<PAGE>   1
Commission File No. 000-29369

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549

                                   FORM 10-KSB

     [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                  For the Fiscal Year Ended: December 31, 2000

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

                     For the Transition Period From __ to __

                       CREATIVE TECHNOLOGIES HOLDINGS INC.
                 ----------------------------------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)

                Nevada                                88-0409146
   -------------------------------               -------------------
   (State or other jurisdiction of                 (I.R.S. Employer
    incorporation or organization)               Identification No.)

1800 Avenue of the Stars, Suite 600
      Los Angeles, California                            90067
---------------------------------------                ---------
(Address of principal executive offices)               (Zip code)

Issuer's telephone number: (310) 407-5175

Securities to be registered pursuant to Section 12(b) of the Act:
                                                                            none
Securities to be registered pursuant to Section 12(g) of the Act:

                               $.001 Common Stock
                               ------------------
                                (Title of Class)

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

         Check if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part II of this Form 10-K or any amendments to this
Form 10-K. [X]

         As of December 31, 2000, there were 12,600,000 shares of the
Registrant's Common Stock, $.001 par value, outstanding.

         The aggregate market value of shares of Common Stock held by
non-affiliates of the Registrant is $-0-.

         State the Registrant's revenues for the December 31, 2000
fiscal year: $-0-.


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                                TABLE OF CONTENTS

                                                                            Page


Item 1.   Description of Business

Item 2.   Description of Property

Item 3.   Legal Proceedings

Item 4.   Submission of Matter to Vote of
          Security Holders

Item 5.   Market for Common Registrant Equity and
          Related Stockholder Matter

Item 6.   Management's Discussion and Analysis
          or Plan of Operation

Item 7.   Financial Statements

Item 8.   Changes in and Disagreements with
          Accountants on Accounting and Financial
          Disclosure

Item 9.   Directors, Executive Officers, Promoters
          and Control Persons; Compliance with
          Section 16(a) of the Exchange Act

Item 10.  Executive Compensation

Item 11.  Security Ownership of Certain
          Beneficial Owners and Management

Item 12.  Certain Relationships and
          Related Transactions

Item 13.  Exhibits and Reports on Form 8-K

          Signature


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Item 1.           Description of Business.
                  -----------------------

Generally.

                  Creative Technologies Holdings Inc. was incorporated under the
laws of the State of Nevada on December 6, 1996 under the name of Morning
Splendor Management, Inc. On November 2, 2000, the Company changed its name from
Morning Splendor Management, Inc. to Creative Technologies Holdings Inc. The
Company has a wholly-owned subsidiary known as Creative Technology & Interactive
Entertainment Group, Inc. which owns 70% of Creative Technology & Entertainment,
Inc., a Nevada corporation. The Company is "branding" an interactive gaming
solutions group, to be known as InnerG. InnerG is engaged in the development of
entertainment solutions for a variety of consumer marketing segments. The
Company is engaged in the development of Internet-based interactive
entertainment software to create online casinos, sports betting, sports pools,
bingo and wagering products.

InnerG.

                  By leveraging the broadband, multimedia, streaming video and
wireless technology, the Company believes that it will be in a position to
deliver the marketable interactive entertainment properties. With InnerG's
unique consumer profile capturing mechanism, InnerG will introduce interactive
products and services designed to heighten specifically targeted consumer market
segments whose lifestyle interests and passions may have not been satisfied from
any other product or service.

                  InnerG's initial product entries will be to create and deliver
a new gaming experience targeted specifically to the "aspiring wealthy" and
"wealthy" international consumer segments. The Company recognizes a significant
opportunity to capture a sizable share of the gaming industry with the
development of a business-to-business (B2B) strategy to license specific InnerG
proprietary gaming solutions to brick and mortar establishments and to high net
worth individuals interested in entering the gaming industry with their own
portal.

                  The Company intends to deliver InnerG's first product in the
second quarter of calendar year 2001. The Company expects to have InnerG's first
B2B licensed product and service with its first business development target,
being the European and Asian casino operators. The InnerG license will offer an
attractive online gaming experience that will satisfy the casinos' demand for a
highly attractive and entertaining gaming product for their offline patrons
going online. InnerG's software product will only be available to those
targeting the markets where online gaming is legal.


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Strategies and Objectives.

                  The Company has a two-pronged business strategy to position
InnerG and its branded product(s) (See Regulation, page 10) as a gaming industry
leader:

                  (a)      The first strategy is based on the smart
                           utilization of consumer demographic profiling to
                           enhance the online gaming experience that clearly
                           satisfies the consumer's 'needs' and 'wants.' This
                           also will include, but will not be limited to,
                           capturing quality market research and consumer
                           user habits to delineate what is needed and
                           expected from a gaming product.  This will
                           significantly help InnerG in the design and
                           deliver of additional gaming products that can
                           meet with immediate success 'out-of-the-box.'

                  (b)      The second strategy is to utilize the broadband
                           spectrum as it continues to mature and find its
                           way into European, Asian and Latin American homes.
                           The high bandwidth delivery provides the Company
                           the opportunity to create a new online advertising
                           product where full-motion 'image' commercials can
                           be used in place of one-dimensional promotional
                           banners and create a potential revenue stream.

                  The Company has identified four key goals to maximize InnerG's
business and earnings potential:

                  (a)      Become a leading provider of Internet based
                           interactive entertainment solutions through
                           creation of online gaming solutions. The Company
                           also will enter into providing entertainment-
                           themed products and services utilizing the
                           Animated Agent technology, personalization engine,
                           AI based search engine, voice recognition and
                           audio and video streaming technologies.

                  (b)      For all licensed product and solutions, the Company
                           will only cater to the buyers that are going to
                           operate within the permissible jurisdictions (See
                           Branding, page 7). All of the Company's products and
                           services will be license based on this premise. The
                           Company will not accept any royalties from wagering
                           activities.

                  (c)      Through branding and positioning strategy, the
                           Company believes that InnerG will become a
                           dominant product development and solutions


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                           provider for the gaming industry through marketing
                           and advertising campaigns, industry
                           affiliations/alliances and event marketing.

                  (d)      To establish other entertainment products,
                           services and solutions that would serve to grow
                           the Company's business portfolio going beyond the
                           gaming industry, to create new revenue models or
                           offer attractive revenue streams for both the
                           short and long term. These may include, but not be
                           limited to, original product offerings or
                           partnering with entertainment companies looking to
                           bring a new idea to market.

Objectives.

                  The Company has five primary objectives to be immediately
satisfied in calendar year ending 2001:

                  (a)      Build a state-of-the-art Internet based gaming
                           solutions business.

                  (b)      Build the first state-of-the-art product -
                           exclusively targeted to the high-end ("aspiring
                           wealthy" and "wealthy") consumer segments.

                  (c)      Establish revenue model guidelines to achieve
                           profitability within the second or third year of
                           operations

                  (d)      Position Inner G as the premier online interactive
                           entertainment provider that will rapidly grow InnerG
                           during the first five years of operations.

                  (e)      Generate a recognizable and respected series of brand
                           names in the gaming product, service, solutions and
                           entertainment industries that easily translates
                           country-to-country.


The Gaming Market.

                  Currently, the size of the online gaming market and the number
of players is believed to be small. Cyber Dialogue.com (NY) estimates that of
the 43.1 million USA adults who used or accessed Internet entertainment sites
(or services), the category breakout shows that less than 1% are online gamers:

                           Sports........................   22.4M
                           Movies .......................   22.1M
                           Music ........................   19.7M


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                           Electronic games..............   18.0M
                           Online gaming.................    1.4M

                  InnerG believes that Internet gaming is underdeveloped. This
is due, in part, to unclear legality in many jurisdictions (USA) and the fact
that mainstream consumer brands like Disney, Sony and others don't advertise and
promote their online gaming activities the way they normally publicize their
online brick and mortar sports or entertainment products.

                  The online gaming industry will become much larger (if and)
when the highly respected gaming operations (MGM, Caesars Palace) or
entertainment entities (Sony Tri-Star) set up online gaming services in
cyberspace and promote this positioning as they do traditional brick and mortar
establishments.

                  In the offline gaming world, consumer expenditures on gaming
(gross gaming revenues for operators of brick and mortar institutions) reached a
significant new high in calendar year ending 1999:

                  The USA Consumer gaming expenditures for the calendar year
ending 1999 was approximately $54.3B. The USA Consumer combined entertainment
expenditure (Movies/Music/Live Sporting events) for calendar year 1999 was
approximately $35.0B.

E-gaming.

                  The Internet business proposition for e-gaming via the
computer, interactive television sets or cellular phones and other portable
devices, is in a formative stage of what will eventually be extensive
development. At present, the industry is in its infancy with only a handful of
entrepreneurial startups handling small-to-medium gaming transactions.

                  Traditional gaming companies are looking to the Internet as a
new revenue model, avoiding domestic taxation, increasing the presence of their
respective brand, and strengthening relationships with existing customers.
Internet gaming may not only be restricted to gaming companies, major media
enterprises (Viacom, Time Warner, etc.) could also expand their product
offerings with Internet gaming and find new and important revenue streams for
the fully amortized intellectual property in their possession.

                  AT&T's Excite@home, AOL Time Warner's RoadRunner, DBS, and the
Telco's are bringing the bandwidth to the home. Major media players,
entertainment and gambling companies are becoming


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part of the gaming landscape. InnerG believes that there is still and will
continue to be substantial demand for at-home gaming via the WWW. As long as the
demand exists, and can be cost-effectively reached, InnerG companies (large and
small) will attempt to supply the demand.

                  Outside of the United States, in-home gaming is becoming very
accepted, jurisdictional issues are being resolved, regulatory procedures are
being instituted, and major capital markets are beginning to open.
                  In the next phase, InnerG believes that major
telecommunications, entertainment, and technology companies will become major
players in the e-gaming industry.

Branding.

                  InnerG intends to establish an attractive, highly marketable
brand name and image for all of the Company's intended products and services:

                  (a)      Critical to InnerG's success is a brand name and
                           positioning that captures a high level of media and
                           consumer attention for their licensed products.
                  (b)      A product descriptor that clearly states what is
                           InnerG's core business and service disciplines for
                           all of the InnerG licensed services.
                  (c)      All branding efforts must have the potential to
                           become a valuable license and merchandise property on
                           it's own (i.e., AOL, Nike, Trump, etc).

                  Branding guarantees the ability to establish a 'personality'
and 'character' for each product to distinguish and differentiate itself from
the competition (i.e. PetShop.com (hand puppet), Nike (swoosh), McDonalds
(golden arches). This will become a critical element is communicating the value
proposition on each and every portal product the Company elects to bring to
market with InnerG software.

Revenue Model.

                  InnerG will derive revenues from primarily three revenue
streams:

                  (a)      The first revenue stream is made up of InnerG
                           software licensing. The Company will sell both
                           total packaged solutions as well as individual
                           games to its clients. Any additional games that


                                       7.
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                           are added as part of the InnerG suite, will be
                           charged separately. The Company will not collect any
                           royalties from the client's operations and its
                           profits.
                  (b)      The second revenue stream is from the maintenance and
                           consulting services that InnerG will provide to its
                           clients. A maintenance agreement will be in place at
                           the time of the license sales and will cover any
                           general upgrades, bug fixes, customer services, etc.
                  (c)      The third revenue stream will be from licensing the
                           motion advertising technology. InnerG will develop
                           and deploy the next generation advertising and will
                           distribute the technology both separately as well as
                           part of the overall package.

Costs.

                  InnerG and the Company will incur the majority of costs during
the first 18 months of operations in the following categories:

                  (a)      Product Development - Approximately $3 million
                           will be required and utilized towards product
                           development. These costs will be towards
                           developer's salaries, outsourcing partner charges
                           and hardware purchases. InnerG intends to
                           integrate both internal development efforts and
                           outside technology partners efforts to deliver
                           applications rapidly.
                  (b)      Sales & Marketing - InnerG will conduct a very
                           focused, targeted sales and marketing campaign and
                           will be required and spend $1 million in the next 18
                           months towards this activity. The larger portion of
                           this expense will come from the revenues that it
                           generates.
                  (c)      Operations and G&A Expenses - This category includes
                           setting up of the development environment including
                           all of the necessary hardware and software, staffing,
                           etc.

Competition.

                  The Company's believe that there are about forty (40)
different gaming solutions providers in the world with over seven hundred (700)
casino operations. While there is a continuous growth in the population of these
companies, four (4) companies have established their dominance in the market.
These are Boss Media from Sweden, Starnet Solutions from Canada, Cryptologic,


                                       8.
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also from Canada and Microgaming from South Africa. In addition there is
competition from companies delivering sportsbook, bingo and pari-mutuel wagering
solutions.

                  The Company faces intense competition in every facet of
business. The following companies are competitors in the area of Internet gaming
software: MicroGaming Systems, Inc., Cryptologic, Inc., Boss Media AB,
Casinobuilder.com, and StarNet. All of these companies have substantially
greater assets and resources than the Company does. Their ability to market
their products is greater. In addition, their software programs offer a more
expansive collection of casino games. These companies have established
distribution networks. In contrast, the Company is beginning the marketing of
products and services and has limited assets or resources at this time to
compete with large companies.

                  The Company anticipates that strategic competition will become
more intense as new companies enter the internet gaming software market. To
remain competitive, the Company may have to reduce the anticipated cost of its
products and services, which may negatively affect our potential profitability
or lead to additional losses.

                  The Company believes that potential new competitors, including
large interactive and online software companies, media companies, and electronic
gaming companies, such as Sega and Sony, may increase their focus on the
interactive wagering market.

                  The Company also anticipates that significant overseas
competition will emerge. This may eventually result in additional competition as
these overseas competitors expand.

                  While the online gaming industry was considered to be at a
little over $1B market in calendar year ending 1999, there is no clear dominance
of the market by one company with other industry verticals. This is attributed
to the fact that almost all of the companies are offering a commodity product
with little or no differentiation. None of these companies are believed to have
a consumer profile strategy that is built into the InnerG business model to
create a consumer specific experience.

                  Technology utilization is considered another factor
attributing to the lack of dominance. InnerG intends to develop a
product/services package for its' clients that will cater to the unique needs of
the customers to generate full customer satisfaction.


                                       9.
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                  Overall, the Company believes that the industry is in it's
infancy with a tremendous growth opportunity ahead. The Company intends for
InnerG to leverage the initial market potential, by deploying considerable
technology improvements with a broader product array in order to establish a
strong, leadership position in this industry.

                  The future is changing rapidly with the entrance of
well-capitalized branded entities in the e-gaming business. Well- financed
companies will consolidate the Internet gaming industry with:

                  (a)      Improved technology
                  (b)      Creation of new generation entertainment sites
                  (c)      Large amounts of capital
                  (d)      Significant branded properties

Regulation.

                  Jurisdictional regulation of Internet gaming is the process
whereby Governments (jurisdictions) through law and licensing, control the fair
and equitable operation of gaming businesses. Jurisdictional regulation provides
a confirmation to the Internet gambler, that the games originating from that
jurisdiction are fair, and operated by responsible business people. The Company
continues to support activities that protect both the consumer and the operator
of such businesses.

                  The Company does not operate Internet casinos and therefore is
not subject to any governmental regulation regarding Internet gaming.
Nonetheless, because its business is dependent upon sales of its products and
services to Internet casinos, its revenues may be negatively affected due to
regulation of the Internet gaming business. While the Company intends to
concentrate marketing efforts upon the Australian, Caribbean, European and
African gaming markets, that permit Internet gaming, international, federal,
state and local laws may be imposed at any time. The uncertainty surrounding the
regulation of Internet gaming could have a material adverse effect on the
Company's business, revenues, operating results and financial condition. The
Company monitors the changes in any laws regarding Internet gaming. Should
Internet gaming be declared illegal in certain jurisdictions, the Company
contemplates doing business in, and/or there is a materially adverse effect upon
business due to such declared illegality, may be forced to change its business
plan.

                  The Company's management remains concerned about the continued
interest by federal and state lawmakers to prohibit Internet gambling. If
Internet gambling is prohibited, interest


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in our products and services will diminish. On November 19, 1999, the United
States Senate passed S. 692, called the Internet Gambling Prohibition Act. On
July 17, 1999, the U.S. House of Representatives failed to pass H.R. 3125, the
U.S. House of Representative's version of the Senate Bill S. 692. Passage of
such a gambling prohibition law would prohibit all Internet gambling sites from
soliciting or collecting wagers from bettors in the United States or that
solicits or collects wagers from bettors in the United States.

                  The Company's policy is to provide software products only to
casino operators who hold a license or demonstrate that they have a license
pending.

Business Strategy.

                  The initial InnerG business model is defined by the delivery
of proprietary gaming software that will be created for use in two product
distribution categories:

Technology.

                  Each high-end consumer target for InnerG's products and
services will generally be equipped with reasonably sophisticated hardware
technology. Some will have access to high bandwidth online connections, but most
will be ill-equipped with the technical know-how and tools to effectively
navigate a complex maze of gaming options that can be thrust upon them.

                  Utilizing advanced digital compression technology and taking
advantage of high bandwidth capabilities, InnerG's content will contain:

                  (a)      Real time video experiences through high speed
                           playback of video graphics.
                  (b)      High quality audio presentations using MP3
                           compression technology.
                  (c)      High resolution graphics.
                  (d)      Employment of Shockwave technology.
                  (e)      Learnout and Hauspie Voice Activation
                           technology.
                  (f)      State-of-the-Art Artificial Intelligence


                                       11.
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Customer Care.

                  InnerG intends to deliver the first 'personal' and
'knowledgeable' high-end online product and proprietary license services. Most
important, InnerG will bring unparalleled customer care to the entire gaming
community:

                  (a)      Unparalleled in that it is virtually non-existent in
                           today's Internet gaming universe (based on the
                           traditional definition of what customer care is from
                           the consumer perspective).
                  (b)      Being able to program individual agents that will
                           exist within the customer's environment, enabling
                           InnerG to access the individual customer profile and
                           monitor that consumer's activity on the Internet to
                           'learn' and 'service' the consumers gaming
                           preferences.
                  (c)      Through InnerG product suite, allows a more rewarding
                           gaming experience for the consumer to enjoy repeat
                           visits to the site.

                  The customer care discipline is a very important aspect of the
overall InnerG business model and the Company believes that it must be designed
and delivered with the utmost care and comprehension to generate loyalty and
positive word-of-mouth.


Item 2.           Description of Property.
                  -----------------------

                  The Company presently occupies executive office space at 1800
Century Park East, Suite 600, Los Angeles, California 90067. Said space is
provided pursuant to a rental agreement by HQ Global Workplaces on a
month-to-month basis at $225.00 per month. InnerG maintains a development
location at 300 N. Washington Street, Falls Church, Virginia 22046. InnerG's
phone numbers are (703) 538-1550; Fax No. (703) 538-1569.

                  The Company has no properties and at this time has no
agreements to acquire any properties.


Item 3.           Legal Proceedings.
                  -----------------

                  There is no litigation pending or threatened by or against the
Company.


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Item 4.           Submission of Matter to Vote of Security Holders.
                  ------------------------------------------------
                  There has been no matters submitted to the Company's security
holders.


Item 5.           Market for Common Company Equity and Related
                  --------------------------------------------
                  Stockholder Matter.
                  ------------------

                  (a)      Market Price.  The Company's Common Stock is not
                           quoted at the present time.

                  There is no trading market for the Company's Common Stock at
present and there has been no trading market to date. There is no assurance that
a trading market will ever develop or, if such a market does develop, that it
will continue. The Company has requested a broker-dealer to make application to
the NASD Regulation, Inc. to have the Company's securities traded on the OTC
Bulletin Board Systems or published, in print and electronic media, or either,
in the National Quotation Bureau LLC "Pink Sheets." The application is currently
pending.

                  The Securities and Exchange Commission adopted Rule 15g-9,
which established the definition of a "penny stock," for purposes relevant to
the Company, as any equity security that has a market price of less than $5.00
per share or with an exercise price of less than $5.00 per share, subject to
certain exceptions. For any transaction involving a penny stock, unless exempt,
the rules require: (i) that a broker or dealer approve a person's account for
transactions in penny stocks; and (ii) the broker or dealer receive from the
investor a written agreement to the transaction, setting forth the identity and
quantity of the penny stock to be purchased. In order to approve a person's
account for transactions in penny stocks, the broker or dealer must (i) obtain
financial information and investment experience and objectives of the person;
and (ii) make a reasonable determination that the transactions in penny stocks
are suitable for that person and that person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks. The broker or dealer must also deliver, prior to
any transaction in a penny stock, a disclosure schedule prepared by the
Commission relating to the penny stock market, which, in highlight form, (i)
sets forth the basis on which the broker or dealer made the suitability
determination; and (ii) that the broker or dealer received a signed, written
agreement from the investor prior to the trans action. Disclosure also has to be
made about the risks of investing in penny stock in both public offering and in
secondary trading, and about commissions payable to both the broker-dealer


                                       13.
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and the registered representative, current quotations for the securities and the
rights and remedies available to an investor in cases of fraud in penny stock
transactions. Finally, monthly statements have to be sent disclosing recent
price information for the penny stock held in the account and information on the
limited market in penny stocks.

                  For the initial listing in the NASDAQ SmallCap market, a
company must have net tangible assets of $4 million or market capitalization of
$50 million or a net income (in the latest fiscal year or two of the last fiscal
years) of $750,000, a public float of 1,000,000 shares with a market value of $5
million. The minimum bid price must be $4.00 and there must be 3 market makers.
In addition, there must be 300 shareholders holding 100 shares or more, and the
company must have an operating history of at least one year or a market
capitalization of $50 million.

                  For continued listing in the NASDAQ SmallCap market, a company
must have net tangible assets of $2 million or market capitalization of $35
million or a net income (in the latest fiscal year or two of the last fiscal
years) of $500,000, a public float of 500,000 shares with a market value of $1
million. The minimum bid price must be $1.00 and there must be 2 market makers.
In addition, there must be 300 shareholders holding 100 shares or more.

                  There can be no assurances that, the Company will qualify its
securities for any listings or listing on NASDAQ or some other national
exchange, or be able to maintain the maintenance criteria necessary to insure
continued listing, if listed. The failure of the Company to qualify its
securities or to meet the relevant maintenance criteria after such qualification
in the future may result in the discontinuance of the inclusion of the Company's
securities on a national exchange. In such events, trading, if any, in the
Company's securities may then continue in the non-NASDAQ over-the-counter
market. As a result, a shareholder may find it more difficult to dispose of, or
to obtain accurate quotations as to the market value of, the Company's
securities.

                  (b)  Holders.

                  There are twenty seven (27) holders of the Company's Common
Stock. On December 11, 1996, the Company issued 650,000, as adjusted for a
forward stock split of its Common Shares for cash. All of the issued and
outstanding shares of the Company's Common Stock were issued in accordance with
exemptions from registration under the Securities Act of 1933, as amended.


                                       14.
<PAGE>   15


                  The Company issued 8,500,000 shares of Common Stock on October
25, 2000, pursuant to a Plan and Agreement of Reorganization in a transaction
exempt from the registration requirements of the Securities Act of 1933, as
amended.

                  All of the shares of Common Stock of the Company issued
pursuant to the Plan and Agreement of Reorganization had been issued to Morgan &
Lynch, Inc., for investment purposes in a "private transaction" and are
"restricted" shares as defined in Rule 144 under the Securities Act of 1933, as
amended, and shares may not be offered for public sale except under Rule 144, or
otherwise, pursuant to said Act.

                  The Company issued 2,000,000 shares of Common Stock on
November 8, 2000, to Netstat Holding, Ltd. of the British Virgin Islands
pursuant to a Stock Purchase Agreement in a transaction exempt from the
registration requirements of the Securities Act of 1933, as amended, pursuant to
Regulation S, and said shares may not be offered for sale in the United States
unless registered or except pursuant to a transaction exempt from registration
under said Act.

                  As of the date of this registration statement, all of the
issued and outstanding shares of the Company's Common Stock held by
non-affiliates are eligible for sale under Rule 144 promulgated under the
Securities Act of 1933, as amended, subject to certain limitations included in
said Rule. In general, under Rule 144, a person (or persons whose shares are
aggregated), who has satisfied a one year holding period, under certain circum
stances, may sell within any three-month period a number of shares which does
not exceed the greater of one percent of the then outstanding Common Stock or
the average weekly trading volume during the four calendar weeks prior to such
sale. Rule 144 also permits, under certain circumstances, the sale of shares
without any quantity limitation by a person who has satisfied a two-year holding
period and who is not, and has not been for the preceding three months, an
affiliate of the Company.

                  In summary, Rule 144 applies to affiliates (that is, control
persons) and nonaffiliates when they resell restricted securities (those
purchased from the company or an affiliate of the company in nonpublic
transactions). Nonaffiliates reselling restricted securities, as well as
affiliates selling restricted or nonrestricted securities, are not considered to
be engaged in a distribution and, therefore, are not deemed to be underwriters
as defined in Section 2(11), if six conditions are met:

         (1)      Current public information must be available about the company
                  unless sales are limited to those made by nonaffiliates after
                  two years.


                                       15.
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         (2)      When restricted securities are sold, generally there
                  must be a one-year holding period.

         (3)      When either restricted or nonrestricted securities are sold by
                  an affiliate after one year, there are limitations on the
                  amount of securities that may be sold; when restricted
                  securities are sold by non- affiliates between the first and
                  second years, there are identical limitations; after two
                  years, there are no volume limitations for resales by
                  non-affiliates.

         (4)      Except for sales of restricted securities made by
                  nonaffiliates after two years, all sales must be made in
                  brokers' transactions as defined in Section 4(4) of the
                  Securities Act of 1933, as amended, or a transaction directly
                  with a "market maker" as that term is defined in Section
                  3(a)(38) of the 1934 Act.

         (5)      Except for sales of restricted securities made by
                  nonaffiliates after two years, a notice of proposed sale must
                  be filed for all sales in excess of 500 shares or with an
                  aggregate sales price in excess of $10,000.

         (6)      There must be a bona fide intention to sell within a
                  reasonable time after the filing of the notice referred to in
                  (5) above.

              (c)          Dividends.

                  The Company has not paid any dividends to date, and has no
plans to do so in the immediate future.

Item 6.           Management's Discussion and Analysis or Plan of
                  Operation

                  The Company is currently still in the process of developing
its Internet based interactive entertainment software to create online casinos,
sports betting, sports pools, bingo and wagering products. The Company does not
anticipate any revenues from product sales until towards the end of the second
quarter of calendar year 2001 or the third quarter of calendar year 2001.

                  Since the Company has had no revenues or earnings from
operations, with no significant assets and limited financial resources, the
Company will in all likelihood sustain operating expenses without corresponding
revenues, at least until the consummation of sales of its products. This may
result in the


                                       16.
<PAGE>   17


Company incurring a net operating loss which will increase conti nuously until
the Company can operate profitably.

Item 7.           Financial Statements.
                  --------------------


              CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


                                TABLE OF CONTENTS





                                                                        PAGE (S)

Report of Independent Auditors                                             1

Consolidated Balance Sheet                                                 2

Consolidated Statement of Operations                                       3

Consolidated Statement of Changes in Stockholders' Equity                  4

Consolidated Statement of Cash Flows                                       5

Notes to Financial Statements                                        6  - 13


<PAGE>   18


                         JOSEFINA C. DE LA CRUZ, C.P.A.
                           A PROFESSIONAL CORPORATION


Josefina C. De la Cruz, CPA
Rebecca Q. Masinsin, CPA                    2700 N Main Street, Suite 900 Sheryl
T. Tacto, CPA                                                Santa Ana, CA 92705
Timothy Vo, CPA                                         Tel. No.  (714) 558-8703
Marissa B. Zacarias, IT Manager                          Fax No.  (714) 558-7940


                         REPORT OF INDEPENDENT AUDITORS

Board of Directors
Creative Technologies Holdings, Inc.
Carson City, Nevada

We have audited the accompanying consolidated balance sheet of Creative
Technologies Holdings Inc., (a Development Stage Company) and Subsidiaries as of
December 31, 2000 and the related statements of operations, stockholders' equity
and cash flows for the year then ended. 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 audit.

We conducted our audit in accordance with generally accepted auditing standards.
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 audit provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Creative
Technologies Holdings Inc. (a Development Stage Company) and Subsidiaries as of
December 31, 2000 and the results of its operations and cash flows for the year
then ended in conformity with generally accepted accounting principles.

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




Josefina C. de la Cruz, CPA
A Professional Corporation

February 17, 2001



--------------------------------------------------------------------------------
           MEMBER - AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS
                               SEC PRACTICE GROUP
               CALIFORNIA SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS
                               TAX PRACTICE GROUP


<PAGE>   19




              CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2000


                                     ASSETS

<TABLE>
<S>                                                                 <C>
CURRENT ASSETS
         Cash                                                       $    68,338
         Advances to employees                                           16,874
         Prepaid expenses                                                77,928
                                                                    -----------

         Total Current Assets                                           163,140
                                                                    -----------

PROPERTY AND EQUIPMENT , NET (NOTE 3)                                   383,245
                                                                    -----------

OTHER ASSETS
         Other  receivables (Note 4)                                    132,115
         Deposits                                                        12,988
                                                                    -----------

         Total Other Assets                                             145,103
                                                                    -----------

TOTAL ASSETS                                                        $   691,488
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
         Accounts payable                                           $   437,197
         Payroll taxes payable                                           30,192
         Advances from officers (Note 5)                                 24,750
         Accrued liabilities                                             18,840
         Loan payable (Note 6)                                           50,000
         Notes payable (Note 7)                                         586,467
         Capital lease payable - current portion (Note 8)                 2,681
                                                                    -----------

         Total Current Liabilities                                    1,150,127

LONG-TERM LIABILITIES
         Capital lease payable (Note 8)                                   6,646
                                                                    -----------

TOTAL LIABILITIES                                                     1,156,773
                                                                    -----------

MINORITY INTERESTS (NOTE 9)                                            (346,195)
                                                                    -----------

STOCKHOLDERS' EQUITY (NOTE 10)
         Common Stock,par value $0.001; 125,000,000 shares
            authorized; 12,600,000 shares issued and outstanding         12,600
         Paid-in Capital                                                989,500
         Accumulated Deficit                                         (1,121,190)
                                                                    -----------

         Total Stockholders' Equity                                    (119,090)
                                                                    -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                          $   691,488
                                                                    ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       2
<PAGE>   20


              CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 2000


<TABLE>
<S>                                                                <C>
REVENUE                                                            $       --
                                                                   ------------

EXPENSES

        General , Administrative and Selling Expenses                 1,386,755
        Development Expenses                                            114,796
        Depreciation and Amortization (Note 3)                           17,981
                                                                   ------------

        TOTAL EXPENSES                                                1,519,532
                                                                   ------------

NET OPERATING LOSS                                                   (1,519,532)

INTEREST INCOME                                                             597
                                                                   ------------

NET LOSS BEFORE MINORITY INTERESTS                                   (1,518,935)

MINORITY INTERESTS' SHARE OF LOSS                                       400,195
                                                                   ------------

NET LOSS APPLICABLE TO COMMON STOCKHOLDERS                         $ (1,118,740)
                                                                   ============

NET LOSS PER COMMON SHARE

        BASIC                                                      $     0.0887
                                                                   ============
        DILUTED                                                    $     0.0887
                                                                   ============

WEIGHTED AVERAGE SHARES OUTSTANDING

        BASIC                                                        12,600,000
                                                                   ============
        DILUTED                                                      12,600,000
                                                                   ============
</TABLE>


           See accompanying notes to consolidated financial statements


                                       3
<PAGE>   21


              CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                      FOR THE YEAR ENDED DECEMBER 31, 2000




<TABLE>
<CAPTION>
                                                                                   Additional                            Total
                                        Common Stock                   Paid-in     Accumulated    Stockholders'
                                            Shares        Amount       Capital       Deficit         Equity
                                        ------------   -----------   -----------   -----------    -------------

<S>                                     <C>            <C>           <C>           <C>            <C>
Balances,  January 1, 2000                 2,100,000   $     2,100   $      --     $    (2,450)   $      (350)

Issuance of 8,500,000 shares of
       common stock in exchange
       for 500,000 common shares of
       a Subsidiary on October 25,2000     8,500,000         8,500       491,500          --          500,000


Issuance of 2,000,000 shares in
       exchange for cancellation of
       $500,000 debt on
       November 8, 2000                    2,000,000         2,000       498,000          --          500,000

Net loss for the year ended
       December 31, 2000                        --            --            --      (1,118,740)    (1,118,740)
                                         -----------   -----------   -----------   -----------    -----------

Balances, December 31, 2000               12,600,000   $    12,600   $   989,500   $(1,121,190)   $  (119,090)
                                         ===========   ===========   ===========    ==========    ===========
</TABLE>


           See accompanying notes to consolidated financial statement


                                       4
<PAGE>   22


              CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 2000


<TABLE>
<S>                                                             <C>
CASH FLOWS FROM OPERATING ACTIVITIES

          Net loss                                              $(1,118,740)
          Adjustment to reconcile net loss to net cash used
          in operating activities
               Depreciation and amortization                         17,981
               Minority interests in net loss of subsidiaries      (400,195)
               Decrease (increase) in:
                     Advances to employees                          (16,874)
                     Prepaid expenses                               (77,928)
                     Other receivables                              (30,000)
               Increase (decrease) in:
                     Accounts payable                               498,197
                     Accrued liabilities                             11,840
                     Advances from officers                          24,400
                     Payroll taxes payable                           30,192
                                                                -----------

          Net Cash Used in Operating Activities                  (1,061,127)
                                                                -----------

CASH FLOWS FROM INVESTING ACTIVITIES

          Principal payments on notes payable                        (5,833)
          Increase in deposits                                      (12,988)
          Principal payments on capital lease                          (668)
          Purchase of property and equipment                       (356,231)
                                                                -----------

          Net Cash Used in Investing Activities                    (375,720)
                                                                -----------

CASH FLOWS FROM FINANCING ACTIVITIES

          Increase in notes receivable                             (102,115)
          Issuance of notes payable                               1,057,300
          Proceeds from line of credit                               50,000
          Proceeds from issuance of common stock                    500,000
                                                                -----------

          Net Cash Provided by Financing Activities               1,505,185
                                                                -----------

NET INCREASE IN CASH                                                 68,338

CASH, BEGINNING OF PERIOD                                              --
                                                                -----------

CASH, END OF PERIOD                                             $    68,338
                                                                ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       5
<PAGE>   23


              CREATIVE TECHNOLOGIES HOLDINGS, INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000



NOTE 1 -  ORGANIZATION HISTORY AND BASIS OF CONSOLIDATED FINANCIAL STATEMENTS

          The accompanying consolidated financial statements include the
          accounts of Creative Technologies Holdings Inc. (CTHI), formerly
          Morning Splendor Management, Inc. and is Subsidiaries, Creative
          Technology & Interactive Entertainment Group, Inc. (CTIEGI) and
          Creative Technology & Entertainment Group, Inc. (CTEGI) collectively
          referred to as "the Company". CTIEGI is 100% owned Subsidiary and
          CTEGI is a 70% subsidiary of CTIEGI.

          Creative Technologies Holdings Inc. was incorporated as Morning
          Splendor Management, Inc. on December 6, 1996 under the laws of the
          State of Nevada to engage in any lawful activity, including but not
          limited to selected mergers and acquisitions. The Company has been in
          the developmental stage since inception. Other than issuing shares,
          the Company has no operating history and revenue.

          Creative Technology and Interactive Entertainment Group, Inc. (CTIEGI)
          was incorporated on June 26, 2000 under the laws of the State of
          Nevada. Other than the issuance of stock to its original shareholders,
          and acquisition of about 70% of CTEGI, a development stage company, it
          has no operations and revenues as of December 31, 2000.

          Creative Technology and Entertainment Group, Inc. (CTEGI) was
          incorporated under the laws of the State of Nevada on May 19, 2000 for
          the purpose of developing online gaming and interactive entertainment
          software. CTEGI is a development stage company and as such has no
          revenues or earnings from operations.


NOTE 2 -  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

          Consolidation Policy

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

          Method of Accounting

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


                                       6
<PAGE>   24


              CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


         Estimates

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

         Cash and Cash Equivalents

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

         Property, Plant and Equipment

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


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

         Income Taxes

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

         Reporting on Costs of Start-Up Activities

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


                                       7
<PAGE>   25


               CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000



         Research and Development Costs

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


         Loss Per Share

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


         Year End

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


NOTE 3 - PROPERTY AND EQUIPMENT

         Property and equipment as of December 31, 2000 consist of the
following:

               Office equipment               $ 262,076
               Software                          50,387
               Furniture and fixture             57,731
               Leasehold improvements            31,032
                                              ---------

               Total property and equipment     401,226
               Accumulated depreciation         (17,981)
                                              ---------

               Property and equipment, net    $ 383,245
                                              =========

Depreciation and amortization expense for the year ended December 31, 2000
amounted to $17,981.


                                       8
<PAGE>   26


             CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


NOTE 4 - OTHER RECEIVABLES

         Other receivables consist of a refund receivable from a vendor for
         $30,000 and advances to a non-related company for $102,115.


NOTE 5 - ADVANCES FROM OFFICERS

         An officer of the Company has advanced funds on behalf of the Company
         to pay for costs incurred while in the process of seeking investors.
         These funds are interest free. As of December 31, 2000, advances from
         officers amounted to $24,750.


NOTE 6 - LOAN PAYABLE

         The Company has a $50,000 promissory note payable on demand in the form
         of a line of credit with a financial institution. The line carries a
         variable rate of interest at the Wall Street Journal prime rate plus
         1.00% per annum (10.5% at December 31, 2000). Monthly payment
         requirements on the line consist of accrued interest only. As of
         December 31, 2000, the Company owed $50,000 against the credit line.


NOTE 7 - NOTES PAYABLE

         Investors owning over 5% equity of CTHI have advanced funds to the
         Company for its development operations. Notes payable, related to these
         advances amount to $557,300 at December 31, 2000. The notes are payable
         on demand and non-interest bearing.

         Notes payable also includes a non-interest bearing note amounting to
         $29,167 relating to purchase of property.

NOTE 8 - CAPITAL LEASE PAYABLE

         Included under office equipment is a capital lease expiring in October
         2003. Leased property under capital lease obligation as of December
         31,2000 consists of the following:

               Office equipment           $ 9,995
               Accumulated depreciation      (333)
                                          -------

                                          $ 9,662
                                          =======

         The asset is depreciated over its estimated useful life of 5 years.
         Depreciation of leased property under capital lease amounted to $333
         for the year ended December 31, 2000.


                                       9
<PAGE>   27


              CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000



         Capital lease obligations at December 31, 2000 consist of the
following:

               Total capital lease payable                  $ 9,327
               Current portion of capital lease payable      (2,681)
                                                            -------

               Long-term portion of capital lease payable   $ 6,646
                                                            =======

Maturities under the capital lease up to the end of the lease term are as
follows:

               2001                                     $4,188
               2002                                      4,188
               2003                                      3,490

NOTE 9 - MINORITY INTERESTS

         Minority interests in CTEGI is 26.7% as of December 31, 2000. Minority
         interests consist of the following:

               5,333,334 shares of common stock,
                  par value $.01                     $  53,334
               Paid -in capital                            666
               Minority interests share of deficit    (400,195)
                                                     ---------
               Total Minority Interests              $(346,195)
                                                     =========


NOTE 10 - STOCKHOLDERS' EQUITY

         The authorized common stock of CTHI consists of 25,000,000 shares with
         a par value of $0.001 of which 12,600,000 common shares are issued and
         outstanding at December 31, 2000.

         On December 6, 1996, CTHI issued 21,000 shares of its no par value
         common stock in consideration of $2,100 in cash.

         On November 29, 1999, the State of Nevada approved the restated
         Articles of Incorporation of CTHI that increased its capitalization
         from 25,000 shares to 25,000,000 shares of common stock. The par value
         of its common stock was changed to $0.001.


                                       10
<PAGE>   28


               CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000



         On November 29, 1999, CTHI forward split its common stock 100:1; thus
         increasing the number of outstanding shares of common stock from 21,000
         shares to 2,100,000 shares.

         On August 31, 2000, CTIEGI issued 500,000 shares of its $0.001 par
         value common stock in consideration of $500,000 cash. These shares were
         exchanged for CTHI shares under a plan and agreement of reorganization
         with CTIEGI and Morgan & Lynch, Inc. (MLI) on October 25, 2000. Under
         the plan, the Company issued 8,500,000 shares of its common stock to
         MLI in exchange for MLI's ownership of 500,000 share of common stock of
         CTIEGI.

         On November 8, 2000, the Company entered into a stock purchase
         agreement with Netsat Holdings, Limited (NHL), a foreign corporation.
         Pursuant to the agreement, the Company issued 2,000,000 shares of its
         common stock in exchange for cancellation of $500,000 debt to NHL.

         The issued and outstanding shares of 12,600,000 common shares at
         December 31, 2000 consist of the following shares:

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

NOTE 11 - INCOME TAXES

         There is no provision for federal income taxes for the year ended
         December 31, 2000 due to the net loss sustained during the period. No
         state income tax provision was made because in Nevada, the state of the
         Company's domicile and operations, taxes on income are not imposed.

         The Company currently has no issues that create timing differences that
         would mandate deferred tax expense. Net operating losses would create
         possible tax assets in future years. Due to the uncertainty as to the
         utilization of net operating loss carry forwards, a valuation allowance
         has been made as to the utilization of net operating loss carry
         forward, to the extent of any tax benefit that net operating losses may
         generate.


                                       11
<PAGE>   29


               CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARY
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000


         The Company's total deferred tax assets as of December 31, 2000 is as
follows:

               Net operating loss carry forward               $ 1,521,383
                                                              ===========

               Current tax asset value of net operating
                      loss carry forwards at statutory rate   $   228,207
               Valuation allowance                               (228,207)
                                                              -----------

               Net deferred tax (asset) liability             $      --
                                                              ===========

               Current Income Tax Expense                     $      --
                                                              ===========

               Deferred Income Tax Expense (Benefit)          $      --
                                                              ===========


NOTE 12 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

         There were no cash payments made for income taxes for the year ended
         December 31, 2000. Cash payments for interest during the year amounted
         to $945.

         The Company's non-cash investing and financing activities during the
         year include,

         a)   Issuance of 2,000,000 shares of common stock for cancellation of
              $500,000 debt

         b)   Issuance of $5,333,334 shares of common stock to minority
              interest shareholders in exchange for services amounting to
              $53,333.

         c)   Purchase of $9,995 office equipment under capital lease.

         d)   Issuance of a note for the purchase of office furniture amounting
              to $35,000.


NOTE 13 - COMMITMENTS

         The Company leases its corporate headquarters under an operating lease
         expiring in December 2001. Minimum lease commitments for the next year
         is as follows:

                     2001                        $ 77,928
                                                 ========


Rent expense for the year ended December 31, 2000 amounted to $68,607.


                                       12
<PAGE>   30


              CREATIVE TECHNOLOGIES HOLDINGS INC. AND SUBSIDIARIES
                          (A DEVELOPMENT STAGE COMPANY)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                DECEMBER 31, 2000



NOTE 14 - GOING CONCERN

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




                                       13


<PAGE>   31


Item 8.           Changes in and Disagreements with Accountants on
                  ------------------------------------------------
                  Accounting and Financial Disclosure.
                  -----------------------------------

                  On January 27, 2001, Barry L. Friedman, 1582 Tulita Drive Las
Vegas, Nevada 89127, the principal accountant which had previously been engaged
to audit Registrant's financial statements, died. Josefina C. de la Cruz, CPA,
2700 North Main Street, Suite 900, Santa Ana, CA 92705 has been engaged to audit
Registrant's financial statements for the fiscal year ended December 31, 2001.
Josefina C. de la Cruz had been the independent auditor for Creative Technology
& Interactive Entertainment Group, Inc. prior to the closing which occurred on
October 31, 2000.


Item 9.           Directors, Executive Officers, Promoters and Control
                  Persons; Compliance with Section 16(a) of the Exchange
                  Act.

                  The members of the Board of Directors of the Company serve
until the next annual meeting of the stockholders, or until their successors
have been elected. The officers serve at the pleasure of the Board of Directors.
Information as to the direc tors and executive officers of the Company is as
follows:

                  Name                                     Position
                  ----                                     --------
          Moises Villanueva                        President/Treasurer/
          6766 Ayala Avenue                        Director
          28th Floor
          Makati City, Philippines

          Valentino Guzman                         Secretary/Director
          6766 Ayala Avenue
          28th Floor
          Makati City, Philippines





                                       17.

<PAGE>   32



          Chris Albornoz                           Director
          9046 Hayvenhurst Avenue
          North Hills, CA 91343

The principal occupation and business experience during the last five years for
each of the present directors and executive officers of the Company are as
follows:

                  Moises Villanueva

                  Moises Villanueva is the President, Treasurer and a
                  Director of the Company.  From December 1998 to the
                  present Mr. Villanueva has been a Tax Manager at Laya
                  Manghaya & Co. (KPMG).  From October 1997 to December
                  1998 Mr. Villanueva was a Senior Manager at Joaquin
                  Cunanan & Co. (Pricewaterhousecoopers).  From January
                  1996 through October 1997 Mr. Villanueva was a Tax
                  Parner at Diaz Murill Dalupan (Deloitte Touche Tohmatsu
                  International).  Mr. Villanueva prepares replies to
                  clients' queries on various tax issues affecting their
                  business operations, undertakes corporate registration
                  for multinational corporations and investors as
                  mandated by the Securities and Exchange Commission, and
                  assists in the post-SEC registrations with other
                  governmental agencies.  He makes researches, industry
                  profile review for clients and potential investors,
                  devises tax planning schemes, tax efficient structures
                  in order to maximize tax savings and handles tax
                  assessment cases, claims for refunds, tax ruling with
                  the Bureau of Internal Revenue and other governmental
                  agencies.

                  Valentino Guzman

                  Valentino Guzman is the Secretary and a Director of the
                  Company. From 1999 to the present, Mr. Guzman is a Senior
                  Partner of Guzman and Tanedo Law Offices. He has wide
                  experience in litigating corporate, criminal, civil and
                  administrative cases in the Philippines. From 1997 to 1999,
                  Mr. Guzman was litigation supervisor and junior partner at
                  Medel, Macam, Tolentino, Pineda and Larcia Law Offices.


                  Chris Albornoz

                  Chris Albornoz is a Director of the Company.  From
                  April 1996 to February 1996 Mr. Albornoz was Manger
                  Systems Operations for Leslies Poolmart.  He was


                                       18.

<PAGE>   33



                  responsible for all Corporate Computer Systems, the
                  Data Center and all networking and telecommunications
                  facilities.

                  The officers and directors may be deemed parents and promoters
of the Company as those terms are defined by the Securities Act of 1933, as
amended. All directors hold office until the next annual stockholders' meeting
or until their death, resignation, retirement, removal, disqualification, or
until their successors have been elected and qualified. Officers of the Company
serve at the will of the Board of Directors.

                  There are no agreements or understandings for any officer or
director of the Company to resign at the request of another person and none of
the officers or directors are acting on behalf of or will act at the direction
of any other person.

                  The Company has checked the box provided on the cover page of
this Form to indicate that there is no disclosure in this form of reporting
person delinquencies in response to Item 405 of Regulation S-B.


Item 10.          Executive Compensation.
                  ----------------------

                  None of the Company's officers and/or directors receive any
compensation for their respective services rendered unto the Company, nor have
they received such compensation in the past. They all have agreed to act without
compensation until authorized by the Board of Directors. As of the date of this
registration statement, none of the directors are accruing any compensation
pursuant to any agreement with the Company.

                  No retirement, pension, profit sharing, stock option or
insurance programs or other similar programs have been adopted by the Company
for the benefit of its employees.


Item 11.          Security Ownership of Certain Beneficial Owners
                  -----------------------------------------------
                  and Management.
                  --------------

                  (a)      Security Ownership of Certain Beneficial Owners.

                  The following table sets forth the security and beneficial
ownership for each class of equity securities of the Company for any person who
is known to be the beneficial owner of more than five percent of the Company.


                                       19.
<PAGE>   34


                                  Name and             Amount and
                                 Address of             Nature of
                                 Beneficial             Beneficial    Percent
Title of Class                     Owner                  Owner       of Class
--------------------------------------------------------------------------------

Common                     Morgan & Lynch, Inc.         8,500,000     67.46%
                           1900 Avenue of the Stars
                           Suite 1635
                           Los Angeles, CA 90067

Common                     Netsat Holdings Ltd.         2,000,000     15.87%
                                 Wickhams Cay 1
                           P.O. Box 362
                           Road Town, Tortola
                           British Virgin Islands

Common                     Moises Villanueva                 0            0%
                           6766 Ayala Avenue
                           28th Floor
                           Makati City, Philippines

Common                     Valentino Guzman                  0            0%
                           6766 Ayala Avenue
                           28th Floor
                           Makati City, Philippines

Common                     Chris Albornoz                    0            0%
                           9046 Hayvenhurst Avenue
                           North Hills, CA 91343

                  The total of the Company's outstanding Common Shares are held
by 27 persons and/or entities.

                  (b)      Security Ownership of Management.

                  The following table sets forth the ownership for each class of
equity securities of the Company owned beneficially and of record by all
directors and officers of the Company.


                                       20.
<PAGE>   35


                                  Name and             Amount and
                                 Address of             Nature of
                                 Beneficial             Beneficial    Percent
Title of Class                     Owner                  Owner       of Class
--------------------------------------------------------------------------------

Common                     Morgan & Lynch, Inc.         8,500,000     67.46%
                           1900 Avenue of the Stars
                           Suite 1635
                           Los Angeles, CA 90067

Common                     Netsat Holdings Ltd.         2,000,000     15.87%
                           Wickhams Cay 1
                           P.O. Box 362
                           Road Town, Tortola
                           British Virgin Islands

Common                     Moises Villanueva                 0            0%
                           6766 Ayala Avenue
                           28th Floor
                           Makati City, Philippines

Common                     Valentino Guzman                  0            0%
                           6766 Ayala Avenue
                           28th Floor
                           Makati City, Philippines

Common                     Chris Albornoz                    0            0%
                           9046 Hayvenhurst Avenue
                           North Hills, CA 91343


Item 12.          Certain Relationships and Related Transactions.
                  ----------------------------------------------

                  There have been no related party transactions, or any other
transactions or relationships required to be disclosed pursuant to Item 404 of
Regulation S-B.


Item 13.          Exhibits and Reports on Form 8-K.
                  --------------------------------

                  There are no reports on Form 8-K incorporated herein by
reference.

                  The following documents are filed as part of this report:


                                       21.
<PAGE>   36


                  (1)      Financial Statements
                  (23.1)   Consent of Josephina De La Cruz, CPA

                                   SIGNATURES

          Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Company has duly caused this registration statement to be
signed on its behalf by the under signed, thereunto duly authorized.

Date: April 16, 2001          CREATIVE TECHNOLOGIES HOLDINGS INC.


                              By: /s/ Moises Villanueva
                                  -------------------------------
                                  Moises Villanueva
                                  President/Treasurer

                  Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

Date: April 16, 2001         CREATIVE TECHNOLOGIES HOLDINGS INC.


                              By: /s/ Moises Villanueva
                                  -------------------------------
                                  Moises Villanueva
                                  President/Treasurer

                              By: /s/ Valentino Guzman
                                  -------------------------------
                                  Valentino Guzman
                                  Secretary

                              By: /s/ Chris Albornoz
                                  -------------------------------
                                  Chris Albornoz
                                  Director


                                       22.