Here are some recent questions we received and the responses. We are attempting to answer all questions the best that we can. If we make an error in response, we will correct any error as soon as we notice it. The goal of providing these questions and answers is to keep the information flowing between the company and our stockholders in an informal setting. Please be sure to reference our filings at our web site http://www.camelotfilms.com/ for more detailed information.

Question:

Stock bashing.....It seems there are a LOT of persons all over the Internet which are putting in loads of time & energy merely to "bash" either Camelot's stock or the Camelot organization or yourself (Robert Atwell). At first, I attributed this to one of two things a) people who bought the stock in the period of October through January only to see their investment diminish by at least 80 or 90 percent, or b) people who bought the stock in the past 6-8 weeks @ .0001 hoping to quickly "flip" the stock @ .0002 for a 100% profit, only they could not & are angry. But then I came across an article that shed some light upon a possible third explanation for all the negative behavior. It's a bit long, so I'll post for you the most pertinent part of the article here:

".....What typically happens in these situations is that the victim company has to massively dilute its share structure from the constant paying of the monthly burn rate with money received from the selling of “real” shares at artificially low levels. Then the goal of the naked short sellers is to point out to the investors, usually via paid “Internet bashers”, that with the, let’s say, 50 billion shares currently issued and outstanding, that this lousy company is not worth the $5 million market cap it is trading at, especially if it is just a shell company whose primary business plan was wiped out by the naked short sellers’ tortuous interference earlier on. ....."
http://newcmkx.proboards.com/index.cgi?board=Answers&action=print&thread=5893

Tell me, do you feel there is currently a paid effort underway to "trash" Camelot's stock? BTW, when I created an account @ "ihub" (that's "investorshub.com") specifically to quell all the Camelot bashing with the above link & pertinent paragraph, the information was promptly deleted from the site......TWICE!!! I'm doing my best to defend Camelot and its stock, but the longer I have to, the more difficult it's becoming as more & more persons are apparently jumping on board the "basher wagon".

Response:

It is possible that this has occurred. When it comes to money, anything is possible. Naked shorting, or any shorting at these low prices would be ill advised, as it would not take that much buying to push the market up. The market is way too volatile. It’s very hard, expensive and time consuming to try to track down certain bashers.

They hide under anonymous names and emails. It’s a shame that they can’t or won’t use their time and energy for fair and realistic posts. Unless they are shorting (as there are no option trading on these types of stocks) what good does it do a stockholder to “bash” a stock that will only hurt the stock value? Maybe it’s a game for them. Maybe, in some cases, they have their own agenda, whether it’s being paid to bash or it could be simply that they thrive on bashing a particular stock, and once that is not fun anymore, they move on to another stock to bash.

There is also the herd mentality that comes into play. When a stock starts to move up, the herd jumps in and follows, regardless of whether the increase is justified or not. Same thing on decreases. Bandwagons go in both directions, up and down. Sometimes it only takes one basher (paid or not) to get the ball rolling, and others follow along. We would also point out that our stock was trading at these low levels with a lot less shares in the float.

It is troubling that some positive posts were taken off the board while the negative ones remain. We’ll have our attorneys check into that. Also, if someone is being paid to bash a stock, according to our attorneys they would be violating securities laws just the same as some promoters do. It works both ways. If you are being paid to discuss a stock, good or bad, it has to be disclosed.

What really causes irritation is that none of these “investors” have invested a dime directly in the company. They have bought stock in the open market from a seller and the money they paid went to that seller and the brokers making commissions. We have invested millions into the business, not to mention all the time, etc. Then you have someone who bought $500 worth of stock from the market attacking the company and the management with personal attacks, making all kinds of accusations that are totally false and unfounded, and why? So their stock will become worthless? What’s the point? If tomorrow the stock went way up and they made a nice profit, would they still be stating the same things? We value every stockholder, regardless of the amount of shares they may have. We appreciate all of their comments both good and bad. Some comments are just difficult to ascertain as to why they are being made when all the comment does is weaken their respective position.

Somehow many believe that the company has some sort of control over the price of the stock. The control is in the hands of the stockholders and market makers. The company can only report what is going on, file the reports and do what it can to make the business successful. Prior to the Internet boom, it was common for a business to take at least five years on the average before one knew whether or not it would survive. Now it’s minute by minute. A business like ours takes a long time to establish its footing and begin to grow.

Everyone is a critic. When you’re hot and things look great, they love you. When you’re cold and things look bleak, they hate you. For whatever reason, people tend to like bad news. All you have to do is watch the news. It’s a crazy world we live in.

We’ll just keep working hard and keep our eye on our goals.

Question:

Research reveals that you're also the CEO of "Sky440, Inc.", trading as SKYF on the "Pink Sheets". Tell me, are there any other companies which you're the CEO of? Obviously, investors in CMLT are under the impression that SKYF won't detract significantly from your duties @ CMLT. Should there be any cause for concern?

Response:

Technically, Robert Atwell is the Chairman and interim CEO of Sky440 while the company searches for a new management team. As the largest stockholder in Sky440, Mr. Atwell had to take back control of the company last year because it had reached a point where he had to protect his investment and that of others. The company’s management had done the best they could under difficult circumstances, but it had become clear that he had to take action. This does not detract significantly from his duties with Camelot.

This is also the case with Emaji, Inc. Unlike Sky440, which has ongoing albeit limited operations, Emaji is just sitting. Mr. Atwell and others had invested a significant amount of money into the company over the years (most before it became Emaji) and took back control of the company to try to protect their investment. Once things settle down with Camelot and there is a new management team in place with Sky440, we’ll see what can be done with Emaji.

On both of these, we had to step in so we could hopefully avoid losing our investments in them. There should not be any cause for concern.

Question:

Perhaps the largest piece of ammunition the bashers have to work with is the knowledge that Camelot has been around since 1978 but have absolutely no finished products to show for it. I've conducted several searches but could find no movies, TV shows, theatrical endeavors, radio shows, or any other piece of commercially viable media either produced or distributed via Camelot Entertainment Group or any substantive subsidiary of Camelot. I'm sure there's a logical explanation for this. However, as a person who's relatively new to the world of investing, I cannot provide an explanation. Is there some sort of Internet reference which could explain the 30-year Camelot business model in a way that makes sense to investors?

Answer:

Camelot Films was founded in 1978 as a private, film fund management company. The design of the company was to work with investors and others behind the scenes as investing in film was, and remains, a very risky investment that few really understand. As the company transitioned into production and distribution, our first theatrical release was in 1982 with “One Down two To Go”, an exploitation movie that was financed directly from a bank (which was unique at that time). We were involved in a number of projects over the years, but did our best to stay behind the scenes, mainly on the business side.

We developed a unique business model during the mid 1980’s that was based upon digital technology. Our goal was, and remains, to implement that business model and effectively change the way movies are developed, financed, produced and distributed. That is happening right now. The industry is changing rapidly.

It only took 20 years for the promised digital technology to really arrive and have an impact. Digital post took hold in the mid 1990’s. Now we have professional digital cameras that come close to film, including the “Red Camera”, the “Arri D21” and others. Digital distribution in coming along slowly. And we will probably be completely immersed in a digital film world by the middle of the next decade. Like I stated previously, these changes do not happen overnight.

Our executive team has been involved in many feature film projects that were released theatrically over the years in addition to “One Down”, including “Lone Wolf McQuade”, “Saved”, “Bully”, “Messenger”, “Trained to Kill” and others. I would recommend looking at the resumes in our filings for additional information. We also have agreements with distribution and production experts with vast amounts of industry experience. Many of these details will emerge when we file our S-1 registration statement.

Camelot became public in 2003/2004 when we took over an ailing public company and moved the Camelot operations into it. All of this information can be found in our annual reports and other filings. When we first became public, we were ready to finally begin implementation of our business model.

Unfortunately, the digital cameras were still not ready for prime time, and then we had an opportunity to build our first physical studio in Tustin, California. Between 2005 and 2008, we focused most of our efforts on what was known as “Camelot Studios at ATEP”. Budgeted at more than $450,000,000, this project would have firmly established phase 2 of our business model under Camelot Studio Group. Much to our disappointment, we were contractually forbidden to make any public announcement of what was going on, other than to minimally reference the project in our filings and make the minimum required legal disclosures. As disclosed in our filings, that project was terminated last year. (We will have materials from that project at the stockholders meeting on May 13th ).

We then began refocusing our efforts back to production and distribution, also disclosed in our filings.

We have always kept an eye on what our main goal is, despite pressure to change direction and become just like every other production company in Hollywood. As we grow, we will have executives and others with numerous credits and other credentials to enhance our team. But we remain steadfast in our resolve to implement what we feel is a plan that will change the way movies are made and released. And we are not the only ones. Every day another company emerges with new ideas and new markets develop. If we can stick to our vision, we’ll get there.

Question:

While we're on the subject of "bashing", there's another criticism that I've seen raised which is a bit less significant than others, but worth mentioning nonetheless. I realize you're in the process of putting together a new website. Since text on the current website talks about "new media", I believe it would behoove you to lend credence to this advocacy by enlisting state of the art web techniques for your new site. Critics are saying things like "....if Camelot is emphasizing 'new media', how come their site isn't built with 'Flash'....", etc, etc. .... I could care less myself, but there are those detractors who won't be sold on Camelot unless it practices what it preaches.

Response:

We agree. We paid a company in Chicago last year to rebuild our entire website and incorporate all of the new media and other features that would enhance our web presence. We are hopeful that we will have the new site soon. I agree, we have to practice what we preach.

Question:

What do you ultimately envision the market for Camelot's eventual productions to be? A cursory glance at several titles in recent PRs would seem to suggest that these films will be akin to the genre encompassing "made for the Sci-Fi Channel". Now, don't get me wrong. I know that those "Sci-Fi Channel" movies are crappy, but if they're still being produced, then there's obviously a lucrative market for them, despite what persons would tend to believe while having the misfortune of viewing "Stan Lee's Harpies". Tell me, where will these films end up?

Response:

It is our intention that every film we make will have a theatrical release, even the smaller films. The releases might be limited, but it is important. We will be looking at packaging up distribution points, such as cable networks, in order to make sure these films have a home and that we can cover production and distribution costs at a minimum. That is very hard to do.

Before a decision is made to greenlight a film, you have to know where you are going to sell it, who your audience is, how it will be marketed, etc. Quality and above the line talent is critical, especially with theatrical releases and foreign sales.

Everything starts with the script. Everything ends with the sale. You have to have both.

We plan to encompass a number of genres. Another important factor is that the foreign market, especially for independents, is shrinking, and as a result you have to look at the domestic marketplace for the majority of recoupment. Bottom line is you want to make the film for x and sell it for y, with y being greater than x. That will determine to a great extent where these films end up.