Table of Contents

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UnitedStatesSecurities and ExchangeCommission

Washington, D.C. 20549

FORM10-QSB

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OFTHESECURITIES EXCHANGE ACT OF 1934

For thequarterly period ended June  30,  2006

CommissionFile Number 0-25563

CKRUSH,INC.

(Name of small business issuer initscharter)

|                                                              |  |  |                                        |
|--------------------------------------------------------------|--|--|----------------------------------------|
| Delaware                                                     |  |  | 65-0648808                             |
| (Stateor other jurisdiction of incorporation ororganization) |  |  | (I.R.S.Employer Identification Number) |
|                                                              |

336 West37th StreetNew York, NY10018

(Address & Zip code ofprincipal executive offices)

(212)564-1111

(Issuer's telephonenumber)

1414 Avenue of Americas,Suite 406New York, NY10019

(Former name, former address andformer fiscal year,if changed since lastreport)

Check whether the issuer (1) filed allreports required to be filed by Section 13 or 15(d) of the Exchange Actduring the last 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subjectto such filing requirements for the past 90 days.Yes    No 

APPLICABLE ONLY TO CORPORATEISSUERS

State the number of shares outstanding of each ofthe issuer's classes of common equity, as of the latestpracticable date:

As of August 10, 2006, there were82,374,978 outstanding shares of common stock, par value $0.01 pershare.

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CKRUSH, INC. ANDSUBSIDIARIES

INDEXTOFORM10-QSB

|        |  |  |                                                                                                                    |  |  |      |  |        |  |
|--------|--|--|--------------------------------------------------------------------------------------------------------------------|--|--|------|--|--------|--|
|   |  |  |                                                                                                               |  |  | Page |
| PARTI  |  |  | FINANCIALINFORMATION                                                                                               |  |  |      |  |   |  |
| Item1. |  |  | FinancialStatements                                                                                                |  |  |      |  | 3      |  |
|   |  |  | CondensedConsolidated Balance Sheet at June 30, 2006(Unaudited)                                                    |  |  |      |  | 3      |  |
|   |  |  | CondensedConsolidated Statement of Operations for the three and six months endedJune 30, 2006 and 2005(Unaudited)  |  |  |      |  | 4      |  |
|   |  |  | CondensedConsolidated Statement of Stockholders’ Deficiency for the sixmonths ended June 30, 2006(Unaudited) |  |  |      |  | 5      |  |
|   |  |  | CondensedConsolidated Statement of Cash Flows for the six months endedJune 30, 2006 and 2005(Unaudited)            |  |  |      |  | 6      |  |
|   |  |  | Notes toCondensed Consolidated FinancialStatements                                                                 |  |  |      |  | 7      |  |
| Item2. |  |  | Management's Discussion and Analysis or Plan ofOperation                                                           |  |  |      |  | 20     |  |
| Item3. |  |  | Controls andProcedures                                                                                             |  |  |      |  | 25     |  |
| PARTII |  |  | OTHERINFORMATION                                                                                                   |  |  |      |  |   |  |
| Item1. |  |  | LegalProceedings                                                                                                   |  |  |      |  | 27     |  |
| Item2. |  |  | Unregistered Sales of Equity Securities and Use ofProceeds                                                         |  |  |      |  | 28     |  |
| Item3. |  |  | Defaults Upon SeniorSecurities                                                                                     |  |  |      |  | 28     |  |
| Item4. |  |  | Submission of Matters to a Vote of SecurityHolders                                                                 |  |  |      |  | 28     |  |
| Item5. |  |  | OtherInformation                                                                                                   |  |  |      |  | 28     |  |
| Item6. |  |  | Exhibits                                                                                                           |  |  |      |  | 29     |  |
|   |  |  | SIGNATURES                                                                                                         |  |  |      |  |   |  |
|   |  |  | CERTIFICATIONS                                                                                                     |  |  |      |  |   |  |
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Table of Contents

PART I —FINANCIAL INFORMATION

|               |                     |
|---------------|---------------------|
| Item 1.  | FINANCIALSTATEMENTS |

CKRUSH, INC. AND SUBSIDIARIESCONDENSEDCONSOLIDATED BALANCESHEET

|                                                                                                                                                 |  |  |             |   |             |                 |  |  |  |   |             |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------|--|--|-------------|---|-------------|-----------------|--|--|--|---|-------------|---|
|                                                                                                                                            |  |  | June30,2006 |   |             | December31,2005 |
|                                                                                                                                            |  |  | (unaudited) |   |             |            |
| Assets                                                                                                                                          |  |  |             |   |        |                 |  |  |  |   |        |   |
| Cash                                                                                                                                            |  |  |             | $ | 99,310      |                 |  |  |  | $ | 57,533      |   |
| Accountsreceivable                                                                                                                              |  |  |             |   | 11,391      |                 |  |  |  |   | 15,431      |   |
| Prepaidexpenses and otherassets                                                                                                                 |  |  |             |   | 104,872     |                 |  |  |  |   | 143,955     |   |
| Filmcosts                                                                                                                                       |  |  |             |   | 4,656,418   |                 |  |  |  |   | 3,998,746   |   |
| Assetsheld for sale to formerpresident                                                                                                          |  |  |             |   | —     |                 |  |  |  |   | 213,559     |   |
| Propertyand equipment –net                                                                                                                |  |  |             |   | 104,127     |                 |  |  |  |   | 18,962      |   |
| Cash –restricted                                                                                                                          |  |  |             |   | 61,164      |                 |  |  |  |   | 150,000     |   |
| TotalAssets                                                                                                                                     |  |  |             | $ | 5,037,282   |                 |  |  |  | $ | 4,598,186   |   |
| Liabilitiesand Stockholders'Deficiency                                                                                                          |  |  |             |   |        |                 |  |  |  |   |        |   |
| Accounts payableand accruedexpenses                                                                                                             |  |  |             | $ | 5,472,185   |                 |  |  |  | $ | 4,900,440   |   |
| Accruedlitigation and judgmentspayable                                                                                                          |  |  |             |   | 2,317,667   |                 |  |  |  |   | 2,135,103   |   |
| Notesand loans payable, including accruedinterest                                                                                               |  |  |             |   | 2,606,807   |                 |  |  |  |   | 2,671,231   |   |
| Deferredsettlement with relatedparty                                                                                                            |  |  |             |   | —     |                 |  |  |  |   | 1,478,845   |   |
| Due torelatedparties                                                                                                                            |  |  |             |   | 375,203     |                 |  |  |  |   | 606,939     |   |
| Participationpayables                                                                                                                           |  |  |             |   | 400,000     |                 |  |  |  |   | 400,000     |   |
| TotalLiabilities                                                                                                                                |  |  |             |   | 11,171,862  |                 |  |  |  |   | 12,192,558  |   |
| MinorityInterest                                                                                                                                |  |  |             |   | 5,305,525   |                 |  |  |  |   | 4,708,130   |   |
| Commitments,Contingencies and OtherMatters                                                                                                      |  |  |             |   |        |                 |  |  |  |   |        |   |
| Stockholders'Deficiency                                                                                                                         |  |  |             |   |        |                 |  |  |  |   |        |   |
| Series D, $.01 parvalue, authorized 399,752 shares, 399,752 shares issued and outstanding(liquidation preference of$2,430,000)                  |  |  |             |   | 3,998       |                 |  |  |  |   | 3,998       |   |
| Series E,$.01 par value, authorized 14,000 shares,1,278 and 1,388 sharesissued and outstanding (liquidation preference of $459,986 and$499,680) |  |  |             |   | 13          |                 |  |  |  |   | 14          |   |
| Common stock, $.01par value, authorized 100,000,000 shares 82,374,978 and 70,994,163shares issued andoutstanding                                |  |  |             |   | 823,750     |                 |  |  |  |   | 709,942     |   |
| Additionalpaid-incapital                                                                                                                        |  |  |             |   | 50,700,557  |                 |  |  |  |   | 40,872,945  |   |
| Accumulateddeficit                                                                                                                              |  |  |             |   | (55,684,339 | )               |  |  |  |   | (48,363,005 | ) |
| Deferredcompensation                                                                                                                            |  |  |             |   | (7,199,084  | )               |  |  |  |   | (5,441,396  | ) |
| Treasurystock, at cost – 104,784 shares of commonstock                                                                                    |  |  |             |   | (85,000     | )               |  |  |  |   | (85,000     | ) |
| TotalStockholders'Deficiency                                                                                                                    |  |  |             |   | (11,440,105 | )               |  |  |  |   | (12,302,502 | ) |
| TotalLiabilities and Stockholders'Deficiency                                                                                                    |  |  |             | $ | 5,037,282   |                 |  |  |  | $ | 4,598,186   |   |
|                                                                                                                                                 |

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CKRUSH, INC. ANDSUBSIDIARIESCONDENSED CONSOLIDATED STATEMENT OFOPERATIONS

|                                                                        |  |  |                          |   |            |                        |  |  |      |   |            |      |  |  |  |   |            |   |  |  |  |   |            |   |
|------------------------------------------------------------------------|--|--|--------------------------|---|------------|------------------------|--|--|------|---|------------|------|--|--|--|---|------------|---|--|--|--|---|------------|---|
|                                                                   |  |  | Threemonths endedJune 30 |   |            | Six months endedJune30 |
|                                                                   |  |  | 2006                     |   |            | 2005                   |  |  | 2006 |   |            | 2005 |
| Netrevenues                                                            |  |  |                          | $ | 15,250     |                        |  |  |      | $ | 226,691    |      |  |  |  | $ | 75,470     |   |  |  |  | $ | 305,207    |   |
| Operatingcosts andexpenses                                             |  |  |                          |   |       |                        |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |       |   |
| Costofrevenues                                                         |  |  |                          |   | 810        |                        |  |  |      |   | 107,725    |      |  |  |  |   | 69,556     |   |  |  |  |   | 207,314    |   |
| Selling,general andadministrative                                      |  |  |                          |   | 6,580,968  |                        |  |  |      |   | 1,368,867  |      |  |  |  |   | 8,216,045  |   |  |  |  |   | 2,732,429  |   |
| Depreciationandamortization                                            |  |  |                          |   | 1,663      |                        |  |  |      |   | 115,128    |      |  |  |  |   | 18,951     |   |  |  |  |   | 236,586    |   |
| Impairmentcharge                                                       |  |  |                          |   | 30,000     |                        |  |  |      |   |       |      |  |  |  |   | 77,000     |   |  |  |  |   |       |   |
| Settlmentcosts                                                         |  |  |                          |   | 186,417    |                        |  |  |      |   |       |      |  |  |  |   | 186,417    |   |  |  |  |   |       |   |
| Gainon sale of exclusive promotionagreements                           |  |  |                          |   | (3,000     | )                      |  |  |      |   |       |      |  |  |  |   | (21,852    | ) |  |  |  |   |       |   |
| Lossfromoperations                                                     |  |  |                          |   | (6,781,608 | )                      |  |  |      |   | (1,365,029 | )    |  |  |  |   | (8,470,647 | ) |  |  |  |   | (2,871,122 | ) |
| Otherincome(expenses)                                                  |  |  |                          |   |       |                        |  |  |      |   |       |      |  |  |  |   |       |   |  |  |  |   |       |   |
| Interestexpense                                                        |  |  |                          |   | (195,101   | )                      |  |  |      |   | (122,823   | )    |  |  |  |   | (368,860   | ) |  |  |  |   | (240,130   | ) |
| Interestexpense – relatedparties                                 |  |  |                          |   |       |                        |  |  |      |   | (55,407    | )    |  |  |  |   |       |   |  |  |  |   | (109,958   | ) |
| Financingcosts paid in common stock andwarrants                        |  |  |                          |   |       |                        |  |  |      |   | (110,250   | )    |  |  |  |   | (33,000    | ) |  |  |  |   | (154,000   | ) |
| Gainon settlement with relatedparty                                    |  |  |                          |   | 1,478,845  |                        |  |  |      |   |       |      |  |  |  |   | 1,478,845  |   |  |  |  |   |       |   |
| Minorityinterest                                                       |  |  |                          |   | 54,033     |                        |  |  |      |   |       |      |  |  |  |   | 72,328     |   |  |  |  |   |       |   |
|                                                                   |  |  |                          |   | 1,337,777  |                        |  |  |      |   | (288,480   | )    |  |  |  |   | 1,149,313  |   |  |  |  |   | (504,088   | ) |
| Netloss                                                                |  |  |                          | $ | (5,443,831 | )                      |  |  |      | $ | (1,653,509 | )    |  |  |  | $ | (7,321,334 | ) |  |  |  | $ | (3,375,210 | ) |
| Netloss per common share (basic anddiluted)                            |  |  |                          | $ | (0.07      | )                      |  |  |      | $ | (0.03      | )    |  |  |  | $ | (0.10      | ) |  |  |  | $ | (0.06      | ) |
| Weightedaverage number of common shares outstanding (basic anddiluted) |  |  |                          |   | 78,069,134 |                        |  |  |      |   | 59,257,196 |      |  |  |  |   | 74,760,918 |   |  |  |  |   | 57,988,469 |   |
|                                                                        |

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Table of Contents

CKRUSH, INC. ANDSUBSIDIARIESCONDENSED CONSOLIDATED STATEMENT OFSTOCKHOLDERS’DEFICIENCY

|                                                                                  |  |  |                |  |         |                     |  |  |                         |   |        |                    |  |  |                      |  |        |               |  |  |                              |   |        |        |  |  |  |  |            |  |  |  |  |   |         |  |  |  |  |   |            |   |  |  |  |   |             |   |  |  |  |   |            |   |  |  |  |  |          |   |  |  |  |   |         |   |  |  |  |   |             |   |
|----------------------------------------------------------------------------------|--|--|----------------|--|---------|---------------------|--|--|-------------------------|---|--------|--------------------|--|--|----------------------|--|--------|---------------|--|--|------------------------------|---|--------|--------|--|--|--|--|------------|--|--|--|--|---|---------|--|--|--|--|---|------------|---|--|--|--|---|-------------|---|--|--|--|---|------------|---|--|--|--|--|----------|---|--|--|--|---|---------|---|--|--|--|---|-------------|---|
|                                                                             |  |  | PreferredStock |  |         | CommonStock         |  |  | AdditionalPaidinCapital |   |        | AccumulatedDeficit |  |  | DeferredCompensation |  |        | TreasuryStock |  |  | TotalStockholders'Deficiency |
|                                                                             |  |  | SeriesD        |  |         | Convertible SeriesE |  |  |                    |   |        |               |
|                                                                             |  |  | Shares         |  |         | Amount              |  |  | Shares                  |   |        | Amount             |  |  | Shares               |  |        | Amount        |  |  | Shares                       |   |        | Amount |
| Balance,December 31,2005                                                         |  |  |                |  | 399,752 |                     |  |  |                         | $ | 3,998  |                    |  |  |                      |  | 1,388  |               |  |  |                              | $ | 14     |        |  |  |  |  | 70,994,163 |  |  |  |  | $ | 709,942 |  |  |  |  | $ | 40,872,945 |   |  |  |  | $ | (48,363,005 | ) |  |  |  | $ | (5,441,396 | ) |  |  |  |  | (104,784 | ) |  |  |  | $ | (85,000 | ) |  |  |  | $ | (12,302,502 | ) |
| Issuanceof common stock in connection with conversion of Series E PreferredStock |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  | (110   | )             |  |  |                              |   | (1     | )      |  |  |  |  | 110,000    |  |  |  |  |   | 1,100   |  |  |  |  |   | (1,099     | ) |  |  |  |   |        |   |  |  |  |   |       |   |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | —     |   |
| conversionof notes and loanspayable                                              |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  |   |               |  |  |                              |   |   |        |  |  |  |  | 4,105,190  |  |  |  |  |   | 41,052  |  |  |  |  |   | 975,668    |   |  |  |  |   |        |   |  |  |  |   |       |   |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | 1,016,720   |   |
| privateplacements –net                                                     |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  |   |               |  |  |                              |   |   |        |  |  |  |  | 5,165,625  |  |  |  |  |   | 51,656  |  |  |  |  |   | 626,054    |   |  |  |  |   |        |   |  |  |  |   |       |   |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | 677,710     |   |
| cashlessexercise of stockoptions                                                 |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  |   |               |  |  |                              |   |   |        |  |  |  |  | 2,000,000  |  |  |  |  |   | 20,000  |  |  |  |  |   | (20,000    | ) |  |  |  |   |        |   |  |  |  |   |       |   |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | —     |   |
| Issuanceof stock options to directors andofficers                                |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  |   |               |  |  |                              |   |   |        |  |  |  |  |       |  |  |  |  |   |    |  |  |  |  |   | 6,717,000  |   |  |  |  |   |        |   |  |  |  |   | (2,277,000 | ) |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | 4,440,000   |   |
| Amortizationof deferredcompensation                                              |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  |   |               |  |  |                              |   |   |        |  |  |  |  |       |  |  |  |  |   |    |  |  |  |  |   |       |   |  |  |  |   |        |   |  |  |  |   | 1,862,083  |   |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | 1,862,083   |   |
| Issuanceof warrants in connection with debtconversion                            |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  |   |               |  |  |                              |   |   |        |  |  |  |  |       |  |  |  |  |   |    |  |  |  |  |   | 11,500     |   |  |  |  |   |        |   |  |  |  |   |       |   |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | 11,500      |   |
| contractforservices                                                              |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  |   |               |  |  |                              |   |   |        |  |  |  |  |       |  |  |  |  |   |    |  |  |  |  |   | 1,400,000  |   |  |  |  |   |        |   |  |  |  |   | (1,400,000 | ) |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | —     |   |
| Write-offdeferred signingbonus                                                   |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  |   |               |  |  |                              |   |   |        |  |  |  |  |       |  |  |  |  |   |    |  |  |  |  |   |       |   |  |  |  |   |        |   |  |  |  |   | 57,229     |   |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | 57,229      |   |
| Beneficialconversion feature of convertible notespayable                         |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  |   |               |  |  |                              |   |   |        |  |  |  |  |       |  |  |  |  |   |    |  |  |  |  |   | 118,489    |   |  |  |  |   |        |   |  |  |  |   |       |   |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | 118,489     |   |
| Netloss                                                                          |  |  |                |  |    |                     |  |  |                         |   |   |                    |  |  |                      |  |   |               |  |  |                              |   |   |        |  |  |  |  |       |  |  |  |  |   |    |  |  |  |  |   |       |   |  |  |  |   | (7,321,334  | ) |  |  |  |   |       |   |  |  |  |  |     |   |  |  |  |   |    |   |  |  |  |   | (7,321,334  | ) |
| Balance,June 30,2006                                                             |  |  |                |  | 399,752 |                     |  |  |                         | $ | 3,998  |                    |  |  |                      |  | 1,278  |               |  |  |                              | $ | 13     |        |  |  |  |  | 82,374,978 |  |  |  |  | $ | 823,750 |  |  |  |  | $ | 50,700,557 |   |  |  |  | $ | (55,684,339 | ) |  |  |  | $ | (7,199,084 | ) |  |  |  |  | (104,784 | ) |  |  |  | $ | (85,000 | ) |  |  |  | $ | (11,440,105 | ) |
|                                                                                  |

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CKRUSH, INC. ANDSUBSIDIARIESCONDENSED CONSOLIDATED STATEMENT OF CASHFLOWS

|                                                                                                           |  |  |                       |   |            |      |  |  |  |   |            |   |
|-----------------------------------------------------------------------------------------------------------|--|--|-----------------------|---|------------|------|--|--|--|---|------------|---|
|                                                                                                      |  |  | Sixmonths endedJune30 |
|                                                                                                      |  |  | 2006                  |   |            | 2005 |
| CashFlows From OperatingActivities                                                                        |  |  |                       |   |       |      |  |  |  |   |       |   |
| Netloss                                                                                                   |  |  |                       | $ | (7,321,334 | )    |  |  |  | $ | (3,375,210 | ) |
| Adjustmentsto reconcile net loss to net cash used in operatingactivities:                                 |  |  |                       |   |       |      |  |  |  |   |       |   |
| Depreciation andamortization                                                                              |  |  |                       |   | 18,951     |      |  |  |  |   | 236,587    |   |
| Amortizationof debt discount                                                                              |  |  |                       |   | 132,422    |      |  |  |  |   |       |   |
| Accruedsettlement costs                                                                                   |  |  |                       |   | 186,417    |      |  |  |  |   |       |   |
| Gain onsale of promotionalrights                                                                          |  |  |                       |   | (21,852    | )    |  |  |  |   |       |   |
| Minorityinterest                                                                                          |  |  |                       |   | (72,328    | )    |  |  |  |   |       |   |
| Gain onsettlement with relatedparty                                                                       |  |  |                       |   | (1,478,845 | )    |  |  |  |   |       |   |
| Compensatoryelement of stock and warrant issuances for selling, general andadministrativeexpenses         |  |  |                       |   | 6,302,083  |      |  |  |  |   | 1,222,389  |   |
| Financingcosts paid in stocks andwarrants                                                                 |  |  |                       |   | 33,000     |      |  |  |  |   | 154,000    |   |
| (Increase)decrease in operatingassets:                                                                    |  |  |                       |   |       |      |  |  |  |   |       |   |
| Accountsreceivable                                                                                        |  |  |                       |   | 4,040      |      |  |  |  |   | 71,246     |   |
| Filmcosts                                                                                                 |  |  |                       |   | (657,672   | )    |  |  |  |   | (1,284,072 | ) |
| Prepaidexpenses and otherassets                                                                           |  |  |                       |   | (40,461    | )    |  |  |  |   | (54,627    | ) |
| Restrictedcash                                                                                            |  |  |                       |   | 88,836     |      |  |  |  |   |       |   |
| Increase(decrease) in operatingliabilities:                                                               |  |  |                       |   |       |      |  |  |  |   |       |   |
| Accounts payable andaccruedexpenses                                                                       |  |  |                       |   | 508,992    |      |  |  |  |   | 604,493    |   |
| Accruedlitigation and judgmentspayable                                                                    |  |  |                       |   | (40,349    | )    |  |  |  |   | (41,009    | ) |
| Notes andloans payable – accruedinterest                                                            |  |  |                       |   | 104,835    |      |  |  |  |   |       |   |
| NetCash Used In OperatingActivities                                                                       |  |  |                       |   | (2,253,265 | )    |  |  |  |   | (2,466,203 | ) |
| CashFlows From InvestingActivities                                                                        |  |  |                       |   |       |      |  |  |  |   |       |   |
| Purchases ofproperty andequipment                                                                         |  |  |                       |   | (88,491    | )    |  |  |  |   | (6,849     | ) |
| Proceedsfrom sale of promotionalagreement                                                                 |  |  |                       |   | 143,000    |      |  |  |  |   |       |   |
| Proceedsfrom sale of assets to formerpresident                                                            |  |  |                       |   | 213,559    |      |  |  |  |   |       |   |
| Investmentin movierights                                                                                  |  |  |                       |   |       |      |  |  |  |   | (14,557    | ) |
| NetCash Used In InvestingActivities                                                                       |  |  |                       |   | 268,068    |      |  |  |  |   | (21,406    | ) |
| CashFlows From FinancingActivities                                                                        |  |  |                       |   |       |      |  |  |  |   |       |   |
| Repaymentsto and advances from stockholders and related parties –net                                |  |  |                       |   | (24,736    | )    |  |  |  |   | 110,536    |   |
| Proceedsfrom issuance of:                                                                                 |  |  |                       |   |       |      |  |  |  |   |       |   |
| preferredstock                                                                                            |  |  |                       |   |       |      |  |  |  |   | 634,800    |   |
| commonstock                                                                                               |  |  |                       |   | 677,710    |      |  |  |  |   | 250,401    |   |
| productioninterests (minorityinterests)                                                                   |  |  |                       |   | 647,000    |      |  |  |  |   | 3,654,976  |   |
| notesand loans payable –other                                                                       |  |  |                       |   | 1,010,000  |      |  |  |  |   | 551,506    |   |
| notes andloans payable – relatedparties                                                             |  |  |                       |   | 50,000     |      |  |  |  |   | 99,298     |   |
| convertibledebt                                                                                           |  |  |                       |   |       |      |  |  |  |   |       |   |
| Payment to relatedparty – deferredsettlement                                                        |  |  |                       |   | (257,000   | )    |  |  |  |   |       |   |
| Repaymentof notes and loans payable –other                                                          |  |  |                       |   | (76,000    | )    |  |  |  |   | (404,006   | ) |
| Repaymentof notes and loans payable – related parties-net                                           |  |  |                       |   |       |      |  |  |  |   | (137,706   | ) |
| Proceeds ofpreferred stock escrowaccount                                                                  |  |  |                       |   |       |      |  |  |  |   |       |   |
| NetCash Provided From FinancingActivities                                                                 |  |  |                       |   | 2,026,974  |      |  |  |  |   | 4,759,805  |   |
| NetIncrease (Decrease) InCash                                                                             |  |  |                       |   | 41,777     |      |  |  |  |   | 2,272,196  |   |
| Cash– Beginning ofPeriod                                                                            |  |  |                       |   | 57,533     |      |  |  |  |   | 219,299    |   |
| Cash– End ofPeriod                                                                                  |  |  |                       | $ | 99,310     |      |  |  |  | $ | 2,491,495  |   |
| SupplementalDisclosures:                                                                                  |  |  |                       |   |       |      |  |  |  |   |       |   |
| Cashpaid during the periodfor:                                                                            |  |  |                       |   |       |      |  |  |  |   |       |   |
| Interest                                                                                                  |  |  |                       | $ | 1,051      |      |  |  |  | $ | 58,499     |   |
| Non-cashinvesting and financingactivities:                                                                |  |  |                       |   |       |      |  |  |  |   |       |   |
| Issuanceof common stock for                                                                               |  |  |                       |   |       |      |  |  |  |   |       |   |
| uponconversion of notes and loanspayable                                                                  |  |  |                       |   | 1,016,720  |      |  |  |  | $ | 798,849    |   |
| conversionSeries E preferredstock                                                                         |  |  |                       |   | 1,100      |      |  |  |  |   |       |   |
| cashless exercise ofwarrants                                                                              |  |  |                       |   | 2,000,000  |      |  |  |  |   |       |   |
| financingcosts                                                                                            |  |  |                       |   |       |      |  |  |  |   |       |   |
| deferredcompensation                                                                                      |  |  |                       |   |       |      |  |  |  |   | 7,410,000  |   |
| accruedexpenses                                                                                           |  |  |                       |   |       |      |  |  |  |   | 502,318    |   |
| Issuance ofpreferred E upon release of funds fromescrow                                                   |  |  |                       |   |       |      |  |  |  |   | 199,064    |   |
| Increase inminority interest and issuance of warrants and new note payable uponconversion of notespayable |  |  |                       |   | 146,500    |      |  |  |  |   |       |   |
|                                                                                                           |

See notesto condensed consolidated financialstatements

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CKRUSH,INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS(Unaudited)

Note1.    Description of Business

Ckrush, Inc. andsubsidiaries the (‘‘Company’’) is anindependent producer of innovative entertainment and sports programmingfor global distribution through all media platforms. We recentlyproduced the feature film comedies ‘‘BeerLeague,’’ set to be released in September  2006,and ‘‘TV the Movie’’. We also co-producedNational Lampoon's ‘‘Pledge This’’also anticipated to be released in the latter part of 2006. Inaddition, we promote and distribute televised sports events and otherprogramming through pay-per-view, video-on-demand and other retailchannels.

Note 2.    Basis of Presentation

TheCompany has incurred net losses of $7.3  million during the sixmonths ended June  30,  2006 and $7.7  million and$12.4  million during the years ended December  31,2005 and 2004, respectively. In addition, the Company is not incompliance with the payment terms for $2.0  million of itsoutstanding notes and loans payable including unpaid interest. Further,the Company had a stockholders' deficiency of $11.4million at June  30,  2006. Historically, the Company hassuccessfully obtained external financing through short-term borrowingsand private placements of equity and convertible debt and thus, theCompany hopes to remedy these defaults through additional borrowings,conversion of existing debt to equity, ownership contributions, and/orrenegotiation of existing terms and conditions of the notes and loanspayable in default. However, if the Company is unable to cure thesedefaults, it may significantly impede our ability to raise additionalfunds and/or to conduct normal business operations.

TheCompany is also taking actions to address liquidity in the followingways:

|                    |                                                                                                        |
|--------------------|--------------------------------------------------------------------------------------------------------|
| •   | developingadditional sources of debt and equity financing to satisfy our currentoperatingrequirements; |

|                    |                                                                                                                                                                                              |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •   | enteringinto new initiatives to develop, produce and distribute film propertiesas well as other sports and entertainment projects for pay-per-view,video-on-demand and other retailchannels; |

|                    |                                                                            |
|--------------------|----------------------------------------------------------------------------|
| •   | continuingto pursue the promotion of selective premium level boxingevents; |

|                    |                                                                     |
|--------------------|---------------------------------------------------------------------|
| •   | pursuingproduction partnerships and joint ventures to fundprojects; |

|                    |                                                  |
|--------------------|--------------------------------------------------|
| •   | reducingoperating costs by reducing overhead;and |

|                    |                                                                                          |
|--------------------|------------------------------------------------------------------------------------------|
| •   | continuing tonegotiate with existing creditors to convert their indebtedness intoequity. |

There can be no assurance that sufficient fundsrequired during the next year or thereafter will be generated fromoperations or that funds will be available from external sources suchas debt or equity financings or other potential sources. The lack ofadditional capital resulting from the Company’s inability togenerate cash flow from operations or to raise capital from externalsources would force the Company to substantially curtail or ceaseoperations and would, therefore, have a material adverse effect on theCompany's business. Furthermore, there can be no assurance thatany such required funds, if available, will be available on attractiveterms or that they will not have a significant dilutive effect on theCompany’s existing stockholders.

These factorsraise substantial doubt about the Company’s ability to continueas a going concern and the accompanying condensed consolidatedfinancial statements do not include any adjustments related to therecoverability or classification of asset carrying amounts or theamounts and classification of liabilities that may result should theCompany be unable to continue as a going concern.

Theaccompanying interim consolidated financial statements of the Companyare unaudited, but in the opinion of management, reflect alladjustments, consisting of normal recurring accruals, necessary for

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a fair presentation of the results for theinterim period. Accordingly, they do not include all information andnotes required by generally accepted accounting principles for completefinancial statements. The results of operations for interim periods arenot necessarily indicative of results to be expected for the entirefiscal year or any other period. These interim consolidated financialstatements should be read in conjunction with the Company'sconsolidated financial statements and notes for the year endedDecember  31,  2005 filed on Form 10-KSB on April12,  2006.

Note 3.    Summary of Significant AccountingPolicies

Revenue Recognition

Sports entertainmentrevenue, principally promotional fight revenue, is comprised of boxoffice ticket sales, site fee income, sponsorships and endorsements.Fight revenue is recognized in full on the date of theevent.

Media entertainment revenue includes revenues fromthe sale or licensing of films and is recognized upon meeting allrecognition requirements of Statement of Position (SOP) 00-2‘‘Accounting by Producers or Distributors ofFilms’’. Revenue from the theatrical release of featurefilms is recognized at the time of exhibition based on theCompany’s participation in box office receipts. Revenue from thesale of digital video disks (‘‘DVDs’’) inthe retail market, net of an allowance for estimated returns and otherallowances, is recognized on the later of shipment to the customer or‘‘street date’’ (when it is available forsale by the customer). Under revenue sharing arrangements, rentalrevenue is recognized when the Company is entitled to receipts and suchreceipts are determinable. Revenue from sales to internationalterritories is recognized when access to the feature has been grantedor delivery has occurred, as required under the sales contract, and theright to exploit the feature film has commenced.

Investment inFilms

Investment in films includes the unamortized costsof completed films which have been produced by the Company or for whichthe Company has acquired distribution rights, films in progress and indevelopment and home video product inventory. For films produced by theCompany, capitalized costs include all direct production and financingcosts, capitalized interest and production overhead. For acquiredfilms, capitalized costs consist of minimum guarantee payments toacquire the distribution rights. Costs of producing films are amortizedusing the individual-film-forecast method, whereby costs are amortizedand participation and residual costs are accrued in the proportion thatcurrent year’s revenue bears to management’s estimate ofultimate revenue at the beginning of the current year expected to berecognized from the exploitation, exhibition or sale of the films.Ultimate revenue includes estimates over a period not to exceed tenyears following the date of initial release. Investment in films andtelevision programs is stated at the lower of amortized cost orestimated fair value on an individual film basis. The valuation ofinvestment in films is reviewed on a title-by-title basis, when anevent or change in circumstances indicates that the fair value of afilm is less than its unamortized cost. The fair value of the film isdetermined using management’s future revenue and cost estimatesand a discounted cash flow approach. Additional amortization isrecorded in the amount by which the unamortized costs exceed theestimated fair value of the film. Estimates of future revenue involvemeasurement uncertainty and it is therefore possible that reductions inthe carrying value of investment in films and television programs maybe required as a consequence of changes in management’s futurerevenue estimates. Films in progress include the accumulated costs ofproductions, which have not yet been completed by the Company. Films indevelopment include costs of acquiring film rights to books, stageplays or original screenplays and costs to adapt such projects. Suchcosts are capitalized and, upon commencement of production, aretransferred to production costs. Projects in development are writtenoff at the earlier of the date they are determined not to berecoverable or when abandoned, or three years from the date of theinitial investment.

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CKRUSH,INC. AND SUBSIDIARIESNOTES TO CONDENSED CONSOLIDATED FINANCIALSTATEMENTS  — (continued)(Unaudited)

Income Taxes

The Companyaccounts for income taxes under the asset and liability method usingSFAS No. 109, ‘‘Accounting for IncomeTaxes.’’ Deferred tax assets and liabilities arerecognized for the future tax consequences attributable to differencesbetween the financial statement carrying amounts of existing assets andliabilities and their respective tax bases and operating loss and taxcredit carry-forwards. Deferred tax assets and liabilities are measuredusing enacted tax rates expected to apply to taxable income in theyears in which those temporary differences are expected to be recoveredor settled. The effect on deferred tax assets and liabilities of achange in tax rates is recognized in income in the period that includesthe enactment date.

The tax effects of temporarydifferences that gave rise to the deferred tax assets and deferred taxliabilities are primarily attributable to net operating losscarry-forwards. Since the Company has a history of losses, a fullvaluation allowance has been established. In addition, utilization ofnet operating loss carry-forwards are subject to a substantial annuallimitation due to the ‘‘change inownership’’ provisions of the Internal Revenue Code. Theannual limitation may result in the expiration of net operating losscarry-forwards before utilization.

Loss pershare

Loss per common share is based upon the weightedaverage number of common shares outstanding during the year. Dilutedloss per common share is the same as basic loss per share, as theeffect of potentially dilutive securities (options — 31,849,000(2006) and 299,000 (2005) and warrants — 31,343,986 (2006) and21,617,374 (2005)) are anti-dilutive.

Use ofEstimates

The preparation of financial statements inconformity with accounting principles generally accepted in the UnitedStates of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expensesduring the reporting period. Actual results could differ from thoseestimates. Significant estimates relate to ultimate revenue and costsfor investment in films, provision for doubtful accounts, income taxesand accruals for contingent liabilities; and impairment assessments forinvestment in films and other projects, property and equipment, andintangible assets. Actual results could differ from suchestimates.

Reclassifications

Certain items inthese consolidated financial statements have been reclassified toconform to the current period presentation.

Recently IssuedAccounting Pronouncements

Effective January1,  2006, the Company adopted Statement of Financial AccountingStandards No. 123 (revised 2004) (‘‘SFAS123(R)’’), ‘‘Share-BasedPayment,’’ which revised Statement of FinancialAccounting Standards 123 (‘‘SFAS 123’’),‘‘Accounting for Stock-BasedCompensation.’’ Refer to Note 4 to the unauditedcondensed consolidated financial statements for further information.There were no other accounting policies adopted during 2006 that had amaterial effect on the Company’s consolidated financialcondition and results of operations.

Note 4.    Stock-BasedCompensation

Effective January  1,  2006, theCompany adopted ‘‘SFAS 123(R)’’, whichrequires all share-based payment transactions with employees, includinggrants of employee stock options, to be recognized as

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compensation expense over therequisite service period based on their relative fair values. Prior tothe adoption of SFAS 123(R), stock-based compensation expense relatedto employee stock options was not recognized in the statement ofoperations if the exercise price was at least equal to the market valueof the common stock on the grant date, in accordance with AccountingPrinciples Board Opinion No. 25, ‘‘Accounting for StockIssued to Employees.’’ Prior to January  1,2006, the Company followed the disclosure-only provisions under SFAS123.

The Company has elected to use the ModifiedProspective Application (‘‘MPA’’) methodfor implementing SFAS 123(R). Under the MPA method, prior periods arenot restated and new awards are valued and accounted for prospectivelyupon adoption. In February  and in June 2006, options wereawarded to officers and members of the Board of Directors of theCompany (see Note 13). As a result of these awards and theimplementation of SFAS 123(R) the Company recorded compensation expenseof $3.6  million and $3.8  million for the three and sixmonths ended June  30, 2006, respectively, which includes$3.2  million for options granted with immediate vestingprovisions. The fair value of the options at the dates of grant werecalculated using the Black-Scholes fair value based method using thefollowing assumptions (expected life – 3 years; interest rate− 4.58% to 5.07%; annual rate of dividends –0%; and volatility – 67% and 123%). As ofJanuary  1,  2005, all outstanding employee options werevested therefore there would have been no impact on compensation costfor the Company's stock option during the 2005 period utilizingthe fair value method set forth in SFAS 123  (R).(Update)

Options outstanding and exercisable by pricerange as of June  30,  2006 were asfollows:

|                  |  |  |                    |  |            |                                                    |  |  |                                |  |      |        |  |  |                              |   |      |  |  |  |  |  |            |  |  |  |  |   |      |  |
|------------------|--|--|--------------------|--|------------|----------------------------------------------------|--|--|--------------------------------|--|------|--------|--|--|------------------------------|---|------|--|--|--|--|--|------------|--|--|--|--|---|------|--|
|             |  |  | OutstandingOptions |  |            | ExercisableOptions                                 |
| Rangeof          |  |  | Number             |  |            | WeightedAverage Remaining Contractual Life inyears |  |  | Weighted Average ExercisePrice |  |      | Number |  |  | WeightedAverageExercisePrice |
| $0.10            |  |  |                    |  | 19,800,000 |                                                    |  |  |                                |  | 10.0 |        |  |  |                              | $ | 0.10 |  |  |  |  |  | 19,800,000 |  |  |  |  | $ | .10  |  |
| $0.20–0.26 |  |  |                    |  | 2,275,000  |                                                    |  |  |                                |  | 9.5  |        |  |  |                              |   | 0.20 |  |  |  |  |  | 25,000     |  |  |  |  |   | .25  |  |
| $0.30–0.38 |  |  |                    |  | 9,550,000  |                                                    |  |  |                                |  | 10.0 |        |  |  |                              |   | 0.30 |  |  |  |  |  | 50,000     |  |  |  |  |   | .35  |  |
| $1.02–1.44 |  |  |                    |  | 224,000    |                                                    |  |  |                                |  | 1.1  |        |  |  |                              |   | 1.35 |  |  |  |  |  | 224,000    |  |  |  |  |   | 1.35 |  |
|             |  |  |                    |  | 31,849000  |                                                    |  |  |                                |  | 9.9  |        |  |  |                              | $ | 0.17 |  |  |  |  |  | 20,099,000 |  |  |  |  | $ | 0.11 |  |
|                  |

Note5.    Film Costs and Minority Interests

Filmcosts consistof:

|                  |  |  |  |   |           |  |
|------------------|--|--|--|---|-----------|--|
| Inprogress       |  |  |  | $ | 4,484,298 |  |
| Indevelopment    |  |  |  |   | 117,975   |  |
| Productinventory |  |  |  |   | 54,145    |  |
|             |  |  |  | $ | 4,656,418 |  |
|                  |

OnJune  27,  2005, the Company entered into a joint ventureoperating agreement for the purpose of arranging, developing andproducing film, television, music, publishing and related properties tobe acquired by the joint venture including certain propertiescontributed by the other joint venture partner. The Company is to makecapital contributions of $748,000 over a 2 year period, of which theCompany contributed $279,000 through June  30,  2006. Inaccordance with the joint venture operating agreement, the Companyobtained the right to prevail in major decisions, as defined, until theCompany has received its maximum preferred return (as defined below).The Company may elect to renew the operating agreement beyond itsinitial term of 2 years for 5 consecutive 1-year renewal 

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periods by making additional annualcontributions increasing by 5% each year. Net income isallocated as follows: (i) 85% to the Company until the Companyaggregate capital contributions plus 20% has been recouped(‘‘minimum preferred return’’); (ii)60% to the Company until the Company’s has received itsminimum preferred return plus $500,000 (the ‘‘maximumpreferred return’’); and (iii) 50% to the Companyafter it receives the maximum preferred return. In addition, theCompany has the right of first refusal to provide or to arrange forfinancing for each project or property pursued or developed by thejoint venture.

During 2005, through a private placementoffering two of the Company’s subsidiaries sold and issued anaggregate of approximately 84 units of revenue participation rights(‘‘RPRs’’) in film projects for anaggregate purchase price of approximately $4.7  millionrepresenting a minority ownership interests in the subsidiaries. TheCompany sold an additional 13 RPR units for $ 702,000, net of placementfees, during the six months ended June  30,  2006. To theextent of available cash flow from the Company’s subsidiaries,the RPRs entitle the investors to a return of 100% of theirrespective purchase price plus a 20% preferred return. If the$2.8  million Funding Amount is not raised for each motionpicture; the aggregate share of the residual cash flow to the investorsshall be reduced on a proportionate basis. In addition, the Companyguaranteed the repayment of one investor’s investment of$2.7  million in the RPR’s. The investor has the right toenforce the guaranty at any time commencing in June  2007, orearlier under certain circumstances. The Company also granted theinvestor a security interest in the Company’s rights andinterests in the related film projects and to escrow a maximum of9,000,000 shares of its common stock as further security for repaymentof the obligation.

In August 2006, the holders of the RPRunits were repaid $450,000 as a result of the receipt of an advancefrom the domestic distributor of one of the film projects.

Note6.    Accrued Litigation and Judgments Payable

FirstEquity

In June  2005, First Equity CapitalCorporation filed an action against the Company in state court inFlorida, alleging that the Company breached an unsigned agreementpursuant to which the Company allegedly hired First Equity to providecertain services. First Equity alleges that the Company is obligated topay First Equity $1.5  million and to issue First Equity up to4,000,000 registered shares of our common stock. The Company has filedan answer denying any liability to First Equity and raising numerousaffirmative defenses. The Company is in the process of taking discoveryin this matter and intends to vigorouslydefend.

Designscape

In April  2005Designscape, Inc. filed an action in New York State Supreme Courtagainst the Company and James DiLorenzo, alleging breach of contractand misrepresentations with respect to an alleged oral agreement toprovide goods and services in connection with the production andstaging of a television series and seeking approximately $550,000 andunspecified damages. The Company has denied the material allegations ofthe complaint and filed a counterclaim seeking damages in excess of$150,000. The matter is currently pending.

ShaneMosley

In November  2005, the Company enteredinto a second settlement agreement related to the sharing of profitswith Shane Mosley, a boxer, and agreed to pay $565,000 to Mosley ininstallments representing 60% of the net profits from any boxingevents promoted or co-promoted by the Company (retroactively toSeptember  2005) until the outstanding sum, plus accruedinterest, is paid in full. In 

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addition, the Company is entitled to a$100,000 credit against the above settlement amount, contingent uponthe transfer and assignment of the Company's rights to the MosleyVideo Library. Amounts unpaid by December  31,  2008 shallbe immediately due and payable. Our former President personallyguaranteed the Company's obligation.

National SportsPartners

In May  2003, National SportsPartners, the owner of Fox Sports Net Broadcast Service, commenced anaction in California against us to collect approximately $239,000 foradvertising time and production fees and costs for airing boxing eventson Fox, plus interest, costs and attorney fees. In August  2004,the Company reached an agreement with NSP in which NSP agreed toforbear from further action against us in exchange for full paymentover time of $239,000, plus deferred interest. As of June30,  2006 the Company had only paid $65,000.

DewayneLayfield

In April  2005, Dewayne Layfield, aholder of a note payable from a subsidiary of the Company, arising froma previous settlement agreement, instituted a second arbitrationproceeding against the Company seeking to recover $172,000 plusattorneys' fees and costs. The Company answered, seeking adeclaration that the Company had no further obligation due to breachesof the related agreement. The Company also filed a counterclaim seekingto recover amounts previously paid related to the previous agreement.In April  2006, the Company paid $31,000 to the holder to reducethe outstanding principal. The matter is currently pending witharbitration scheduled for September  2006.

J.P. MorganChase & Company

On January  13,2004, J.P. Morgan Chase & Company obtained a judgment in the amountof $95,000 against the Company's former President and the Companyin connection with the Company's default on an outstanding note.In May  2004, the Company settled by agreeing to pay theoutstanding principal amount, plus interest at 4% per annum, in60 monthly payments of $2,000 each, in exchange for forbearance on anyadditional efforts to collect upon the unsatisfied portion of thebalance. The balance on this obligation at June 30, 2006 amounted to$76,000. The Company is not in compliance with the terms set forth inthe forbearance agreement.

Other

Thereare other matters in which the Company has entered into settlements inprior years for which the Company has not made the requiredpayments.

In the opinion of management, on the advice ofcounsel, the Company has made adequate provision for potentialliabilities, if any, arising from litigation settlements and otherclaims arising from the above matters. As of June  30,2006, the Company had accrued $2.3 million, with respect to suchmatters. However, the costs and other effects of pending or futurelitigation, governmental investigations, legal and administrative casesand proceedings (whether civil or criminal), settlements, judgments andinvestigations, claims and changes in those matters (including thosematters described above), and developments or assertions by or againstthe Company relating to contractual rights related to boxers and thepromotion of boxing events, intellectual property rights andintellectual property licenses, could have a material adverse effect onthe Company's business, financial condition and operatingresults.

Note 7.    Notes and LoansPayable

Notes and loan payable includes accrued interest(at rates ranging from none to 23%) of $391,000. During the sixmonths ended June  30,  2006, the Company borrowed$1,010,000 under short-term 

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arrangements with various individuals. Inconnection with the issuance of the notes, the Company paid fees of$136,000 which was included in ‘‘interestexpense’’ in the condensed consolidated statements ofoperations for the six months ended June  30,  2006. Alsoin connection with the issuance of these notes and related warrants,the Company recorded imputed discount of $118,000 which represents thefair value of the beneficial conversion feature of the below marketconversion rate using the Black-Scholes pricing model. The beneficialconversion feature was recorded pursuant to Emerging Issues Task Force(‘‘EITF’’) 00-27: Application of EITF No.98-5, ‘‘Accounting for Convertible Securities withBeneficial Conversion Features or Contingently Adjustable ConversionRatios,’’ to certain convertible instruments. Inaccordance with EITF 02-27, the Company evaluated the value of thebeneficial conversion feature and recorded this amount as a reductionto the carrying amount of the convertible debt and as an addition topaid-in capital. Included in ‘‘interestexpense’’ is $96,000 for amortization of the discount forthe six months ended June  30,  2006.

Duringthe six months ended June  30,  2006, the holders of$1,017,000 of notes payable, including accrued interest, allowed theCompany to convert the indebtedness into 4,105,190 shares of commonstock. In addition a note holder with principal and interest past dueof $156,000 exchanged the obligation for one RPR unit in theCompany’s film projects, a warrant to purchase 50,000 shares ofcommon stock at $0.10 per share, a new $80,000 note payable and $16,000in cash.

The Company is not in compliance with the paymentterms for $2.0  million of the notes and loans payable includingunpaid interest.

Note 8.    Settlement with RelatedParty

On November  1,  2005, the Companyentered into an agreement with Livingston Investments, LLC(‘‘Livingston’’) and the Mackin CharitableRemainder Trust (the ‘‘Mackin Trust’’) tosettle the following outstanding indebtedness of the Company payable toLivingston and the MackinTrust:

|              |                                                                                                                    |
|--------------|--------------------------------------------------------------------------------------------------------------------|
| •  | A loan payable of$1,000,000, dated March  15,  2002, with all accrued andunpaid interest of approximately$355,000; |

|                    |                                                                                                                |
|--------------------|----------------------------------------------------------------------------------------------------------------|
| •   | A notepayable with an outstanding balance of $110,000, together with accruedand unpaid interest of $68,000;and |

|                    |                                                                                                                                                                                                                  |
|--------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •   | All sums dueand/or payable in the future by the Company to Livingston ($1,562,000based upon the present value of the obligation) pursuant to a certainten year consulting agreement, dated as of April  30,2002. |

Pursuant to the agreement, the Company paid thefollowing amounts and issued the following securities insettlement:

|                    |                                                                                                                                                                          |
|--------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •   | $400,000in cash in installments, of which $143,000 was paid in November2005 and the balance was paid in April 2006 in connection with thetransaction described in Note9; |

|                    |                                                                                                                                                                      |
|--------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •   | ten (10) yearwarrants to purchase an aggregate of 7,500,000 shares, exercisable at$0.10 per share, 1,500,000 of which vest on an annual basis commencingin 2006; and |

|                    |                                |
|--------------------|--------------------------------|
| •   | 800,000shares of common stock. |

In addition, the Company grantedto an affiliate of Livingston the exclusive right to license theelectronic media rights to the boxing libraries owned by the Companythroughout the world (excluding the United States) for a three (3) yearperiod. Pursuant to the license, the affiliate will be entitled to a20% commission from the license fees received and may alsoretain 75% of proceeds received from such license fees startingin February  2006. The assets and obligations related to thislicense was transferred to the Company's former President inconnection with the transaction described in Note 9.

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The shares of common stock issuedand the shares of common stock underlying the warrants have piggy-backregistration rights, as well as on demand registration rights in theevent that the holder has not been able to utilize such piggy-backregistration rights by February  10,  2007. The warrantsalso provide that they may be exercised on a cashlessbasis.

In consideration, and upon satisfaction, of theforegoing, Livingston and the Mackin Trust agreed to (i) forgive thebalance of the loans, (ii) release the security interest in the boxingfilm library, (iii)  terminate the consulting agreement and toforgive all payments due and to be due there under, (iv) waive anyrights that they may have to accelerate the consulting agreement, and(v) pay the Company an amount equal to the proceeds from the sale, ifany, by another affiliate of Livingston of 66,658 shares of the capitalstock in M.P.I. Media Partners International BV, a Netherlands companyengaged in television rights management as well as sponsorship andadvertising rights management.

As a result of making thefinal payment in April 2006, the Company recognized a gain of $1.5million in the accompanying consolidated statement of operations forthe three and six months ended June  30, 2006.

Note9.    Transactions with former President

InApril  2006, the Company entered into 3 agreements with CedricKushner, the Company’s former President which provides, amongother matters, thefollowing:

|              |                                                                                                                                                                                                                                                                                                                                                                                      |
|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Repayment termsfor the Company’s indebtedness owed to Kushner of $263,000 weremodified to provide for interest at 5%, quarterly payments of$10,000, plus amounts equivalent to a pro rata portion of amounts paidto certain other Company’s creditors, plus 50% of netrevenue up to $100,000 from a promotional agreement, with the unpaidbalance due December  31,2008; |

|              |                                                                                                                                                                                                                                 |
|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | The Companyindemnified Kushner for any liability resulting from his service as adirector or officer, subject to the limitations of the Delawarecorporate statute, and for any Company obligations that he guaranteedpersonally; |

|              |                                                                                                                        |
|--------------|------------------------------------------------------------------------------------------------------------------------|
| •  | The Companysubleased its headquarters to a entity owned by Kushner, at the samerent payable by Company to thelandlord; |

|              |                                                                                               |
|--------------|-----------------------------------------------------------------------------------------------|
| •  | The Companytransferred its rights to its library of boxing videos to Kushner for$250,000; and |

|              |                                                                                                                                                                                                                               |
|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| •  | Kushner willconsult with Ckrush with respect to the promotion of David Tua, aboxer, in exchange for 50% of the net proceeds earned from theTua exclusive promotion agreement, after first repaying $400,000 owedto investors. |

The assets which are subject to thisagreement, principally furniture and fixtures and the library rights,were classified as ‘‘Assets held for Sale’’in the consolidated financial statements at December  31,2005. The Company utilized the proceeds of this transaction to pay theamount due in connection with the deferred settlement with a relatedparty (see Note 8).

Also in April  2006, the Companysold 2,937,500 shares of common stock for $376,000 to an entity whichalso purchased a substantial portion of Kushner’s shares of theCompany’s common stock and 1,171,875 shares for $150,000pursuant to a private placement. The Company’s new Presidentalso purchased all of Kushner’s shares of Series D preferred(339,788.66 shares) after the Company’s Board of Directorsremoved the liquidation preference contained in the originaldesignation.

Note 10.    Related PartyTransactions

Due to related parties at June30,  2006 includes Company obligations for advances made by itsformer President (see Note 7) and Executive Vice President on theCompany’s behalf of $266,000 and $2,000, 

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respectively. The advances are unsecured,have no specific terms, conditions or maturities. In February2006, these individuals resigned their positions with the Company. Inaddition, the Company’s President is due $107,000 includingaccrued interest.

The Company entered into a consultingagreement with an entity controlled by Company’s new Presidentfor certain general business and boxing promotion related consultingservices which commenced on January  1,  2003 and continuesthrough April  30,  2008. As compensation the Companyissued 700,000 shares of its common stock valued at $560,000 which wasrecorded as deferred compensation in 2003. Amortization expense relatedto this agreement of $56,000 was charged to operations in each of thesix month periods ended June  30,  2006 and 2005. Theentity also advanced $73,000 and $381,000 for payments to theCompany’s trade and other vendors during the six months endedJune  30,  2006 and 2005, respectively, all of which wasrepaid during each period. The entity was also compensated $64,000 and$128,000 for assistance in connection with certain financingtransactions during the six months ended June  30,  2006and 2005, respectively.

Note 11.    Stockholders'Deficiency

Series E Convertible PreferredStock

In 2006, the holders of 110 shares of the Series Epreferred stock converted their preferred shares into 110,000 shares ofcommon stock.

Common Stock

In 2006, the Companyissued 4,105,190 shares of common stock in connection with theconversion of outstanding notes and accrued interest aggregatingapproximately $1,017,000.

During 2006, the Company sold5,165,625 shares of common stock, in private placements at pricesranging from $.12 to $.16 per share including the common shares sold inthe transaction discussed in Note 9.

The Company hasoutstanding stock options, warrants, convertible securities and othercontingent obligations, all of which could require the Company to issuecommon stock in a number which exceeds the authorized amount as of June30, 2006. The Company intends to call a meeting of its shareholders, assoon as it is practical, to approve an increase in the number ofauthorize common shares.

In accordance with EmergingIssues Task Force Issue 00-19 (‘‘EITF00-19’’), ‘‘Accounting for Derivative FinancialInstruments Indexed To, and Potentially Settled in, a Company'sOwn Stock’’, the above mentioned lack of sufficient numberof authorized shares to meet the Company's obligations to issuecommon shares results in a requirement to account for certain of theoutstanding securities as liabilities. No reclassification was madeduring the three months ended June  30, 2006 as the fair value ofthese outstanding securities as of June  30, 2006, as well asthe change in fair value during the three months then ended were notconsidered material to the consolidated financialstatements.

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Warrants

A summary ofwarrant activity for the six months ended June  30,  2006and 2005 is asfollows:

|                                    |  |  |                   |  |            |                               |  |  |                   |   |     |                               |  |  |  |  |            |   |  |  |  |   |      |  |
|------------------------------------|--|--|-------------------|--|------------|-------------------------------|--|--|-------------------|---|-----|-------------------------------|--|--|--|--|------------|---|--|--|--|---|------|--|
|                               |  |  | 2006              |  |            | 2005                          |
|                               |  |  | Numberof Warrants |  |            | WeightedAverage ExercisePrice |  |  | Number ofWarrants |   |     | WeightedAverageExercise Price |
| Balance – beginning ofperiod |  |  |                   |  | 30,051,373 |                               |  |  |                   | $ | .26 |                               |  |  |  |  | 9,823,113  |   |  |  |  | $ | .61  |  |
| Issued                             |  |  |                   |  | 5,050,000  |                               |  |  |                   |   | .15 |                               |  |  |  |  | 12,445,000 |   |  |  |  |   | .10  |  |
| Exercised                          |  |  |                   |  | (2,500,000 | )                             |  |  |                   |   | .10 |                               |  |  |  |  | (333,332   | ) |  |  |  |   | .19  |  |
| Expired                            |  |  |                   |  | (1,257,388 | )                             |  |  |                   |   | .34 |                               |  |  |  |  | (283,408   | ) |  |  |  |   | 5.00 |  |
| Balance– end ofperiod        |  |  |                   |  | 31,343,985 |                               |  |  |                   | $ | .30 |                               |  |  |  |  | 21,651,374 |   |  |  |  | $ | .39  |  |
|                                    |

StockOptions

Stock option share activity and weighted averageexercise price under these plans for the six months ended June30,  2006 is asfollows:

|                          |  |  |                  |  |            |                              |  |  |  |   |      |  |
|--------------------------|--|--|------------------|--|------------|------------------------------|--|--|--|---|------|--|
|                     |  |  | Numberof Options |  |            | WeightedAverageExercisePrice |
| Balance, January  1,2006 |  |  |                  |  | 299,000    |                              |  |  |  | $ | 1.09 |  |
| Granted in2006           |  |  |                  |  | 31,550,000 |                              |  |  |  |   | .17  |  |
| Balance,June 30,2006     |  |  |                  |  | 31,849,000 |                              |  |  |  | $ | .17  |  |
|                          |

OnApril  24,  2006, the Company engaged Trilogy CapitalPartners, Inc. (‘‘Trilogy’’) to providemarketing and financial public relation services. The initial term ofthe agreement is 12 months for a monthly fee of $12,500. Thereafter,the agreement may be terminated upon 30 days prior written notice. Inaddition, Trilogy was issued warrants to purchase 5  million(5,000,000) shares of common stock at an exercise price of $.15 pershare. The warrants are immediately exercisable and expire onApril  24,  2009. The Company also agreed to file aregistration statement with the Securities and Exchange Commission onor before June  8,  2006 to register the shares of commonstock underlying the warrants for resale. In August 2006, the Companyand Trilogy agreed to terminate the agreement.

Note12.    Segment Data

SFAS No. 131‘‘Disclosures About Segments of an Enterprise and RelatedInformation’’ requires the Company to make certaindisclosures about each reportable segment. The Company’sreportable segments are determined based on the distinct nature oftheir operations and each segment is a strategic business unit thatoffers different products and services and is managed separately. SFASNo. 131 defines operating segments as components of an enterprise aboutwhich separate financial information is available that is evaluatedregularly by the chief operating decision maker in deciding how toallocate resources and in assessing performance.

TheCompany has two reportable segments: sports entertainment and mediaentertainment. The sports entertainment segment consists of promotionof professional boxers and boxing events. The media entertainmentsegment consists of development and production of digital and filmedcontent for global distribution to all media platforms includingfeature films, DVD titles, television programming and other similarproducts.

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Segmented information by businessis as follows:    

|                                                                                                   |  |  |                        |   |            |       |  |  |        |   |         |        |  |  |       |   |         |        |  |  |  |   |            |   |  |  |  |   |          |   |  |  |  |   |         |  |
|---------------------------------------------------------------------------------------------------|--|--|------------------------|---|------------|-------|--|--|--------|---|---------|--------|--|--|-------|---|---------|--------|--|--|--|---|------------|---|--|--|--|---|----------|---|--|--|--|---|---------|--|
|                                                                                              |  |  | Sixmonths ended June30 |
|                                                                                              |  |  | 2006                   |   |            | 2005  |
|                                                                                              |  |  |                   |   |            | Media |  |  | Sports |   |         |   |  |  | Media |   |         | Sports |
| Netrevenues                                                                                       |  |  |                        | $ | 75,470     |       |  |  |        | $ | 75,470  |        |  |  |       | $ | 0       |        |  |  |  | $ | 305,207    |   |  |  |  | $ | 29,389   |   |  |  |  | $ | 275,818 |  |
|                                                                                              |  |  |                        |   |       |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   |       |   |  |  |  |   |     |   |  |  |  |   |    |  |
| Operatingcosts andrevenues                                                                        |  |  |                        |   |       |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   |       |   |  |  |  |   |     |   |  |  |  |   |    |  |
| Costofrevenues                                                                                    |  |  |                        |   | 69,556     |       |  |  |        |   | 69,556  |        |  |  |       |   | 0       |        |  |  |  |   | 207,314    |   |  |  |  |   | 29,115   |   |  |  |  |   | 178,199 |  |
| Depreciationandamortization                                                                       |  |  |                        |   | 18,951     |       |  |  |        |   | 3,326   |        |  |  |       |   | 15,625  |        |  |  |  |   | 236,586    |   |  |  |  |   | 140,359  |   |  |  |  |   | 96,227  |  |
| Impairmentcharges                                                                                 |  |  |                        |   | 77,000     |       |  |  |        |   | 77,000  |        |  |  |       |   | 0       |        |  |  |  |   | 0          |   |  |  |  |   | 0        |   |  |  |  |   | 0       |  |
|                                                                                              |  |  |                        |   | 165,507    |       |  |  |        |   | 149,882 |        |  |  |       |   | 15,625  |        |  |  |  |   | 443,900    |   |  |  |  |   | 169,474  |   |  |  |  |   | 274,426 |  |
| Segmentprofit/(loss)                                                                              |  |  |                        |   | (90,037    | )     |  |  |        | $ | (74,412 | )      |  |  |       | $ | (15,625 | )      |  |  |  |   | (138,693   | ) |  |  |  | $ | (140,085 | ) |  |  |  | $ | 1,392   |  |
| Less:    Corporateselling, general andadministrative                          |  |  |                        |   | 1,913,962  |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   | 1,510,039  |   |  |  |  |   |     |   |  |  |  |   |    |  |
| Compensatoryelement of stock and warrant issuances for selling, general andadministrativeexpenses |  |  |                        |   | 6,302,083  |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   | 1,222,389  |   |  |  |  |   |     |   |  |  |  |   |    |  |
| Interestexpense                                                                                   |  |  |                        |   | 368,860    |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   | 350,088    |   |  |  |  |   |     |   |  |  |  |   |    |  |
| Financingcosts paid in stocks andwarrants                                                         |  |  |                        |   | 33,000     |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   | 154,000    |   |  |  |  |   |     |   |  |  |  |   |    |  |
| Other                                                                                             |  |  |                        |   | (1,386,608 | )     |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   | 0          |   |  |  |  |   |     |   |  |  |  |   |    |  |
| Netloss                                                                                           |  |  |                        | $ | (7,321,334 | )     |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  | $ | (3,375,209 | ) |  |  |  |   |     |   |  |  |  |   |    |  |
|                                                                                                   |

|                                                                                                   |  |  |                          |   |            |       |  |  |        |   |         |        |  |  |       |   |         |        |  |  |  |   |            |   |  |  |  |   |         |   |  |  |  |   |         |  |
|---------------------------------------------------------------------------------------------------|--|--|--------------------------|---|------------|-------|--|--|--------|---|---------|--------|--|--|-------|---|---------|--------|--|--|--|---|------------|---|--|--|--|---|---------|---|--|--|--|---|---------|--|
|                                                                                              |  |  | Threemonths ended June30 |
|                                                                                              |  |  | 2006                     |   |            | 2005  |
|                                                                                              |  |  |                     |   |            | Media |  |  | Sports |   |         |   |  |  | Media |   |         | Sports |
| Netrevenues                                                                                       |  |  |                          | $ | 15,250     |       |  |  |        | $ | 15,250  |        |  |  |       | $ | — |        |  |  |  | $ | 226,691    |   |  |  |  | $ | 28,072  |   |  |  |  | $ | 198,619 |  |
| Operatingcosts andrevenues                                                                        |  |  |                          |   |       |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   |       |   |  |  |  |   |    |   |  |  |  |   |    |  |
| Costofrevenues                                                                                    |  |  |                          |   | 810        |       |  |  |        |   | 810     |        |  |  |       |   | — |        |  |  |  |   | 107,725    |   |  |  |  |   | 4,272   |   |  |  |  |   | 103,453 |  |
| Depreciationandamortization                                                                       |  |  |                          |   | 1,663      |       |  |  |        |   | 1,663   |        |  |  |       |   |    |        |  |  |  |   | 115,128    |   |  |  |  |   | 80,899  |   |  |  |  |   | 34,229  |  |
| Impairmentcharges                                                                                 |  |  |                          |   | 30,000     |       |  |  |        |   | 30,000  |        |  |  |       |   | — |        |  |  |  |   |       |   |  |  |  |   |    |   |  |  |  |   |    |  |
|                                                                                              |  |  |                          |   | 32,473     |       |  |  |        |   | 32,473  |        |  |  |       |   | — |        |  |  |  |   | 222,853    |   |  |  |  | $ | 85,171  |   |  |  |  | $ | 137,682 |  |
| Segmentprofit/(loss)                                                                              |  |  |                          |   | (17,223    | )     |  |  |        | $ | (17,223 | )      |  |  |       | $ | — |        |  |  |  |   | 3,838      |   |  |  |  | $ | (57,099 | ) |  |  |  | $ | 60,937  |  |
| Less:    Corporateselling, general andadministrative                          |  |  |                          |   | 1,144,385  |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   | 723,366    |   |  |  |  |   |    |   |  |  |  |   |    |  |
| Compensatoryelement of stock and warrant issuances for selling, general andadministrativeexpenses |  |  |                          |   | 5,436,583  |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   | 645,500    |   |  |  |  |   |    |   |  |  |  |   |    |  |
| Interestexpense                                                                                   |  |  |                          |   | 195,101    |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   | 178,230    |   |  |  |  |   |    |   |  |  |  |   |    |  |
| Financingcosts paid in stocks andwarrants                                                         |  |  |                          |   | 0          |       |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   | 110,250    |   |  |  |  |   |    |   |  |  |  |   |    |  |
| Other                                                                                             |  |  |                          |   | (1,349,461 | )     |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  |   |       |   |  |  |  |   |    |   |  |  |  |   |    |  |
| Netloss                                                                                           |  |  |                          | $ | (5,443,831 | )     |  |  |        |   |    |        |  |  |       |   |    |        |  |  |  | $ | (1,653,508 | ) |  |  |  |   |    |   |  |  |  |   |    |  |
|                                                                                                   |

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Note 13.    OtherMatters

In July  2006, we have formed a newdivision to be known as Ckrush Digital Media to focus on theconvergence of entertainment and digital technologies and to capitalizeon the growth of new media and the participatory pop culture of onlinecommunities and digital technologies. In the same month, as its firstinitiative, Ckrush Digital Media launched LiveMansion.com, an onlinesocial networking website created to harness the burgeoning influenceof youth-oriented online communities and to capitalize oncross-marketing opportunities. Further, the Company also announced, inJuly 2006, that it would produce ‘‘LiveMansion: TheMovie’’ which will be cast online by members of theLiveMansion.com social networking community. To assist in the financingof the movie, the Company sold $1.2 million of minority ownershipinterests, for which to the extent of available cash flow from thefilm, the investors are entitled to a return of 100% of thepurchase price plus a 20% preferred return.

InFebruary  2006, the Company assigned its exclusive promotionalagreement with a boxer for $140,000. As a result of this transactionthe Company recorded a gain of approximately $19,000. In addition, ifthe boxer wins a major bout during the term of the agreement, theCompany is entitled to an additional payment of $250,000.

In June 2004, the Company and other parties entered into anagreement to form and become members of Pledge This Holdings, LLC(‘‘PTH’’). PTH was formed to finance,produce and distribute a feature-length motionpicture.  In order to induce a group of investors toinvest in and make other accommodations to PTH, as well as, in partialconsideration of its then 22.5% membership interest in PTH, theCompany entered into an agreement to guarantee the repayment of theinvestors’ investment of $1  million if not recouped on orbefore June  30,  2005 and to pay interest on theinvestment at the rate of 12%. As further consideration, theCompany issued 1,000,000 shares of its common stock, fair valued at$510,000. In connection with PTH obtaining additional financing, in2005, the Company’s membership interest was reduced to10% and another investor agreed to participate in the guaranteeof the aforementioned $1  million investment to a maximum of80%. As of June 30,  2006, the investors have not beenrepaid and are entitled to take the following action until such time asthey have been repaid: (i) take control of the film property of PHL;and (ii) seize the Company's interest in PHL.  If thiswere to occur, our revenues, profits, results of operations, financialcondition and future prospects would be materially and adverselyaffected. The Company and the investors are negotiating an extensionuntil October  31,  2006.

Mr.DiLorenzo, a consultant to the Company and former officer, originallyhad a 7% membership interest in PTH which was relinquished inconnection with obtaining of additional financing for PTH. Also, anaffiliate of Livingston Investments, LLC, a related party of theCompany, has a 6% membership interest in PTH.

Note14.    Employment Agreements

In June  2006, theCompany’s Board of Directors approved the Company entering intoemployment agreements with its executive officers (other than its ChiefFinancial Officer — see below) and a consultant. The agreementseach provide for a three-year term with automatic renewals, subject toeither party's right not to renew and also provided for optiongrants. The Company will pay the President a base salary of $200,000and the CEO $175,000 for the first year of the agreement, subject toannual increases not less than 10% of the prior year'sbase salary, and a discretionary bonus. The Company granted thePresident options to purchase 10,500,000 shares of common stock, ofwhich 8,000,000 are exercisable at $.10 per share and are fully vestedfor past services. The balance of 2,500,000 will have an exercise priceof $.30 per share and vest at the rate of 69,444 shares per month overthree-year term. The CEO was granted options to purchase3,000,000 shares, of which 1,000,000 are exercisable at $.10 per shareand are fully vested for past services; the balance of 2,000,000 will

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have an exercise price of $.30 per share andvest at the rate of 55,555 shares per month over three-year term. Inthe event of a change of control while the executives are employed, theCompany will pay each an amount that, after deducting federal and stateincome and payroll withholding taxes, would equal three (3) times theirthen-base salary. In addition, the Board of Directorsestablished a compensation program for the independent members of theBoard. The members who are not employed by the Company will receive anannual retainer of $6,000 and options to purchase 100,000 shares of theCompany’s common stock at $.10 per share, vested immediately,except the Chair of the Audit Committee whose annual retainer is$12,000 and options to purchase 250,000 shares of the Company’scommon stock at $.10 per share. The options awarded are subject toshareholder approval for an increase in the number of authorized commonshares and, as applicable, a qualified option plan.

OnFebruary  13,  2006, the Company entered into an employmentagreement with its Executive Vice President — Chief FinancialOfficer. The agreement provides for a three-year term with automaticrenewals, subject to either party's right not to renew. TheCompany will pay a base salary of $175,000 for the first year of theagreement, subject to annual increases not less than 10% of theprior year's base salary, and a discretionary bonus. The Companygranted options to purchase 3,000,000 shares of our common stock to theexecutive, of which 750,000 are exercisable at $.10 per share and arefully vested. The balance of 2,250,000 will be qualified, subject toshareholder approval, have an exercise price of $.20 per share and vestat the rate of 62,500 shares per month over the initial three-yearterm. In the event of a change of control while the executive isemployed, the Company will pay him an amount that, after deductingfederal and state income and payroll withholding taxes, would equalthree (3) times his then-base salary. The Company is also obligated tomaintain in escrow an amount equal to 3 months of theexecutive’s salary until the Company obtains $3  millionof additional equity. The Company has not escrowed suchamount.

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|              |                                                          |
|--------------|----------------------------------------------------------|
| Item2.  | MANAGEMENT'S DISCUSSION AND ANALYSIS ORPLAN OF OPERATION |

Safe Harbor Statement RegardingForward-Looking Statements

Management believes certainstatements in this Form 10-QSB may constitute‘‘forward-looking statements’’ within themeaning of Section 27A of the Securities Act of 1933 and Section 21E ofthe Securities Exchange Act of 1934. Forward-looking statements includeall statements that do not relate solely to historical or currentfacts, and can be identified by the use of words such as‘‘may,’’ ‘‘should,’’‘‘estimate,’’‘‘expect,’’‘‘anticipate,’’‘‘intend,’’‘‘believe,’’‘‘predict,’’‘‘potential,’’ or words of similar import.Forward-looking statements are necessarily based on estimates andassumptions that are inherently subject to significant business,economic and competitive uncertainties and risks, many of which aresubject to change. These uncertainties and risks include, but are notlimited to, economic, regulatory or competitive conditions; theadequacy of the our reserves for; our ability to maintain an effectivesystem of internal controls over financial reporting; marketfluctuations and changes in interest rate; the ability of oursubsidiaries to implement their business plans and strategies; and ourability to obtain additional capital in the future. As a consequence,current plans, anticipated actions and future financial condition andresults may differ from those expressed in any forward-lookingstatements made by or on behalf of us. Additionally, forward-lookingstatements speak only as of the date they are made, and we undertake noobligation to release publicly the results of any future revisions orupdates we may make to forward-looking statements to reflect newinformation or circumstances after the date hereof or to reflect theoccurrence of future events.

OVERVIEW

We are anindependent producer of entertainment and sports content fordistribution to all media platforms. We produced, for release in2006, the feature film comedies ‘‘BeerLeague,’’ starring Artie Lange (the popular comedian andactor who is a regular on the Howard Stern Show) and ‘‘TVthe Movie,’’ starring Steve O, Preston Lacy and Wee-Man(all of ‘‘Jackass’’ fame).  We also co-produced the feature film comedy NationalLampoon's ‘‘Pledge This,’’ starringParis Hilton, anticipated to be released in 2006. In addition,we produce programming for pay-per-view, video-on-demand, internationalmarkets, as well as, for retail and direct responsesale. Further, we promote and distribute televised sports eventsand other programming through pay-per-view, video-on-demand and otherretail channels.

We are headquartered in New YorkCity.

Reportable Segments

We have two reportablesegments: media entertainment and sports entertainment. The mediasegment consists primarily of projects that we currently produce orwill produce or co produce such as feature films, DVD titles,television programming and other similar products. The sports segmentproduces boxing events and promotes professionalboxers.

Critical Accounting Policies

Theaccompanying discussion and analysis of our financial condition andresults of operations are based upon our consolidated financialstatements, which have been prepared in accordance with accountingprinciples generally accepted in the United States of America(‘‘US GAAP’’). The preparation of theseconsolidated financial statements requires us to make estimates andjudgments that affect the reported amounts of assets, liabilities,revenues and expenses, and related disclosure of contingent assets andliabilities. These estimates form the basis for making judgments aboutthe carrying values of assets and liabilities that are not readilyapparent from other sources. We base our estimates and judgments onhistorical experience and all available information. However, futureevents are subject to change, and the best estimates and judgmentsroutinely require adjustment. US GAAP requires us to make estimates andjudgments in several areas, including those related to recordingvarious accruals (such as incentive compensation and restructuringcosts), income taxes, the useful lives of long-lived assets, such asproperty and equipment and intangible assets, and potential losses fromcontingencies and litigation. We believe the policies discussed beloware the most critical to our consolidated financial statements becausethey are affected significantly by management's judgments,assumptions and estimates.

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RevenueRecognition

|  |              |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Media entertainment revenueincludes revenues from the sale or licensing of films and is recognizedupon meeting all recognition requirements of Statement of Position(SOP) 00-2 ‘‘Accounting by Producers or Distributors ofFilms’’. Revenue from the theatrical release of featurefilms is recognized at the time of exhibition based on theCompany’s participation in box office receipts. Revenue from thesale of digital video disks (‘‘DVDs’’) inthe retail market, net of an allowance for estimated returns and otherallowances, is recognized on the later of shipment to the customer or‘‘street date’’ (when it is available forsale by the customer). Under revenue sharing arrangements, rentalrevenue is recognized when the Company is entitled to receipts and suchreceipts are determinable. Revenue from sales to internationalterritories is recognized when access to the feature has been grantedor delivery has occurred, as required under the sales contract, and theright to exploit the feature film hascommenced |

|  |              |                                                                                                                                                                                              |
|--|--------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Fight revenue, promotionalfight revenue is comprised of box office ticket sales, site fee income,sponsorships and endorsements. Fight revenue is recognized in full onthe date of the event. |

Impairment of Long-LivedAssets

In accordance with Statement of FinancialAccounting Standards (‘‘SFAS’’) No. 144,‘‘Accounting for the Impairment or Disposal of Long-LivedAssets’’, the Company continually monitors events andchanges in circumstances that could indicate carrying amounts oflong-lived assets may not be recoverable. An impairment loss isrecognized when expected cash flows are less than the assets'carrying value. Accordingly, when indicators of impairment are present,we evaluate the carrying value of such assets in relation to theoperating performance and future discounted cash flows of theunderlying business. Our policy is to record an impairment loss when itis determined that the carrying amount of the asset may not berecoverable.

Intangible Assets

As a creator anddistributor of sports and entertainment copyrights, we have asignificant and growing number of intangible assets, includingtrademarks and contractual relationships. In accordance with accountingprinciples generally accepted in the United States of America, theCompany does not recognize the fair value of internally generatedintangible assets. Costs incurred to create and produce a copyrightedproduct, are either expensed as incurred, or capitalized as tangibleassets, as in the case of inventorial product costs. However,accounting recognition is not given to any increasing asset value thatmay be associated with the collection of the underlying copyrightedmaterial.

Intangibles are being amortized over theirestimated useful lives ranging from 5 to 10 years, utilizing thestraight-line method. Video and television libraries amortized overtheir estimated useful lives of 5 years, utilizing the straight-linemethod. As of June 30, 2006, all intangibles which were being amortizedwere either fully amortized and/or were transferred in connection withthe sale to the former president.

Income Taxes

Weutilize the asset and liability method to account for income taxeswhereby deferred tax assets and liabilities are recognized to reflectthe future tax consequences attributable to temporary differencesbetween the financial reporting basis of existing assets andliabilities and their respective tax losses. Deferred tax assets andliabilities are measured using enacted tax rates expected to berecovered and settled.

We have provided a 100%valuation allowance for the deferred tax assets, because the ultimaterealizations of those assets are uncertain. Utilization of netoperating loss carry-forwards are subject to a substantial annuallimitation due to the ‘‘change inownership’’ provisions of the Internal Revenue Code. Theannual limitation may result in the expiration of net operating losscarry-forwards before utilization.

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COMPARISON OF THE THREE MONTHS ENDED JUNE30, 2006 AND JUNE 30, 2005

The following represents acomparison of segment operating results for the three months endedJune  30,  2006 and2005.

|                                |  |  |      |   |         |   |  |  |      |  |         |    |  |  |  |   |         |   |  |  |  |  |        |   |
|--------------------------------|--|--|------|---|---------|---|--|--|------|--|---------|----|--|--|--|---|---------|---|--|--|--|--|--------|---|
|                           |  |  | 2006 |   |         | % |  |  | 2005 |  |         | %  |
| Netrevenues                    |  |  |      |   |    |   |  |  |      |  |    |    |  |  |  |   |    |   |  |  |  |  |   |   |
| Media                          |  |  |      | $ | 15,250  |   |  |  |      |  | 100.0   | %  |  |  |  | $ | 28,072  |   |  |  |  |  | 12.4   | % |
| Sports                         |  |  |      |   | — |   |  |  |      |  | — |    |  |  |  |   | 198,619 |   |  |  |  |  | 87.6   |   |
|                           |  |  |      |   | 15,250  |   |  |  |      |  | 100.0   |    |  |  |  |   | 226,691 |   |  |  |  |  | 100.0  |   |
| Costof revenues and othercosts |  |  |      |   |    |   |  |  |      |  |    |    |  |  |  |   |    |   |  |  |  |  |   |   |
| Media                          |  |  |      |   | 32,473  |   |  |  |      |  | 212.9   |    |  |  |  |   | 85,171  |   |  |  |  |  | 37.6   |   |
| Sports                         |  |  |      |   | — |   |  |  |      |  | — |    |  |  |  |   | 137,682 |   |  |  |  |  | 60.7   |   |
|                           |  |  |      |   | 32,473  |   |  |  |      |  | 212.9   |    |  |  |  |   | 222,853 |   |  |  |  |  | 98.3   |   |
| Segmentprofit                  |  |  |      |   |    |   |  |  |      |  |    |    |  |  |  |   |    |   |  |  |  |  |   |   |
| Media                          |  |  |      |   | (17,223 | ) |  |  |      |  | (112.9  | )  |  |  |  |   | (57,099 | ) |  |  |  |  | (25.2  | ) |
| Sports                         |  |  |      |   | — |   |  |  |      |  |    |    |  |  |  |   | 60,937  |   |  |  |  |  | 26.9   |   |
|                           |  |  |      | $ | (17,223 | ) |  |  |      |  | (112.9  | )% |  |  |  | $ | 3,838   |   |  |  |  |  | 1.7    | % |
|                                |

Netrevenues decreased by $211,000, to $15,000 for the three months endedJune  30,  2006 from $227,000 in the prior year period. The2006 net revenues were derived totally from the media segment andreflects the reduction of our involvement in the promotion of boxing.Our net revenues are not expected to be significant until the releaseof our 3 film projects in the fall 2006.

Cost of revenueswhich relate to the production costs for filmed products and boxingevents decreased by $190,000, to $32,000 for the quarter endedJune  30,  2006, compared to $223,000 incurred in theperiod year period. Other segment allocated costs include depreciationand amortization and impairment charges aggregating $32,000 in 2006 and$115,000 in 2005.

Our segment operating results resultedin a loss of $17,000 in the 2006 quarter as compared to a $4,000 profitfor the prior year period. The change in operating results in 2006 wasprincipally reflective of the decrease in net revenues as the Companytransitions its programming offerings.

Selling, generaland administrative expenses increased $5.2 million to $6.6 million forthe quarter ended June 30, 2006, from $1.4 million in the prior yearperiod. The increase is attributable to the charge of $5.0 million, inthe 2006 period, resulting from the implementation of FASB 123 (R),including the $4.6 million charge for the issuance of immediatelyvested options for past service.

Financing costsincluding interest discount amortization excluding fees and charges forfair market valuations of our securities issued in lieu of cashpayments for financing activities increased $17,000 in the three monthsended June 30, 2006 as compared to the prior year period as a result ofamortization of bond discount recorded in connection with the sale ofconvertible notes payable in the first quarter of 2006. There were noequity issuances as compensation for financings in the 2006quarter.

Other income items in the quarter of $1.3million principally relates to the gain from the settlement withrelated party.

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COMPARISON OF THE SIX MONTHS ENDED JUNE30, 2006 AND JUNE 30, 2005

The following represents acomparison of segment operating results for the six months endedJune  30,  2006 and2005.

|                                |  |  |      |   |         |   |  |  |      |  |         |    |  |  |  |   |          |   |  |  |  |  |        |    |
|--------------------------------|--|--|------|---|---------|---|--|--|------|--|---------|----|--|--|--|---|----------|---|--|--|--|--|--------|----|
|                           |  |  | 2006 |   |         | % |  |  | 2005 |  |         | %  |
| Netrevenues                    |  |  |      |   |    |   |  |  |      |  |    |    |  |  |  |   |     |   |  |  |  |  |   |    |
| Media                          |  |  |      | $ | 75,470  |   |  |  |      |  | 100.0   | %  |  |  |  | $ | 29,389   |   |  |  |  |  | 9.6    | %  |
| Sports                         |  |  |      |   | — |   |  |  |      |  | — |    |  |  |  |   | 275,818  |   |  |  |  |  | 90.4   |    |
|                           |  |  |      |   | 75,470  |   |  |  |      |  | 100.0   |    |  |  |  |   | 305,207  |   |  |  |  |  | 100.0  |    |
| Costof revenues and othercosts |  |  |      |   |    |   |  |  |      |  |    |    |  |  |  |   |     |   |  |  |  |  |   |    |
| Media                          |  |  |      |   | 149,882 |   |  |  |      |  | 198.6   |    |  |  |  |   | 169,474  |   |  |  |  |  | 55.5   |    |
| Sports                         |  |  |      |   | 15,625  |   |  |  |      |  | 20.7    |    |  |  |  |   | 274,426  |   |  |  |  |  | 89.9   |    |
|                           |  |  |      |   | 165,507 |   |  |  |      |  | 219.3   |    |  |  |  |   | 443,900  |   |  |  |  |  | 145.4  |    |
| Segmentprofit                  |  |  |      |   |    |   |  |  |      |  |    |    |  |  |  |   |     |   |  |  |  |  |   |    |
| Media                          |  |  |      |   | (74,412 | ) |  |  |      |  | (98.6   | )  |  |  |  |   | (140,085 | ) |  |  |  |  | (45.9  | )  |
| Sports                         |  |  |      |   | (15,625 | ) |  |  |      |  | (20.7   | )  |  |  |  |   | 1,392    |   |  |  |  |  | .5     |    |
|                           |  |  |      | $ | (90,037 | ) |  |  |      |  | (119.3  | )% |  |  |  | $ | (138,693 | ) |  |  |  |  | (45.4  | )% |
|                                |

Netrevenues decreased by $230,000 to $75,000 for the six months ended June30, 2006 from $305,000 in the prior year period. The 2006 net revenueswere derived totally from the media segment and reflects the reductionof our involvement in the promotion of boxing. Our net revenues are notexpected to be significant until the release of our film projects inthe fall 2006.

Cost of revenues which relate to theproduction costs for filmed products and boxing events decreased by$278,000 to $66,000 for the six months ended June 30, 2006, compared to$444,000 incurred in the period year period. Other segment allocatedcosts include depreciation and amortization and impairment chargesaggregating $96,000 in 2006 and $237,000 in 2005.

Oursegment operating results resulted in a loss $74,000 in the 2006quarter as compared to a loss of $139,000 for the prior year period.The change in operating results in 2006 was principally reflective ofthe decrease in sports promotion activities as the Company transitionsits programming offerings.

Selling, general andadministrative expenses increased $5.5 million to $8.2 million for thesix months ended June 30, 2006, from $2.7 million in the prior yearperiod. The increase is attributable to the charge of $5.2 million inthe six months ended June 30, 2006 resulting from the implementation ofFASB 123 (R) including the $4.6 million charge for the issuance ofimmediately vested options for officers.

Financing costsincluding interest discount amortization and fees exclusive of chargesfor fair market valuations of our securities issued in lieu of cashpayments for financing activities were comparable. There was noissuance of securities as payment for financing in the quarter endedJune 30, 2006 resulting in a reduction in such charges for the currentsix months as compared to the prior year period.

Otherincome items in the 2006 period of $1.4 million principally relates tothe gain from the settlement with related party.

Off-BalanceSheet Arrangements

We had no off-balance sheetarrangements. Additionally, we review our relationships with otherentities to identify whether it is the primary beneficiary of avariable interest entity. If the determination is made that we are theprimary beneficiary, then the entity is consolidated in accordance withFinancial Accounting Standards Board(‘‘FASB’’) Interpretation No.(‘‘FIN’’) 46 ‘‘Consolidationof Variable Interest Entities’’. Investments in which weexercise significant influence, but do not control, are accounted forusing the equity method of accounting. Investments in which there is nosignificant influence are accounted for using the cost method ofaccounting.

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LIQUIDITY AND CAPITALRESOURCES

We incurred net losses of $7.3  millionduring the six months ended June  30,  2006 and $7.7million and $12.4  million during the year ended December31,  2005 and 2004, respectively. In addition, we are not incompliance with the payment terms for $2.0  million of ouroutstanding notes and loans payable including unpaid interest. Further,we had a stockholders' deficiency of $11.4  million atJune  30,  2006. Historically, we have successfullyobtained external financing through short-term borrowings and privateplacements of equity and convertible debt and thus, we hope to remedythese defaults through additional borrowings, conversion of existingdebt to equity, ownership contributions, and/or renegotiation ofexisting terms and conditions of the notes and loans payable indefault. However, if we are unable to cure these defaults, it maysignificantly impede our ability to raise additional funds and/or toconduct normal business operations.

We have also takingactions to address liquidity in the followingways:

|  |              |                                                                                                         |
|--|--------------|---------------------------------------------------------------------------------------------------------|
|  | •  | developing additional sources ofdebt and equity financing to satisfy our current operatingrequirements; |

|  |              |                                                                                                                                                             |
|--|--------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | entering into newinitiatives to develop, produce and distribute film properties as wellas other entertainment projects for direct response and retailsales; |

|  |              |                                                                            |
|--|--------------|----------------------------------------------------------------------------|
|  | •  | continuing to pursue thepromotion of selective premium level boxingevents; |

|  |              |                                                                     |
|--|--------------|---------------------------------------------------------------------|
|  | •  | pursuing production partnershipsand joint ventures to fundprojects; |

|  |              |                                                   |
|--|--------------|---------------------------------------------------|
|  | •  | reducing operating costs byreducing overhead; and |

|  |              |                                                                                          |
|--|--------------|------------------------------------------------------------------------------------------|
|  | •  | continuing tonegotiate with existing creditors to convert their indebtedness intoequity. |

There can be no assurance that sufficient fundsrequired during the next year or thereafter will be generated fromoperations or that funds will be available from external sources suchas debt or equity financings or other potential sources. The lack ofadditional capital resulting from our inability to generate cash flowfrom operations or to raise capital from external sources would forceus to substantially curtail or cease operations and would, therefore,have a material adverse effect on its business. Furthermore, there canbe no assurance that any such required funds, if available, will beavailable on attractive terms or that they will not have a significantdilutive effect on our existing stockholders.

Thesefactors raise substantial doubt about our ability to continue as agoing concern and the accompanying consolidated financial statements donot include any adjustments related to the recoverability orclassification of asset carrying amounts or the amounts andclassification of liabilities that may result should we be unable tocontinue as a going concern.

Commitments andContingencies

In connection with both our sports andmedia operations, we guaranteed certain investors and otherparticipants in our projects the return of their investments and insome cases with a preferred return. In addition to amounts included inminority interests and/or participation payables (aggregating$5.7  million) we have guaranteed a $1  million investment,along with a co-guarantor.

We are of the opinion, basedupon advice of counsel, that we have made adequate provision forpotential liabilities, if any, arising from litigation settlements andother claims described in Part II Item 1 – LegalProceedings. As of June  30,  2006, we had accruedapproximately $2.3  million, with respect to such matters.However, the costs and other effects of pending or future litigation,governmental investigations, legal and administrative cases andproceedings (whether civil or criminal), settlements, judgments andinvestigations, claims and changes in those matters (including thosematters described above), and developments or assertions by or againstus relating to contractual rights related to boxers and the promotionof boxing events, intellectual property rights and intellectualproperty licenses, could have a material adverse effect on the ourbusiness, financial condition and operating results.

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Cash Flows

AtJune  30,  2006, our cash position reflected a balance of$99,000, exclusive of a restricted deposit required by our consentdecree with the SEC to cover the cost of a special consultant ascompared to the $58,000 balance at year end.

OperatingCash Flows.    Our principal operating source of cash duringthe six months ended June  30,  2006 was net revenues frommedia sales.  Our principal operating uses of cash related toproduction costs for films. For the six months ended June30,  2006, we used cash of $2.3  million in operatingactivities principally to fund our operating loss of $2.2million, exclusive of net non cash items of $5.1  million, theacquisition of film costs of $658,000 and prepaid expenses and otherassets of $25,000. Cash from operations was principally provided by theincrease in amounts due for payables and other accruals ($574,000) andcash from escrow ($88,000).

Investing CashFlows.    Cash provided from investing activities for the sixmonths ended June  30,  2006 was related to proceeds fromsale of promotional agreement and assets to former president of$357,000 and cash used was for the acquisition of furnishings for ournew executive offices of $88,000.

Financing CashFlows.    Net cash generated from financing activities for thesix months ended June  30,  2006 was $2,027,000 whichconsisted of net proceeds of short-term borrowings, net of repaymentsof indebtedness of $984,000, sales of common stock which netted$678,000 and sales of production interests (minority interests) of$647,000, net of financing costs.

EFFECT OF RECENTLY ISSUEDACCOUNTING PRONOUNCEMENTS

Effective January1,  2006, the Company adopted Statement of Financial AccountingStandards No. 123 (revised 2004) (‘‘SFAS123(R)’’), ‘‘Share-BasedPayment,’’ which revised Statement of FinancialAccounting Standards 123 (‘‘SFAS 123’’),‘‘Accounting for Stock-BasedCompensation.’’ Refer to Note 4 to the unauditedcondensed consolidated financial statements for further information.There were no other accounting policies adopted during the firstquarter of 2006 that had a material effect on the Company’sfinancial condition and results of operations.

|              |                         |
|--------------|-------------------------|
| Item3.  | CONTROLS AND PROCEDURES |

As ofJune  30,  2006, the end of the period covered by thisQuarterly Report, the Company carried out an evaluation, under thesupervision and with the participation of our management, including ourChief Executive Officer and Chief Financial Officer, of theeffectiveness of the design and operation of our disclosure controlsand procedures pursuant to Securities and Exchange Act Rule 13a-15 and15d-15. These individuals were not employed by the Company untilFebruary  2006.

A control system, no matter how wellconceived and operated, can provide only reasonable assurance that theobjectives of the control system are met. We do not expect thatour disclosure controls and procedures can detect or prevent allmisstatements. Further, the design of a control system must reflectthat there are resource constraints, and the benefits of controls mustbe considered relative to their costs. Because of the inherentlimitations in all control systems, no evaluation of controls canprovide absolute assurance that all control issues have beendetected. These inherent limitations include the realities thatjudgments in decision-making can be faulty, and that breakdown canoccur because of simple error or mistake. The design of anysystem of controls also is based in part upon certain assumptions aboutthe likelihood of future events, and there can be no assurance that anydesign will succeed in achieving its stated goals under all potentialfuture conditions. Over time, controls may become inadequatebecause of changes in conditions, or the degree of compliance with thepolicies or procedures may deteriorate. Because of the inherentlimitations in a control system, misstatements may occur and not bedetected. At this time, management has determined that ourdisclosure controls and procedures may not be sufficient, especiallydue to the limited number of Company employees, i) to ensure that dataerrors, control problems, or acts of fraud are detected and ii) toconfirm that appropriate corrective actions, including processimprovements, are undertaken in a timely manner. As a result, we haveconcluded that our current system of disclosure controls and proceduresrequires further enhancements to ensure that they are effective inrecording, processing, 

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summarizing, and reporting, on a timelybasis, information required to be disclosed by us in the reports thatwe file or submit under the Exchange Act.

Our managementconsidered the following deficiencies to be material weaknesses in theeffectiveness of our disclosure controls. A ‘‘materialweakness’’ is a reported condition in which the design oroperation of one or more of the specific disclosure control componentshas a defect or defects that could have a material adverse effect onthe our ability to record, process, summarize and report financial datain our financial statements in a timelymanner:

|  |              |                                                                                                                                                                                                                                       |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Maintaining sufficient personnelwith an appropriate level of accounting knowledge, experience andtraining in the application of generally accepted accounting principles(GAAP) commensurate with our financial reportingrequirements; |

|  |              |                                                             |
|--|--------------|-------------------------------------------------------------|
|  | •  | Maintaining adequatesegregation of duties in keyfunctions;. |

|  |              |                                                                       |
|--|--------------|-----------------------------------------------------------------------|
|  | •  | Adequately documentingcertain transactions and manual journalentries; |

|  |              |                                              |
|--|--------------|----------------------------------------------|
|  | •  | Adhering to a comprehensiveclosing calendar; |

|  |              |                                                                                                                                                                    |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Failing to have amanagement committee in place to handle decisions relating to theCompany’s operations, including review of quarterly and annualfilings; and |

|  |              |                                                                |
|--|--------------|----------------------------------------------------------------|
|  | •  | Maintaining formal internalaccounting and disclosure controls. |

Management hasinitially responded to the deficiencies in our disclosure controls byperforming additional accounting, financial analysis, and managerialreview procedures in order to ensure that the financial informationcontained in our Quarterly Report on Form 10-QSB was reliable. Detailedvalidation work was performed by our personnel with respect to all ofour balance sheet account balances in order to verify the financialinformation and to substantiate the disclosures contained in ourQuarterly Report on Form 10-QSB. Additional analysis was also performedon income statement amounts and compared to prior year amounts forreasonableness.

As a result of a settlement with the SEC,we have retained consultants to assist in the assessment of ourinternal accounting and disclosure controls and to make recommendationsfor timely corrective actions and hired the CEO and CFO inFebruary  2006. In addition, a majority of our Board ofDirectors, as reconstituted in March  2006, consists of membersindependent of management. We also instituted an Audit Committee atthat time.

Together with the consultants, management willreview and document our disclosure controls and procedures, includingour internal controls and procedures for financial reporting and willreport its progress and findings to the Audit Committee. We will focuson a number of areas that we will endeavor to improve, including thesegregation of duties in key functions; the creation of formalaccounting controls, policies and procedures; the hiring of additionalmanagement and staff experienced in financial reporting; as well asfinalizing documentation of our accounting and disclosure internalcontrols and procedures. Further, management continues to look formethods to ensure that our systems evolve with our business and toimprove our overall system ofcontrol.

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PART II —OTHER INFORMATION

Item 1.    LEGALPROCEEDINGS

First Equity

In June2005, First Equity Capital Corporation filed an action against us instate court in Florida, alleging that we breached an unsigned agreementpursuant to which we allegedly hired First Equity to provide certainservices. First Equity alleges that we are obligated to pay FirstEquity $1.5  million and to issue First Equity up to 4,000,000registered shares of our common stock. We have filed an answer denyingany liability to First Equity and raising numerous affirmativedefenses. We are in the process of taking discovery in this matter andintends to vigorouslydefend.

Designscape

In April  2005Designscape, Inc. filed an action in New York State Supreme Courtagainst us and James DiLorenzo, alleging breach of contract andmisrepresentations with respect to an alleged oral agreement to providegoods and services in connection with the production and staging of atelevision series and seeking approximately $550,000 and unspecifieddamages. We have denied the material allegations of the complaint andfiled a counterclaim seeking damages in excess of $150,000. The matteris currently pending.

Shane Mosley

InNovember  2005, we entered into a second settlement agreementrelated to the sharing of profits with Shane Mosley, a boxer, andagreed to pay $565,000 to Mosley in installments representing60% of the net profits from any boxing events promoted orco-promoted by us (retroactively to September  2005) until theoutstanding sum, plus accrued interest, is paid in full. In addition,we are entitled to a $100,000 credit against the above settlementamount, contingent upon the transfer and assignment of our rights tothe Mosley Video Library. Amounts unpaid by December  31,2008 shall be immediately due and payable. Our former Presidentpersonally guaranteed our obligation.

National SportsPartners

In May  2003, National SportsPartners, the owner of Fox Sports Net Broadcast Service, commenced anaction in California against us to collect approximately $239,000 foradvertising time and production fees and costs for airing boxing eventson Fox, plus interest, costs and attorney fees. In August  2004,we reached an agreement with NSP in which NSP agreed to forbear fromfurther action against us in exchange for full payment over time of$239,000, plus deferred interest. As of June  30,  2006 weonly paid $65,000.

Dewayne Layfield

InApril  2005, Dewayne Layfield, a holder of a note payable fromone of our subsidiaries, arising from a previous settlement agreement,instituted a second arbitration proceeding against us seeking torecover $172,000 plus attorneys' fees and costs. We answered,seeking a declaration that we had no further obligation to due tobreaches of the related agreement. We also filed a counterclaim seekingto recover amounts previously paid related to the previous agreement.In April  2006, we paid $31,000 to the holder to reduce theoutstanding principal. The matter is currently pending with arbitrationscheduled for September  2006.

J.P. Morgan Chase &Company

On January  13,  2004, J.P.Morgan Chase & Company obtained a judgment in the amount of $95,000against our former President and us in connection with our default onan outstanding note. In May  2004, we settled by agreeing to paythe outstanding principal amount, plus interest at 4% per

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annum, in 60 monthly payments of$2,000 each, in exchange for forbearance on any additional efforts tocollect upon the unsatisfied portion of the balance. The balance onthis obligation at June 30,  2006 amounted to $76,000. We are notin compliance with the terms set forth in the forbearanceagreement.

Other

There are other mattersin which we have entered into settlements in prior years for which wehave not made the required payments.

In the opinion ofmanagement, on the advice of counsel, we have made adequate provisionfor potential liabilities, if any, arising from litigation settlementsand other claims arising from the above matters. As of June30,  2006, we accrued $2.3  million, with respect to suchmatters. However, the costs and other effects of pending or futurelitigation, governmental investigations, legal and administrative casesand proceedings (whether civil or criminal), settlements, judgments andinvestigations, claims and changes in those matters (including thosematters described above), and developments or assertions by or againstus relating to contractual rights related to boxers and the promotionof boxing events, intellectual property rights and intellectualproperty licenses, could have a material adverse effect on ourbusiness, financial condition and operating results.

Item2.    UNREGISTERED SALES OF EQUITYSECURITIES AND USE OF PROCEEDS

During the three monthsended June 30, 2006, the Company sold 5,165,525 shares of common stockin private placements at prices ranging from $.12 to $.16 per share.The proceeds were used for working capital purposes.

Item3.    DEFAULTS UPON SENIORSECURITIES

The Company is in default of several notes andloans payable in the aggregate amount of approximately $2.0million including accrued stock. The Company hopes to remedy thesedefaults through additional borrowings, conversion of existing debt toequity, ownership contributions, and/or renegotiation of existing termsand conditions of notes and loans payable in default. If the Company isunable to cure these defaults, it may significantly impede theCompany's ability to raise additional funds and/or to conductnormal business operations

Item4.    SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS

None.

Item5.    OTHER INFORMATION

TheCompany has no other information to report, which might otherwise bereported under Form 8-K.

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Item6.    EXHIBITS

|               |  |  |                                                                                                                                                                  |
|---------------|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  | Description                                                                                                                                                      |
| 3.1*          |  |  | Articlesof Incorporation of theRegistrant(1)                                                                                                                     |
| 3.2*          |  |  | By-laws ofRegistrant(1)                                                                                                                                          |
| 3.3*          |  |  | Certificate ofDesignation, Preferences and Rights of Series E Convertible PreferredStock of Cedric Kushner Promotions, Inc., dated October25,2004.(6)            |
| 3.4*          |  |  | Amendment to theBy-Laws of Cedric Kushner Promotions,Inc.(9)                                                                                                     |
| 3.5*          |  |  | Amendments to theCertificate of Incorporation of Cedric Kushner Promotions,Inc.(9)                                                                               |
| 4.1*          |  |  | Specimen commonstock Certificate(1)                                                                                                                              |
| 10.1*         |  |  | 1996Incentive and Non-qualified Stock OptionPlan(1)                                                                                                              |
| 10.2*         |  |  | Form of IncentiveStock Option Agreement under 1996 Incentive and Non-qualified StockOption Plan(1)                                                               |
| 10.3*         |  |  | Form ofNon-qualified Stock Option Agreement under 1996 Incentive andNon-qualified Stock OptionPlan(1)                                                            |
| 10.4*         |  |  | 1998 Incentive andNon-qualified Stock OptionPlan(1)                                                                                                              |
| 10.5*         |  |  | Form of IncentiveStock Option Agreement under 1998 Incentive and Non-qualified StockOption Plan(1)                                                               |
| 10.6*         |  |  | Form ofNon-qualified Stock Option Agreement under 1998 Incentive andNon-qualified Stock OptionPlan(1)                                                            |
| 10.7*         |  |  | Form ofNon-qualified Stock Option Agreement for Outside Directors under 1998Incentive and Non-qualified Stock OptionPlan(1)                                      |
| 10.8*         |  |  | Form of Note andWarrant Purchase Agreement, executed between December  2001 andApril  2002, between the Company and various purchasers in aprivate placement.(2) |
| 10.9*         |  |  | Formof Promissory Note, executed between December  2001 andApril  2002, between the Company and various purchasers in aprivate placement.(2)                     |
| 10.10*        |  |  | Formof Warrant to Purchase Common Stock, executed between December2001 and April  2002, between the Company and various purchasersin a privateplacement.(2)      |
| 10.11*        |  |  | Form of Noteand Warrant Purchase Agreement, executed between March  2002 andApril  2002, between the Company and various purchasers in aprivate placement.(2)    |
| 10.12*        |  |  | Formof Convertible Promissory Note, executed between March  2002 andApril  2002, between the Company and various purchasers in aprivate placement.(2)            |
| 10.13*        |  |  | Formof Warrant to Purchase Common Stock, executed between March  2002and April  2002, between the Company and various purchasers in aprivate placement.(2)       |
| 10.14*        |  |  | Formof Convertible Promissory Note, executed between January  2003and March  2003, between the Company and various purchasers in aprivate placement.(3)          |
| 10.15*        |  |  | Formof Warrant to Purchase Common Stock, executed between January2003 and March  2003, between the Company and various purchasersin a privateplacement.(3)       |
| 10.16*        |  |  | Form of Noteand Warrant Purchase Agreement, executed between January  2003and March  2003, between the Company and various purchasers in aprivate placement.(3)  |
|               |

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|               |  |  |                                                                                                                                                                                                   |
|---------------|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  | Description                                                                                                                                                                                       |
| 10.17*        |  |  | Form of Warrant toPurchase Common Stock, executed May, 28 2003 between the Company and apurchaser in a privateplacement(3)                                                                        |
| 10.18*        |  |  | Form of Noteand Warrant Purchase Agreement, executed May, 28 2003 between theCompany and a purchaser in a privateplacement.(3)                                                                    |
| 10.19*        |  |  | Form ofConvertible Promissory Note, executed May, 28 2003 between the Companyand a purchaser in a privateplacement.(3)                                                                            |
| 10.20*        |  |  | Form ofPromissory Note, executed January  30,  2003, between theCompany and a lender.(3)                                                                                                          |
| 10.21*        |  |  | Form of PromissoryNote, executed March  24,  2003, between the Company and alender. (3)                                                                                                           |
| 10.22*        |  |  | Form ofPromissory Note, executed March  27,  2003, between theCompany and a lender.(3)                                                                                                            |
| 10.23*        |  |  | Form of Warrant toPurchase Common Stock, executed August  12,  2003 betweenthe Company and a purchaser in a privateplacement(3)                                                                   |
| 10.24*        |  |  | Form ofConvertible Promissory Note, executed August  12,  2003between the Company and a purchaser in a privateplacement(3)                                                                        |
| 10.25*        |  |  | Form of Noteand Warrant Purchase Agreement, executed August  12,  2003between the Company and a purchaser in a privateplacement.(3)                                                               |
| 10.26*        |  |  | Form ofWarrant to Purchase Common Stock between the Company and Yeend &Castaneda, dated September  5,2003(3)                                                                                  |
| 10.27*        |  |  | Form of Note andWarrant Purchase Agreement, executed December  2003, between theCompany and various purchasers in a privateplacement.(3)                                                          |
| 10.28*        |  |  | Form ofWarrant to Purchase Common Stock, executed December  2003,between the Company and various purchasers in a privateplacement.(3)                                                             |
| 10.29*        |  |  | Form ofConvertible Promissory Note, executed December  2003, between theCompany and various purchasers in a privateplacement.(3)                                                                  |
| 10.30*        |  |  | Supplementto the Note and Warrant Purchase Agreement, executed December2003, between the Company and various purchasers in a privateplacement.(3)                                                 |
| 10.31*        |  |  | ConsultingAgreement, effective January  1,  2004, between the Companyand Bulldog Management,LLC.(3)                                                                                               |
| 10.32*        |  |  | Form of Warrant toPurchase Common Stock, executed between January  2004 andApril  2004, between the Company and various purchasers in aprivate placement.(3)                                      |
| 10.33*        |  |  | Formof Note and Warrant Purchase Agreement, executed between January2004 and April  2004, between the Company and various purchasersin a privateplacement.(3)                                     |
| 10.34*        |  |  | Form ofConvertible Promissory Note, executed between January  2004 andApril  2004, between the Company and various purchasers in aprivateplacement.(3)                                            |
| 10.35*        |  |  | Supplement,dated March  19,  2004, to the Note and Warrant PurchaseAgreement, executed between January  2004 and April  2004,between the Company and various purchasers in a privateplacement.(3) |
| 10.36*        |  |  | Supplement,dated March  29,  2004, to the Note and Warrant PurchaseAgreement, executed between January  2004 and April  2004,between the Company and various purchasers in a privateplacement.(3) |
|               |

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|               |  |  |                                                                                                                                                                                                                                                                              |
|---------------|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  | Description                                                                                                                                                                                                                                                                  |
| 10.37*        |  |  | Consulting Agreement,effective March  24,  2004, between the Company and BusterMathis,Jr.(3)(7)                                                                                                                                                                              |
| 10.38*        |  |  | PromissoryNote, dated September  1,  2003, between the Company andDewayne Layfield.(3)                                                                                                                                                                                       |
| 10.39*        |  |  | Consulting Agreement,effective June  1,  2004, between the Company and RoyRoberts.(4)(7)                                                                                                                                                                                     |
| 10.40*        |  |  | Form of Note andWarrant Purchase Agreement, executed between July  2004 andAugust  2004, between the Company and various purchasers in aprivate placement.(4)                                                                                                                |
| 10.41*        |  |  | Formof Convertible Promissory Note, executed between July  2004 andAugust  2004, between the Company and various purchasers in aprivate placement.(4)                                                                                                                        |
| 10.42*        |  |  | Formof Warrant to Purchase Common Stock, executed between July  2004and August  2004, between the Company and various purchasers in aprivate placement.(4)                                                                                                                   |
| 10.43*        |  |  | 2002Incentive and Non-qualified Stock OptionPlan(5)                                                                                                                                                                                                                          |
| 10.44*        |  |  | ConsultingAgreement, effective January  10,  2005, between theCompany and Philabelle Consulting,LLC.(7)                                                                                                                                                                      |
| 10.45*        |  |  | Term Sheet forModification of Loan and Consulting Arrangements dated as ofFebruary  10,  2005, by and among Livingston Investments,LLC, Mackin Charitable Remainder Trust, Cedric Kushner Promotions,Inc., Cedric Kushner Promotions, Ltd. and Cedric Kushner Boxing,Inc,(8) |
| 10.46*        |  |  | ConversionAgreement, dated February  15,  2005, between the Companyand a NoteHolder.                                                                                                                                                                                         |
| 10.47*        |  |  | Debt SettlementAgreement, dated January  23,  2005, between the Companyand Yeend & Castaneda,LLP.(9)                                                                                                                                                                     |
| 10.48*        |  |  | ConversionAgreement dated as of June  15,  2005 between the Companyand aNoteholder.(10)                                                                                                                                                                                      |
| 10.49*        |  |  | SubscriptionAgreement dated as of June  28,  2005 by and between CkrushEntertainment, Inc. and the investors named on the signature pagesthereto.(11)                                                                                                                        |
| 10.50*        |  |  | GuarantyAgreement dated as of June  28,  2005 by and between CkrushEntertainment, Inc., the Company and Cornell Capital Partners,L.P.(11)                                                                                                                                    |
| 10.51*        |  |  | SecurityAgreement dated as of June  28,  2005 by and between CkrushEntertainment, Inc., and Cornell Capital Partners,L.P.(11)                                                                                                                                                |
| 10.52*        |  |  | Pledge and EscrowAgreement dated as of June  28,  2005 by and between theCompany, Cornell Capital Partners, L.P. and David Gonzalez,Esq.(11)                                                                                                                                 |
| 10.53*        |  |  | OperatingAgreement of Identity Films & Company, LLC dated as of June27,  2005 by and between Ckrush Entertainment, Inc. and IdentityFilms, LLC.(12)                                                                                                                      |
| 10.54*        |  |  | AmendmentNo. 1 to the Guaranty and Pledge Agreement dated as of June30,  2005 by and between the Company and the investors named onthe signature pagethereto.(13)                                                                                                            |
| 10.55*        |  |  | Contributionand Indemnification Agreement dated as of June  30,  2005by and between the Company and World Wide South Beach,LLC.(13)                                                                                                                                          |
|               |

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|               |  |  |                                                                                                                                                                                             |
|---------------|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ExhibitNumber |  |  | Description                                                                                                                                                                                 |
| 10.56*        |  |  | Amendment No. 1 tothe Class A Common Stock and Installment Payment Agreement dated as ofJune  30,  2005 by and between the Company and theinvestors named on the signature pagethereto.(13) |
| 10.57*        |  |  | SettlementAgreement among the Company and Cedric Kushner, dated March31,  2006 and effective April  10,2006.(14)                                                                            |
| 10.58*        |  |  | Letter ofEngagement between Trilogy Capital Partners, Inc. and the Company,dated April  24,2006.(15)                                                                                        |
| 10.59*        |  |  | Form of Warrantissued to Trilogy Capital Capital Partners, Inc., dated April24,2006.(15)                                                                                                    |
| 31.1          |  |  | Certification byChief Executive Officer pursuant to Sarbanes-Oxley Section 302. (filedherewith)                                                                                             |
| 31.2          |  |  | Certification by ChiefFinancial Officer pursuant to Sarbanes-Oxley Section 302. (filedherewith)                                                                                             |
| 32.1          |  |  | Certification by ChiefExecutive Officer pursuant to 18 U.S.C. Section 1350. (filedherewith)                                                                                                 |
| 32.2          |  |  | Certification by ChiefFinancial Officer pursuant to 18 U.S.C. Section 1350. (filedherewith)                                                                                                 |
|               |

|  |
|--|
|  |  |
|  |

|   |                  |
|---|------------------|
| * | Previouslyfiled. |

|     |                                                                                                                                    |
|-----|------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Incorporatedby reference to our Current Report on Form SB-2 filed with theSecurities and Exchange Commission on Form July  7,1998. |

|     |                                                                                                                                   |
|-----|-----------------------------------------------------------------------------------------------------------------------------------|
| (2) | Incorporatedby reference to our Current Report on Form 8-K filed with theSecurities and Exchange Commission on Form May  15,2002. |

|     |                                                                                                                                       |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Incorporatedby reference to our Current Report on Form 10-KSB filed with theSecurities and Exchange Commission on Form June  25,2004. |

|     |                                                                                                                                         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|
| (4) | Incorporatedby reference to our Current Report on Form 10-QSB filed with theSecurities and Exchange Commission on Form August  13,2004. |

|     |                                                                                                                                                   |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------------|
| (5) | Incorporatedby reference to our Information Statement on Schedule 14A-6 filed withthe Securities and Exchange Commission on Form November12,2004. |

|     |                                                                                                                                             |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------|
| (6) | Incorporatedby reference to our Current Report on Form 10-QSB/A filed with theSecurities and Exchange Commission on Form November  18,2004. |

|     |                                                                                                                                               |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------|
| (7) | Incorporatedby reference to our Registration Statement on Form S-8 filed with theSecurities and Exchange Commission on Form January  18,2005. |

|     |                                                                                                                                        |
|-----|----------------------------------------------------------------------------------------------------------------------------------------|
| (8) | Incorporatedby reference to our Current Report on Form 8-K filed with theSecurities and Exchange Commission on Form February  15,2005. |

|     |                                                                                                                                      |
|-----|--------------------------------------------------------------------------------------------------------------------------------------|
| (9) | Incorporatedby reference to our Current Report on Form 10-KSB filed with theSecurities and Exchange Commission on Form May  13,2005. |

|      |                                                                                                                                    |
|------|------------------------------------------------------------------------------------------------------------------------------------|
| (10) | Incorporatedby reference to our Current Report on Form 8-K filed with theSecurities and Exchange Commission on Form June  21,2005. |

|      |                                                                                                                                   |
|------|-----------------------------------------------------------------------------------------------------------------------------------|
| (11) | Incorporatedby reference to our Current Report on Form 8-K filed with theSecurities and Exchange Commission on Form July  5,2005. |

|      |                                                                                                                                   |
|------|-----------------------------------------------------------------------------------------------------------------------------------|
| (12) | Incorporatedby reference to our Current Report on Form 8-K filed with theSecurities and Exchange Commission on Form July  8,2005. |

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|      |                                                                                                                                    |
|------|------------------------------------------------------------------------------------------------------------------------------------|
| (13) | Incorporatedby reference to our Current Report on Form 8-K filed with theSecurities and Exchange Commission on Form July  14,2005. |

|      |                                                                                                                                     |
|------|-------------------------------------------------------------------------------------------------------------------------------------|
| (14) | Incorporatedby reference to our Current Report on Form 8-K filed with theSecurities and Exchange Commission on Form April  14,2006. |

|      |                                                                                                                                     |
|------|-------------------------------------------------------------------------------------------------------------------------------------|
| (15) | Incorporatedby reference to our Current Report on Form 8-K filed with theSecurities and Exchange Commission on Form April  24,2006. |

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SIGNATURES

Pursuantto the requirements of the Securities Exchange Act of 1934, theregistrant has duly caused this report to be signed on its behalf bythe undersigned thereunto dulyauthorized.

|                      |  |  |                                                                                         |
|----------------------|--|--|-----------------------------------------------------------------------------------------|
|                 |  |  | CKRUSH,INC. &SUBSIDIARIES                                                           |
| Date:August 11, 2006 |  |  | /s/ RoyRoberts                                                                          |
|                 |  |  | Roy RobertsChief ExecutiveOfficer(Principal ExecutiveOfficer)                           |
| Date: August 11,2006 |  |  | /s/ Jan E.Chason                                                                        |
|                 |  |  | Jan E. ChasonCFO and ExecutiveVice President(Principal Financial and AccountingOfficer) |
|                      |

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