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

                                   FORM 10-QSB

(Mark One)

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

                For the quarterly period ended September 30, 2005

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

                For the transition period from _______ to ________.

                        Commission file number: 33-18143

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

                        PEAK ENTERTAINMENT HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)

            NEVADA                                              87-0449399
(State or other jurisdiction of                               (IRS Employer
 incorporation or organization)                             Identification No.)

          Bagshaw Hall, Bagshaw Hill, Bakewell, Derbyshire, UK DE45 1DL
                    (Address of principal executive offices)

                                 44 1629 814555
                           (Issuer's telephone number)

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

Check whether the issuer (1) has 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 past 90 days.
Yes [X] No [ ]

Indicated by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of November 1, 2005, we had 31,470,108 shares of common stock issued and
outstanding.

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

<PAGE>


                        PEAK ENTERTAINMENT HOLDINGS, INC.

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                 Page

PART I.  FINANCIAL INFORMATION
<S>                                                                                             <C>
Item 1.  Condensed Consolidated Financial Statements (unaudited)                                  3
         Condensed Consolidated Balance Sheets as of September 30, 2005 and December 31, 2004     3
         Condensed Consolidated Statements of Operations for the Nine Months
                  Ended September 30, 2005 and 2004                                               4
         Condensed Consolidated Statements of Cash Flows for the Nine Months
                  Ended September 30, 2005 and 2004                                               5
         Notes to Condensed Consolidated Financial Statements                                     7

Item 2.  Management's Discussion and Analysis                                                    24

Item 3.  Controls and Procedures                                                                 32

PART II. OTHER INFORMATION

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                             33
Item 5.  Other Information                                                                       34
Item 6.  Exhibits                                                                                35

SIGNATURES                                                                                       36
</TABLE>









                                       2

<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        PEAK ENTERTAINMENT HOLDINGS, INC.
                           CONSOLIDATED BALANCE SHEET


<TABLE>
<CAPTION>
                                                            December 31,      September 30,
                                                               2004               2005
                                                            -----------       -----------
                                                             (Audited)        (Unaudited)
                                                            -----------       -----------
ASSETS

CURRENT ASSETS
<S>                                                         <C>               <C>
Cash and cash equivalents                                   $    10,235       $      --
Accounts receivable                                             498,187           902,168
Inventory                                                        91,743              --
Other current assets                                            861,728         1,048,358
                                                            -----------       -----------
Total current assets                                          1,461,893         1,950,526

Deferred professional fees                                      205,834           186,482
Plant and equipment, net                                        259,649           215,309
Intangible assets, net of amortization                        1,972,683         1,829,489
                                                            -----------       -----------
                                                            $ 3,900,059       $ 4,181,806
                                                            ===========       ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES

Accounts payable                                            $ 1,301,539       $ 1,356,127
Short-term borrowing                                               --             209,505
Stockholders' advance account                                   752,522           551,215
Licenses fees payable                                            67,831            62,064
Other accrued liabilities                                     2,290,629         2,525,697
                                                            -----------       -----------
Total current liabilities                                     4,412,521         4,704,878

LONG TERM LIABILITIES

License fees payable                                          1,234,119         1,199,882
Convertible debentures                                          330,652         1,032,005
                                                            -----------       -----------
Total long term liabilities                                   1,564,771         2,231,887

STOCKHOLDERS' DEFICIT

Common stock, par value $0.001 - 900,000,000
   Shares authorized, 29,040,955 and 31,470,108 issued
   and outstanding                                               29,050            31,470
Additional paid in capital                                    4,576,739         6,850,654
Accumulated deficit                                          (5,960,203)       (9,342,865)
Other comprehensive income                                     (722,819)         (294,218)
                                                            -----------       -----------
Total stockholders' deficit                                 (2,077, 233)       (2,754,959)
                                                            -----------       -----------
                                                            $ 3,900,059       $ 4,181,806
                                                            ===========       ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                        PEAK ENTERTAINEMNT HOLDINGS, INC.
                            STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                          Three months       Three months       Nine months        Nine months
                                             ended              ended              ended               ended
                                          September 30,      September 30,      September 30,      September 30,
                                              2004               2005               2004               2005
                                          ------------       ------------       ------------       ------------
<S>                                       <C>                <C>                <C>                <C>
Revenue                                   $    138,474       $    437,908       $    248,014       $  1,090,688

Cost of Goods Sold                             101,418             76,743            186,332            191,926

                                          ------------       ------------       ------------       ------------
Gross profit                                    37,056            361,165             61,682            898,762

Operating expenses
Selling, general and administrative            505,452            641,973          2,104,581          1,811,702
Non cash expenses                               87,136            431,990            339,392          1,854,127
                                          ------------       ------------       ------------       ------------
Total operating expenses                       592,588          1,073,963          2,443,973          3,665,829



                                          ------------       ------------       ------------       ------------
Loss from operations                          (555,552)          (712,798)        (2,382,291)        (2,767,067)

Gain/ (loss) on settlement of
convertible
debentures and accrued interest               (434,800)                              443,376            (37,559)

Foreign exchange gain                          (26,720)           (61,673)             9,092           (341,868)

Interest expense                              (127,077)            (4,729)          (473,101)          (236,168)


                                          ------------       ------------       ------------       ------------
Net loss                                  $ (1,144,129)      $   (779,199)      $ (2,402,924)      $ (3,382,662)
                                          ============       ============       ============       ============

Basic and diluted net loss per share      $      (0.04)      $      (0.02)      $      (0.10)      $      (0.11)
                                          ============       ============       ============       ============

Weighted average common shares
outstanding                                 26,928,879         31,470,108         24,808,303         30,824,904
                                          ============       ============       ============       ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       4

<PAGE>

                        PEAK ENTERTAINMENT HOLDINGS, INC
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                             Nine months ended  Nine months ended
                                                                               September 30,      September 30,
                                                                                   2004               2005
                                                                                -----------       -----------
Cash flows from operating activities

<S>                                                                             <C>               <C>
Net loss                                                                        $(2,402,924)      $(3,382,662)

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

Depreciation                                                                         13,985            80,054
Amortization of intangible assets                                                   106,360           271,610

Foreign exchange gain/(loss)                                                         (9,092)          341,868
Accretion of discount on debentures                                                 245,941           110,293

Gain on settlement of debentures                                                   (443,376)             --
Non-cash interest                                                                      --             418,396
Non-cash professional and consulting fees                                           713,695         1,854,127
Loss on sale of intangibles                                                          65,222

Changes in working capital:

Accounts receivable                                                                 (16,270)         (403,981)
Inventories                                                                          55,400            91,743

Other current assets                                                                (83,009)         (186,630)
Accounts payable and other accrued liabilities                                    2,134,102           283,889
                                                                                -----------       -----------


Net cash used in operating activities                                              (380,034)         (521,293)


Cash flows from investing activities:


Purchase of plant and equipment                                                      (4,456)          (35,714)

Purchase of intangibles                                                          (2,060,244)         (128,416)
Issue of debentures                                                               2,024,000           560,000
Settlement of debentures                                                         (1,000,000)             --


                                                                                -----------       -----------
Net cash (used in)/ provided by investing activities                               (895,065)          395,870
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       5

<PAGE>

                           PEAK ENTERTAINMENT HOLDINGS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                   (CONTINUED)

<TABLE>
<CAPTION>
                                                                   Nine months ended        Nine months ended
                                                                     September 30,            September 30,
                                                                         2004                     2005
                                                                     -----------              -----------
<S>                                                                  <C>                     <C>
Cash flows from financing activities:                                $                        $


Short term (repayment) borrowing, net                                   (281,460)                 209,505
Stockholders' advances (repayment) account                                44,420                 (201,307)
Issue of common stock shares                                             350,000                     --
Issue of common stock purchase warrants                                  150,000                     --


                                                                     -----------              -----------
Net cash provided by/(used in) financing activities                      262,960                    8,198

Cumulative translation adjustment                                        115,865                  101,092




(Decrease) increase in cash and cash equivalents                        (136,206)                 (16,133)


Cash and cash equivalents, beginning of period                           152,339                   16,133

Cash and cash equivalents, end of period                             $    16,133              $         0


Supplemental disclosures of cash flow information


Interest Paid                                                        $     1,300              $        60


Purchases of licenses through issuance of long-term liabilities      $ 1,733,685                     --


Issuance of shares in settlement of liability                        $   443,500                     --
</TABLE>

          See accompanying notes to consolidated financial statements.

                                       6

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

1        Description of Business

         Peak Entertainment Holdings, Inc, formerly Peak Entertainment Ltd, was
         formed on November 20, 2001 as 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 property from concept
         to consumer in-house, controlling and co-ordinating broadcast,
         promotions and product launches (toys, apparel, video games, etc.) to
         build market momentum and worldwide brand quality.

         The accompanying consolidated financial statements have been prepared
         in conformity with accounting principles generally accepted in the
         United States of America, which contemplate continuation of the Company
         as a going concern. As shown in the financial statements, at September
         30, 2005 and for the nine months then ended, the Company has suffered
         recurring losses, negative cash flows from operations, negative working
         capital, an accumulated deficit of $9,031,232 and a stockholders'
         deficiency of $2,754,959.

         As shown in the accompanying financial statements, the Company incurred
         a net loss of $3,382,662 during the current period. Current economic
         conditions have limited the ability of the Company in acquiring
         additional equity capital.

         In response to economic conditions, management has implemented expense
         reduction and revenue enhancements as well as initiated additional
         investor financing. Specifically, management has implemented reductions
         on the salaries of senior management. Also, nonessential capital
         expenditures, travel and other expenses have either been eliminated or
         postponed. Management has shifted its corporate and business
         development activities to focus strategic resources. To that end, the
         Company continues to pursue a three million dollar bridge financing
         round directed toward existing and strategic investors. Management
         believes the combination of these actions maximizes the probability of
         the Company's ability to remain in business.
         A portion of that capital has been secured recently but it is still
         uncertain at this stage whether the Company will be totally successful
         in accomplishing these objectives. Without this capital there is some
         uncertainty about the Company's ability to continue as a going concern
         though management are close to completing this transaction following
         the appointment of credible merchant bankers and management
         consultants. The financial statements do not include any adjustments
         that might be necessary should the Company be unable to continue as a
         going concern.

         The Company has developed a business plan to increase revenue by
         capitalizing on its integrated media products The Company is in
         constant discussions with outside sources to provide the required funds
         to cover operational costs. This continuous need raises 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.

                                       7
<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

2        Summary of Significant Accounting Policies

         (A)      Principals of Consolidation and Combination

                  The accompanying consolidated financial statements include the
                  accounts of Peak Entertainment Limited, Jusco Toys Ltd, Jusco
                  UK Ltd, Wembley Sportsmaster Ltd and Cameo Collectables Ltd
                  after elimination of inter-company transactions and balances.
                  Peak Entertainment Limited, 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 Collectables Ltd
                  were combined with Peak Entertainment Holdings, Inc as both
                  entities were under common control.

         (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 continue 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)      Interim Financial Information

                  In the opinion of management, the interim financial
                  information as of September 30, 2005 contains all adjustments,
                  consisting only of normal recurring adjustments, necessary for
                  a fair presentation of the results for such periods. Results
                  for interim periods are not necessarily indicative of results
                  to be expected for an entire year.

                  The accompanying consolidated financial statements have been
                  prepared in accordance with generally accepted accounting
                  principles for interim financial information and with the
                  instructions to Form 10-QSB and Article 10 of Regulation S-X.
                  Certain information and footnote disclosures normally included
                  in the consolidated financial statements prepared in
                  accordance with generally accepted accounting principles have
                  been condensed or omitted pursuant to such rules and
                  regulations. These consolidated financial statements should be
                  read in conjunction with the consolidated financial
                  statements, and the notes thereto, included in the Company's
                  Annual Report on Form 10-KSB for the year ended December 31,
                  2004.

                                       8
<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

2        Summary of Significant Accounting Policies (continued)

         (D)      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.

         (E)      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. Revenue 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:

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

                  2.      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,

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

                  4.      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)      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.

                                       9

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

2        Summary of Significant Accounting Policies (continued)

         (F)      Intangible assets and amortization (continued)

                  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".

         (G)      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.

         (H)      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.

         (I)      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
                  an 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.

         (J)      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.

                                       10

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)


2        Summary of Significant Accounting Policies (continued)

         (K)      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.

         (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.

                                       11

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

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.

                  Basic and diluted earnings per share are the same during the
                  quarter ended September 30, 2004 and 2005 as the impact of
                  dilutive securities is antidilutive. There were 9,948,000
                  warrants to purchase shares of the Company's common stock
                  outstanding as of September 30, 2005.

         (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 expenses
                  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.

                                       12

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

2        Summary of Significant Accounting Policies (continued)

         (Q)      Recent Accounting Pronouncements

                  In December 2004, the Financial Accounting Standards Board
                  ("FASB") issued Statement of Financial Accounting Standards No
                  123, "Share-Based Payment" ("SFAS Statement 123R") which
                  replaces SFAS No 123, "Accounting for Stock-Based
                  Compensation," and supercedes APB Opinion No 25, "Accounting
                  for Stock Issued to Employees." This statement requires that
                  all share-based payments to employees be recognized in the
                  financial statements based on their fair values on the date of
                  grant. SFAS No 123R is effective as of the beginning of the
                  first interim or annual reporting period that begins after
                  December 31, 2005 and applies to all awards granted, modified,
                  repurchased or cancelled after the effective date. The Company
                  is evaluating the requirements of SFAS 123R and expects that
                  its adoption will not have a material impact on the Company's
                  consolidated results of operations and earnings per share.


3        Significant current assets and liabilities

         Included within current assets and current liabilities are the
         following significant balances:


                                     December 31,    September 30,
                                        2004              2005
        Other current assets

        Prepaid consulting          $        -       $      158,320
        Accrued royalty income            826,242           734,724
        Other current assets               35,486           155,314
                                ----------------- -----------------
                                    $     861,728    $    1,048,358
                                ================= =================



                                       13

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

4        Advances from Factor

         On October 2, 2003 Cameo Collectables Limited entered into an invoice
         factoring agreement with Arbuthnot Commercial Finance Ltd ("ACF").
         Under the agreement, the Company identified receivables that it wanted
         to factor and submitted them to ACF. Once ACF approved the receivables
         that were submitted it purchased the receivables with recourse and
         invoiced the customers direct. ACF paid 100% of the invoice amount to a
         current account on the collection date. Customers paid ACF directly.

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

         The Company accounted 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 recorded the advances received as a liability
         until the customer invoice is paid in full. In addition, the Company
         recognized the interest charge in full at the time the initial advance
         was received. The assets of Cameo Collectables Limited are pledged as
         security to Arbuthnot Commercial Finance Limited.

         The above agreements ceased on the 21 January 2005.


5        Convertible debt

         On May 6, 2005, we entered into Securities Purchase Agreements with
         four accredited investors. Pursuant to the agreements, we sold a
         principal amount of $360,000 in 12% convertible debentures and 432,000
         common stock purchase warrants for gross proceeds of $360,000. The
         debentures mature in 270 days from May 6, 2005. The debentures may
         mature earlier upon future different funding by us of any dollar amount
         equaling 15% more than amounts closed pursuant to the private
         placement. The debentures accrue interest at the rate of 12% per year,
         compounded annually, and is payable at maturity. The principal amount
         of the debentures may be converted into shares of common stock at the
         conversion price of $0.30 per share. Any conversion at or prior to
         maturity date constitutes a waiver of all accrued interest on the
         debentures. The conversion price for the debentures may be adjusted
         downward for issuances of securities by us at prices below the lower of
         $.30 per common share, or fair market value for such securities as
         determined at the time of issuance. For late payment, there will be a
         cash penalty equal to 1.5% of the outstanding principal amount of the
         debentures, compounded monthly for each month that payment in full is
         not effected, up to a maximum cash penalty equal to 9% of the
         outstanding principal amount of the debentures, and, in addition, there
         will be monthly reduction in warrant exercise price of the warrants at
         the rate of 2.5% and up to a maximum of 20% reduction in the exercise
         price. The obligations of the Company under the debentures are secured
         by security interest rights in substantially all of the Company's
         assets, to the extent not already encumbered. Each of these investors
         agreed, except upon 75 days prior written notice, it may not convert
         the debentures or exercise the warrants for shares of common stock to
         the extent that such it would cause the investor to beneficially own
         4.9% or more of our then issued and outstanding common stock. The
         warrants are exercisable for five years at $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 warrant holder is entitled to seek the registration of the
         underlying shares in registration statements filed by the Company in
         the future. We used the proceeds for general corporate purposes.

                                       14

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)


5        Convertible debt (continued)

         On August 10, 2005, we sold to one accredited investor a 10%
         convertible promissory note in the principal amount of $100,000 due
         November 8, 2005, and warrants to purchase 333,333 shares of common
         stock. Interest on the note is due at maturity. Interest is to accrue
         on the principal amount at a fixed simple rate of ten percent per year,
         calculated on the actual number of days elapsed on the basis of a 360
         day year. The principal amount and accrued interest on the note may be
         converted into shares of common stock at the conversion price of $0.30
         per share. The warrants are exercisable at a price of $0.30 per share
         until August 10, 2008. Our obligations under the note are protected by
         a subordinated lien on our intellectual property that is subordinate to
         the liens of prior lenders. We granted the investor certain piggyback
         registration rights with respect to the shares of common stock
         underlying the securities purchased, agreeing to seek registration of
         the eligible shares in a registration statement that we file at a
         future date. If we do not file a registration statement within a six
         month period, the holder is entitled to demand the filing of a
         registration statement covering the resale of the underlying shares of
         common stock. We used the proceeds for general corporate purposes.

         On August 22, 2005, we sold to one accredited investor a 10%
         convertible promissory note in the principal amount of $100,000 due
         November 21, 2005, and warrants to purchase 333,333 shares of common
         stock. Interest on the note is due at maturity. Interest is to accrue
         on the principal amount at a fixed simple rate of ten percent per year,
         calculated on the actual number of days elapsed on the basis of a 360
         day year. The principal amount and accrued interest on the note may be
         converted into shares of common stock at the conversion price of $0.30
         per share. The warrants are exercisable at a price of $0.30 per share
         until August 22, 2008. Our obligations under the note are protected by
         a subordinated lien on our intellectual property, that is subordinate
         to the liens of prior lenders. We granted the investor certain
         piggyback registration rights with respect to the shares of common
         stock underlying the securities purchased, agreeing to seek
         registration of the eligible shares in a registration statement that we
         file at a future date. If we do not file a registration statement
         within a six month period, the holder is entitled to demand the filing
         of a registration statement covering the resale of the underlying
         shares of common stock. We used the proceeds for general corporate
         purposes.



                                       15

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

6        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 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 were directors of Peak Entertainment Holdings,
         Inc. Terence Herzog is a shareholder of Peak Entertainment Holdings,
         Inc. In December 2004, Mr. Herzog and Mr. Schenkein resigned as
         directors of the Company.

         During the period the company had the following transactions with its
         related parties:

                  a)       Wilfred and Paula Shorrocks

                           As of December 31, 2004 and September 30, 2005 the
                           Company owed Wilfred and Paula Shorrocks $752,522 and
                           $551,215, respectively.

                           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 installments of $25,000
                           on January 31, 2005, May 31, 2005, September 30,
                           2005, December 31, 2005, March 31, 2006 and September
                           30, 2006 and installments of $100,000 on March 31,
                           2007 and September 30, 2007, with any balance to be
                           repaid in full on January 31, 2008.

                           Interest accrues 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.

                           License agreement

                           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
                           license fees payable and the related asset is
                           included in intangible assets.

                                       16

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)


6        Transactions with related parties (continued)

                           On February 25, 2002, the Company entered into a
                           license agreement for rights to Monsters 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 were individually entitled to a certain
                           percentage of the revenues. The Company was 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 was 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 were
                           entitled to 30% 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 revenue allocation referred to
                           revenues from character and merchandise licensing and
                           sales activities, and the allocation was to be
                           adjusted for entertainment production financing
                           terms. In October 2004, Morrison Entertainment Group
                           sent the Company a notice terminating any and all
                           agreements with the Company. On December 22, 2004,
                           the Company entered into an agreement with Morrison
                           Entertainment Group, whereby the parties dissociated
                           the Company's Monster Quest property and products
                           from Morrison Entertainment Group's Monster In My
                           Pocket property and products. Any and all agreements
                           between the parties entered into prior to December
                           22, 2004, including license agreements, were
                           terminated.

7        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 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 vested on
         July 24, 2004. POW has the right to demand registration of the shares
         of common stock underlying the warrant at the Company's expense,
         although no demand had been received at the date of this report.

         The warrants have been valued using the Black-Scholes Option Model. The
         value of the warrants that vested 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 were subject to future vesting, and
         vested on July 24, 2004, were determined at the end of each reporting
         period. The Company recorded the expense for each quarter based on the
         value of the warrants at the end of each reporting period. For the
         quarter ended June 30, 2004, the Company recorded an expense of $10,918
         related to these warrants, and for the six months ended June 30, 2004,
         the Company recorded an expense of $9,295.

         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 has been recorded as a current asset
         and has been fully amortized to earnings.

                                       17

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

7        Warrants (continued)

         On December 17, 2003, the exercise price of the warrants held by Mr.
         Kuessous was 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 was 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 was 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 has now
         fully amortized the original value of $263,983.

         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, resulting in an additional expense of $311,995, which was
         included in selling, general and administrative expenses in 2003.

         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 $215,000 principal amount of 12% convertible debentures, accrued
         interest 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, accrued interest 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 provided 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 $0.75 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 accounted for this transaction in accordance with EITF
         00-27 "Application of Issue 98-5 to Certain Convertible Instruments".
         Accordingly, the Company first allocated 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
         was used to offset the carrying value of the convertible debentures and
         accrued interest and resulted in a gain on the extinguishment of the
         debt. The Company determined that the fair value of the warrants to be
         repurchased and the beneficial conversion features at January 5, 2004
         exceeded the total consideration to be paid of $1,580,000. Accordingly,
         the Company recorded a gain on the extinguishment of the convertible
         debentures and accrued interest. In accordance with FAS 133, the
         1,000,000 shares of common stock are considered an embedded derivative
         instrument and recorded as equity.

                                       18

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

7        Warrants (continued)

         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 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 $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 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.

         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 was recorded and will be amortized over the life of the
         debt of approximately 3 years.

         During the quarter ended September 30, 2004, $541,000 of the 8%
         convertible debentures was converted at $0.30 per share into 1,805,000
         shares of common stock. A loss on conversion of $481,395 was recognized
         during that quarter.

         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
         Pricing Model and have a value of $224,988 at the date of grant. The
         value of the warrants will be amortized 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.

                                       19

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

7        Warrants (continued)

         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 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 provisions 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 has then estimated the
         intrinsic value of the beneficial conversion feature. The Company has
         determined that the intrinsic value of the beneficial conversion
         feature exceeds the face value of the debt and accordingly, the Company
         has recorded 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 September 28, 2004, the Company entered into a "Securities Purchase
         Agreement" with three accredited persons. Pursuant to the agreements,
         the Company sold 1,666,666 shares of common stock and 1,750,000 common
         stock purchase warrants, exercisable for three years at $0.50 per
         share, for an aggregate purchase price of $500,000.

         Prior to the termination date, the warrant shall be callable, under the
         circumstances described below, at the discretion of the company, for
         $0.10 per warrant. The Company's right to call shall be exercisable
         commencing upon the day following the tenth consecutive business day
         during which the Company's common stock has traded at prices of, or in
         excess of, $1.75 per share, subject to adjustment for stock splits,
         dividends, subdivisions, reclassification and the like, with weekly
         volume of such trading being in excess of the total number of shares
         represented by this warrant. In the event the Company exercises its
         right to call the warrants, the Company shall give the Holder written
         notice of such decision. In the event that the Holder does not exercise
         all or any part of the warrants or the Company does not receive the
         warrant from the Holder within 30 days from the date on the notice to
         the Holder of the Company's intension to redeem the warrant, then the
         warrant shall be deemed canceled, and the holder shall not be entitled
         to further exercise thereof or to the redemption fee.

         The value of the stock and warrants is made more difficult due to the
         call provision of the warrant, which reduces the value of the warrant.
         The Company recognizes that due to the call provision it is
         inappropriate to value the warrant using the Black-Scholes Option
         Model. The Company has calculated the fair value of the common stock at
         a price of $0.21 per share, being the trading price at September 28,
         2004. The remaining proceeds of $150,000 have been allocated as the
         value of the warrants at the date of the grant.

         On January 4, 2005, the Company entered into a consulting agreement
         with Salvani Investments, pursuant to which it issued 1,000,000
         warrants, exercisable for 5 years at $0.50 per share, in exchange for
         business consulting and investor relations services. The warrants have
         been valued using the Black-Scholes option model at a value of
         $298,831.08 at the date of grant. The value of these warrants has been
         recorded as deferred professional fees and will be amortized to
         earnings ratably over one year.

         On January 5, 2005, the Company sold to Dan Brecher 250,000 warrants,
         exercisable for three years at $0.50 per share, for $2,500. These
         warrants were valued by using the Black-Scholes option model at a value
         of $74,707.77 at the date of grant. The value of these warrants has
         been recorded as an expense to non cash legal fees.

                                       20

<PAGE>



                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

7        Warrants (continued)

         On March 1, 2005, the Company entered into a loan agreement for
         $500,000 with Tayside Trading Ltd. Pursuant to the loan agreement, the
         Company issued 500,000 warrants, exercisable for five years at $0.50
         per share, to the lender. The Company also granted the lender an option
         exercisable commencing with the date of return of the $500,000 and
         expiring two weeks thereafter, to acquire, at the purchase price of
         $100,000, (i) shares of the Company's common stock at $0.30 per share
         (333,333 shares) and (ii) warrants to purchase 200,000 shares of common
         stock, exercisable for five years at $0.50 per share. These warrants
         have been valued using the Black-Scholes option pricing model at a
         value of $184,377.11 at the date of grant. The value of these warrants
         has been recorded as an expense to non cash finance charges.

         On March 2, 2005, the Company issued 50,000 warrants, exercisable for
         five years at $0.50 per share, to Aaron M. Lasry in return for business
         consulting services. These warrants have been valued using the
         Black-Scholes option pricing model at a value of $17,438.74 at the date
         of Grant and has been recorded in non cash compensation.

8        Stockholders' Equity

         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 has recorded the value of the common stock as an
         expense, as there is no continuing benefit.

         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 Company issued 16,667 shares of common stock to Mr Ivers
         at a value of $8,333 at the date of grant. Accordingly, the Company
         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 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 has recorded the
         transaction as professional fees expensed in the quarter ended March
         31, 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.

                                       21

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

8        Stockholders' Equity (continued)

         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
         $0.50 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 which was March 10, 2004 The
         total fee of $117,744 has been offset against the proceeds of the
         offering.

         On April 28, 2004, the Company entered into an agreement with Laura
         Wellington, whereby it exchanged a debt of $250,000 owed to Ms
         Wellington for 500,000 shares of common stock. Ms Wellington had loaned
         $250,000 to the company in November 2003. The total value of the common
         stock at the date of grant was $250,000 compared with the $250,000
         carrying value of the advance, so there was no additional expense.

         On July 23, 2004, the Company entered into an agreement with Laura
         Wellington, whereby it exchanged a debt of $194,000 owed to Ms
         Wellington for 388,000 shares of common stock. The total value of the
         common stock at the date of the grant was $194,000 compared with the
         $194,000 carrying value of the debt, so there was no additional
         expense.

         On August 17, 2004, the Company issued 75,001 shares to Portfolio PR in
         connection with professional services provided. The shares had a value
         of $18,750 at the date of the grant. The Company expensed $36,000 as
         professional fees during the quarter, being the value of professional
         services received, and recognized a profit of $17,250 on issue of the
         shares.

         On September 1, 2004, the Company entered into a consultancy agreement
         with CEOcast, Inc. to provide consultancy services for a six month
         period commencing September 1, 2004, in exchange for 400,000 shares of
         common stock of the Company. These shares had a value of $44,000 at the
         date of grant.

         In April and June 2005, the Company issued 212,765 shares of restricted
         common stock to Crescent Fund, LLC in return for financial consulting
         services. These shares were valued at $96,276 based on the fair market
         value of the stock on the date of grant.

         In May 2005, the Company issued 78,397 shares of restricted common
         stock to Dan Brecher for the conversion of accrued interest.

         In June 2005, the Company issued 157,991 shares of restricted stock to
         Platinum Partners for the conversion of accrued interest on outstanding
         debentures.


9        Subsequent Events

         On October 1, 2005, we entered into a consulting agreement with
         CEOcast, Inc., pursuant to which we agreed to issue 200,000 shares of
         our common stock in connection with the agreement, and 182,000 shares
         of common stock in connection with balance due under a prior agreement
         with CEOcast dated September 1, 2004. The agreement is for a term of
         six months.

                                       22

<PAGE>

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               September 30, 2005
                                   (Unaudited)

9        Subsequent Events  (continued)

         In October 2005, we sold to three accredited investors 30,000 units of
         our securities for $300,000. Each unit, at a price of $10,000, consists
         of: (i) a 12% $10,000 convertible debenture, convertible into shares of
         common stock at $0.30 per share, and (ii) warrants to purchase 25,000
         shares of the Company's common stock. Interest on the principal amount
         of the debenture will accrue at the simple interest rate of 12% per
         year computed on the basis of a 360 day year. Interest is payable at
         maturity in cash. The debenture will mature in 18 months from issue,
         unless earlier due. The debentures are secured by assets of our
         company, to the extent not already encumbered. We agreed not to grant
         any other person, after the closing upon the private placement pursuant
         to which the units were offered, a priority security interest in its
         assets for so long as the debentures remain outstanding, except with
         the consent of 2/3 of the outstanding face amount of holders of the
         debentures. Consent of a two-thirds majority of the holders of our
         debentures will be required for (i) any sale by the company of
         substantially all of our assets unless the proceeds of such sale are
         used to repay the debentures, (ii) any merger of the company with
         another entity, where we are not the surviving corporation, unless as
         part of such transaction the debentures will be repaid, or (iii)
         certain other actions materially affecting the debentures that require
         approval of the debenture holders under the corporations laws of the
         State of Nevada. The warrants will be exercisable for a period of five
         years into shares of common stock at $0.30 per share. We granted the
         investor certain piggyback registration rights with respect to the
         shares of common stock underlying the warrants purchased, agreeing to
         seek registration of the eligible shares in a registration statement
         that we file at a future date. We used the proceeds for general
         corporate purposes.




                                       23

<PAGE>

ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
           RESULTS OF OPERATIONS

                          "FORWARD-LOOKING" INFORMATION

This report on Form 10-QSB 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

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

We have not generated significant revenues in this period because we had not yet
funded the television shows upon which we plan our exploitation of the related
intellectual rights portfolio. Our ability to convert current negotiations to
executed contracts is dependent upon such progress with the television shows. We
have delayed the production of the associated toys and merchandise for the
television shows, and this has compromised our ability to generate sales in
these areas.

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, 2004.

With limited available capital, we have produced initial episodes of our planned
television shows and we believe that we will now be viewed more favorably by
potential capital sources and believe that we should have better success in
raising much needed capital to fund full production of the planned television
shows.

Further, we have diversified the way in which we seek to finance some of our
television show production budgets, and during this year we have focused on
third party co-production financing. The delay in obtaining from, and limited
capital provided by, third party co-production financiers has delayed our
planned production timetable, but has been successful in significantly reducing
the internal cash expenditure of Peak.

We have entered into an agreement with Maverick Entertainment Group Plc., and
have certain exploitation rights to certain of its intellectual property: Muffin
the Mule and Snailsbury Tails, both of which the British Broadcasting
Corporation commissioned television episodes. Peak expects to exploit these
television shows aggressively in 2005 and anticipate increased revenues via
their licensing and manufacturing divisions as a result. We, and third party
financiers, have financed over $1,600,000 for the production of The Wumblers,
and we are expecting to finance the balance of the production budget
($1,900,000) with the support of Silly Goose Company and third parties.

The Wumblers has been licensed to 4Kids Entertainment LLC for broadcast, home
entertainment (video/DVD), licensing and merchandising rights in the United
States, and we expect to utilize 4Kids Entertainment's prominence in the
industry to market and promote The Wumblers.

We have still yet to raise the requisite capital for the television shows in
order to complete production in earnest and it is still a factor that until we
raise sufficient capital to produce the planned television shows, we do not
expect to generate any significant revenues from any of our lines of business.
If we are is unable to raise capital to produce its television shows, we intend
to alter our business plan to focus on licensing our intellectual property to
third parties, and on the sale of toys and consumer goods.

                                       24

<PAGE>

Business

Our 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, we have not generated significant revenues and we will require
substantial working capital to execute our business plan.

Our current business plan is centered on the production of television shows
geared for the children's entertainment market. Once our planned television
shows are produced, we believe that we will be able to generate revenue through
the sale of broadcast rights of those shows. We also intend to license
intellectual property rights created from the television shows and offer for
sale merchandise related to the television shows.

Until we raise sufficient capital to produce our planned television shows, we do
not expect to generate any significant revenues from any of our lines of
business. If we are unable to raise capital to produce our planned television
shows, we intend to alter our business plan to focus on licensing intellectual
property to third parties, and on the sale of toys and other consumer goods.


RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED
SEPTEMBER 30, 2005 AND 2004

Revenues

Consolidated net revenues increased 340% to $1,090,688 and 216% to $437,908 for
the nine months and three months ended September 30, 2005 as compared to 2004.

In 2004 and continued into 2005, we were primarily focused on the raising of
capital, and the sales of inventory along with products launched in 2003 that
were short-term cash generating projects. Our intention is to begin aggressively
marketing toy products associated with television projects once adequate
financing has been obtained for the production of the television shows. We have
negotiated various representation agreements with licensees, and attended
worldwide trade shows and retail presentations to raise the profile of our
products in order to seed the markets in anticipation of the television show
launches.

We are still in the early production stages of two television shows, and we
expect to remain in the production stages of the shows through 2005 and into
2006. Until we have completed production of the shows and are in a position to
generate revenues from the sales of broadcast rights for the shows, we do not
have an adequate basis for projecting revenues, nor identifying trends or
demands. This applies for all main lines of our business, as our business plan
is centered around the television shows.

Cost of Revenue

For the nine and three months ended September 30, 2005 cost of revenues was
$191,926 and $76,743, respectively, as compared to $186,332 and $101,418 for the
same periods in 2004. Cost of revenues as a percentage of revenues decreased to
18% for the nine and three months ended September 30, 2005, respectively, as
compared to 75% and 73% for the same periods in 2004. Cost of revenue is
primarily made up of inventory, transport and royalties due on licenses.

We anticipate that our cost of revenue with respect to income from entertainment
and consumer products will increase significantly in 2005 as we enter into the
production stages of more television show episodes and increased marketing
efforts for the sale of consumer goods. It is anticipated that the cost of
revenue for our television shows will initially increase in relation to 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 entertainment comprise mostly of non-recurring episode production
costs, we expect such costs to 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.

                                       25

<PAGE>

Operating Expenses

Selling, General and Administrative Expenses. Selling, general and
administrative costs were $1,811,702 and $641,973 for the nine and three months
ended September 30, 2005, respectively, compared to $2,104,581 and $505,452 for
the nine and three months ended June 30, 2004. Selling, general and
administrative costs decreased by 14% for the nine ended September 30, 2005,
respectively, as compared to the - nine months ended June 30, 2004. This decline
represents management focus on controlling spending. The significant and
noteworthy expenses were principally costs incurred from legal, accounting and
other professional services related to the ongoing SEC filings and investment
within the company. Such costs have been a significant factor affecting the
business operations at a time when we lack sufficient revenues from operations
to finance the production of our television shows and rely upon financing from
third parties. We will continue to incur such expenses in 2005 as the company is
in the financing stages of its animation projects and general investment into
the company. We anticipate that expenses for legal, accounting and other
professional services will continue to be a significant factor during 2005, due
to our continuing need to raise capital and our securities law reporting
obligations as a publicly-held company.

Non-cash expense

Non cash expense for the nine and three months ended September 30, 2005 was
$1,854,127 and $431,990, respectively, as compared to $339,392 and $87,136 for
the same periods in 2004, an increase of $1,514,735 and $1,486,873. The increase
in non cash expense is primarily related to the Company increased efforts to
raise capital for its operations.


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 rely on short-term outside funding to meet our short-term liquidity needs, as
the internal cash flows generated by sales of our toys and gift products have
been insufficient to fully meet our short-term liquidity needs. We anticipate
that in fiscal year 2006, we will be in position to meet our short-term and
long-term liquidity needs through the internal cash flows generated from
broadcast sales from our current entertainment projects, Monster Quest and The
Wumblers, which are scheduled for production in late 2005 to early 2006. 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.

                                       26
<PAGE>

Sources and Uses of Cash

To date, the Company has financed its operations primarily through the sale of
equity securities and debt. At September 30, 2005, we had no cash and used
approximately $521,000 to fund our operations and net loss for the nine months
ended September 30, 2005. The Company's consolidated financial statements for
December 31, 2004 had been prepared on the assumption that the Company will
continue as a going concern. The Company's independent auditors issued there
audit report for the December 31, 2004 financial statements dated May 16, 2005
that includes an explanatory paragraph stating that the Company's recurring
losses and accumulated deficit, among other things, raised substantial doubt
about the Company's ability to continue as a going concern. The Company's
historical sales have never been sufficient to cover its expenses and it has
been necessary to rely upon financing from the sale of equity securities and
debt to sustain operations. The Company's ultimate future capital requirements
will depend on many factors, including cash flow from operations, customer
acquisition, and the Company's ability to successfully market its products.

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 Quest. 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 Operating Activities

For the nine months ended September 30, 2005, cash flows from operating
activities resulted in negative cash flows of $521,000. The net loss of
$3,382,662, increase in accounts receivable by $403,981 and other assets by
$186,630 were offset by non-cash charges of $3,076,000 for depreciation,
amortization of intangible assets, amortization of discount on debentures,
non-cash professional and consulting fees.

         Sources and Uses of Cash from Investing Activities

Cash flows from investing activities resulted in positive cash flows of
approximately $396,000 for the nine months ended September 30, 2005, as compared
to cash used of $895,000 in 2004. In the nine months ended September 30, 2005 we
raised $560,000 of cash from debt and purchased $36,000 in equipment and
$128,000 to purchase intangibles. In 2005, our focus will be on production and
investment in new product licenses from third parties. We may expend significant
resources in investing activities in 2005.

         Sources and Uses of Cash from Financing Activities

Cash flows from financing activities resulted in positive cash flows of $8,000
for the nine months ended September 30, 2005, compared to same period in 2004 of
negative $263,000. In 2005, we intend to continue to rely upon capital raised
from third party investors in private placements to fund our operations, as well
as any entertainment production financing partners we can obtain. Entertainment
production financing partners will share in the proceeds of the sale of the
produced product.

In 2005, we intend 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 we can obtain. Entertainment
production financing partners will share in the proceeds of the sale of the
produced product.

                                       27

<PAGE>

Sales of Securities in 2005

On January 29, 2004, we entered into a Securities Purchase Agreement with an
individual investor. 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 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 to another
interest payment period, or cause us to issue common stock in exchange for
interest. We used the proceeds for working capital purposes. On January 26,
2005, the investor converted these $50,000 in debentures, plus $4,000 in accrued
interest, into an aggregate of 180,000 shares.

On May 6, 2005, we entered into Securities Purchase Agreements with four
accredited investors. Pursuant to the agreements, we sold a principal amount of
$360,000 in 12% convertible debentures and 432,000 common stock purchase
warrants for gross proceeds of $360,000. The debentures mature in 270 days from
May 6, 2005. The debentures may mature earlier upon future different funding by
us of any dollar amount equaling 15% more than amounts closed pursuant to the
private placement. The debentures accrue interest at the rate of 12% per year,
compounded annually, and is payable at maturity. The principal amount of the
debentures may be converted into shares of common stock at the conversion price
of $0.30 per share. Any conversion at or prior to maturity date constitutes a
waiver of all accrued interest on the debentures. The conversion price for the
debentures may be adjusted downward for issuances of securities by us at prices
below the lower of $.30 per common share, or fair market value for such
securities as determined at the time of issuance. For late payment, there will
be a cash penalty equal to 1.5% of the outstanding principal amount of the
debentures, compounded monthly for each month that payment in full is not
effected, up to a maximum cash penalty equal to 9% of the outstanding principal
amount of the debentures, and, in addition, there will be monthly reduction in
warrant exercise price of the warrants at the rate of 2.5% and up to a maximum
of 20% reduction in the exercise price. The obligations of the Company under the
debentures are secured by security interest rights in substantially all of the
Company's assets, to the extent not already encumbered. Each of these investors
agreed, except upon 75 days prior written notice, it may not convert the
debentures or exercise the warrants for shares of common stock to the extent
that such it would cause the investor to beneficially own 4.9% or more of our
then issued and outstanding common stock.

On August 10, 2005, we sold to one accredited investor a 10% convertible
promissory note in the principal amount of $100,000 due November 8, 2005, and
warrants to purchase 333,333 shares of common stock. Interest on the note is due
at maturity. Interest is to accrue on the principal amount at a fixed simple
rate of ten percent per year, calculated on the actual number of days elapsed on
the basis of a 360 day year. The principal amount and accrued interest on the
note may be converted into shares of common stock at the conversion price of
$0.30 per share. The warrants are exercisable at a price of $0.30 per share
until August 10, 2008. The obligations of the Company under the note are
protected by a subordinated lien on our intellectual property, that is
subordinate to the liens of prior lenders. We used the proceeds for general
corporate purposes.

On August 22, 2005, we sold to one accredited investor a 10% convertible
promissory note in the principal amount of $100,000 due November 21, 2005, and
warrants to purchase 333,333 shares of common stock. Interest on the note is due
at maturity. Interest is to accrue on the principal amount at a fixed simple
rate of ten percent per year, calculated on the actual number of days elapsed on
the basis of a 360 day year. The principal amount and accrued interest on the
note may be converted into shares of common stock at the conversion price of
$0.30 per share. The warrants are exercisable at a price of $0.30 per share
until August 22, 2008. The obligations of the Company under the note are
protected by a subordinated lien on our intellectual property, that is
subordinate to the liens of prior lenders. We used the proceeds for general
corporate purposes.

                                       28

<PAGE>

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 cash flow
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 its report dated May 16, 2005, the independent registered public accounting
firm stated that our financial statements for the year ended December 31, 2004
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.

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

      o     seeking institutional investors for equity investments;
      o     complete 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 sales of
            consumer products and pre-sales on our projects in development;
      o     renegotiate payments terms of existing contractual obligations;
      o     develop co-production financing opportunities for our entertainment
            projects;
      o     consider third-party licensing alliances for the products in our
            entertainment division; and
      o     seek acquisition and partnership opportunities with third party
            companies to expand our fully integrated media business.

To address these issues, in 2005, we have entered into agreements with various
investment banking companies to assist us in raising capital. We have entered
into a preliminary agreement with Maverick Entertainment Plc, and expect to
enter into more formal discussions about potentially combining our businesses
during 2005. We anticipate increased revenues from having our first completed TV
series to exploit later in 2005 with Muffin the Mule. Further, we expect to
generate pre-sales from the Wumblers in the second half of 2005 as the show is
slated to launch in the US and other international territories in early 2006.

                                       29

<PAGE>

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.

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.

(1)   Revenue Recognition.

Revenue 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).

                                       30
<PAGE>

RECENT ACCOUNTING PRONOUNCEMENTS

In December 2004, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No 123, "Share-Based Payment" ("SFAS
Statement 123R") which replaces SFAS No 123, "Accounting for Stock-Based
Compensation," and supersedes APB Opinion No 25, "Accounting for Stock Issued to
Employees." This statement requires that all share-based payments to employees
be recognized in the financial statements based on their fair values on the date
of grant. SFAS No 123R is effective as of the beginning of the first interim or
annual reporting period that begins after December 31, 2005 and applies to all
awards granted, modified, repurchased or cancelled after the effective date. The
Company is evaluating the requirements of SFAS 123R and expects that its
adoption will not have a material impact on the Company's consolidated results
of operations and earnings per share.

In December 2004, the FASB issued SFAS No 153, "Exchanges of Nonmonetary Assets
- an Amendment of APB Opinion No 29" (SFAS 153). SFAS 153 eliminates the
exception for nonmonetary exchanges of similar productive assets and replaces it
with a general exception for exchanges of nonmonetary assets that do not have
commercial substance. SFAS 153 is effective for fiscal years beginning after
June 15, 2005 and is required to be adopted by the Company in the first quarter
of 2006. The Company does not believe that the adoption of SFAS 153 will have a
material impact on the Company's consolidated results of operations or financial
condition.















                                       31

<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and
Principal Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) or Rule 15a-15(e) of the
Exchange Act) as of the end of the period covered by this report. Based on that
evaluation, our Chief Executive Officer and Principal Financial Officer
concluded that our disclosure controls and procedures, as of the end of the
period covered by this report, are effective in providing reasonable assurance
that the information required to be disclosed in this report has been recorded,
processed, summarized and reported, on a timely basis, as of the end of the
period covered by this report, and that our disclosure controls and procedures
are also effective to ensure that information required to be disclosed in the
reports we file under the Exchange Act is accumulated and communicated to our
management, including our principal executive officer and principal financial
officer, to allow timely decisions regarding required disclosure.

There was no change in our internal control over financial reporting (as defined
in Rule 13a-15(f) of the Exchange Act) that occurred during the third quarter of
fiscal year 2005 ended September 30, 2005 that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.





















                                       32

<PAGE>

                           PART II. OTHER INFORMATION

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On August 10, 2005, we sold to one accredited investor a 10% convertible
promissory note in the principal amount of $100,000 due November 8, 2005, and
warrants to purchase 333,333 shares of common stock. Interest on the note is due
at maturity. Interest is to accrue on the principal amount at a fixed simple
rate of ten percent per year, calculated on the actual number of days elapsed on
the basis of a 360 day year. The principal amount and accrued interest on the
note may be converted into shares of common stock at the conversion price of
$0.30 per share. The warrants are exercisable at a price of $0.30 per share
until August 10, 2008. Our obligations under the note are protected by a
subordinated lien on our intellectual property, that is subordinate to the liens
of prior lenders. We granted the investor certain piggyback registration rights
with respect to the shares of common stock underlying the securities purchased,
agreeing to seek registration of the eligible shares in a registration statement
that we file at a future date. If we do not file a registration statement within
a six month period, the holder is entitled to demand the filing of a
registration statement covering the resale of the underlying shares of common
stock. We used the proceeds for general corporate purposes. 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 August 22, 2005, we sold to one accredited investor a 10% convertible
promissory note in the principal amount of $100,000 due November 21, 2005, and
warrants to purchase 333,333 shares of common stock. Interest on the note is due
at maturity. Interest is to accrue on the principal amount at a fixed simple
rate of ten percent per year, calculated on the actual number of days elapsed on
the basis of a 360 day year. The principal amount and accrued interest on the
note may be converted into shares of common stock at the conversion price of
$0.30 per share. The warrants are exercisable at a price of $0.30 per share
until August 22, 2008. Our obligations under the note are protected by a
subordinated lien on our intellectual property, that is subordinate to the liens
of prior lenders. We granted the investor certain piggyback registration rights
with respect to the shares of common stock underlying the securities purchased,
agreeing to seek registration of the eligible shares in a registration statement
that we file at a future date. If we do not file a registration statement within
a six month period, the holder is entitled to demand the filing of a
registration statement covering the resale of the underlying shares of common
stock. We used the proceeds for general corporate purposes. 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 October 1, 2005, in a transaction deemed to be exempt from registration under
the Securities Act in reliance on Section 4(2) of the Securities Act as
transactions by an issuer not involving a public offering, we entered into a
consulting agreement with CEOcast, Inc., pursuant to which we agreed to issue
200,000 shares of our common stock in connection with the agreement, and 182,000
shares of common stock in connection with balance due under a prior agreement
with CEOcast dated September 1, 2004. The agreement is for a term of six months.

In October 2005, we sold to three accredited investors 30,000 units of our
securities for $300,000. Each unit, at a price of $10,000, consists of: (i) a
12% $10,000 convertible debenture, convertible into shares of common stock at
$0.30 per share, and (ii) warrants to purchase 25,000 shares of the Company's
common stock. Interest on the principal amount of the debenture will accrue at
the simple interest rate of 12% per year computed on the basis of a 360 day
year. Interest is payable at maturity in cash. The debenture will mature in 18
months from issue, unless earlier due. The debentures are secured by assets of
our company, to the extent not already encumbered. We agreed not to grant any
other person, after the closing upon the private placement pursuant to which the
units were offered, a priority security interest in its assets for so long as
the debentures remain outstanding, except with the consent of 2/3 of the
outstanding face amount of holders of the debentures. Consent of a two-thirds
majority of the holders of our debentures will be required for (i) any sale by
the company of substantially all of our assets unless the proceeds of such sale
are used to repay the debentures, (ii) any merger of the company with another
entity, where we are not the surviving corporation, unless as part of such
transaction the debentures will be repaid, or (iii) certain other actions
materially affecting the debentures that require approval of the debenture
holders under the corporations laws of the State of Nevada. The warrants will be
exercisable for a period of five years into shares of common stock at $0.30 per
share. We granted the investor certain piggyback registration rights with
respect to the shares of common stock underlying the warrants purchased,
agreeing to seek registration of the eligible shares in a registration statement
that we file at a future date. We used the proceeds for general corporate
purposes. 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.

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<PAGE>

ITEM 5. OTHER INFORMATION

We entered into a license agreement dated February 1, 2005 with Color Media
International. 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 Serbia and Montenegro. We are to receive royalties of 5% of
the net sales price. The minimum guaranteed royalty is UK (pounds) 10,000 plus
VAT, payable quarterly over the term of the license. The license expires on
January 31, 2007.

We entered into a license agreement dated April 20, 2005 with Character Options
Ltd. Under the agreement, we licensed the right to Muffin The Mule intellectual
property for use in connection with the sale of toy products, not yet specified.
The license territory is the United Kingdom, Channel Islands, and Ireland. We
are to receive royalties of 10% of the sales price. The minimum guaranteed
royalty is UK (pounds) 100,000. The license period is for three years.

We entered into a license agreement dated July 2005 with Future Publishing
Limited. Under the agreement, we licensed the right to Muffin The Mule
intellectual property for use in connection with the sale of a magazine. The
license territory is the United Kingdom, Ireland, Northern Ireland, Channel
Islands, and the Isle of Man. We are to receive royalties of 6% of the cover
price less VAT on sales of the magazine after the first six issues. The minimum
guaranteed royalty is UK (pounds) 22,500 plus VAT payable in five installments,
with the first installment payable at the time of the publication of the seventh
issue and payable quarterly thereafter. The license period is for two years from
the first publication date.

We entered into a Television License Agreement dated July 11, 2005with HOP!
Channel Ltd. for the broadcast of 52 eleven minute episodes (9.5 hours) of The
Wumblers on cable and satellite television. The territory is Israel. The license
fee per hour is USD $400, or a total license fee of USD $3,800. The license
period is for four years from January 1, 2006.

We entered into a license agreement dated August 16, 2005 with Martin Yaffe
International Ltd. Under the agreement, we licensed the right to Muffin The Mule
intellectual property for use in connection with the sale of rocking horse and
stick horse toys. The license territory is the United Kingdom and Ireland. We
are to receive royalties of 10% of the net sales price or 12% of F.O.B. price.
The minimum guaranteed royalty is UK (pounds) 7,500 plus VAT payable quarterly
over the term of the license. The license expires on December 31, 2007.

We entered into a license agreement dated September 1, 2005 with Toontastic
Publishing Ltd. This is a renewal of an earlier 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 Ireland. We are to
receive royalties of 4% of the net sales price and 5% of Toontastic purchase
price on covermounts manufactured by a third party of Pretty Pony Club toys.
There is no minimum guaranteed royalty under the renewed license. The license
expires on August 31, 2006.

We entered into a license agreement, dated September 1, 2005, with Fun2Learn
Ltd. Under the agreement, we licensed the right to Muffin The Mule intellectual
property for use in connection with children's coin operated rides. The license
territory is the United Kingdom. We are to receive royalties of UK (pounds) 100
per unit. The minimum guaranteed royalty is UK (pounds) 2,000 plus VAT payable
quarterly over the term of the license. The license expires on December 31,
2007.

The staff of the Division of Corporation Finance of the Securities and Exchange
Commission issued comments on June 9, 2005 to the Company in connection with its
review of the Company's Annual Report on Form 10-KSB/A for the year ended
December 31, 2004 filed on May 16, 2005. Based on these comments and discussions
with the Commission, and after consultation with the Company's independent
registered public accounting firm, the Company's management recommended, and its
Board of Directors determined on June 24, 2005, that it will restate its
financial statements for the year ended December 31, 2004. As a result, the
financial statements issued by the Company for the year ended December 31, 2004
should no longer be relied upon. The Company's determination to restate these
previously issued financial statements stems from comments from the Commission
requesting information related to (i) the accounting of pre-production labor
costs, and (ii) the nature, source, and basis for measurement of foreign
exchange gain (loss). The Company is working with its independent auditors to
complete the review of the accounting matters and quantify the impact on the
financial statements that were previously filed. The Company does not believe
that the changes will materially adversely affect the Company's results of
operation for the year ended December 31, 2004. Once this review is complete,
the Company will restate its 2004 year end financial statements. The Company
expects to complete its review of this matter shortly.


                                       34
<PAGE>

ITEM 6. EXHIBITS

The following exhibits are filed with this report:

Exhibit Number    Description of Exhibit
--------------    ----------------------

4.1               Form of Securities Purchase Agreement, May 2005 (Incorporated
                  by reference to Exhibit 4.1 of Form 8-K filed on July 15,
                  2005)
4.2               Securities Purchase Agreement, August 10, 2005 (Incorporated
                  by reference to Exhibit 4.2 of Form 10-QSB filed on August 17,
                  2005)
4.3*              Securities Purchase Agreement, August 22, 2005
4.4*              Form of Agreements related to sale of Units of Securities,
                  October 2005
10.1*             License Agreement with Color Media International, dated
                  February 1, 2005
10.2*             License Agreement with Character Options Ltd., dated April 20,
                  2005
10.3*             License Agreement with Future Publishing Limited, July 2005
10.4*             Television License Agreement with HOP! Channel Ltd., dated
                  July 11, 2005
10.5*             License Agreement with Martin Yaffe International Ltd, dated
                  August 16, 2005
10.6*             License Agreement with Toontastic Publishing Ltd., Renewal,
                  dated September 1, 2005
10.7*             License Agreement with Fun2Learn Ltd., dated September 1, 2005
10.8*             Consultant Agreement with CEOcast, October 1, 2005
11                Statement re: computation of per share earnings is hereby
                  incorporated by reference to "Financial Statements" of Part I
                  - Financial Information, Item 1 - Financial Statements,
                  contained in this Form 10-QSB.
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 18 U.S.C.
                  Section 1350
32.2*             Certification of Principal Financial Officer Pursuant to 18
                  U.S.C. Section 1350
---
* Filed herewith.









                                       35

<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                         PEAK ENTERTAINMENT HOLDINGS, INC.


Dated:  November 21, 2005                By:  /s/ WILFRED SHORROCKS
                                              ---------------------
                                         Wilfred Shorrocks,
                                         Chairman and Chief Executive Officer



Dated:  November 21, 2005                By:  /s/ NICOLA YEOMANS
                                              ------------------
                                         Nicola Yeomans
                                         Principal Financial Officer















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