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

                                  FORM 10-QSB/A

(Mark One)

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

                FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2003

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

             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)


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


          BAGSHAW HALL, BAGSHAW HILL, BAKEWELL, DERBYSHIRE, UK DE45 1DL
                    (Address of principal executive offices)

                                 44 1629 814555
                           (Issuer's telephone number)

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

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the 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 [ ]

As of November 18, 2003, the issuer had 21,190,760 shares of common stock
outstanding.

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 SEPTEMBER 30, 2003

                                TABLE OF CONTENTS


                                                                           PAGE

PART I.  FINANCIAL INFORMATION

Item 1.  Financial Statements                                                3

         Consolidated Balance Sheets                                         3
         Consolidated Statements of Operations                               4
         Consolidated Statements of Comprehensive Loss                       5
         Consolidated Statements of Cash Flows                               6
         Notes to Consolidated Financial Statements                          7

Item 2.  Management's Discussion and Analysis of Financial
           Condition and Results of Operations                              22

Item 3.  Controls and Procedures                                            34

PART II.  OTHER INFORMATION

Item 1.  Legal Proceedings                                                  35
Item 2.  Changes in Securities and Use of Proceeds                          35
Item 5.  Other Information                                                  35
Item 6.  Exhibits and Reports on Form 8-K                                   37

Signatures                                                                  38


                                       2
<PAGE>


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS


                                                     December 31,  September 30,
                                                        2002           2003
                                                                     Unaudited

ASSETS

CURRENT ASSETS

Cash and cash equivalents                             $     9,870        11,593
Accounts receivable                                        63,341       152,885
Inventories                                               238,058       264,072
Other current assets                                           --        89,133
                                                      -----------   -----------
Total current assets                                  $   311,269   $   517,683

Deferred professional fees                                     --       588,319
Plant and equipment, net                                  136,538       208,000
Intangible assets, net of amortization                  1,984,159     1,988,855
                                                      -----------   -----------
                                                      $ 2,431,966   $ 3,302,857
                                                      ===========   ===========

LIABILITIES AND  STOCKHOLDERS' EQUITY/(DEFICIT)

CURRENT LIABILITIES

Short term borrowings                                 $   264,600       273,583
Advances from factor                                           --         2,239
Accounts payable                                          578,835     1,000,603
Stockholders' advances account                            894,193       848,092
License fees payable                                      300,000       451,432
Other accrued liabilities                                 233,316       901,640
                                                      -----------   -----------
Total current liabilities                             $ 2,270,944   $ 3,477,589

LONG TERM LIABILITIES

License fees payable                                    1,200,000     1,088,838
Convertible debentures                                         --       556,910
                                                      -----------   -----------
Total long term liabilities                           $ 1,200,000   $ 1,645,748

STOCKHOLDERS' EQUITY (DEFICIT)

Common stock, par value $0.001 - 900,000,000
shares authorized, 19,071,684 and 21,190,879 issued
and outstanding                                       $    19,075   $    21,197
Additional paid in capital                                (19,072)    1,231,885
Retained earnings (deficit)                              (967,451)   (2,898,984)
Other comprehensive income                                (71,530)     (174,578)
                                                      -----------   -----------
Total stockholders' equity (deficit)                   (1,038,978)   (1,820,480)
                                                      -----------   -----------
                                                      $ 2,431,966   $ 3,302,857
                                                      ===========   ===========


See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                        3 months ended  3 months ended  9 months ended  9 months ended
                                         September 30,   September 30,   September 30,   September 30,
                                             2002            2003            2002            2003
                                          -----------     -----------     -----------     -----------
<S>                                       <C>             <C>             <C>             <C>
Revenue
  Character related consumer products         119,374          95,115         119,374         425,307
   Licensing arrangements                          --          42,508              --          89,953
                                          -----------     -----------     -----------     -----------
Net revenue                                   119,374         137,623         119,374         515,260

Cost of Revenue

   Cost of goods sold                         129,236          34,056         129,236         228,011
                                          -----------     -----------     -----------     -----------
Total cost of revenue                         129,236          34,056         129,236         228,011

Gross profit                                   (9,862)        103,567          (9,862)        287,249

Operating expenses
   Selling, general and administrative        238,163         520,630         580,153       1,701,408
   Depreciation and amortisation               28,970          44,257          42,669         127,098
                                          -----------     -----------     -----------     -----------

Total operating expenses                      267,133         564,887         622,822       1,828,506
                                          -----------     -----------     -----------     -----------

Loss from operations                         (276,995)       (461,320)       (632,684)     (1,541,257)

Foreign exchange gain                         (76,659)         38,605          10,932          70,600

Interest expense                               (8,850)       (233,192)         (8,850)       (460,874)
                                          -----------     -----------     -----------     -----------

Net loss                                     (362,504)       (655,907)       (630,602)     (1,931,531)
                                          ===========     ===========     ===========     ===========

Basic and diluted net loss per share      $     0.019     $     0.031     $     0.033     $     0.095

Weighted average common shares
 outstanding                               19,071,684      21,190,879      19,071,684      20,321,395
                                          ===========     ===========     ===========     ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                   3 months ended  3 months ended  9 months ended   9 months ended
                                    September 30,   September 30,   September 30,    September 30,
                                        2003           2002             2003             2002
                                     ----------      ----------      ----------       ----------
<S>                                  <C>             <C>             <C>              <C>
Net loss                               (362,504)       (655,907)       (630,602)      (1,931,531)

Cumulative translation adjustment       (35,020)        (40,193)        (25,520)        (103,048)
                                     ----------      ----------      ----------       ----------
Comprehensive loss                     (397,524)       (696,100)       (656,122)      (2,034,579)
                                     ==========      ==========      ==========       ==========
</TABLE>


See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           Nine months ended September 30
                                                          -------------------------------
Cash flows from operating activities:                        2002                2003
                                                          -----------         -----------
<S>                                                       <C>                 <C>
Net loss                                                  $  (630,602)        $(1,931,531)

Adjustments to reconcile net loss to net
  cash used in operating activities:
Depreciation                                                    1,539               9,941
Amortization of intangible assets                              41,130             117,157
Foreign exchange gain                                         (10,932)            (70,600)
Amortization of discount on debentures                             --             348,411
Non-cash common stock expenses                                     --              65,664

Changes in working capital:

Accounts receivable                                                --             (87,295)
Inventories                                                  (183,735)            (17,556)
Other current assets                                          (22,668)            (89,133)
Accounts payable and other accrued liabilities                146,452           1,039,877
                                                          -----------         -----------
Net cash used in operating activities                        (658,816)           (615,065)
                                                          ===========         ===========

Cash flows from investing activities:

Purchase of plant and equipment                              (116,925)            (76,552)
Purchase of intangibles                                      (259,794)            (43,021)
                                                          -----------         -----------
Net cash used in investing activities                        (376,719)           (119,573)
                                                          ===========         ===========

Cash flows from financing activities:

Short term borrowings, net                                    234,210                (418)
Stockholders' advances account                                877,828             (77,872)
Advances from factor                                               --               2,239
Convertible debentures                                             --             785,000
                                                          -----------         -----------
Net cash provided from financing activities                 1,112,038             708,949
                                                          ===========         ===========
Cumulative translation adjustment                             (38,426)             27,412
                                                          ===========         ===========
Increase in cash and cash equivalents                          38,077               1,723
Cash and cash equivalents, beginning of period                     --               9,870
                                                          -----------         -----------
Cash and cash equivalents, end of period                       38,077         $    11,593
                                                          ===========         ===========
Supplemental disclosure of cash flow information

Interest paid                                             $        15         $       666
                                                          ===========         ===========
Purchase of licenses through issuance of long
term liabilities                                          $ 1,400,000         $     8,336
                                                          ===========         ===========
Accounting for reserve acquisition                                 --         $   208,500
                                                          ===========         ===========
</TABLE>


See accompanying notes to consolidated financial statements.


                                       6
<PAGE>


               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   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 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 September 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 entered into an agreement for the issuance of up
      to $785,000 in convertible debentures and warrants to purchase 1,570,000
      shares of the company's common stock.

      The Company has developed a business plan to increase revenue by
      capitalizing on its integrated media products. However, the company must
      obtain funds from outside sources in fiscal 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 Peak Entertainment Limited, Peak Entertainment Holdings LLC,
            Jusco Toys Ltd, Jusco UK Ltd, Wembley Sportsmaster Ltd and Cameo
            Collectables Ltd after elimination of inter-company transactions and
            balances. Jusco Toys Ltd, Jusco UK Ltd and Wembley Sportsmaster Ltd
            are wholly-owned subsidiaries of Peak Entertainment Holdings, Inc.
            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.


                                       7
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.    Summary of Significant Accounting Policies (continued)

      (B)   Interim Financial Information

            In the opinion of management, the interim financial information as
            of September 30, 2003 and for the nine months ended September 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-KSB for the transition period 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.


                                       8
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   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.


                                       9
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   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.

      (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.


                                       10
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.    Summary of Significant Accounting Policies (continued)

      (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 nil for the three months
            and nine months ended September 30, 2002 and $23,459 and $30,922 for
            the three and nine months ended September 30, 2003, respectively.


                                       11
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   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.


                                       12
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   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 quarters
            ended September 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)   Warrants

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

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


                                       13
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


2.    Summary of Significant Accounting Policies (continued)

      (Q)   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>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3.    Plant and Equipment

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

                    Fixtures and fittings                               64,695
                    Moulds and tooling                                 117,613
                    Computer equipment                                  38,812
                                                                       -------
                                                                       221,120

                    Accumulated depreciation                            13,120
                                                                       -------
                                                                       208,000
                                                                       =======

      The Company is not currently using or depreciating the moulds 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. This enquiry has been determined in March 2004 at
      a cost to the Company of (pound)9,235. The Company owns other moulds and
      tooling included above that has a cost of $31,371, which it is currently
      using and hence depreciating.

4.    Intangible Assets

                                                      Accumulated
                                           Cost       amortization     Total

            Licences                      1,860,544     168,427      1,692,117
            Trademarks                      118,237       5,492        112,745
            Film and television costs       166,847        --          166,847
            Website costs                    21,572       4,426         17,146
                                          ---------   ---------      ---------
                                          2,167,200     178,345      1,988,855
                                          =========   =========      =========

      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>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   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 has not been repaid and is due upon
      demand. 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
      September 30, 2003.

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

      Rent expense for all operating leases charged against earnings amounted to
      $14,232 and $44,571 in the three months and nine months ended September
      30, 2003 respectively and $15,904 and $41,193 in the three months and nine
      months ended September 30, 2002.


                                       16

<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.    Transactions with related parties

      The relationship between the Company and its related parties are:

      o     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.

      o     Terence Herzog and Michael Schenkein are deemed to be related
            parties as they are principals of Agora Capital Partners Inc, a
            management consulting company. They are directors of Peak
            Entertainment Holdings Inc. Terence Herzog is a shareholder of Peak
            Entertainment Holding 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                                      (115,366)
                  Foreign exchange loss                                  69,265
                                                                      ---------
                  Balance due by the Company at September 30, 2003    $ 848,092
                                                                      =========


                  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.

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


                                       17
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


8.    Transactions with related parties (continued)

      b)    Terence Herzog and Michael Schenkein

            i)    Consulting Services

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

9.    Warrants

      On February 28, 2002, Palladium, the predecessor to Peak Entertainment
      Holdings, Inc entered into an agreement pursuant to which Palladium issued
      $208,500 in convertible debentures and issued warrants to purchase 645,000
      shares of the Company's common stock exercisable for five years at $0.31
      per share. These warrants are still outstanding as of September 30, 2003,
      and can be exercised to purchase shares of Peak Entertainment Holdings,
      Inc.

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

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

      The value of the warrants that vest on July 24, 2004 are determined at the
      end of each reporting period. The company records the expense for each
      quarter based on the value of the warrants at the end of each reporting
      period. For the quarter ended September 30, 2003, the Company has recorded
      total expense of $22,589 related to these warrants.

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


                                       18
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   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 Holdings, Inc.
      Immediately prior to the transaction, Peak Entertainment Holdings, Inc
      authorized a stock split so that the outstanding shares of common stock
      were increased from 4 to 19,071,684. Immediately after the transaction,
      the shareholders of Peak Entertainment Holdings, Inc (Wilf and Paula
      Shorrocks) owned approximately 90% of the outstanding common stock of
      Palladium. This transaction has been accounted for as a reverse
      acquisition of a public shell. The accounting for a reverse acquisition
      with a public shell is considered to be a capital transaction rather than
      a business combination. That is, the transaction is equivalent to the
      issuance of common stock by Peak for the net monetary assets of Palladium,
      accompanied by a recapitalization. Palladium's net assets has been
      recorded at carryover basis and no goodwill was generated in the
      transaction. The net deficit of Palladium, $208,500, at the time of
      transaction is included in stockholders' equity. The other side of this
      transaction is to add 208,500 in liabilities related to convertible
      debentures to the historical financial statements of Peak Entertainment
      Holdings Inc. The historical financial statements of the "registrant"
      became those of Peak Entertainment Holdings, Inc. Subsequent to the
      transaction, Palladium changed its name to Peak Entertainment Holdings,
      Inc.


                                       19
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.   Reverse Acquisition (continued)

      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
Holdings Inc -
April 22, 2003                  2   $        6   $        0   -$1,346,875        -$42,096     -$1,388,965

Stock split(1)         19,071,682       19,072      -19,072            --                              --
                       ----------   ----------   ----------   -----------   -------------     -----------
Subtotal               19,071,684       19,078      -19,072    -1,346,875         -42,096      -1,388,965

Palladium
Communications, Inc.
- Net assets on April
22, 2003 (2)            2,119,196        2,119     -210,619         --              --           -208,500
                       ----------   ----------   ----------   -----------   -------------     -----------

Total stockholder      21,190,879   $   21,197    -$229,691   -$1,346,875        -$42,096     -$1,597,465
Equity immediately
after the
recapitalization
</TABLE>


      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 reverse acquisition, the Company entered
      into an agreement for the issuance of up to $785,000 in convertible
      debentures and warrants to purchase 1,570,000 shares of the Company's
      common stock.

      The 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% of 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
      $0.31 per share.


                                       20
<PAGE>

               PEAK ENTERTAINMENT HOLDINGS, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


10.   Reverse Acquisition (continued)

      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.


                                       21
<PAGE>


ITEM 2.      MANAGEMENT'S 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, 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 September 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 have 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 we will require
substantial working capital to execute our business plan.

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


                                       22
<PAGE>


The quarter ended September 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, in turn, has delayed and compromised our ability to license
intellectual property rights and to sell toys and merchandise based on the
television shows.

We have not generated significant revenues in this period as expected because
forecasted investment in the television shows to activate our exploitation of
the intellectual rights portfolio has not been received, and, our ability to
convert current negotiations to executed contracts has not been possible.

Further, we have delayed the production of the associated toys and merchandise
for the television shows and this has also compromised our ability to generate
sales in these areas. We have been able to gradually increase our gross profit
from the last quarter of this year and slightly decrease our overhead. Our
employee overhead has increased with appointments of key personnel significantly
in the set up of an in-house computer graphics team with three animation
designers now in place.

The significant costs incurred in acquiring the intellectual property rights and
the legal and professional costs associated with being a publicly-held company
and funding should be considered as a major factor in our early operating
history.

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.

RESULT OF OPERATIONS

THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AS COMPARED TO THREE AND NINE
MONTHS ENDED SEPTEMBER 30, 2002.

REVENUES
--------

Revenues for the three and nine months ended September 30, 2003 were $137,623
and $515,260, respectively, a 15% and 331% increase over revenues in the
corresponding periods in 2002. The increase in total revenue is primarily
attributable to the revenues from licensing arrangements. We experienced a
slight decrease in revenues from the sale of consumer products. In 2003, we
commenced the sale of our consumer products activities, focused primarily on our
gift product Countin' Sheep, and sales of Kewpie Dolls. In 2002, we sold
products that we acquired as part of our acquisition of Jusco Toys Ltd. from a
third party.

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

<TABLE>
<CAPTION>
------------------------------------------------ ------------------------ -------------------------- ----------------
Division                                            2003 Revenue ($)          2002 Revenue ($)         % Increase
                                                         Sept 03                   Sept 02
------------------------------------------------ ------------------------ -------------------------- ----------------
<S>                                              <C>                       <C>                       <C>
Entertainment/ Production                                  nil                       nil                   N/A
------------------------------------------------ ------------------------ -------------------------- ----------------
Licensing Arrangements                                   42,508                      nil                   N/A
------------------------------------------------ ------------------------ -------------------------- ----------------
Character Related Consumer Products                      95,115                    119,374                (20%)
------------------------------------------------ ------------------------ -------------------------- ----------------
         Total Revenues                                 137,623                    119,374                 15%
------------------------------------------------ ------------------------ -------------------------- ----------------
</TABLE>


                                       23
<PAGE>


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 experience 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 months ended September 30, 2003, cost of goods sold decreased 279%
to $34,056. For the nine months ended September 30, 2003, cost of goods sold
increased 76% to $228,011. Cost of goods sold in the three months ended
September 30, 2003 was low because the majority of costs relating to these sales
were incurred in the June 03 quarter.

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
consist 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 September
30, 2003 was 75% compared to a loss of $9,862 of the same period the previous
year.

Gross profits as a percentage of revenue for the nine months ended September 30,
2003 was 55.74%, as compared to the loss of $9,862 for the same period ended
September 30, 2003.

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

Selling, general and administrative expenses for the Company increased by 9% to
$520,630 for the three month period ending September 30, 2003 compared to
$238,163 for the three months ended September 30, 2002. Selling, general and
administrative expenses have increased 193% to $1,701,408 for the nine month
period ended September 30, 2003 as compared to $580,153 for the same period last
year. This increase relates primarily to the increased legal and professional
costs associated with being a public company. Such costs have been a significant
factor affecting the business operations at a time when we lack sufficient
revenues from operations to finance the production of our 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 in 2004, due to our continuing need to raise capital and our securities
law reporting obligations as a publicly-held company.

NET LOSS
--------

Operating loss for the three months ended September 30, 2003 was $461,320 as
compared to an operating loss of $276,995 for the three months ended September
30, 2002. Operating loss for the nine months ended September 30, 2003 was
$1,541,257 as compared to an operating loss of $632,684 for the nine months
ended September 30, 2002. This increase in operating loss is primarily due to
the increases in selling, general and administrative expenses.


                                       24
<PAGE>


Interest expense for the three months ended September 30, 2003 increased to
$233,192 from $8,850 for the three months ended September 30, 2002. Interest
expense for the nine months ended September 30, 2003 increased to $460,874 from
$8,850 for the nine months ended September 30, 2002. This is due mainly to the
interest charges on the outstanding debentures.

The net loss for the three months ended September 30, 2003 was $655,907 as
compared to net loss of $362,504 for the three months ended September 30, 2002.
The net loss for the nine months ended September 30, 2003 was $1,931,531as
compared to net loss of $630,602 for the nine months ended September 30, 2002.
This loss increase for this period is mainly due to the increased legal and
professional fees and the interest that is payable on the outstanding debentures
..

Basic and diluted loss per share for the three months ended September 30, 2003
were $0.031 compared to loss per share of $0.019 for the same period in 2002.
Basic and diluted loss per share for the nine months ended September 30, 2003
were $0.095 compared to loss of $0.033 for the same period in 2002.

LIQUIDITY AND CAPITAL RESOURCES

We had a negative net change in cash of $1,723 for the nine months ended
September 30, 2003, compared to $38,077 for the period ended September 30, 2002.

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 September 30, 2003, we had commitments for capital and other expenditures
aggregating $5,123,337 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 As   Agreement Terms        Amount payable in 2004     Notes
Obligations              of 9/30/03
------------------------ -------------- ---------------------- -------------------------- ----------------------------
<S>                      <C>            <C>                    <C>                        <C>
Short term loan -                       20% interest per
                         $273,583       annum, secured by      $273,583
                                        certain inventory
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Accounts Payable -                      Various (composed                                 All current liabilities
Various                  $1,000,603     significantly of       $1,000,603                 are within the contract
                                        various ordinary                                  terms and will be paid in
                                        business expenses,                                accordance with the
                                        as well as legal,                                 contract terms.
                                        accounting, and
                                        other professional
                                        fees).
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Stock holders'                                                                            In 2004, we entered into a
advances account -       $848,092       Promissory note        $848,092                   promissory note, payable
Shorrocks                               agreed in Jan 04                                  in installments.  First
                                                                                          payment due on 1/2005 and
                                                                                          to be repaid in full not
                                                                                          later than 2008.
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Short Term License                                                                        Payment terms currently
                         $451,432                              $451,432                   being renegotiated.
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Debentures- various                     Discount and                                      In 2004, we repurchased
debenture holders        $556,910       interest on the        $556,910                   the debentures.
                                        debenture
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Other - including Tax
& Social security and    $903,879                              $903,879
accruals
------------------------ -------------- ---------------------- -------------------------- ----------------------------
Long Term License        $1,088,838                            $1,088,838
------------------------ -------------- ---------------------- -------------------------- ----------------------------
------------------------ -------------- ---------------------- -------------------------- ----------------------------
TOTAL                    $5,123,337                            $5,123,337
------------------------ -------------- ---------------------- -------------------------- ----------------------------
</TABLE>


                                       25
<PAGE>


You will note that $1,936,930, or 38% of the total, is committed to the
principals of the company in promissory notes or long-term licenses and a
further 11% is committed to the convertible debenture agreements.

In addition to the commitments set forth in the table above, we will need to
raise substantial capital in 2004 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 cost 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.

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, including 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 carried 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.


                                       26
<PAGE>


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 to focus on licensing activities, or
curtail or terminate operations.

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

For the nine months ended September 30, 2003, we had a net operating loss of
$1,541,257, and an overall net loss of $1,931,531. We experienced neutral cash
flow for the nine months ended September 30, 2003. At September 30, 2003, we had
$11,593 in cash and had a working capital deficit of $615,065.

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 nine months ended September 30, 2003, cash flows from operating
activities resulted in negative cash flows of $615,065, due primarily to a
significant increase in accounts payable of $893,425. 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 equipment,
intangibles and repaying stockholders advances.

It is necessary for us to obtain additional cash infusion from an outside source
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.

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

For the nine months ended September 30, 2003, cash flows from investing
activities resulted in negative cash flows of $119,573, a significant decrease
from cash used in investing activities in 2002 of $376,719.

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 quarter ended September 2003
consisted of capital purchases of plant and equipment of $76,552, and the
purchase of intangibles in the form of license agreements for intellectual
property rights amounting to $43,021.

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.


                                       27
<PAGE>


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 nine months ended September 30, 2003, cash flows from financing
activities resulted in positive cash flow of $708,949, which is less than cash
flow from financing activities in 2002. Cash flow derived primarily from the
sale of convertible debentures in 2003.

Whereas, in 2002, the primary sources of funds were loans from our officers to
fund our start-up 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.

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 September 30, 2002, the Shorrocks loaned to us $894,193, and
we repaid $46,101 to the Shorrocks in 2002. As of September 30, 2003, we owed
the Shorrocks $848,092. 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, and an additional $235,000 in
July 2003.

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,
including that 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 September 30, 2003, we had an aggregate of approximately $1,000,000 in 12%
convertible debentures outstanding, without including the interest accruing on
the debentures.


                                       28
<PAGE>


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 the 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 had 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 of our 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. Jack 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.

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


                                       29
<PAGE>


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 operation 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.

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
thereafter 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.


                                       30
<PAGE>


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 we try to keep
within the budget to the extent feasible. We have implemented procedures for
cash management controls.

PLAN OF OPERATIONS TO ADDRESS GOING CONCERN

The Company needs additional cash for its working capital purposes and to reduce
or resolve existing debt obligations. If the Company's does not resolve issues
and contractual obligations on existing debts, and if the creditors elect to
foreclose on existing debts, which is likely to occur, the Company will not have
sufficient funds to operate.

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.

The primary issues management focused on and 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     amend or re-negotiate payments terms of existing contractual
            obligations, including working with the holders of convertible
            debentures on a restructuring of the debt they hold, by means of
            extension of maturity dates, modifying repayment terms, exchange of
            debentures to other forms of debts or otherwise, which would ease
            the Company's debt burden and allow for the raising of additional
            capital; and

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

The Company has been investigating new investment opportunities to allow the
Company to move forward and use cash to invest in animation, which in turn will
generate significant cash inflows from licensing opportunities.


                                       31
<PAGE>


To address these issues, in 2004, we repurchased debentures that were
outstanding in 2003 and 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.

      (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.


                                       32
<PAGE>


      (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 Others 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 the adoption of the Statement will have no affect 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 the adoption of the new Statement will have no impact on its
financial statements.

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.


                                       33
<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
September 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.


                                       34
<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 by Jusco Toys 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.

In July 2003, pursuant to a consulting agreement with POW! Entertainment LLC and
Stan Lee, the Company issued to POW warrants, in reliance on an exemption from
registration pursuant to Section 4(2) of the Securities Act of 1933, to purchase
750,000 shares of the Company's common stock, exercisable for five years at
$0.35 per share. Warrants to purchase 375,000 shares vested upon execution of
the consulting agreement, and the remaining warrants to purchase the remaining
375,000 shares are to vest after one year. After one year, POW has the right to
demand registration of the shares of common stock underlying the warrant at the
Company's expense.

In July 2003, pursuant to a consulting agreement with Jack Kuessous, the Company
issued to Kuessous warrants, in reliance on an exemption from registration
pursuant to Section 4(2) of the Securities Act of 1933, to purchase 240,000
shares of common stock, exercisable for three years at $1.20 per share.

ITEM 5. OTHER INFORMATION.

In July 2003, the Company entered into a consulting agreement with POW!
Entertainment LLC and Stan Lee. Lee is the co-creator of comic book characters,
and POW is a production company formed by Lee. Under the agreement, the Company
engaged Lee as a creative consultant to provide to the Company advice on
creative ideas developed by the Company for establishing publishing and
entertainment intellectual property and to introduce writers, artists and
publishing houses to the Company to enable the Company to develop its projects
for publishing, film and television. As compensation, we issued to POW warrants
to purchase 750,000 shares of the Company's common stock, exercisable for five
years at $0.35 per share. Warrants to purchase 375,000 shares vested upon
execution of the consulting agreement, and the remaining warrants to purchase
the remaining 375,000 shares are to vest after one year. After one year, POW has
the right to demand registration of the shares of common stock underlying the
warrant at the Company's expense. The Company also agreed to reimburse Lee for
any and all reasonable out-of-pocket expenses incurred in fulfilling his role as
creative consultant. If the Company seeks to use Lee's services after an idea,
concept or project has gone into development, the Company is to pay POW
consulting fees for Lee's time at Lee's then current hourly consulting fee.
Additionally, if the Company seeks to use Lee's services after an idea, concept
or project has gone into production, the Company is to pay POW producer's fees
at Lee's then current producer's fee. The agreement is for a term of three
years, however, it may be earlier terminated by either party upon sixty (60)
days written notice.

In July 2003, the Company entered into a consulting agreement with Jack
Kuessous. Under the agreement, the Company engaged Kuessous to provide to the
Company marketing, sales and business development services and services for the
exploitation of products or licenses related to the garment and textiles
industry. Kuessous is to use his best efforts to keep the Company informed of
all corporate business opportunities that comes to his attention that may be
beneficial to the Company's business so that the Company can obtain the benefits
from his knowledge, experience, and personal contacts. The agreement is for a
term of one year. As consideration for entering into the agreement, the Company
issued to Kuessous warrants to purchase 240,000 shares of common stock,
exercisable for three years at $1.20 per share. The Company is not required to
pay Kuessous any other compensation under the agreement for services rendered.
Pursuant to an amended consulting agreement dated December 17, 2003, the
exercise price for the warrants is $0.50 per share.


                                       35
<PAGE>


In July 2003, Mr. Kuessous advanced $100,000 to the Company. During the month
ended September 30, 2003, the Company was negotiating with Kuessous the terms of
repayment of the advance through an issuance of shares of the Company's common
stock and an exchange of the warrants issued to Kuessous for warrants
exercisable at a different exercise price. 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.

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

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

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


                                       36
<PAGE>


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A)   EXHIBITS.

The following exhibits are filed with this report:

<TABLE>
<CAPTION>
Exhibit Number            Description of Exhibit
--------------            ----------------------
<S>                       <C>
Exhibit 10.1*             Disclosure Schedules to Securities Purchase Agreement dated April 22, 2003

Exhibit 10.2*             Consulting Agreement with POW! Entertainment and Stan Lee with Exhibits

Exhibit 10.3*             Consulting Agreement with Jack Kuessous with Form of Warrant

Exhibit 10.4              Distribution Agreement, dated July 1, 2003 with Perfectly Plush Inc. (Incorporated by
                          reference to Exhibit 10.15 of Form SB-2 filed on February 2, 2004)

Exhibit 10.5              International Representation Agreement with Haven Licensing Pty Ltd, dated August 19,
                          2003, 2003 (Incorporated by reference to Exhibit 10.16 of Form SB-2 filed on February
                          2, 2004)

Exhibit 10.6              International Representation Agreement with Character Licensing & Marketing, dated
                          September 17, 2003 (Incorporated by reference to Exhibit 10.17 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, Item 1 - Financial
                          Statements, contained in this Form 10-QSB.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
</TABLE>


----------------
*    Previously filed.

** Filed herewith.

(B)   REPORTS ON FORM 8-K.

A Report on Form 8-K/A filed on July 2, 2003, supplementing the Report filed on
May 7, 2003, which disclosed the acquisition of Peak Entertainment Ltd. by the
Company under Item 1, and provided the relevant financial information under Item
7.


                                       37
<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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