**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-QSB**





(Mark
      One)


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





**For
      the Quarterly Period Ended November 30, 2006**





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





**For
      the Transition Period from _________ to _________**





**Commission
      file number: 0-30703**





**COLLECTIBLE
      CONCEPTS GROUP, INC.**


(Exact
      name of registrant as specified on its charter)





**Delaware**
            
            **95-4026880**(State
                or other jurisdiction of
              incorporation
                or organization)
            
            (IRS
                Employer
              Identification
                No.)





**1600
      Lower State Road**


**Doylestown,
      PA 18901**


(Address
      of principle executive offices)





**(215)
      491-1075**


(Registrant’s
      telephone number, including area code)







(Former
      name, former address and former fiscal year, if changed since last
      report)





Indicate
      by check mark whether the registrant: (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
      the
      past 12 months (or for such shorter period that the registrant was required
      to
      file such reports), and (2) has been subject to such filing requirements for
      the
      past 90 days.


Yes
o  No
x





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act).


Yes
oNo
x





State
      the
      number of shares outstanding of each of the registrant's classes of common
      equity, as of the latest practicable date:  347,275,928  shares
      issued and outstanding as of January 10, 2007.







**COLLECTIBLE
      CONCEPTS GROUP, INC.**


**INDEX**PART
                  I
              FINANCIAL
                  STATEMENTSITEM
                  1
              Condensed
                  Consolidated Balance Sheet As of November 30, 2006
                  (Unaudited)
              
              3Condensed
                  Consolidated Statements of Operations For The Three and Nine Months
                  Ended
                  November 30, 2006 and 2005 (Unaudited)
              
              4Condensed
                  Consolidated Statement of Changes In Shareholders' Deficiency For
                  The Nine
                  Months ended November 30, 2006 (Unaudited)
              
              5Condensed
                  Consolidated Statements of Cash Flows For The Nine Months ended
                  November
                  30, 2006 and 2005 (Unaudited)
              
              6Notes
                  To Condensed Consolidated Financial Statements As of November 30,
                  2006
                  (Unaudited)
              
              7
                  -
                  25ITEM
                  2
              Management’s
                  Discussion and Analysis of Financial Condition and Results of
                  Operations
              
              26
                  - 37ITEM
                  3
              Controls
                  and Procedures
              
              38PART
                  II
              OTHER
                  INFORMATIONITEM
                  1
              Legal
                  proceedings
              
              39ITEM
                  2
              Unregistered
                  sales of equity securities and use of proceeds
              
              39ITEM
                  3
              Defaults
                  upon senior securities
              
              39ITEM
                  4
              Submission
                  of matters to a vote of security holders
              
              39ITEM
                  5
              Other
                  information
              
              39ITEM
                  6
              Exhibits
              
              40SIGNATURES
              
              41





2




COLLECTIBLE
                CONCEPTS GROUP, INC AND SUBSIDIARIESCONDENSED
                CONSOLIDATED BALANCE SHEETS(Unaudited)




November
                30,
            
            February
                28,2006
            
            2006ASSETSCURRENT
                ASSETSCash
                and cash equivalents
            
            $
            -
            
            $
            74,738Accounts
                receivable, net of allowance of $31,133 and $10,517,
                respectively
            
            
            156,454
            
            
            57,835Inventories,
                net of allowance of $50,000 and $-0-
            
            
            473,663
            
            
            189,844Prepaid
                interest
            
            
            -
            
            
            20,625Prepaid
                royalties
            
            
            24,401
            
            
            62,416Other
                prepaid expenses
            
            
            100
            
            
            2,865Total
                current assets
            
            
            654,618
            
            
            408,323Property
                and equipment, net
            
            
            7,886
            
            
            1,130Other
                assets:Film
                library, net
            
            
            -
            
            
            245,800Trade
                credits
            
            
            -
            
            
            -Trademarks
            
            
            1,300
            
            
            1,300Deposits
            
            
            3,200
            
            
            3,200Total
                other assets
            
            
            4,500
            
            
            250,300TOTAL
                ASSETS
            
            $
            667,006
            
            $
            659,753LIABILITIES
                AND DEFICIENCY IN STOCKHOLDERS' EQUITYCURRENT
                LIABILITIESCash
                overdraft
            
            $
            13,156
            
            $
            -Accounts
                payable and accrued expenses
            
            
            3,187,015
            
            
            2,898,725Accrued
                expenses, related party
            
            
            -
            
            
            744,513Notes
                and loans payable
            
            
            823,349
            
            
            483,459Loans
                payable, related party
            
            
            3,111
            
            
            1,878Convertible
                subordinated debentures
            
            
            34,500
            
            
            127,300Convertible
                secured debentures
            
            
            2,604,589
            
            
            1,887,399Total
                current liabilities
            
            
            6,665,720
            
            
            6,143,274Long
                term debt, less current maturitiesNotes
                payable
            
            
            200,000
            
            
            200,000Derivative
                liability related to convertible debentures
            
            
            16,991,000
            
            
            13,743,000Warrant
                liability related to convertible debentures
            
            
            25,353
            
            
            53,569Total
                long term liabilities
            
            
            17,216,353
            
            
            13,996,569Total
                liabilities
            
            
            23,882,073
            
            
            20,139,843COMMITMENTS
                AND CONTINGENCIESDEFICIENCY
                IN STOCKHOLDERS' EQUITYPreferred
                stock, Series A; par value $0.001 per share; 1,000,000 shares authorized,
                1,000,000 and -0- issued and outstanding, respectively
            
            
            1,000
            
            
            -Common
                stock, par value $0.00001 per share; 10,000,000,000 shares authorized,
                99,860,251 and 6,996,950 issued and outstanding, respectively (Note
                F)
            
            
            999
            
            
            70Common
                stock to be issued, 1,200,569 and 3,135,738, respectively (Note
                F)
            
            
            91,279
            
            
            149,714Common
                stock subscription
            
            
            -
            
            
            15,000Subscription
                receivable
            
            
            -
            
            
            (15,000
            )Additional
                paid in capital (Note F)
            
            
            17,814,842
            
            
            14,806,739Deferred
                equity based expense
            
            
            -
            
            
            (40,000
            )Accumulated
                deficit
            
            
            (41,123,187
            )
            
            (34,396,613
            )Total
                deficiency in stockholders' equity
            
            
            (23,215,067
            )
            
            (19,480,090
            )TOTAL
                LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
            
            $
            667,006
            
            $
            659,753See
                the accompanying notes to the unaudited condensed consolidated financial
                statements





3


COLLECTIBLE
                CONCEPTS GROUP, INC AND SUBSIDIARIESCONDENSED
                CONSOLIDATED STATEMENTS OF OPERATIONS(unaudited)




Three
                months ended November 30,
            
            Nine
                months ended November 30,2006
            
            2005
            
            2006
            
            2005Restated-See
                Note K
            
            
            
            Restated-See
                Note KREVENUES:Net
                sales
            
            $
            291,495
            
            $
            109,392
            
            $
            636,891
            
            $
            482,404Cost
                of sales
            
            
            249,893
            
            
            41,898
            
            
            636,808
            
            
            380,357Gross
                profit (loss)
            
            $
            41,602
            
            
            67,494
            
            
            83
            
            
            102,047OPERATING
                EXPENSESSelling
                and administrative
            
            
            323,259
            
            
            357,694
            
            
            1,518,705
            
            
            998,880Impairment
                loss
            
            
            -
            
            
            -
            
            
            233,200
            
            
            -Depreciation
                and amortization
            
            
            664
            
            
            846
            
            
            14,489
            
            
            4,069Total
                operating expenses
            
            
            323,923
            
            
            358,540
            
            
            1,766,394
            
            
            1,002,949LOSS
                FROM OPERATIONS
            
            
            (282,321
            )
            
            (291,046
            )
            
            (1,766,311
            )
            
            (900,902
            )Other
                income (expense)
            
            
            -
            
            
            8,959
            
            
            9,785
            
            
            15,959Financing
                costs related to conversion of convertible debt
            
            
            (86,100
            )
            
            -
            
            
            (1,442,926
            )
            
            -Gain
                (loss) on adjustment of derivative and warrant liability to fair
                value
            
            
            583,007
            
            
            9,818,523
            
            
            (2,319,784
            )
            
            (4,423,115
            )Interest
                expense
            
            
            (369,710
            )
            
            (337,759
            )
            
            (1,207,339
            )
            
            (962,338
            )Net
                Income (loss) before income taxes
            
            
            (155,123
            )
            
            9,198,677
            
            
            (6,726,574
            )
            
            (6,270,396
            )Income
                taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -NET
                INCOME (LOSS)
            
            $
            (155,123
            )
            $
            9,198,677
            
            $
            (6,726,574
            )
            $
            (6,270,396
            )Net
                income (loss) per common shares outstanding (basic)
            
            $
            (0.00
            )
            $
            1.31
            
            $
            (0.08
            )
            $
            (0.90
            )Net
                income (loss) per common shares outstanding (fully diluted) (Note
                A)
            
            
            N/A
            
            
            Note
                A
            
            
            N/A
            
            
            N/AWeighted
                average common shares outstanding (basic and diluted) (Note
                F)
            
            
            93,868,403
            
            
            6,996,950
            
            
            83,528,883
            
            
            6,996,950





See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements





4





COLLECTIBLE
                CONCEPTS GROUP, INC AND SUBSIDIARIESCONDENSED
                CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDERS'
                EQUITYNINE
                MONTHS ENDED NOVEMBER 30, 2006(unaudited)




Common
                stock
            
            Common
            
            Additional
            
            
            
            DeferredPreferred
            
            Stock
            
            Common
            
            Stock
            
            to
                be issued:
            
            Stock
            
            Paid
                in
            
            Subscription
            
            Equity
                based
            
            AccumulatedShares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Subscription
            
            Capital
            
            Receivable
            
            Compensation
            
            Deficit
            
            TotalBalance
                as of February 28, 2006 (Note F)
            
            
            
            
            $
            -
            
            
            6,996,950
            
            $
            70
            
            
            3,135,738
            
            $
            149,714
            
            $
            15,000
            
            $
            14,806,739
            
            $
            (15,000
            )
            $
            (40,000
            )
            $
            (34,396,613
            )
            $
            (19,480,090
            )Conversion
                of secured convertible debentures to common stock
            
            
            
            
            
            
            
            
            14,431,054
            
            
            144
            
            
            
            
            
            
            
            
            
            
            
            526,547
            
            
            
            
            
            
            
            
            
            
            
            526,691Conversion
                of subordinated convertible debentures to common stock and interest
                to
                common stock
            
            
            
            
            
            
            
            
            4,525,390
            
            
            45
            
            
            
            
            
            
            
            
            
            
            
            180,968
            
            
            
            
            
            
            
            
            
            
            
            181,013Conversion
                of notes and loans payable to common stock
            
            
            
            
            
            
            
            
            65,341,610
            
            
            654
            
            
            
            
            
            
            
            
            
            
            
            1,288,415
            
            
            
            
            
            
            
            
            
            
            
            1,289,069Amortization
                of deferred compensation expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            40,000
            
            
            
            
            
            40,000Common
                stock issued for services rendered
            
            
            
            
            
            
            
            
            4,887,000
            
            
            49
            
            
            
            
            
            
            
            
            
            
            
            221,751
            
            
            
            
            
            
            
            
            
            
            
            221,800Cash
                received on subscription
            
            
            
            
            
            
            
            
            270,000
            
            
            3
            
            
            
            
            
            
            
            
            (15,000
            )
            
            14,997
            
            
            15,000
            
            
            
            
            
            
            
            
            15,000Common
                stock issued for subscribed shares
            
            
            
            
            
            
            
            
            1,080,000
            
            
            11
            
            
            (1,080,000
            )
            
            (60,000
            )
            
            
            
            
            59,989
            
            
            
            
            
            
            
            
            
            
            
            -Common
                stock issued under late issuance stock subscription
                provisions
            
            
            
            
            
            
            
            
            1,435,000
            
            
            14
            
            
            (1,435,000
            )
            
            
            
            
            
            
            
            (14
            )
            
            
            
            
            
            
            
            
            
            
            -Common
                stock to be issued for anti-dilution note provisions
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,473,078
            
            
            16,689
            
            
            
            
            
            (16,689
            )
            
            
            
            
            
            
            
            
            
            
            -Common
                stock issued for anti-dilution note provisions
            
            
            
            
            
            
            
            
            893,247
            
            
            9
            
            
            (893,247
            )
            
            (15,124
            )
            
            
            
            
            15,115
            
            
            
            
            
            
            
            
            
            
            
            -Fair
                value of options issued
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,100
            
            
            
            
            
            
            
            
            
            
            
            3,100Conversion
                of loans payable to preferred stock
            
            
            1,000,000
            
            
            1,000
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            713,924
            
            
            -
            
            
            -
            
            
            -
            
            
            714,924Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (6,726,574
            )
            
            (6,726,574
            )Balance
                at November 30, 2006
            
            
            1,000,000
            
            $
            1,000
            
            
            99,860,251
            
            $
            999
            
            
            1,200,569
            
            $
            91,279
            
            $
            -
            
            $
            17,814,842
            
            $
            -
            
            $
            -
            
            $
            (41,123,187
            )
            $
            (23,215,068
            )





See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements





5


COLLECTIBLE
                CONCEPTS GROUP, INC AND SUBSIDIARIESCONDENSED
                CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited)




Nine
                months ended November 30,2006
            
            2005Restated-See
                note KNet
                loss
            
            $
            (6,726,574
            )
            $
            (6,270,396
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            14,489
            
            
            4,069Provision
                for bad debt expense
            
            
            9,298
            
            
            -Provision
                for trade credit allowance
            
            
            376,227
            
            
            -Impairment
                of film liabrary
            
            
            233,200
            
            
            -Common
                stock issued in connection with services rendered, net of
                cancellations
            
            
            221,800
            
            
            41,987Common
                stock issued in connection with anti-dilution note
                provisions
            
            
            20,262
            
            
            -Options
                issued for services rendered
            
            
            3,100
            
            
            -Debt
                forgiveness
            
            
            -
            
            
            (15,959
            )Amortization
                of deferred equity based expense
            
            
            40,000
            
            
            -Accretion
                of convertible notes payable
            
            
            806,338
            
            
            486,475Loss
                on conversion of notes and loans payable
            
            
            902,418
            
            
            -Loss
                on conversion of secured convertible debt
            
            
            497,545
            
            
            319,413Loss
                on conversion subordinate debt and interest
            
            
            42,463
            
            
            -Unrealized
                loss on adjustment of derivative and warrant liability to fair value
                of
                underlying securities
            
            
            2,319,784
            
            
            4,423,115(Increase)
                decrease in:Accounts
                receivable
            
            
            (107,917
            )
            
            (19,949
            )Loans
                receivable
            
            
            -
            
            
            1,245Trade
                credits
            
            
            (376,227
            )
            
            -Inventories
            
            
            (249,294
            )
            
            (99,940
            )Prepaid
                interest
            
            
            20,625
            
            
            -Prepaid
                royalties
            
            
            37,916
            
            
            (109,506
            )Other
                prepaid expenses
            
            
            2,765
            
            
            -Increase
                (decrease) in:Cash
                overdraft
            
            
            13,156
            
            
            -Accounts
                payable and accrued expenses
            
            
            377,810
            
            
            151,507Net
                cash used in operating activities
            
            
            (1,520,816
            )
            
            (1,087,939
            )CASH
                FLOWS FROM INVESTING ACTIVITIES:Purchase
                of fixed assets
            
            
            (8,645
            )
            
            -Net
                cash used in investing activities
            
            
            (8,645
            )
            
            -CASH
                FLOWS FROM FINANCING ACTIVITIES:Proceeds
                from common stock subscribed
            
            
            15,000
            
            
            60,000Proceeds
                from issuance of convertible secured debentures
            
            
            900,000
            
            
            1,223,332Repayments
                of notes and loans payable
            
            
            (131,510
            )
            
            (22,497
            )Proceeds
                from notes and loans payable
            
            
            670,000
            
            
            15,000Repayments
                of notes payable-related party
            
            
            (1,235
            )
            
            (32,619
            )Proceeds
                from notes payable-related party
            
            
            2,468
            
            
            -Net
                cash provided from financing activities
            
            
            1,454,723
            
            
            1,243,216Net
                (decrease)increase in cash and cash equivalents
            
            
            (74,738
            )
            
            155,277Cash
                and cash equivalents at beginning of period
            
            
            74,738
            
            
            1,040Cash
                and cash equivalents at end of period
            
            $
            -
            
            $
            156,317SUPPLEMENTAL
                DISCLOSURES OF CASH FLOW INFORMATION:Cash
                paid during the period for interest
            
            $
            -
            
            $
            -Cash
                paid during the period for taxes
            
            $
            -
            
            $
            -





See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements




6


**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**


**NOTE
      A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING
      POLICIES**





Basis
      of Presentation





These
      unaudited condensed consolidated statements have been prepared in accordance
      with accounting principles generally accepted in the United States of America
      for interim financial information and the instructions to Form 10-QSB and do
      not
      include all the information and footnotes required by accounting principles
      generally accepted in the United States of America for complete financial
      statements. In the opinion of management, all adjustments (consisting of normal
      recurring accruals) considered necessary for a fair presentation of the results
      for the interim periods have been included. Operating results for the three
      and
      nine months ended November 30, 2006 are not necessarily indicative of the
      results that may be expected for the year ending February 28, 2007. The
      accompanying unaudited condensed consolidated financial statements and the
      information included under the heading "Management's Discussion and Analysis"
      should be read in conjunction with the Company's audited consolidated financial
      statements and related notes included in the Company's Form 10-KSB for the
      year
      ended February 28, 2006.





Principles
      of Consolidation




The
      unaudited condensed consolidated financial statements include the accounts
      of
      Collectible Concepts Group, Inc. and its two wholly owned subsidiaries, Team
      Sports Specialties Corporation and Music Art Corporation (collectively, the
      "Company"). All significant intercompany accounts and transactions have been
      eliminated in consolidation.





Use
      of
      Estimates




The
      preparation of the unaudited condensed consolidated financial statements are
      in
      conformity with accounting principles generally accepted in the United States
      of
      America requires management to make estimates and assumptions that affect the
      reported amounts of assets and liabilities and disclosures of contingent assets
      and liabilities at the date of the condensed consolidated financial statements
      and reported amounts of revenues and expenses during the reporting period.
      Actual results could differ from those estimates.





Concentration
      of Credit Risk





Financial
      instruments and related items, which potentially subject the Company to
      concentrations of credit risk, consist primarily of cash, cash equivalents
      and
      trade receivables. The Company places its cash and temporary cash investments
      with high credit quality institutions. At times, such investments may be in
      excess of the FDIC insurance limit. The Company periodically reviews its trade
      receivables in determining its allowance for doubtful accounts. At November
      30,
      2006 and February 28, 2006, allowance for doubtful account balance was $31,133
      and $10,517, respectively.





Loss
      per Share




Basic
      and
      diluted loss per share amounts are computed based on net loss divided by the
      weighted average number of common shares outstanding. The assumed conversion
      of
      convertible debt into 19,104,177 common shares and 2,536,184 common shares
      as of
      November 30, 2006 and 2005, respectively, and the exercise of outstanding
      options and warrants to purchase 121,176,400 common shares and 532,184 common
      shares as of November 30, 2006 and 2005, respectively, were not included in
      the
      computation of diluted loss per share because the assumed conversion and
      exercise would be anti-dilutive for all periods presented-See Note F. As of
      November 30, 2006, the Company does not have enough common shares available
      to
      convert all the eligible debt to shares if the debt holders elected to convert
      all of their notes and to issue the required number of shares of common stock
      to
      be issued per the statement of stockholders' deficiency. The Company and its
      attorney are currently working on the necessary actions to rectify the
      situation.





The
      Company computes earnings per share under Financial Accounting Standard No.
      128,
      "Earnings Per Share" ("SFAS 128"). Net loss per common share is computed by
      dividing net loss by the weighted average number of shares of common stock
      and
      dilutive common stock equivalents outstanding during the year. Dilutive
      common stock equivalents consist of shares issuable upon conversion of
      convertible preferred shares and the exercise of the Company's stock options
      and
      warrants (calculated using the treasury stock method). For the three months
      ended November 30, 2005, common stock equivalents derived from shares issuable
      in conversion of the Callable Secured Convertible Notes are not considered
      in
      the calculation of the weighted average number of common shares outstanding
      because they would be anti-dilutive, thereby decreasing the net loss per
      share.




7


**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**




**NOTE
      A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
      (continued)**





Non
      monetary/barter transactions





The
      Company consummated contracts whereby the Company, for product delivered, has
      available for usage: media, goods and services with certain restrictions and
      limitations collectively referred to as “trade credits”. Since collectiblity
      cannot be reasonably assured, the Company records these transactions as benefit
      is received.





Stock
      based compensation





In
      December 2002, the FASB issued SFAS No. 148, “Accounting for Stock-Based
      Compensation-Transition and Disclosure-an amendment of SFAS 123.” This statement
      amended SFAS 123, “Accounting for Stock-Based Compensation,” to provide
      alternative methods of transition for a voluntary charge to the fair value
      based
      method of accounting for stock-based employee compensation. In addition, this
      statement amended the disclosure requirements of SFAS No. 123 to require
      prominent disclosures in both annual and interim financial statements about
      the
      method of accounting for stock-based employee compensation and the effect of
      the
      method used on reported results. Effective for the nine months ended November
      30, 2006 the Company has adopted SFAS 123 (R) which supersedes APB Opinion
      No.
      25, “Accounting for Stock Issued to Employees” and eliminates the intrinsic
      value method that was provided in SFAS 123 for accounting of stock-based
      compensation to employees. The Company made no employee stock-based compensation
      grants before February 28, 2006 and during the nine months ended November 30,
      2006 and therefore has no unrecognized stock compensation related liabilities
      or
      expense unvested or vested prior to 2006 and for the nine months ended November
      30, 2006.


Accounting
        for investments
 
 As
        more
        fully described in Note H, the Company owns 37.5% of American Sports Venture,
        a
        Joint Venture operation. The Company accounts for their investment using
        the
        Equity method of accounting. For the nine months ended November 30, 2006
        and
        2005, the Joint Venture did not recognize any income or loss requiring the
        Company to record its pro-rata portion.




Recent
      Accounting Pronouncements





In
      May
      2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections”
(“SFAS 154”) which replaces Accounting Principles Board Opinions No. 20
“Accounting Changes” and SFAS No. 3, “Reporting Accounting Changes in Interim
      Financial Statements-An Amendment of APB Opinion No. 28.” SFAS 154 provides
      guidance on the accounting for and reporting of accounting changes and error
      corrections. It establishes retrospective application, or the latest practicable
      date, as the required method for reporting a change in accounting principle
      and
      the reporting of a correction of an error. SFAS 154 is effective for accounting
      changes and the reporting of a correction of an error made in fiscal years
      beginning after December 15, 2005 and is required to be adopted by the Company
      in the first quarter of fiscal 2007. The Company has elected to adopt SFAS
      154
      early and did so in their financial statements for the year ended February
      28,
      2006.





On
      February 16, 2006 the Financial Accounting Standards Board (FASB) issued
      SFAS 155, “Accounting for Certain Hybrid Instruments,” which amends SFAS 133,
“Accounting for Derivative Instruments and Hedging Activities,” and SFAS 140,
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities.” SFAS 155 allows financial instruments that have embedded
      derivatives to be accounted for as a whole (eliminating the need to bifurcate
      the derivative from its host) if the holder elects to account for the whole
      instrument on a fair value basis. SFAS 155 also clarifies and amends certain
      other provisions of SFAS 133 and SFAS 140. This statement is effective for
      all
      financial instruments acquired or issued in fiscal years beginning after
      September 15, 2006. The Company does not expect its adoption of this new
      standard to have a material impact on its financial position, results of
      operations or cash flows.





In
      March
      2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
      Financial Assets - an amendment to FASB Statement No. 140. Statement 156
      requires that an entity recognize a servicing asset or servicing liability
      each
      time it undertakes an obligation to service a financial asset by entering into
      a
      service contract under certain situations. The new standard is effective for
      fiscal years beginning after September 15, 2006. The adoption of SFAS No.156
      did
      not have a material impact on the Company's financial position and results
      of
      operations.





In
      July
      2006, the FASB issued Interpretation No. 48 (FIN 48). “Accounting for
      uncertainty in Income Taxes”. FIN 48 clarifies the accounting for Income Taxes
      by prescribing the minimum recognition threshold a tax position is required
      to
      meet before being recognized in the financial statements. It also provides
      guidance on derecognition, measurement, classification, interest and penalties,
      accounting in interim periods, disclosure and transition and clearly scopes
      income taxes out of SFAS 5, “ *Accounting
      for Contingencies”.* FIN
      48 is
      effective for fiscal years beginning after December 15, 2006. We have not yet
      evaluated the impact of adopting FIN 48 on our consolidated financial position,
      results of operations and cash flows.




8




**COLLECTIBLE
      CONCEPTS GROUP, INC AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**As
      of November 30, 2006**


**(Unaudited)**


**NOTE
      A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES
      (continued)**





In
      September 2006 the Financial Account Standards Board (the “FASB”) issued its
      Statement of Financial Accounting Standards 157, Fair Value Measurements. This
      Statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles (GAAP), and expands disclosures
      about fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. FAS 157 effective date is for fiscal
      years beginning after November 15, 2007. The Company does not expect adoption
      of
      this standard will have a material impact on its financial position, operations
      or cash flows.





In
      September 2006 the FASB issued its Statement of Financial Accounting Standards
      158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans”. This Statement improves financial reporting by requiring an employer to
      recognize the overfunded or underfunded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      in its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income
      of a
      business entity or changes in unrestricted net assets of a not-for-profit
      organization. This Statement also improves financial reporting by requiring
      an
      employer to measure the funded status of a plan as of the date of its year-end
      statement of financial position, with limited exceptions. The effective date
      for
      an employer with publicly traded equity securities is as of the end of the
      fiscal year ending after December 15, 2006. The Company does not expect adoption
      of this standard will have a material impact on its financial position,
      operations or cash flows





Reclassifications





Certain
      items in the prior period have been reclassified to conform to classifications
      used in the current period.





**NOTE
      B - FILM LIBRARY**




The
        Company acquired a historical film library containing thousands of hours
        of
        sports events including boxing, baseball, football and auto racing along
        with
        others. The asset acquisition agreement made December 15, 2005 gives the
        Company
        title to the entire library. The Film library consists of over 5,000 hours
        of
        sporting events from the years 1948 - 1972; there are also additional sports
        films in the library after 1972 in addition there is an old time cartoon
        library
        as well as classic movies. The film library was acquired for a purchase price
        of
        $250,000 with $50,000 paid in cash and the remainder due five years from
        the
        date of the note along with interest accrued at 6% per annum. As part of
        acquisition of the film library, the Company was assigned a licensing agreement
        whereby royalties (minimum of $50,000 per year) will be received over the
        next
        ten years. Since collectiblity cannot be reasonably assured, the Company
        has not
        recorded revenue from the licensing agreement. Additionally,
        the Company has been notified by certain licensees that the rights may not
        have
        been properly acquired from the seller. The matter is currently under review
        by
        management.




During
      the three months ended August 31, 2006, the Company management preformed an
      evaluation of its intangible assets including the film library for purposes
      of
      determining the implied fair value of the assets at August 31, 2006. The test
      indicated that the recorded remaining book value of its film library exceeded
      its fair value, as determined by discounted cash flows. As a result, upon
      completion of the assessment, management recorded a non-cash impairment charge
      of $233,200, net of tax, or $0.00 per share during the three months ended August
      31, 2006 to reduce the carrying value of the patents to $ 0. Considerable
      management judgment is necessary to estimate the fair value. Accordingly, actual
      results could vary significantly from management’s estimates.




9


**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**


**NOTE
      C - CONVERTIBLE SECURED DEBENTURES**





Notes
      payable at November 30, 2006 and February 28, 2006 are as follows:





November
                30,
              2006
            
            February
                28,200610%
                convertible debenture dated May 2000, face value of $400,000, due
                one year
                from the date of the note with interest payable quarterly during
                the life
                of the note. The note is convertible into the Company’s common stock at
                the lower of a) $4.00 (See Note F) or b) 25% of market value. The
                Company
                has granted the note holder a security interest in substantially
                all of
                the Company’s assets and intellectual property. Additionally, the note
                holder has certain registration rights. The Company is in violation
                of the
                loan covenants (see below)
            
            $
            169,672
            
            $
            258,82012%
                convertible debenture dated May 28, 2002, face value of $75,000,
                due one
                year from date of the note with interest payable per annum. The note
                is
                convertible into the Company’s common stock at the lower of a) $1.00 (See
                Note F) or b) 25% of the average of the three lowest intraday trading
                prices for the common stock on a principal market for twenty days
                before,
                but not including, conversion date. The Company granted the note
                holder a
                security interest in substantially all of the Company’s assets and
                intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            75,000
            
            
            75,00015%
                convertible debenture dated November 26, 2002, face value of $250,000,
                due
                one year from date of the note with interest payable per annum. The
                note
                is convertible into the Company’s common stock at the lower of a) $1.00
                (See Note F) or b) 25% of the average of the three lowest intraday
                trading
                prices for the common stock on a principal market for twenty days
                before,
                but not including, conversion date. The Company granted the note
                holder a
                security interest in substantially all of the Company’s assets and
                intellectual property. Additionally the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            250,000
            
            
            250,00015%
                convertible debenture dated May 15, 2003, face value of $25,000,
                due one
                year from date of the note with interest payable per annum. The note
                is
                convertible into the Company’s common stock at the lower of a) $1.00 (See
                Note F) or b) 25% of the average of the three lowest intraday trading
                prices for the common stock on a principal market for twenty days
                before,
                but not including, conversion date. The Company granted the note
                holder a
                security interest in substantially all of the Company’s assets and
                intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            25,000
            
            
            25,000





10




**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**
  **NOTE
        C - CONVERTIBLE SECURED DEBENTURES (continued)**





November
                30,
              2006
            
            February
                28,200615%
                convertible debenture dated June 20, 2003, face value of $25,000,
                due one
                year from date of the note with interest payable per annum. The note
                is
                convertible into the Company’s common stock at the lower of a) $1.00 (See
                Note F) or b) 25% of the average of the three lowest intraday trading
                prices for the common stock on a principal market for twenty days
                before,
                but not including, conversion date. The Company granted the note
                holder a
                security interest in substantially all of the Company’s assets and
                intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            25,000
            
            
            25,00015%
                convertible debenture dated July 23, 2003, face value of $25,000,
                due one
                year from date of the note with interest payable per annum. The note
                is
                convertible into the Company’s common stock at the lower of a) $1.00 (See
                Note F) or b) 25% of the average of the three lowest intraday trading
                prices for the common stock on a principal market for twenty days
                before,
                but not including, conversion date. The Company granted the note
                holder a
                security interest in substantially all of the Company’s assets and
                intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            25,000
            
            
            25,00015%
                convertible debenture dated November 14, 2003, face value of $50,000,
                due
                one year from date of the note with interest payable per annum. The
                note
                is convertible into the Company’s common stock at the lower of a) $1.00
                (See Note F) or b) 25% of the average of the three lowest intraday
                trading
                prices for the common stock on a principal market for twenty days
                before,
                but not including, conversion date. The Company granted the note
                holder a
                security interest in substantially all of the Company’s assets and
                intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            50,000
            
            
            50,00015%
                convertible debenture dated January 13, 2004, face value of $50,000,
                due
                one year from date of the note with interest payable per annum. The
                note
                is convertible into the Company’s common stock at the lower of a) $1.00
                (See Note F) or b) 25% of the average of the three lowest intraday
                trading
                prices for the common stock on a principal market for twenty days
                before,
                but not including, conversion date. The Company granted the note
                holder a
                security interest in substantially all of the Company’s assets and
                intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            $
            50,000
            
            $
            50,000





11




**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**
  **NOTE
        C - CONVERTIBLE SECURED DEBENTURES (continued)**





November
                30,
              2006
            
            February
                28, 200615%
                convertible debenture dated February 13, 2004, face value of $25,000,
                due
                one year from date of the note with interest payable per annum. The
                note
                is convertible into the Company’s common stock at the lower of a) $1.00
                (See Note F) or b) 25% of the average of the three lowest intraday
                trading
                prices for the common stock on a principal market for twenty days
                before,
                but not including, conversion date. The Company granted the note
                holder a
                security interest in substantially all of the Company’s assets and
                intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            25,000
            
            
            25,00015%
                convertible debenture March 16, 2004, face value of $100,000, due
                one year
                from date of the note with interest payable per annum. The note is
                convertible into the Company’s common stock at the lower of a) $1.00 (See
                Note F) or b) 25% of the average of the three lowest intraday trading
                prices for the common stock on a principal market for twenty days
                before,
                but not including, conversion date. The Company granted the note
                holder a
                security interest in substantially all of the Company’s assets and
                intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            100,000
            
            
            100,00015%
                convertible debenture dated May 28, 2004, face value of $550,000,
                due two
                years from date of the note with interest payable per annum. The
                note is
                convertible into the Company’s common stock at the lower of a) $1.00 (See
                Note F) or b) 25% of the average of the three lowest intraday trading
                prices for the common stock on a principal market for twenty days
                before,
                but not including, conversion date. The Company granted the note
                holder a
                security interest in substantially all of the Company’s assets and
                intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            550,000
            
            
            482,94515%
                convertible debenture dated September 30, 2004, face value of $250,000,
                due two years from date of the note with interest payable per annum.
                The
                note is convertible into the Company’s common stock at the lower of a)
                $0.26 (See Note F) or b) 25% of the average of the three lowest intraday
                trading prices for the common stock on a principal market for twenty
                days
                before, but not including, conversion date. The Company granted the
                note
                holder a security interest in substantially all of the Company’s assets
                and intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            250,000
            
            
            176,712





12




**COLLECTIBLE
      CONCEPTS GROUP, INC AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**As
      of November 30, 2006**


**(Unaudited)**


**NOTE
      C - CONVERTIBLE SECURED DEBENTURES (continued)**





November
                30,
              2006
            
            February
                28,200610%
                convertible debenture dated May 18, 2005, face value of $400,000,
                due
                three years from date of the note with interest payable per annum.
                The
                note is convertible into the Company’s common stock at the lower of a)
                $0.16 (See Note F) or b) 25% of the average of the three lowest intraday
                trading prices for the common stock on a principal market for twenty
                days
                before, but not including, conversion date. The Company granted the
                note
                holder a security interest in substantially all of the Company’s assets
                and intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            $
            204,932
            
            $
            104,47510%
                convertible debenture dated July 7, 2005, face value of $850,000,
                due
                three years from date of the note with interest payable per annum.
                The
                note is convertible into the Company’s common stock at the lower of a)
                $0.16 (See Note F) or b) 25% of the average of the three lowest intraday
                trading prices for the common stock on a principal market for twenty
                days
                before, but not including, conversion date. The Company granted the
                note
                holder a security interest in substantially all of the Company’s assets
                and intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            396,667
            
            
            183,1962%
                convertible debenture dated September 29, 2005, face value of $302,597,
                due three years from date of the note with interest payable per annum.
                The
                note is convertible into the Company’s common stock at the lower of a)
                $0.16 (See Note F) or b) 25% of the average of the three lowest intraday
                trading prices for the common stock on a principal market for twenty
                days
                before, but not including, conversion date. The Company granted the
                note
                holder a security interest in substantially all of the Company’s assets
                and intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            117,999
            
            
            42,00410%
                convertible debenture dated January 20, 2006, face value of $400,000,
                due
                three years from date of the note with interest payable per annum.
                The
                note is convertible into the Company’s common stock at the lower of a)
                $0.16 (See Note F) or b) 20% of the average of the three lowest intraday
                trading prices for the common stock on a principal market for twenty
                days
                before, but not including, conversion date. The Company granted the
                note
                holder a security interest in substantially all of the Company’s assets
                and intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            114,703
            
            
            14,2478%
                convertible debenture dated March 23, 2006, face value of $400,000,
                due
                three years from date of the note with interest payable per annum.
                The
                note is convertible into the Company’s common stock at the lower of a)
                $3.00 (See Note F) or b) 20% of the average of the three lowest intraday
                trading prices for the common stock on a principal market for twenty
                days
                before, but not including, conversion date. The Company granted the
                note
                holder a security interest in substantially all of the Company’s assets
                and intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            $
            92,055
            
            $
            -





13




**COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of November 30, 2006**
 **(Unaudited)**
 **NOTE
          C - CONVERTIBLE SECURED DEBENTURES (continued)**





November
                30,
              2006
            
            February
                28,20068%
                convertible debenture dated May 31, 2006, face value of $500,000,
                due
                three years from date of the note with interest payable per annum.
                The
                note is convertible into the Company’s common stock at the lower of a)
                $3.00 (See Note F) or b) 25% of the average of the three lowest intraday
                trading prices for the common stock on a principal market for twenty
                days
                before, but not including, conversion date. The Company granted the
                note
                holder a security interest in substantially all of the Company’s assets
                and intellectual property. Additionally, the note holder has certain
                registration rights. The Company is in violation of the loan covenants
                (see below)
            
            
            83,561
            
            
            -0-2,604,589
            
            
            1,887,399Less
                current portion
            
            
            2,604,589
            
            
            1,887,399Long
                term portion
            
            $
            -0-
            
            $
            -0-





The
      Company entered into a Securities Purchase Agreement with accredited investors
      in May 2000 for the issuance of an aggregate of $400,000 of convertible notes
      (“Convertible Notes”) and attached to the Convertible Notes was warrants to
      purchase 40,000 shares (See Note F) of the Company’s common stock at an exercise
      price of $20.00 (See Note F) for five years. The Convertible Notes accrue
      interest at 10% per annum, payable quarterly, and were due one year from the
      date of the note. The note holder has the option to convert any unpaid note
      principal to the Company’s common stock at a rate of the lower of a) $4.00 (See
      Note F) or b) 25% of the current market value. The Company issued to the
      investors Convertible Notes of $400,000 in exchange for net proceeds of
      $400,000. As of November 30, 2006, the remaining balance of these debentures
      of
      $169,672 is still unpaid and in default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on May 28, 2002 for the issuance of an aggregate of $75,000 of convertible
      notes
      (“Convertible Notes”) and attached to the Convertible Notes were warrants to
      purchase 1,500 shares (See Note F) of the Company’s common stock at an exercise
      price $0.50 (See Note F) for five years. The Convertible Notes accrue interest
      at 12% per annum and were due one year from the date of the note. The note
      holder has the option to convert any unpaid note principal to the Company’s
      common stock at a rate of the lower of a) $1.00 (See Note F) or b) 25% of the
      average of the three lowest intraday trading prices for the common stock on
      a
      principal market for the 20 trading days before, but not including, conversion
      date. The Company issued to the investors Convertible Notes of $75,000 in
      exchange for net proceeds of $75,000. As of November 30, 2006, the remaining
      balance of these debentures of $75,000 is still unpaid and in
      default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on November 26, 2002 for the issuance of an aggregate of $250,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 5,000 shares (See Note F) of the Company’s common stock at an
      exercise price of $0.45 (See Note F) for five years. The Convertible Notes
      accrue interest at 15% per annum and were due one year from the date of the
      note. The note holder has the option to convert any unpaid note principal to
      the
      Company’s common stock at a rate of the lower of a) $1.00 (See Note F) or b) 25%
      of the average of the three lowest intraday trading prices for the common stock
      on a principal market for the 20 trading days before, but not including,
      conversion date. The Company issued to the investors Convertible Notes of
      $250,000 in exchange for net proceeds of $250,000. As of November 30, 2006,
      the
      remaining balance of these debentures of $250,000 is still unpaid and in
      default.




14




**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**
  **NOTE
        C - CONVERTIBLE SECURED DEBENTURES (continued)**





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on May 15, 2003 for the issuance of an aggregate of $25,000 of convertible
      notes
      (“Convertible Notes”) and attached to the Convertible Notes were warrants to
      purchase 500 shares (See Note F) of the Company’s common stock at an exercise
      price of $0.40 (See Note F) for five years. The Convertible Notes accrue
      interest at 15% per annum and were due one year from the date of the note.
      The
      note holder has the option to convert any unpaid note principal to the Company’s
      common stock at a rate of the lower of a) $1.00 (See Note F) or b) 25% of the
      average of the three lowest intraday trading prices for the common stock on
      a
      principal market for the 20 trading days before, but not including, conversion
      date. The Company issued to the investors Convertible Notes of $25,000 in
      exchange for net proceeds of $25,000. As of November 30, 2006, the remaining
      balance of these debentures of $25,000 is still unpaid and in
      default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on June 20, 2003 for the issuance of an aggregate of $25,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 500 shares (See Note F) of the Company’s common stock at an exercise
      price of $0.20 (See Note F) for five years. The Convertible Notes accrue
      interest at 15% per annum and were due one year from the date of the note.
      The
      note holder has the option to convert any unpaid note principal to the Company’s
      common stock at a rate of the lower of a) $1.00 (See Note F) or b) 25% of the
      average of the three lowest intraday trading prices for the common stock on
      a
      principal market for the 20 trading days before, but not including, conversion
      date. The Company issued to the investors Convertible Notes of $25,000 in
      exchange for net proceeds of $25,000. As of November 30, 2006, the remaining
      balance of these debentures of $25,000 is still unpaid and in
      default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on July 23, 2003 for the issuance of an aggregate of $25,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 500 shares of the Company’s common stock at an exercise price of
      $0.10 (See Note F) for five years. The Convertible Notes accrue interest at
      15%
      per annum and were due one year from the date of the note. The note holder
      has
      the option to convert any unpaid note principal to the Company’s common stock at
      a rate of the lower of a) $1.00 (See Note F) or b) 25% of the average of the
      three lowest intraday trading prices for the common stock on a principal market
      for the 20 trading days before, but not including, conversion date. The Company
      issued to the investors Convertible Notes of $25,000 in exchange for net
      proceeds of $25,000. As of November 30, 2006, the remaining balance of these
      debentures of $25,000 is still unpaid and in default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on November 14, 2003 for the issuance of an aggregate of $50,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 1,000 shares (See Note F) of the Company’s common stock at an
      exercise price of $0.10 for five years. The Convertible Notes accrue interest
      at
      15% per annum and were due one year from the date of the note. The note holder
      has the option to convert any unpaid note principal to the Company’s common
      stock at a rate of the lower of a) $1.00 (See Note F) or b) 25% of the average
      of the three lowest intraday trading prices for the common stock on a principal
      market for the 20 trading days before, but not including, conversion date.
      The
      Company issued to the investors Convertible Notes of $50,000 in exchange for
      net
      proceeds of $50,000. As of November 30, 2006, the remaining balance of these
      debentures of $50,000 is still unpaid and in default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on January 13, 2004 for the issuance of an aggregate of $50,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 1,000 shares (See Note F) of the Company’s common stock at an
      exercise price of $0.10 (See Note F) for five years. The Convertible Notes
      accrue interest at 15% per annum and were due one year from the date of the
      note. The note holder has the option to convert any unpaid note principal to
      the
      Company’s common stock at a rate of the lower of a) $1.00 (See Note F) or b) 25%
      of the average of the three lowest intraday trading prices for the common stock
      on a principal market for the 20 trading days before, but not including,
      conversion date. The Company issued to the investors Convertible Notes of
      $50,000 in exchange for net proceeds of $50,000. As of November 30, 2006, the
      remaining balance of these debentures of $50,000 is still unpaid and in
      default.




15




**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**


**NOTE
      C - CONVERTIBLE SECURED DEBENTURES (continued)**





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on February 13, 2004 for the issuance of an aggregate of $25,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 500 shares (See Note F) of the Company’s common stock at an exercise
      price of $0.15 (See Note F) for five years. The Convertible Notes accrue
      interest at 15% per annum and were due one year from the date of the note.
      The
      note holder has the option to convert any unpaid note principal to the Company’s
      common stock at a rate of the lower of a) $1.00 (See Note F) or b) 25% of the
      average of the three lowest intraday trading prices for the common stock on
      a
      principal market for the 20 trading days before, but not including, conversion
      date. The Company issued to the investors Convertible Notes of $25,000 in
      exchange for net proceeds of $25,000. As of November 30, 2006, the remaining
      balance of these debentures of $25,000 is still unpaid and in
      default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on March 16, 2004 for the issuance of an aggregate of $100,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 2,000 shares (See Note F) of the Company’s common stock at an
      exercise price of $0.15 (See Note F) for five years. The Convertible Notes
      accrue interest at 15% per annum and were due one year from the date of the
      note. The note holder has the option to convert any unpaid note principal to
      the
      Company’s common stock at a rate of the lower of a) $1.00 (See Note F) or b) 25%
      of the average of the three lowest intraday trading prices for the common stock
      on a principal market for the 20 trading days before, but not including,
      conversion date. The Company issued to the investors Convertible Notes of
      $100,000 in exchange for net proceeds of $100,000. As of November 30, 2006,
      the
      remaining balance of these debentures of $100,000 is still unpaid and in
      default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on May 28, 2004 for the issuance of an aggregate of $550,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 16,500 shares (See Note F) of the Company’s common stock at an
      exercise price of $3.00 for seven years. The Convertible Notes accrue interest
      at 15% per annum and were due two years from the date of the note. The note
      holder has the option to convert any unpaid note principal to the Company’s
      common stock at a rate of the lower of a) $1.00 (See Note F) or b) 25% of the
      average of the three lowest intraday trading prices for the common stock on
      a
      principal market for the 20 trading days before, but not including, conversion
      date. The Company issued to the investors Convertible Notes of $550,000 in
      exchange for net proceeds of $550,000. As of November 30, 2006, the remaining
      balance of these debentures of $550,000 is still unpaid and in
      default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on September 30, 2004 for the issuance of an aggregate of $250,000 of
      convertible notes (“Convertible Notes”) and attached to the Convertible Notes
      were warrants to purchase 12,500 shares (See Note F) of the Company’s common
      stock at an exercise price of $3.00 for seven years. The Convertible Notes
      accrue interest at 15% per annum and were due two years from the date of the
      note. The note holder has the option to convert any unpaid note principal to
      the
      Company’s common stock at a rate of the lower of a) $0.26 (See Note F) or b) 25%
      of the average of the three lowest intraday trading prices for the common stock
      on a principal market for the 20 trading days before, but not including,
      conversion date. The Company issued to the investors Convertible Notes of
      $250,000 in exchange for net proceeds of $250,000. As of November 30, 2006,
      the
      remaining balance of these debentures of $250,000 is still unpaid and in
      default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on May 18, 2005 for the issuance of an aggregate of $400,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 473,684 shares (See Note F) of the Company’s common stock at an
      exercise price of $0.16 (See Note F) for five years. The Convertible Notes
      accrue interest at 10% per annum (current default rate of 15%) and were due
      three years from the date of the note. The note holder has the option to convert
      any unpaid note principal to the Company’s common stock at a rate of the lower
      of a) $0.16 (See Note F) or b) 25% of the average of the three lowest intraday
      trading prices for the common stock on a principal market for the 20 trading
      days before, but not including, conversion date. The Company issued to the
      investors Convertible Notes of $400,000 in exchange for net proceeds of
      $400,000. As of November 30, 2006, the remaining balance of these debentures
      of
      $400,000 is still unpaid and in default.




16




**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**


**NOTE
      C - CONVERTIBLE SECURED DEBENTURES (continued)**





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on July 7, 2005 for the issuance of an aggregate of $850,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 17,000 shares (See Note F) of the Company’s common stock at an
      exercise price of $0.16 (See Note F) for five years. The Convertible Notes
      accrue interest at 10% per annum (current default rate of 15%) and were due
      three years from the date of the note. The note holder has the option to convert
      any unpaid note principal to the Company’s common stock at a rate of the lower
      of a) $0.16 (See Note F) or b) 25% of the average of the three lowest intraday
      trading prices for the common stock on a principal market for the 20 trading
      days before, but not including, conversion date. The Company issued to the
      investors Convertible Notes of $850,000 in exchange for net proceeds of
      $850,000. As of November 30, 2006, the remaining balance of these debentures
      of
      $850,000 is still unpaid and in default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on September 29, 2005 for the issuance of an aggregate of $302,597 of
      convertible notes (“Convertible Notes”) in exchange for accrued interest due
      said accredited investors. The Convertible Notes accrue interest at 2% per
      annum
      and were due three years from the date of the note. The note holder has the
      option to convert any unpaid note principal to the Company’s common stock at a
      rate of the lower of a) $0.16 (See Note F) or b) 25% of the average of the
      three
      lowest intraday trading prices for the common stock on a principal market for
      the 20 trading days before, but not including, conversion date. The Company
      issued to the investors Convertible Notes of $302,597 in exchange for net
      proceeds of $302,597. As of November 30, 2006, the remaining balance of these
      debentures of $302,597 is still unpaid and in default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on January 20, 2006 for the issuance of an aggregate of $400,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 4,000 shares (See Note F) of the Company’s common stock at an
      exercise price of $0.20 (See Note F) for five years. The Convertible Notes
      accrue interest at 10% per annum and were due three years from the date of
      the
      note. The note holder has the option to convert any unpaid note principal to
      the
      Company’s common stock at a rate of the lower of a) $0.16 (See Note F) or b) 20%
      of the average of the three lowest intraday trading prices for the common stock
      on a principal market for the 20 trading days before, but not including,
      conversion date. The Company issued to the investors Convertible Notes of
      $400,000 in exchange for net proceeds of $400,000. As of November 30, 2006,
      the
      remaining balance of these debentures of $400,000 is still unpaid and in
      default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on March 23, 2006 for the issuance of an aggregate of $400,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 1,000,000 shares (See Note F) of the Company’s common stock at an
      exercise price of $0.50 (See Note F) for seven years. The Convertible Notes
      accrue interest at 8% per annum and were due three years from the date of the
      note. The note holder has the option to convert any unpaid note principal to
      the
      Company’s common stock at a rate of the lower of a) $3.00 (See Note F) or b) 20%
      of the average of the three lowest intraday trading prices for the common stock
      on a principal market for the 20 trading days before, but not including,
      conversion date. The Company issued to the investors Convertible Notes of
      $400,000 in exchange for net proceeds of $400,000. As of November 30, 2006,
      the
      remaining balance of these debentures of $400,000 is still unpaid and in
      default.





The
      Company entered into a Securities Purchase Agreement with accredited investors
      on May 31, 2006 for the issuance of an aggregate of $500,000 of convertible
      notes (“Convertible Notes”) and attached to the Convertible Notes were warrants
      to purchase 1,000,000 shares (See Note F) of the Company’s common stock at an
      exercise price of $0.50 (See Note F) for seven years. The Convertible Notes
      accrue interest at 8% per annum and were due three years from the date of the
      note. The note holder has the option to convert any unpaid note principal to
      the
      Company’s common stock at a rate of the lower of a) $3.00 (See Note F) or b) 25%
      of the average of the three lowest intraday trading prices for the common stock
      on a principal market for the 20 trading days before, but not including,
      conversion date. The Company issued to the investors Convertible Notes of
      $500,000 in exchange for net proceeds of $500,000. As of November 30, 2006,
      the
      remaining balance of these debentures of $500,000 is still unpaid and in
      default.





Due
      to
      the indeterminate number of shares which might be issued under the embedded
      convertible host debt conversion feature of these debentures, the Company is
      required to record a liability relating to both the detachable warrants and
      embedded convertible feature of the notes payable (included in the liabilities
      as a “derivative liability”).





The
      accompanying financial statements comply with current requirements relating
      to
      warrants and embedded derivatives as described in FAS 133 as follows:




17




**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**
  **NOTE
      C - CONVERTIBLE SECURED DEBENTURES (continued)**





·
            The
                Company treats the full fair market value of the derivative and warrant
                liability on the convertible secured debentures as a discount on
                the
                debentures (limited to their face value). The excess, if any, is
                recorded
                as an increase in the derivative liability and warrant liability
                with a
                corresponding increase in Loss on adjustment of the derivative and
                warrant
                liability to fair value.





·
            Subsequent
                to the initial recording, the change in the fair value of the detachable
                warrants, determined under the Black-Scholes option pricing formula
                and
                the change in the fair value of the embedded derivative (utilizing
                the
                Black-Scholes option pricing formula) in the conversion feature of
                the
                convertible debentures are recorded as adjustments to the liabilities
                as
                of each balance sheet date with a corresponding change in Loss on
                adjustment of the derivative and warrant liability to fair
                value.





·
            The
                expense relating to the change in the fair value of the Company’s stock
                reflected in the change in the fair value of the warrants and derivatives
                (noted above) is included in other income in the accompanying consolidated
                statements of operations.





The
      following table summarizes the various components of the convertible debentures
      as of November 30, 2006 and February 28, 2006:





November
                30,
              2006
            
            February
                28,
              2006Convertible
                debentures described above (net of conversions)
            
            $
            4,447,269
            
            $
            3,636,417Less:
                discount
            
            
            (1,842,680
            )
            
            (1,749,018
            )Convertible
                debentures as reported
            
            $
            2,604,589
            
            $
            1,887,399





**NOTE
      D - CONVERTIBLE SUBORDINATED DEBENTURES**





Convertible
      subordinated debentures as of November 30, 2006 and February 28, 2006 are as
      follows:





November
                30,
              2006
            
            February
                28,200612%
                convertible debenture, unsecured with a maturity of August 2001.
                The
                debenture is convertible into the Company’s common stock at $5.00 (See
                Note F) per share. The note is currently in default.
            
            $
            -
            
            $
            40,00012%
                convertible debenture, unsecured with a maturity at August 2001.
                The
                debenture is convertible into the Company’s common stock at $7.50 (See
                Note F) per share. The note is currently in default.
            
            
            -
            
            
            31,80012%
                convertible debenture, unsecured with an original one year maturity
                at May
                2004. The debenture is convertible into the Company’s common stock at
                $4.00 (See Note F) or 50% of the average of the lowest three intraday
                trading prices during the twenty trading days immediately preceding
                conversion. The note is currently in default
            
            
            34,500
            
            
            55,500Total
            
            
            34,500
            
            
            127,300Less:
                current portion
            
            
            (34,500
            )
            
            (127,300
            )Long
                term debt
            
            $
            -
            
            $
            -





18




**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**
  **NOTE
      E - LOAN AGREEMENTS**





The
      Company entered into an agreement with an individual investor whereby the
      investor agreed to provide up to $750,000 with an interest rate of 18% per
      annum, payable annually, maturing one year from each draw. The Company, at
      its
      option can repay the debt in cash or may elect to convert any of the loans
      into
      shares of its common stock at 75% of the closing bid of the previous day. As
      of
      November 30, 2006, the Company has borrowed $536,500, net, from this facility
      which is included in notes and loans payable.





**NOTE
      F - CAPITAL STOCK**





Series
      A - Convertible Preferred Stock





On
      September 4, 2006, the Company filed a Certificate of Designation creating
      a
      $0.001 par value Series A Convertible Preferred Stock for 1,000,000 shares.





The
      holders of record of the Series A Convertible Preferred stock shall have the
      right, at their option, at any time subsequent to the date on which the Closing
      Bid Price of the Company’s common stock is at least $0.05 (See Note F), to
      convert any or all of such holder’s shares of Series A Convertible Preferred
      stock into such number of fully paid and non-assessable shares of the Company’s
      common stock equal to the number of shares of Series A - Convertible Preferred
      stock multiplied by 20 (See Note F).





The
      holders of the Series shall have the right to vote, separately, in person or
      by
      proxy, at a special or annual meeting of the shareholders, on all matters voted
      on by the holders of the Common Stock voting together as a single class with
      other shares entitled to vote. With respect to any such vote, each share of
      Series A Preferred Stock shall entitle the holder at cast 60 (See Note F) votes
      per share of Series A Preferred stock.





The
      Series A Preferred Stock shall, with respect to distributions of assets and
      rights upon the occurrence of a Liquidation rank (i) senior to all classes
      of
      common stock of the Company and (ii) senior to each other class of Capital
      Stock
      of the Company hereafter created with does not expressly rank pari passu or
      senior to the Series A Preferred Stock.





The
      Series A Preferred Stock shall not be redeemed or subject to redemption, whether
      by option of the Company or any holder thereof, or otherwise.





The
      holders of record of the Series A Convertible Preferred shall be entitled to
      share in any cash dividends or distributions that my be declared and paid on
      the
      Common Stock on a pro rata basis as if the holders had been converted into
      shares of Common Stock.





Common
      Stock





On
      December 14, 2006, the Company affected a one-for-one hundred reverse stock
      split of it authorized and outstanding shares of common stock, $0.001 par value.
      Total authorized shares were reduced from 15,000,000,000 to 10,000,000,000
      shares and the par value was changed from $0.001 to $0.00001 per share. All
      references in the financial statements and notes to financial statements, number
      of shares, and share amounts have been retroactively restated to reflect the
      reverse split and change in par value. The Company has restated 99,860,251
      and
      6,996,950 shares of common stock issued and outstanding as of November 30,
      2006
      and February 28, 2006, respectively.





In
      October 2001, the Company entered into an agreement with a third party whereby
      the third party has an anti-dilution ownership of 1.603% of the Company. For
      the
      nine months ended November 30, 2006, the Company issued 893,247 (See above)
      under this provision to the third party. An additional 668,569 (See above)
      has
      not been issued. These shares are shown as common stock to be issued with a
      corresponding decrease to additional paid in capital as of November 30, 2006.
      On
      February 28, 2005, ownership of the 1.603% anti-dilution agreement was sold
      to
      another company.





In
      March
      2006, the Company amended its article of incorporation with an effective date
      of
      March 24, 2006. This amendment was to increase the number of authorized $0.001
      par value common shares from 700,000,000 to 15,000,000,000. This amendment
      also
      created and authorized a new class of preferred $0.001 par value stock with
      10,000,000 shares.




19




**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**
  **NOTE
      F - CAPITAL STOCK (continued)**





During
      the nine months ended November 30, 2006, the Company issued 1,080,000 (See
      above) shares of common stock for $60,000 received in fiscal 2006 and 270,000
      (See above) shares of common stock for $15,000 received in first quarter of
      fiscal 2007. In addition, the Company issued 1,435,000 (See above) common shares
      under a late issuance stock subscription provision.





During
      the nine months ended November 30, 2006, the Company issued 4,887,000 (See
      above) shares of its common stock for $221,800 of services
      rendered.





During
      the three months ended May 31, 2006, the Company converted $63,804 of
      convertible secured debentures into 6,042,000 (See above) shares of common
      stock
      having a fair value of $417,071. The conversion of debt to stock was based
      upon
      conversion prices set forth in the Securities Purchase Agreement (see Note
      C).
      The loss of $353,267 on these conversions was included in the Loss on adjustment
      of derivative and warrant liability to fair value.





During
      the three months ended May 31, 2006, the Company converted $89,800 of
      convertible subordinated debentures and $48,749 in related interest into
      4,525,390 (See above) shares of common stock. The conversions of debt to stock
      were based upon negotiated conversion prices with debtors (See note D) for
      prices below the conversion prices at date of original issuance. The Company
      recognized a financing cost of $42,464 on these conversions.





During
      the three months ended May 31, 2006, the Company converted $147,150 of notes
      and
      loans payable into 11,341,610 (See above) shares of common stock. The
      conversions of debt to stock were based upon negotiated conversion prices with
      debtors. The Company recognized a financing cost of $411,917 on these
      conversions.





During
      the three months ended August 31, 2006, the Company converted $152,500 of loans
      payable into 45,000,000 (See above) shares of common stock. The conversions
      of
      debt to stock were based upon negotiated conversion prices with debtors. The
      Company recognized a financing cost of $477,500 on these
      conversions





During
      the three months ended August 31, 2006, the Company converted $21,444 of
      convertible secured debentures into 6,889,054 (See above) shares of common
      stock
      having a fair value of $93,791. The conversion of debt to stock was based upon
      conversion prices set forth in the Securities Purchase Agreement (see Note
      C).
      The loss of $72,347 on these conversions was included in the Loss on adjustment
      of derivative and warrant liability to fair value.





During
      the three months ended November 30, 2006, the Company converted $25,000 of
      loans
      payable into 9,000,000 (See above) shares of common stock. The conversions
      of
      debt to stock were based upon negotiated conversion prices with debtors. The
      Company recognized a financing cost of $75,000 on these conversions





During
      the three months ended November 30, 2006, the Company converted $3,900 of
      convertible secured debentures into 1,500,000 (See above) shares of common
      stock
      having a fair value of $15,000. The conversion of debt to stock was based upon
      conversion prices set forth in the Securities Purchase Agreement (see Note
      C).
      The loss of $11,100 on these conversions was included in the Loss on adjustment
      of derivative and warrant liability to fair value.





**NOTE
      G - STOCK OPTIONS**





In
      December 2003, the Company issued 200,000 (See Note F) options to a consultant
      having a ten-year term. The exercise price is $0.10 (See Note F) for the first
      50,000 (See Note F) options, $0.20 (See Note F) for the next 50,000 (See Note
      F)
      options, $0.30 (See Note F) for the next 50,000 (See Note F) options and $0.40
      (See Note F) for the last 50,000(See Note F) options. The only restriction
      is
      that no more than 50.000 (See Note F) options can be exercised in any one year.
      The total expense associated with issuing the options of $40,000 is being
      recognized over the earliest periods that the options may be exercised. The
      expense associated with these options were $2,500 and $5,000 for the nine months
      ended November 30, 2006 and 2005, respectively.





In
      May
      2005, the Company issued 14,000,000 options to an advisor having a three-year
      term. The exercise price is $0.30 (See Note F). As of November 30, 2006, the
      related agreement was canceled and options voided.




20




**COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
        of November 30, 2006**
 **(Unaudited)**
  **NOTE
      H - COMMITMENTS AND CONTINGENCIES**





Licenses





The
      Company has entered into various licensing agreements (the “Agreements”) for the
      right to manufacture, sell and distribute certain collectibles and novelties
      relating to current and future movie characters, as well as certain accessories
      containing logos and names of professional, minor league and college sports
      teams. The Agreements for the collectibles initially expired at various dates
      through 2004 and generally require the Company to pay a royalty of between
      9%
      and 12% of sales, with certain minimum royalty payments required. The Company
      has decided not to renew royalty agreements as they pertain to college sports
      teams and current and future movie characters. The unpaid minimum royalty fees
      of $310,390 ($209,750 which are owed on non renewed agreements) related to
      these
      agreements are included in accrued expenses in the accompanying consolidated
      balance sheet. Royalty expense amounted to approximately $50,990 and $109,513
      for the nine months ended November 30, 2006 and 2005, respectively.





On
      February 28, 2005, the Company sold a partial interest (2.5%) in its future
      revenues generated under each of its National Football League (“NFL”) license
      (2005), its National Basketball Association (“NBA”) license in 2005-2006 and its
      upcoming license in 2006 with Major League Baseball (“MLB”). The agreement
      included a clause that would extend the partial sale of revenues to an
      additional year of sales under the NFL license, should the Company be
      unsuccessful in obtaining the MLB license. The 2.5% revenues stake was sold
      to a
      third-party company for a total of $80,000. Additionally, the purchaser assumed
      the rights to a 1.603% anti-dilution ownership in the Company from its previous
      owner, as well as all of the issued shares of common stock previously owned
      by
      that party.





In
      May
      2005, the Company agreed to give an advisor a 5% royalty for five years for
      helping the Company secure the following licensing agreements, National Hockey
      League (“NHL”), Minor League Baseball, Arena Football and the National
      Basketball Association (“NBA”).





On
      April
      10, 2006 the Company signed a license agreement with Diann Wall-Wilson for
      a
      broad line of products utilizing her copyrighted designs for the United States
      Marine Corp Bulldog, United States Navy Goat, United States Air Force Falcon
      and
      the Coast Guard Otter. The Company paid $20,000 for this license in $5,000
      monthly increments beginning April 10, 2006 and the final payment paid July
      10,
      2006. This licensing agreement is for 5 years. The agreement calls for a 10%
      royalty of which the $20,000 in initial payments are a pre paid
      royalty.





Payroll
      Related Taxes





The
      Company is non-compliant with respect to payment of employee and employer
      payroll-related taxes. The estimated liability that is included in accrued
      expenses was approximately $196,000 as of November 30, 2006 which includes
      penalties and interest.





Other
      Contingencies





In
      the
      normal course of business the Company is subject to various regulations,
      proceedings, lawsuits, claims and other matters, including actions under laws
      and regulations related to the environment and health and safety, among others.
      The Company believes the amounts provided in its consolidated financial
      statements, as prescribed by generally accepted accounting principles, are
      adequate in light of the probable and estimable liabilities. However, there
      can
      be no assurances that the actual amounts required to discharge alleged
      liabilities from various lawsuits, claims, legal proceedings and other matters,
      and to comply with applicable laws and regulations, will not exceed the amounts
      reflected in the accompanying consolidated financial statements or will not
      have
      a material adverse effect on its consolidated results of operations, financial
      condition and cash flows. Any costs that may be incurred in excess of those
      amounts provided as of November 30, 2006 cannot currently be
      determined.





In
      fiscal
      2002, a licensing company commenced a lawsuit for various causes of action
      for
      breach of contract, trademark infringement and seeking a permanent injunction
      precluding the Company from using any of the plaintiffs’ intellectual property.
      The Company consented to the entry of a permanent injunction and the parties
      entered into a settlement agreement, which resulted in the dismissal of the
      action in December 2003. However, despite the dismissal of the action, the
      plaintiff reserves the right to pursue monetary claims against the Company
      for
      its breach of various license agreements.




21




**COLLECTIBLE
      CONCEPTS GROUP, INC AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**As
      of November 30, 2006**


**(Unaudited)**





**NOTE
      H - COMMITMENTS AND CONTINGENCIES (continued)**





Agreements





In
      February 2003, the Company entered into a joint venture agreement with another
      party whereby the other party was responsible for producing and marketing
      flashlight and battery products. The Company was responsible for obtaining
      the
      necessary licenses, design of the images and the marketing of the products.
      Under the terms of the agreement, 50% of the sales were to be retained by the
      Company and the other 50% were to be remitted to the other entity. Nothing
      had
      ever transpired under the joint venture. On November 8, 2003, the Company
      replaced its joint venture agreement and entered into a new services agreement.
      The Company will assist in obtaining licenses and managing other aspects of
      the
      business of selling licensed flashlight and battery products. Any licenses
      obtained in this manner will be assigned. This agreement provides a 1% royalty
      to the Company on net sales of any flashlight and/or battery products containing
      images available either from licenses the Company has or assisted in obtaining.
      Additionally, the Company may sell these licensed products and will receive
      a
      sales commission based on a formula of several variables that is expected to
      produce an average commission of 15% of the sale price. As of the date of this
      report, the Company has not sold any of the licensed products and has earned
      no
      royalties as provided by this agreement.





In
      September 2004, the Company signed a licensing agreement with the National
      Football League, which expired on March 31, 2005. The agreement was renewed
      for
      the period April 2005 through March 2006. The agreement was not renewed again
      by
      the Company.





In
      March
      2005, the Company signed a licensing agreement with the NBA, which expires
      on
      September 30, 2006. The agreement includes a 12% royalty paid on sales, with
      a
      minimum royalty for the period of $25,000. On September 9, 2005, the Company
      signed an amendment to its license with the NBA to add additional products.
      This
      increase in products changed the minimum royalty agreement from $25,000 to
      $35,000, which is included in prepaid royalties and is being amortized over
      the
      term of the agreement or until the minimum is met, whichever is sooner. In
      addition, the amendment also changed the royalty percentage from 12% to
      16%.





On
      May
      12, 2005, the Company signed a licensing agreement with the Arena Football
      League, which expires on June 30, 2007. The agreement includes a 12% royalty
      paid on sales with no minimum royalty guarantees. The Company paid a “First
      Advance” of $10,000 for the rights to the license, which is included in prepaid
      royalties and is being amortized over the term of the agreement or until the
      royalties exceed the First Advance, whichever is sooner.





On
      September 12, 2005, the Company signed a licensing agreement with the National
      Hockey League, which expires on June 30, 2007. The agreement includes a 10%
      royalty paid on sales with a minimum royalty for the period of $50,000,
      subsequently amended to $22,500, which is included in prepaid royalties and
      is
      being amortized over the term of the agreement or until the minimum is met,
      whichever is sooner.





In
      March
      2006, the Company signed a one year renewable Purchase and Sale Agreement with
      Brax-3D, LLC. This agreement gives the Company an exclusive right to sell
      products produced by Brax-3D, LLC as long as the Company meets minimum
      purchasing requirements of $1,284,750 in products. As part of this agreement,
      Collectible is required to provide Brax-3D, LLC a $200,000 standby letter of
      credit. As yet, the letter of credit has not been provided.





In
      March
      2006, the Company consummated a contract whereby the Company, for product
      delivered, has available for usage: media, goods and services with certain
      restrictions and limitations collectively referred to as “trade credits”. The
      Company’s ability to access these trade credits has not yet been
      determined.





On
      April
      30, 2006, the Company entered into a Joint Venture Agreement with Gridworks,
      Inc. of Elgin, Iowa. Under the agreement, a new corporation called American
      Sports Ventures, Inc. was formed of which the Company, Gridworks and an
      individual investor are shareholders with ownership percentages of 37.5%, 37.5%
      and 25%, respectively. Gridworks is a licensed manufacturer of wood sports
      collectibles. Under the terms of the agreement, the Company and the individual
      investor will provide the capital necessary to fund the Gridworks operations
      as
      well as all marketing and other operating expenses associated with American
      Sports Ventures, Inc. Gridworks will be providing its wood collectibles to
      American Sports Ventures at cost and the Company will be executing various
      marketing initiatives to sell the products. Net profits, if any, from operations
      will be distributed to the shareholders in accordance with their respective
      ownership percentage. The Company is obligated to meet certain minimum purchase
      requirements. American Sports Ventures, Inc. The Joint Venture has recognized
      no
      income during the current quarter; therefore the Company will recognize no
      income from the Joint Venture.


22


**COLLECTIBLE
      CONCEPTS GROUP, INC AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**As
      of November 30, 2006**


**(Unaudited)**





**NOTE
      H - COMMITMENTS AND CONTINGENCIES (continued)**





Concentrations





For
      the
      nine months ended November 30, 2006 and 2005, 24% and 78%, of the Company’s
      revenues were derived from its three largest customers, respectively.


For
        the
        nine months ended November 30, 2006 and 2005, 89.77% and 80%, of the Company’s
        purchases were made from its 3 largest vendors, respectively, of which 30%
        of
        the total 2006 purchases were from American Sports Venture, Inc., a related
        party (See Note H).





The
      Company obtains a significant portion of its new borrowings from one investment
      group. During the nine months ended November 30, 2006, the Company borrowed
      $900,000 from this investment group. As of November 30, 2006, a total of
      $4,447,269 was owed to this investment group (See Note C).





Debt
      Conversions




As
      of
      November 30, 2006, the Company did not have a sufficient number of authorized
      shares of common stock available if all of the convertible secured and
      convertible subordinated debenture holders decided to convert their debt into
      the Company’s common stock. The Company has increased the number of authorized
      shares to 10,000,000,000 (See Note F) to partly rectify the situation but a
      possible shortfall may exist (See Note N - below). The provisions of the
      convertible secured debentures call for a 24% penalty on the amount of debt
      a
      note holder attempts to convert and if there are not enough authorized shares
      available to do so (See Note C with regard to the convertible secured
      debentures). However the convertible subordinated debenture agreements do not
      contain a provision to address the inability of the debt holders to convert
      and
      the possible financial effects of this are unknown (See Notes D and
      N).





In
      the
      nine months ended November 30, 2006, the Company recorded a discount on
      convertible secured debentures with a corresponding increase in the derivative
      and warrant liabilities.





**NOTE
      I - RELATED PARTY TRANSACTIONS**





The
      Company has an employment agreement with its president, who has elected in
      the
      past to defer a portion of his salary in support of the cash needs of the
      Company. As of November 30, 2006 and 2005, the amount of salary deferred was
      $-0- and $590,537, respectively, which is included in accrued expenses - related
      parties. Also $-0- and $183,975 of accrued compensation were due to the
      Company’s President’s wife as of November 30, 2006 and 2005, respectively. On
      September 4, 2006 the Company issued 1,000,000 shares of Series A Preferred
      Stock in settlement of the accrued salary obligations (See Note F).





The
      Company has loans payable of $3,111, which are included as loans payable -
      related party in the accompanying consolidated balance sheet, due to a related
      party as of November 30, 2006. During the nine months ended November 30, 2006,
      the Company recorded interest expense of $71 relating to loans from its
      president and other related parties and $39,795 in accrued interest was payable
      relating to these loans as of November 30, 2006, which is included in accrued
      expenses in the accompanying consolidated balance sheet.





**NOTE
      J - NON-CASH INVESTING AND FINANCING ACTIVITIES IN THE STATEMENTS OF CASH
      FLOWS**





During
      the nine months ended November 30, 2006, the Company converted $89,148 of
      convertible secured debentures into 14,431,054 (See Note F) shares of common
      stock and a $497,545 loss on adjustment of derivative and warrant liability
      to
      fair value was recognized accordingly.





During
      the nine months ended November 30, 2006, the Company converted $89,800 of
      convertible subordinated debentures and $48,749 of related interest into
      4,525,390 (See Note F) shares of common stock and $42,464 financing cost was
      recognized accordingly.





During
      the nine months ended November 30, 2006, the Company converted $324,650 of
      notes
      and loans payable into 65,341,610 (See Note F) shares of common stock and a
      $902,418 financing cost was recognized accordingly.





During
      the nine months ended November 30, 2006, the Company received $376,227 in trade
      credits for sale of inventory included in revenue. As of November 30, 2006,
      the
      Company has reserved fully against these trade credits.


23


**COLLECTIBLE
      CONCEPTS GROUP, INC AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**As
      of November 30, 2006**


**(Unaudited)**





**NOTE
      K - RESTATEMENT**





During
      fiscal 2006, it was determined the correct application of accounting principles
      had not been applied in the accounting for convertible debentures and detachable
      warrants (See note C).





Based
      on
      the original accounting for the convertible debentures and detachable warrants,
      the Company recognized an embedded beneficial conversion feature present in
      the
      convertible note and allocated a portion of the proceeds equal to the intrinsic
      value of that feature (limited to the face value of the notes) to additional
      paid in capital. Accordingly, the proceeds attributed to the common stock,
      convertible debt and warrants have been restated to reflect the fair value
      method.





The
      accounting principles on the aforementioned transactions are currently reflected
      in the accompanying November 30, 2006 financial statements in accordance with
      SFAS 154. The necessary corrections to apply the impact to the previously issued
      November 30, 2005 financial statements are as follows:





Three
      months ended:




November
                30, 2005 financial statement balance prior torestatement
            
            November
                30, 2005 financial statementpost
                restatement
            
            Amount
                increase (decrease) in November 30, 2005financialstatementsNet
                Income (loss)
            
            $
            (594,643
            )
            $
            9,198,677
            
            $
            9,793,320Income
                (Loss) per share-basic and diluted-See Note A)
            
            $
            (0.08
            )
            $
            1.31
            
            $
            1.39





Nine
      months ended:




November
                30, 2005 financial statement balance prior torestatement
            
            November
                30, 2005 financial statementpost
                restatement
            
            Amount
                increase (decrease) in November 30, 2005financialstatementsNet
                loss
            
            $
            (1,660,806
            )
            $
            (6,270,396
            )
            $
            (4,609,590
            )Loss
                per share-basic and diluted
            
            $
            (0.24
            )
            $
            (0.90
            )
            $
            (0.66
            )





The
      resulting effects on the prior period adjustments on the November 30, 2005
      cash
      flows by area are as follows:





November
                30, 2005 financial statement balance prior torestatement
            
            November
                30, 2005 financial statement postrestatement
            
            Amount
                increase (decrease) in November 30, 2005 financialstatementsNet
                cash from operating activities
            
            $
            (1,087,939
            )
            $
            (1,087,939
            )
            $
            -Net
                cash from investing activities
            
            
            -
            
            
            -
            
            
            -Net
                cash from financing activities
            
            $
            1,243,216
            
            $
            1,243,216
            
            $
            -




24


**COLLECTIBLE
      CONCEPTS GROUP, INC AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**


**As
      of November 30, 2006**


**(Unaudited)**





**NOTE
      L - GOING CONCERN**





The
      accompanying consolidated financial statements have been prepared on a going
      concern basis, which contemplates the realization of assets and the settlement
      of liabilities and commitments in the normal course of business. Since
      inception, the Company has not generated sufficient revenues to meet its
      operating expenses and has incurred significant operating losses and net losses.
      As of and for the nine months ended November 30, 2006, the Company had a working
      capital deficiency of $6,011,102, a stockholders’ deficiency of $23,215,068 a
      net loss of $6,726,574 and net cash used in operations of $1,520,816. The
      Company has minimal cash available for operations and is in default with respect
      to repayment provisions of certain convertible secured and convertible
      subordinated debentures, and notes and loans payables. In addition, the Company
      was not able to complete an effective registration statement within 150 days
      as
      required in connection with the sale of certain convertible secured debentures
      to a group of investors and, as a result, the Company is in default of the
      debenture agreement. These matters raise substantial doubt about the Company’s
      ability to continue as a going concern. The consolidated financial statements
      do
      not include any adjustments relating to the recoverability and classification
      of
      recorded assets, or the amounts and classification of liabilities that might
      be
      necessary in the event the Company cannot continue in existence.





In
      order
      to generate additional revenues and the working capital needed to continue
      and
      expand operations, the Company’s management has committed to a plan for reducing
      expenses, increasing retail distribution channels for its products and raising
      additional capital. There can be no assurances that the Company will be able
      to
      obtain the necessary funding to finance their operations or grow revenue in
      sufficient amounts to fund their operations.





**NOTE
      M - CORRECTION OF MAY 31, 2006 QUARTERLY FINANCIAL
      STATEMENTS**





As
      stated
      in Note A - Nature of Operations and Summary of Accounting Policies, the Company
      recognizes the benefits derived from a barter transaction consummated in the
      year ended February 28, 2006 when the benefits are received since collectiblity
      cannot be reasonably assured. In the three months ended May 31, 2006, the
      Company erroneously reported the full expected future benefit of $376,227 as
      sales. The accompanying financial statements have been adjusted to correct
      the
      error.





**NOTE
      N - SUBSEQUENT EVENTS**





Effective
      December 14, 2005, the Company amended their Certificate of Incorporation to
      effect a reverse stock split of the Company’s issued and outstanding shares of
      Common Stock at a ratio of 100 to 1; reduce the number of authorized shares
      from
      15,000,000,000 to 10,000,000,000 and decrease the Company’s par value from
      $0.001 to $0.00001 per share. All references in the financial statements and
      notes to financial statements, number of shares, and share amounts have been
      retroactively restated to reflect the reverse split and change in par value.





On
      December 31, 2006, the Company entered into a Securities Purchase Agreement
      with
      accredited investors for the issuance of an aggregate of $270,430 of convertible
      notes (“Convertible Notes”). The Convertible Notes accrue interest at 2% per
      annum and were due three years from the date of the note. The note holder has
      the option to convert any unpaid note principal to the Company’s common stock at
      a rate of the lower of a) $0.16 (See Note F) or b) 25% of the average of the
      three lowest intraday trading prices for the common stock on a principal market
      for the 20 trading days before, but not including, conversion date. The Company
      issued to the investors Convertible Notes of $270,430 in exchange for
      cancellation of accrued interest of $270,430.


On
        January 3, 2007, the Company entered into an agreement to purchase a Wi-Fi
        TV
        station form Wi-Fi TV, Inc. The cost of this station is $12,500 to be financed
        by Wi-Fi TV, Inc. The $12,500 is due in 4 quarterly payments of $3,125 each,
        with the first payment due by March 31, 2007. The Wi-Fi TV provides
        communication mediums which allow access to a larger market.
 
 Subsequent
        to November 30, 2006, the Company converted $118,000 in loans payable into
        238,000,000 shares of its common stock, $13,575 in secured convertible
        debentures into 9,995,952 shares of its common stock and has issued 1,418,000
        common stock shares as payment towards an anti-dilution agreement (Note
        F).


25


*The
      following discussion should be read in conjunction with the unaudited condensed
      consolidated financial statements and notes thereto set forth in Item 1of this
      Quarterly Report. In addition to historical information, this discussion and
      analysis contains forward-looking statements that involve risks, uncertainties
      and assumptions, which could cause actual results to differ materially from
      Management’s expectations. Factors that could cause differences include, but are
      not limited to, expected market demand for the Company’s services, fluctuations
      in pricing for products distributed by the Company and services offered by
      competitors, as well as general conditions of the telecommunications
      marketplace.*





**ITEM
      2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
      OF
      OPERATIONS**





Some
      of
      the information in this Form 10-QSB contains forward-looking statements that
      involve substantial risks and uncertainties. You can identify these statements
      by forward-looking words such as "may," "will," "expect," "anticipate,"
      "believe," "estimate" and "continue," or similar words. You should read
      statements that contain these words carefully because they:





·
            discuss
                our future expectations;





·
            contain
                projections of our future results of operations or of our financial
                condition; and





·
            state
                other "forward-looking" information.





We
      believe it is important to communicate our expectations. However, there may
      be
      events in the future that we are not able to accurately predict or over which
      we
      have no control. Our actual results and the timing of certain events could
      differ materially from those anticipated in these forward-looking statements
      as
      a result of certain factors, including those set forth in our filings with
      the
      Securities and Exchange Commission.





The
      following detailed analysis of operations should be read in conjunction with
      the
      audited consolidated financial statements and related notes included in the
      Company's Form 10-KSB for the year ended February 28, 2006.





**General**





We
      earn
      revenues from distributing novelty and high-end licensed sports products. These
      products are currently sold through gift shops, distributors, department stores,
      the Internet, catalogs, convenience stores, drug stores, supermarkets and a
      variety of retail stores.





Our
      new
      business model has evolved into a portfolio of various licenses within different
      sports so that we are not as effected by seasonality as we have been in the
      past.We have sought out and made joint ventures that have added both more
      licenses and more products to our line. On April 30, 2006, we entered into
      a
      joint venture agreement with Gridworks, Inc of Elgin, Iowa. Under that joint
      venture agreement, a new corporation named American Sports Ventures, Inc was
      created that will eventually hold new licenses to be added in the future.
      Gridworks is a licensed manufacturer of high-quality wood sports collectibles
      that are skillfully laser etched at their plant in Elgin. The line includes
      NFL
      footballs in several sizes, NCAA licensed basketballs, MLB baseball bats and
      special event items such as a Super Bowl or Worlds Series commemorative item,
      all made of wood. Under the terms of the agreement, Collectible Concepts Group
      and Barry Nelson, the President of Gridworks, will be providing the capital
      necessary to fund the Gridworks operations as well as all marketing and other
      operating expenses associated with American Sports Ventures, Inc. Gridworks
      will
      be providing its wood collectibles to American Sports Ventures at cost.





The
      joint
      venture, American Sports Ventures, created a new website, www.sportsmemoriesinwood.com to
      market and sell products to the general public. In addition, American Sports
      Ventures made a 30 second commercial that has been airing on New York, NY and
      Philadelphia, PA sports stations, to attract buyers to the site. These began
      airing at the beginning of the NFL season and initial results are
      promising.





In
      addition, we are marketing to convenience store and supermarkets for the first
      time because of our new lines of NFL salt and pepper shakers and MLB and NFL
      three dimensional eighteen ounce drinking cups **** that
      we
      market under our distribution agreement with Brax3D. Our new customers include
      chains such as Weis Supermarkets, Giant/Eagle and Royal Farms. We hope this
      will
      be a growing area of revenues for the company in the near future.


26





This
      past
      holiday season, we and our joint venture partner, American Sports Ventures,
      worked with 13 mall operators to open 16 kiosks during the months of November
      and December. Although this was less than our expected number of 25 mall kiosks,
      which reduction was due to funding shortages that lead to delays in inventory
      production, we believe that we have established a framework for future mall
      kiosk stands. These kiosks carried the full line of American Sports Ventures
      as
      well as Brax3D products as well as our proprietary licensed products. Each
      kiosk
      was stocked with college and professional sports team items and concentrated
      on
      the local regional teams for that area.





On
      April
      10, 2006 we signed a license agreement with Diann Wall-Wilson for a broad line
      of products utilizing her copyrighted designs for the United States Army Mule
      United States Marine Corp Bulldog, United States Navy Goat, United States Air
      Force Falcon and the Coast Guard Otter. We paid $20,000 for this license in
      $5,000 monthly increments beginning April 10, 2006 and the final payment due
      July 10, 2006. This licensing agreement is for 5 years. The agreement calls
      for
      a 10% royalty of which the $20,000 in initial payments are a pre-paid
      royalty.





On
      February 28, 2005, we sold to Alizay Consultant Limited a 2.5% interest in
      our
      future revenues generated under our NFL, NBA license in 2005-2006 and any future
      license in 2006 with Major League Baseball (“MLB”), if obtained. The agreement
      included a clause that would extend the partial sale of revenues to an
      additional year of sales under the NBA license, should we be unsuccessful in
      obtaining the MLB license. We did not obtain the MLB license, therefore Alizay
      will receive a 2.5% interest in the NBA revenues generated during the 2006-2007
      license period.





On
      September 4, 2006, we filed a Certificate of Designation creating 1 million
      shares of Series A Convertible Preferred Stock. The holders of record of the
      Series A Convertible Preferred stock shall have the right, at their option,
      at
      any time subsequent to the date on which the Closing Bid Price of the Company’s
      common stock is at least $0.05, to convert any or all of such holder’s shares of
      Series A Convertible Preferred stock into such number of fully paid and
      non-assessable shares of the Company’s common stock equal to the number of
      shares of Series A - Convertible Preferred stock multiplied by 20. The holders
      of the Series shall have the right to vote, separately, in person or by proxy,
      at a special or annual meeting of the shareholders, on all matters voted on
      by
      the holders of the Common Stock voting together as a single class with other
      shares entitled to vote. With respect to any such vote, each share of Series
      A
      Preferred Stock shall entitle the holder at cast 60 votes per share of Series
      A
      Preferred stock. The Series A Preferred Stock shall, with respect to
      distributions of assets and rights upon the occurrence of a Liquidation rank
      (i)
      senior to all classes of common stock of the Company and (ii) senior to each
      other class of Capital Stock of the Company hereafter created with does not
      expressly rank pari passu or senior to the Series A Preferred Stock.  The
      Series A Preferred Stock shall not be redeemed or subject to redemption, whether
      by option of the Company or any holder thereof, or otherwise. The holders of
      record of the Series A Convertible Preferred shall be entitled to share in
      any
      cash dividends or distributions that my be declared and paid on the Common
      Stock
      on a pro rata basis as if the holders had been converted into shares of Common
      Stock.





We
      acquired a historical film library containing thousands of hours of sports
      events including, among others, boxing, baseball, football and auto racing.
      The
      asset acquisition agreement was entered into December 15, 2005 and gives us
      title to the entire library. The film library consists of over 5,000 hours
      of
      sporting events from the years 1948 through 1972. Additionally, there are also
      sports films in the library after 1972. As well, there is an old time cartoon
      library as well as classic movies. The film library was acquired for a purchase
      price of $250,000 with $50,000 paid in cash and the remainder in a note payable
      due five years from the acquisition date along with interest accrued at 6%
      per
      annum. As part of acquisition of the film library, we were assigned a licensing
      agreement whereby royalties (minimum of $50,000 per year) will be received
      over
      the next ten years, although there are questions concerning the ability of
      the
      licensee to pay such royalties. Additionally, we have entered into a Joint
      Marketing agreement with Back in Time TV under which we will each under which
      we
      will cross market each other’s products.





We
      have
      recently learned that there is a problem with the Back in Time Deal due to
      the
      fact that we have been notified by several licensors that the film properties
      were not properly owned by the Pacificap Entertainment Holdings, the company
      from which we purchased the library. Until this matter is clarified, we are
      withholding all payments due to Pacificap and are exploring the possibility
      of
      rescinding the transaction.


27





Effective
      December 14, 2005, we amended our Certificate of Incorporation to effect a
      reverse stock split of our issued and outstanding shares of Common Stock at
      a
      ratio of 100 to 1; reduce the number of authorized shares from 15,000,000,000
      to
      10,000,000,000 and decrease the par value from $0.001 to $0.00001 per share.





On
      December 31, 2006, we entered into a Securities Purchase Agreement with our
      current **** note
      holders for the issuance of an aggregate of $270,430 of convertible notes in
      exchange for cancellation of accrued interest of $270,430. The Convertible
      Notes
      accrue interest at 2% per annum and are due three years from the date of
      issuance. The note holder has the option to convert any unpaid note principal
      into shares of our common stock at a rate of the lower of a) $0.16 or b) 25%
      of
      the average of the three lowest intraday trading prices for the common stock
      on
      a principal market for the 20 trading days before, but not including, conversion
      date.





On
      January 3, 2007, we entered into an agreement to purchase a Wi-Fi TV station
      form Wi-Fi TV, Inc. The cost of this station is $12,500 to be financed by Wi-Fi
      TV, Inc. The $12,500 is due in 4 quarterly payments of $3,125 each, with the
      first payment due by March 31, 2007. The Wi-Fi TV platform contains live TV,
      live chat, interactive shopping cart and even free online phone calls, combined
      with multiple categories of channels and breaking news about these topics.
      We
      believe this will provide us with a greater marketing reach, allowing us to
      reach a larger target audience than traditional forms of marketing and
      advertising. Our TV station will be available globally on the Internet. Wi-Fi
      TV
      allows viewers to chat live about the program they are watching and all of
      our
      products will be included in the Wi-Fi TV Shopping Cart, opening a brand new
      technologic window of sales opportunities. We are already beginning work on
      the
      scripts for the channel and expects to have segments ready for airing by March
      15, 2007.





**RESULTS
      OF OPERATIONS**





**NINE
      MONTHS ENDED NOVEMBER 30, 2006 COMPARED TO NINE MONTHS ENDED NOVEMBER 30, 2005.**





Net
      revenue for the nine months ended November 30, 2006 was $636,891 compared to
      $482,404 for the nine months ended November 30, 2005. Net revenue for both
      periods consisted primarily of sales of professional and collegiate sports
      related products, promotional Fanbana sales and E-Bay Internet sales . The
      increase in net revenue was a result of implantation of our new alliances with
      Brax3D and Gridworks. These alliances were not in place until May of 2006 and
      at
      this point our full focus became selling these products. As with any changeover
      of this nature, it is taking our resources and redirecting them,  while
      our
      inventory and marketing catch up to our new business direction. These alliances
      have directly lead to the increase in revenue.





Sales
      for
      the nine months ended November 30, 2006 were comprised of products offered
      with
      our National Basketball League and National Hockey League licenses as well
      as
      alliances with Brax3D and Gridworks. The National Football League license
      expired on March 31, 2006 and was not renewed. Instead of paying the royalties
      for the NFL license our self, we have decided to work with distributors who
      have
      NFL licenses to sell their products instead; we have determined that the impact,
      if any, on revenue will be minimal due to the change in our business strategy.





Additional
      revenues were also produced from the sale of products related to our special
      order promotional business. In addition to income from traditional sources,
      revenue was generated from Internet sales through E-Bay. The timely availability
      of product samples has become a critical element in the ability to successfully
      obtain orders from distributors and especially retailers who prepare product
      sales plans (plan-o-gram) at least six months in advance. Consumer demand for
      these products is most often driven directly by the initial start of a sports
      season and followed later by the success of individual teams. Consequently,
      we
      have missed the window of opportunity afforded us by our licenses. We are
      constantly seeking to remedy this serious problem by raising additional working
      capital and, most importantly, by seeking new sourcing for our principal
      products that can produce samples in a timely and cost effective way to support
      the sales efforts.


28





Cost
      of
      sales for the nine months ended November 30, 2006 increased by $256,451 from
      $380,357 for the nine months ended November 30, 2005 to $636,808 for the nine
      months ended November 30, 2006. This increase was mainly attributable to an
      increase in sales volume. Cost of sales as a percentage of revenues increased
      to
      100% for the nine months ended November 30, 2006 from 78.8% for the same period
      last year.





Cost
      of
      sales for the nine months ended November 30, 2006 were comprised of costs
      associated with the sale of the products related to the National Football League
      License and College Licenses owned by our distributors  as
      well
      as alliances with Brax3D and Gridworks. These products are contract manufactured
      for us by both domestic and foreign companies to specifications developed by
      us
      and approved by the various licensors. We do not feel this places us at risk
      for
      filling future orders on a timely basis because we have developed relationships
      with alternate suppliers for most of our products. Several of our manufacturers
      will also store and ship product directly to a customer, thereby reducing
      shipping time and eliminating the costs we would incur if the product was first
      shipped to our location. We also feels we are not at risk for any currency
      fluctuations in our dealing with our foreign manufacturers since all orders
      are
      based on U.S. dollars and we do not have any long term purchase commitments.





Selling
      and administrative expenses for the nine months ended November 30, 2006
      increased to $1,518,705 from $998,880 for the same period the prev ious
      year. The increases in selling and administrative expenses were mainly a result
      of increases sales for the period. For
      the
      nine months ended November 30, 2006 we incurred $221,800 in non cash services
      through the issuance of common stock.




Selling
      and administrative expense consists of payroll and related fringe benefits,
      royalties, commissions paid to manufacturers sales representatives, advertising,
      rent, depreciation and other related fixed overhead expenses. Also included
      in
      this category are the expenses related to the replication of movie props to
      ready them for mass production by the contract manufacturers, as well as the
      non-cash costs related to services satisfied by the issuance of our stock.
      The
      services provided were in direct support of our operations. As we grow and
      increase sales of current product, we anticipate we will have to rely less
      on
      the issuance of stock for services due to increased cash flows as well as
      capital. The benefits to us from these stock transactions are to reduce the
      use
      of cash, which allow us to devote the maximum amount of resources to expanding
      the business. For accounting purposes, we valued these services at the fair
      market value of the services rendered or the fair market value of the stock
      at
      times of issuance whichever was more readily determinable. Production costs
      include prototypes and samples of packaging, displays and products. All expensed
      production costs are included within selling and administrative expenses.


We
        incurred interest expense of $1,207,339 for the nine months ended November
        30,
        2006 as compared to $962,338 for the same period the previous year due to
        increased borrowings and the debt accretion related to the application of
        SFAS
        133. The accretion of debt calculation added $806,338 and $486,475 of interest
        expense respectively for the nine months ended November 30, 2006 and November
        30, 2005, respectively.




29


For
      the
      nine months ended November 30, 2006, we incurred a non-cash loss in adjusting
      the fair value of the debenture and related warrant derivatives relating to
      the
      convertible debentures of $2,319,784 as compared with $4,423,115 during the
      prior year.





As
      a
      result of the above, we had a net loss of $6,726,574 for the nine months ended
      November 30, 2006 as compared to a net loss of $6,270,396 for the same period
      last year.





**THREE
      MONTHS ENDED NOVEMBER 30, 2006 COMPARED TO THREE MONTHS ENDED NOVEMBER 30,
      2005.**





Net
      revenue for the three months ended November 30, 2006 was $291,495 compared
      to
      $109,392 for the three months ended November 30, 2005. Net revenue for both
      periods consisted primarily of sales of professional and collegiate sports
      related products, promotional Fanbana sales and E-Bay Internet sales. The
      increase in net revenue was a result of implantation of our new alliances with
      Brax3D and Gridworks.





Cost
      of
      sales for the three months ended November 30, 2006 increased by $207,995 from
      $41,898 for the three months ended November 30, 2005 to $249,893 for the three
      months ended November 30, 2006. This increase was mainly attributable the
      increase in sales. Cost of sales as a percentage of revenues increased to 85.7%
      for the three months ended November 30, 2006 from 38.3% for the same period
      last
      year.





Cost
      of
      sales for the three months ended November 30, 2006 were comprised of costs
      associated with the sale of the products related to the National Basketball
      League and National Hockey League Licenses as well as alliances with Brax3D
      and
      Gridworks. These products are contract manufactured for us by both domestic
      and
      foreign companies to specifications developed by us and approved by the various
      licensors. We do not feel this places us at risk for filling future orders
      on a
      timely basis because we have developed relationships with alternate suppliers
      for most of our products. Several of our manufacturers will also store and
      ship
      product directly to a customer, thereby reducing shipping time and eliminating
      the costs we would incur if the product was first shipped to our location.
      We
      also feels we are not at risk for any currency fluctuations in our dealing
      with
      our foreign manufacturers since all orders are based on U.S. dollars and we
      do
      not have any long term purchase commitments.





Selling
      and administrative expenses for the three months ended November 30, 2006
      decreased to $323,259 from $357,694 for the same period the previous year.




Selling
      and administrative expense consists of payroll and related fringe benefits,
      royalties, commissions paid to manufacturers sales representatives, advertising,
      rent, depreciation and other related fixed overhead expenses. Also included
      in
      this category are the expenses related to the replication of movie props to
      ready them for mass production by the contract manufacturers, as well as the
      non-cash costs related to services satisfied by the issuance of our stock.
      The
      services provided were in direct support of our operations. As we grow through
      acquisitions and the sales of current product, we anticipate we will have to
      rely less on the issuance of stock for services due to increased cash flows
      as
      well as capital. The benefits to us from these stock transactions are to reduce
      the use of cash, which allow us to devote the maximum amount of resources to
      expanding the business. For accounting purposes, we valued these services at
      the
      fair market value of the services rendered or the fair market value of the
      stock
      at times of issuance whichever was more readily determinable. Production costs
      include prototypes and samples of packaging, displays and products. All expensed
      production costs are included within selling and administrative expenses.





We
      incurred interest expense of $369,710 for the three months ended November 30,
      2006 as compared to $337,759 for the same period the previous year due to
      increased borrowings and the debt accretion related to the application of SFAS
      133. The accretion of debt calculation added $228,852 and $264,378 of interest
      expense respectively for the three months ended November 30, 2006 and November
      30, 2005, respectively.


For
        the
        three months ended November 30, 2006, we incurred a non-cash gain/(loss)
        in
        adjusting the fair value of the debenture and related warrant derivatives
        relating to the convertible debentures of $583,007 as compared with $9,818,523
        during the prior year.




30




As
      a
      result of the above, we had a net loss of $155,123 for the three months ended
      November 30, 2006 as compared to a net income of $9,198,677 for the same period
      last year.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      November 30, 2006, we had a working capital deficiency of $6,011,102. The
      working capital deficit as
      of
      November 30, 2006 is a direct result of the unprofitable operations for prior
      years as well as for the past three months ende d
      November 30, 2006 that resulted in cash used in operating activities of
      $1,520,816. We had an ending cash balance of $0 at November 30, 2006. As such,
      we need to raise additional capital to continue operations. We currently do
      not
      have any commitments for additional capital, and no assurances that capital
      will
      be available on terms acceptable to us, or at all.





We
      have
      financed our losses through private sales of debt securities and the issuance
      of
      stock for services. During the nine months ended November 30, 2006, we received
      the following capital infusions: $900,000 from issuance of secured convertible
      debentures, $670,000 from notes and loans payable and $15,000 from the issuance
      of common stock.





We
      are
      working with various distributors and independent sales representatives in
      an
      effort to cut costs, offer a greater variety of products and to increase the
      customer base for our products. We believe that if we can increase our revenues
      and improve our gross profit margin that this will allow us to reach
      profitability.





While
      we
      have raised capital to meet our working capital and financing needs in the
      past,
      additional financing is required within the next 12 months in order to meet
      our
      current and projected cash flow deficits from operations and development. We
      believe that we will need approximately $1,500,000 in additional funds to
      continue operations for the next 12 months, depending on revenues from
      operations. We are constantly seeking additional sources of financing; however,
      there can be no assurance that financing will be available in amounts or on
      terms acceptable to us, if at all.





As
      of
      November 30, 2006, we had $826,460 in outstanding notes and loans payable,
      (of
      which $3,111 is due to related parties), $34,500 in convertible subordinated
      debentures and $2,604,589 in outstanding convertible secured debentures. As
      of
      November 30, 2006, we had $3,187,016 in accounts payable, accrued expenses,
      accrued payroll, accrued royalties and related taxes. (Some of the accrued
      expenses are for federal withholding taxes and are related to calendar years
      1999, 2000 and 2001. We are currently making payments on our current federal
      payroll tax obligations as well as monthly payments for these prior
      obligations). We have been able to operate based on deferring vendor and
      employee payments, deferring interest and debt repayments and obtaining
      additional borrowings and proceeds from equity. However, there is no guarantee
      that we will continue to be successful with respect to these actions.
      Furthermore, there can be no assurances that we will be able to obtain the
      necessary funding to finance our operations or grow revenue in sufficient
      amounts to fund our operating expenses.





Our
      independent auditors have issued a going concern paragraph in their opinion
      on
      our consolidated financial statements for the fiscal year ended February 28,
      2006 that states there is substantial doubt about our ability to continue as
      a
      going concern. Our ability to continue as a going concern is dependent on our
      ability to access capital through debt and equity funding as well as market
      and
      sell our various products.


31


To
      obtain
      funding for its ongoing operations, the Company has entered into Securities
      Purchase Agreements with several accredited investors, on the following dates
      for the sale of secured convertible notes and warrants:


**Transaction
                  Date**
              
              **Secured
                  Convertible Notes Sold**
              
              **Interest
                  Rate**
              
              **Conversion
                  Price**
              
              **Warrants**May
                  2000
              
              $400,000
                ($169,672
                  remaining)
              
              10%
              
              $4.00
                  or 25% of market value
              
              40,000May
                  28, 2002
              
              $75,000
              
              12%
              
              $1.00
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              1,500November
                  26, 2002
              
              $250,000
              
              15%
              
              $1.00
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              5,000May
                  15, 2003
              
              $25,000
              
              15%
              
              $1.00
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              500June
                  20, 2003
              
              $25,000
              
              15%
              
              $1.00
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              500July
                  23, 2003
              
              $25,000
              
              15%
              
              $1.00
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              500November
                  14, 2003
              
              $50,000
              
              15%
              
              $1.00
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              1,000January
                  13, 2004
              
              $50,000
              
              15%
              
              $1.00
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              1,000February
                  13, 2004
              
              $25,000
              
              15%
              
              $1.00
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              500March
                  16, 2004
              
              $100,000
              
              15%
              
              $1.00
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              2,000May
                  28, 2004
              
              $550,000
              
              15%
              
              $1.00
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              16,500September
                  30, 2004
              
              $250,000
              
              15%
              
              $.26
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              12,500May
                  18, 2005
              
              $400,000
              
              10%
              
              $.16
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              473,684July
                  7, 2005
              
              $850,000
              
              10%
              
              $.16
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              17,000September
                  29, 2005
              
              $302,597
              
              2%
              
              $0.16
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              -0-January
                  20, 2006
              
              $400,000
              
              10%
              
              $0.16
                  or 20% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              4,000March
                  23, 2006
              
              $400,000
              
              8%
              
              $3.00
                  or 20% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              1,000,000May
                  31, 2006
              
              $500,000
              
              8%
              
              $3.00
                  or 20% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              1,000,000December
                  31, 2006
              
              $270,430
              
              2%
              
              $0.16
                  or 25% of the average of the lowest three intraday trading prices
                  during
                  the twenty trading days immediately preceding conversion
              
              -0-






32





The
      secured convertible notes bear interest as described above, typically mature
      one
      to three years from the date of issuance or one to three years from when we
      are
      in compliance with the terms of the securities purchase agreements, and are
      convertible into our common stock, at the investors' option, on the terms as
      described above. As of January 2, 2007, the average of the three lowest intraday
      trading prices for our common stock during the preceding 20 trading days as
      reported on the Over the Counter Bulletin Board was $.0015 and, therefore,
      the
      conversion price for the secured convertible notes was $.000375 at 25% or $.0003
      at 20%. Based on this conversion price, the $4,447,269 in secured convertible
      notes remaining, excluding interest, would convert into 11,859,384,000 shares
      of
      our common stock. If the price of our common stock should decrease, we will
      be
      required to issue substantially more shares, which will cause dilution to our
      existing stockholders. There is no upper limit on the number of shares that
      may
      be issued, which will have the effect of further diluting the proportionate
      equity interest and voting power of holders of our common stock .





In
      connection with the sale of convertible notes, we granted the investors
      registration rights. Pursuant to the registration rights agreements, we were
      required to file registration statements for the shares underlying the
      convertible notes and warrants within a specified period of time from the sale
      of such securities and to have the registration statement declared effective
      by
      the Securities and Exchange Commission within another specified period of time.
      In the event that we did not timely file the registration statements or have
      them declared effective, we are obligated to pay liquidated damages. We have
      not
      filed any registration statements registering the securities underlying the
      convertible securities. As a result, an event of default has occurred regarding
      all of the above listed secured convertible debentures. As a result of this
      default, we are obligated to pay the debenture holders the principal amount
      of
      the debentures together with interest and certain other amounts. We do not
      have
      the capital resources to pay the amounts required under this agreement. The
      secured convertible debenture holders have informed us that they do not intend
      to take any action at this time due to the default. We do not, however, have
      any
      legally binding commitment from the debenture holders to waive the default
      provision of the debenture. In addition, we granted the investors a security
      interest in substantially all of our assets, including the assets of our wholly
      owned subsidiaries, and intellectual property. These events of default, taken
      as
      a whole, are reasonably likely to have a material impact on our short-term
      and
      long-term liquidity. The investors have been willing in the past to provide
      us
      with capital as needed to sustain our day-to-day operations and to forego
      enforcing default provisions, however, no assurance can be given that they
      will
      provide such capital in the future or continue to forego enforcing default
      provisions, which they are under no obligation to do so. In the event that
      we
      need additional capital in the future for our day-to-day operations, and the
      investors do not provide such funds, we will have to seek capital from new
      investors. As a result of these events of default and that all of our assets
      are
      secured by the current investors, it is highly unlikely that we would be able
      to
      obtain additional capital from other investors. If we are unable to obtain
      additional capital, we would likely be required to curtail or cease our
      operations. As all of our assets are secured by our existing lenders, of which
      we are currently in default, we do not anticipate filing for bankruptcy
      protection, as all of our assets would be transferred to our lenders pursuant
      to
      our existing security agreements.





In
      November 2001, we issued $71,800 in subordinated convertible debentures. The
      debentures have a 12% coupon and mature one year from date of issuance.
      Conversions to common stock are at the lower of $1.00 or 25% of the average
      of
      the lowest three intraday trading prices during the twenty trading days
      immediately preceding conversion. The debentures are in
      default.


33





In
      May
      2004, we issued $65,500 in subordinated convertible debentures. The debentures
      have a 12% coupon and mature one year from date of issuance. Conversions to
      common stock are at a price of $.10 per share of common stock. Conversions
      of
      any interest on the debentures are at current market price. On September 1,
      2004, $10,000 of the note, and $1,200 in interest were converted into 114,286
      shares of common stock. The debentures are in default.





Earlier
      this year, we did a 100:1 reverse stock split, but this is still not a
      sufficient number of authorized shares of common stock available if all debt
      holders decided to convert their convertible secured debentures into our common
      stock. We are working on rectifying the situation. The provisions of the debt
      instruments call for a 24% penalty on the amount of debt owed if a noteholder
      attempts to convert and there are not enough authorized shares available.





The
      lack
      of a sufficient number of authorized shares of common stock available for the
      conversion of all our outstanding convertible debt resulted from a combination
      of issues. First, as a result of the variable conversation price, as our stock
      price has declined since we first issued the convertible notes/debentures,
      resulting in a significant increase in the number of shares issuable upon
      conversion of all our outstanding convertible debt. Second, since becoming
      a
      public company, we have had problems in filing our periodic reports on a timely
      basis. Between the filing of our quarterly report on January 14, 2002 for the
      quarter ended November 30, 2001 (which itself was not timely filed) and the
      filing of our quarterly report on July 20, 2004 for the quarter ended November
      30, 2001, we did not file any periodic reports. On April 14, 2005, we filed
      our
      quarterly report for the quarter ended November 30, 2004, which brought us
      current for the first time in several years. Unfortunately, we did not file
      our
      annual report for the year ended February 28, 2005 or our quarterly reports
      for
      the quarter ended May 31, 2005 on a timely basis. Those reports have
      subsequently been filed and we are now current in our reporting requirements.
      However, as a result of our lack of filings, we were unable to file an
      information/proxy statement during that time to increase the number of shares
      of
      our authorized common stock. In addition, as a result of our lack of filings,
      we
      had limited ability to raise funds. As a result, we sold multiple rounds of
      convertible debentures/notes at a significant discount to the market price
      in
      order to continue our operations during such time. As a result, there were
      not
      enough shares of common stock that were authorized but unissued underlying
      those
      convertible debentures/notes, when issued.





In
      November 2002, we successfully negotiated a long-term payment plan with the
      IRS
      to retire our outstanding payroll tax obligations. The plan was executed in
      December 2002 and calls for escalating monthly payments to be made over a period
      of 18 months. After an initial down payment of $25,800 in December 2002, we
      have
      agreed to a payment schedule of $5,750 for the first six months, $13,000 for
      the
      next six months and $25,000 for the final six months. We made the agreed
      payments in a timely fashion through the first six months and are currently
      behind schedule on the balance. We are negotiating with the IRS to recast the
      plan in accordance with our ability to make timely payments.





We
      will
      still need additional investments in order to continue operations to cash flow
      break even. Additional investments are being sought, but we cannot guarantee
      that we will be able to obtain such investments. Financing transactions may
      include the issuance of equity or debt securities, obtaining credit facilities,
      or other financing mechanisms. However, the trading price of our common stock
      and the downturn in the U.S. stock and debt markets could make it more difficult
      to obtain financing through the issuance of equity or debt securities. Even
      if
      we are able to raise the funds required, it is possible that we could incur
      unexpected costs and expenses, fail to collect significant amounts owed to
      us,
      or experience unexpected cash requirements that would force us to seek
      alternative financing. Further, if we issue additional equity or debt
      securities, stockholders may experience additional dilution or the new equity
      securities may have rights, preferences or privileges senior to those of
      existing holders of our common stock. If additional financing is not available
      or is not available on acceptable terms, we will have to curtail our
      operations.





By
      adjusting our operations and development to the level of capitalization, we
      believe we have sufficient capital resources to meet projected cash flow
      deficits. However, if during that period or thereafter, we are not successful
      in
      generating sufficient liquidity from operations or in raising sufficient capital
      resources, on terms acceptable to us, this could have a material adverse effect
      on our business, results of operations liquidity and financial
      condition.


34




**Critical
      Accounting Policies**





Our
      financial statements are prepared based on the application of accounting
      principles generally accepted in the United States of America. These accounting
      principles require us to exercise significant judgment about future events
      that
      affect the amounts reported throughout our financial statements. Actual events
      could unfold quite differently than our previous judgments had predicted.
      Therefore the estimates and assumptions inherent in the financial statements
      included in this report could be materially different once those actual events
      are known. We believe the following policies may involve a higher degree of
      judgment and complexity in their application and represent critical accounting
      policies used in the preparation of our financial statements. If different
      assumptions or estimates were used, our financial statements could be materially
      different from those included in this report.





Revenue
      Recognition **:** **** We
      recognize revenues in accordance with Staff Accounting Bulletin 104, Revenue
      Recognition in Financial Statements (SAB 104). We develop and sell collectibles
      in the entertainment and sports markets. Revenue from such product sales is
      recognized when persuasive evidence of an arrangement exists, delivery has
      occurred, the fee is fixed or determinable and collectibility is probable.
      At
      this time the earnings process is complete and the risks and rewards of
      ownership have transferred to the customer, which is generally when the goods
      are shipped and all significant obligations of the Company have been
      satisfied.





Accounts
      Receivable: **** We
      must
      make judgments about the collectibility of our accounts receivable to be able
      to
      present them at their net realizable value on the balance sheet. To do this,
      we
      carefully analyze the aging of our customer accounts, try to understand why
      accounts have not been paid, and review historical bad debt problems. From
      this
      analysis, we record an estimated allowance for receivables that we believe
      will
      ultimately become uncollectible. As of November 30, 2006, we had an allowance
      for bad debts of $31,133. We actively manage our accounts receivable to minimize
      our credit risks and believe that our current allowance for doubtful accounts
      is
      fairly stated.





Realizability
      of Inventory Values: We make
      judgments about the ultimate realizability of our inventory in order to record
      our inventory at its lower of cost or market. These judgments involve reviewing
      current demand for our products in comparison to present inventory levels and
      reviewing inventory costs compared to current market values. As of November
      30,
      2006, we had inventory of $473,663 on hand.





Long-lived
      Assets: We
      assess the impairment of long-lived assets whenever events or changes in
      circumstances indicate that their carrying value may not be recoverable from
      the
      estimated future cash flows expected to result from their use and eventual
      disposition. Our long-lived assets subject to this evaluation include property
      and equipment. Intangible assets other than goodwill are reviewed for impairment
      whenever events or changes in circumstances indicate that the carrying value
      may
      not be fully recoverable. We are required to make judgments and assumptions
      in
      identifying those events or changes in circumstances that may trigger
      impairment.




35


Fair
      Value of Financial Instruments :
      Carrying amounts of financial instruments held by the Company, which includes
      cash, accounts receivable, accounts payable and accrued expenses approximate
      fair value due to the short-term maturities of these assets and liabilities.
      Long-term debt, convertible secured debentures, notes and loans payable and
      convertible subordinated debentures approximate fair value based upon debt
      terms
      available for entities under similar terms.





Derivative
      Valuations: In
      accordance with SFAS 133, we are required to estimate the fair value of any
      embedded derivatives and detachable warrants relating to our secured convertible
      debentures. These estimates require significant assumptions and management
      judgment which may affect the amounts reported throughout the financial
      statements. This resulted in the Company recognizing expense of $2,319,784
      and
      $4,423,115 for the nine months ended November 30, 2006 and 2005,
      respectively.





**Recent
      Accounting Pronouncements**





In
      May
      2005, the FASB issued SFAS No. 154, "Accounting Changes and Error Corrections"
      ("SFAS 154") which replaces Accounting Principles Board Opinions No. 20
      "Accounting Changes" and SFAS No. 3, "Reporting Accounting Changes in Interim
      Financial Statements-An Amendment of APB Opinion No. 28." SFAS 154 provides
      guidance on the accounting or and reporting of accounting changes and error
      corrections. It establishes retrospective application, or the latest practicable
      date, as the required method for reporting a change in accounting principle
      and
      the reporting of a correction of an error. SFAS 154 is effective for accounting
      changes and a correction of errors made in fiscal years beginning after December
      15, 2005 and is required to be adopted by the Company in the first quarter
      of
      fiscal 2007. The Company has elected to adopt SFAS 154 with the current 10-KSB
      financial reporting. The Company changed its accounting policy with how it
      accounts for derivatives and the relating detachable warrants. The impact of
      this adoption resulted in the Company recording additional expense of
      $2,160,086, for the year ended February 28, 2005.





On
      February 16, 2006 the Financial Accounting Standards Board (FASB) issued
      SFAS 155, “Accounting for Certain Hybrid Instruments,” which amends SFAS 133,
“Accounting for Derivative Instruments and Hedging Activities,” and SFAS 140,
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities.” SFAS 155 allows financial instruments that have embedded
      derivatives to be accounted for as a whole (eliminating the need to bifurcate
      the derivative from its host) if the holder elects to account for the whole
      instrument on a fair value basis. SFAS 155 also clarifies and amends certain
      other provisions of SFAS 133 and SFAS 140. This statement is effective for
      all
      financial instruments acquired or issued in fiscal years beginning after
      September 15, 2006. The Company does not expect its adoption of this new
      standard to have a material impact on its financial position, results of
      operations or cash flows.





In
      March
      2006, the FASB issued FASB Statement No. 156, Accounting for Servicing of
      Financial Assets - an amendment to FASB Statement No. 140. Statement 156
      requires that an entity recognize a servicing asset or servicing liability
      each
      time it undertakes an obligation to service a financial asset by entering into
      a
      service contract under certain situations. The new standard is effective for
      fiscal years beginning after September 15, 2006. The adoption of SFAS No.156
      did
      not have a material impact on the Company's financial position and results
      of
      operations.





In
      July
      2006, the FASB issued Interpretation No. 48 (FIN 48). “Accounting for
      uncertainty in Income Taxes”. FIN 48 clarifies the accounting for Income Taxes
      by prescribing the minimum recognition threshold a tax position is required
      to
      meet before being recognized in the financial statements. It also provides
      guidance on derecognition, measurement, classification, interest and penalties,
      accounting in interim periods, disclosure and transition and clearly scopes
      income taxes out of SFAS 5, “ *Accounting
      for Contingencies”.* FIN
      48 is
      effective for fiscal years beginning after December 15, 2006. We have not yet
      evaluated the impact of adopting FIN 48 on our consolidated financial position,
      results of operations and cash flows.





In
      September 2006 the Financial Account Standards Board (the “FASB”) issued its
      Statement of Financial Accounting Standards 157, Fair Value Measurements. This
      Statement defines fair value, establishes a framework for measuring fair value
      in generally accepted accounting principles (GAAP), and expands disclosures
      about fair value measurements. This Statement applies under other accounting
      pronouncements that require or permit fair value measurements, the Board having
      previously concluded in those accounting pronouncements that fair value is
      the
      relevant measurement attribute. Accordingly, this Statement does not require
      any
      new fair value measurements. However, for some entities, the application of
      this
      Statement will change current practice. FAS 157 effective date is for fiscal
      years beginning after November 15, 2007. The Company does not expect adoption
      of
      this standard will have a material impact on its financial position, operations
      or cash flows.


36





In
      September 2006 the FASB issued its Statement of Financial Accounting Standards
      158 “Employers’ Accounting for Defined Benefit Pension and Other Postretirement
      Plans”. This Statement improves financial reporting by requiring an employer to
      recognize the overfunded or underfunded status of a defined benefit
      postretirement plan (other than a multiemployer plan) as an asset or liability
      in its statement of financial position and to recognize changes in that funded
      status in the year in which the changes occur through comprehensive income
      of a
      business entity or changes in unrestricted net assets of a not-for-profit
      organization. This Statement also improves financial reporting by requiring
      an
      employer to measure the funded status of a plan as of the date of its year-end
      statement of financial position, with limited exceptions. The effective date
      for
      an employer with publicly traded equity securities is as of the end of the
      fiscal year ending after December 15, 2006. The Company does not expect adoption
      of this standard will have a material impact on its financial position,
      operations or cash flows


37


**ITEM
      3. CONTROLS AND PROCEDURES**





*(a)* *Evaluation
      of disclosure controls and procedures.*





Our
      management, with the participation of our chief executive officer and chief
      financial officer, evaluated the effectiveness of our disclosure controls and
      procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934
      as
      of November 30, 2006. In designing and evaluating the disclosure controls
      and procedures, management recognizes that any controls and procedures, no
      matter how well designed and operated, can provide only reasonable assurance
      of
      achieving the desired control objectives. In addition, the design of disclosure
      controls and procedures must reflect the fact that there are resource
      constraints and that management is required to apply its judgment in evaluating
      the benefits of possible controls and procedures relative to their costs.





Based
      on our evaluation, our chief executive officer and chief financial officer
      concluded that our disclosure controls and procedures are designed at a
      reasonable assurance level and are effective to provide reasonable assurance
      that information we are required to disclose in reports that we file or submit
      under the Exchange Act is recorded, processed, summarized and reported within
      the time periods specified in Securities and Exchange Commission rules and
      forms, and that such information is accumulated and communicated to our
      management, including our chief executive officer and chief financial officer,
      as appropriate, to allow timely decisions regarding required disclosure.





*(b)
      Changes in internal control over financial reporting.*





We regularly
      review our system of internal control over financial reporting and make changes
      to our processes and systems to improve controls and increase efficiency, while
      ensuring that we maintain an effective internal control environment. Changes
      may
      include such activities as implementing new, more efficient systems,
      consolidating activities, and migrating processes.





There
      were no changes in our internal control over financial reporting that occurred
      during the period covered by this Quarterly Report on Form 10-QSB that have
      materially affected, or are reasonably likely to materially affect, our internal
      control over financial reporting.


38


**PART
      II**





**ITEM
      1 LEGAL PROCEEDING**





From
      time
      to time, we may become involved in various lawsuits and legal proceedings which
      arise in the ordinary course of business. However, litigation is subject to
      inherent uncertainties, and an adverse result in these or other matters may
      arise from time to time that may harm our business. we are currently not aware
      of any such legal proceedings or claims that we believe will have, individually
      or in the aggregate, a material adverse affect on our business, financial
      condition or operating results.





**ITEM
      2**  **CHANGES
      IN SECURITIES AND USE OF PROCEEDS**





During
      the nine months ended November 30, 2006, we issued 4,887,000 shares for various
      services rendered including **** 3,260,000
      shares to Paul Lipschutz and 10,000 shares to Jay Lipschutz for their services
      as officers and directors. In addition, the following shares were issued for
      financial consulting services: Richard Day - 20,000 shares, Robert Orr - 40,000
      shares, Ken Volstad - 160,000 shares, and Ray Maiwurm - 1,114,000 shares. The
      following shares were issued for sales consultant services: Pat O’Connell -
      100,000 shares, Mathew Segal - 100,000 shares, Steven Kaufman - 50,000 shares,
      Martin Uniacke - 25,000 shares, Terry Macioge - 6,000 shares and William Gardner
      - 2,000 shares.





The
      Company relied upon the exemption provided in Section 4(2) of the Securities
      Act
      of 1933 in connection with above-referenced transactions. The Company relied
      on
      Section 4(2) with respect to these transactions as no public solicitation was
      employed, the shares bore restrictive legends, and the acquirers of the shares
      had access to the information which would be contained in the Registration
      Statement and had sufficient sophistication so as not to require the protection
      afforded by the Registration under the Securities Act. Each of the purchasers
      of
      the Company’s securities was given the opportunity to ask question of and
      received answers from Company management. No commission or other remuneration
      was paid or given in connection with the offer and sale of the
      securities.




**ITEM
      3**  **DEFAULTS UPON SENIOR SECURITIES**





The
      Company is currently in default on all of its convertible secured debentures
      that the Company has issued, in the total amount of $4,448,269. The Company
      is
      also currently in default on interest payments owed on these secured convertible
      debentures. As a result of these defaults, the Company is obligated to pay
      interest and certain other amounts. The Company does not have the capital
      resources to pay the amounts required. The debenture holders have informed
      the
      Company that they do not intend to take any action at this time due to the
      default. The Company does not, however, have any legally binding commitment
      from
      the debenture holders. The debentures are secured substantially by all of the
      Company's assets.





**ITEM
      4**  **SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS**





Not
      applicable.





**ITEM
      5**  **OTHER
      INFORMATION**




Not
      applicable.


39


**ITEM
      6**  **EXHIBITS**





31.1
      -
      Certification of Chief Executive Officer pursuant to Rule 13a-14 and Rule
      15d-14(a), promulgated under the Securities and Exchange Act of 1934, as
      amended




31.2
      -
      Certification of Chief Financial Officer pursuant to Rule 13a-14 and Rule 15d
      14(a), promulgated under the Securities and Exchange Act of 1934, as
      amended





32.1
      -
      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002 (Chief Executive Officer)





32.2
      -
      Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
      906 of the Sarbanes-Oxley Act of 2002 (Chief Financial Officer)


40


**SIGNATURES**





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


**COLLECTIBLE
                CONCEPTS GROUP, INC.**Date:
                January 16, 2007
            By:
            */s/
              PAUL S. LIPSCHUTZ*Paul
                S. Lipschutz
              Chief
                  Executive Officer (Principal Executive Officer), Principal Financial
                  Officer and Principal Accounting
                  Officer


41