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

                                  FORM 10-QSB/A
                                (Amendment No. 2)
                                   (Mark One)

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

                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003

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

             For the transition period from ________ to ___________.

                       Commission file number: 33-18143-D

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

         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) (Zip Code)

                                 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 Securities Exchange Act of 1934 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 [ ]

The number of shares outstanding of the Issuer's common stock at $.001 par value
as of June 30, 2003 was 21,190,760.

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


<PAGE>


                                         PEAK ENTERTAINMENT HOLDINGS, INC.
                                                 AND SUBSIDIARIES

                                                   FORM 10-QSB/A
                                        FOR THE QUARTER ENDED JUNE 30, 2003


<TABLE>
<CAPTION>
                                TABLE OF CONTENTS
                                                                                                          Page

<S>                                                                                                        <C>
Introductory Statement                                                                                     3

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements                                                                              4

         Consolidated Balance Sheets                                                                       4
         Consolidated Statements of Operations                                                             5
         Consolidated Statements of Comprehensive Loss                                                     6
         Consolidated Statements of Cash Flows                                                             7
         Notes to Consolidated Financial Statements                                                        8

Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations            20
Item 3.  Controls and Procedures                                                                          33

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                                                34
Item 2.  Changes in Securities and Use of Proceeds                                                        34
Item 3.  Defaults Upon Senior Securities                                                                  34
Item 4.  Submission of Matters to a Vote of Security Holders                                              34
Item 5.  Other Information                                                                                35
Item 6.  Exhibits and Reports on Form 8-K                                                                 36

Signatures                                                                                                37
</TABLE>


                                       2
<PAGE>


                             INTRODUCTORY STATEMENT

RECENT DEVELOPMENTS

Prior to April 2003, our corporate name was Palladium Communications Inc. and we
conducted a telecommunications business.

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

On April 22, 2003, we acquired the business of Peak Entertainment Ltd., a United
Kingdom company, by acquiring all of the outstanding shares of Peak
Entertainment Ltd. in a transaction viewed as a reverse acquisition. We
exchanged 19,071,684 shares of our common stock for all of the shares of Peak
Entertainment Ltd. in a transaction viewed as a reverse acquisition. The shares
issued to the holders of Peak Entertainment Ltd. constituted 90 percent of our
outstanding shares. At the closing of the reverse acquisition, we appointed the
principals of Peak Entertainment, Ltd., as officers and directors of our
company, and our former directors and officers resigned.

On May 14, 2003, we changed our corporate name to Peak Entertainment Holdings,
Inc.

BUSINESS OVERVIEW

We develop, market and sell entertainment and consumer products focused on the
children's media and leisure market. 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 it will require substantial working capital to execute its 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.


                                       3
<PAGE>


Part I - FINANCIAL INFORMATION

Item 1.  FINANCIAL STATEMENTS

Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                             December 31, 2002   June 30, 2003
                                                                                                  Unaudited
Assets

Current Assets

<S>                                                                               <C>            <C>
Cash and cash equivalents .....................................................   $     9,870    $    91,047
Accounts receivable ...........................................................        63,341        177,062
Inventories ...................................................................       238,058        243,294
Other current assets ..........................................................          --          269,121
                                                                                  -----------    -----------
Total current assets ..........................................................   $   311,269    $   780,524

Plant and equipment, net ......................................................       136,538        154,495
Intangible assets, net of amortization ........................................     1,984,159      2,020,462
                                                                                  -----------    -----------
                                                                                  $ 2,431,966    $ 2,955,481
                                                                                  ===========    ===========
Liabilities and Stockholders' Equity/(Deficit)

Current Liabilities

Short term borrowings .........................................................   $   264,600    $   323,216
Advances from factor ..........................................................          --            7,126
Accounts payable ..............................................................       578,835      1,016,327
Stockholders' advances account ................................................       894,193        824,937
License fees payable ..........................................................       300,000        378,343
Other accrued liabilities .....................................................       233,316        627,559
                                                                                  -----------    -----------
Total current liabilities .....................................................   $ 2,270,944    $ 3,177,508

Long Term Liabilities

License fees payable ..........................................................     1,200,000      1,213,474
Convertible debentures ........................................................                      359,048
                                                                                  -----------    -----------
Total long term liabilities ...................................................   $ 1,200,000    $ 1,572,522

Stockholders' Equity (deficit)

Common stock, par value $0.001 - 900,000,000 shares authorized,  19,071,684 and
21,190,760 issued and outstanding .............................................   $    19,075    $    21,197
Additional paid in capital ....................................................       (19,072)       555,313
Retained earnings (deficit) ...................................................      (967,451)    (2,244,579)
Other comprehensive income ....................................................       (71,530)      (126,480)
                                                                                  -----------    -----------
Total stockholders' equity (deficit) ..........................................    (1,038,978)    (1,794,549)
                                                                                  -----------    -----------
                                                                                  $ 2,431,966    $ 2,955,481
                                                                                  ===========    ===========
</TABLE>



See accompanying notes to consolidated financial statements


                                       4
<PAGE>


Consolidated Statements of Operations (Unaudited)

<TABLE>
<CAPTION>
                                        3 months ended  3 months ended  6 months ended  6 months ended
                                        June 30, 2002   June 30, 2003    June 30, 2002   June 30, 2003
<S>                                     <C>             <C>              <C>             <C>
Revenue

  Character related consumer products            --            99,738            --          328,114
   Licensing arrangements ............           --            19,734            --           47,627
                                         ------------    ------------    ------------    -----------
Net revenue ..........................           --           119,472            --          375,741

Cost of Revenue
   Cost of goods sold ................           --            97,656            --          247,229
                                         ------------    ------------    ------------    -----------
Total cost of revenue ................           --            97,656            --          247,229

Gross profit .........................           --            21,816            --          128,512

Operating expenses
   Selling, general and administrative        179,635         730,964         330,259      1,122,848
   Depreciation and amortisation .....         13,699          41,951          13,699         80,180
                                         ------------    ------------    ------------    -----------
Total operating expenses .............        193,334         772,915         343,958      1,203,028
                                         ------------    ------------    ------------    -----------

Loss from operations .................       (193,334)       (751,099)       (343,958)    (1,074,516)

Foreign exchange gain ................         84,565          65,619          84,565         31,834

Interest expense .....................           --          (212,224)           --         (226,539)
                                         ------------    ------------    ------------    -----------
Net loss .............................   $   (108,769)   $   (897,704)   $   (259,393)   $(1,269,221)
                                         ============    ============    ============    ===========


Basic and diluted net loss per share .   $      0.006    $      0.043    $      0.014    $     0.061

Weighted average common shares
 outstanding .........................     19,071,684      20,701,742      19,071,684     20,678,456
                                         ============    ============    ============    ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       5
<PAGE>


Consolidated Statements of Comprehensive Loss (Unaudited)


<TABLE>
<CAPTION>
                                        3 months ended  3 months ended  6 months ended  6 months ended
                                        June 30, 2002   June 30, 2003    June 30, 2002   June 30, 2003
<S>                                     <C>             <C>              <C>             <C>


Net loss ........................        $   (108,769)   $   (897,704)      $(259,393)   $ (1,269,221)

Cumulative translation adjustment             (18,815)        (84,384)        (18,148)       (126,480)
                                         ------------    ------------    ------------    ------------
Comprehensive loss ..............        $   (127,584)   $   (982,088)   $   (277,541)   $ (1,395,701)
                                         ============    ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       6
<PAGE>


<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (Unaudited)

                                                               Six months ended June 30
                                                               ------------------------
                                                                   2002        2003
                                                               -----------    ---------
<S>                                                             <C>           <C>
Cash flows from operating activities:

Net loss                                                        $ (259,393) $(1,269,221)
Adjustments to reconcile net loss to net cash used
 in operating activities:

Depreciation ...............................................          --          2,796
Amortization of intangible assets ..........................        13,699       77,384
Foreign exchange gain ......................................       (84,565)     (31,834)
Amortization of discount on debentures .....................          --        150,548
Changes in working capital:

Accounts receivable ........................................          --       (112,135)
Inventories ................................................       (46,444)        (738)
Other current assets .......................................       (28,303)     (44,322)
Accounts payable and other accrued liabilities .............       158,780      857,278
                                                               -----------    ---------
Net cash used in operating activities ......................      (246,226)    (370,244)
                                                               ===========    =========
Cash flows from investing activities:

Purchase of plant and equipment ............................      (111,410)     (19,840)
Purchase of intangibles ....................................      (250,455)     (54,958)
                                                               -----------    ---------
Net cash used in investing activities ......................      (361,865)     (74,798)
                                                               ===========    =========
Cash flows from financing activities:

Short term borrowings, net .................................          --         51,976
Stockholders' advances account, net.........................       648,368      (97,396)
Advances from factor, net...................................          --          7,126
Convertible debentures .....................................          --        550,000
                                                                -----------    ---------

Net cash provided from financing activities ................       648,368      511,706
                                                               ===========    =========
Cumulative translation adjustment ..........................        20,217       14,513
                                                               ===========    =========
Increase in cash and cash equivalents ......................        20,060       81,177
Cash and cash equivalents, beginning of period .............          --          9,870
                                                               -----------    ---------
Cash and cash equivalents, end of period ...................   $    20,060    $  91,047
                                                               ===========    =========
Supplemental disclosure of cash flow information
Interest paid ..............................................   $      --      $      29
                                                               ===========    =========
Purchase of licenses through issuance of long
term liabilities ...........................................   $ 1,400,000    $   8,252
                                                               ===========    =========
Accounting for reserve acquisition .........................          --      $ 208,500
                                                               ===========    =========
</TABLE>

See accompanying notes to consolidated financial statements


                                       7
<PAGE>


Notes to consolidated financial statements


1     Description of Business and Future Prospects

      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 a property from concept to
      consumer, in-house, controlling and coordinating broadcast, promotions and
      product launches (toys, apparel, video games, etc.) to build market
      momentum and worldwide brand quality.

      The accompanying financial statements have been prepared assuming that the
      company will continue as a going concern. As explained below the Company
      has sustained recurring operating losses and has a net capital deficiency
      as of June 30, 2003. On April 22, 2003, the Company completed a reverse
      acquisition with a public shell and has become a public company with
      access to the US capital markets. Immediately following the reverse
      acquisition, the Company issued $785,000 in convertible debentures and
      warrants to purchase 1,570,000 shares of the company's common stock. The
      Company received $300,000 at the time of issuance of the debentures and
      warrants and has since received the balance.

      The Company has developed a business plan to increase revenue by
      capitalizing on its integrated media products. However, the Company must
      obtain funds from outside sources in fiscal 2003 to provide needed
      liquidity and successfully implement its business plan. Presently, the
      Company has no firm commitments from outside sources to provide these
      funds. These factors raise substantial doubt about the Company's ability
      to continue in existence. The financial statements do not contain any
      adjustments that might result from the outcome of this uncertainty. While
      the Company is optimistic that it can execute its revised business plan,
      there can be no assurance that;

      A     Increased sales necessary to obtain profitability will materialize,
            and

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

2     Summary of Significant Accounting Policies

      (A)   Principals of Consolidation and Combination

            The accompanying combined financial statements include the accounts
            of Jusco Toys Ltd, Jusco UK Ltd, Wembley Sportsmaster Ltd and Cameo
            Collectables Ltd after elimination of inter-company transactions and
            balances. Jusco Toys Ltd, Jusco UK Ltd and Wembley Sportsmaster Ltd
            are wholly-owned subsidiaries of Peak Entertainment Holdings, Inc,
            which is owned by Wilfred and Paula Shorrocks. Cameo Collectables
            Ltd was formed on August 20, 2002 and is owned by Wilfred and Paula
            Shorrocks. The financial statements of Cameo Collectables Ltd have
            been combined with Peak Entertainment Holdings, Inc as both entities
            were under common control until February 7, 2003, when Peak
            Entertainment Holdings, Inc acquired the whole of the share capital
            in Cameo Collectables Ltd, by means of a share for share exchange.


                                       8
<PAGE>


Notes to consolidated financial statements


      (B)   Interim Financial Information

            In the opinion of management, the interim financial information as
            of June 30, 2003 and for the six months ended June 30, 2003 and 2002
            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-Q 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-K
            for the year ended December 31, 2002.

      (C)   Risks and Uncertainties

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


                                       9
<PAGE>


Notes to consolidated financial statements


2     Summary of Significant Accounting Policies (continued)

      (D)   Revenue Recognition

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

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

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

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

            D     The arrangement fee is fixed or determinable.

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

      (E)   Intangible assets and amortization

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

            Trade marks                        -    10 years
            Website development costs          -     3 years

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


                                       10
<PAGE>


Notes to consolidated financial statements


2     Summary of Significant Accounting Policies (continued)

      (E)   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 in website development. EITF 00-02 distinguishes
            between those costs incurred during the development, application and
            infrastructure development stage and those costs incurred during the
            operating stage. The Company expenses all costs incurred during the
            development and operating stages. The Company evaluates costs
            incurred during the applications and infrastructure development
            stage using the guidance in Statement of Position (SOP) 98-1,
            "Accounting for the Costs of Computer Software Developed or Obtained
            for Internal Use".

      (F)   Plant and equipment

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

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

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

      (G)   Film and television costs

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


                                       11
<PAGE>


Notes to consolidated financial statements


2     Summary of Significant Accounting Policies (continued)

      (H)   Asset Impairment

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

      (I)   Cash Equivalents

            For purposes of the statements of cash flows, all temporary
            investments purchased with a maturity of three months or less are
            considered to be cash equivalents.

      (J)   Inventories

            Inventory is valued at the lower of cost or market, with cost being
            determined on the first-in, first-out basis. The Company reviews the
            book value of slow-moving items, discounted product lines and
            individual products to determine if these items are properly valued.
            The Company identifies these items and assesses the ability to
            dispose of them at a price greater than cost. If it is determined
            that cost is less than market value, then cost is used for inventory
            valuation. If market value is less than cost, then the Company
            establishes a reserve for the amount required to value the inventory
            at market. 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.

      (K)   Advertising costs

            Advertising costs, included in selling, general and administrative
            expenses, are expensed as incurred and were $0 for the three months
            and six months ended June 30, 2002 and $7,150 and $7,463 for the
            three and six months ended June 30, 2003, respectively.


                                       12
<PAGE>


Notes to consolidated financial statements

2     Summary of Significant Accounting Policies (continued)

      (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.

      (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.


                                       13
<PAGE>


Notes to consolidated financial statements

2     Summary of Significant Accounting Policies (continued)

      (O)   Earnings Per Share

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

            For the purposes of calculating earnings per share at December 31,
            2002 the Company has retroactively restated its outstanding common
            stock based upon the stock split declared on April 22, 2003 ( See
            Note 10).

            Basic and diluted earnings per share are the same during the periods
            ended June 30, 2002 and 2003 as the impact of dilutive securities is
            antidilutive. There are 2,215,000 warrants to purchase shares of the
            Company's Common stock currently outstanding.

      (P)   Recent Accounting Pronouncements

            In June 2002, the FASB issued Statements No 146, "Accounting for
            Costs Associated with Exit or disposal Activities". The standard
            requires companies to recognize costs associated with exit or
            disposal activities when they are incurred rather than at the date
            of commitment to an exit or disposal plan. Examples of costs covered
            by the standard include lease termination cost and certain employee
            severance costs that are associated with a restructuring,
            discontinued operation, plant closing, or other exit or disposal
            activity. Previous accounting guidance provided by EITF Issue No.
            94-3, "Liability Recognition for Certain Employee Termination
            Benefits and Other Costs to Exit an Activity (including Certain
            Costs Incurred in a Restructuring)" is replaced by this Statement.
            Statement 146 is to be applied prospectively to exit or disposal
            activities initiated after December 31, 2002. The Company adopted
            this Statement on January 1, 2003 and the adoption had no affect on
            the Company's financial statements for the period ended June 30,
            2003.

            In April 2003, the FASB issued Statement No. 149, "Amendment of
            Statement 133 on Derivative Instruments and Hedging Activities". The
            Statement amends Statement 133 for decisions made by the Derivatives
            Implementation Group, in particular the meaning of an initial net
            investment, the meaning of underlying and the characteristics of a
            derivative that contains financing components. Presently, the
            Company has no derivative financial instruments and, therefore,
            believes that adoption of the Statement will have no effect on its
            financial statements.

            In May 2003, the FASB issued Statement No. 150 "Accounting for
            Certain Financial Instruments with Characteristics of both
            Liabilities and Equity". The Statement requires that the issuer
            classify certain instruments as liabilities, rather than equity, or
            so-called mezzanine equity. Presently, the Company has no financial
            instruments that come under the scope of the Statement and,
            therefore, believe that adoption of the new Statement will have no
            impact on its financial statements.


                                       14
<PAGE>


Notes to consolidated financial statements


3     Plant and Equipment

      Plant and equipment comprise the following at June 30, 2003.

      Fixtures and fittings                             $ 28,098
      Moulds and tooling                                  98,056
      Computer equipment                                  37,183
                                                        --------
                                                         163,337
      Accumulated depreciation                             8,842
                                                        --------
                                                        $154,495
                                                        ========

      The company is not currently using or depreciating the molds and tooling
      acquired from the acquisition of Jusco Toys Ltd, due to the enquiry from
      the Hong Kong Inland Revenue Department. These moulds and tooling will be
      utilized once the enquiry has been settled and management believes that no
      impairment has occurred. The company owns other molds and tooling included
      above that has a cost of $12,684, which it is currently using and hence
      depreciating.


4     Intangible Assets

                                                    Accumulated
                                        Cost        amortization         Total
                                        ----        ------------         -----
      Licenses                        $1,841,794      $134,905     $1,706,889
      Trademarks                         117,046         4,316        112,730
      Film and television costs          139,983            --        139,983
      Website costs                       75,660        14,800         60,860
                                     -----------      --------     ----------
                                      $2,174,483      $154,021     $2,020,462
                                     ===========      ========     ==========

      As of December 31, 2002, the estimated aggregate amortization expense,
      based on current levels of intangible assets for the succeeding five years
      is as follows:

                                     $

      December 31, 2003                155,893
      December 31, 2004                156,366
      December 31, 2005                145,809
      December 31, 2006                 91,943
      December 31, 2007                 91,943


                                       15
<PAGE>


Notes to consolidated financial statements


5     Short Term Borrowings

      On July 10, 2002, the Company borrowed $240,000 from an individual lender.
      The debt bears interest at 20% per year. The debt and all accrued interest
      was due on January 10, 2003. The debt is collateralized by certain
      inventory of the Company's subsidiary, Jusco UK Limited.


6     Advances from Factor

      On January 13, 2003 Peak Entertainment Holdings, Inc entered into an
      invoice factoring agreement with IFT London Ltd. Under the agreement, the
      Company specifically identifies receivables that it wants to receive
      advances on and submits them to the factor. Once the factor approves the
      receivables that are submitted, the Company receives 70% of the invoice
      amount. Customers are then instructed to pay the factor directly. When the
      customer pays the entire outstanding balance to the factor, the Company
      receives the remaining 30% of the invoice amount, less a financing charge
      equal to 8% of the total invoice amount.

      The Company accounts for this arrangement in accordance with Statement of
      Financial Accounting Standard No. 140 "Accounting for Transfers and
      Servicing of Financial Assets and Extinguishments of Liabilities." Under
      the agreement any invoices not paid prior to the end of the recourse
      periods are reassigned to the Company. Accordingly, the Company records
      the advances received as a liability until the customer invoice is paid in
      full. In addition, the Company recognizes the interest charge in full at
      the time the initial advance is received.

7     Commitments

      The Company leases certain buildings under non-cancellable operating
      leases. Future minimum lease payments under those leases are as follows at
      June 30, 2003.

      Year ending December 31, 2003                         $56,124
                                                            =======

      Rent expense for all operating leases charged against earnings amounted to
      $18,203 and $30,339 in the three months and six months ended June 30, 2003
      respectively and $12,284 and $25,289 in the three months and six months
      ended June 30, 2002, respectively.


                                       16
<PAGE>


Notes to consolidated financial statements



8     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 the following companies: Jusco UK Ltd, Jusco
      Toys Ltd, Wembley Sportsmaster Ltd, Cameo Collectables Ltd and Peak
      Entertainment Holdings, Inc.

      During the six months the company had the following transactions with its
      related parties:

      a)    Wilfred and Paula Shorrocks

            i)    Movements on stockholders' advances account

                      Balance due by the Company December 31, 2002     $894,193
                      Cash repayments                                   (97,396)
                      Foreign exchange loss                              28,140
                                                                      ---------
                      Balance due by the Company at June 30, 2003     $ 824,937
                                                                      =========

            There are no terms for repayment and no interest has been charged to
            the Company during the period.

            ii)   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 due to expire on December 31,
            2023. There are no set repayment terms. This liability is included
            in unearned royalties and other advances.

9     Warrants

      On February 28, 2002, Palladium, the predecessor to Peak Entertainment
      Holdings, Inc issued warrants to purchase 645,000 shares of the Company's
      common stock at $0.31 per share. The warrants are for a term of 5 years
      and expire on February 28, 2007. On April 22, 2003 Peak Entertainment
      Holdings, Inc. issued warrants to purchase 1,570,000 shares of the
      Company's common stock at $0.31 per share. The warrants are for a term of
      5 years and expire on April 22, 2008. These warrants are still outstanding
      as of June 30, 2003, and can be exercised to purchase shares of Peak
      Entertainment Holdings, Inc.


                                       17
<PAGE>


Notes to consolidated financial statements

10    Reverse acquisition

      On April 22, 2003, Palladium Communications, Inc. ("Palladium") (a US
      public company) issued 19,071,684 shares of its common stock for all of
      the outstanding common stock of Peak Entertainment Ltd. Immediately prior
      to the transaction, Peak Entertainment Ltd. authorized a stock split so
      that the outstanding shares of common stock were increased from 4 to
      19,071,684. Immediately after the transaction, the former shareholders of
      Peak Entertainment Ltd. (Wilf and Paula Shorrocks) owned approximately 90%
      of the outstanding common stock of Palladium. On April 27, 2003, Palladium
      transferred all of its assets and liabilities, excluding the ownership of
      Peak Entertainment Ltd to Palladium Consulting Group, LLC. Therefore at
      the time of the acquisition Palladium was considered to be public shell.
      This transaction was accounted for as a reverse acquisition of a public
      shell.

      The accounting for a reverse acquisition with a public shell is considered
      to be a capital transaction rather than a business combination. That is,
      the transaction is equivalent to the issuance of common stock by Peak for
      the net monetary assets of Palladium, accompanied by a recapitalization.
      Palladium's net assets have been recorded at carryover basis and no
      goodwill has been generated in the transaction. The historical financial
      statements of the "registrant" became those of Peak Entertainment
      Holdings, Inc.

      Balance Sheet Adjustments

      The following is a summary of the adjustments to effect the
      recapitalization:

<TABLE>
<CAPTION>
                                                                        Additional                        Other
      Stockholders' Equity                                 Common        Paid In         Retained      Comprehensive
                                            Shares         Stock         Capital         Earnings         Income          Total

<S>                                                  <C>         <C>            <C>       <C>             <C>           <C>
      Peak Entertainment                             2           $6             $0       -$1,346,875     -$42,096      -$1,388,965
      Holdings Inc - April 22, 2003
      Stock split(1)                        19,071,682       19,072        -19,072                 0            0               0
      Subtotal                              19,071,684       19,078        -19,072        -1,346,875      -42,096      -1,388,965
      Palladium                              2,119,076        2,119       -210,619                 0            0        -208,500
      Communications, Inc. -
      Net assets on April 22, 2003 (2)
      Total stockholder                     21,190,760      $21,197      -$229,691       -$1,346,875     -$42,096       -$1,597,465
      Equity immediately
      after the
      recapitalization
</TABLE>


                                       18

<PAGE>


Notes to consolidated financial statements


      In order to effect the merger, the following transactions were recorded:

      1     Peak Entertainment Holdings, Inc completed a 9,535,842 for 1 stock
            split. This transaction has no impact on total stockholders' equity.

      2     The net deficit of Palladium, $208,500, at the time of transaction
            is included in stockholders' equity. The other side of this
            transaction is to add $208,500 in liabilities related to convertible
            debentures to the historical financial statements of Peak
            Entertainment Holdings, Inc.

      On April 22, 2003, immediately following the recapitalization, to obtain
      funding for ongoing operations the Company issued $785,000 in convertible
      debentures and warrants to purchase 1,570,000 shares of the company's
      common stock.

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

      The Company has recorded these debentures and warrants in accordance with
      the provisions of EITE 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 then estimated the intrinsic value of the
      beneficial conversion feature resulting from the ability of the debenture
      holders to convert at a 50% discount. As a result, the Company has
      recorded a debt discount of $785,000. The debt discount will be amortized
      as interest expense over the life of the debentures, which is one year.

11    Contingent Liabilities

      The Company is presently under enquiry from the Hong Kong Inland Revenue
      Department. At this point in time, management believes that this enquiry
      will not have a material adverse impact on the Company's financial
      condition or results of operations.


                                       19
<PAGE>


Item 2.      MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULTS OF OPERATIONS

You should read the following discussion and analysis in conjunction with the
information set forth in the unaudited financial statements and notes thereto,
included elsewhere herein, and the audited financial statements and the notes
thereto.

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

                             INTRODUCTORY STATEMENT

The quarter ended June 30, 2003 was a period of transition, as we sold our
former telecommunications business and acquired a recently commenced media
entertainment business. 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.

SALE OF FORMER BUSINESS

Prior to April 2003, our corporate name was Palladium Communications Inc. and we
conducted a telecommunications business.

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

On April 22, 2003, we acquired the business of Peak Entertainment Ltd., a United
Kingdom company, by acquiring all of the outstanding shares of Peak
Entertainment Ltd. in a transaction viewed as a reverse acquisition.

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

CURRENT 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 it will require
substantial working capital to execute its 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.


                                       20
<PAGE>

The quarter ended June 30, 2003 was an extremely difficult time for us. We had
very little operating capital to fund the production of planned television
shows, and focused on raising capital from third parties to fund the production
of the television shows.

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

Until we raise sufficient capital to produce its 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 entertainment
products, 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 OPERATION

THREE AND SIX MONTHS ENDED JUNE 30, 2003 AS COMPARED TO THREE AND SIX MONTHS
ENDED JUNE 30, 2002.

REVENUES
--------

Revenues for the three and six months ended June 30, 2003 were $119,472 and
$375,741, respectively, a 100% increase over revenues in the corresponding
period of 2002 of nil. This increase resulted mainly from the sale of our gift
related products `Countin' Sheep' and `Kewpie Dolls'. Also included within the
increased revenue figure are royalties generated under various licensing
arrangements. At the same time in 2002, we did not generate any revenues as we
were still very much in the final stages of finalizing production of products
for sale. This period in 2002 was primarily the set up period for us.

A breakdown of revenues by our business divisions is set forth in the table
below.

<TABLE>
<CAPTION>
------------------------------------------------ ------------------------ -------------------------- ----------------
Division                                            2003 Revenue ($)          2002 Revenue ($)         % Increase
                                                       (3 months)                (6 months)             over 2002
------------------------------------------------ ------------------------ -------------------------- ----------------
<S>                                              <C>                      <C>                        <C>
Entertainment/ Production                                  nil                       nil                   N/A
------------------------------------------------ ------------------------ -------------------------- ----------------
Licensing Arrangements                                   19,734                    47,627                  N/A
------------------------------------------------ ------------------------ -------------------------- ----------------
Character Related Consumer Products                      99,738                    328,114                 N/A
------------------------------------------------ ------------------------ -------------------------- ----------------
         Total Revenues                                  119,472                   375,741                 N/A
------------------------------------------------ ------------------------ -------------------------- ----------------
</TABLE>

We have not generated significant revenues in this period as was expected
because our primary revenue sources in this period related to consumer gift
products, which experiences seasonal lulls.

We only recently commenced our operations. We do not believe that our historical
revenues are indicative of any current or future trends or demands, nor of
future operating performance. In 2003, we were in the early production stages of
two television shows, and we expect to remain in the production stages of the
shows in 2004. Until we have completed production of the shows and are in
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 licensing
activities and consumer projects are expected to be centered around our
entertainment products.

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

For the three and sixth months ended June 30, 2003, cost of revenues was $97,656
and $247,229, respectively, a 100% increase over the corresponding period in
2002 of nil. The increase in cost of revenues is attributable to an increase in
costs associated with the production consumer goods.

                                       21
<PAGE>

We anticipate that our cost of revenue with respect to our entertainment
division and our consumer product division will increase significantly in the
remainder of 2003 and in 2004, as we enter into the production stages of
television show episodes and increase marketing efforts for the sale of consumer
goods. It is anticipated that the cost of revenue for our entertainment products
will initially increase in relation 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 our entertainment division
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.

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

Gross profits as a percentage of revenue for the three months ended June 30,
2003 was 18%. Gross profits as a percentage of revenue for the six months ended
June 30, 2003 was 34. No revenues were generated in the three and six month
periods ending June 30, 2002.

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

Selling, general and administrative expenses increased by 306%, to $730,964 for
the three month period ending June 30, 2003 compared to $179,635 for the three
months ended June 30, 2002. Selling, general and administrative expenses
increased 239% to $1,122,848 for the six-month period ended June 30, 2003 as
compared to $330,259 for the same period last year. This increase relates
primarily to the increased legal and professional costs associated with being a
public company, and other professional services related to the reverse
acquisition, financing transactions such as the issuance of convertible
debentures. 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 entertainment products, and rely upon financing from third
parties. We did not incur such expenses in 2002 when we were a privately-held
company and did not engage in substantial financing activities. We anticipate
that expenses for legal, accounting and other professional services will
continue to be a significant factor, due to our continuing need to raise capital
and our securities law reporting obligations as a publicly-held company.

Additionally, our overhead has increased with appointments of animation designs.
This strategic move increases the control of our projects and it is intended
that the investment will be recouped with savings from outsourcing to third
parties.

NET LOSS
--------

Operating loss for the three months ended June 30, 2003 was $751,099 as compared
to an operating loss of $193,334 for the three months ended June 30, 2002.
Operating loss for the six months ended June 30, 2003 was $1,074,516 compared to
an operating loss of $343,958 for the six months ended June 30, 2002.

This increase in operating loss is primarily due to increased legal and
professional fees, which have been generated due to the reverse acquisition,
financing transactions such as the issuance of convertible debentures, and
securities law reporting obligations as a publicly-held company.

Interest expense by the Company for the three months ended June 30, 2003
increased to $212,224 from nil for the three months ended June 30, 2002.
Interest expense for the Company for the six months ended June 30, 2003
increased to $226,539 from nil for the six months ended June 30, 2002. This
increase is mainly attributable to the amount of interest that is payable upon
12% debentures issued in April 2003 and those that we acquired from the former
business.

                                       22
<PAGE>

The net loss for the three months ended June 30, 2003 was $897,704 as compared
to net loss of $108,769 for the three months ended June 30, 2002.. The net loss
for the six months ended June 30, 2003 was $1,269,221 as compared to net loss of
$259,393 for the six months ended June 30, 2002. This loss for the period is
attributable to the increase in costs and interest payable in relation to the
reverse acquisition, significant increases in professional fees associated with
being a publicly-held company, and the interest on outstanding debentures.

Basic and diluted net loss per share for the three months ended June 30, 2003
were $0.043 compared to a net loss per share of $0.006 for the same period in
2002. Basic and diluted loss per share for the six months ended June 30, 2003
were $0.061 compared to loss of $0.014 for the same period last year.

LIQUIDITY AND CAPITAL RESOURCES

We had a positive net change in cash of $81,177 for the six months ended June
30, 2003, compared to the same period in the year June 30, 2002 of $20,060.

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

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

As of June 30, 2003, we had commitments for capital and other expenditures
aggregating $4,750,030 included in current and long term liabilities, payable
over a maximum 20 year period. Those commitments and the amounts payable in
2004, giving effect to terms amended in 2004, are summarized in the following
table.

<TABLE>
<CAPTION>
------------------------ --------------- ------------------------ ------------------------- --------------------------
Contractual              Liability       Agreement Terms          Amount payable            Notes
Obligations              As of 6/30/03
------------------------ --------------- ------------------------ ------------------------- --------------------------
<S>                      <C>             <C>                      <C>                       <C>
Short term borrowings    $323,216        20% interest per         $323,216, plus interest   We intend to repay the
                                         annum, secured by                                  loan in 2004 by selling
                                         certain inventory                                  inventory.
------------------------ --------------- ------------------------ ------------------------- --------------------------
Accounts Payable -       $1,016,327      Various (composed        $1,016,327                All current liabilities
Various                                  significantly of                                   are within the contract
                                         various ordinary                                   terms and will be paid
                                         business expenses, as                              in accordance with the
                                         well as legal,                                     contract terms.
                                         accounting, and other
                                         professional fees).

------------------------ --------------- ------------------------ ------------------------- --------------------------
Stock holders'           $824,937        Promissory note agreed   $0                        In 2004, we entered into
advances account -                       in 2004                                            a promissory note,
                                                                                            payable in
                                                                                            installments.  First
                                                                                            payment due on 1/2005
                                                                                            and to be repaid in full
                                                                                            not later than 2008.
------------------------ --------------- ------------------------ ------------------------- --------------------------
License fees payable     $378,343                                 $378,343

------------------------ --------------- ------------------------ ------------------------- --------------------------
Advance from factor      $7,126                                   None - deducted from
                                                                  factored debt
------------------------ --------------- ------------------------ ------------------------- --------------------------
Other - including Tax    $627,559                                 $627,559
& Social security and
accruals
------------------------ --------------- ------------------------ ------------------------- --------------------------


                                       23
<PAGE>

------------------------ --------------- ------------------------ ------------------------- --------------------------
Long Term License        $1,213,474      10% royalty payable      $1,213,474                Pay from royalties from
                                         quarterly in                                       licenses to third
                                         perpetuity.  Guarantee                             parties over the term of
                                         of $1,000,000, with no                             the contract.
                                         established payment                                In 2004, we amended the
                                         term.                                              license agreement to
                                                                                            establish a minimum
                                                                                            quarterly royalty payment
                                                                                            of $12,500 due beginning
                                                                                            September 30, 2004.
------------------------ --------------- ------------------------ ------------------------- --------------------------
Convertible debentures   $359,048                                 $359,048
------------------------ --------------- ------------------------ ------------------------- --------------------------
TOTAL                    $4,750,030                               $3,917,967
------------------------ --------------- ------------------------ ------------------------- --------------------------
</TABLE>


You will note that $2,038,411, or 43% of the total, is committed to the
principals of the company in promissory notes or long-term licenses and a
further 8% is committed to the convertible debenture agreements.

In addition to the commitments set forth in the table above, we will need in
2004 to raise substantial capital to finance the production of our entertainment
projects:

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

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

We believe that we will need operating capital of approximately $3,000,000 in
the next twelve months to maintain our current operations, and additional
operating capital of approximately $7,500,000 in the next twelve to twenty four
months to finance television production of our planned entertainment projects
which are already in various stages of pre-production and early production, but
currently unable to be scheduled for further production until additional capital
is obtained.

We anticipate meeting certain of our short-term liquidity needs from cash flows
generated by ongoing sales of our consumer products, and other short-term and
long-term liquidity needs through cash flows generated by sales from our current
entertainment projects, Monster In My Pocket and The Wumblers, once production
is funded and ready for broadcast sales.

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.

Management expects to satisfy its production costs needs by entering into
co-production agreements with third parties, which is customary in the industry,
in which co-producers provide a certain amount of capital and are entitled to a
specified percentage of the revenues.


                                       24
<PAGE>

Until our entertainment projects can be funded and full television production
activities commenced so that we can begin to sell broadcast rights to air the
shows, we will continue to rely on short-term outside funding to finance our
non-production related operating expenses and pay our liabilities. We intend to
continue to raise funds through private placements of our securities, including
the issuance of debt. We sold certain convertible debentures in April 2003 that
place certain limitations on our financing activities, such as the debenture
holders held security interests in substantially all of our assets and
collateral, and a majority of the debenture holders had to approve any of our
financing proposals that involved issuance of securities convertible into an
indeterminable amount of shares or carry registration rights or other equity
financings. 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.

Other than raising funds from outside sources, we have no concrete plans in
effect to address issues created by the facts that: we have negative cash flow
from operations, our current liabilities exceed our current assets, or we may
become unable to pay our liabilities as they come due. If we are unable to
obtain funding for the entertainments projects, we may be forced to alter our
business plan to exclude production and focus on licensing activities, or
curtail or terminate operations.

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

For the six months ended June 30, 2003, we had a net operating loss of
$1,074,516, and an overall net loss of $1,269,221. We experienced positive cash
flow for the six months ended June 30, 2003, primarily due to cash received from
financing activities. At June 30, 2003, we had $91,047 in cash and had a working
capital deficit of $370,244.

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

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

For the six months ended June 30, 2003, cash flows from operating activities
resulted in negative cash flows of $370,244, due primarily from a significant
increase in accounts payable of $857,278. The increase in accounts payable is
primarily due to significant legal, accounting and other professional fees. We
expect to continue to experience an increase in accounts payable in 2004 until
we are in position to sell our entertainment products.

Cash has been used in operating activities, the purchase of new plant and
equipment, and intangibles and repaying stockholders' advances.

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

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

                                       25
<PAGE>

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

For the six months ended June 30, 2003, cash flows from investing activities
resulted in negative cash flows of $74,798, a significant decrease from cash
used in investing activities in 2002 of $361,865

Cash used in investing activities was significantly larger in 2002, because we
were still in our start-up stages through much of 2002. In 2002, we used
significant cash to acquire assets essential for our start-up business stage.
Cash applied to investing activities for the year ended December 31, 2002
consisted of capital purchases of plant and equipment of $111,410, and the
purchase of intangibles in the form of license agreements for intellectual
property rights amounting to $250,455.

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

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

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

For the six months ended June 30, 2003, cash flows from financing activities
resulted in positive cash flow of $511,706, which is slightly less than cash
flow from financing activities in 2002. Cash flow derived primarily from the
sale of convertible debentures.

Whereas, in 2002, the primary source of funds were significant loans from our
officers to fund our operations. In the future, we intend to rely upon cash
provided by entertainment production financing partners, and to rely upon
capital raised from third party investors in private placements to fund our
operations. Entertainment production financing partners will share in the
proceeds of the sale of the produced products.

SHORT TERM BORROWINGS. We had net cash provided from a short term financing
agreement for the six months ended December 31, 2002 totaling $264,600. This was
an agreement to provide working capital on a short-term basis secured against
certain inventory. At June 30, 2003, the balance was $323,216. The debt was
originally due on January 10, 2003. It is envisaged that the loan will be repaid
in 2004 from revenues from the sale of inventory.

STOCKHOLDER ADVANCES. From time to time, Mr. and Mrs. Shorrocks loaned money to
us to fund day-to-day operations, as well as for the acquisition of certain
properties. Through December 31, 2002, the Shorrocks loaned to us $972,386, and
we repaid $78,193 to the Shorrocks in 2002. As of June 30, 2003, we owed the
Shorrocks $824,937. These monies were loaned without interest and did not have a
due date, and were due on demand. In March 2004, we gave the Shorrocks an
unsecured promissory note for the monies due, establishing a repayment schedule.
The amount due is to be repaid in installments, consisting of six periodic
payments of $25,000 from January 31, 2005 through September 30, 2006, two
payments of $100,000 on March 31, 2007 and September 30, 2007, and the balance
due on January 31, 2008. The promissory note provides for earlier repayment of
any unpaid balance in full upon various conditions of our future financial
results, such as, at a time when we achieve shareholders' equity in excess of
150% of the amount due, or we achieve positive net income from operations in
excess of 150% of the amount due.

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

On April 22, 2003, following the acquisition of Peak Entertainment Ltd., we
entered into an agreement for the sale to the same holders of the then
outstanding convertible debentures additional convertible debentures in the
principal amount of up to $785,000 and warrants to buy 1,570,000 shares of our
common stock. We received $550,000 in April 2003.

                                       26
<PAGE>

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

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

The debentures also carried certain limitations on our financing activities,
such as the debenture holders held security interests in substantially all of
our assets and collateral, and a majority of the debenture holders had to
approve any of our financing proposals that involved issuance of securities
convertible into an indeterminable amount of shares or carry registration rights
or other equity financings.

SUBSEQUENT REPURCHASE OF CONVERTIBLE DEBENTURES. The outstanding debentures
represented a large amount of debt relative to our identifiable liquid assets.
As of June 30, 2003, we had an aggregate of approximately $765,000 in 12%
convertible debentures outstanding, without including the interest accruing on
the debentures. In the months after April 2003 through December 2003, we had
very little success in raising capital from third parties to fund our
operations. This inability was due, in part, to the conversion terms of the
outstanding debentures. Potential financiers were unwilling to commit capital to
us because of the conversion terms of the outstanding debentures, since the
debenture holders could convert their debentures into a significant and
potentially limitless number of our shares at a significant discount to the
market price of our common stock. In order to raise capital, we needed to seek
an amendment of the conversion terms of the debentures or repurchase the
debentures.

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

We financed the repurchase primarily through the sale of new 8% convertible
debentures due January 2007, accordingly, we may need approximately $1,860,000
to pay off the debentures and accrued interest in January 2007 if none of the
debentures and accrued interest are converted into our common stock.

CERTAIN SALES OF SECURITIES IN 2003 AND 2004
--------------------------------------------

On July 9, 2003, Mr. Kuessous loaned us $100,000, and on December 17, 2003, we
exchanged the debt for 583,333 shares of common stock and 150,000 common stock
purchase warrants exercisable for three years at $0.50 per share.


                                       27
<PAGE>


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

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

The debentures issued in January 2004 are substantially different from the
repurchased debentures. The most material difference in the debentures is that
the repurchased debentures accrued interest at 12% whereas the new debentures
accrue interest at 8%, the repurchased debentures were due in 2004 whereas the
new debentures mature in 2007. Other differences are that the repurchased
debentures could be converted at a fluctuating rate at a substantial discount to
the market price of our common stock into an undeterminable amount of shares of
common stock whereas the new debentures are convertible at a fixed rate into a
fixed number of shares of common stock.

We may need approximately $1,860,000 to pay off the debentures and accrued
interest in January 2007 if none of the debentures and accrued interest are
converted into our common stock. That amount payable in January 2007 represents
641% of our gross profit as of December 31, 2003. We do not presently have the
cash to pay that amount, and our present revenues and gross profit levels make
it unreasonable to think that our present operations are capable of producing
cash streams to pay the debt in 2007. We do not have any specific plan to pay
the debentures or the accrued interest. We believe that the holders of the
debentures are likely to convert the debentures into shares of common stock
prior to maturity of the 8% debentures in 2007. If the debentures are not
converted prior to 2007, we anticipate that by January 2007 our operations will
be producing sufficient revenues and cash flow to pay off the debt, because it
is highly unlikely that we will continue to be in operations in 2007 if we are
unable to resolve our going concern issues in 2004 or 2005. The first interest
payment on the 8% convertible debentures is not due until January 2005, and if
our operating revenues are insufficient to pay the interest, or if the interest
amount is not converted into common stock, we will seek to resolve payment of
interest through a promissory note, issuance of other securities, or some other
similar arrangement.


                                       28
<PAGE>


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

On April 28, 2004, we entered into an agreement with Laura Wellington, whereby
we exchanged a debt of $250,000 owed to Ms. Wellington in exchange for 500,000
shares of common stock. Ms. Wellington had loaned $250,000 to us in or about
October 2003, which we used for working capital purposes.

CASH MANAGEMENT

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

After paying for ordinary expenses, to the extent that we have available cash,
including cash received from financing arrangements, significantly all of our
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 important that
we do not increase the budget by significant amounts and that it tries to keep
within the budget to the extent feasible. We have implemented procedures for
cash management controls.

PLAN OF OPERATIONS TO ADDRESS GOING CONCERN

In their report dated May 30, 2003, our independent auditors stated that our
financial statements for the year ended December 31, 2001 and 2002 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.


                                       29
<PAGE>


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

o     seeking institutional investors for equity investments;

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

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

o     renegotiate payments terms of existing contractual obligations; and

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

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

Additionally, we have discussed renegotiation of payments terms of certain
existing contractual obligations.

CRITICAL ACCOUNTING POLICIES

We have identified the policies below as critical to our business operations and
the understanding of our results of operations. The impact and any associated
risks related to these policies on our business operations is discussed
throughout Management's Plan of Operations where such policies reflect our
reported and expected financial results. For a detailed discussion on the
application of these and other accounting policies, see Note 2 in the Notes to
the Consolidated Financial Statements in Item 7 of the Annual Report of Form
10-KSB as of December 31, 2002. The preparation of this Quarterly Report on Form
10-QSB requires us to make estimates and assumptions that affect the reported
amount of assets and liabilities, disclosure of contingent assets and
liabilities at the date of our financial statements, and the reported amounts of
revenue and expenses during the reported period. There can be no assurance that
actual results will not differ from those estimates.

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

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

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

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

      (d)   the arrangement fee is fixed or determinable.

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

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

                                       30
<PAGE>

(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 the Company's operations being based in the United
Kingdom, the British Pound has been selected as the Company's functional
currency. In converting from the functional currency to the reporting currency,
assets and liabilities of the Company are translated into US dollars at the
exchange rate for the year. The resulting translation adjustments are recorded
within other comprehensive income.

Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet and the gains or losses on translation are included
in the statement of operations.

(4) Research and development expenditure.
    -------------------------------------

All research and development expenditures have been incurred internally and are
expensed to the statement of operations as incurred.

RECENT ACCOUNTING PRONOUNCEMENTS

In June 2002, the FASB issued Statements No 146, "Accounting for Costs
Associated with Exit or disposal Activities". The standard requires companies to
recognize costs associated with exit or disposal activities when they are
incurred rather than at the date of commitment to an exit or disposal plan.
Examples of costs covered by the standard include lease termination cost and
certain employee severance costs that are associated with a restructuring,
discontinued operation, plant closing, or other exit or disposal activity.
Previous accounting guidance provided by EITF Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)" is replaced by
this Statement. Statement 146 is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002. The Company adopted this Statement
on January 1, 2003 and the adoption had no affect on the Company's financial
statements for the period ended June 30, 2003.

In April 2003, the FASB issued Statement No. 149, "Amendment of Statement 133 on
Derivative Instruments and Hedging Activities". The Statement amends Statement
133 for decisions made by the Derivatives Implementation Group, in particular
the meaning of an initial net investment, the meaning of underlying and the
characteristics of a derivative that contains financing components. Presently,
the Company has no derivative financial instruments and, therefore, believes
that adoption of the Statement will have no effect on its financial statements.

In May 2003, the FASB issued Statement No. 150 "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity". The Statement
requires that the issuer classify certain instruments as liabilities, rather
than equity, or so-called mezzanine equity. Presently, the Company has no
financial instruments that come under the scope of the Statement and, therefore,
believe that adoption of the new Statement will have no impact on its financial
statements.

                                       31
<PAGE>


FORWARD-LOOKING STATEMENTS

The foregoing management discussion and analysis contains forward-looking
statements and information that are based on the Company's management's beliefs,
as well as assumptions made by, and information currently available to the
Company's management. These forward-looking statements are based on many
assumptions and factors, and are subject to many conditions, including the
Company's continuing ability to obtain additional financing, and the ability to
service indebtedness as a result of the Company's operations. Except for the
historical information contained in this report, all forward-looking information
are estimates by the Company's management and are subject to various risks,
uncertainties and other factors that may be beyond the Company's control and may
cause results to differ from the Company's management's current expectations,
which may cause the Company's actual results, performance or achievements to be
materially different from future results, performance or achievements expressed
or implied by such forward-looking statements.


                                       32
<PAGE>


Item 3. CONTROLS AND PROCEDURES.

The Company's management, with the participation of the Company's Chief
Executive Officer and Principal Financial Officer, has evaluated the
effectiveness of the Company's disclosure controls and procedures (as such term
is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June
30, 2003. Based on such evaluation, the Company's Chief Executive Officer and
Principal Financial Officer have concluded that, as of the end of such period,
the Company's disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required
to be disclosed by the Company in the reports that it files or submits under the
Exchange Act.

There have not been any changes in the Company's internal control over financial
reporting during the fiscal quarter to which this report relates that have
materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.


                                       33
<PAGE>


                           PART II - OTHER INFORMATION

Item 1. LEGAL PROCEEDINGS.

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

Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.

        On April 22, 2003, we acquired Peak Entertainment Ltd., together with
its subsidiaries. Under the terms of the agreement, we acquired 100 percent of
Peak Entertainment's stock in exchange for the issuance by us of 19,071,684
shares of our common stock to the twelve holders of Peak Entertainment Ltd.
common stock in a transaction viewed as a reverse acquisition. Each of those
persons receiving shares of our common stock was an accredited investor as that
term is defined under Regulation D of the Securities Act of 1933, as amended. 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.

        In April 2003, the Company entered into a securities purchase
agreement, dated April 22, 2003, for the sale of an aggregate of $785,000
principal amount of 12% convertible debentures and warrants to purchase
1,570,000 shares of common stock in reliance on an exemption from registration
pursuant to Section 4(2) of the Securities Act of 1933 to four accredited
investors introduced to the Company by The N.I.R. Group, LLC: AJW Partners, LLC,
New Millennium Capital Partners II, LLC, AJW Offshore, Ltd. (formerly known as
AJW/New Millennium Offshore, Ltd.), and AJW Qualified Partners, LLC (formerly
known as Pegasus Capital Partners, LLC). The debentures bear interest at 12%,
and mature one year from the date of issuance. The debenture holders have the
right to convert the principal amount of the debentures and the accrued interest
into shares of common stock at the lesser of $1 or 50% of the average of the
three lowest intraday trading price of the Company's common stock during the
twenty trading days before the election of conversion. The full principal amount
of the convertible debentures are due upon default under the terms of
convertible debentures. In addition, the Company granted the investors a
security interest in substantially all of our assets and intellectual property
and registration rights. The warrants are exercisable for five years at $0.31
per share. If the Company issues shares of common stock below the market price,
determined by averaging the last reported sale prices for our shares of common
stock for the five trading days immediately preceding such issuance, the
exercise price of the warrants is to be adjusted. The exercise price shall be
determined by multiplying the exercise price in effect immediately prior to the
dilutive issuance by a fraction. The numerator of the fraction is equal to the
sum of the number of shares outstanding immediately prior to the offering plus
the quotient of the amount of consideration received by the Company in
connection with the issuance divided by the market price in effect immediately
prior to the issuance. The denominator of such issuance shall be equal to the
number of shares outstanding after the dilutive issuance. In the event that the
Company breaches any representation or warranty regarding the condition of the
Company made in the Securities Purchase Agreement, or breaches any covenant made
in the agreement, the Company is to liable for liquidated damages in shares or
cash, at the election of the investors, equal to three percent of the
outstanding amount of the convertible debentures per month plus accrued and
unpaid interest. These debentures and warrants were repurchased from the holders
in January 2004.

Item 3. DEFAULTS UPON SENIOR SECURITIES.

        Not applicable.

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

        None.



                                       34
<PAGE>


Item 5. OTHER INFORMATION.

        In April 2003, we sold our telecommunications business to Palladium
Consulting Group, LLC for $75,000 The assets sold to Palladium Consulting Group
consisted of substantially all of our assets, including all carrier agreements,
sales agent agreements, and equipment. The retained assets included cash and
notes receivable. Palladium Consulting Group assumed certain of our liabilities,
including our payables for phone systems and equipment and a lease for office
facilities. We retained liabilities in connection with outstanding convertible
debentures. As a result of the transaction, we had substantially no assets and
had significant liabilities, consisting of the retained convertible debentures
and accrued interest.

        On April 22, 2003, following the sale of our former business, we
acquired the business of Peak Entertainment Ltd., together with its
subsidiaries. We exchanged 19,071,684 shares of our common stock for all of the
shares of Peak Entertainment Ltd. in a transaction viewed as a reverse
acquisition. The shares issued to the holders of Peak Entertainment Ltd.
constituted 90 percent of our outstanding shares. Upon completion of the reverse
acquisition, we appointed the principals of Peak Entertainment, Ltd., as our
officers and directors. Our former directors and officers resigned on the date
of the reverse acquisition.

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

        We have a letter of intent agreement with Mainframe Entertainment Inc.,
dated June 1, 2003, pursuant to which Mainframe is to provide 20%, approximately
$1,600,000, of funding for the production of television episodes of Monster In
My Pocket. Mainframe is to have sole television distribution rights in Canada
and is entitled to 100% of the television distribution proceeds in Canada, and
joint television distribution rights in the United States and is entitled to 5%
to 7.5% of the television distribution proceeds in the United States. Mainframe
is entitled to 35% of the gross licensing and merchandising revenues in Canada,
and 5% to 20% of the gross licensing and merchandising revenues in the United
States.


                                       35
<PAGE>


Item 6. EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits.

The following exhibits are filed with this report:

Exhibit No.          Description

Exhibit 2.1          Agreement and Plan of Acquisition by and among Palladium
                     Communications, Inc., Peak Entertainment, Ltd., Wilfred
                     Shorrocks and Paula Shorrocks, made as of the 22nd day of
                     April, 2003 (Incorporated by reference to exhibit 10.1 of
                     Form 8-K filed on May 7, 2003)

Exhibit 2.2          Asset Purchase Agreement, dated as of April 22, 2003,
                     between Palladium Communications, Inc. and Palladium
                     Consulting Group LLC (Incorporated by reference to Exhibit
                     2.4 of Form SB-2 filed on February 2, 2004)

Exhibit 4.1          Amendment to Securities Purchase Agreement, dated June 17,
                     2003 (Incorporated by reference to Exhibit 4.2 of Form SB-2
                     filed on February 2, 2004)

Exhibit 4.2          Securities Purchase Agreement, dated as of April 22, 2003
                     (Incorporated by reference to Exhibit 4.2 of Form SB-2
                     filed on February 2, 2004)

Exhibit 4.3          Disclosure Schedules to Securities Purchase Agreement dated
                     April 22, 2003 (Incorporated by reference to exhibit 10.1
                     of Form 10-QSB filed on November 26, 2003)

Exhibit 10.1         Agreement, dated April 28, 2003, with The Silly Goose
                     Company, LLC (Incorporated by reference to Exhibit 10.14 of
                     Form SB-2 filed on February 2, 2004)

Exhibit 10.2         Agreement with Mainframe Entertainment, Inc. dated June 1,
                     2003 (Incorporated by reference to Exhibit 10.24 of Form
                     SB-2 filed on February 2, 2004)

Exhibit 11*   -      Statement re: computation of per share earnings is hereby
                     incorporated by reference to "Financial Statements" of Part
                     I-Financial Information.

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

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

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

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

 -----
*  Filed herewith.


(b)   Reports on Form 8-K.

During the quarterly period ended June 30, 2003, the Company filed the following
reports on Form 8-K:

1.    A Report filed on May 7, 2003, which disclosed the acquisition of Peak
      Entertainment Ltd. by the Company under Item 1.

2.    A Report filed on June 10, 2003, which disclosed a change of accountants
      under Item 4, and a change in fiscal year under Item 8.


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<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.

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

                                         Dated: May 18, 2004


                                         By:  /s/ Nicola Yeomans
                                            -----------------------------
                                         Nicola Yeomans
                                         Principal Financial Officer

                                         Dated:  May 18, 2004








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