**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 August 31, 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: 9,036,025,097 shares issued and
      outstanding as of October 13, 2006.





1


**COLLECTIBLE
      CONCEPTS GROUP, INC.**





**INDEX**PART
                I
            FINANCIAL
                STATEMENTSITEM
                1
            Condensed
                Consolidated Balance Sheets As Of August 31, 2006 (Unaudited) and
                February
                28, 2006
            3Condensed
                Consolidated Statements Of Operations For The Three and Six Months
                Ended
                August 31, 2006 and 2005 (Unaudited)
            4Condensed
                Consolidated Statement Of Changes In Shareholders' Deficiency For
                The Six
                Months ended August 31, 2006 (Unaudited)
            5Condensed
                Consolidated Statements Of Cash Flows For The Six Months ended August
                31,
                2006 and 2005 (Unaudited)
            6Notes
                To Condensed Consolidated Financial Statements As Of August 31, 2006
                (Unaudited)
            7-
                23ITEM
                2
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            23-
                31ITEM
                3
            Controls
                and Procedures
            34PART
                II
            OTHER
                INFORMATIONITEM
                1
            Legal
                proceedings
            35ITEM
                2
            Unregistered
                sales of equity securities and use of proceeds
            35ITEM
                3
            Defaults
                upon senior securities
            35ITEM
                4
            Submission
                of matters to a vote of security holders
            35ITEM
                5
            Other
                information
            35ITEM
                6
            Exhibits
            35SIGNATURES
            37




2


COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES
 CONDENSED
          CONSOLIDATED BALANCE SHEETS


August
                31,
            
            February
                28,2006
            
            2006ASSETS
            
            (Unaudited)CURRENT
                ASSETSCash
                and cash equivalents
            
            $
            -
            
            $
            74,738Accounts
                receivable, net of allowance of $19,856 and $10,517,
                respectively
            
            
            185,019
            
            
            57,835Inventories,
                net of allowance of $50,000 and $0, respectively
            
            
            508,943
            
            
            189,844Prepaid
                interest
            
            
            -
            
            
            20,625Prepaid
                royalties
            
            
            30,515
            
            
            62,416Other
                prepaid expenses
            
            
            100
            
            
            2,865Total
                current assets
            
            
            724,577
            
            
            408,323Property
                and equipment, net
            
            
            8,550
            
            
            1,130Other
                assets:Film
                library, net (Note B)
            
            
            -
            
            
            245,800Trade
                credits (Note A)
            
            
            -
            
            
            -Trademarks
            
            
            1,300
            
            
            1,300Deposits
            
            
            3,200
            
            
            3,200Total
                other assets
            
            
            4,500
            
            
            250,300TOTAL
                ASSETS
            
            $
            737,627
            
            $
            659,753LIABILITIES
                AND DEFICIENCY IN STOCKHOLDERS' EQUITYCURRENT
                LIABILITIESCash
                disbursed in excess of available balance
            
            $
            22,678
            
            $
            -Accounts
                payable and accrued expenses
            
            
            2,915,920
            
            
            2,898,725Accrued
                expenses, related party
            
            
            685,266
            
            
            744,513Notes
                and loans payable
            
            
            768,349
            
            
            483,459Loans
                payable, related party
            
            
            843
            
            
            1,878Convertible
                subordinated debentures (Note D)
            
            
            34,500
            
            
            127,300Convertible
                secured debentures (Note C)
            
            
            2,361,150
            
            
            1,887,399Total
                current liabilities
            
            
            6,788,706
            
            
            6,143,274Long
                term debt, less current maturitiesNotes
                payable
            
            
            200,000
            
            
            200,000Derivative
                liability related to convertible debentures
            
            
            17,574,000
            
            
            13,743,000Warrant
                liability related to convertible debentures
            
            
            25,360
            
            
            53,569Total
                long term liabilities
            
            
            17,799,360
            
            
            13,996,569Total
                liabilities
            
            
            24,588,066
            
            
            20,139,843COMMITMENTS
                AND CONTINGENCIES (Note H)DEFICIENCY
                IN STOCKHOLDERS' EQUITY (Note F)Preferred
                stock, par value $0.001 per share; 10,000,000 shares authorized,
                0 issued
                and outstanding
            
            
            -
            
            
            -Common
                stock, par value $0.001 per share; 15,000,000,000 shares authorized,
                9,036,025,097 and 699,695,037 issued and outstanding,
                respectively
            
            
            9,036,025
            
            
            699,694Common
                stock to be issued, 104,580,356 and 302,362,036,
                respectively
            
            
            89,731
            
            
            149,714Common
                stock subscription
            
            
            -
            
            
            15,000Subscription
                receivable
            
            
            -
            
            
            (15,000
            )Additional
                paid in capital
            
            
            8,001,868
            
            
            14,107,115Deferred
                equity based expense
            
            
            (10,000
            )
            
            (40,000
            )Accumulated
                deficit
            
            
            (40,968,063
            )
            
            (34,396,613
            )Total
                deficiency in stockholders' equity
            
            
            (23,850,439
            )
            
            (19,480,090
            )TOTAL
                LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
            
            $
            737,627
            
            $
            659,753





See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements


3
 COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES
 CONDENSED
            CONSOLIDATED STATEMENTS OF OPERATIONS
 (Unaudited)


Three
                months ended August 31,
            
            Six
                months ended August 31,2006
            
            2005
            
            2006
            
            2005Restated-See
                Note K
            
            
            
            Restated-See
                Note KREVENUES:Net
                sales
            
            $
            277,828
            
            $
            357,980
            
            $
            345,396
            
            $
            373,012Cost
                of sales
            
            
            242,677
            
            
            316,525
            
            
            386,915
            
            
            338,459Gross
                profit (loss)
            
            
            35,151
            
            
            41,455
            
            
            (41,519
            )
            
            34,553OPERATING
                EXPENSESSelling
                and administrative
            
            
            471,797
            
            
            350,548
            
            
            1,195,446
            
            
            641,186Impairment
                loss (Note B)
            
            
            233,200
            
            
            -
            
            
            233,200
            
            
            -Depreciation
                and amortization
            
            
            6,679
            
            
            735
            
            
            13,825
            
            
            3,223Total
                operating expenses
            
            
            711,676
            
            
            351,283
            
            
            1,442,471
            
            
            644,409LOSS
                FROM OPERATIONS
            
            
            (676,525
            )
            
            (309,828
            )
            
            (1,483,990
            )
            
            (609,856
            )Other
                income (expense)
            
            
            9,785
            
            
            7,000
            
            
            9,785
            
            
            7,000Financing
                costs related to conversion of convertible debt
            
            
            (549,177
            )
            
            -
            
            
            (1,356,826
            )
            
            -Gain
                (loss) on adjustment of derivative and warrant liability to fair
                value
            
            
            169,701
            
            
            (13,061,172
            )
            
            (2,902,791
            )
            
            (14,241,638
            )Interest
                expense
            
            
            (428,623
            )
            
            (393,920
            )
            
            (837,629
            )
            
            (624,579
            )Net
                loss before income taxes
            
            
            (1,474,838
            )
            
            (13,757,920
            )
            
            (6,571,450
            )
            
            (15,469,073
            )Income
                taxes
            
            
            -
            
            
            -
            
            
            -
            
            
            -NET
                (LOSS)
            
            $
            (1,474,838
            )
            $
            (13,757,920
            )
            $
            (6,571,450
            )
            $
            (15,469,073
            )Net
                loss per common shares outstanding (basic and diluted)
            
            $
            (0.00
            )
            $
            (0.02
            )
            $
            (0.00
            )
            $
            (0.02
            )Weighted
                average common shares outstanding (basic and diluted)
            
            
            6,263,318,107
            
            
            699,695,037
            
            
            3,879,214,215
            
            
            699,695,037





See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements




4


COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES


CONDENSED
        CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY
 SIX
        MONTHS ENDED AUGUST 31, 2006




Common
            
            Additional
            
            
            
            DeferredCommon
            
            Stock
            
            Common
                stock to be issued:
            
            Stock
            
            Paid
                in
            
            Subscription
            
            Equity
                based
            
            AccumulatedShares
            
            Amount
            
            Shares
            
            Amount
            
            Subscription
            
            Capital
            
            Receivable
            
            Compensation
            
            Deficit
            
            TotalBalance
                as of February 28, 2006
            
            
            699,695,037
            
            $
            699,694
            
            
            313,573,817
            
            $
            149,714
            
            $
            15,000
            
            $
            14,107,115
            
            $
            (15,000
            )
            $
            (40,000
            )
            $
            (34,396,613
            )
            $
            (19,480,090
            )Conversion
                of secured convertible debentures to common stock
            
            
            1,293,105,384
            
            
            1,293,105
            
            
            
            
            
            
            
            
            
            
            
            (781,414
            )
            
            
            
            
            
            
            
            
            
            
            511,691Conversion
                of subordinated convertible debentures to common stock and interest
                to
                common stock
            
            
            452,539,000
            
            
            452,539
            
            
            
            
            
            
            
            
            
            
            
            (271,526
            )
            
            
            
            
            
            
            
            
            
            
            181,013Conversion
                of notes and loans payable to common stock
            
            
            5,634,161,012
            
            
            5,634,162
            
            
            
            
            
            
            
            
            
            
            
            (4,445,095
            )
            
            
            
            
            
            
            
            
            
            
            1,189,067Amortization
                of deferred compensation expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            30,000
            
            
            
            
            
            30,000Common
                stock issued for services rendered
            
            
            588,700,000
            
            
            588,700
            
            
            
            
            
            
            
            
            
            
            
            (336,900
            )
            
            
            
            
            
            
            
            
            
            
            251,800Cash
                received on subscription
            
            
            27,000,000
            
            
            27,000
            
            
            
            
            
            
            
            
            (15,000
            )
            
            (12,000
            )
            
            15,000
            
            
            
            
            
            
            
            
            15,000Common
                stock issued for subscribed shares
            
            
            108,000,000
            
            
            108,000
            
            
            (108,000,000
            )
            
            (60,000
            )
            
            
            
            
            (48,000
            )
            
            
            
            
            
            
            
            
            
            
            -Common
                stock issued under late issuance stock subscription
                provisions
            
            
            143,500,000
            
            
            143,500
            
            
            (143,500,000
            )
            
            
            
            
            
            
            
            (143,500
            )
            
            
            
            
            
            
            
            
            
            
            -Common
                stock to be issued for anti-dilution note provisions
            
            
            
            
            
            
            
            
            131,831,203
            
            
            15,141
            
            
            
            
            
            (10,003
            )
            
            
            
            
            
            
            
            
            
            
            5,138Common
                stock issued for anti-dilution note provisions
            
            
            89,324,664
            
            
            89,325
            
            
            (89,324,664
            )
            
            (15,124
            )
            
            
            
            
            (59,077
            )
            
            
            
            
            
            
            
            
            
            
            15,124Fair
                value of options issued
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,267
            
            
            
            
            
            
            
            
            
            
            
            2,267Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (6,571,450
            )
            
            (6,571,450
            )Balance
                at August 31, 2006
            
            
            9,036,025,097
            
            $
            9,036,025
            
            
            104,580,356
            
            $
            89,731
            
            $
            -
            
            $
            8,001,867
            
            $
            -
            
            $
            (10,000
            )
            $
            (40,968,063
            )
            $
            (23,850,439
            )





See
      the
      accompanying notes to the unaudited condensed consolidated financial
      statements





5


COLLECTIBLE
        CONCEPTS GROUP, INC AND SUBSIDIARIES


CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS


(unaudited)




Six
                months ended August 31,2006
            
            2005Restated-See
              note KCASH
              FLOWS FROM OPERATING ACTIVITIES:Net
                loss
            
            $
            (6,571,450
            )
            $
            (15,469,073
            )Adjustments
                to reconcile net loss to net cash used in operating
                activities:Depreciation
                and amortization
            
            
            13,825
            
            
            3,223Provision
                for bad debt expense
            
            
            9,298
            
            
            -Impairment
                loss (Note B)
            
            
            233,200
            
            
            -Common
                stock issued in connection with services rendered, net of
                cancellations
            
            
            251,800
            
            
            85,634Common
                stock issued in connection with anti-dilution note
                provisions
            
            
            20,262Options
                issued for services rendered
            
            
            2,267
            
            
            -Amortization
                of deferred equity based expense
            
            
            30,000
            
            
            200,000Accretion
                of convertible notes payable
            
            
            558,999
            
            
            161,226Loss
                on conversion of notes and loans payable
            
            
            887,418
            
            
            -Loss
                on conversion of secured convertible debt
            
            
            42,463
            
            
            -Loss
                on conversion subordinate debt and interest
            
            
            426,445
            
            
            98,532Unrealized
                loss on adjustment of derivative and warrant liability to fair value
                of
                underlying securities
            
            
            2,902,791
            
            
            14,241,638(Increase)
                decrease in:Accounts
                receivable
            
            
            (136,482
            )
            
            (90,245
            )Loans
                receivable
            
            
            -
            
            
            1,245Inventories
            
            
            (319,098
            )
            
            (49,593
            )Prepaid
                interest
            
            
            20,625
            
            
            (106,119
            )Prepaid
                royalties
            
            
            31,801Other
                prepaid expenses
            
            
            2,865
            
            
            -Increase
                (decrease) in:Cash
                disbursed in excess of available balance
            
            
            22,678
            
            
            -Accounts
                payable and accrued expenses
            
            
            134,745
            
            
            153,612Net
                cash used in operating activities
            
            
            (1,435,548
            )
            
            (769,920
            )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
            
            
            (114,510
            )
            
            (17,380
            )Proceeds
                from notes and loans payable
            
            
            570,000
            
            
            15,000Repayments
                of notes payable-related party
            
            
            (1,235
            )
            
            (26,182
            )Proceeds
                from notes payable-related party
            
            
            200
            
            
            -Net
                cash provided from financing activities
            
            
            1,369,455
            
            
            1,254,770Net
                increase (decrease) in cash and cash equivalents
            
            
            (74,738
            )
            
            484,850Cash
                and cash equivalents at beginning of period
            
            
            74,738
            
            
            1,040Cash
                and cash equivalents at end of period
            
            $
            -
            
            $
            485,890SUPPLEMENTAL
                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 August 31, 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
      six months ended August 31, 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 August 31,
      2006 and February 28, 2006, allowance for doubtful account balance was $19,856
      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 191,046,766,000 common shares and 253,618,422 common
      shares as of August 31, 2006 and 2005, respectively, and the exercise of
      outstanding options and warrants to purchase 12,117,640,000 common shares and
      53,218,422 common shares as of August 31, 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. As
      of
      August 31, 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.





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.





7
 **COLLECTIBLE
            CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
            of August 31, 2006**
 **(Unaudited)**


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





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 six months ended August
      31,
      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 six months ended August 31, 2006 and
      therefore has no unrecognized stock compensation related liabilities or expense
      unvested or vested prior to 2006 and for the six months ended August 31, 2006.





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.





Reclassifications





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




8
 **COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of August 31, 2006**
 **(Unaudited)**






**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.





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.





**NOTE
      C - CONVERTIBLE SECURED DEBENTURES**





Notes
      payable at August 31, 2006 and February 28, 2006 are as follows:





August
                31,2006
            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) $0.04 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)
            $173,572
            $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) $0.01 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) $0.01 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
            250,000


9
 **COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of August 31, 2006**
 **(Unaudited)**







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





August
                31,2006
            February
                28,200615%
                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) $0.01 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 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) $0.01 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) $0.01 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) $0.01 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) $0.01 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


10
 **COLLECTIBLE
            CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
            of August 31, 2006**
 **(Unaudited)**





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





August
                31,2006
            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) $0.01 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) $0.01 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) $0.01 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)
                $0.0026 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)
            $239,726
            $176,71210%
                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)
                $0.0016 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)
            171,690
            104,475


11
 **COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of August 31, 2006**
 **(Unaudited)**


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





August
                31,2006
            February
                28,200610%
                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)
                $0.0016 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)
            326,027
            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)
                $0.0016 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)
            92,852
            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)
                $0.0016 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)
            $81,461
            $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)
                $0.03 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)
            58,813
            -0-8%
                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)
                $0.03 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)
            42,009
            -0-2,361,150
            1,887,399Less
                current portion
            2,361,150
            1,887,399Long
                term portion
            $
                -0-
            $
                -0-





12
 **COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of August 31, 2006**
 **(Unaudited)**




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





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 4,000,000 shares of the Company’s common stock at an exercise price of
      $0.20 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) $0.04 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 August 31, 2006, the remaining
      balance of these debentures of $173,572 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 150,000 shares of the Company’s common stock at an exercise price
      $0.005 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) $0.01 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 August 31, 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 500,000 shares of the Company’s common stock at an exercise price of
      $0.0045 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) $0.01 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 August 31, 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 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 50,000 shares of the Company’s common stock at an exercise price of
      $0.004 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) $0.01 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 August 31, 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 50,000 shares of the Company’s common stock at an exercise price of
      $0.002 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) $0.01 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 August 31, 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 50,000 shares of the Company’s common stock at an exercise price of
      $0.001 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) $0.01 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 August 31, 2006, the remaining balance of these debentures of $25,000
      is
      still unpaid and in default.





13
 **COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of August 31, 2006**
 **(Unaudited)**




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





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 100,000 shares of the Company’s common stock at an exercise price of
      $0.001 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) $0.01 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 August 31, 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 100,000 shares of the Company’s common stock at an exercise price of
      $0.001 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) $0.01 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 August 31, 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 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 50,000 shares of the Company’s common stock at an exercise price of
      $0.0015 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) $0.01 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 August 31, 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 200,000 shares of the Company’s common stock at an exercise price of
      $0.0015 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) $0.01 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 August 31, 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 1,650,000 shares of the Company’s common stock at an exercise price
      of $0.03 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) $0.01 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 August 31, 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 1,250,000 shares of the Company’s common stock at an
      exercise price of $0.03 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) $0.0026 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 August 31, 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 August 31, 2006**
 **(Unaudited)**




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





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 47,368,422 shares of the Company’s common stock at an exercise price
      of $0.0016 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) $0.0016 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 August 31, 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 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 1,700,000 shares of the Company’s common stock at an exercise price
      of $0.0016 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) $0.0016 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 August 31, 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) $0.0016 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 August 31, 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 400,000 shares of the Company’s common stock at an exercise price of
      $0.002 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) $0.0016 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 August 31, 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 100,000,000 shares of the Company’s common stock at an exercise
      price of $0.005 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) $0.03 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 August 31, 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 100,000,000 shares of the Company’s common stock at an exercise
      price of $0.005 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) $0.03 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 August 31, 2006, the remaining balance of these debentures
      of
      $500,000 is still unpaid and in default.





15
 **COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of August 31, 2006**
 **(Unaudited)**




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





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:





·
            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 August 31, 2006 and February 28, 2006:





August
                31,
              2006
            
            February
                28,
              2006Convertible
                debentures described above (net of conversions)
            
            $
            4,451,169
            
            $
            3,636,417Less:
                discount
            
            
            (2,090,019
            )
            
            (1,749,018
            )Convertible
                debentures as reported
            
            $
            2,361,150
            
            $
            1,887,399





**NOTE
      D - CONVERTIBLE SUBORDINATED DEBENTURES**





Convertible
      subordinated debentures as of August 31, 2006 and February 28, 2006 are as
      follows:





August
                31,
              2006
            
            February
                28,
              200612%
                convertible debenture, unsecured with a maturity of August 2001.
                The
                debenture is convertible into the Company’s common stock at $0.05 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 $0.075 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
                $0.04 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
            
            $
            -
            
            $
            -




16
 **COLLECTIBLE
            CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
            of August 31, 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
      August 31, 2006, the Company has borrowed $471,500, net, from this facility
      which is included in notes and loans payable.





**NOTE
      F - CAPITAL STOCK**





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
      six months ended August 31, 2006, the Company issued 89,324,664 under this
      provision to the third party. An additional 51,380,356 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 August 31, 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.





During
      the six months ended August 31, 2006, the Company issued 108,000,000 shares
      of
      common stock for $60,000 received in fiscal 2006 and 27,000,000 shares of common
      stock for $15,000 received in first quarter of fiscal 2007. In addition, the
      Company issued 143,500,000 common shares under a late issuance stock
      subscription provision.





During
      the six months ended August 31, 2006, the Company issued 588,700,000 shares
      of
      its common stock for $251,800 of services rendered.





During
      the three months ended May 31, 2006, the Company converted $63,804 of
      convertible secured debentures into 604,200,000 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 $92,800 of
      convertible subordinated debentures and $48,749 in related interest into
      452,539,000 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 $39,464 on these conversions.





During
      the three months ended May 31, 2006, the Company converted $147,150 of notes
      and
      loans payable into 1,134,161,012 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 $21,444 of
      convertible secured debentures into 688,905,384 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 August 31, 2006, the Company converted $152,500 of loans
      payable into 4,500,000,000 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





On
      August
      31, 2006, the last reported sales price of the Company’s common stock was
      $0.0001 per share, which is less than the $0.001 par value of our common stock.
      Delaware law restricts sales of unissued shares of common stock at a price
      less
      than the par value of the common stock. The purchaser of such shares may be
      assessed for any difference between par value and the sales price less than
      par
      value. For the six months ended August 31, 2006 the Company has issued common
      stock at below par value in satisfaction of debt and other obligations.


17
 **COLLECTIBLE
            CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
            of August 31, 2006**
 **(Unaudited)**


**NOTE
      G - STOCK OPTIONS**





In
      December 2003, the Company issued 20,000,000 options to a consultant having
      a
      ten-year term. The exercise price is $0.001 for the first 5,000,000 options,
      $0.002 for the next 5,000,000 options, $0.003 for the next 5,000,000 options
      and
      $0.004 for the last 5,000,000 options. The only restriction is that no more
      than
      5,000,000 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 was $1,667 and $4,167 for the six months ended August 31, 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 $0.003. As of August 31, 2006, the related agreement
      was canceled and options voided. .





**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 $311,275 ($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 $44,770 and $61,845
      for
      the six months ended August 31, 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 August 31, 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 August 31, 2006 cannot currently be
      determined.





18
 **COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of August 31, 2006**
 **(Unaudited)**




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





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.





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.


19
 **COLLECTIBLE
            CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
            TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
            of August 31, 2006**
 **(Unaudited)**


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





Concentrations





For
      the
      six months ended August 31, 2006 and 2005, 59% and 87%, of the Company’s
      revenues were derived from its three largest customers, respectively.





For
      the
      six months ended August 31, 2006 and 2005, 96.9% and 96.0%, of the Company’s
      purchases were made from its 4 largest vendors, respectively.





The
      Company obtains a significant portion of its new borrowings from one investment
      group. During the six months ended August 31, 2006, the Company borrowed
      $900,000 from this investment group. As of August 31, 2006, a total of
      $4,451,169 was owed to this investment group (See Note C).





Debt
      Conversions





As
      of
      August 31, 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 15,000,000,000 to partly rectify the situation but a possible
      shortfall still exists. 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 Note D).





In
      the
      six months ended August 31, 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 to
      defer
      a portion of his salary in support of the cash needs of the Company. As of
      August 31, 2006 and 2005, the amount of salary deferred was $547,979 and
      $601,821, respectively, which is included in accrued expenses - related parties.
      Also $137,287 and $186,743 of accrued compensation were due to the Company’s
      President’s wife as of August 31, 2006 and 2005, respectively.





The
      Company has loans payable of $843, which are included as loans payable - related
      party in the accompanying consolidated balance sheet, due to a related party
      as
      of August 31, 2006. During the six months ended August 31, 2006, the Company
      recorded interest expense of $50 relating to loans from its president and other
      related parties and $39,816 in accrued interest was payable relating to these
      loans as of August 31, 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 six months ended August 31, 2006, the Company converted $85,248 of
      convertible secured debentures into 1,293,105,384 shares of common stock and
      a
      $425,614 loss on adjustment of derivative and warrant liability to fair value
      was recognized accordingly.





During
      the six months ended August 31, 2006, the Company converted $89,800 of
      convertible subordinated debentures and $48,749 of related interest into
      452,539,000 shares of common stock and $42,464 financing cost was recognized
      accordingly.





During
      the six months ended August 31, 2006, the Company converted $299,650 of notes
      and loans payable into 5,634,161,012 shares of common stock and a $889,417
      financing cost was recognized accordingly.





During
      the six months ended August 31, 2006, the Company received $376,227 in trade
      credits for sale of inventory included in revenue. As of August 31, 2006, the
      Company has reserved fully against these trade credits..





20
 **COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of August 31, 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 August 31, 2006 financial statements in accordance with
      SFAS
      154. The necessary corrections to apply the impact to the previously issued
      August 31, 2005 financial statements are as follows:





Three
      months ended:





August
                31, 2005 financial statement balance prior torestatement
            
            August
                31, 2005 financial statementpost
                restatement
            
            Amount
                increase (decrease) in August 31, 2005financialstatementsNet
                loss
            
            $
            (594,515
            )
            $
            (13,757,920
            )
            $
            (13,163,405
            )Loss
                per share-basic and diluted
            
            $
            (0.00
            )
            $
            (0.02
            )
            $
            (0.02
            )





Six
      months ended:





August
                31, 2005 financial statement balance prior torestatement
            
            August
                31, 2005 financial statementpost
                restatement
            
            Amount
                increase (decrease) in August 31, 2005financialstatementsNet
                loss
            
            $
            (1,066,209
            )
            $
            (15,469,073
            )
            $
            (14,402,864
            )Loss
                per share-basic and diluted
            
            $
            (0.00
            )
            $
            (0.02
            )
            $
            (0.02
            )





The
      resulting effects on the prior period adjustments on the August 31, 2005 cash
      flows by area are as follows:





August
                31, 2005 financial statement balance prior torestatement
            
            August
                31, 2005 financial statement postrestatement
            
            Amount
                increase (decrease) in August 31, 2005 financialstatementsNet
                cash from operating activities
            
            $
            (769,920
            )
            $
            (769,920
            )
            $
            -Net
                cash from investing activities
            
            
            -
            
            
            -
            
            
            -Net
                cash from financing activities
            
            
            1,254,770
            
            
            1,254,770
            
            
            -





21
 **COLLECTIBLE
          CONCEPTS GROUP, INC AND SUBSIDIARIES**
 **NOTES
          TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **As
          of August 31, 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 six months ended August 31, 2006, the Company had a working
      capital deficiency of $6,064,130, a stockholders’ deficiency of $23,850,439 a
      net loss of $6,571,450 and net cash used in operations of $1,435,548. 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.


22
  *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 Nick Fegen, an investor in 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.





23


Additionally,
      we expect to open either in joint ventures or as customers, twenty-five mall
      kiosks for this holiday season with the kiosks being open for two months,
      November and December. These kiosks will carry the full line of American Sports
      Ventures as well as Brax3D products as well as Collectible Concepts proprietary
      licensed products. Each kiosk will be stocked with college and professional
      sports team items and will concentrate on the local regional teams for that
      area. We anticipate opening up to 25 mall kiosks, and we currently have
      agreements or are finalizing agreements for the following locations: Cherry
      Hill, New Jersey, Willow Grove, Pennsylvania, Monmouth, New Jersey, Christiana,
      Delaware, Neshaminy Valley and four others in Iowa amongst others throughout
      the
      country.





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 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.





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.








24


**RESULTS
      OF OPERATIONS**





**SIX
      MONTHS ENDED AUGUST 31, 2006 COMPARED TO SIX MONTHS ENDED AUGUST 31, 2005.**





Net
      revenue for the six months ended August 31, 2006 was $345,396 compared to
      $373,012 for the six months ended August 31, 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
      decrease 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 the company`s full focus became selling these products. As with
      any
      change-over of this nature, it is taking the company resources and redirecting
      them, which leads to a short term revenue decrease while our inventory and
      marketing catch up to the company`s new direction.





Sales
      for
      the six months ended August 31, 2006 were comprised of products offered with
      our
      National Football League License and College Licenses. 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
      determine 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 certain of 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.





Cost
      of
      sales for the six months ended August 31, 2006 increased by $48,456 from
      $338,459 for the six months ended August 31, 2005 to $386,915 for the six months
      ended August 31, 2006.  This
      increase was mainly attributable to a decrease sales volume. Cost of sales
      as a
      percentage of revenues increased to 112% for the six months ended August 31,
      2006 from 90.7% for the same period last year.





Cost
      of
      sales for the six months ended August 31, 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. 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 six months ended August 31, 2006 increased
      to $1,195,446 from $641,186 for the same period the previous year. The increase
      in selling and administrative expenses were mainly a result of increases sales
      for the period. For the six months ended August 31, 2006 we incurred $251,800
      in
      non cash services through the issuance of common stock.





25


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 $837,629 for the six months ended August 31, 2006
      as compared to $624,579 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 $600,621 and $298,532 of interest expense
      respectively for the six months ended August 31, 2006 and August 31, 2005,
      respectively.





For
      the
      six months ended August 31, 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 $2,902,791 as compared with $14,241,638 during the
      prior year.





As
      a
      result of the above, we had a net loss of $6,571,450 for the six months ended
      August 31, 2006 as compared to a net loss of $15,469,073 for the same period
      last year.





**THREE
      MONTHS ENDED AUGUST 31, 2006 COMPARED TO THREE MONTHS ENDED AUGUST 31, 2005.**





Net
      revenue for the three months ended August 31, 2006 was $277,828 compared to
      $357,980 for the three months ended August 31, 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
      decrease in net revenue was a result of total sales focus on retail to be
      prepared for the upcoming 2006 holiday season as compared to a large amount
      of
      promotional sales for the three months ended August 31, 2005.





Sales
      for
      the three months ended August 31, 2006 decreased from the three months ended
      August 31, 2005 due to a decrease in promotional sales. Sales of non-promotional
      items were $272,096 for the three months ended August 31, 2006 as compared
      to
      $37,930 for the three months ended August 31, 2005.





Cost
      of
      sales for the three months ended August 31, 2006 decreased by $73,848 from
      $316,525 for the three months ended August 31, 2005 to $242,677 for the three
      months ended August 31, 2006.  This
      decrease was mainly attributable the decrease in extraordinary shipping cost
      incurred for delivery of promotional products which was caused by manufacturing
      delays. Cost of sales as a percentage of revenues decreased to 87.3% for the
      three months ended August 31, 2006 from 88.4% for the same period last year.





Cost
      of
      sales for the three months ended August 31, 2006 were comprised of costs
      associated with the sale of the products related to the National Football League
      License and College Licenses. 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.





26


Selling
      and administrative expenses for the three months ended August 31, 2006 increased
      to $471,797 from $350,548 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 $428,623 for the three months ended August 31,
      2006
      as compared to $393,920 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 $361,392 and $177,907 of interest expense
      respectively for the three months ended August 31, 2006 and August 31, 2005,
      respectively.





For
      the
      three months ended August 31, 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 $169,701 as compared with
      ($13,061,172) during the prior year.





As
      a
      result of the above, we had a net loss of $1,474,838 for the three months ended
      August 31, 2006 as compared to a net loss of $13,757,920 for the same period
      last year.





**LIQUIDITY
      AND CAPITAL RESOURCES**





As
      of
      August 31, 2006, we had a working capital deficiency of $6,064,129.  The
      working capital deficit as of August 31, 2006 is a direct result of the
      unprofitable operations for prior years as well as for the past three months
      ended August 31, 2006 that resulted in cash used in operating activities of
      $1,435,548. We had an ending  cash
      balance  of
      $0 at
      August 31, 2006. As such, we need to raise additional capital to continue
      operations for the within the next twelve months. 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 six months ended August 31, 2006, we received
      the
      following capital infusions: $900,000 from issuance of secured convertible
      debentures, $570,000 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 $750,000 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.





27


As
      of
      August 31, 2006, we had $769,192 in outstanding notes and loans payable, (of
      which $843 is due to related parties), $34,500 in convertible subordinated
      debentures and $2,361,150 in outstanding convertible secured debentures. As
      of
      August 31, 2006, we had $2,915,920 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.





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
              ($173,572
                remaining)
            10%
            $0.04
                or 25% of market value
            4,000,000May
                28, 2002
            $75,000
            12%
            $.01
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            150,000November
                26, 2002
            $250,000
            15%
            $.01
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            500,000May
                15, 2003
            $25,000
            15%
            $.01
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            50,000June
                20, 2003
            $25,000
            15%
            $.01
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            50,000July
                23, 2003
            $25,000
            15%
            $.01
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            50,000November
                14, 2003
            $50,000
            15%
            $.01
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            100,000January
                13, 2004
            $50,000
            15%
            $.01
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            100,000February
                13, 2004
            $25,000
            15%
            $.01
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            50,000






28




March
                16, 2004
            $100,000
            15%
            $.01
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            200,000May
                28, 2004
            $550,000
            15%
            $.01
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            1,650,000September
                30, 2004
            $250,000
            15%
            $.0026
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            1,250,000May
                18, 2005
            $400,000
            10%
            $.0016
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            47,368,422July
                7, 2005
            $850,000
            10%
            $.0016
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            1,700,000September
                29, 2005
            $302,597
            2%
            $0.0016
                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%
            $0.0016
                or 20% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            400,000March
                23, 2006
            $400,000
            8%
            $0.03
                or 20% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            100,000,000May
                31, 2006
            $500,000
            8%
            $0.03
                or 25% of the average of the lowest three intraday trading prices
                during
                the twenty trading days immediately preceding conversion
            100,000,000





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 October 11, 2006, 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 $.0001 and,
      therefore, the conversion price for the secured convertible notes was $.000025
      at 25% or $.00002 at 20%. Based on this conversion price, the $4,463,725 in
      secured convertible notes remaining, excluding interest, would convert into
      186,549,000,000 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.





29


In
      August
      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 $0.01 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.





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 $.001 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 11,428,571
      shares of common stock. The debentures are in default.





Earlier
      this year, we increased the number of authorized shares of common stock to
      15,000,000,000, 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 August 31, 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.





30


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.





**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 August 31, 2006, we had an allowance
      for
      bad debts of $19,856. 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 August 31,
      2006, we had inventory of $508,943 on hand.




31


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.





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 $2,902,791
      and
      $14,241,638 for the six months ended August 31, 2006 and 2005,
      respectively.





**Recent
      Accounting Pronouncements**





In
      December 2004, the FASB issued SFAS No. 123 (R), “Share-Based Payment”. SFAS No.
      123 (R) revises SFAS No. 123, “Accounting for Stock-Based Compensation” and
      supersedes APB Opinion No. 25, “Accounting for Stock Issued to Employees”. SFAS
      No. 123 (R) focuses primarily on the accounting for transactions in which an
      entity obtains employee services in share-based payment transactions. SFAS
      No.
      123 (R) requires companies to recognize in the statement of operations the
      cost
      of employee services received in exchange for awards of equity instruments
      based
      on the grant-date fair value of those awards (with limited exceptions). SFAS
      No.
      123 (R) is effective as of the first interim or annual reporting period that
      begins after June 15, 2005 for non-small business issuers and after December
      15,
      2005 for small business issuers. Accordingly, the Company adopted SFAS No.
      123
      (R) in its quarter ending March 31, 2006. The Company did not have an impact
      from this revised standard or any significant impact on the Company’s results of
      operations.





In
      November 2004, the FASB issued Statement of Financial Accounting Standards
      No. 151, "Inventory Costs". This statement amends the guidance
      in ARB No. 43 Chapter 4 Inventory Pricing to require items such as idle facility
      costs, excessive spoilage, double freight and handling costs to be expenses
      in
      the current period, regardless if they are abnormal amounts or not. This
      Statement became become effective for the Company in the quarter ended May
      31,
      2006. The
      adoption of this Statement had no immediate material impact on the
      Company.




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.





32


On
      February 16, 2006 the 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
      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 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.






33


**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 August 31, 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.






34


**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 six months ended August 31, 2006, we issued 588,700,000 shares for various
      services rendered.including **** 326,000,000
      shares to Paul Lipschutz and 101,000,000 shares to Jay Lipschutz for their
      services as officers and directors. In addition, the following shares were
      issued for financial consulting services: Richard Day - 2,000,000 shares, Robert
      Orr - 4,000,000 shares, Ken Volstad - 16,000,000 shares, and Ray Maiwurm -
      111,400,000 shares. The following shares were issued for sales consultant
      services: Pat O’Connell - 10,000,000 shares, Mathew Segal - 10,000,000 shares,
      Steven Kaufman - 5,000,000 shares, Martin Uniacke - 2,500,000 shares, Terry
      Macioge - 600,000 shares and William Gardner - 200,000 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 $4,451,169. 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.




35


**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)













36


**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: October
              20, 2006
            By:
            */s/* *PAUL
              S. LIPSCHUTZ*Paul
                S. Lipschutz
                Chief
                  Executive Officer (Principal Executive Officer), Principal Financial
                  Officer and Principal Accounting Officer




37