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

                                   FORM 10-KSB

[X]      ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
         ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

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

            For the transition period from __________ to __________.

                       Commission file number: 33-18143-D

                                ----------------

                        PEAK ENTERTAINMENT HOLDINGS, INC.
                 (Name of small business issuer in its charter)

                                ----------------

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                          NEVADA                                                     87-0449399
(State or other jurisdiction of incorporation or organization)         (I.R.S. Employer Identification No.)
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                           BAGSHAW HALL, BAGSHAW HILL
                        BAKEWELL, DERBYSHIRE, UK DE45 1DL

(Address of principal executive offices)                              (Zip Code)

         Issuer's telephone number:  44 1629 814555

         Securities registered under Section 12(b) of the Exchange Act:  None.

         Securities registered under Section 12(g) of the Exchange Act:  None.


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the 90 past days. YES [ ] NO [ X ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

State issuer's revenues for its most recent fiscal year:  $1,014,996.

The aggregate market value of voting and non-voting stock of the issuer held by
non-affiliates on April 1, 2004 was $2,475,608.40.

                    APPLICABLE ONLY TO CORPORATE REGISTRANTS

As of April 1, 2004, we had 24,431,288 shares of common stock issued and
outstanding.

                       DOCUMENTS INCORPORATED BY REFERENCE

None.

    TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES [ ] NO [X]


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                        PEAK ENTERTAINMENT HOLDINGS, INC.

                                TABLE OF CONTENTS

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                                                                                                             PAGE
                                                                                                             ----
  PART I

<S>            <C>                                                                                            <C>
  Item 1.      Description of Business                                                                         3
  Item 2.      Description of Property                                                                         12
  Item 3.      Legal Proceedings                                                                               12
  Item 4.      Submission of Matters to a Vote of Security Holders                                             12

  PART II

  Item 5.      Market for Common Equity and Related Stockholder Matters                                        13
  Item 6.      Management's Discussion and Analysis                                                            17
  Item 7.      Financial Statements                                                                            30
  Item 8.      Changes In and Disagreements With Accountants on Accounting and Financial Disclosure            58
  Item 8A.     Controls and Procedures.                                                                        59

  PART III

  Item 9.      Directors, Executive Officers, Promoters and Control Persons; Compliance
               With Section 16(a) of the Exchange Act                                                          60
  Item 10.     Executive Compensation                                                                          62
  Item 11.     Security Ownership of Certain Beneficial Owners and Management                                  63
  Item 12.     Certain Relationships and Related Transactions                                                  64
  Item 13.     Exhibits and Reports on Form 8-K                                                                65
  Item 14.     Principal Accountant Fees and Services                                                          66
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                                       2
<PAGE>

                                     PART I

ITEM 1.    DESCRIPTION OF BUSINESS

GENERAL OVERVIEW

Peak Entertainment Holdings, Inc. ("Peak Entertainment;" "we;" "us;" the
"Company") only recently began its current business operations.

On April 22, 2003, we sold our former telecommunications business and acquired
the media and entertainment business of Peak Entertainment, Ltd.

Peak Entertainment Ltd. is a United Kingdom registered company incorporated in
November 2001. In 2001, Peak Entertainment Ltd. was in its start-up stages. Peak
Entertainment Ltd. began its entertainment activities and licensing activities
in February 2002 , and its consumer product activities in April 2002.

Peak Entertainment Holdings, Inc. has a limited history of revenues and
significant operational losses to date, as well as an accumulated shareholder
deficit.

As of the date of this report on Form 10-KSB, we are not current on our
reporting requirements under Section 15(d) of the Securities Exchange Act
because we have not yet filed a transition report on Form 10-KSB for the
transition period July 1, 2002 to December 31, 2002 that was required to be
filed in September 2003 due to our election to change our fiscal year on June 5,
2003 to a December 31 year end. We intend to submit the transition report
shortly. Accordingly, we have not been current on our reporting requirements
since September 2003. Companies whose securities are quoted on the OTC Bulletin
Board, such as us, must be reporting issuers under the Securities Exchange Act
of 1934, and must be current in their reports under Section 13 or 15(d) of the
Securities Exchange Act in order to maintain price quotation privileges on the
OTC Bulletin Board. If we fail to remain current on our reporting requirements,
we could be removed from the OTC Bulletin Board.

ORGANIZATION HISTORY

Peak Entertainment Holdings, Inc. was originally incorporated as Corvallis, Inc.
in the state of Nevada on September 28, 1987 to seek business opportunities.

On October 31, 2000, Corvallis and USAStarOne.Net, Inc., a Texas corporation,
entered into an Agreement and Plan of Reorganization by which Corvallis merged
with USAOneStar through a stock-for-stock exchange. USAOneStar was incorporated
on July 21, 2000, and was an Internet service provider using a network marketing
structure for distribution of its services. Corvallis issued 13,500,000 shares
valued at $13,500 in a stock-for-stock exchange for the 1,000,000 outstanding
shares of common stock of USAOneStar. Corvallis was the surviving entity in the
merger, and Corvallis changed its name to USAOneStar.Net, Inc. The shareholders
of USAOneStar, acquired 89.9% of the 15,005,000 shares outstanding immediately
after the share exchange.

On August 31, 2001, USAOneStar.Net, Inc. and Palladium Communications, Inc., a
Kentucky corporation, entered into an Agreement and Plan of Reorganization by
which USAOneStar acquired Palladium as a wholly-owned subsidiary through a
stock-for-stock exchange. Palladium was incorporated in April 23, 1998, and was
a reseller of telecommunications services. Pursuant to the agreement, USAOneStar
issued 183,000,000 common shares valued at approximately $700,000 to the
shareholders of Palladium in exchange for approximately 6,500 issued and
outstanding shares of Palladium, which represented 100% of that company's issued
and outstanding shares. Upon completion of the share exchange, Palladium's
shareholders held approximately 92% of the 199,000,000 shares of common stock
outstanding immediately after the share exchange. Subsequently, USAOneStar
changed its name to Palladium Communications, Inc.

On March 31, 2003, the Company effected a 100 for 1 reverse stock split. As a
result of the reverse split, the 211,907,574 shares of our common stock that
were issued and outstanding became 2,119,195 shares issued and outstanding.


                                       3
<PAGE>

Pursuant to an Asset Purchase Agreement, dated as of April 22, 2003, Palladium
Communications, Inc. sold for the purchase price of $75,000 substantially all of
its assets and certain liabilities to Palladium Consulting Group, LLC. The
assets sold to Palladium Consulting Group, LLC consisted of substantially all
assets related to the business operations of Palladium Communications, Inc.,
including all Palladium Communications, Inc.'s carrier agreements, sales agent
agreements, and equipment. The assets retained by Palladium Communications, Inc.
included its cash and notes receivable. The liabilities assumed by Palladium
Consulting Group, Inc. included payment for phone systems, equipment and a lease
for office facilities. The liabilities retained by the Company consisted
primarily of its outstanding debentures and the interest on the debentures. As a
result of the transaction, Palladium Communications, Inc. had no operating
business, and had substantially no assets and had significant liabilities
related primarily to retained convertible debentures.

On April 22, 2003, pursuant to an Agreement and Plan of Acquisition, Palladium
Communications, Inc., a Nevada corporation, acquired all of the outstanding
shares of Peak Entertainment Ltd., together with its subsidiaries, in exchange
for the issuance of 19,071,684 shares of Palladium Communications, Inc.'s common
stock to the holders of Peak Entertainment Ltd. in a transaction viewed as a
reverse acquisition. The shares issued to the holders of Peak Entertainment Ltd.
constituted 90 percent of the outstanding shares of Peak Entertainment Holdings,
Inc.

Upon consummation of the acquisition of Peak Entertainment, Ltd., the founders
of Peak Entertainment, Ltd., Wilf and Paula Shorrocks, were appointed directors
and officers of Palladium. The former directors and officers of Palladium
Communications resigned as of the acquisition date.

On May 14, 2003, Palladium changed its corporate name to Peak Entertainment
Holdings, Inc.

As of December 31, 2003, we had 21,774,212 shares of common stock issued and
outstanding.

BUSINESS OVERVIEW

Peak Entertainment Holdings, Inc. maintains its executive offices in Bakewell,
England. Peak Entertainment maintains a web site at:
http://www.peakentertainment.co.uk.

We operate primarily through our wholly-owned United Kingdom subsidiary, Peak
Entertainment Ltd., and its subsidiaries: Jusco UK Ltd, a United Kingdom
registered company; Jusco Toys Ltd, a Hong Kong registered company; Wembley
Sports Master Ltd., a United Kingdom registered company; and Cameo Collectables
Ltd, a United Kingdom registered company.

We also utilize a wholly owned United States subsidiary, Peak Entertainment
Holdings LLC, a Delaware limited liability company formed in April 2002.

STRATEGY

Our business plan is to develop, market and sell media content and related
consumer products focused on the children's entertainment market. Our planned
activities include the development, production and distribution of television
shows targeted for the children's entertainment market, the licensing of
intellectual property rights related to our entertainment products, and the
manufacturing and sales of consumer products related to our entertainment
products.

Our primary strength is in the conception and development of a character and
entertainment concept that we believe children will find appealing. Our business
objective is to develop a character or entertainment concept into a media
product, such as into a television show, a movie, or a book, and to build the
media product into a merchandisable consumer brand and either sell items
ourselves such as a video game, a toy, or apparel, or license merchandise rights
to third parties for manufacture and sale by third parties. We anticipate that
we will rely on third parties such as animation and television production
companies to co-produce entertainment shows, and broadcast companies to
broadcast our television shows.


                                       4
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We believe that this business model will enable us to develop a character and
product idea from its concept stages, through development, manufacturing, and
promotion stages, to the consumer product, while maintaining control of the
character concept and product ideas, so that we will be able to control and
coordinate broadcast, promotions and product launches.

STRUCTURE AND BUSINESS INITIATIVES

Peak Entertainment has three lines of business: entertainment, licensing, and
consumer products.

ENTERTAINMENT DIVISION

Our entertainment division is currently working on three product lines that are
in the pre-production or production stages. We anticipate that this division
will generate revenues from the distribution of television shows to broadcasting
companies and other media outlets. The key costs for this division are
substantial animation and production costs in getting television episodes
produced.

         MONSTER  IN MY POCKET
         ---------------------

Monster In My Pocket are miniature pocket-sized monster characters based upon
the history and heritage of 'Monsters' from Medusa, Mynator and Cyclops of
mythological times to the modern classics of Frankenstein, Dracula and Werewolf.

We have a license for worldwide master rights from Morrison Entertainment Group,
Inc. for the use of "Monster In My Pocket" and related licenses, pursuant to a
license agreement dated February 25, 2002. The contract, which covers a
twenty-year term, requires the payment of $500,000 to Morrison, at the rate of
$100,000 every six months, commencing on March 31, 2002. Of such amount,
$120,000 has been paid to date. We have agreed with Morrison to delay additional
payment requirements at this time. Such milestone payments are to be off-set
against royalties payable to Morrison pursuant to the agreement. Monster In My
Pocket is already an established consumer products concept with a proven
pedigree and sales by others which have exceeded $200 million at retail. We
intend to expand this product line with a new animated television series using
the Monster In My Pocket characters.

The television project is in pre-production stages with our in-house computer
graphics studio creating the models, frames, characters and environments. Our
production team, in conjunction with our co-production partners, will produce 26
thirty-minute episodes. We have a letter of intent agreement with Mainframe
Entertainment Inc., pursuant to which Mainframe is to provide 20%, approximately
$1,600,000, of funding to the project. Mainframe is to have sole television
distribution rights in Canada and is entitled to 100% of the television
distribution proceeds in Canada, and joint television distribution rights in the
United States and is entitled to 5% to 7.5% of the television distribution
proceeds in the United States. Mainframe is entitled to 35% of the gross
licensing and merchandising revenues in Canada, and 5% to 20% of the gross
licensing and merchandising revenues in the United States.

We are to provide $250,000 of funding, either in cash or services, for each of
the 26 episodes. The project is currently in pre-production with story boards
and models being prepared. We are actively seeking sources of financing to fund
the project, but have no such commitments to date. A delay in receipt of funding
will likely delay the timetable for production. Assuming the receipt of funding
by June 2004, we anticipate production for delivery of the first thirteen
episodes by April 2005 and the next thirteen by October 2005. If sufficient
funding is not available shortly, the timetable for production of the episodes
will likely be re-scheduled for completion for Fall 2005 or Spring 2006.

We intend to distribute this series of 26 animated programs in various markets.
We currently have a broadcast contract signed with Good Morning Television in
the United Kingdom (known as GMTV), for terrestrial broadcast rights for a
period of five years in the United Kingdom markets in exchange for an aggregate
license fee of $393,000 payable through July 2005. GMTV has committed to running
the episodes from October 2004 and throughout 2005.


                                       5
<PAGE>

We will seek to distribute programs in other countries, including the United
States, although no such agreements have been reached to date.

In addition, we have an agreement with Character Option Ltd., a major United
Kingdom toy marketer, to distribute toys in the United Kingdom.

         THE WUMBLERS
         ------------

The Wumblers are a sweet natured, whimsical collection of cartoon characters.
The Wumblers is an educational and entertainment show geared toward preschool
aged children.

We entered into an entertainment production agreement, dated as of December 16,
2003, with The Silly Goose Company, LLC for the production of animated
television episodes for a certain intellectual property entitled "The Wumblers".
Pursuant to an agreement dated April 28, 2003, we are entitled to all
exploitation rights in The Wumblers including merchandise and distribution
rights. We are to finance or obtain financing for the episodes. Funding sources
will share copyright interests in the television episodes according to the
allocation of net proceeds. We will have the right to produce other episodes
based on the licensed intellectual property. We have the right to exploit the
licensed property worldwide in perpetuity.

On January 9, 2004, we entered into an Agreement for the Provision of Co
Production Services with Cosgrove Hall Films Ltd. for the co-production of 52
eleven minute episodes of an animated television program for children
provisionally entitled "The Wumblers." We are providing the intellectual
property, format and concept for the television episodes, and Cosgrove Hall
Films will supply the production services. Cosgrove Hall Films will be paid for
its production services. The costs of the production of the episodes is
projected to be approximately $3,000,000.

We have completed the production of one pilot episode to date. We anticipate
that the remaining episodes will be completed by April 2005, subject to receipt
of financing for production costs. We are actively seeking sources of financing
to fund the completion of this project.

         FAIREEZ
         -------

Faireez are fantasy fairy-tale creatures with magical powers.

Pursuant to terms of understanding with Moody Street Kids and Funbag Animation
Studios Inc., we have the worldwide distribution rights, excluding Canada and
Australia, and worldwide merchandising rights to an animated television series
project called The Faireez, at royalty rates of 35%-40% of gross revenues. The
license term is 25 years with an option to extend the term for an additional 25
years.

This project is in the pre-production stages. There are 52 eleven minute
episodes currently planned. The project is anticipated to commence production in
or about June 2004 with the initial episodes available for distribution in or
about April 2005. The project is anticipated for completion in or about October
2005.

LICENSING DIVISION

This division is responsible for the licensing and sublicensing of intellectual
properties to and from third parties. We intend to license or sub-license our
products for use by others in other mediums, such as in video games, apparel,
toys, and other merchandise.

We have an in-house licensing team headed by our licensing director, Alan
Shorrocks. We have entered into agreements with several international agents and
intend to further develop a network of international agents for the
international promotions of our products.

We entered into license agreements with Character Option Ltd. for Monster In My
Pocket products, with Toontastic Publishing for magazine use of our Pretty Pony
Club concepts, and with CCA Greetings for our Countin' Sheep products for use in
greeting cards.


                                       6
<PAGE>

Our licensing division has not generated significant revenues to date. We
anticipate that this licensing division will become much more active once we
have produced sufficient episodes of our entertainment products so that
broadcasting of the shows can commence. After broadcasting, and subject to a
receptive audience, we believe that this division may become our principal
source of revenues.

The principal revenues for this division is anticipated to be a customary 35%
commission we receive from all revenue received from licensing entertainment
properties to broadcasters, toy and gaming companies, and other manufacturers
such as clothing and home entertainment. The division earns revenue from selling
licenses for our non-entertainment driven properties. The key costs for this
division are staff, travel, toy and good production costs, and costs for
attendance in annual toy and licensing trade shows internationally.

We intend to expand the licensing of our products through:

      o     A consumer public relations campaign; and

      o     Related marketing programs.

International toy fairs, such as MIP TV in Cannes, France in April 2004, have
provided an ideal forum to display our products. We will also attend the New
York Licensing Show in June 2004.

CONSUMER PRODUCTS

Our consumer products division has historically been our primary source of
revenues. This division presently operates primarily through two wholly-owned
subsidiaries:

      o     Cameo Collectables - for the sale of gift and collectibles items;
            and

      o     Jusco Toys - for the manufacture and production of toys and other
            consumer products.

Currently, our consumer products division manufactures and sells the following
products:

      o     Countin' Sheep products in the United Kingdom and United States
            markets since January 2003;

      o     Mini Flora products in the United Kingdom market since January 2003;
            and

      o     Pretty Pony Club products in the United Kingdom market since
            December 2002.

         CAMEO COLLECTABLES
         ------------------

Cameo Collectables is our sales, marketing and distribution division responsible
for distribution and sales of consumer products from our license portfolio,
including Countin' Sheep and Mini Flora products. A sales support team of three
full time employees are responsible for customer services, invoicing and
administration.

COUNTIN SHEEP - Countin Sheep products are based upon a well-known 19th Century
cure for sleeplessness. The remedy has since become a legend passed down from
generation to generation and is well known by adults and children alike. This
product line is a unique range of toy merchandise. Every flock consists of 6
doll sheep, each with their own birthplace, date, personality trait, and number
branded patch. Each sheep is a limited edition, easily identifiable by its
authentic tag and distinctive individual features. The product line includes
gift cards and other merchandise.

MINI FLORA - Mini Flora are miniature-sized hand-crafted clay flowers resembling
some of the worlds most popular flora. The petals are made of a special clay
that has elastic properties allowing the flowers to be re-arranged. The product
line includes display stands and accessories.

PRETTY PONY CLUB - Products sold consist of small mold ponies of various styles
and colors supplied in connection with magazine distribution by Toontastic.


                                       7
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KEWPIE - The Kewpie dolls are high quality collector dolls with porcelain look
vinyl heads and hands applied to period and themed costumes. The dolls are sold
in series, usually two per year, with a range of around 20 lines from a
catalogue to collectors and specialty doll shops. The dolls are sold in
presentation boxes with an official certificate of authentication and have been
in the market since 1916. We commenced selling the dolls in December 2002, and
we discontinued sales of dolls in January 2004. We do not believe that the
discontinuation of this product line will have a material effect on our
operations.

         JUSCO TOYS
         ----------

Our Jusco Toys subsidiary works with third party manufacturers and distributors
to make toys and other consumer products. We acquired Jusco Toys in April 2002,
to acquire its inventory and its manufacturing capabilities. Jusco will be used
primarily to manufacture products for third parties, some of which may be our
licensees.

         WEMBLEY SPORTSMASTER
         --------------------

This division is not currently active, and we do not anticipate that we will
utilize this division in fiscal year 2004. We acquired the assets of Wembley
Sportmaster primarily for its trademarks. Our future intent is to launch a range
of balls, leisure toys, inflatable pools and play products under the Wembley
Sportsmaster banner.

DESIGN STUDIO TEAM

We have set up an in-house design studio team, with designers and artists,
equipped with a state-of-the-art animation studio. The team is involved in
character creation, storyboard development, and animation production for our
Entertainment Division. The team is also involved in preparing marketing
literature for our Licensing Division, and toy design, packaging and display
solutions for our Consumer Products Division.

INTELLECTUAL PROPERTY RIGHTS

We have acquired the following rights:

o     In My Pocket Rights (including Monster In My Pocket) Worldwide - from
      Morrison Entertainment Group, Inc., in a license agreement between
      Morrison Entertainment Group, Peak, and Wilf and Paula Shorrocks, dated
      February 25, 2002 for $500,000 in staged payments for a 20-year term. We
      are entitled to 10% of the revenues from the United States, 35% of the
      revenues from the United Kingdom, and 40% of the revenues from other
      territories. Morrison Entertainment Group is entitled to 60% of the
      revenues from the United States, 32.5% of the revenues from the United
      Kingdom, and 30% of the revenues from other territories. The Shorrocks are
      entitled to 30% of the revenues from the United States, 32.5% of the
      revenues from the United Kingdom, and 32.5% of the revenues from other
      territories. The revenue allocation refers to revenues from character and
      merchandise licensing and sales activities, and the allocation is to be
      adjusted for entertainment production financing terms. Any such royalty
      payment shall be deducted from the $500,000 staged payments, assuming the
      royalties are earned during the period when the staged payments are to be
      made.

o     Shorrocks Portfolio Worldwide - from Wilf and Paula Shorrocks, in a
      license agreement dated April 30, 2002, in perpetuity for royalties of 10%
      of the net selling price, with a guaranteed minimum royalty of $1,000,000.

o     Afro Ken - from SAN-X Co., Ltd., pursuant to a license agreement dated
      January 14, 2003. Under the agreement, we have the right to use
      copyrighted property Afro Ken, for marketing, distribution and sale of
      dolls. The license territory is The British Isles, including Ireland and
      its possessions. We are to pay royalties of 10% of gross sales. The
      minimum guarantee is UK (pound)10,000, of which the first advance was due
      on signing and a second advance is due on December 31, 2004. The license
      term expires on December 31, 2004, with an option to renew for one year.


                                       8
<PAGE>

o     The Wumblers - from The Silly Goose Company, LLC. We entered into an
      entertainment production agreement, dated as of December 16, 2003, with
      The Silly Goose Company, LLC for the production of animated television
      episodes for certain intellectual property entitled "The Wumblers".
      Pursuant to an agreement dated April 28, 2003, we are entitled to all
      exploitation rights in The Wumblers including merchandise and distribution
      rights. We are to finance or obtain financing for the episodes. Funding
      sources will share copyright interests in the television episodes
      according to the allocation of net proceeds. We will have the right to
      produce other episodes based on the licensed intellectual property. We
      have the right to exploit the licensed property worldwide in perpetuity.
      We are entitled to 35% to 40% of the gross revenues, depending on the
      location from which revenues are generated and the form of the source of
      revenues, whether television, music, or merchandise. We and any financing
      partners are entitled to recoup all production and marketing costs from
      gross revenues. Silly Goose is entitled to 31% of the net proceeds.

o     Faireez - Pursuant to terms of understanding with Moody Street Kids and
      Funbag Animation Studios Inc., we have the worldwide distribution rights,
      excluding Canada and Australia, and worldwide merchandising rights to an
      animated television series project called The Faireez, at royalty rates of
      35%-40% of gross revenues. The license term is 25 years with an option to
      extend the term for an additional 25 years.

We have licensed the following rights to third parties:

o     Monster In My Pocket for electronic games - We entered into a license
      agreement, dated December 12, 2003, with Radica U.K. Ltd. Under the
      agreement, we licensed certain rights to Monster In My Pocket in
      connection with the sale of electronic handheld games. The license
      territory is the United Kingdom, Channel Islands and Eire. We are to
      receive royalties of 8% to 10% of the net selling price. The license term
      is three years.

o     Pretty Pony Club - to Toontastic Publishing Ltd., pursuant to a license
      agreement dated December 5, 2002, and renewed in 2004. Under the
      agreement, we licensed the right to intellectual property called Pretty
      Pony Club in connection with the sale of comic books. The license
      territory is the United Kingdom and Eire. We are to receive royalties of
      4% of the net sales price or 5% of the purchase price, depending on the
      manufacturer. We received an advance royalty of $4,025 in 2002, additional
      royalties of $17,159 in 2003 for the license period ended February 29,
      2004, and an additional advance royalty of $2,500 in 2004 under the
      renewed license. There is no minimum guaranteed royalty under the renewed
      license. The license expires on February 28, 2005.

We have granted the following distribution and sales rights:

o     We entered into a distribution agreement, dated July 1, 2003, with
      Perfectly Plush Inc., a Canadian company, whereby Perfectly Plush would
      serve as exclusive distributor of our Countin' Sheep products in Canada.
      Under the agreement, Perfectly Plush is to pay us a royalty of 10% of the
      net selling price, which is included in the purchase shipment price.
      Perfectly Plush shall pay to us 25% of the value of the invoice on
      placement of order, 25% on release from port of shipment and the remaining
      balance on release of products from port of entry on orders for the first
      54,000 pieces. For subsequent orders, Perfectly Plush shall pay us 25%
      of the value of the invoice on placement of order, 25% on release from
      port of shipment, 25% on release of products from port of entry, and the
      remaining balance within 45 days of receipt of shipment. The agreement
      expires on December 31, 2004.

o     We entered into a distribution agreement, dated January 20, 2003, with
      Character Options Ltd., whereby it would serve as exclusive distributor of
      our `Monster In My Pocket' products in the United Kingdom, Channel Islands
      and Eire. Under the agreement, Character Options paid a non-refundable
      advance of UK (pound)100,000, credited against royalty payments, and is to
      pay us a royalty of 10% of the net selling price. We are entitled to a
      guaranteed minimum royalty of UK (pound)150,000 if 26 episodes of `Monster
      In My Pocket' are broadcast on GMTV or satellite television by December
      31, 2004. The agreement expires on December 31, 2005.


                                       9
<PAGE>

o     We entered into an agency agreement, dated February 4, 2003, with Colin
      Lisle & Associates Limited. The license territory is Asia Pacific
      (excluding Australia and New Zealand); Scandinavia; Belgium; France,
      Holland; Italy; Portugal; Spain; Austria; Czech Republic; Germany;
      Hungary; Poland; Romania; Russia; Switzerland; Greece; Israel; Turkey;
      Cyprus; Malta; South Africa; Middle East. The agreement expires on
      December 31, 2004. The commission rate is 6% of invoiced sales.

o     We entered into a representation agreement, dated August 19, 2003, with
      Haven Licensing Pty Ltd. for the use of Monster In My Pocket Brand,
      excluding television and video distribution, in Australia and New Zealand.
      The commission rate is 30% of gross receipts. The agreement expires on
      December 31, 2006.

o     We entered into a representation agreement, dated September 17, 2003, with
      Character Licensing & Marketing for the use of Monster In My Pocket Brand,
      excluding television and video distribution, in South Africa. The
      commission rate is 30% of gross receipts. The agreement expires on
      September 16, 2005.

o     We entered into a representation agreement, dated October 31, 2003, with
      Kidz Entertainment, for the use of Monster In My Pocket Brand, in the
      Nordic Region of Europe. The commission rate is 30% of gross receipts. The
      agreement expires on December 31, 2006.

COMPETITIVE ENVIRONMENT

We have many competitors internationally across three principal areas of our
proposed business: entertainment, licensing and consumer products.

Competitors includes large companies who operate with similar business
strategies as we do, but on a much larger scale, such as Vivendi with its
Universal Studios and Time Warner Inc. with Warner Brothers. These large
companies have an integrated business approach to their properties, with
television, film, licensed toys and merchandise, and have a competitive
advantage to their competitors because they own or are significant partners in
worldwide broadcast companies and have direct access to their consumers
internationally. Similarities can be observed within the United Kingdom with the
BBC who commission television shows, control their own channel and content, and
have their own licensing and consumer products division, BBC Worldwide, who
exploit the rights and place the content internationally.

Other competitors include companies who do not have their own broadcast
facilities, as we do not, and therefore do not enjoy the competitive advantages
that broadcast companies like Vivendi and Time Warner have. These smaller
broadcast-independent companies include H.I.T. Entertainment, 4 Kids
Entertainment, DIC Entertainment and Saban. These smaller firms have created
many of the well-known and popular properties, such as 4 Kids Entertainment's
Pokemon, H.I.T.'s Bob The Builder , and Saban's Power Rangers. Pokemon, since
its appearance in 1998, has generated sales of $15 billion through 2003. Both
Nickelodeon's Rugrats and Fox Kids/Saban's Power Rangers, both launched in 1992,
are well-known brands to this day.

Most of our competitors operate in the same three primary business lines as we
do, entertainment, licensing and consumer products, and do so on an
international scale. Successful companies have gained visibility through
coordinated marketing efforts in various segments of the market, and do not rely
on generating revenues from television licensing and distribution income alone,
but also on income from product licensing and merchandise sales. Successful
television shows in one territory tend to also be successful in other
territories, and the ability to license the brand and sell consumer products is
related to the popularity and the success of the television shows. Accordingly,
the same companies and the same brands tend to dominate the market in each of
the three business segments, entertainment, licensing and consumer products, of
the children's market.

Many companies and brands do not succeed in this highly competitive market. The
international broadcast arena has witnessed a demand for more and more content
over recent years as the proliferation of new television channels continues to
grow.


                                       10
<PAGE>

According to Screen Digest's 2001 study of the children's television business
"Broadcasters will spend an estimated $2.7 billion worldwide on producing,
commissioning and acquiring children's programs in 2001. But independent
producers and distributors have emerged as the pivotal players in the worldwide
children's television industry. Their role will become even more important as
funding from broadcasters stagnates." North America accounts for 40% of the
total children's television market, followed by Western Europe (33%) and Asia
(22%). According to a recent article published in the March 2004 issue of
Broadcast Magazine there are now over 240 television and cable channels
internationally dedicated to children's entertainment with over 150 of them
launching in the last three years. The focus therefore for us is to supply
quality children's programming to television broadcasters and this provide the
platform for an integrated business model, launching our intellectual properties
and opening up revenue streams from licensing and merchandising.

The licensing market for merchandise has a worldwide retail sales value of over
$108 billion annually according to a January 2004 TLL Licensing Business Study.
Although the licensing market declined 0.7% from 2002 to 2003, the TLL Licensing
Business Study predicts a 7.0% increase in 2004. A December 2003 Yale-Harvard
statistical survey, performed for the Licensing Industry Merchandising
Association-LIMA, reported that the licensing market overall in 2003 in North
America represented $7 billion in royalty income, which accounts for 66% of the
world wide sales of licensed merchandise.

We intend to participate in the toy market by licensing entertainment driven
properties to strategic partners, including large toy and entertainment
companies. We will also seek to sell directly to large general merchandisers and
toy retail chains, although we have no such agreements to date. According to the
National Purchase Diary (NPD), reported in January 2004, the toy market
worldwide in total was $76.9 billion in 2002 with $54.4 billion coming from
traditional toys and $22.5 billion coming from video games. North America
accounted for $34.5 billion of the traditional toy sales and $11.2 billion in
video games. In 2002, licensed toys comprised 29% of the $76.9 billion world
market for toys.

PRINCIPAL SUPPLIERS

In 2003, we were not dependent on any particular supplier.

DEPENDENCE ON MAJOR CUSTOMERS

In our fiscal year ended December 31, 2003, Silly Goose Company represented
approximately 49% of our revenues.

GOVERNMENT REGULATION

Our toy and related products sold in the United States are subject to the
provisions of The Consumer Product Safety Act (the "CPSA"), The Federal
Hazardous Substances Act (the "FHSA"), The Flammable Fabrics Act (the "FFA"),
and the regulations promulgated thereunder. The CPSA empowers the Consumer
Product Safety Commission (the "CPSC") to take action against hazards presented
by consumer products, including the formulation and implementation of
regulations and uniform safety standards. The CPSC has the authority to seek to
declare a product "a banned hazardous substance" under the CPSA and to ban it
from commerce. The CPSC can file an action to seize and condemn an "imminently
hazardous consumer product" under the CPSA and may also order equitable remedies
such as recall, replacement, repair or refund for the product. The FHSA provides
for the repurchase by the manufacturer of articles which are banned. Consumer
product safety laws also exist in some states and cities within the United
States and in Canada, Australia and Europe. We vigorously seek to maintain
compliance with the CPSA, the FHSA, the FFA, international standards, and our
own standards. Notwithstanding the foregoing, there can be no assurance that all
of our products are or will be hazard free. Any material product recall could
have an adverse effect on our results of operations or financial condition,
depending on the product, and could affect sales of other products.

The Children's Television Act of 1990 and the rules promulgated thereunder by
the United States Federal Communications Commission, as well as the laws of
certain countries, place certain limitations on television commercials during
children's programming. We, of course, seek to comply in all respects with these
laws and regulations.


                                       11
<PAGE>

COMPLIANCE WITH ENVIRONMENTAL LAWS

Not applicable.

RESEARCH AND DEVELOPMENT

The continuing development of new products and the redesigning of existing items
for continued market acceptance are key determinants of success in the toy and
entertainment product industry. In 2002, in connection with our start-up
operations, $337,729 was incurred on activities relating to the development,
design and engineering of new products and their packaging and to the
improvement or modification of ongoing products. Much of this work is performed
by our internal staff of designers, artists and model makers. In 2003, we did
not expend any significant capital on research and development activities.

EMPLOYEES

As of January 30, 2004, we employed a total of 18 employees on a full-time
basis, 9 of which are management level employees and five of which are clerical,
and four are employed as designers. We also have two consultants and a team of
14 sales agents in the United Kingdom.

ITEM 2. DESCRIPTION OF PROPERTY

We lease approximately 3,000 square feet of space for our Bakewell, England
headquarters pursuant to a month-to-month lease at approximately $5,760 per
month. We believe that our facilities are adequate for our present purposes.

ITEM 3. LEGAL PROCEEDINGS

We are not a party to any material pending legal proceeding, other than ordinary
routine litigation incidental to our business, except that in connection with
our purchase of Jusco Toys Ltd from the administrators of Just Group Plc in
2002, the Hong Kong Inland Revenue Department instituted a proceeding in January
2003 due to incomplete revenue filings occurring before our acquisition of Jusco
Toys. This enquiry has been determined in March 2004 at a cost to the Company of
$9,235.

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

Not applicable.


                                       12
<PAGE>

                                     PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET INFORMATION

Our common stock is quoted on the OTC Bulletin Board under the symbol "PKEH".
For the periods indicated, the following table sets forth the high and low bid
prices per share of common stock, adjusted to reflect a one-for-100 reverse
stock split effected on March 31, 2003. These prices represent inter-dealer
quotations without retail markup, markdown, or commission and may not
necessarily represent actual transactions.

Prices prior to April 22, 2003 are not related to our current business
operations, but reflect a predecessor business, Palladium Communications Inc., a
business that we sold in April 2003 and no longer conduct. SEE "OUR
BUSINESS--ORGANIZATION HISTORY."

Fiscal Quarter Ended                        High Bid          Low Bid
--------------------                        --------          -------
March 31, 2001                               $3.62              $1.31
June 30, 2001                                 2.25               0.59
September 30, 2001                            1.01               0.35
December 31, 2001                             1.01               0.16
March 31, 2002                                0.24               0.02
June 30, 2002                                 0.035              0.001
September 30, 2002                            0.015              0.004
December 31, 2002                             0.007              0.003
March 31, 2003                                0.003              0.001
June 30, 2003                                 1.75               0.03
September 30, 2003                            1.15               0.55
December 31, 2003                             0.80               0.40
March 31, 2004                                0.90               0.41

HOLDERS

As of December 31, 2003, we had approximately 550 record holders of our common
stock. The number of record holders was determined from the records of our
transfer agent and does not include beneficial owners of common stock whose
shares are held in the names of various security brokers, dealers, and
registered clearing agencies.

DIVIDENDS

We have never declared or paid any cash dividends on our common stock. We do not
anticipate paying any cash dividends to stockholders in the foreseeable future.
In addition, any future determination to pay cash dividends will be at the
discretion of the Board of Directors and will be dependent upon our financial
condition, results of operations, capital requirements, and such other factors
as the Board of Directors deem relevant.


                                       13
<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

<TABLE>
<CAPTION>
                                        Number of securities to       Weighted average
                                        be issued upon exercise       exercise price of        Number of securities
                                        of outstanding options,     outstanding options,     remaining available for
          Plan category (1)               warrants and rights        warrants and rights         future issuance
          -----------------               -------------------        -------------------         ---------------
<S>                                              <C>                           <C>                          <C>
Equity compensation plans approved by                  0                       $ 0                          0
securities holders

Equity compensation plans not                    990,000                        $0.38                       0
approved by security holders (2)(3)

Total                                            990,000                        $0.38                       0
</TABLE>

(1)   The above table does not include securities and convertible securities
      issued in fiscal year 2003 that were issued in connection with financing
      arrangements.

(2)   In connection with a consulting agreement with POW! Entertainment, on July
      24, 2003, we issued 750,000 warrants to purchase shares of common stock,
      exercisable for five years from July 24, 2003 at an exercise price of
      $0.35 per share. Warrants to purchase 375,000 shares vested upon execution
      of the consulting agreement, and the remaining warrants to purchase the
      remaining 375,000 shares are to vest on July 24, 2004. Beginning July 24,
      2004, POW has the right to demand registration of the shares of common
      stock underlying the warrant at our expense.

(3)   In connection with an amended consulting agreement, we issued 240,000
      warrants to purchase shares of common stock, exercisable for three years
      from December 2003 at $0.50 per share.

TRANSFER AGENT

The transfer agent for our common stock is American Stock Transfer & Trust
Company.

RECENT SALES OF UNREGISTERED SECURITIES

The Company entered into a Cancellation of Debt in Exchange for Securities
Agreement, dated as of December 17, 2003, whereby the Company exchanged a debt
of $100,000 owed to Jack Kuessous in exchange for 583,333 shares of common stock
and 150,000 common stock purchase warrants exercisable for three years at $0.50
per share. Kuessous had loaned $100,000 to us in or about July 2003. We relied
on an exemption from registration for a private transaction not involving a
public distribution provided by Section 4(2) under the Securities Act.

The Company entered into an Amendment to the Consulting Agreement, dated as of
December 17, 2003, amending a July 2003 consulting agreement with Jack Kuessous
pursuant to which the Company issued to Kuessous warrants to purchase 240,000
shares of common stock, exercisable for three years at $1.20 per share. Under
the amendment, we issued warrants to purchase 240,000 shares of common stock,
exercisable for three years at $0.50 per share in exchange for the previously
issued warrants. We relied on an exemption from registration for a private
transaction not involving a public distribution provided by Section 4(2) under
the Securities Act.


                                       14
<PAGE>

On January 5, 2004, the Company completed a Settlement Agreement and Release
dated as of December 22, 2003 with The N.I.R. Group, LLC, AJW Partners, LLC, New
Millennium Capital Partners II, LLC, AJW Offshore, Ltd. (formerly known as
AJW/New Millennium Offshore, Ltd.), and AJW Qualified Partners, LLC (formerly
known as Pegasus Capital Partners, LLC). Under the agreement, the Company
exchanged $1,000,000 and 1,000,000 shares of our unregistered common stock in
return for the surrender of an aggregate of $208,500 principal amount of 12%
convertible debentures and warrants to purchase 645,000 shares of common stock,
issued pursuant to a Securities Purchase Agreement dated as of February 28,
2002, and an aggregate of $785,000 principal amount of 12% convertible
debentures and warrants to purchase 1,570,000 shares of common stock, issued
pursuant to a Securities Purchase Agreement dated as of April 22, 2003. The
$1,000,000 payment to the former debenture holders consisted of $500,000 in
cash, and $500,000 by promissory notes which was paid in full on March 22, 2004.
The agreement provides that, after a period of thirteen months, all of the
1,000,000 shares of common stock still owned at that time may be put to us at
$.75 per share, on an all-or-none basis, for a one month period. The Company
also paid for $10,000 of the former debenture holders' legal fees and expenses
in connection with the transaction. We relied on an exemption from registration
for a private transaction not involving a public distribution provided by
Section 4(2) under the Securities Act.

On January 5, 2004, the Company entered into Securities Purchase Agreements with
four accredited investors: Platinum Partners Global Macro Fund LP, Gary Barnett,
Millstones Brands Inc. and Dan Brecher. Pursuant to the agreements, the Company
sold $1,500,000 in 8% convertible debentures due January 5, 2007 and 3,000,000
common stock purchase warrants. The purchase price totaled $1,500,000, of which
$750,000 was paid in cash, and $750,000 by promissory notes. The principal
amount of the debentures, plus any accrued and unpaid interest on the
debentures, may be converted into shares of common stock at the conversion price
of $0.30 per share. The conversion price may be adjusted downward for issuances
of securities by the Company at prices below the lower of $.50 per common share,
or fair market value for such securities as determined at the time of issuance.
Annual interest payments on the debentures are due on January 7 of each year,
commencing with January 7, 2005. At the option of the Company, interest payments
may be accrued beyond the annual interest payment date, in which event the
debenture holder shall have the option to accrue the interest payment then due
for another interest payment period, or cause the Company to issue common stock
in exchange for interest. Unless upon 75 days prior written notice, the
debenture and warrant holder may not convert the debentures or warrants for
shares of common stock to the extent that such conversion would cause it to
beneficially own 4.9% or more of our then issued and outstanding common stock.
After the tenth consecutive business day in which our common stock trades at
$3.00 or greater, the warrants becomes redeemable at $0.10 per warrant. We
relied on an exemption from registration for a private transaction not involving
a public distribution provided by Section 4(2) under the Securities Act.

On January 23, 2004, the Company entered into an agreement for services with
Vintage Filings, LLC. We issued 300,000 common stock purchase warrants,
exercisable for three years at $0.50 per share pursuant to the agreement. We
relied on an exemption from registration for a private transaction not involving
a public distribution provided by Section 4(2) under the Securities Act.

On January 29, 2004, we entered into a Securities Purchase Agreement with Shai
Stern. Pursuant to the agreement, we sold $50,000 in 8% convertible debentures
due January 29, 2007 and 100,000 common stock purchase warrants. The principal
amount of the debentures, plus any accrued and unpaid interest on the
debentures, may be converted into shares of common stock at the conversion price
of $0.30 per share. Annual interest payments on the debentures are due on
January 29 of each year, commencing with January 29, 2005. At our option,
interest payments may be accrued beyond the annual interest payment date, in
which event the debenture holder shall have the option to accrue the interest
payment then due for another interest payment period, or cause us to issue
common stock in exchange for interest. The warrants are exercisable at a price
of $0.50 per share. After the tenth consecutive business day in which our common
stock trades at $3.00 or greater, the warrants become redeemable at $0.10 per
warrant. We relied on an exemption from registration for a private transaction
not involving a public distribution provided by Section 4(2) under the
Securities Act.

On February 11, 2004, the Company entered into a financial advisor agreement
with Ameristar International Capital, Inc. We issued 100,000 shares of common
stock as an initial equity fee pursuant to the agreement. We relied on an
exemption from registration for a private transaction not involving a public
distribution provided by Section 4(2) under the Securities Act.


                                       15
<PAGE>

On February 12, 2004, the Company issued 16,667 shares to William Ivers in
connection with business consulting services, related to preparation of a
written business plan, rendered by Mr. Ivers. We relied on an exemption from
registration for a private transaction not involving a public distribution
provided by Section 4(2) under the Securities Act.

On February 12, 2004, the Company issued 20,000 shares to Lou Schneider in
connection with business consulting services, related to establishing potential
apparel-related licensing relationships with third parties, rendered by Mr.
Schneider. We relied on an exemption from registration for a private transaction
not involving a public distribution provided by Section 4(2) under the
Securities Act.

On February 12, 2004, the Company issued an aggregate of 20,409 shares in
connection with financial consulting services rendered by Rolin Inc. We relied
on an exemption from registration for a private transaction not involving a
public distribution provided by Section 4(2) under the Securities Act.

On March 10, 2004, the Company entered into Securities Purchase Agreements with
eleven accredited investors: Kenneth Grief, Wayne Saker, Gilad Ottensoser, Sam
Ottensoser, Boro Durakovic, JG Products, INC, Gerald Griffin, Al Lehmkuhl, Kevin
Bostenero, Eisenberger Investments, and David Herzog. Pursuant to the
agreements, the Company sold an aggregate of 1,000,000 shares of common stock
and 600,000 common stock purchase warrants, exercisable for three years at $0.75
per share, for the total purchase price of $500,000. Legend Merchant Group, Inc.
acted as the placement agent for these transactions. All of the purchasers were
preexisting customers of Legend Merchant Group. We paid Legend a fee of $25,000,
and 100,000 common stock purchase warrants exercisable for three years at $.50
per share and 60,000 common stock purchase warrants exercisable for three years
at $0.75 per share, for its services. We agreed to seek registration of the
resale of the shares of common stock and the shares underlying the warrants in
the amendment to our registration statement initially filed in February 2004. If
that registration statement becomes effective, but does not include the
investors' shares, the investors can demand that we will file a separate
registration statement seeking registration of the investors' securities, and we
will have ten days to file such a registration statement and we will need to pay
a $2,500 per day penalty for late filing of such registration statement. In the
event that the registration statement is not declared effective within the later
of 120 days from March 10, 2004 or thirty days after receipt of a last comment
letter from the S.E.C., we will be required to issue, as a penalty,
approximately 100,000 shares of common stock for each subsequent month period in
which the registration statement has not been declared effective. We relied on
an exemption from registration for a private transaction not involving a public
distribution provided by Section 4(2) under the Securities Act.

All of the above offerings and sales were deemed to be exempt under Section 4(2)
of the Securities Act of 1933, as amended. No advertising or general
solicitation was employed in offering the securities. The offerings and sales
were made to a limited number of persons, all of whom were accredited investors,
and transfer was restricted by the Company in accordance with the requirements
of the Securities Act of 1933. In addition to representations by the
above-referenced persons, we have made independent determinations that all of
the above-referenced persons were accredited or sophisticated investors, and
that they were capable of analyzing the merits and risks of their investment,
and that they understood the speculative nature of their investment.
Furthermore, all of the above-referenced persons were provided with access to
our Securities and Exchange Commission filings.


                                       16
<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

                          "FORWARD-LOOKING" INFORMATION

This report on Form 10-KSB contains certain "forward-looking statements" within
the meaning of Section 21E of the Securities Exchange Act of 1934, as amended,
which represent our expectations and beliefs, including, but not limited to
statements concerning the Company's expected growth. The words "believe,"
"expect," "anticipate," "estimate," "project," and similar expressions identify
forward-looking statements, which speak only as of the date such statement was
made. These statements by their nature involve substantial risks and
uncertainties, certain of which are beyond our control, and actual results may
differ materially depending on a variety of important factors.

                             INTRODUCTORY STATEMENT

The following discussion and analysis should be read in conjunction with the
information set forth in the audited financial statements for the year ended
December 31, 2003.

Unless otherwise stated, the discussion and analysis refers to the business of
Peak Entertainment Ltd., which the Company acquired on April 22, 2003, in a
transaction viewed as a reverse acquisition, and does not refer to the
operations for the Company's former business which was sold in April 2003. Under
applicable accounting principles the historical financial statement of Peak
Entertainment Holdings, Ltd. became those of the Company.

The year ended 2003 was a period of transition, as the former business of the
Company was sold, and a new business was acquired.

SALE OF FORMER BUSINESS

Prior to April 2003, the Company was known as Palladium Communications Inc. and
conducted a telecommunications business.

In April 2003, the Company sold off substantially all of its assets and certain
of its liabilities to Palladium Consulting Group, LLC, in exchange for $75,000.
The assets sold consisted of substantially all of the Company's assets used in
its telecommunications business, including all of the Company's carrier
agreements, sales agent agreements, and equipment, which business the Company
discontinued on April 22, 2003. The assets retained by Palladium Communications,
Inc. included its cash and notes receivable, which were nominal amounts. The
liabilities assumed by Palladium Consulting Group, Inc. consisted primarily of
payment for phone systems and other equipment and a lease for office facilities.
The Company retained substantially all of the liabilities, consisting primarily
of outstanding debentures and accrued interest. As a result of the transaction,
the Company was essentially a shell with no assets and with substantial
liabilities related to outstanding debentures.

On April 22, 2003, the Company acquired the business of Peak Entertainment Ltd.,
a United Kingdom company, by acquiring all of the outstanding shares of Peak
Entertainment Ltd.

The purpose of these transactions was to try to create some value for the
Company's shareholders. It is the understanding of the Company's current
management that the former principals of the Company sought to discontinue its
business operations as a publicly-held entity, and the principals of Peak
Entertainment Ltd. sought access to financing, which it had difficulty doing as
a privately-held company.

CURRENT BUSINESS

The Company's business operations are primarily in three areas of the children's
entertainment and leisure market: production of television shows; licensing of
entertainment concepts and characters; and sale of merchandise products. Since
inception, the Company has not generated significant revenues and it will
require substantial working capital to execute its business plan.


                                       17
<PAGE>

The Company's current business plan is centered on the production of television
shows geared for the children's entertainment market. Once the Company's planned
television shows are produced, the Company believes that it can generate revenue
through the sale of broadcast rights of those shows. The Company also intends to
license intellectual property rights created from the television shows and offer
for sale merchandise related to the television shows.

The year ended December 31, 2003 was an extremely difficult time for the
Company. The Company had very little operating capital to fund the production of
planned television shows, and focused on raising capital from third parties to
fund the production of the television shows. The Company experienced difficulty
in raising capital in 2003 from potential capital sources. The Company believes
that this difficulty was due to the terms of convertible debentures outstanding
in 2003, which contained terms very favorable to the debenture holders, and made
potential financiers reluctant to provide capital to the Company. Accordingly,
the Company entered into discussions with the debenture holders and repurchased
those debentures in January 2004.

The difficulty in raising capital in 2003 has delayed the Company's projected
timetable for its business operation. The lack of capital to fund production of
a single television episode show in 2003, in turn, has delayed and compromised
the Company's ability to license intellectual property rights and sell toys and
merchandise based on the television shows.

The Company believes that with the repurchase in January 2004 of debentures that
were outstanding at December 31, 2003, the Company's capital structure will be
viewed more favorably by potential capital sources, and the Company will have
better success in 2004 to raise much needed capital to fund production of the
planned television shows.

Until the Company raises sufficient capital to produce its planned television
shows, the Company does not expect to generate any significant revenues from any
of its lines of business. If the Company is unable to raise capital to produce
its entertainment products, the Company intends to alter its business plan to
focus on licensing its intellectual property to third parties, and on the sale
of toys and consumer goods.

RESULTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2003 COMPARED WITH THE YEAR ENDED DECEMBER 31,
2002

REVENUES
--------

Consolidated net revenues increased 231% to $1,014,996 for the year ended
December 31, 2003 from $306,350 for the same period in 2002. A breakdown of
revenues by our business divisions is set forth in the table below.

<TABLE>
<CAPTION>
------------------------------------------------ ------------------------ -------------------------- ----------------
Division                                            2003 Revenue ($)          2002 Revenue ($)         % Increase
------------------------------------------------ ------------------------ -------------------------- ----------------
<S>                                                     <C>                        <C>                   <C>
Entertainment/ Production                                500,000                     nil                   N/a
------------------------------------------------ ------------------------ -------------------------- ----------------
Licensing Arrangements                                   97,081                     7,503                1,194%
------------------------------------------------ ------------------------ -------------------------- ----------------
Character Related Consumer Products                      417,914                   298,847                 40%
------------------------------------------------ ------------------------ -------------------------- ----------------
         Total Revenues                                 1,014,996                  306,350                231%
------------------------------------------------ ------------------------ -------------------------- ----------------
</TABLE>

The increase in total revenue is primarily attributable to the revenue from
production by our in house animation team. This was principally due to a
commission by Silly Goose LLC to produce a pilot episode of The Wumblers. This
initial production sale to Silly Goose LLC forms part of the overall
co-production agreement to produce 52 episodes in conjunction with Cosgrove Hall
Films Ltd from the overall estimated production costs of $3 million.

Revenues from licensing increased 1,194% to $97,081 in 2003 from $7,503 in 2002.
Licensing revenues in 2002 related to advance royalties for a licensing
agreement for Pretty Pony Club with a publishing company, Toontastic Ltd, for
United Kingdom comic book rights. In 2003, the Company generated revenues of
$81,777 in advance royalties from a licensing arrangement with Character
Options, $8,177 for advance royalties from licensing arrangements for greeting
cards with CCA Ltd, and $19,458 in royalties collected on the Toontastic
publishing license agreement.


                                       18
<PAGE>

Revenues from the sale of consumer products increased 39.8% from $298,847 in
2002 to $417,914 in 2003. Sales in 2002 were generated from sales of toy related
inventory acquired as part of our acquisition of Jusco Toys Ltd. In 2003, the
Company commenced its principal consumer products activities, focused primarily
on our collector `gift' concept, Countin' Sheep. This product was sold primarily
in the United Kingdom and accounted for 56% of our consumer product sales. We
expect to build on this initial base by appointing distributors domestically and
internationally in 2004. The balance of sales of $181,606 was generated from our
license to sell Kewpie Doll products primarily in the United States.

The Company only recently commenced its operations. The Company does not believe
that its historical revenues are indicative of any current or future trends or
demands, nor of future operating performance. In 2003, the Company was in the
early production stages of three entertainment shows, and is expected to remain
in the production stages of the shows in 2004. Until the Company has completed
production of the shows and is in position to generate revenues from the sales
of broadcast rights for the shows, the Company does not have an adequate basis
for projecting revenues, nor identifying trends or demands. This applies for all
main lines of the Company's business, as the Company's business is expected to
be centered around its entertainment products.

COST OF REVENUE
---------------

For the year ended December 31, 2003, cost of revenues was $725,066 as compared
to $259,934 in 2002, an increase of 179% The increase in cost of revenues is
attributable to an increase in costs associated with the production consumer
goods, and the incurrence of entertainment production costs in connection with
the production of The Wumblers pilot episode. Cost of revenues as a percentage
of revenues decreased to 71% in 2003 as compared to 85% in 2002. This was
achieved principally by reducing haulage and storage costs for consumer goods
and by introducing an improved sales administration system.

The Company anticipates that its cost of revenue with respect to its
entertainment division and its consumer product division will increase
significantly in 2004, as the Company enters into the production stages of more
television show episodes and increases marketing efforts for the sale of
consumer goods. It is anticipated that the cost of revenue for our entertainment
products will initially increase in relation with our entertainment revenues,
until such time that the television episodes are completed, at which time the
significant costs will have been incurred. Since costs for our entertainment
division comprise mostly of non-recurring episode production costs, we expect
such coststo decrease as a percentage of revenues as we distribute the shows and
generate revenues from more and more markets. It is anticipated that the cost of
revenue for our consumer products will increase in direct relation to an
increase in revenues.

GROSS PROFIT
------------

Gross profit for the twelve months ended December 31, 2003 was $289,930, or
28.6% of revenues, as compared to $46,416, or 15.2% of revenues, for the same
period in 2002.

OPERATING EXPENSES
------------------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative costs were $2,614,593 for the year ending December 31, 2003
compared to $1,056,638 for the year ending December 31, 2002. As a percentage of
revenues, selling, general and administrative costs decreased to 257% for the
year ending December 31, 2003 from 345% for the year ending December 31, 2002.
The following table summarizes the costs incurred in 2003.


                                       19
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------- -------------------------------------- -----------------------------------
Operation                                                Expense ($)                        % of Total Cost
------------------------------------------- -------------------------------------- -----------------------------------
<S>                                                       <C>                                     <C>
Marketing                                                  233,054                                 9%
------------------------------------------- -------------------------------------- -----------------------------------
Employee Compensation                                      523,293                                20%
------------------------------------------- -------------------------------------- -----------------------------------
Occupency Costs                                            93,978                                  4%
------------------------------------------- -------------------------------------- -----------------------------------
Legal and Professional                                    1,150,506                               44%
------------------------------------------- -------------------------------------- -----------------------------------
Cancellation of debt with Jack Kuessous                    286,913                                11%
(Excess of the value of shares issued
over the original debt)
------------------------------------------- -------------------------------------- -----------------------------------
General Cost                                               326,849                                12%
------------------------------------------- -------------------------------------- -----------------------------------
TOTAL                                                     2,614,593
------------------------------------------- -------------------------------------- -----------------------------------
</TABLE>

Ordinary business expenses, such as marketing expenses, employee compensation,
and other miscellaneous business expenses, with respect to each category,
increased in 2003 as we grew our operations and planned for more products in
2003. We believe that such increases were typical and to be expected as we
conducted no substantial operations through much of early 2002, and, accordingly
a year to year comparison would not be particularly useful. We anticipate that
each of these categories will be comparable or increase slightly in 2004.
However, if we are able to complete the bulk of our entertainment production
projects in 2004, rather than in 2005 as presently projected, we will be in
position to actively promote the entertainment shows in 2004, and therefore, we
expect our marketing expenses to increase substantially in 2004 by approximately
100% or more.

The significant and noteworthy expenses were principally costs incurred from
legal, accounting and other professional services in respect of the reverse
merger, financing transactions such as the issuance of convertible debentures,
and securities law reporting obligations as a publicly-held company which
totaled $1,150,506, and further costs incurred for cancellation of the short
term debt with Jack Kuessous was $511,115, aggregating $1,437,419, or 55% of the
total costs. Such costs have been a significant factor affecting the business
operations at a time when the Company lacks sufficient revenues from operations
to finance the production of its entertainment products, and relies upon
financing from third parties. We did not incur such expenses in 2002 when we
were a privately-held company and did not engage in substantial financing
activities. We anticipate that expenses for legal, accounting and other
professional services will continue to be a significant factor in 2004, due to
our continuing need to raise capital.

DEPRECIATION AND AMORTIZATION. Depreciation for the year ended December 31, 2003
was $14,460 as compared to $3,445 for the same period in 2002. The increase is
in direct relationship with the expansion of the Company's capital spending on
equipment.

Amortization for year ended December 31, 2003 was $159,370 as compared to
$75,429 for the same period in 2002. The increase is in direct relationship with
the expansion of the Company's investments in trademarks, website development
costs and licensing rights.

NET LOSS
--------

Net loss for the year ended December 31, 2003 was $2,966,547 as compared to
$938,903 for the same period in 2002.

Net loss increased from $938,908, or $0.05 loss per share, in 2002 to
$2,966,547, or $0.14 loss per share, in 2003. The increase in net loss is
significantly attributable to an increase in legal, professional and
administrations costs incurred in completing the reverse merger, financing
transactions including the issuance of debentures, and costs attendant to
securities reporting obligations as a publicly-held company. Legal, accounting
and other professional costs of $1,150,506 in 2003 accounted for 44% of the
operating expenses. In addition, the interest accrued on the 12 % convertible
debentures outstanding in 2003 of $540,274 accounted for a significant
percentage of operating expenses, and represented a significant percentage of
gross profit before operating expenses. We benefited from foreign interest gains
by $217,273 as a result of the strong pound ((pound)) against the US dollar ($).


                                       20
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

CASH REQUIREMENTS
-----------------

Our revenues have been insufficient to cover our operating expenses. Since
inception, we have been dependent on loans from the Company's officers and on
private placements of the Company's securities in order to sustain operations.

Management expects to satisfy our liquidity needs on a short-term basis through
private placements of the Company's securities, including the issuance of debt.
There can be no assurances that the proceeds from private placements or other
capital transactions will continue to be available, that revenues will increase
to meet our cash needs, that a sufficient amount of our securities can or will
be sold, or that any common stock purchase options/warrants will be exercised to
fund our operating needs.

We believe that we will need operating capital of approximately $3,000,000 in
the next twelve months to maintain our current operations, and operating capital
of approximately $7,500,000 in the next twelve to twenty four months to complete
our planned entertainment projects already in the pre-production and production
stages.

As of December 31, 2003, we had commitments for capital and other expenditures
aggregating $6,326,218 included in current and long term liabilities, payable
over a maximum 20 year period. Those commitment and the amounts payable in 2004,
after giving effect to terms amended in 2004, are summarized in the
following table.

<TABLE>
<CAPTION>
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Contractual              Liability      Agreement Terms        Amount payable in 2004     Notes
Obligations              As of 12/31
------------------------ -------------- ---------------------- -------------------------- ----------------------------
<S>                      <C>            <C>                    <C>                        <C>
Short term loan -        $266,835       20% interest per       $266,835, plus interest    We intend to repay the
CK Supermarkets                         annum, secured by                                 loan in 2004 by selling
                                        certain inventory                                 inventory.
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Accounts Payable -       $1,209,339     Various (composed      $1,209,339                 All current liabilities
Various                                 significantly of                                  are within the contract
                                        various ordinary                                  terms and will be paid in
                                        business expenses,                                accordance with the
                                        as well as legal,                                 contract terms.
                                        accounting, and
                                        other professional
                                        fees).
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Stock holders'           $916,634       No pre-set payment     $0                         In 2004, we entered into a
advances account -                      terms.                                            promissory note, payable
Shorrocks                                                                                 in installments.  First
                                                                                          payment due on 1/2005 and
                                                                                          to be repaid in full not
                                                                                          later than 2008.
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Short Term License -     $380,000       Varying royalty        $380,000                   Payment terms currently
Morrison Entertainment                  terms - 30-60%.                                   being renegotiated.
                                        Guarantee of
                                        $500,000.
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Short Term License -     $71,429        10% royalty payable    $71,429                    Pay royalties from sales
Jesco Imports                           - guarantee $100,000                              achieved.
                                        over five years.
------------------------ -------------- ---------------------- -------------------------- ----------------------------
</TABLE>


                                       21
<PAGE>

<TABLE>
<CAPTION>
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Debentures- various      $838,279       Discount and           $0                         In 1/2004, securities were
debenture holders                       interest on the                                   repurchased by the Company.
                                        debenture
------------------------ -------------- ---------------------- -------------------------- ----------------------------
<S>                      <C>            <C>                    <C>                        <C>
Other - including Tax    $1,315,693                            $1,315,693
& Social security and
accruals
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Long Term License -      $1,078,009     10% royalty payable    $62,500                    Pay from royalties from
Shorrocks                               quarterly in                                      licenses to third parties
                                        perpetuity. Guarantee                             over the term of the
                                        of  $1,000,000, with                              contract.
                                        no established payment
                                        term.Company




------------------------ -------------- ---------------------- -------------------------- ----------------------------
Laura Wellington         $250,000       No pre-set payment     $0                         In 2004, negotiated terms
Short Term Borrowings                   terms.                                            of exchange of debt for
                                                                                          500,000 shares of common
                                                                                          stock.
------------------------ -------------- ---------------------- -------------------------- ----------------------------

TOTAL                    $6,326,218                            $3,305,796
------------------------ -------------- ---------------------- -------------------------- ----------------------------
</TABLE>

You will note that $1,994,643, or 32% of the total, is committed to the
principals of the company in promissory notes or long-term licenses and a
further 13% is committed to the debenture agreements.

In addition to the commitments set forth in the table above, we will need to
raise substantial capital to finance the production of our entertainment
projects:

o     Monster In My Pocket. Approximately $5 million in the next twelve months
      to produce 26 episodes of the program.

o     The Wumblers. Approximately $2,500,000 in the next twelve months to
      develop this project.

We anticipate meeting our short-term and long-term liquidity needs through the
internal cash flows generated by ongoing sales growth from projects, such as our
current entertainment projects, Monster In My Pocket and The Wumblers, which are
scheduled for production in 2004. However, our gross profit in 2003 represented
only 5% of our commitments as of December 31, 2003. Because our current
operations did not generate any significant revenues and our principal planned
products are still in production stages, we are in constant need of cash to pay
for our ordinary operating expenses, and more significantly, to pay for the
production costs of three projects currently in various stages of production.
Accordingly, until our entertainment projects can be funded and full television
production activities commenced, we will continue to rely on short-term outside
funding. If we are unable to obtain funding for the projects, we may be forced
to curtail or terminate operations.

SOURCES AND USES OF CASH
------------------------

For the twelve months ended December 31, 2003, the Company had a net operating
loss of $2,498,493, and an overall net loss of $2,966,547. We experienced
positive cash flow for the year ended December 31, 2003, primarily due to cash
received from financing activities. At December 31, 2003, the Company had
$152,339 in cash and had a working capital deficit of $659,894.


                                       22
<PAGE>

In 2003, the Company did not use or depreciate the moulds and tooling acquired
from the acquisition of Jusco Toys Ltd, due to an enquiry from the Hong Kong
Inland Revenue Department. The enquiry concerned the non-submission of certain
tax computations to ascertain taxes payable by the prior owners of Jusco Toys.
This was unknown to Peak until after we acquired Jusco Toys from the
administrators of Just Group Plc. This enquiry has been determined in March 2004
at a cost to the Company of $9,235, and the Company now can utilize the moulds
and tooling and depreciate the equipment.

         SOURCES AND USES OF CASH FROM OPERATING ACTIVITIES
         --------------------------------------------------

Cash flows from operating activities resulted in negative cash flows of
$659,894, due primarily from a significant increase in accounts payable of
$1,669,647. The negative cash flow was offset by an increase in current assets
of $434,445, and by a decrease in accounts receivable of $35,351 and a decrease
in inventory of $26,982. The increase in other current assets is due in large
part to cost of inventory. The increase in accounts payable is primarily due to
significant legal, accounting and other professional fees that we have not yet
paid. We expect to continue to experience an increase in accounts payable in
2004 until we are in position to sell our entertainment products.

It is necessary for us to obtain additional capital from outside sources to
allow us to move forward with our operations and proposed new products. We
believe that our future growth is dependent on the degree of success of current
operations in generating revenues, the ability to resolve our obligations under
the contractual terms of our existing obligations, and the ability to obtain
additional funding for our operations. We need additional funds for development
of animation for our products, the sale of which, in turn, it is anticipated,
could produce cash inflows from licensing opportunities.

Management expects to satisfy our liquidity needs on a short-term basis through
the continuing support of the directors, outside financings, and the subsequent
expected sales growth from our various company activities. We anticipate meeting
our long-term liquidity needs through the internal cash flows generated by
ongoing sales growth from projects such as our current entertainment project
Monster In My Pocket. Furthermore, we will attempt to limit our long-term
liquidity needs through the continuance of cost control measures applied to our
operations.

         SOURCES AND USES OF CASH FROM INVESTING ACTIVITIES
         --------------------------------------------------

Cash flows from investing activities resulted in negative cash flows of $109,001
in 2003, a significant decrease from cash flows of $531,026 in 2002. In the
twelve months ending December 31, 2003, cash applied to investing activities
consisted of $63,676 toward plant and equipment, and $47,132 toward purchase of
intangibles in the form of license agreements for intellectual property rights.
The acquisitions in 2003 were for minor licenses and intellectual property
rights.

In 2003, our focus was on production rather than investment in new product
licenses from third parties, and our focus in 2004 will continue to be the same.
We do not expect to expend significant resources in investing activities in
2004.

Cash used in investing activities was significantly larger in 2002, because we
were still in our start-up stages through much of 2002. In 2002, we used
significant cash to acquire assets essential for the Company's start-up business
stage. Cash applied to investing activities for the twelve months ended December
31, 2002 consisted of capital purchases of plant and equipment of $45,801,
purchase of intangibles in the form of license agreements for intellectual
property rights amounting to $283,834, and the acquisition of Jusco Toys Ltd and
Wembley Sportmaster Ltd for $201,391.

Cash for our initial start-up expenses was obtained primarily from advances from
two of our directors, Wilf and Paula Shorrocks.

         SOURCES AND USES OF CASH FROM FINANCING ACTIVITIES
         --------------------------------------------------

Cash flows from financing activities resulted in positive cash flows of $952,351
in 2003, which is comparable to cash flows from financing activities in 2002.


                                       23
<PAGE>

Whereas, in 2002, the primary source of funds were loans from the Company's
officers, in 2003, the Company relied upon capital raised from the sale of
convertible debentures to fund its operations. In 2004, the Company intends to
continue to rely upon capital raised from third party investors in private
placements to fund the Company's operations, as well as any entertainment
production financing partners it can obtain. Entertainment production financing
partners will share in the proceeds of the sale of the produced product.

SHORT TERM BORROWINGS. We had net cash provided from short term financing
agreements for the twelve months ended December 31, 2002 totaling $264,600. This
was an agreement to provide working capital on a short-term basis secured
against certain inventory. At December 31, 2003, the balance was $332,786. The
debt was originally due on January 10, 2003. It is envisaged that the loan will
be repaid in 2004 from revenues from the sale of inventory.

STOCKHOLDER ADVANCES. From time to time, Mr. and Mrs. Shorrocks loaned money to
the Company to fund day-to-day operations, as well as for the acquisition of
certain properties. Since inception through December 31, 2002, the Shorrocks
loaned to Peak Entertainment an aggregate of $972,386, and we repaid $78,193 to
the Shorrocks in 2002 and $71,206 in 2003. As of December 31, 2003, the
Shorrocks are owed $916,634. These monies were loaned without interest and did
not have a due date, and were due on demand. In March 2004, we gave the
Shorrocks a promissory note for the monies due establishing a repayment
schedule. The amount due is to be repaid in installments, consisting of six
periodic payments of $25,000 from January 31, 2005 through September 30, 2006,
two payments of $100,000 on March 31, 2007 and September 30, 2007, and the
balance due on January 31, 2008. The promissory note provides for earlier
repayment of any unpaid balance subject to various future financial results of
the Company, such as the Company obtaining shareholders' equity in excess of
150% of the amount due, or positive net income from operations in excess of 150%
of the amount due.

ISSUANCE OF CONVERTIBLE DEBENTURES AND REPURCHASE OF 2002 AND 2003 CONVERTIBLE
DEBENTURES. In April 2003, immediately following the sale of the Company's
predecessor telecommunications business to Palladium Consulting Group, we had
outstanding convertible debentures in the principal amount of $208,500 and
warrants to buy 645,000 shares of common stock. These securities had been sold
by the Company's predecessor business in February 2002 and we retained these
liabilities following the sale of the Company's former telecommunications
business.

On April 22, 2003, following the acquisition of Peak Entertainment Ltd., we sold
to the same investors of the outstanding convertible debentures additional
convertible debentures in the principal amount of $785,000 and warrants to buy
1,570,000 shares of our common stock.

We sold the debentures in April 2003 to raise operating capital and used the
proceeds for the payment of licensing commitments and general working capital.

The conversion terms of the debentures provided that the debentures could be
converted into shares of our common stock at the lower of $1.00 or a 50%
discount to the trading price of the common stock. Accordingly, the conversion
price was continuously adjustable, with no minimum or floor conversion price
set. Therefore, our obligation to issue shares upon conversion of debentures was
essentially limitless.

These debentures represented a large amount of debt relative to our identifiable
liquid assets. As of January 1, 2004, we had an aggregate of approximately
$1,000,000 in 12% convertible debentures outstanding, with outstanding interest
payable of approximately $629,779.

In the months after April 2003 through December 2003, we had very little success
in raising capital from third parties to fund our operations. This inability was
due, in part, to the conversion terms of the outstanding debentures. Potential
financiers were unwilling to commit capital to us because of the conversion
terms of the outstanding debentures, since the debenture holders could convert
their debentures into a significant and potentially limitless number of our
shares at a significant discount to the market price of our common stock. In
order to raise capital, we needed to seek an amendment of the conversion terms
of the debentures or repurchase the debentures.


                                       24
<PAGE>

On January 5, 2004, we completed a transaction with former debenture holders in
which we repurchased from the former debenture holders an aggregate of
$1,000,000 principal amount of 12% convertible debentures and 2,215,000 common
stock purchase warrants, which represented all of the securities that they
purchased pursuant to Securities Purchase Agreements dated as of February 28,
2002 and April 22, 2003. We paid the former debenture holders $1,000,000 in cash
and 1,000,000 shares of our unregistered common stock for the repurchase of the
securities. The $1,000,000 payment to the former debenture holders consisted of
$500,000 in cash, and $500,000 by promissory notes, which was paid in full on
March 22, 2004. In order to make such payment, we used $250,000 that we had in
operating capital, and $750,000 that we raised through the sale of securities.
In the period from February 5, 2005 to March 5, 2005, the former debenture
holders have the right to make us buy from them all of the 1,000,000 shares of
common stock issued to them on January 5, 2004, at the price of $.75 per share.
The put right only applies if the former debenture holders wish to make us buy
all 1,000,000 shares that they still own at that time, less any amounts they may
have previously sold or transferred. The put right is not transferable. We also
paid for $10,000 of the former debenture holders' fees and expenses in
connection with the transaction.

Although we repurchased the 12% debentures in January 2004, we have current
liabilities related to the repurchased debentures reported on our December 31,
2003 balance sheet of $838,279. Because we financed the repurchase primarily
through the sale of new 8% convertible debentures due January 2007, we may need
approximately $1,860,000 to pay off the debentures and accrued interest in
January 2007 if none of the debentures are converted into the Company's common
stock, however, we believe that the holders of the debentures are likely to
convert the debentures, including accrued interest, into shares of common stock
prior to maturity of the 8% debentures in 2007. The first interest payment on
the 8% convertible debentures is not due until January 2005, and if the interest
amount is not converted into cash, we believe that we may, at that time, have
the cash from our operating revenues to make payment.

SALES OF SECURITIES IN 2004

On January 5, 2004, we sold $1,500,000 in 8% convertible debentures due January
5, 2007 and 3,000,000 common stock purchases warrants. The purchase price
totaled $1,500,000, of which $750,000 was paid in cash, and $750,000 by
promissory notes. The promissory notes are due within three business days of the
effectiveness of a registration statement registering the resale of the shares
underlying the debentures and warrants. The principal amount of the debentures,
plus any accrued and unpaid interest on the debentures, may be converted into
shares of common stock at the conversion price of $0.30 per share. Annual
interest payments on the debentures are due on January 7 of each year,
commencing with January 7, 2005. At our option, interest payments may be accrued
beyond the annual interest payment date, in which event the debenture holder
shall have the option to accrue the interest payment then due for another
interest payment period, or cause us to issue common stock in exchange for
interest. The warrants are exercisable at a price of $0.50 per share. After the
tenth consecutive business day in which our common stock trades at $3.00 or
greater, the warrants become redeemable at $0.10 per warrant. The $1,500,000
convertible debentures due January 5, 2007 are protected by security interests
in substantially all of our collateral. We will need the approval of the
debenture holders in order to grant security interest rights to third parties
that are senior to or on par with these debentures. We used $750,000 of the
proceeds for the retirement of previously issued 12% debentures discussed above.

On January 29, 2004, we entered into a Securities Purchase Agreement with Shai
Stern. Pursuant to the agreement, we sold $50,000 in 8% convertible debentures
due January 29, 2007 and 100,000 common stock purchase warrants. The purchase
price was $50,000. The principal amount of the debentures, plus any accrued and
unpaid interest on the debentures may be converted into shares of common stock
at the conversion price of $0.30 per share. Annual interest payments on the
debentures are due on January 29 of each year, commencing with January 29, 2005.
At our option, interest payments may be accrued beyond the annual interest
payment date, in which event the debenture holder shall have the option to
accrue the interest payment then due for another interest payment period, or
cause us to issue common stock in exchange for interest. We used the proceeds
for working capital purposes.


                                       25
<PAGE>

On March 10, 2004, the Company entered into Securities Purchase Agreements with
eleven accredited investors. Pursuant to the agreements, the Company sold an
aggregate of 1,000,000 shares of common stock and 600,000 common stock purchase
warrants, exercisable for three years at $0.75 per share, for the total purchase
price of $500,000. Legend Merchant Group, Inc. acted as the placement agent for
these transactions. All of the purchasers were preexisting customers of Legend
Merchant Group. We paid Legend a fee of $25,000, and 100,000 common stock
purchase warrants exercisable for three years at $.50 per share and 60,000
common stock purchase warrants exercisable for three years at $0.75 per share,
for its services. We agreed to seek registration of the resale of the shares of
common stock and the shares underlying the warrants in the amendment to our
registration statement initially filed in February 2004. If that registration
statement becomes effective, but does not include the investors' shares, the
investors can demand that we file a separate registration statement seeking
registration of the investors' securities. We will have ten days to file such a
registration statement, and we will need to pay a $2,500 per day penalty for
late filing of such registration statement. In the event that the registration
statement is not declared effective within the later of 120 days from March 10,
2004 or thirty days after receipt of a last comment letter from the S.E.C., we
will be required to issue, as a penalty, approximately 100,000 shares of common
stock for each subsequent month period in which the registration statement has
not been declared effective. We used the proceeds from the sale of securities
for working capital purposes.

CASH MANAGEMENT

The Company will use its cash to meet certain expenses necessary to operate,
such as payment of employee salaries, taxes, and ordinary business expenses such
as office rent. The Company will also use cash to make payments on short term
borrowings, contractually obligated payments on license arrangements and other
accounts payable, although the Company will seek to renegotiate the timing and
payment schedule of certain license arrangements.

After paying for ordinary expenses, to the extent that the Company has available
cash, including cash received from financing arrangements, significantly all of
its cash will be applied to the production of the television episodes. We have
been in negotiations with co-production partners for all of our television
episodes. The total cost of each show will be formalized by way of a cashflow
budget, payable over a period of 12 to 36 months. This will be monitored in
detail. It will be a requirement of any of our partners to supply us with an
actual budget statement on a monthly basis compared to the agreed budget. It is
imperative that the Company does not increase the budget by significant amounts
and that it tries to keep within the budget as much as it can. We have
implemented tight procedures to ensure that the cash management has sufficient
controls.

PLAN OF OPERATIONS TO ADDRESS GOING CONCERN
-------------------------------------------

In their reports dated April 22, 2004, our independent auditors stated that our
financial statements for the years ended December 31, 2002 and 2003 were
prepared assuming that we would continue as a going concern. Our ability to
continue, as a going concern is an issue raised as a result of historical losses
from operations, cash flow deficits and a net capital deficiency. As a result of
the foregoing, the auditors have expressed substantial doubt about our ability
to continue as a going concern.

We continue to experience net operating losses. Our ability to continue as a
going concern is subject to our ability to generate a profit or obtain necessary
funding from outside sources, including obtaining additional funding from the
sale of our securities, increasing sales or obtaining loans from various
financial institutions where possible. Our continued net operating losses and
stockholders' deficit increases the difficulty in meeting such goals and there
can be no assurances that such methods will prove successful.


                                       26
<PAGE>

The primary issues management will focus on in the immediate future to address
this matter include:

      o     seeking institutional investors for equity investments in the
            Company;

      o     initiating negotiations to secure short term financing through
            promissory notes or other debt instruments on an as needed basis;

      o     focusing on, and continue to expand revenues, through our sales of
            consumer products, rather than on our projects in development by our
            entertainment division;

      o     renegotiate payments terms of existing contractual obligations;

      o     issue securities of the Company in lieu of cash for certain services
            performed for the Company; and

      o     consider third-party licensing of the products in our entertainment
            division.

To address these issues, in 2004, the Company has entered into agreements with
two investment banking companies to assist the Company in raising capital.
However, it appears that potential financiers are reluctant to invest until
after the registration statement that we submitted in February 2004 is
effective, and any delays in the Company attaining effectiveness of the
registration statement will increase our legal and accounting professional fees
and will delay receipt of potential financing that we need to fund our
entertainment projects, which, in turn, will distract management from furthering
its business projects as management will be required to focus on seeking
operating capital.

Additionally, the Company has discussed renegotiation of payments terms of
certain existing contractual obligations.


CRITICAL ACCOUNTING POLICIES AND ESTIMATES

This Management's Discussion and Analysis of Financial Condition and Results of
Operations discusses our consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. On an on-going
basis, management evaluates its estimates and judgments, including those related
to revenue recognition, intangible assets, financing operations, and
contingencies and litigation. Management bases its estimates and judgments on
historical experience and on various other factors that are believed to be
reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying value of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. The accounting policies are
described in the notes to the consolidated financial statements included in this
document for the fiscal year ended December 31, 2003.

Certain significant accounting policies and estimates inherent in the
preparation of our financial statements include policies and estimates with
regards to revenue recognition, capitalization of film and television costs, and
currency.


                                       27
<PAGE>

(1)   Revenue Recognition.
      --------------------

Revenues from the production of television entertainment is recognized in
accordance with Statement of Position 00-2 "Accounting by Producers or
Distributors of Film". Under this guidance, the Company recognizes revenue from
the sale of television entertainment when all of the following conditions are
met:

      (a)   persuasive evidence of a sale or licensing arrangement with a
            customer exists,

      (b)   the television episode is complete and in accordance with the terms
            of the arrangement, has been delivered or is available for immediate
            and unconditional delivery,


      (c)   the license period of the arrangement has begun and the customer can
            begin its exploitation, exhibition or sale, and


      (d)   the arrangement fee is fixed or determinable.

While this accounting treatment has not been material in our past operations,
from time to time, we expect to receive funds in advance to produce television
show episodes, the production of which could take from one to three years.
Advances received will not be recorded as revenues until the revenue recognition
conditions are met.

Revenue from character licensing arrangements is recognized over the life of the
agreement. Revenue from the sale of character related consumer products is
recognized at the time of shipment when title of the products passes to the
customer. Amounts received in advance are recorded as unearned revenue until the
earnings process is complete.

(2)   Film and Television Costs.
      --------------------------

The Company capitalizes the costs of developing film and television projects in
accordance with Statement of Position 00-2 "Accounting by Producers or
Distributors of Film". These costs will be amortized using the
individual-film-forecast-computation method, which amortizes costs in the same
ratio that current period actual revenue bears to estimated remaining
unrecognized ultimate revenue at the beginning of the current fiscal year. The
Company has recorded no amortization to date as revenue has yet to be
recognized.

(3)   Functional currency and treatment of foreign currency translation.
      ------------------------------------------------------------------

Due to the majority of our operations being based in the United Kingdom, the
British Pound has been selected as our functional currency.

Transactions denominated in foreign currencies are translated at the year-end
rate with any differences recorded as foreign currency transaction gains and
losses and are included in the determination of net income or loss. The Company
has translated the financial statements into US Dollars. Accordingly, assets and
liabilities are translated using the exchange rate in effect at the balance
sheet date, while income and expenses are translated using average rates.
Translation adjustments are reported as a separate component of stockholders'
equity (deficit).

RECENT ACCOUNTING PRONOUNCEMENTS

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity," SFAS No 150
clarifies the definition of a liability as currently defined in FASB Concepts
Statement No. 6, "Elements of Financial Statements," as well as other planned
revisions. This statement requires a financial instrument that embodies an
obligation of an issuer to be classified as a liability. In addition, the
statement establishes standards for the initial and subsequent measurement of
these financial instruments and disclosure requirements. SFAS 150 is effective
for financial instruments entered into or modified after May 31, 2003 and for
all other matters, is effective at the first interim period beginning after June
15, 2003. The adoption of SFAS 150 did not have a material effect on the
Company's financial position or results of operations.


                                       28
<PAGE>

In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities", SFAS No 149 amends SFAS No. 133
for decisions made by the FASB's Derivatives Implementation Group other FASB
projects dealing with financial instruments, and in response to implementation
issues raised in relation to the application of the definition of a derivative.
This statement is generally effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designed after June 30, 2003.
The adoption of SFAS 149 did not have material effect on the Company's financial
position or results of operations.

In January 2003, the FASB issued Interpretation ("FIN") No. 46, "Consolidation
of Variable Interest Entities" and in December 2003, a revised interpretation
was issued (FIN No. 46, as revised). In general, a variable interest entity
("VIE") is a corporation, partnership, trust, or any other legal structure used
for business purposes that either does not have equity investors with voting
rights or has equity investors that do not provide sufficient financial
resources for the entity to support its activities FIN 46, As revised, requires
a VIE to be consolidated by a company if that company is designated as the
primary beneficiary. The interpretation applies to VIEs created after January
31, 2003, and for all financial statements issued after December 15, 2003 for
VIEs in which an enterprise held a variable interest that it acquired before
February 1, 2003. The adoption of FIN 46, as revised, did not have a material
effect on the Company's financial position or results of operations.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transaction and Disclosure". This statements amends SFAS No 123,
"Accounting for Stock-Based Compensation," to provide alternative methods of
transition for a voluntary change to the fair value based method of accounting
for stock-based employee compensations. In addition, SFAS 148 amends the
disclosure requirements of SFAS 123 to require prominent disclosure requirements
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results. The Company adopted the disclosure provisions of this
standard.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting
and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). FIN 45 addresses the disclosures to be made
by a guarantor in its interim and annual financial statements about its
obligations under guarantees. The disclosure requirements in this interpretation
are effective for financial statements of interim or annual periods ending after
December 15, 2002. The adoption of FIN 45 did not have a material effect on the
Company's financial position or results of operations.


                                       29
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

PEAK ENTERTAINMENT HOLDINGS, INC

Consolidated Financial Statements

For the years ended December 31, 2002
and December 31, 2003


                                       30
<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 2002 AND
DECEMBER 31, 2003

CONTENTS

PAGE:

F-1      Independent auditors' report

F-2      Consolidated balance sheets

F-3      Consolidated statements of operations

F-4      Consolidated statements of comprehensive loss

F-5      Consolidated statements of changes in stockholders' equity (deficit)

F-6      Consolidated statements of cash flows

F-7      Notes to Consolidated financial statements


<PAGE>


INDEPENDENT AUDITORS' REPORT

TO THE SHAREHOLDERS OF PEAK ENTERTAINMENT HOLDINGS, INC

We have audited the accompanying consolidated balance sheets of Peak
Entertainment Holdings, Inc as of December 31, 2002 and 2003, and the related
consolidated statements of operations, comprehensive loss, stockholders' equity
(deficit) and cash flows for the years ended December 31, 2002 and December 31,
2003. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Peak
Entertainment Holdings, Inc as of December 31, 2002 and 2003, and the
consolidated results of its operations and its cash flows for the years ended
December 31, 2002 and December 31, 2003, in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, cash flow deficits and has a net capital deficiency that raise
substantial doubt about its ability to continue as a going concern. Management's
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


GOODBAND VINER TAYLOR
SHEFFIELD, ENGLAND
APRIL 22, 2004


                                       F-1



<PAGE>


PEAK ENTERTAINMENT HOLDINGS, INC

CONSOLIDATED BALANCE SHEETS

                                                           December 31
                                                           -----------

Assets                                                 2002           2003
------                                              -----------    -----------

Current Assets
--------------

Cash and cash equivalents                           $     9,870    $   152,339
Accounts receivable                                      63,341         34,620
Inventories                                             238,058        236,007
Other current assets                                       --          588,439
                                                    -----------    -----------
Total current assets                                $   311,269    $ 1,011,405

Deferred professional fees                                   --        335,833
Plant and equipment, net                                136,538        198,245
Intangible assets, net of amortization                1,984,159      2,079,716
                                                    -----------    -----------
                                                    $ 2,431,966    $ 3,625,199
                                                    ===========    ===========

Liabilities and Stockholders' Equity/(Deficit)
----------------------------------------------

Current Liabilities
-------------------

Short term borrowings                               $   264,600    $   582,786
Advances from factor                                         --          1,437
Accounts payable                                        578,835      1,209,339
Stockholders' advances account                          894,193        916,634
License fees payable                                    300,000        457,715
Other accrued liabilities                               233,316      1,325,524
                                                    -----------    -----------
Total current liabilities                           $ 2,270,944    $ 4,493,435

Long Term Liabilities
---------------------

License fees payable                                  1,200,000      1,078,009
Convertible debentures                                     --          754,774
                                                    -----------    -----------
Total long term liabilities                         $ 1,200,000    $ 1,832,783

Stockholders' Equity (deficit)
------------------------------

Common stock, par value $0.001 -
900,000,000 shares authorized, 19,071,684 and
21,774,212 shares issued and outstanding            $    19,075    $    21,777
Additional paid in capital                              (19,072)     1,650,841
Retained earnings (deficit)                            (967,451)    (3,933,998)
Accumulated comprehensive income/(loss)                 (71,530)      (439,639)
                                                    -----------    -----------
Total stockholders' equity (deficit)                 (1,038,978)    (2,701,019)
                                                    -----------    -----------
                                                    $ 2,431,966    $ 3,625,199
                                                    ===========    ===========

See accompanying notes to consolidated financial statements.


                                       F-2

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

CONSOLIDATED STATEMENTS OF OPERATIONS

                                            Year ended            Year ended
                                         December 31, 2002     December 31, 2003
                                         -----------------     -----------------

Revenue
  Character related consumer products       $   298,847          $   417,914
  Character licensing arrangements                7,503               97,082
  Film and television licensing
    arrangements                                     --              500,000
                                            -----------          -----------
Net revenue                                     306,350            1,014,996

Cost of Revenue
   Cost of goods sold                           259,934              725,066
                                            -----------          -----------
Total cost of revenue                           259,934              725,066

Gross profit                                     46,416              289,930

Operating expenses
   Selling, general and administrative        1,056,638            2,614,593
   Depreciation and amortization                 78,660              173,830
                                            -----------          -----------
Total operating expenses                      1,135,298            2,788,423
                                            -----------          -----------

Loss from operations                         (1,088,882)          (2,498,493)

Foreign exchange - gain                         168,545              217,273

Interest expense                                (18,571)            (685,327)
                                            -----------          -----------
Net loss                                    $  (938,908)         $(2,966,547)
                                            ===========          ===========


Basic and diluted net loss per share        $      0.05          $      0.14

Weighted average common shares outstanding   19,071,684           20,562,980
                                            ===========          ===========

See accompanying notes to consolidated financial statements.


                                       F-3

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

                                            Year ended             Year ended
                                         December 31, 2002     December 31, 2003
                                         -----------------     -----------------

Net loss                                   $  (938,908)          $(2,966,547)

Cumulative translation adjustment              (71,530)             (368,109)
                                           -----------           -----------
Comprehensive loss                         $(1,010,438)          $(3,334,656)
                                           ===========           ===========

See accompanying notes to consolidated financial statements.


                                       F-4

<PAGE>


PEAK ENTERTAINMENT HOLDINGS, INC

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                                             Accumulated
                                                                Additional    Retained       Other
                                                      Common    paid          Earnings       comprehensive
                                           Shares     stock     in capital    deficit        income/(loss)     Total
                                         ----------   -------   ----------    -----------    -----------    -----------
<S>                                      <C>           <C>         <C>            <C>                           <C>
Balance, December 31, 2001               19,071,684    19,075      (19,072)       (28,543)          --          (28,540)

Net loss                                       --        --           --         (938,908)          --         (938,908)
Cumulative translation adjustment              --        --           --             --          (71,530)       (71,530)
                                         ----------   -------   ----------    -----------    -----------    -----------
Balance, December 31, 2002               19,071,684   $19,075   $  (19,072)   $  (967,451)   $   (71,530)   $(1,038,978)
                                         ==========   =======   ==========    ===========    ===========    ===========

Recapitalisation in connection
   with the acquisition of
   Palladium Communications               2,119,195     2,119     (210,619)          --             --         (208,500)
Issuance of convertible debentures             --        --        785,000           --             --          785,000
Issuance of warrants in exchange
  for future consulting services               --        --        684,120           --             --          684,120
Issuance of common stock and warrants
  in exchange for cancellation of
  short-term debt                           583,333       583      411,412           --             --          411,995
Net loss                                       --        --           --       (2,966,547)          --       (2,966,547)
Cumulative translation adjustment              --        --           --             --         (368,109)      (368,109)
                                         ----------   -------   ----------    -----------    -----------    -----------
Balance, December 31, 2003               21,774,212   $21,777   $1,650,841    $(3,933,998)   $  (439,639)   $(2,701,019)
                                         ==========   =======   ==========    ===========    ===========    ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-5

<PAGE>


PEAK ENTERTAINMENT HOLDINGS, INC

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                   Year ended        Year ended
                                               December 31, 2002  December 31, 2003
                                               -----------------  -----------------
<S>                                               <C>              <C>
Cash flows from operating activities:

Net loss                                          $  (938,908)     $(2,966,547)

Adjustments to reconcile net loss to
net cash used in operating activities:

Depreciation                                            3,445           14,460
Amortization of intangible assets                      75,429          159,370
Foreign exchange gain                                (168,545)        (217,273)
Amortization of discount on debentures                   --            546,274
Non-cash common stock expenses                           --            506,287

Changes in working capital:

Accounts receivable                                   (63,341)          35,351
Inventories                                          (238,058)          26,982
Other current assets                                      428         (434,445)
Accounts payable and other accrued liabilities        804,626        1,669,647
                                                  -----------      -----------
Net cash used in operating activities                (524,924)        (659,894)
                                                  ===========      ===========

Cash flows from investing activities:

Purchase of plant and equipment                       (45,801)         (63,676)
Acquisitions (net of cash acquired)                  (201,391)            --
Purchase of intangibles                              (283,834)         (47,132)
Proceeds from sale of plant and equipment                --              1,807
                                                  -----------      -----------
Net cash used in investing activities                (531,026)        (109,001)
                                                  ===========      ===========

Cash flows from financing activities:

Short term borrowings, net                            264,600          237,120
Stockholders advances account                         870,048          (71,206)
Advances from factor                                     --              1,437
Convertible debentures                                   --            785,000
                                                  -----------      -----------
Net cash provided from financing activities         1,134,648          952,351
                                                  ===========      ===========

Cumulative translation adjustment                     (68,828)         (40,987)
                                                  ===========      ===========

Increase in cash and cash equivalents                   9,870          142,469
Cash and cash equivalents, beginning of year             --              9,870
                                                  -----------      -----------
Cash and cash equivalents, end of year            $     9,870      $   152,339
                                                  ===========      ===========

Supplemental disclosure of cash flow information

Interest paid                                     $        69      $    24,533
                                                  ===========      ===========

Disclosure of non-cash investing and financing activities:

Purchase of licenses through issuance
  of long term liabilities                        $ 1,500,000      $    17,785
                                                  ===========      ===========
Reverse acquisition                                      --            208,500
                                                  ===========      ===========
Issuance of stock for debt                               --            332,500
                                                  ===========      ===========
</TABLE>

See accompanying notes to consolidated financial statements.


                                       F-6

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003


1     DESCRIPTION OF BUSINESS AND FUTURE PROSPECTS

      Peak Entertainment Holdings, Inc ("the Company"), formerly Peak
      Entertainment Limited was formed on November 20, 2001 and is an integrated
      media group focused on children. Its activities include the production of
      television entertainment, character licensing and consumer products
      development, including toy and gift manufacturing and distribution.
      Integration enables Peak Entertainment Holdings, Inc to take a property
      from concept to consumer in-house, controlling and coordinating broadcast,
      promotions and product launches (toys, apparel, video games, etc.). The
      company operates in one business segment, media.

      The accompanying financial statements have been prepared assuming that the
      company will continue as a going concern. As explained below, the Company
      has sustained recurring operating losses, cash flow deficits and has a net
      capital deficiency as of December 31, 2003. On April 22, 2003, the Company
      completed a reverse acquisition with a public shell and has become a
      public company with access to the US capital markets. Immediately
      following the reverse acquisition, the Company entered into an agreement
      for the issuance of up to $785,000 in convertible debentures and warrants
      to purchase 1,570,000 shares of the company's common stock.

      The Company has developed a business plan to increase revenue by
      capitalizing on its integrated media products. However, the Company must
      obtain funds from outside sources in fiscal 2004 to provide needed
      liquidity and successfully implement its business plan. Presently, the
      Company has no firm commitments from outside sources to provide these
      funds. These factors raise substantial doubt about the Company's ability
      to continue in existence. The financial statements do not contain any
      adjustments that might result from the outcome of this uncertainty. While
      the Company is optimistic that it can execute its business plan, there can
      be no assurance that;

      A     increased sales necessary to obtain profitability will materialize,
            and

      B     the Company will be able to raise sufficient cash to fund the
            additional working capital requirements.

2     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

      (A)   Principals of Consolidation and Combination

            The accompanying consolidated financial statements include the
            accounts of Peak Entertainment Limited, Peak Entertainment Holdings,
            LLC, Jusco Toys Ltd, Jusco UK Ltd, Wembley Sportsmaster Ltd and
            Cameo Collectables Ltd after elimination of inter-company
            transactions and balances. Peak Entertainment Limited, Peak
            Entertainment Holdings, LLC, Jusco Toys Ltd, Jusco UK Ltd, Cameo
            Collectables Ltd and Wembley Sportsmaster Ltd are wholly-owned
            subsidiaries of Peak Entertainment Holdings, Inc.

            Cameo Collectables Ltd was formed on August 20, 2002 and was owned
            by Wilfred and Paula Shorrocks until February 7, 2003 when Peak
            Entertainment Holdings Inc acquired the whole of the share capital
            of Cameo Collectables Ltd.

            Prior to February 7, 2003 the financial statements of Cameo
            Collectable Ltd were combined with Peak Entertainments Holdings, Inc
            as both entities were under common control.


                                       F-7

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

2     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (B)   Basis of Preparation

            The financial statements have been prepared on a going concern
            basis, the validity of which depends upon future funding being
            available. The validity of the going concern concept is also
            dependent upon the continued support of the directors.

            Should such support be withdrawn and funding not made available, the
            company may be unable to as a going concern. Adjustments would have
            to be made to reduce the value of assets to their recoverable amount
            to provide for any further liabilities which might arise and to
            reclassify fixed assets as current assets.

      (C)   Risks and Uncertainties

            The entertainment/media industry is highly competitive. The Company
            competes with many companies, including larger, well capitalized
            companies that have significantly greater financial and other
            resources. The Company's success is dependent upon the appeal of its
            entertainment products. Consumer preferences with respect to
            entertainment products are continuously changing and are difficult
            to predict. Therefore, the Company's success will depend on its
            ability to redesign, restyle and extend the useful life of products
            and to develop, introduce and gain customer acceptance of new
            entertainment products. The Company's ability, or inability, to
            manage these risk factors could influence future financial and
            operating results.

      (D)   Revenue Recognition

            The Company generates revenues from three distinct sources; the
            license fees generated from the production of television
            entertainment, character licensing and sales of character related
            consumer products. Revenues from the production of television
            entertainment is recognized in accordance with Statement of Position
            00-2 "Accounting by Producers or Distributors of Film". Under this
            guidance, the Company recognizes revenue from the sale of television
            entertainment when all of the following conditions are met:

            A     Persuasive evidence of a sale or licensing arrangement with a
                  customer exists,

            B     The television episode is complete and in accordance with the
                  terms of the arrangement, has been delivered or is available
                  for immediate and unconditional delivery,

            C     The license period of the arrangement has begun and the
                  customer can begin its exploitation, exhibition or sale, and

            D     The arrangement fee is fixed or determinable.

            Revenue from character licensing arrangements is recognized over the
            life of the agreement. Revenue from the sale of character related
            consumer products is recognized at the time of shipment when title
            of the products passes to the customer. Amounts received in advance
            are recorded as unearned revenue until the earnings process is
            complete.


                                       F-8

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003


2     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (E)   Intangible assets and amortization

            Intangible assets are stated at cost less accumulated amortization
            and any provision for impairment. Amortization is provided on
            intangible fixed assets over their expected useful lives as follows:

            Trade marks                             -        10 years
            Website development costs               -         3 years

            Licensing rights are amortised on a straight line basis over the
            term of the agreement, which range from 3 years - 20 years.

            Web Site Development Costs

            In March 2000, EITF No. 00-02, Accounting for Website Development
            Costs, was issued which addresses how an entity should account for
            costs incurred related to website development. EITF 00-02
            distinguishes between those costs incurred during the development,
            application and infrastructure development stage and those costs
            incurred during the operating stage. The Company expenses all costs
            incurred during the development and operating stages. The Company
            evaluates costs incurred during the applications and infrastructure
            development stage using the guidance in Statement of Position (SOP)
            98-1, "Accounting for the Costs of Computer Software Developed or
            Obtained for Internal Use".

      (F)   Plant and equipment

            Plant and equipment are stated at cost, net of accumulated
            depreciation. Depreciation is provided on plant and equipment over
            their expected useful lives as follows:

            Fixtures & fittings                     -        10 years
            Moulds and tooling                      -         5 years
            Computer equipment & software           -         4 years

            Costs associated with the repair and maintenance of plant and
            equipment are expensed as incurred.


                                       F-9

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003


2     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (G)   Film and television costs

            The Company capitalizes the costs of developing film and television
            projects in accordance with Statement of Position 00-2 "Accounting
            by Producers or Distributors of Film". These costs will be amortized
            using the individual-film-forecast-computation method, which
            amortizes costs in the same ratio that current period actual revenue
            bears to estimated remaining unrecognized ultimate revenue at the
            beginning of the current fiscal year. The Company has recorded no
            amortization to date as revenue has yet to be recognized.

      (H)   Asset Impairment

            The Company periodically evaluates the carrying value of long-lived
            assets when events and circumstances warrant such a review. The
            carrying value of a long-lived asset is considered impaired when the
            anticipated undiscounted cash flow from such asset is separately
            identifiable and is less than the carrying value. In that event, a
            loss is recognized based on the amount by which the carrying value
            exceeds the fair market value of the long-lived asset. Fair market
            value is determined primarily using the anticipated cash flows
            discounted at a rate commensurate with the risk involved.

      (I)   Cash Equivalents

            For purposes of the statements of cash flows, all temporary
            investments purchased with a maturity of three months or less are
            considered to be cash equivalents. The Company maintains bank
            accounts in the United States of America, United Kingdom and Hong
            Kong. The balances held in these accounts are $64,187,
            (pound)50,244, and HK $1,998 respectively.

      (J)   Inventories

            Inventory is valued at the lower of cost or market, with cost being
            determined on the first-in, first-out basis. The Company reviews the
            book value of slow-moving items, discounted product lines and
            individual products to determine if these items are properly valued.
            The Company identifies these items and assesses the ability to
            dispose of them at a price greater than cost. If it is determined
            that cost is less than market value, then cost is used for inventory
            valuation. If market value is less than cost, then the Company
            establishes a reserve for the amount required to value the inventory
            at the market value. It the Company is not able to achieve its
            expectations of the net realizable value of the inventory at its
            current value, the Company adjusts its reserve accordingly.
            Inventory is comprised entirely of finished goods.


                                      F-10


<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

2     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (K)   Advertising costs

            Advertising costs, included in selling, general and administrative
            expenses, are expensed as incurred and were $3,827 and $46,286 for
            the years ended December 31, 2002 and December 31, 2003,
            respectively.

      (L)   Foreign currencies

            The Company uses the British Pound as its functional currency.
            Transactions denominated in foreign currencies are translated at the
            year-end rate with any differences recorded as foreign currency
            transaction gains and losses and are included in the determination
            of net income or loss. The Company has translated the financial
            statements into US Dollars. Accordingly, assets and liabilities are
            translated using the exchange rate in effect at the balance sheet
            date, while income and expenses are translated using average rates.
            Translation adjustments are reported as a separate component of
            stockholders' equity (deficit).

      (M)   Income taxes

            Income taxes are provided based on the liability method of
            accounting pursuant to Statement of Financial Accounting Standards
            No 109 "Accounting for Income Taxes" ("SFAS 109"). In accordance
            with SFAS No 109, deferred tax assets are recognised for deductible
            temporary differences and operating loss carry forwards, and
            deferred tax liabilities are recognised for taxable temporary
            differences. Temporary differences are the differences between the
            reported amounts of assets and liabilities and their tax basis.
            Deferred tax assets are reduced by a valuation allowance when, in
            the opinion of management, it is more likely than not that some
            portion or all of the deferred tax assets will not be realized.

      (N)   Use of Estimates

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


                                      F-11

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

2     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (O)   Earnings Per Share

            Earnings per share is based on the weighted average number of shares
            of common stock and dilutive common stock equivalents outstanding.
            Basic earnings per share includes no dilution and is computed by
            dividing income available to common shareholders by the weighted
            average number of common shares outstanding for the period. Diluted
            earnings per share reflects the potential dilution of securities
            that could share in the earnings of an entity.

            For the purposes of calculating earnings per share, the Company has
            retroactively restated its outstanding common stock based upon the
            stock split declared on April 22, 2003.

            Basic and diluted earnings per share are the same during 2002 and
            2003 as the impact of dilutive securities is antidilutive. There are
            3,355,000 warrants to purchase shares of the Company's common stock
            outstanding as of December 31, 2003.

      (P)   Warrants

            The Company issues warrants to purchase shares of its common stock
            in exchange for services and in combination with the sale of
            convertible debentures. The Company accounts for warrants issued in
            exchange for services in accordance with EITF 96-18 "Accounting for
            Equity Instruments that are Issued to Other Than Employees for
            Acquiring, or in Conjunction with Selling, Goods or Services". The
            Company records expense based on the fair value of the equity
            instruments. The Company measures the fair value of the equity
            instruments using the stock price and other measurement assumptions
            as of the earlier of (1) the date at which a commitment for
            performance by the counterparty to earn the equity instruments is
            reached, or (2) the date at which the counterparty's performance is
            complete.

            The Company accounts for warrants issued in combination with
            convertible debentures in accordance with the provisions of EITF
            00-27 "Application of EITF 98-5 to Certain Convertible Instruments".
            Under the provisions of EITF 00-27, the Company allocates the total
            proceeds received between the convertible debentures and the
            warrants based on their relative fair value at the date of issuance.


                                      F-12

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

2     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (Q)   Recent Accounting Pronouncements

            In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
            Financial Instruments with Characteristics of both Liabilities and
            Equity," SFAS No 150 clarifies the definition of a liability as
            currently defined in FASB Concepts Statement No. 6, "Elements of
            Financial Statements," as well as other planned revisions. This
            statement requires a financial instrument that embodies an
            obligation of an issuer to be classified as a liability. In
            addition, the statement establishes standards for the initial and
            subsequent measurement of these financial instruments and disclosure
            requirements. SFAS 150 is effective for financial instruments
            entered into or modified after May 31, 2003 and for all other
            matters, is effective at the first interim period beginning after
            June 15, 2003. The adoption of SFAS 150 did not have a material
            effect on the Company's financial position or results of operations.

            In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
            133 on Derivative Instruments and Hedging Activities", SFAS No 149
            amends SFAS No. 133 for decisions made by the FASB's Derivatives
            Implementation Group other FASB projects dealing with financial
            instruments, and in response to implementation issues raised in
            relation to the application of the definition of a derivative. This
            statement is generally effective for contracts entered into or
            modified after June 30, 2003 and for hedging relationships designed
            after June 30, 2003. The adoption of SFAS 149 did not have material
            effect on the Company's financial position or results of operations.

            In January 2003, the FASB issued Interpretation ("FIN") No. 46,
            "Consolidation of Variable Interest Entities" and in December 2003,
            a revised interpretation was issued (FIN No. 46, as revised). In
            general, a variable interest entity ("VIE") is a corporation,
            partnership, trust, or any other legal structure used for business
            purposes that either does not have equity investors with voting
            rights or has equity investors that do not provide sufficient
            financial resources for the entity to support its activities FIN 46,
            As revised, requires a VIE to be consolidated by a company if that
            company is designated as the primary beneficiary. The interpretation
            applies to VIEs created after January 31, 2003, and for all
            financial statements issued after December 15, 2003 for VIEs in
            which an enterprise held a variable interest that it acquired before
            February 1, 2003. The adoption of FIN 46, as revised, did not have a
            material effect on the Company's financial position or results of
            operations.


                                      F-13

<PAGE>


PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003


2     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

      (Q)   Recent Accounting Pronouncements (continued)

            In December 2002, the FASB issued SFAS No. 148, "Accounting for
            Stock-Based Compensation-Transaction and Disclosure". This
            statements amends SFAS No 123, "Accounting for Stock-Based
            Compensation," to provide alternative methods of transition for a
            voluntary change to the fair value based method of accounting for
            stock-based employee compensations. In addition, SFAS 148 amends the
            disclosure requirements of SFAS 123 to require prominent disclosure
            requirements in both annual and interim financial statements about
            the method of accounting for stock-based employee compensation and
            the effect of the method used on reported results. The Company
            adopted the disclosure provisions of this standard.

            In November 2002, the FASB issued Interpretation No. 45,
            "Guarantor's Accounting and Disclosure Requirements for Guarantees,
            Including Indirect Guarantees of Indebtedness of Others" ("FIN 45").
            FIN 45 addresses the disclosures to be made by a guarantor in its
            interim and annual financial statements about its obligations under
            guarantees. The disclosure requirements in this interpretation are
            effective for financial statements of interim or annual periods
            ending after December 15, 2002. The adoption of FIN 45 did not have
            a material effect on the Company's financial position or results of
            operations.

3     ACQUISITION

      On April 19, 2002, the Company acquired the assets of Jusco Toys Ltd for
      $111,993 from the administrators of Just Group plc, in order to obtain the
      tooling and moulds owned by Jusco Toys Ltd. Jusco Toys Ltd is registered
      in Hong Kong.

      The acquisition of Jusco Toys Ltd has been accounted for in accordance
      with SFAS 141. The cost of the acquisition was allocated to the assets
      acquired based on estimates of their respective fair values at the date of
      acquisition.

      The following summarises the final purchase price allocation of the assets
      acquired at the date of acquisition.

      Cash                                                             $  17,811
      Moulds and toolings                                                 91,980
      Fixtures and fittings                                                2,202
                                                                       ---------
      Cash purchase price                                              $ 111,993
                                                                       =========

      The Company's combined results of operations have incorporated Jusco Toys
      Ltd's activity on a combined basis from April 19, 2002, the date of
      acquisition.

      On April 19, 2002 the Company acquired the assets of Wembley Sportsmaster
      Ltd for $107,209 from the administrators of Just Group plc in order to
      obtain the trademarks owned by Wembley Sportsmaster Ltd.


                                      F-14

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003


3     ACQUISITION (CONTINUED)

      The acquisition of Wembley Sportsmaster Ltd has been accounted for in
      accordance with SFAS 141. The cost of the acquisition was allocated to the
      assets acquired based on estimates of their respective fair values at the
      date of acquisition.

      The following summarises the final purchase price allocation of the assets
      acquired at the date of acquisition.

      Trademarks                                                        $107,209
                                                                        --------
      Cash purchase price                                               $107,209
                                                                        ========

      The Company's combined results of operations have incorporated Wembley
      Sportsmaster Ltd activity on a combined basis form April 19, 2002, the
      date of acquisition.

4     PLANT AND EQUIPMENT

      Plant and equipment comprise the following:

                                                             2002          2003

      Fixtures and fittings                                $ 25,380     $135,966
      Moulds and tooling                                     95,654      105,674
      Computer equipment & software                          18,949       41,405
                                                            -------      -------
                                                            139,983      283,045
      Accumulated depreciation                                3,445       84,800
                                                            -------      -------
                                                            136,538      198,245
                                                            =======      =======

      The Company is not currently using or depreciating the moulds and tooling
      acquired from the acquisition of Jusco Toys Ltd, due to an enquiry from
      the Hong Kong Inland Revenue Department. These moulds and tooling will be
      utilized once the enquiry has been settled and management believes that no
      impairment has occurred. This enquiry has been determined in March 2004 at
      a cost to the Company of $9,235. The Company can now utilize the moulds
      and tooling. The Company owns other moulds and tooling included above that
      has a cost of $13,670, which it is currently using and hence depreciating.


                                      F-15

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

5     INTANGIBLE ASSETS

      Intangible assets comprise the following at December 31, 2002.

                                                   Accumulated
                                       Cost        amortization      Total

      Licences                      $1,780,607     $   69,511     $1,711,096
      Trademarks                       114,182          2,946        111,236
      Film and television costs        111,316             --        111,316
      Website costs                     53,483          2,972         50,511
                                    ----------     ----------     ----------
                                    $2,059,588     $   75,429     $1,984,159
                                    ==========     ==========     ==========

      Intangible assets comprise the following at December 31, 2003.

                                                   Accumulated
                                       Cost        amortization      Total

      Licences                      $1,984,870     $  213,982     $1,770,888
      Trademarks                       126,138          4,025        122,113
      Film and television costs        170,338             --        170,338
      Website costs                     23,014          6,637         16,377
                                    ----------     ----------     ----------
                                    $2,304,360     $  224,644     $2,079,716
                                    ==========     ==========     ==========

      As of December 31, 2003, the estimated aggregate amortization expense,
      based on current levels of intangible assets for the succeeding five years
      is as follows:

                                          $

      December 31, 2004               157,484
      December 31, 2005               185,425
      December 31, 2006               149,143
      December 31, 2007               141,473
      December 31, 2008               141,473


                                      F-16

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

6     INCOME TAXES

      The components of the deferred tax balances at December 31, 2002 and 2003
      are as follows.

<TABLE>
<CAPTION>
                                                               2002            2003
<S>                                                          <C>            <C>
      Deferred tax assets - non - current
      Loss carry forwards                                    $ 263,208      $ 728,959
                                                             ---------      ---------
      Total deferred tax assets                                263,208        728,959
                                                             ---------      ---------
      Deferred tax liabilities - current
      Depreciation and amortization not currently
       deductible for tax purposes                              23,014         19,401
                                                             ---------      ---------
      Total deferred tax liabilities                            23,014         19,401
                                                             ---------      ---------
      Net deferred tax asset  before valuation allowance       240,194        709,558
      Valuation allowance                                     (240,194)      (709,558)
                                                             ---------      ---------
      Net deferred tax asset                                 $      --      $      --
                                                             =========      =========
</TABLE>

      The Company's effective tax rate of 0% differs from the statutory rate of
      30% due to the fact that the Company, at this point in time, considers it
      more likely than not that the deferred tax asset related to net operating
      loss carryforwards will not be recognized. Accordingly, deferred tax
      assets at December 31, 2002 and 2003 have been reduced by a valuation
      allowance relating to the tax benefits attributable to net operating
      losses. Operating losses can be carried forward indefinitely in the United
      Kingdom. At December 31, 2003 the net operating loss carry forwards total
      $2,429,862.

      It has been assumed that any losses will be utilised against the first
      available profits at a tax rate of 30% but a tax rate of 19% may be used,
      if the small Company rate of tax is utilised.

7     SHORT TERM BORROWINGS

      On July 10, 2002, the Company borrowed $240,000 from an individual lender.
      The debt bears interest at 20% per year. The debt and all accrued interest
      was originally due on January 10, 2003. The debt has not been repaid and
      is due upon demand. Accordingly, the debt and all accrued interest
      totalling $332,786 is included in short term borrowings. The debt is
      collateralized by certain inventory of the company's subsidiary, Jusco UK
      Ltd.

      In November 2003, the company borrowed $250,000 from an individual lender.
      There are no terms for repayment and no interest has been charged to the
      company during the year. The company intends to convert this debt into
      shares of common stock during 2004.


                                      F-17

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

8     ADVANCES FROM FACTOR

      On January 13, 2003 the Company entered into an invoice factoring
      agreement with IFT London Ltd ("IFT"). Under the agreement, the Company
      specifically identifies receivables that it wants to receive advances on
      and submits them to IFT. Once IFT approves the receivables that are
      submitted, the Company receives 70% of the invoice amount. Customers are
      then instructed to pay IFT directly. When the customer pays the entire
      outstanding balance to IFT, the Company receives the remaining 30% of the
      invoice amount, less a financing charge equal to 8% of the total invoice
      amount. The Company no longer factors receivables through this agreement.

      On October 2, 2003 Cameo Collectables Limited entered into an invoice
      factoring agreement with Arbuthnot Commercial Finance Ltd ("ACF"). Under
      the agreement, the Company identifies receivables that it wants to factor
      and submits them to ACF. Once ACF approves the receivables that are
      submitted it purchases the receivables with recourse and invoices the
      customers direct. ACF pays 100% of the invoice amount to a current account
      on the collection date. Customers pay ACF directly.

      ACF's financing charge of 1.75% of the total invoice amount is debited to
      the current account. The Company is entitled to withdraw any credit
      balance on the current account representing cleared funds.

      The Company accounts for this arrangement in accordance with Statement of
      Financial Accounting Standard No. 140 "Accounting for Transfers and
      Servicing of Financial Assets and Extinguishments of Liabilities." Under
      the agreement any invoice not paid 6 months after the date on which it was
      due to be paid can be re-sold back to the Company. Accordingly, the
      Company records the advances received as a liability until the customer
      invoice is paid in full. In addition, the Company recognizes the interest
      charge in full at the time the initial advance is received. The assets of
      Cameo Collectables Limited are pledged as security to Arbuthnot Commercial
      Finance Limited.

9     CONVERTIBLE DEBENTURE

      Convertible debentures are comprised of the following as at December 31,
      2003:


                                                                    $
      12% convertible debentures issued in April 2003                   785,000
      Unamortized debt discount                                        (238,726)
                                                                    ------------
                                                                         546,274
      Assumption of debentures on reverse acquisition of Palladium       208,500
                                                                    ------------
      Balance at December 31, 2003                                       754,774
                                                                    ============


                                      F-18


<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

10    COMMITMENTS

      The Company leases buildings under non-cancellable operating leases.
      Future minimum lease payments under those leases are as follows at
      December 31, 2003.

      Year ending December 31, 2004                                        $   -
                                                                           =====

      Rent expense for all operating leases charged against earnings amounted to
      $90,470 in 2002 and $69,028 in 2003.

11    TRANSACTIONS WITH RELATED PARTIES

      The relationship between the Company and its related parties are:

      Wilfred and Paula Shorrocks are deemed to be related parties as they are
      directors of the following companies: Peak Entertainment Limited, Jusco UK
      Ltd, Jusco Toys Ltd, Wembley Sportsmaster Ltd and Cameo Collectables Ltd.
      They are directors and shareholders of Peak Entertainment Holdings, Inc.

      Terence Herzog and Michael Schenkein are deemed to be related parties as
      they are principals of Agora Capital Partners Inc, a management consulting
      company. They are directors of Peak Entertainment Holdings Inc. Terence
      Herzog is a shareholder of Peak Entertainment Holdings Inc.

      During the years ended December 31, 2002 and December 31, 2003 the Company
      had the following transactions with its related parties:

      a)    Wilfred and Paula Shorrocks

            i)    Movements on stockholders' advances account

                  Balance due by the Company at December 31, 2001      $ 21,761
                  Advances received                                     950,625
                  Cash repayments                                       (78,193)
                                                                       --------
                  Balance due by the Company December 31, 2002         $894,193
                  Cash repayments                                       (71,206)
                  Foreign exchange loss                                  93,647
                                                                       --------
                  Balance due by the Company December 31, 2003         $916,634
                                                                       ========

                  No interest has been charged to the Company during the period.

                  On March 24, 2004 the company signed a promissory note which
                  established a repayment schedule for the amounts advanced by
                  the stockholders. The amount advanced is to be repaid in
                  instalments of $25,000 and $100,000 until January 31, 2008
                  when any balance is to be repaid in full.

                  Interest will accrue commencing July 1, 2005 on any unpaid
                  balance, at 8% per annum.

                  The promissory note provides for earlier repayment of any
                  unpaid balance subject to various future financial results of
                  the Company.


                                      F-19

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003


11    TRANSACTIONS WITH RELATED PARTIES (CONTINUED)

            ii)   License agreements

                  On April 30, 2002 the Company entered into a license agreement
                  with Wilfred and Paula Shorrocks whereby the Company acquired
                  the exclusive rights to apply various intellectual properties
                  to the manufacture, distribution and sale of products on a
                  worldwide basis. Under the terms of the agreement the Company
                  has undertaken to pay to Wilfred and Paula Shorrocks a
                  guaranteed minimum royalties amount of US $1,000,000, with the
                  agreement treated for accounting purposes as due to expire on
                  December 31, 2023. On April 14, 2004, the company entered into
                  an amendment of the license agreement which established a
                  minimum quarterly royalty payment of $12,500 beginning
                  September 30, 2004. This liability is included in licence fees
                  payable and the related asset is included in intangible
                  assets.

                  On February 25, 2002, the Company entered into a license
                  agreement for rights to In My Pocket from Morrison
                  Entertainment Group, Inc., in which Wilfred and Paula
                  Shorrocks, were also parties. Pursuant to the agreement,
                  Wilfred and Paula Shorrocks are individually entitled to a
                  certain percentage of the revenues. The Company is entitled to
                  10% of the revenues from the United States, 35% of the
                  revenues from the United Kingdom, and 40% of the revenues from
                  other territories. Morrison Entertainment Group is entitled to
                  60% of the revenues from the United States, 32.5% of the
                  revenues from the United Kingdom, and 30% of the revenues from
                  other territories. The Shorrocks are entitled to 30% of the
                  revenues from the United States, 32.5% of the revenues from
                  the United Kingdom, and 32.5% of the revenues from other
                  territories. The revenue allocation refers to revenues from
                  character and merchandise licensing and sales activities, and
                  the allocation is to be adjusted for entertainment production
                  financing terms.

      b)    Terence Herzog and Michael Schenkein

            i)    Consulting Services

                  From March 2003 through March 2004, Agora Capital Partners
                  Inc, through Terence Herzog and Michael Schenkein, has
                  provided management consulting services to the Company. The
                  Company paid aggregate fees of $46,000 for such consulting
                  services in 2003.



                                      F-20


<PAGE>


PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

12    REVERSE ACQUISITION

      On April 22, 2003, Palladium Communications, Inc. ("Palladium") (a US
      public company) issued 19,071,684 shares of its common stock for all of
      the outstanding common stock of Peak Entertainment Holdings, Inc.
      Immediately prior to the transaction, Peak Entertainment Holdings, Inc
      authorized a stock split so that the outstanding shares of common stock
      were increased from 2 to 19,071,684. Immediately after the transaction,
      the shareholders of Peak Entertainment Holdings, Inc (Wilf and Paula
      Shorrocks) owned approximately 90% of the outstanding common stock of
      Palladium. This transaction has been accounted for as a reverse
      acquisition of a public shell. The accounting for a reverse acquisition
      with a public shell is considered to be a capital transaction rather than
      a business combination. That is, the transaction is equivalent to the
      issuance of common stock by Peak for the net monetary assets of Palladium,
      accompanied by a recapitalization. Palladium's net deficit has been
      recorded at carryover basis and no goodwill was generated in the
      transaction. The net deficit of Palladium, $208,500, at the time of
      transaction is included in stockholders' equity. The other side of this
      transaction is to add 208,500 in liabilities related to convertible
      debentures to the historical financial statements of Peak Entertainment
      Holdings Inc. The historical financial statements of the "registrant"
      become those of Peak Entertainment Holdings, Inc. Subsequent to the
      transaction, Palladium changed its name to Peak Entertainment Holdings,
      Inc.

13    STOCKHOLDERS' EQUITY

      Immediately following the reverse acquisition, the Company entered into an
      agreement for the issuance of up to $785,000 in convertible debentures and
      warrants to purchase 1,570,000 shares of the Company's common stock. The
      Company received $300,000 at the time of execution of the agreement for
      the issuance of the debentures and warrants and received the remainder of
      $250,000 on June 26, 2003 and $235,000 on July 11, 2003.

      The debentures bear interest at 12%, mature one year from the date of
      issuance and are convertible at the option of the holder at the lower of
      $1.00 or 50% off the average of the three lowest intra-day trading prices
      for the common stock on a principal market for the 20 trading days before
      but not including the conversion date. The warrants are exercisable for
      five years at $0.31 per share.


                                      F-21

<PAGE>


PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

13    STOCKHOLDERS' EQUITY (CONTINUED)

      The Company has recorded these debentures and warrants in accordance with
      the provisions of EITF 00-27 "Application of Issue 98-5 to Certain
      Convertible Instruments". Under the provision of EITF 00-27, the Company
      has allocated the total proceeds received between the convertible
      debentures and the warrants based on their relative fair value at the date
      of issuance. The Company then estimated the intrinsic value of the
      beneficial conversion feature resulting from the ability of the debenture
      holders to convert at a 50% discount. As a result, the Company has
      recorded a debt discount of $785,000. The debt discount will be amortized
      as interest expense over the life of the debentures, which is one year.

      On February 28, 2002, Palladium, the predecessor to Peak Entertainment
      Holdings, Inc entered into an agreement pursuant to which Palladium issued
      $208,500 in convertible debentures and issued warrants to purchase 645,000
      shares of the Company's common stock exercisable for five years at $0.31
      per share. These warrants are still outstanding as of December 31, 2003,
      and can be exercised to purchase shares of Peak Entertainment Holdings,
      Inc.

14    WARRANTS

      On July 24, 2003, pursuant to a consulting agreement with POW!
      Entertainment LLC and Stan Lee, the Company issued to POW warrants, to
      purchase 750,000 shares of the Company's common stock which are
      exercisable for five years at $0.35 per share in exchange for consulting
      services to be provided over a three year term. Warrants to purchase
      375,000 shares of common stock vested upon execution of the consulting
      agreement, and the remaining warrants to purchase 375,000 shares of common
      stock vest on July 24, 2004. After one year from issuance, POW has the
      right to demand registration of the shares of common stock underlying the
      warrant at the Company's expense.

      The warrants have been valued using the Black-Scholes Option Model. The
      value of the warrants that vest immediately was $390,000 on the date of
      grant. The value of these warrants has been recorded as deferred
      professional fees and will be amortized to earnings ratably over the three
      year service period.

      The value of the warrants that vest on July 24, 2004 are determined at the
      end of each reporting period. The company records the expense for each
      quarter based on the value of the warrants at the end of each reporting
      period. For the year ended December 31, 2003, the Company has recorded
      total expense of $30,137 related to these warrants.

      On July 15, 2003 pursuant to a consulting agreement with Mr Jack Kuessous,
      the Company issued to Mr Kuessous warrants to purchase 240,000 shares of
      the Company's common stock with an exercise price of $1.20 per share in
      exchange for consulting services over a one year period. The warrants
      vested immediately upon execution of the consulting agreement. The
      warrants have been valued using the Black-Scholes Option Model and had a
      value of $263,983 on the date of grant. The value of these options were
      initially recorded as a current asset and will be amortised to earnings
      ratably over the one year service period.


                                      F-22

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

14    WARRANTS (CONTINUED)

      On December 17, 2003 the exercise price of the warrants held by Mr.
      Kuessous were changed from $1.20 per share to $0.50 per share. The amount
      to be expensed over the remaining service period related to the $1.20
      warrants will be the remaining unamortized fair value of the $0.50
      warrants as of December 17, 2003, plus the amount by which the fair value
      of the $1.20 warrants valued as of December 17, 2003 is greater than the
      fair value of the $0.50 warrants immediately before the terms were
      modified. The Company used the Black-Scholes Option Model and determined
      that the value of the $0.50 warrants immediately prior to the conversion
      of the terms was essentially the same as the $1.20 warrants granted on
      December 17, 2003. Accordingly, the Company will continue to amortize the
      original value of $263,983 over the one year service period.

      In July 2003, Mr Kuessous advanced the Company $100,000. On December 17,
      2003, the company entered into a "Cancellation of Debt in Exchange for
      Securities Agreement", whereby Mr Kuessous cancelled the $100,000 owed to
      him by the Company in exchange for 583,333 shares of common stock of the
      company and 150,000 common stock purchase warrants with an exercise price
      of $0.50 per share. The warrants vested immediately and are exercisable
      over a three year period. The warrants have been valued using the
      Black-Scholes Option Model and had a value of $79,449 at the date of grant
      and the common stock had a value of $332,500 on the date of issuance. The
      total value of the common stock and warrants is $411,995 and was compared
      with the $100,000 carrying value of the advances, and results in an
      additional expense of $311,995, which is included in selling, general and
      administrative expenses.

15    SUBSEQUENT EVENTS

      On January 9, 2004, Peak Entertainment Limited entered into an "Agreement
      for the Provision of Co Production Services" with Cosgrove Hall Films Ltd.
      for the co-production of 52 episodes of an animated television program for
      children provisionally entitled "The Wumblers." The Company is providing
      the intellectual property, format and concept for the television episodes,
      and Cosgrove Hall Films will supply the production services. The costs of
      the production of the episodes to be incurred by the Company is projected
      to be approximately $3,000,000.

      On January 26, 2004 Peak Entertainment Holdings Inc entered into an
      agreement with POW! Entertainment LLC for the development and exploitation
      of the property "Tattoo - the Marked Man". The Company has the worldwide
      distribution and merchandising rights in perpetuity and is to fund the
      project development in the amount of $250,000. The parties are to share
      all profits received from the project, after deduction of expenses, and in
      addition, POW will be entitled any executive producer fees from theatrical
      and television releases.


                                      F-23

<PAGE>


PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

15    SUBSEQUENT EVENTS (CONTINUED)

      On January 5, 2004 the Company completed a "Settlement Agreement and
      Release" with former holders of 12% convertible debentures. Under the
      agreement, the Company exchanged $1,000,000 and 1,000,000 shares of
      unregistered common stock in return for the surrender of an aggregate of
      $208,500 principal amount of 12% convertible debentures and warrants to
      purchase 645,000 shares of common stock, issued pursuant to a "Securities
      Purchase Agreement" dated as of February 28, 2002, and an aggregate of
      $785,000 principal amount of 12% convertible debenture and warrants to
      purchase 1,570,000 shares of common stock, issued pursuant to a
      "Securities Purchase Agreement" dated as of April 22, 2003. The $1,000,000
      consisted of $500,000 paid on January 5, 2004 and $500,000 in promissory
      notes, which was subsequently paid on March 22, 2004. The agreement
      provides that, after a period of thirteen months from January 2004, all of
      the 1,000,000 shares of common stock still owned at that time by the
      former debenture holders may be put to the Company at a price $.75 per
      share, on an all-or-none basis, for a one month period. The Company also
      paid for $10,000 of the former debenture holders' legal fees and expenses
      in connection with the transaction.

      The Company will account for this transaction in accordance with EITF
      00-27 "Application of Issue 98-5 to Certain Convertible Instruments".
      Accordingly, the Company will first allocate the consideration paid based
      on the fair value of the warrants to be repurchased and the beneficial
      conversion features as of January 5, 2004. Any remaining consideration
      will be used to offset the carrying value of the convertible debentures
      and will result in a gain or loss on the extinguishment of the debt. The
      Company has determined that the fair value of the warrants to be
      repurchased and the beneficial conversion features at January 5, 2004
      exceed the total consideration to be paid of $1,580,000. Accordingly, the
      Company will be recording a gain on the extinguishment of the convertible
      debentures which is limited to their carrying value, which is $754,774.

      On January 5, 2004 the Company entered into "Securities Purchase
      Agreements" with four accredited investors. Pursuant to the agreements,
      the Company sold $1,500,000 in 8% convertible debentures due January 5,
      2007 and 3,000,000 common stock purchase warrants, exercisable for five
      years at $0.50 per share. The purchase price totalled $1,500,000, of which
      $750,000 was paid in cash, and $750,000 by promissory notes. The principal
      amount of the debentures, plus any accrued and unpaid interest on the
      debenture, may be converted into shares of common stock at the conversion
      price of $0.30 per share. The conversion price may be adjusted downward
      for issuances of securities by the Company at prices below the lower of
      $0.50 per common share, or fair market value for such securities as
      determined at the time of issuance. Annual interest payments on the
      debentures are due on January 7 of each year, commencing with January 7,
      2005. At the option of the Company, interest payments may be accrued
      beyond the annual interest payment date, in which event the debenture
      holder shall have the option to accrue the interest payment then due for
      another interest payment period, or cause the Company to issue common
      stock in exchange for interest. Unless upon 75 days prior written notice,
      the debenture and warrant holder may not convert the debentures or
      warrants for shares of common stock to the extent that such conversion
      would cause it to beneficially own 4.9% or more of our then issued and
      outstanding common stock. After the tenth consecutive business day in
      which the common stock trades at $3.00 or greater, the warrants become
      redeemable at $0.10 per warrant.


                                      F-24

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

15    SUBSEQUENT EVENTS (CONTINUED)

      The warrants have been valued using the Black-Scholes Option Model at a
      value of $1,649,901 at the date of grant. A discount of the full amount of
      the debt will be recorded and amortized over the life of the debt of
      approximately 3 years. The $750,000 received on January 5, 2004 has been
      recognized at that date; the remaining $750,000 will be recognized when it
      is received, on registration of the underlying shares.

      On January 23, 2004, the Company entered into an agreement for services to
      be provided over twelve months with Vintage Filings, LLC. It issued
      300,000 common stock purchase warrants, which vested immediately and are
      exercisable for three years at $0.50 per share pursuant to the agreement.
      The warrants have been valued using the Black-Scholes Option Limited
      Pricing Model and have a value of $224,988 at the date of grant. The value
      of the warrants will be recorded as additional selling, general and
      administrative expenses ratably over the twelve month service period.

      On January 29,  2004,  the Company  entered  into a  "Securities  Purchase
      Agreement" with Shai Stern.  Pursuant to the agreement,  it issued $50,000
      in 8% convertible debentures due January 29, 2007 and 100,000 common stock
      purchase  warrants.  The  principal  amount  of the  debentures,  plus any
      accrued  and unpaid  interest on the  debentures,  may be  converted  into
      shares of common stock at the conversion price of $0.30 per share.  Annual
      interest  payments  on the  debenture  are due on January 29 of each year,
      commencing  with January 29, 2005.  At the option of the Company  interest
      payments may be accrued beyond the annual interest  payment date, in which
      event the  debenture  holder  shall have the option to accrue the interest
      payment then due for another interest payment period, or cause the Company
      to  issue  common  stock  in  exchange  for  interest.  The  warrants  are
      exercisable for three years at a price of $0.50 per share. After the tenth
      consecutive  business  day in which the  common  stock  trades at $3.00 or
      greater, the warrants become redeemable at $0.10 per warrant. The warrants
      have been valued using the  Black-Scholes  Option Pricing Model and have a
      value of $51,997  at the date of grant.  The  Company  will  record  these
      debentures  and warrants in accordance  with the  provisions of EITF 00-27
      "Application of Issue 98-5 to Certain Convertible  Instrument".  Under the
      provisions  of EITF 00-27,  the Company will  allocate the total  proceeds
      received  between the  convertible  debentures  and the warrants  based on
      their  relative fair value at the date of issuance.  The Company will then
      estimate the intrinsic  value of the beneficial  conversion  feature.  The
      Company has determined that intrinsic  value of the beneficial  conversion
      feature  exceeds the face value of the debt and  accordingly,  the Company
      will record a debt discount of 50,000. The debt discount will be amortized
      as interest expense over the life of the debentures, which is three years.

      On February 11, 2004 the Company entered into a financial advisor
      agreement with Ameristar International Capital, Inc. It issued 100,000
      shares of common stock as an initial equity fee pursuant to the agreement.
      These shares had a fair value of $43,000 at the date of grant. The Company
      will record the value of the common stock as an expense, as there is no
      continuing benefit.


                                      F-25

<PAGE>

PEAK ENTERTAINMENT HOLDINGS, INC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2002 AND DECEMBER 31, 2003

15    SUBSEQUENT EVENTS (CONTINUED)

      In 2003, the Company entered into an agreement with William Ivers in
      connection with business consulting services, relating to the preparation
      of a written business plan rendered by Mr Ivers. In exchange for these
      services, the Company agreed to pay $19,012 in cash and issue 16,667
      shares of common stock at a future date. On February 12, 2004 the
      Companies issued 16,667 shares of common stock to Mr Ivers at a value of
      $8,333 at the date of grant. Accordingly, the Company has expensed the
      value of the shares at December 31, 2003 and recorded a corresponding
      liability.

      In 2003, the Company entered into an agreement with Lou Schneider in
      connection with business consulting services, related to establishing
      potential apparel-related licensing relationships with third parties,
      rendered by Mr Schneider. In exchange for these services, the company
      agreed to issue 20,000 shares of common stock at a future date. On
      February 12, 2004 the company issued 20,000 shares of common stock to Mr
      Schneider at a value of $10,000 at the date of grant. Accordingly the
      Company has expensed the value of the shares at December 31, 2003 and
      recorded a corresponding liability.

      In 2003 the Company entered into an agreement with Rolin Inc to provide
      financial advisory services in exchange for common stock of the Company.
      On February 12, 2004, the Company issued an aggregate of 20,409 shares of
      common stock to Rolin Inc. These shares had a fair value of $10,204 at the
      date of grant. The Company will record the transaction as professional
      fees to be expensed in 2004.

      On March 10, 2004, the Company entered into "Securities Purchase
      Agreements" with eleven accredited investors. Pursuant to the agreements,
      the Company sold an aggregate of 1,000,000 shares of common stock and
      600,000 common stock purchase warrants, exercisable for three years at
      $0.75 per share, for a total purchase price of $500,000.

      Legend Merchant Group, Inc acted as the placement agent for the above
      transaction. All of the purchasers were pre-existing customers of Legend
      Merchant Group. The Company paid Legend a fee of $25,000, and 100,000
      common stock purchase warrants exercisable for three years at $.50 per
      share and 60,000 common stock purchase warrants exercisable for three
      years at $0.75 per share, for its services. The warrants have been valued
      using the Black-Scholes Option Pricing Model and have a value of $92,794
      at the date of grant. The total fee of $117,744 will be offset against the
      proceeds of the offering.


                                      F-26

<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

Palladium Communications (former business)

In January 2002, our board of directors determined it would be in our best
interest to change auditors and the board recommended and approved such action.
On January 31, 2002 we engaged Chisholm & Associates, Certified Public
Accountants, as our new independent auditors. On February 4, 2002, McCauley
Nicolas & Company, LLC, Certified Public Accountants, resigned as our
independent auditors. We engaged McCauley Nicolas & Company, LLC on November 1,
2001 and it reviewed our unaudited financials statements for the quarter ended
September 30, 2001. McCauley Nicolas & Company, LLC did not provide a report
related to our audited financials. From November 1, 2001 through February 4,
2002, there were no disagreements or reportable events with McCauley Nicolas &
Company, LLC on any matter regarding accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.

Chisholm & Associates had served as our independent auditors from August of 2000
through November 1, 2001 and it had audited our financials statements for the
fiscal years ended June 30, 2001, 2000, and 1999. During the interim period from
November 1, 2001 through January 31, 2002, we did not consult with Chisholm &
Associates regarding the application of accounting principles to a specified
transaction, either completed or proposed, or the type of audit opinion that
might be rendered on our financial statements, and neither a written report was
provided to us nor oral advice was provided that Chisholm & Associates concluded
was an important factor considered by us in reaching a decision as to an
accounting, auditing or financial reporting issue. Nor did we consult with
Chisholm & Associates as to any matter that was either the subject of a
disagreement or a reportable event with McCauley Nicolas & Company, LLC during
the interim period from November 1, 2001 through January 31, 2002.

Peak Entertainment Holdings, Inc. (current business)

On June 5, 2003, Peak Entertainment Holdings, Inc., a Nevada corporation (the
"Company"), notified Chisholm & Associates ("Chisholm"), its independent public
accountants, that the Company was terminating its services, effective as of that
date. The Company's Board of Directors approved such decision.

Chisholm's opinion in its report on the Company's financial statements for the
year ended June 30, 2002 (prior to the Company's merger with Peak Entertainment
Holdings Ltd.), expressed substantial doubt with respect to the Company's
ability, at that time, to continue as a going concern. During the year ended
June 30, 2002 and for the six months ended June 30, 2001 and 2000, and the years
ended December 31, 2000 and 1999, Chisholm did not issue any other report on the
financial statements of the Company which contained any adverse opinion or
disclaimer of opinion, or was qualified or modified as to uncertainty, audit
scope or accounting principles, except as to going concern issues. Furthermore,
during such period there were no disagreements with Chisholm within the meaning
of Instruction 4 to Item 304 of Regulation S-B under the Securities Exchange Act
of 1934 on any matter of accounting principles or practices, financial statement
disclosure, or auditing scope or procedure, which disagreements, if not resolved
to the satisfaction of Chisholm, would have caused them to make reference in
connection with their opinion to the subject matter of the disagreement in
connection with any report they might have issued.

On June 5, 2003, the Company engaged Goodband Viner Taylor, as its independent
public accountants. The Company did not previously consult with Goodband Viner
Taylor regarding any matter, including but not limited to:

            o     the application of accounting principles to a specified
                  transaction, either completed or proposed; or the type of
                  audit opinion that might be rendered on the Company's
                  financial statements; or

            o     any matter that was either the subject matter of a
                  disagreement (as defined in Item 304(a)(1)(iv) of Regulation
                  S-B and the related instructions) or a reportable event (as
                  defined in Item 304(a)(1)(v) of Regulation S-B).


                                       31
<PAGE>

ITEM 8A.  CONTROLS AND PROCEDURES

Based on a recent evaluation, as of the end of the period covered by this Annual
Report on Form 10-KSB, our Chief Executive Officer and Principal Financial
Officer have concluded that our disclosure controls and procedures (as defined
in the Exchange Act Rules 13a-15(e) and 15d-15(e)) are effective in timely
alerting them to material information relating to the Company (including its
consolidated subsidiaries) required to be included in periodic reports filed or
submitted under the Securities Exchange Act of 1934.

There were no changes in our internal control over financial reporting that
occurred during our last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.


                                       32
<PAGE>

                                    PART III

ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
           COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

OUR MANAGEMENT

The persons listed in the table below are our present directors and executive
officers.

Name                        Age        Position
----                        ---        --------
Wilfred Shorrocks           54         Chairman, Chief Executive Officer
                                       and Director
Paula Shorrocks             51         Vice President - Design and Development,
                                       and Director
Phil Ogden                  36         Vice President - Sales and Marketing, and
                                       Director
Alan Shorrocks              43         Vice President - Licensing Division
Nicola Yeomans              33         Vice President - Finance
Terence Herzog              60         Director
Michael Schenkein           52         Director

Directors are elected to serve until the next annual meeting of stockholders and
until their successors are elected and qualified. Currently there are five seats
on our board of directors.

Directors serve without cash compensation and without other fixed remuneration.
Officers are elected by the Board of Directors and serve until their successors
are appointed by the Board of Directors. Biographical resumes of each officer
and director are set forth below.

MANAGEMENT PROFILE

WILFRED SHORROCKS, CHAIRMAN AND CHIEF EXECUTIVE OFFICER

Mr. Shorrocks, founded Peak Entertainment Ltd. in November 2001 and he became
Chairman, Chief Executive Officer and a director of Peak Entertainment Holdings,
Inc. in April 2003. Prior to that, Mr. Shorrocks was co-founder of Just Group,
Plc., where he acted as its Chief Executive Officer from 1987 to 2001. At Just
Group, Mr. Shorrocks was responsible for all areas of activity relating to
development and creation of concepts through to intellectual property
acquisition, corporate acquisition, and financing activities. In January 2002,
about five months subsequent to his departure from Just Group, Just Group
entered into administration, a process similar to the Chapter 11 bankruptcy
process. In 1980, he founded Acamas Toys, a developer of toys, and he sold his
ownership of Acamas Toys in 1987. From 1973 to 1980, Mr. Shorrocks worked in
sales at, what was at that time, the world's largest toy maker, Dunbee Combex
Marx, makers of Sindy dolls and Hornby railways, and he became Sales & Marketing
Director for the Burbank sales division of Dunbee Combex Marx. He is the spouse
of Paula Shorrocks, and the brother of Alan Shorrocks.

PAULA SHORROCKS, VICE PRESIDENT - DESIGN AND DEVELOPMENT, AND DIRECTOR

Ms. Shorrocks, co-founded Peak Entertainment Ltd. in November 2001 and she
became Vice President and a director of Peak Entertainment Holdings, Inc. in
April 2003. Prior to that, Ms. Shorrocks was co-founder of Just Group, Plc.,
where she acted as its Commercial Director from 1987 to 2001. At Just Group, Ms.
Shorrocks identified opportunities and then secured rights to represent blue
chip companies as licensing agent for their brands. In January 2002, about five
months subsequent to her departure from Just Group, Just Group entered into
administration, a process similar to the Chapter 11 bankruptcy process. Before
co-founding Just Group, Ms. Shorrocks taught Business Studies at The Harwich
School, Essex and West Gloucester College of Further Education (1978-1987). She
also was the Marketing Manager for Acamas Toys. She is the spouse of Wilfred
Shorrocks.


                                       33
<PAGE>

PHIL OGDEN, VICE PRESIDENT - SALES AND MARKETING, AND DIRECTOR

Mr. Ogden, joined Peak Entertainment Ltd. in November 2001 and he became Vice
President and a director of Peak Entertainment Holdings, Inc. in April 2003.
From October 1998 to October 2001, Mr. Ogden served as Sales and Marketing
Director, in a non-executive capacity, at Just Group Plc. Prior to working at
Just Group, Mr. Ogden developed his sales and marketing experience with Seymour
International, a division of UK's leading magazine distributor, Frontline, from
1989 to 1998. Mr. Ogden was employed as an Account Director with the
responsibility for the strategic and commercial success of a portfolio of
Seymour's premier clients including Dennis, Paragon, FT Magazines (Investors
Chronicle) and TimeWarner.

ALAN SHORROCKS, VICE PRESIDENT - LICENSING DIVISION

Mr. Shorrocks, has been Vice President - Licensing Division of Peak
Entertainment Ltd. since November 2001 and he became Vice President of Peak
Entertainment Holdings, Inc. in April 2003. Prior to that time, Mr. Shorrocks
was Licensing Director, in a non-executive capacity, of Just Group Plc. from
1991 through October 2001. Before joining Just Group, Mr. Shorrocks ran his own
companies specializing in the leisure and surfing markets and was exclusive
United Kingdom importer/ distributor for various branded merchandise including
Quicksilver from the early 1980's. He sold his company Victory along with the
United Kingdom rights to market Victor Wetsuits in 1991. He is the brother of
Wilf Shorrocks.

NICOLA YEOMANS, VICE PRESIDENT - FINANCE

Ms. Yeomans joined Peak Entertainment in June 2002 as company accountant. She
became Vice President - Finance of Peak Entertainment Holdings Inc. in January
2004 and serves as the principal person in charge of accounting and financials.
Prior to that time, she was an accountant, in a non-executive capacity, for Just
Group Plc from July 1997 to December 2001. Before joining Just Group Plc, Ms.
Yeomans trained as an accountant for the entertainment arm of the BBC (British
Broadcasting Corporation) at their London headquarters. She qualified as a
Certified Chartered Accountant (A.C.C.A) in October 1998. She is currently
studying towards a Masters Degree (M.B.A) in international business studies and
corporate finance.

TERENCE HERZOG, DIRECTOR

Mr. Herzog has been a director of Peak Entertainment Ltd. since February 2003
and he became a director of Peak Entertainment Holdings, Inc. in April 2003. In
June 2000, Mr. Herzog co-founded and is Managing Director of Agora Capital
Partners, Inc. For a number of years ending in 2000, Mr. Herzog served as a
consultant to executive management for various private and public entities
advising on mergers and acquisitions, corporate development and financing.

MICHAEL SCHENKEIN, DIRECTOR

Mr. Schenkein has been a Director of Peak Entertainment Ltd. since February 2003
and he became a director of Peak Entertainment Holdings, Inc. in April 2003. Mr.
Schenkein co-founded and is Managing Director of Agora Capital Partners, Inc.,
formed in June 2000. Prior to that time, Mr. Schenkein had founded M.S.
Editorial in 1978, where he was Chief Executive Officer of that postproduction
film/video company and its successor Big Picture Editorial, until 1995. From
1995 to 2000, Mr. Schenkein was Senior Executive Vice President for Cabanna
Inc., the successor to Big Picture. From 2000 on, Mr. Schenkein served as a
consultant to executive management for various private and public entities
advising on mergers and acquisitions, corporate development and financing.


                                       34
<PAGE>

BOARD COMMITTEES AND MEETINGS

During the fiscal year that ended on December 31, 2003, the Board of Directors
held one meeting, attended or participated in by all of the directors. Other
matters were undertaken by written consent by the Board of Directors.

The Board of Directors is responsible for matters typically performed by an
audit committee. We do not have a separate audit committee, nor any other
committee, of the Board of Directors. No person serving on our Board of
Directors qualifies as a financial expert. We seek to attract persons with
financial experience to serve on our Board of Directors and we intend to form an
audit committee of the Board of Directors during our fiscal year 2004.

We have not yet adopted a code of ethics applicable to our directors, officers
and employees. However, we expect to adopt a code of ethics during our fiscal
year 2004.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires Peak's directors
and executive officers, and persons who own more than ten percent of Peak's
common stock, to file with the SEC initial reports of beneficial ownership and
reports of changes in beneficial ownership of Peak's common stock. Such persons
are also required by SEC regulations to furnish Peak with copies of all such
Section 16(a) forms they file. Based solely on a review of the copies of such
reports furnished to Peak, Peak is not aware of any material delinquencies in
the filing of such reports.


ITEM 10.      EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

The following tables set forth certain information regarding our Chief Executive
Officer and each of our most highly compensated executive officers whose total
annual salary and bonus for the past three fiscal years exceeded $100,000:

                                                                     Fiscal
Name and Principal Position        Year     Salary       Bonus     Other (1)
---------------------------        ----     ------       -----     ---------

Wilfred Shorrocks,(2)              2003     $ 7,556        $0        $   0
  Chief Executive Officer          2002       5,200         0           00
Raymond C. Dauenhauer, Jr.         2002      58,900         0       63,937
   (former President and CEO)      2001      46,400         0       37,705
                                   2000       4,241         0       37,316

(1)   Includes management fees, commissions and directors' fees. Does not
      include repayment of advances made by the executive to us.

(2)   The Company intends to enter into an employment agreement with Mr.
      Shorrocks and other executive officers during its 2004 fiscal year.

STOCK OPTION PLAN

During our fiscal year 2004, we intend to adopt and implement, subject to
shareholder approval, an employee stock incentive plan, whereby we may issue
shares of common stock and stock options to our employees and consultants. We
intend for the plan to cover the issuance of an amount equal to up to 10% of our
outstanding shares of common stock.


                                       35
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth, as of December 31, 2003, the shares of our common
stock beneficially owned by

      o     by each person who is known by us to beneficially own more than 5%
            of our common stock;

      o     by each of our officers and directors; and

      o     by all of our officers and directors as a group.

This information was determined in accordance with Rule 13(d)-3 under the
Securities Exchange Act of 1934, and is based upon the information provided by
the persons listed below.

All persons named in the table have the sole voting and dispositive power with
respect to common stock beneficially owned. Beneficial ownership of shares of
common stock that are acquirable within 60 days upon the exercise or conversion
of stock options, warrants, or other convertible securities are listed
separately. For each person named in the table, the calculation of percent of
class gives effect to those acquirable shares.

The address of each of the persons named in the table is c/o Peak Entertainment,
Ltd. Bagshaw; Hall, Bagshaw Hill, Bakewell, Derbyshire, UK DE45 1DL.

<TABLE>
<CAPTION>
---------------------------------------- ----------------------- ----------------------------- ----------------
Name and Address                           Amount and Nature          Additional Shares            Percent
of Beneficial Owner                       of Beneficial Owner     Acquirable Within 60 days       Of Class
---------------------------------------- ----------------------- ----------------------------- ----------------
<S>                                                  <C>                                    <C>          <C>
Wilfred Shorrocks  (1)(2)                             8,361,899                             0            38.4%
Paula Shorrocks  (1)(2)                               8,361,899                             0            38.4%
Phil Ogden                                              476,792                             0             2.2%
Alan Shorrocks (2)                                      476,792                             0             2.2%
Nicola Yeomans (3)                                            0                             0             0%
Terence Herzog (4)                                      565,085                             0             2.6%
Michael Schenkein                                             0                             0
---------------------------------------- ----------------------- ----------------------------- ----------------
All officers and directors as a group                18,242,267                             0            83.8%
(7 persons)
---------------------------------------- ----------------------- ----------------------------- ----------------
</TABLE>

(1)   For purposes of reporting beneficial ownership in the table, the ownership
      of shares of common stock by Wilfred and Paula Shorrocks are listed
      separately. Wilfred and Paula Shorrocks are each other's spouse.
      Accordingly, each may be deemed the beneficial owner of the shares held by
      the other.

(2)   Alan Shorrocks is the brother of Wilfred Shorrocks. Alan Shorrocks
      disclaims beneficial ownership of shares held by Wilfred and Paula
      Shorrocks. Each of Wilfred and Paula Shorrocks disclaims beneficial
      ownership of shares held by Alan Shorrocks.

(3)   Nicola Yeomans became an officer in January 2004.

(4)   All of Mr. Herzog's shares are owned by WMB Corporation, of which Mr.
      Herzog is the sole owner.

CHANGES IN CONTROL

We do not have any arrangements that may result in a change in control.


                                       36
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

From time to time, Mr. and Mrs. Shorrocks loaned money to the Company to fund
day-to-day operations, as well as for the acquisition of certain properties.
Since inception through December 31, 2002, the Shorrocks loaned to Peak
Entertainment an aggregate of $972,386, and we repaid $78,193 to the Shorrocks
in 2002 and $71,206 in 2003. As of December 31, 2003, the Shorrocks are owed
$916,634. These monies were loaned without interest and did not have a due date,
and were due on demand. In March 2004, we gave the Shorrocks a promissory note
for the monies due establishing a repayment schedule. The amount due is to be
repaid in installments, consisting of six periodic payments of $25,000 from
January 31, 2005 through September 30, 2006, two payments of $100,000 on March
31, 2007 and September 30, 2007, and the balance due on January 31, 2008. The
promissory note provides for earlier repayment of any unpaid balance subject to
various future financial results of the Company, such as the Company obtaining a
shareholders' equity exceeds 150% of the amount due, or positive net income from
operations in excess of 150% of the amount due.

On February 25, 2002, we entered into a license agreement for rights to In My
Pocket from Morrison Entertainment Group, Inc., in which Wilf and Paula
Shorrocks, were also parties. Pursuant to the agreement, Wilf and Paula
Shorrocks are individually entitled to a certain percentage of the revenues. We
are entitled to 10% of the revenues from the United States, 35% of the revenues
from the United Kingdom, and 40% of the revenues from other territories.
Morrison Entertainment Group is entitled to 60% of the revenues from the United
States, 32.5% of the revenues from the United Kingdom, and 30% of the revenues
from other territories. The Shorrocks are entitled to 30% of the revenues from
the United States, 32.5% of the revenues from the United Kingdom, and 32.5% of
the revenues from other territories. The revenue allocation refers to revenues
from character and merchandise licensing and sales activities, and the
allocation is to be adjusted for entertainment production financing terms.

On April 30, 2002, we entered into a license agreement with Wilfred and Paula
Shorrocks whereby we acquired from the Shorrocks the exclusive rights to apply
various intellectual properties to the manufacture, distribution and sale of
products on a worldwide basis. Under the terms of the agreement, we undertook to
pay to Wilfred and Paula Shorrocks 10% of the royalties in perpetuity, with a
guaranteed minimum royalties amount of $1,000,000. There were no set payment
terms in the license agreement. In April 2004, the Company amended the license
agreement to establish a minimum quarterly royalty payment of $12,500 due
beginning September 30, 2004.

On April 22, 2003, Peak Entertainment Ltd., together with its subsidiaries, was
acquired by Palladium Communications, Inc., a Nevada corporation, which
subsequently changed its name to Peak Entertainment Holdings, Inc. Under the
terms of the agreement, we acquired 100 percent of Peak Entertainment Ltd.'s
stock in exchange for the issuance by us of 19,071,684 shares of our common
stock to the holders of Peak Entertainment Ltd. The new shares constituted 90
percent of the outstanding shares of Peak Entertainment Holdings, Inc. after the
acquisition. Officers and directors who received shares pursuant to the
acquisition are:

            o     Wilfred Shorrocks, 8,486,899 shares;

            o     Paula Shorrocks, 8,486,899 shares;

            o     Phil Ogden, 476,792 shares;

            o     Alan Shorrocks, 476,792 shares; and

            o     Terence Herzog, 743,585 shares.

On October 3, 2003, each of Wilf and Paula Shorrocks gifted 125,000 shares to
Cary Fields.

On October 6, 2003, Terence Herzog gifted an aggregate of 178,500 shares to six
persons, none of whom are affiliates of the Company.

The outside directors of the Company, Terence Herzog and Michael Schenkein, are
principals of Agora Capital Partners, Inc., a management consulting company.
From March 2003 through March 2004, Agora Capital Partners, through Terence
Herzog and Michael Schenkein, has provided management consulting services to the
Company. The Company paid aggregate fees of $46,000 in 2003 for such consulting
services.


                                       37
<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

EXHIBITS

Exhibits required to be filed by Item 601 of Regulation S-B are included in
Exhibits to this Report as follows:

Exhibit No.     Description
-----------     -----------
3.1*            Restated Bylaws

10.1*           Financial Advisor Agreement with Ameristar International
                Capital, Inc.

10.2*           Form of Securities Purchase Agreement, dated as of March 3, 2004

10.3*           Stock Purchase Warrant Agreement issued to Legend Merchant Group
                in connection with Securities Purchase Agreement, dated as of
                March 3, 2004

10.4*           Financial Advisor Agreement with Source Capital Group, Inc.

10.5*           License Agreement with Toontastic Publishing Ltd., Renewal

10.6*           Promissory Note to Shorrocks

10.7*           Amendment to Shorrocks License Agreement

11*             Statement Concerning Computation of Per Share Earnings is hereby
                incorporated by reference to "Financial Statements" of Part II -
                Item 7, contained in this Form 10-KSB.

21*             List of Subsidiaries

31.1*           Certification of Chief Executive Officer Pursuant to Securities
                Exchange Act Rule 13a-14(a)/15d-14(a)

31.2*           Certification of Principal Financial Officer Pursuant to
                Securities Exchange Act Rule 13a-14(a)/15d-14(a)

32.1*           Certification of Chief Executive Officer Pursuant to Securities
                Exchange Act Rule 13a-14(b) and 18 U.S.C. Section 1350

32.2*           Certification of Principal Financial Officer Pursuant to
                Securities Exchange Act Rule 13a-14(b) and 18 U.S.C. Section
                1350

----------
*     Filed herewith.


REPORT ON FORM 8-K

On January 12, 2004, the Company filed a report on Form 8-K, dated, January 9,
2004, reporting under Item 5, the repurchase from former debenture holders of an
aggregate of $1,000,000 in 12% convertible debentures due April 2004 and
2,215,000 common stock purchase warrants, which were issued pursuant to
Securities Purchase Agreements dated as of February 28, 2002 and April 22, 2003.
The repurchased convertible debentures were convertible into shares of the
Company's common stock at the lower of $1.00 or a 50% discount to the trading
price of the common stock prior to the conversion. The repurchased warrants were
exercisable at $0.31 per share.

On January 12, 2004, the Company filed a report on Form 8-K, dated, January 12,
2004, reporting under Item 5, the private placement sales to accredited
investors of $1,500,000 in 8% convertible debentures due January 5, 2007 and
3,000,000 common stock purchase warrants. The convertible debentures are
convertible into shares of the Company's common stock at $0.30 per share. The
warrants are exercisable for three years at $0.50 per share.


                                       38
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

Fees for audit services provided by our principal accountant during the years
ended December 31, 2002 and 2003 were $64,396 and $250,848, respectively. Audit
services consisted primarily of the annual audits, review of our financial
statements, and services that are normally provided by our accountants in
connection with statutory and regulatory filings or engagements for those fiscal
years.

AUDIT-RELATED FEES

There were no fees billed for services reasonably related to the performance of
the audit or review of our financial statements outside of those fees disclosed
above under the caption Audit Fees for fiscal years 2002 and 2003.

TAX FEES

Fees for tax services provided by our principal accountant during the years
ended December 31, 2002 and 2003 were $0 and $5,397, respectively. Tax services
related primarily to the preparation of company tax filings with regulatory
agencies.

ALL OTHER FEES

There were no other fees billed for services.

AUDIT COMMITTEE PROCEDURE

The Board of Directors is responsible for matters typically performed by an
audit committee. We do not have a separate audit committee of the Board of
Directors. The Board of Directors considered whether, and determined that, the
auditor's provision of non-audit services was compatible with maintaining the
auditor's independence. All of the services described above for fiscal years
ended 2002 and 2003 were approved by the Board of Directors. We intend to
continue using its principal accountant, goodband viner taylor, solely for audit
and audit- related services, tax consultation and tax compliance services, and,
as needed, for due diligence in acquisitions and similar transactions.

PRE-APPROVAL POLICIES AND PROCEDURES

The Board of Directors approved all of the services described above, and all
fees paid. The Board of Directors did not have pre-approval policies and
procedures in place during our fiscal years ended 2002 and 2003. In fiscal year
2004, we intend to implement a policy whereby, we will, prior to engaging our
accountants to perform a particular service, obtain an estimate for the service
to be performed and begin pre-approving all services.


                                       39
<PAGE>

                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                            PEAK ENTERTAINMENT HOLDINGS, INC.

                                            By:  /s/ WILFRED SHORROCKS
                                                 -------------------------------
                                            Wilfred Shorrocks,
                                            Chairman and Chief Executive Officer

                                            Dated:  April 27, 2004


      In accordance with the Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
indicated:

<TABLE>
<CAPTION>
SIGNATURE                                    TITLE                                  DATE

<S>                        <C>                                                  <C>
/s/ WILFRED SHORROCKS      President, Chairman, and Chief Executive Officer     April 27, 2004
---------------------      (Principal Executive Officer)
Wilfred Shorrocks


/s/ PAULA SHORROCKS        Vice President and Director                          April 27, 2004
---------------------
Paula Shorrocks


/s/ PHIL OGDEN             Vice President and Director                          April 27, 2004
---------------------
Phil Ogden


/s/ ALAN SHORROCKS         Vice President                                       April 27, 2004
---------------------
Alan Shorrocks


/s/ Nicola Yeomans         Vice President                                       April 27, 2004
---------------------
Nicola Yeomans             Principal Accounting Officer)
</TABLE>


                                       40