficiencies and material weaknesses in the design or operation
of
internal control over financial reporting which are reasonably likely to
adversely affect the small business issuer’s ability to record, process,
summarize and report financial information; and
(b)
Any
fraud, whether or not material, that involves management or other employees
who
have a significant role in the small business issuer’s internal control over
financial reporting.
August
15, 2006
/s/George
Jackson
George
Jackson
Chief
Financial Officer
Exhibit
32
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of Camelot Entertainment Group, Inc.
(“Camelot”) on Form 10-Q for the period ending June 30, 2006 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, Robert
P. Atwell, President and Chief Executive Officer of Camelot Entertainment Group,
Inc. and a member of the Board of Directors, certify, pursuant to s.906 of
the
Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly represents, the financial
condition and result of operations of Camelot Entertainment Group, Inc..
/s/
Robert P. Atwell
Robert
P.
Atwell
Chief
Executive Officer
August
15, 2006
CERTIFICATION
PURSUANT TO
18
U.S.C. SECTION 1350,
AS
ADOPTED PURSUANT TO
SECTION
906 OF THE SARBANES-OXLEY ACT OF 2002
In
connection with the Quarterly Report of Camelot Entertainment Group, Inc.
(“Camelot”) on Form 10-Q for the period ending June 30, 2006 as filed with the
Securities and Exchange Commission on the date hereof (the “Report”), I, George
Jackson, President and Chief Financial Officer of Camelot Entertainment Group,
Inc. and a member of the Board of Directors, certify, pursuant to s.906 of
the
Sarbanes-Oxley Act of 2002, that:
(1)
The Report fully complies with the requirements of section 13(a) or 15(d)
of the Securities Exchange Act of 1934; and
(2)
The information contained in the Report fairly represents, the financial
condition and result of operations of Camelot Entertainment Group, Inc..
/s/George
Jackson
George
Jackson
Chief
Financial Officer
August
15, 2006