UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-QSB

(Mark One)



|    |                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------
|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001.

OR



|      |                                                                                                                 
|----- | ----------------------------------------------------------------------------------------------------------------
|[   ] | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION FROM  TO
.

COMMISSION FILE NUMBER 0-29369

CREATIVE TECHNOLOGIES HOLDINGS, INC.

---

(Name of Small Business Issuer in its charter)


|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Nevada                                                         |  | 88-0409146                          
|                                                               |  |                                     
|(State or other jurisdiction of
incorporation or organization) |  | (I.R.S. Employer
Identification No.)
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|                                                              
|1800 Avenue of the Stars, Suite 600
Los Angeles, California    |  | 90067                               
|                                                               |  |                                     
|(Address of principal executive offices)                       |  | (Zip code)                          

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [   ] No [X]

State the number of shares outstanding of each of the issuers classes of
common equity, as of the latest practicable date:



| |  | At March 31, 2001, there were outstanding 12,600,000 shares of the
Registrants Common Stock, $.001 par value.
| |  | --------------------------------------------------------------------------------------------------------------

Transitional Small Business Disclosure Format: Yes [   ] No [X]

1



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Table of Contents



|                           |  |                                                             |  |  |  |  |  | 
|-------------------------- |  | ----------------------------------------------------------- |  |  |  |  |  | 
|ACCOUNTANTS REVIEW REPORT
|                           |  | Consolidated Balance Sheet                                 
|                           |  | Consolidated Statement of Operations                       
|                           |  | Consolidated Statement of Changes in Stockholders Equity  
|                           |  | Consolidated Statement of Cash Flows                       
|                           |  | Notes to Consolidated Financial Statements                 
|                           |  | Schedule of General Development and Administrative Expenses
|SIGNATURE                 

PART I

FINANCIAL INFORMATION

Item I. Financial Statements

CREATIVE TECHNOLOGIES HOLDINGS, INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001

TABLE OF CONTENTS

|                                  |                                                              |  |         |        | 
|--------------------------------- | ------------------------------------------------------------ |  | ------- | ------ | 
|                                  |                                                              |  | PAGE(S)
|                                  |                                                              |  |        
|ACCOUNTANTS REVIEW REPORT        |                                                              |  | 3       |       
|                                 
|                                 
|                                 
|                                 
|CONSOLIDATED FINANCIAL STATEMENTS |                                                              |  |         |       
|                                 
|                                 
|                                 
|                                 
|                                  | Balance Sheet                                                |  |         | 4      | 
|                                 
|                                 
|                                 
|                                 
|                                  | Statement of Operations                                      |  |         | 5      | 
|                                 
|                                 
|                                 
|                                 
|                                  | Statement of Changes in Stockholders Equity                 |  |         | 6      | 
|                                 
|                                 
|                                 
|                                 
|                                  | Statement of Cash Flows                                      |  |         | 7      | 
|                                 
|                                 
|                                 
|                                 
|                                  | Notes to Financial Statements                                |  |         | 8  14 | 
|                                 
|                                 
|                                 
|                                 
|                                  | SUPPLEMENTARY INFORMATION                                    |  |         |        | 
|                                 
|                                 
|                                 
|                                 
|                                  | Schedule of General, Administrative and Development Expenses |  |         | 15     | 

2



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[JOSEFINA C. DE LA CRUZ, C.P.A. LETTERHEAD]




ACCOUNTANTS REVIEW REPORT

To the Board of Directors
Creative Technologies Holdings, Inc. and Subsidiaries
Carson City, Nevada

We have reviewed the accompanying balance sheet of Creative Technologies
Holdings, Inc. and Subsidiaries (Development Stage Companies), as of March 31,
2001 and the related statements of operations, changes in stockholders equity
and cash flows for the three months then ended, in accordance with Statements
on Standards for Accounting and Review Services issued by the American
Institute of Certified Public Accountants. All information included in these
financial statements is the representation of the management of Creative
Technologies Holdings, Inc. and Subsidiaries.

A review consists principally of inquiries of Company personnel and analytical
procedures applied to financial data. It is substantially less in scope than
an audit in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the accompanying financial statements in order for them to be in
conformity with generally accepted accounting principles.

Our review was made for the purpose of expressing limited assurance that there
are no material modifications that should be made to the financial statements
in order for them to be in conformity with generally accepted accounting
principles. The information included in the accompanying schedule of general,
administrative and development expenses is presented only for supplementary
analysis purposes. Such information has been subjected to the inquiry and
analytical procedures applied in the review of the basic financial statements,
and we are not aware of any material modifications that should be made to it.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 14 to the financial
statements, the Company has no established source of revenue. This raises
substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.

Josefina C. de la Cruz, CPA
A Professional Corporation

June 28, 2001

3



---






CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED BALANCE SHEET
March 31, 2001

|                                           |                                                                                                         |   |           |            |   |  | 
|------------------------------------------ | ------------------------------------------------------------------------------------------------------- | - | --------- | ---------- | - |  | 
|ASSETS                                    
|                                          
|                                          
|                                          
|                                          
|CURRENT ASSETS                             |                                                                                                         |   |           |           
|                                          
|                                          
|                                          
|                                          
|                                           | Cash                                                                                                    |   | $         | 15,347     |  
|                                          
|                                          
|                                          
|                                          
|                                           | Advances to employees                                                                                   |   |           | 26,753     |  
|                                          
|                                          
|                                          
|                                          
|                                           | Prepaid expenses                                                                                        |   |           | 12,988     |  
|                                           |                                                                                                         |   |           |           
|                                           | Total current assets                                                                                    |   |           | 55,088     |  
|                                           |                                                                                                         |   |           |           
|PROPERTY AND EQUIPMENT , NET (NOTE 3)      |                                                                                                         |   | 397,065   |           
|                                           |                                                                                                         |   |           |           
|OTHER ASSETS                               |                                                                                                         |   |           |           
|                                          
|                                          
|                                          
|                                          
|                                           | Receivables  others (Note 4)                                                                           |   |           | 269,520    |  
|                                          
|                                          
|                                          
|                                          
|                                           | Deposits                                                                                                |   |           | 77,928     |  
|                                           |                                                                                                         |   |           |           
|                                           | Total other assets                                                                                      |   |           | 347,448    |  
|                                           |                                                                                                         |   |           |           
|TOTAL ASSETS                               |                                                                                                         | $ | 799,601   |           
|                                           |                                                                                                         |   |           |           
|LIABILITIES AND STOCKHOLDERS EQUITY      
|                                          
|                                          
|                                          
|                                          
|CURRENT LIABILITIES                        |                                                                                                         |   |           |           
|                                          
|                                          
|                                          
|                                          
|                                           | Accounts payable                                                                                        |   | $         | 605,054    |  
|                                          
|                                          
|                                          
|                                          
|                                           | Payroll taxes payable                                                                                   |   |           | 39,941     |  
|                                          
|                                          
|                                          
|                                          
|                                           | Due to Investors (Note 5)                                                                               |   |           | 1,561,692  |  
|                                          
|                                          
|                                          
|                                          
|                                           | Accrued salaries payable                                                                                |   |           | 73,960     |  
|                                          
|                                          
|                                          
|                                          
|                                           | Loan payable (Note 6)                                                                                   |   |           | 50,000     |  
|                                          
|                                          
|                                          
|                                          
|                                           | Notes payable (Note 7)                                                                                  |   |           | 11,667     |  
|                                          
|                                          
|                                          
|                                          
|                                           | Capital lease payable  current portion (Note 8)                                                        |   |           | 3,021      |  
|                                           |                                                                                                         |   |           |           
|                                           | Total current liabilities                                                                               |   |           | 2,345,335  |  
|                                          
|                                          
|                                          
|                                          
|LONG-TERM LIABILITIES                     
|                                           | Capital lease payable (Note 8)                                                                          |   |           | 5,847      |  
|                                           |                                                                                                         |   |           |           
|TOTAL LIABILITIES                          |                                                                                                         |   | 2,351,182 |           
|                                           |                                                                                                         |   |           |           
|MINORITY INTERESTS (Note 9)                |                                                                                                         |   | (621,566  | )         
|                                           |                                                                                                         |   |           |           
|STOCKHOLDERS EQUITY (Note 10)             |                                                                                                         |   |           |           
|                                          
|                                          
|                                          
|                                          
|                                           | Common Stock, par value $0.001; 125,000,000 shares
authorized; 12,600,000 shares issued and outstanding |   |           | 12,600     |  
|                                          
|                                          
|                                          
|                                          
|                                           | Paid-in capital                                                                                         |   |           | 989,500    |  
|                                          
|                                          
|                                          
|                                          
|                                           | Accumulated deficit                                                                                     |   |           | (1,932,115 | )
|                                           |                                                                                                         |   |           |           
|                                           | Total stockholders equity                                                                              |   |           | (930,015   | )
|                                           |                                                                                                         |   |           |           
|TOTAL LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                         | $ | 799,601   |           
|                                           |                                                                                                         |   |           |           

See accompanying notes and accountants review report.

4



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CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2001

|                                           |                                                  |   |            |            | 
|------------------------------------------ | ------------------------------------------------ | - | ---------- | ---------- | 
|REVENUE                                    |                                                  | $ |           |           
|                                           |                                                  |   |            |           
|EXPENSES                                   |                                                  |   |            |           
|                                          
|                                          
|                                          
|                                          
|                                           | General, Administrative and Development Expenses |   |            | 1,066,159  | 
|                                          
|                                          
|                                          
|                                          
|                                           | Depreciation and Amortization (Note 3)           |   |            | 20,889     | 
|                                           |                                                  |   |            |           
|                                           | Total Expenses                                   |   |            | 1,087,048  | 
|                                           |                                                  |   |            |           
|NET OPERATING LOSS                         |                                                  |   | (1,087,048 | )         
|                                          
|                                          
|                                          
|                                          
|INTEREST INCOME                            |                                                  |   | 753        |           
|                                           |                                                  |   |            |           
|NET LOSS BEFORE MINORITY INTERESTS         |                                                  |   | (1,086,295 | )         
|                                          
|                                          
|                                          
|                                          
|MINORITY INTERESTS SHARE OF LOSS          |                                                  |   | 275,371    |           
|                                           |                                                  |   |            |           
|NET LOSS APPLICABLE TO COMMON STOCKHOLDERS |                                                  | $ | (810,924   | )         
|                                           |                                                  |   |            |           
|NET LOSS PER COMMON SHARE                  |                                                  |   |            |           
|                                          
|                                          
|                                          
|                                          
|                                           | Basic                                            |   | $          | 0.0644     | 
|                                           |                                                  |   |            |           
|                                           | Diluted                                          |   | $          | 0.0644     | 
|                                           |                                                  |   |            |           
|WEIGHTED AVERAGE SHARES OUTSTANDING        |                                                  |   |            |           
|                                          
|                                          
|                                          
|                                          
|                                           | Basic                                            |   |            | 12,600,000 | 
|                                           |                                                  |   |            |           
|                                           | Diluted                                          |   |            | 12,600,000 | 
|                                           |                                                  |   |            |           

See accompanying notes and accountants review report.

5



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CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS EQUITY
For the Period January 1, 2000 to March 31, 2001



|                                                                                                                       |  |              |            |         |  |             |        |               |  |            |         |  |  |   |            |       |  |   |            |  
|---------------------------------------------------------------------------------------------------------------------- |  | ------------ | ---------- | ------- |  | ----------- | ------ | ------------- |  | ---------- | ------- |  |  | - | ---------- | ----- |  | - | ---------- | -
|                                                                                                                       |  |              |            |         |  |             |        |               |  | Additional |         |  |  |   |            | Total
|                                                                                                                       |  | Common Stock |            | Paid-in |  | Accumulated |        | Stockholders'
|                                                                                                                       |  | Shares       |            | Amount  |  | Capital     |        | Deficit       |  | Equity    
|                                                                                                                       |  |              |            |         |  |             |        |               |  |           
|Balances, January 1, 2000                                                                                              |  |              | 2,100,000  |         |  | $           | 2,100  |               |  | $          |        |  |  | $ | (2,450     | )     |  | $ | (350       | )
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Issuance of 8,500,000 shares of
common stock in exchange
for 500,000 common shares of
a Subsidiary on October 25, 2000 |  |              | 8,500,000  |         |  |             | 8,500  |               |  |            | 491,500 |  |  |   |           |       |  |   | 500,000    |  
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Issuance of 2,000,000 shares in
exchange for cancellation of
$500,000 debt on
November 8, 2000                         |  |              | 2,000,000  |         |  |             | 2,000  |               |  |            | 498,000 |  |  |   |           |       |  |   | 500,000    |  
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Net loss for the year ended
December 31, 2000                                                                          |  |              |           |         |  |             |       |               |  |            |        |  |  |   | (1,118,740 | )     |  |   | (1,118,740 | )
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|                                                                                                                      
|Net loss for the three months
ended March 31, 2001                                                                     |  |              |           |         |  |             |       |               |  |            |        |  |  |   | (810,925   | )     |  |   | (810,925   | )
|                                                                                                                       |  |              |            |         |  |             |        |               |  |            |         |  |  |   |            |       |  |   |            |  
|Balances, March 31, 2001                                                                                               |  |              | 12,600,000 |         |  | $           | 12,600 |               |  | $          | 989,500 |  |  | $ | (1,932,115 | )     |  | $ | (930,015   | )
|                                                                                                                       |  |              |            |         |  |             |        |               |  |            |         |  |  |   |            |       |  |   |            |  

See accompanying notes and accountants review report.

6



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CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
(Development Stage Companies)
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Three Months Ended March 31, 2001



|                                     |                                                                           |                                              |                             |                                     |  |   |          |          |          |         |          |  
|------------------------------------ | ------------------------------------------------------------------------- | -------------------------------------------- | --------------------------- | ----------------------------------- |  | - | -------- | -------- | -------- | ------- | -------- | -
|CASH FLOWS FROM OPERATING ACTIVITIES |                                                                           |                                              |                             |                                     |  |   |          |         
|                                    
|                                    
|                                    
|                                    
|                                     | Net loss                                                                  |                                              |                             |                                     |  |   | $        | (810,925 | )       
|                                    
|                                    
|                                    
|                                    
|                                     | Adjustment to reconcile net loss to net cash used
by operating activities |                                              |                             |                                     |  |   |          |          |         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           | Depreciation and amortization                |                             |                                     |  |   |          |          | 20,889   |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           | Minority interests in net loss of subsidiary |                             |                                     |  |   |          |          | (275,371 | )      
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           | Decrease (increase) in:                      |                             |                                     |  |   |          |          |          |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              | Advances to employees       |                                     |  |   |          |          |          | (10,379 | )       
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              | Other refund receivables    |                                     |  |   |          |          |          | 30,000  |         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           | Increase (decrease) in:                      |                             |                                     |  |   |          |          |          |        
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              | Accounts payable            |                                     |  |   |          |          |          | 167,857 |         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              | Accrued liabilities         |                                     |  |   |          |          |          | 55,120  |         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              | Payroll taxes payable       |                                     |  |   |          |          |          | 9,749   |         
|                                     |                                                                           |                                              |                             |                                     |  |   |          |         
|                                     |                                                                           |                                              | NET CASH USED               |                                     |  |   |          |         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              | BY OPERATING ACTIVITIES     |                                     |  |   | (813,060 | )       
|                                     |                                                                           |                                              |                             |                                     |  |   |          |         
|CASH FLOWS FROM INVESTING ACTIVITIES |                                                                           |                                              |                             |                                     |  |   |          |         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              |                             | Purchase of property and equipment  |  |   |          |          |          |         | (34,709  | )
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              |                             | Principal payments on capital lease |  |   |          |          |          |         | (459     | )
|                                     |                                                                           |                                              |                             |                                     |  |   |          |         
|                                     |                                                                           |                                              | NET CASH USED               |                                     |  |   |          |         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              | BY INVESTING ACTIVITIES     |                                     |  |   | (35,168  | )       
|                                     |                                                                           |                                              |                             |                                     |  |   |          |         
|CASH
FLOWS FROM FINANCING ACTIVITIES |                                                                           |                                              |                             |                                     |  |   |          |         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              |                             | Increase in notes receivable        |  |   |          |          |          |         | (11,435  | )
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              |                             | Increase in loans to affiliates     |  |   |          |          |          |         | (155,470 | )
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              |                             | Principal payments on note payable  |  |   |          |          |          |         | (17,500  | )
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              |                             | Increase in notes payable           |  |   |          |          |          |         | 979,642  |  
|                                     |                                                                           |                                              |                             |                                     |  |   |          |         
|                                     |                                                                           |                                              | NET CASH PROVIDED           |                                     |  |   |          |         
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              | BY FINANCING ACTIVITIES     |                                     |  |   | 795,237  |         
|                                     |                                                                           |                                              |                             |                                     |  |   |          |         
|                                     |                                                                           |                                              | NET DECREASE IN CASH        |                                     |  |   | (52,991  | )       
|                                    
|                                    
|                                    
|                                    
|                                     |                                                                           |                                              | CASH AT BEGINNING OF PERIOD |                                     |  |   | 68,338   |         
|                                     |                                                                           |                                              |                             |                                     |  |   |          |         
|                                     |                                                                           |                                              | CASH AT END OF PERIOD       |                                     |  | $ | 15,347   |         
|                                     |                                                                           |                                              |                             |                                     |  |   |          |         

See accompanying notes and accountants review report.

7



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CREATIVE TECHNOLOGIES HOLDINGS, INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001

NOTE 1  ORGANIZATION HISTORY AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS



| |  | The accompanying consolidated financial statements include the accounts of
Creative Technologies Holdings Inc. (CTHI), formerly Morning Splendor Management,
Inc. and its Subsidiaries, Creative Technology & Interactive Entertainment
Group, Inc. (CTIEGI) and Creative Technology & Entertainment Group, Inc.
(CTEGI) collectively referred to as the Company. CTIEGI is 100% owned
Subsidiary and CTEGI is 70% subsidiary of CTIEGI.
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Creative Technologies Holdings Inc. was incorporated as Morning Splendor
Management, Inc. on December 6, 1996 under the laws of the State of Nevada
to engage in any lawful activity, including but not limited to selected
mergers and acquisitions. The Company has been in the developmental stage
since inception. Other than the acquisition of CTIEGI, a subsidiary, the
Company has no operating history and revenue.              
|
| |  | Creative Technology and Interactive Entertainment Group, Inc. (CTIEGI) was
incorporated on June 26, 2000 under the laws of the State of Nevada.
Other than the issuance of stock to its original shareholders, and
acquisition of about 70% of CTEGI, a development stage company, it has no
operations and revenues as of March 31, 2001.                                                                                                
|
| |  | Creative Technology and Entertainment Group, Inc. (CTEGI) was incorporated
under the laws of the State of Nevada on May 19, 2000 for the purpose of
developing online gaming and interactive entertainment software. CTEGI is
a development stage company and as such has no revenues or earnings from
operations.                                                                                                                        

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy



| |  |  | The consolidated financial statements include the accounts of the
Company and all of its wholly owned and majority-owned subsidiaries.
All significant inter-company accounts and transactions have been
eliminated in consolidation. Investments in unconsolidated
affiliates are accounted for using the equity method when the
Company owns at least 20% but no more than 50% of such affiliates.
Under the equity method, the Company records its proportionate
shares of profits and losses based on its percentage interest in
earnings of companies 50% or less.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Method of Accounting



| |  |  | The Company prepares its financial statements on the accrual method
of accounting, recognizing income when earned and expenses when
incurred.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------

8



---



CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001

Estimates



| |  |  | The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Cash and Cash Equivalents



| |  |  | The Company considers all highly liquid investments with maturity of
three months or less to be cash equivalents for purpose of reporting
cash flows.
| |  |  | -----------------------------------------------------------------------------------------------------------------------------------------------------

Property, Plant and Equipment



| |  |  | Property, plant and equipment are stated at cost. Depreciation is
computed using the straight-line method over the estimated useful
lives of the related assets, less residual value where appropriate
as follows:
| |  |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                       |  |                                                         
|---------------------- |  | --------------------------------------------------------
|Software               |  | 3 years                                                 
|                      
|                      
|                      
|                      
|Office Equipment       |  | 5 years                                                 
|                      
|                      
|                      
|                      
|Furniture and Fixtures |  | 7 years                                                 
|                      
|                      
|                      
|                      
|Leasehold Improvements |  | 5 years or remaining term of
lease, whichever is shorter

Income Taxes



| |  |  | Income taxes are provided for using the liability method of
accounting in accordance with Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. A
deferred tax asset or liability is recorded for all temporary
differences between financial and tax reporting. Deferred tax
expense (benefit) results from the net change during the
year of deferred tax assets and liabilities.
| |  |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Reporting on Costs of Start-Up Activities



| |  |  | Statement of Position 98-5 (SOP 98-5), Reporting on the Costs of
Start-Up Activities provides guidance on the financial reporting of
start-up and organization costs. It requires most costs of start-up
activities and organization costs to be expended as incurred. With
the adoption of SOP 98-5, there has been little or no effect on the
companys financial statements.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9



---



CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001

Research and Development Costs



| |  |  | In accordance with Statement of Financial Accounting Standards No. 2
(SFAS 2), Accounting for Research and Development Costs, all
research and development (R&D) costs are expensed when they are
incurred. Assets used in R&D activity, such as machinery,
equipment, facilities and patents that have alternative future use
either in R&D activities or otherwise are capitalized.
| |  |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Loss Per Share



| |  |  | Net loss per share is provided in accordance with Statement of
Financial Accounting Standards No. 128 (SFAS 128), Earnings Per
Share. Basic loss per share is computed by dividing losses
available to common stockholders by the weighted average number of
common shares outstanding during the period. Diluted loss per share
reflects per share amounts that would have resulted if dilutive
common stock equivalents had been converted to common stock. As of
December 31,2000, the Company had no dilutive common stock such as
stock options.
| |  |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Year End



| |  |  | The Company has selected December 31 as its year-end.
| |  |  | -----------------------------------------------------

NOTE 3  PROPERTY AND EQUIPMENT, NET

Property and equipment as of March 31, 2001 consist of the following:



|                             |  |      |       |       |  |       |         |   |  |   |         |  
|---------------------------- |  | ---- | ----- | ----- |  | ----- | ------- | - |  | - | ------- | -
|                             |  | CTHI |       | CTEGI |  | TOTAL
|                             |  |      |       |       |  |       |         |   |  |   |         |  
|Office equipment             |  | $    | 2,731 |       |  | $     | 292,654 |   |  | $ | 295,385 |  
|                            
|                            
|                            
|                            
|Software                     |  |      |      |       |  |       | 50,387  |   |  |   | 50,387  |  
|                            
|                            
|                            
|                            
|Furniture and fixtures       |  |      |      |       |  |       | 56,229  |   |  |   | 56,229  |  
|                            
|                            
|                            
|                            
|Leasehold improvements       |  |      |      |       |  |       | 31,032  |   |  |   | 31,032  |  
|                            
|                            
|                            
|                            
|Automobile                   |  |      |      |       |  |       | 2,900   |   |  |   | 2,900   |  
|                             |  |      |       |       |  |       |         |   |  |   |         |  
|Total property and equipment |  |      | 2,731 |       |  |       | 433,202 |   |  |   | 435,933 |  
|                            
|                            
|                            
|                            
|Accumulated depreciation     |  |      | (152  | )     |  |       | (38,716 | ) |  |   | (38,868 | )
|                             |  |      |       |       |  |       |         |   |  |   |         |  
|Property and equipment, net  |  | $    | 2,579 |       |  | $     | 394,486 |   |  | $ | 397,065 |  
|                             |  |      |       |       |  |       |         |   |  |   |         |  



| |  | Depreciation and amortization expense for the three months ended March 31,
2001 amounted to $20,889.
| |  | ----------------------------------------------------------------------------------------------------

10



---



CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001

NOTE 4  RECEIVABLES  OTHERS



| |  | Other receivables consist of funds due from other entities amounting to
$269,520.
| |  | ---------------------------------------------------------------------------------

NOTE 5  DUE TO INVESTORS



| |  | Investors owning over 5% equity of CTHI have advanced funds to the Company
for its development operations. Notes payable, related to these advances
amount to $1,561,962 at March 31, 2001. The notes are payable on demand
and non-interest bearing.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 6  LOAN PAYABLE



| |  | The Company has a $50,000 promissory note payable on demand in the form of
a line of credit with a financial institution. The line carries a
variable rate of interest at the Wall Street Journal prime rate plus 1.00%
per annum (10.5% at March 31, 2001). Monthly payment requirements on the
line consist of accrued interest only. As of March 31, 2001, the Company
owed $50,000 against the credit line.
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 7  NOTES PAYABLE



| |  | Note payable represents the balance on a non-interest bearing note
amounting to $11,667 relating to the purchase of furniture and fixtures.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------

NOTE 8  CAPITAL LEASE PAYABLE



| |  | Included under office equipment is a capital lease expiring in October
2003. Leased property under capital lease obligation as of March 31,2001
consists of the following:
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                         |  |   |       |  
|------------------------ |  | - | ----- | -
|Office equipment         |  | $ | 9,995 |  
|                        
|                        
|                        
|                        
|Accumulated depreciation |  |   | (750  | )
|                         |  |   |       |  
|                         |  | $ | 9,245 |  
|                         |  |   |       |  



| |  | The asset is depreciated over its estimated useful life of 5 years.
Depreciation of leased property under capital lease amounted to $500 for
the three months ended March 31, 2001.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11



---



CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001



| |  | Capital lease obligations at March 31, 2001 consist of the following:
| |  | ---------------------------------------------------------------------

|                                           |  |   |        |  
|------------------------------------------ |  | - | ------ | -
|Total capital lease payable                |  | $ | 8,868  |  
|                                          
|                                          
|                                          
|                                          
|Current portion of capital lease payable   |  |   | (3,021 | )
|                                           |  |   |        |  
|Long-term portion of capital lease payable |  | $ | 5,847  |  
|                                           |  |   |        |  

NOTE 9  MINORITY INTERESTS



| |  | Minority interests in CTEGI is 26.7% as of March 31, 2001. Minority
interests consist of the following:
| |  | -------------------------------------------------------------------------------------------------------

|                                                 |  |   |          |  
|------------------------------------------------ |  | - | -------- | -
|5,333,334 shares of common stock,
par value $.01 |  | $ | 53,334   |  
|                                                
|                                                
|                                                
|                                                
|Paid-in capital                                  |  |   | 666      |  
|                                                
|                                                
|                                                
|                                                
|Minority interests share of deficit             |  |   | (675,566 | )
|                                                 |  |   |          |  
|Total Minority Interests                         |  | $ | (621,566 | )
|                                                 |  |   |          |  

NOTE 10  STOCKHOLDERS EQUITY



| |  | The authorized common stock of CTHI consists of 25,000,000 shares with a
par value of $0.001 of which 12,600,000 common shares are issued and
outstanding at March 31, 2001.                                                                                                           
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On December 6, 1996, CTHI issued 21,000 shares of its no par value common
stock in consideration of $2,100 in cash.                                                                                                                                                                    
|
| |  | On November 29, 1999, the State of Nevada approved the restated Articles
of Incorporation of CTHI that increased its capitalization from 25,000
shares to 25,000,000 shares of common stock. The par value of its common
stock was changed to $0.001.                                  
|
| |  | On November 29, 1999, CTHI forward split its common stock 100:1; thus
increasing the number of outstanding shares of common stock from 21,000
shares to 2,100,000 shares.                                                                                                              
|
| |  | On August 31, 2000, CTIEGI issued 500,000 shares of its $0.001 par value
common stock in consideration of $500,000 cash. These shares were
exchanged for CTHI shares under a plan and agreement of reorganization
with CTIEGI and Morgan & Lynch, Inc. (MLI) on October 25, 2000. Under

12



---



CREATIVE TECHNOLOGIES HOLDINGS
INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001



| |  | the plan, the Company issued 8,500,000 shares of its common stock to MLI
in exchange for MLIs ownership of 500,000 share of common stock of
CTIEGI.                                                                                                                         
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On November 8, 2000, the Company entered into a stock purchase agreement
with Netsat Holdings, Limited (NHL), a foreign corporation. Pursuant to
the agreement, the Company issued 2,000,000 shares of its common stock in
exchange for cancellation of $500,000 debt to NHL.
|
| |  | The issued and outstanding shares of 12,600,000 common shares at March 31,
2001 are as follows:                                                                                                                                                                              

|                        |       |  |           |            | 
|----------------------- | ----- |  | --------- | ---------- | 
|Regulation S shares     |       |  | 2,000,000 |           
|                       
|                       
|                       
|                       
|Other Restricted Shares |       |  | 9,950,000 |           
|                       
|                       
|                       
|                       
|Free Trading Shares     |       |  | 650,000   |           
|                        |       |  |           |           
|                        | Total |  |           | 12,600,000 | 
|                        |       |  |           |           

NOTE 11  INCOME TAXES



| |  | There is no provision for federal income taxes for the year ended March
     31, 2001 due to the net loss sustained during the period. No state income
     tax provision was made because in Nevada, the state of the Company's
     domicile and operations, taxes on income are not imposed.                                                                                                                                                     
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | The Company currently has no issues that create timing differences that
        would mandate deferred tax expense. Net operating losses would create possible tax assets in future years. Due to the uncertainty as to the utilization of net operating loss carry forwards, a valuation allowance has been made as to the
utilization of net operating loss carry forward, to the extent of any tax benefit that net operating losses may generate
|
| |  | The Companys total deferred tax
assets as of March 31, 2001 is as follows:                                                                                                                                                                                                                                                                                                                                                                         

|                                                                               |  |   |           |  
|------------------------------------------------------------------------------ |  | - | --------- | -
|Net operating loss carry forward                                               |  | $ | 2,607,678 |  
|                                                                               |  |   |           |  
|Current tax asset value of net operating
loss carry forwards at statutory rate |  | $ | 391,152   |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Valuation allowance                                                            |  |   | (391,152  | )
|                                                                               |  |   |           |  
|Net deferred tax (asset) liability                                             |  | $ |          |  
|                                                                               |  |   |           |  
|Current Income Tax Expense                                                     |  | $ |          |  
|                                                                               |  |   |           |  
|Deferred Income Tax Expense (Benefit)                                          |  | $ |          |  
|                                                                               |  |   |           |  

13



---



CREATIVE TECHNOLOGIES HOLDINGS
INC. AND SUBSIDIARIES
(Development Stage Companies)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001

NOTE 12  SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION



| |  | There were no cash payments made for income taxes for the three months
ended March 31, 2001. Cash payments for interest during the year amounted
to $5,160.00.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTE 13  COMMITMENTS



| |  | The Company leases its corporate headquarters under an operating lease
expiring in December 2001. The agreement does not provide for an option
to extend the terms of the lease.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Rent expense for the three months ended March 31, 2001 amounted to
$38,964.

NOTE 14  GOING CONCERN



| |  | The Companys financial statements are prepared using generally accepted
accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal
course of business. However, the Company does not have an established
source of revenues to cover its development and operating costs and to
allow it to continue as a going concern. Current sources of funds for
development costs of the Company are periodic funding of and advances from
its investors. Funding from investors, however, have been set for a
specified period and amount. The Companys only source of funds would be
additional advances from its investors if it continues to have no source
of revenues.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14



---






CREATIVE TECHNOLOGIES HOLDINGS
INC. AND SUBSIDIARIES
(Development Stage Companies)
SCHEDULE OF GENERAL DEVELOPMENT AND ADMINISTRATIVE EXPENSES
For the Three Months Ended March 31, 2001

|                       |  |   |           | 
|---------------------- |  | - | --------- | 
|Salaries & wages       |  | $ | 457,889   | 
|                      
|                      
|                      
|                      
|Professional fees      |  |   | 301,161   | 
|                      
|                      
|                      
|                      
|Travel & promotions    |  |   | 57,197    | 
|                      
|                      
|                      
|                      
|Payroll taxes          |  |   | 45,765    | 
|                      
|                      
|                      
|                      
|Rent                   |  |   | 38,964    | 
|                      
|                      
|                      
|                      
|Service contract fees  |  |   | 33,000    | 
|                      
|                      
|                      
|                      
|Recruiting expenses    |  |   | 27,116    | 
|                      
|                      
|                      
|                      
|Telephone              |  |   | 26,409    | 
|                      
|                      
|                      
|                      
|Insurance              |  |   | 24,644    | 
|                      
|                      
|                      
|                      
|Office expenses        |  |   | 21,027    | 
|                      
|                      
|                      
|                      
|Computer expenses      |  |   | 18,723    | 
|                      
|                      
|                      
|                      
|Office supplies        |  |   | 6,074     | 
|                      
|                      
|                      
|                      
|Interest               |  |   | 5,160     | 
|                      
|                      
|                      
|                      
|Payroll administration |  |   | 1,395     | 
|                      
|                      
|                      
|                      
|Postage & delivery     |  |   | 1,017     | 
|                      
|                      
|                      
|                      
|Dues and subscriptions |  |   | 618       | 
|                       |  |   |           | 
|                       |  | $ | 1,066,159 | 
|                       |  |   |           | 

15



---



See accountants review report.



|Item II. |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations
|-------- |  | -------------------------------------------------------------------------------------

All statements, trend analysis and other information contained in this
Report relative to markets for the Companys products and trends in revenues,
gross margin and anticipated expense levels, as well as other statements
including words such as believe, anticipate, expect, estimate, plan
and intend and other similar expressions, constitute forward-looking
statements. Those forward-looking statements are subject to business and
economic risks, and the Companys actual results of operations may differ from
those contained in the forward-looking statements. The following discussion of
the financial condition and results of operations of the Company should also be
read in conjunction with the Financial Statements and Notes related thereto
included elsewhere in this Report.

(1)      Results of Operations

The three months ended March 31, 2001 did not generate any revenues for
the Company. In addition, the Company incurred general, administrative and
development expenses in the amount of $1,066,159 for the three months ended
March 31, 2001. A significant portion of this amount supported Creative
Technology and Entertainment Group, Inc., a development stage company engaged
in developing online gaming and interactive entertainment software. Creative
Technology and Entertainment Group, Inc. has no revenues or earnings from
operations.

Net loss per share was at $0.0644 for the three months ended March 31,
2001.

(2)      Liquidity

As of March 31, 2001, the Company had negative working capital. Investors
owning more than five percent equity of the Company advanced funds to the
Company for its development operations in the amount of $1,561,962. The
Company plans to raise additional capital through a private placement. The
additional capital will be used to provide financing necessary to advance the
Company as a provider of interactive games through the Internet.

16



---





|Item III. |  | Qualitative and Quantitative Disclosures About Market Risk.
|--------- |  | -----------------------------------------------------------

The Company has neither considered or conducted any research concerning
qualitative and quantitative market risk.

PART II

OTHER INFORMATION

|         |                                                                       |  | 
|-------- | --------------------------------------------------------------------- |  | 
|Item 1  | Legal Proceedings           None                                      |  | 
|        
|        
|        
|        
|Item 2  | Changes in the Rights of the Companys Security Holders          None |  | 
|        
|        
|        
|        
|Item 3  | Defaults by the Company on its Senior Securities           None       |  | 
|        
|        
|        
|        
|Item 4  | Submission of Matter to Vote of Security Holders           None       |  | 
|        
|        
|        
|        
|Item 5  | Other Information                                                     |  | 



| | (a) |  | Board Meetings.
| | --- |  | ---------------

The board held two meetings during the current quarter, including both
regularly scheduled and special meetings and actions by unanimous written
consent.

The board of directors has not established any audit committee. In
addition, the Company does not have any other compensation or executive or
similar committees. The Company will not, in all likelihood, establish any
audit committee until such time as the Company completes a business
combination, of which there can be no assurance. The Company recognizes that
an audit committee, when established, will play a critical role in the
financial reporting system of the Company by overseeing and monitoring
managements and the independent auditors participation in the financial
reporting process. At such time as the Company establishes an audit committee,
its additional disclosures with the Companys auditors and management may
promote investor confidence in the integrity of the financial reporting
process.



| | (b) |  | Committees.
| | --- |  | -----------

Until such time as an audit committee has been established, the full board
of directors will undertake those tasks normally associated with an audit
committee to include, but not by way of limitation, the (i) review and
discussion of the audited financial statements with management, (ii)
discussions with the independent auditors the matters required to be discussed
by the Statement On Auditing Standards No. 61, as may be modified or
supplemented, and (iii) received

17



---



from the auditors disclosures regarding the auditors Independents Standards
Board Standard No. 1, as may be modified or supplemented.

The board of directors of the Company, consistent with its intent to
enhance the reliability and credibility of its financial statements, has
submitted the financial statements included in this Form 10-QSB to its
independent auditors prior to the filing of this report for review.

Item 6  Exhibits and Reports on Form 8-K



The following exhibits are filed with this report:



|(b) |  | No reports on Form 8-K were filed during the quarter for which the report
is filed.
|--- |  | -----------------------------------------------------------------------------------




SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

|                     |                                     |                             |  | 
|-------------------- | ----------------------------------- | --------------------------- |  | 
|Dated: July 24, 2001 | CREATIVE TECHNOLOGIES HOLDINGS INC.
|                    
|                     | By:                                 | /s/ Moises Villanueva      
|                     |                                     |                            
|                     |                                     | Moises Villanueva
President

18