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

                                   FORM 10Q-SB

(Mark One)

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

                  For the quarterly period ended June 30, 2005

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

             For the transition period from ________ to ___________.

                        Commission file number: 33-18143
                                -----------------

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

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

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

                                 44 1629 814555
                           (Issuer's telephone number)

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

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

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

Transitional Small Business Disclosure Format (check one): Yes |_| No |X|

<PAGE>

                        PEAK ENTERTAINMENT HOLDINGS, INC.

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>
                                                                                          Page
<S>      <C>                                                                              <C>
PART I.  FINANCIAL INFORMATION

Item 1.  Condensed Consolidated Financial Statements (unaudited)                            3
         Condensed Consolidated Balance Sheets as of June 30, 2005 and December 31, 2004    3
         Condensed Consolidated Statements of Operations for the Three and Six Months
                  Ended June 30, 2005 and 2004                                              4
         Condensed Consolidated Statements of Cash Flows for the Six Months
                  Ended June 30, 2005 and 2004                                              5
         Notes to Condensed Consolidated Financial Statements                               7

Item 2.  Management's Discussion and Analysis                                              22

Item 3.  Controls and Procedures                                                           29

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings                                                                 30
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds                       31
Item 6.  Exhibits                                                                          31

SIGNATURES                                                                                 32
</TABLE>


                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                        PEAK ENTERTAINMENT HOLDINGS, INC
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                Dec 31, 2004   June 30, 2005
                                                                                ----------------------------
                                                                                 (Audited)      (Unaudited)
                                                                                ------------    ------------
<S>                                                                             <C>             <C>
ASSETS

CURRENT ASSETS

Cash and cash equivalents                                                       $     10,235    $     27,361
Accounts receivable                                                                  498,187         447,807
Inventory                                                                             91,743              --
Other current assets                                                                 861,728         758,080
                                                                                ------------    ------------
Total current assets                                                               1,461,893       1,233,248

Deferred professional fees                                                           205,834         289,588
Plant and equipment, net                                                             259,649         229,397
Intangible assets, net of amortization                                             1,972,683       1,844,267
                                                                                ------------    ------------
                                                                                $  3,900,059    $  3,596,500
                                                                                ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY/ (DEFICIT)

CURRENT LIABILITIES

Accounts payable                                                                $  1,301,539    $  1,577,648
Stockholders' advance account                                                        752,522         575,466
Licenses fees payable                                                                 67,831          63,543
Other accrued liabilities                                                          2,290,629       1,894,956

                                                                                ------------    ------------
Total current liabilities                                                          4,412,521       4,111,613

LONG TERM LIABILITIES

License fees payable                                                               1,234,119       1,211,248
Convertible debentures                                                               330,652         725,232
                                                                                ------------    ------------
                                                                                                   1,564,771
Total long term liabilities                                                        1,936,480

STOCKHOLDERS' DEFICIT

Common stock, par value $0.001 - 900,000,000
Shares authorized, 29,040,955 and 31,470,108 issued
and outstanding                                                                       29,050          31,470
Additional paid in capital                                                         4,576,739       6,339,688
Retained deficit                                                                  (5,960,203)     (8,563,666)
Other comprehensive income                                                          (722,819)       (259,085)
                                                                                ------------    ------------
Total stockholders' deficit                                                       (2,451,593)     (2,077,233)

                                                                                ------------    ------------
                                                                                $  3,900,059    $  3,596,500
                                                                                ============    ============
</TABLE>


See accompanying notes to consolidated financial statements.


                                       3
<PAGE>

                        PEAK ENTERTAINEMNT HOLDINGS, INC
                      STATEMENTS OF OPERATIONS (UNAUDITED)


<TABLE>
<CAPTION>
                                       3 Months        3 Months        6 Months        6 Months
                                         ended           ended           ended           ended
                                     June 30, 2004   June 30, 2004   June 30, 2004   June 30, 2004
                                      ============    ============    ============    ============
<S>                                   <C>             <C>             <C>             <C>
Revenue                               $     36,363    $    349,372    $    109,540    $    652,780

Cost of Goods Sold                          20,214          22,712          84,914         115,183

                                      ------------    ------------    ------------    ------------
Gross profit                                16,149         326,660          24,626         537,597

Operating expenses
Selling, general and administrative        820,997         739,759       1,576,124       1,169,730
Non cash expenses                          237,986         949,246         280,118       1,422,137
                                      ------------    ------------    ------------    ------------
Total operating expenses                 1,058,983       1,689,005       1,856,242       2,591,867



                                      ------------    ------------    ------------    ------------
Loss from operations                    (1,042,834)     (1,362,345)     (1,831,616)     (2,054,270)


Gain/ (loss) on settlement of
convertible
debentures and accrued interest                 --              --         883,033         (37,559)

Foreign exchange gain                       (8,465)        (41,765)         35,812        (280,195)

Interest expense                          (181,780)       (128,954)       (346,023)       (231,439)
INCLUDE

                                      ------------    ------------    ------------    ------------
Net loss                              $ (1,233,079)   $ (1,533,064)   $ (1,258,794)   $ (2,603,463)
                                      ============    ============    ============    ============

Basic and diluted net loss per
share                                 $      (0.05)   $      (0.05)   $       0.05    $      (0.09)
                                      ============    ============    ============    ============

Weighted average common shares
outstanding                             24,292,002      31,313,286      23,931,288      30,152,634
                                      ============    ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       4
<PAGE>

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


<TABLE>
<CAPTION>
                                                                           6 months ended   6 months ended
                                                                            June 30, 2004   June 30, 2005
                                                                             ------------    ------------
<S>                                                                          <C>             <C>
Cash flows from operating activities

Net loss                                                                     $ (1,258,794)   $ (2,603,463)

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

Depreciation                                                                        9,069          65,966
Amortization of intangible assets                                                  78,707         232,516

Foreign exchange gain/(loss)                                                      (35,812)        280,195
Accretion of discount on debentures                                               249,010

Gain on settlement of debentures                                                 (883,033)        (37,559)
Non-cash interest                                                                      --         220,264
Non-cash professional and consulting fees                                         618,871       1,422,137
Loss on sale of intangibles                                                        65,222

Changes in working capital:

Accounts receivable                                                                21,519          50,380
Inventories                                                                          (457)         91,743

Other current assets                                                              (67,400)        103,648
Accounts payable and other accrued liabilities                                    904,277        (146,723)
                                                                             ------------    ------------


Net cash used in operating activities                                            (298,821)       (320,896)


           Cash flows from investing activities:


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

Purchase of intangibles                                                          (615,318)       (104,100)

Issue of debentures                                                             2,024,000         360,000

Settlement of debentures                                                       (1,000,000)


                                                                             ------------    ------------
Net cash (used in)/ provided by investing activities                              404,226         220,186
</TABLE>

See accompanying notes to consolidated financial statements.


                                       5
<PAGE>

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

<TABLE>
<CAPTION>
                                                    6 months ended  6 months ended
                                                     June 30, 2004   June 30, 2005
                                                      ------------    ------------
<S>                                                   <C>             <C>
Cash flows from financing activities:                 $               $

Short term borrowing, net                                 (318,663)
Stockholders' advances account                               4,992        (177,056)


                                                      ------------    ------------
Net cash provided by/(used in) financing activities       (313,671)       (177,056)

Cumulative translation adjustment                           71,006         294,892




(Decrease) increase in cash and cash equivalents          (137,260)         17,126
Cash and cash equivalents, beginning of period             152,339          10,235

Cash and cash equivalents, end of period              $     15,079    $     27,361


Supplemental disclosures of cash flow information

Interest Paid                                         $        993    $         16

Issuance of shares in settlement of liability         $    249,500    $         --
</TABLE>


See accompanying notes to consolidated financial statements.


                                       6
<PAGE>

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


1     Description of Business

      Peak Entertainment Holdings, Inc, formerly Peak Entertainment Ltd, was
      formed on November 20, 2001 as an integrated media group focused on
      children. Its activities include the production of television
      entertainment, character licensing and consumer products development,
      including toy and gift manufacturing and distribution. Integration enables
      Peak Entertainment Holdings, Inc to take property from concept to consumer
      in-house, controlling and co-ordinating broadcast, promotions and product
      launches (toys, apparel, video games, etc.) to build market momentum and
      worldwide brand quality.

      The accompanying consolidated financial statements have been prepared in
      conformity with accounting principles generally accepted in the United
      States of America, which contemplate continuation of the Company as a
      going concern. As shown in the financial statements, at June 30, 2005 and
      for the six months then ended, the Company has suffered recurring losses,
      negative cash flows from operations, negative working capital, an
      accumulated deficit of $8,563,666 and a stockholders' deficiency of
      $2,451,593.

      As shown in the accompanying financial statements, the Company incurred a
      net loss of $2,603,463 during the current period. Current economic
      conditions have limited the ability of the Company in acquiring additional
      equity capital.

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

      The Company has developed a business plan to increase revenue by
      capitalizing on its integrated media products. The Company is in constant
      discussions with outside sources to provide the required funds to cover
      operational costs. This continuous need raises substantial doubt about the
      Company's ability to continue in existence. The financial statements do
      not contain any adjustments that might result from the outcome of this
      uncertainty. While the Company is optimistic that it can execute its
      business plan, there can be no assurance that;

      a) increased sales necessary to obtain profitability will materialize, and

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


                                       7
<PAGE>

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


2     Summary of Significant Accounting Policies

      (A)   Principals of Consolidation and Combination

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

            Cameo Collectables Ltd and Wembley Sportsmaster Ltd are wholly-owned
            subsidiaries of Peak Entertainment Holdings, Inc.

            Cameo Collectables Ltd was formed on August 20, 2002 and was owned
            by Wilfred and Paula Shorrocks until February 7, 2003 when Peak
            Entertainment Holdings, Inc acquired the whole of the share capital
            of Cameo Collectables Ltd. Prior to February 7, 2003 the financial
            statements of Cameo Collectables Ltd were combined with Peak
            Entertainment Holdings, Inc as both entities were under common
            control.

      (B)   Basis of Preparation

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

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

      (C)   Interim Financial Information

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

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


                                       8
<PAGE>

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


2     Summary of Significant Accounting Policies (continued)

      (D)   Risks and Uncertainties

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

      (E)   Revenue Recognition

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

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

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

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

            4.    The arrangement fee is fixed or determinable.

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

      (F)   Intangible assets and amortization

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

            Trade marks                        -         10 years
            Website development costs          -          3 years

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


                                       9
<PAGE>

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


2     Summary of Significant Accounting Policies (continued)

      (F)   Intangible assets and amortization (continued)

            Web Site Development Costs

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

      (G)   Plant and equipment

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

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

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

      (H)   Film and television costs

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

      (I)   Asset Impairment

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

      (J)   Cash Equivalents

            For purposes of the statements of cash flows, all temporary
            investments purchased with a maturity of three months or less are
            considered to be cash equivalents. The Company maintains bank
            accounts in the United States of America, United Kingdom and Hong
            Kong.


                                       10
<PAGE>

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


2     Summary of Significant Accounting Policies (continued)

      (K)   Inventories

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

      (L)   Advertising costs

            Advertising costs, included in selling, general and administrative
            expenses, are expensed as incurred and were nil and $50,704 for the
            six months ended June 30, 2004 and June 30, 2005, respectively.

      (M)   Foreign currencies

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

      (N)   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.

      (O)   Use of Estimates

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


                                       11
<PAGE>

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


2     Summary of Significant Accounting Policies (continued)

      (P)   Earnings Per Share

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

            Basic and diluted earnings per share are the same during the quarter
            ended June 30, 2004 and 2005 as the impact of dilutive securities is
            antidilutive. There were 9,282,000 warrants to purchase shares of
            the Company's common stock outstanding as of June 30, 2005.

      (Q)   Warrants

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

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

      (R)   Recent Accounting Pronouncements

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

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


                                       12
<PAGE>

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


3     Significant current assets and liabilities

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


                                     December 31,     June 30,
                                         2004           2005
Other current assets

Prepaid consulting                   $         --   $    289,588
Accrued royalty income                    826,242        351,461
Other current assets                       35,486        117,031

                                     ------------   ------------
                                     $    861,728   $    758,080
                                     ============   ============

Accounts payable
UK professional fees                 $    373,613   $    269,569

US professional fees                      222,160        355,590
TV animation costs - Monster Quest        129,689             --
Other accounts payable                    575,977        952,489

                                     ------------   ------------
                                     $  1,301,439   $  1,577,648
                                     ============   ============

Other accrued liabilities
Consultancy fees                     $    196,513   $    180,841
Wumblers pilot show costs                 111,448             --
Deferred royalties income                 957,060        795,771
Sales and payroll taxes                   409,195        407,751
Debenture interest                        100,802        209,511
Other accrued liabilities                 515,611        301,082

                                     ------------   ------------
                                     $  2,290,629   $  1,894,956
                                     ============   ============


                                       13
<PAGE>

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


4     Advances from Factor

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

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

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

      The above agreements ceased on the 21 January 2005.


5     Convertible debt

      On May 6, 2005, we entered into Securities Purchase Agreements with four
      accredited investors. Pursuant to the agreements, we sold a principal
      amount of $360,000 in 12% convertible debentures and 432,000 common stock
      purchase warrants for gross proceeds of $360,000. The debentures mature in
      270 days from May 6, 2005. The debentures may mature earlier upon future
      different funding by us of any dollar amount equaling 15% more than
      amounts closed pursuant to the private placement. The debentures accrue
      interest at the rate of 12% per year, compounded annually, and is payable
      at maturity. The principal amount of the debentures may be converted into
      shares of common stock at the conversion price of $0.30 per share. Any
      conversion at or prior to maturity date constitutes a waiver of all
      accrued interest on the debentures. The conversion price for the
      debentures may be adjusted downward for issuances of securities by us at
      prices below the lower of $.30 per common share, or fair market value for
      such securities as determined at the time of issuance. For late payment,
      there will be a cash penalty equal to 1.5% of the outstanding principal
      amount of the debentures, compounded monthly for each month that payment
      in full is not effected, up to a maximum cash penalty equal to 9% of the
      outstanding principal amount of the debentures, and, in addition, there
      will be monthly reduction in warrant exercise price of the warrants at the
      rate of 2.5% and up to a maximum of 20% reduction in the exercise price.
      The obligations of the Company under the debentures are secured by
      security interest rights in substantially all of the Company's assets, to
      the extent not already encumbered. Each of these investors agreed, except
      upon 75 days prior written notice, it may not convert the debentures or
      exercise the warrants for shares of common stock to the extent that such
      it would cause the investor to beneficially own 4.9% or more of our then
      issued and outstanding common stock. The warrants are exercisable for five
      years at $0.50 per share. After the tenth consecutive business day in
      which the common stock trades at $3.00 or greater, the warrants become
      redeemable at $0.10 per warrant. The warrant holder is entitled to seek
      the registration of the underlying shares in registration statements filed
      by the Company in the future. We used the proceeds for general corporate
      purposes.


                                       14
<PAGE>

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


6     Transactions with related parties

      The relationship between the Company and its related parties are:

      Wilfred and Paula Shorrocks are deemed to be related parties as they are
      directors and shareholders of Peak Entertainment Holdings, Inc.

      Terence Herzog and Michael Schenkein are deemed to be related parties as
      they are principals of Agora Capital Partners Inc, a management consulting
      company. They were directors of Peak Entertainment Holdings, Inc. Terence
      Herzog is a shareholder of Peak Entertainment Holdings, Inc. In December
      2004, Mr. Herzog and Mr. Schenkein resigned as directors of the Company.

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

      a)    Wilfred and Paula Shorrocks

            As of December 31, 2004 and June 30, 2005 the owed Wilfred and Paula
            Shorrocks $752,522 and $575,466, respectively.

            Interest amounting to $11,856 for the six months ended June 30, 2005
            and $24,040 in the year to December 31, 2004 has been accrued.

            On March 24, 2004, the Company signed a promissory note which
            established a repayment schedule for the amounts advanced by the
            stockholders. The amount advanced is to be repaid in installments of
            $25,000 on January 31, 2005, May 31, 2005, September 30, 2005,
            December 31, 2005, March 31, 2006 and September 30, 2006 and
            installments of $100,000 on March 31, 2007 and September 30, 2007,
            with any balance to be repaid in full on January 31, 2008.

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

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

            License agreement

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


                                       15
<PAGE>

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


6     Transactions with related parties (continued)

            On February 25, 2002, the Company entered into a license agreement
            for rights to Monsters In My Pocket from Morrison Entertainment
            Group, Inc., in which Wilfred and Paula Shorrocks were also parties.
            Pursuant to the agreement, Wilfred and Paula Shorrocks were
            individually entitled to a certain percentage of the revenues. The
            Company was entitled to 10% of the revenues from the United States,
            35% of the revenues from the United Kingdom, and 40% of the revenues
            from other territories. Morrison Entertainment Group was entitled to
            60% of the revenues from the United States, 32.5% of the revenues
            from the United Kingdom, and 30% of the revenues from other
            territories. The Shorrocks were entitled to 30% of the revenues from
            the United States, 32.5% of the revenues from the United Kingdom,
            and 30% of the revenues from other territories. The revenue
            allocation referred to revenues from character and merchandise
            licensing and sales activities, and the allocation was to be
            adjusted for entertainment production financing terms. In October
            2004, Morrison Entertainment Group sent the Company a notice
            terminating any and all agreements with the Company. On December 22,
            2004, the Company entered into an agreement with Morrison
            Entertainment Group, whereby the parties dissociated the Company's
            Monster Quest property and products from Morrison Entertainment
            Group's Monster In My Pocket property and products. Any and all
            agreements between the parties entered into prior to December 22,
            2004, including license agreements, were terminated.


7     Warrants

      On July 24, 2003, pursuant to a consulting agreement with POW!
      Entertainment LLC and Stan Lee, the Company issued to POW warrants to
      purchase 750,000 shares of the Company's common stock exercisable for five
      years at $0.35 per share in exchange for consulting services to be
      provided over a three year term. Warrants to purchase 375,000 shares of
      common stock vested upon execution of the consulting agreement, and the
      remaining warrants to purchase 375,000 shares of common stock vested on
      July 24, 2004. POW has the right to demand registration of the shares of
      common stock underlying the warrant at the Company's expense, although no
      demand had been received at the date of this report.

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

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

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


                                       16
<PAGE>

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


7     Warrants (continued)

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

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

      On January 5, 2004, the Company completed a "Settlement Agreement and
      Release" with former holders of 12% convertible debentures. Under the
      agreement, the Company exchanged $1,000,000 and 1,000,000 shares of
      unregistered common stock in return for the surrender of an aggregate of
      $215,000 principal amount of 12% convertible debentures, accrued interest
      and warrants to purchase 645,000 shares of common stock, issued pursuant
      to a "Securities Purchase Agreement" dated as of February 28, 2002, and an
      aggregate of $785,000 principal amount of 12% convertible debentures,
      accrued interest and warrants to purchase 1,570,000 shares of common
      stock, issued pursuant to a "Securities Purchase Agreement" dated as of
      April 22, 2003. The $1,000,000 consisted of $500,000 paid on January 5,
      2004 and $500,000 in promissory notes, which was subsequently paid on
      March 22, 2004. The agreement provided that, after a period of thirteen
      months from January 2004, all of the 1,000,000 shares of common stock
      still owned at that time by the former debenture holders may be put to the
      Company at a price $0.75 per share, on an all-or-none basis, for a one
      month period. The Company also paid for $10,000 of the former debenture
      holders' legal fees and expenses in connection with the transaction.

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


                                       17
<PAGE>

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


7     Warrants (continued)

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

      The warrants have been valued using the Black-Scholes Option Model at a
      value of $1,649,901 at the date of grant. A discount of the full amount of
      the debt was recorded and will be amortized over the life of the debt of
      approximately 3 years.

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

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

      On January 29, 2004, the Company entered into a "Securities Purchase
      Agreement" with Shai Stern. Pursuant to the agreement, it issued $50,000
      in 8% convertible debentures due January 29, 2007 and 100,000 common stock
      purchase warrants. The principal amount of the debentures, plus any
      accrued and unpaid interest on the debentures, may be converted into
      shares of common stock at the conversion price of $0.30 per share. Annual
      interest payments on the debenture are due on January 29 of each year,
      commencing with January 29, 2005. At the option of the Company interest
      payments may be accrued beyond the annual interest payment date, in which
      event the debenture holder shall have the option to accrue the interest
      payment then due for another interest payment period, or cause the Company
      to issue common stock in exchange for interest. The warrants are
      exercisable for three years at a price of $0.50 per share. After the tenth
      consecutive business day in which the common stock trades at $3.00 or
      greater, the warrants become redeemable at $0.10 per warrant.


                                       18
<PAGE>

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


7     Warrants (continued)

      The warrants have been valued using the Black-Scholes Option Pricing Model
      and have a value of $51,997 at the date of grant. The Company has recorded
      these debentures and warrants in accordance with the provisions of EITF
      00-27 "Application of Issue 98-5 to Certain Convertible Instruments".
      Under the provisions of EITF 00-27, the Company has allocated the total
      proceeds received between the convertible debentures and the warrants
      based on their relative fair value at the date of issuance. The Company
      has then estimated the intrinsic value of the beneficial conversion
      feature. The Company has determined that the intrinsic value of the
      beneficial conversion feature exceeds the face value of the debt and
      accordingly, the Company has recorded a debt discount of $50,000. The debt
      discount will be amortized as interest expense over the life of the
      debentures, which is three years.

      On September 28, 2004, the Company entered into a "Securities Purchase
      Agreement" with three accredited persons. Pursuant to the agreements, the
      Company sold 1,666,666 shares of common stock and 1,750,000 common stock
      purchase warrants, exercisable for three years at $0.50 per share, for an
      aggregate purchase price of $500,000.

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

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

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

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


                                       19
<PAGE>

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


7     Warrants (continued)

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

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

8     Stockholders' Equity

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

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

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

      In 2003, the Company entered into an agreement with Rolin Inc to provide
      financial advisory services in exchange for common stock of the Company.
      On February 12, 2004, the Company issued an aggregate of 20,409 shares of
      common stock to Rolin Inc. These shares had a fair value of $10,204 at the
      date of grant. The Company has recorded the transaction as professional
      fees expensed in the quarter ended March 31, 2004.

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


                                       20
<PAGE>

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


8     Stockholders' Equity (continued)

      Legend Merchant Group, Inc acted as the placement agent for the above
      transaction. All of the purchasers were pre-existing customers of Legend
      Merchant Group. The Company paid Legend a fee of $25,000, and 100,000
      common stock purchase warrants exercisable for three years at $0.50 per
      share and 60,000 common stock purchase warrants exercisable for three
      years at $0.75 per share, for its services. The warrants have been valued
      using the Black-Scholes Option Pricing Model and have a value of $92,794
      at the date of grant which was March 10, 2004 The total fee of $117,744
      has been offset against the proceeds of the offering.

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

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

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

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

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

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

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


9     Subsequent Events

      On August 10, 2005 the Company borrowed $100,000 as a convertible
      promissory note from Crown Northern Way Capital, LLC in a private
      placement. The note bears interest yielding 10% simple interest and is
      convertible at $0.30 per share. In addition, the Company issued 333,333
      warrants with an exercise price of $.30 to the lender.


                                       21
<PAGE>

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

                          "FORWARD-LOOKING" INFORMATION

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

Introductory Statement

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

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

The following discussion and analysis should be read in conjunction with the
information set forth in the audited financial statements for the year ended
December 31, 2004.

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

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

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

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

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


                                       22
<PAGE>

Business

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

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

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


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

Revenues

Consolidated net revenues increased 496% to $652,780 and 861% to $349,372 for
the six months and three months ended June 30, 2005 as compared to 2004.

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

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

Cost of Revenue

For the six and three months ended June 30, 2005 cost of revenues was $115,183
and $22,712 as compared to $84,914 and $20,214 in 2004. Cost of revenues as a
percentage of revenues decreased to 18% and 7% for the six and three months
ended June 30, 2005 as compared to 78% and 56% in 2004. Cost of revenue is
primarily made up of inventory, transport and royalties due on licenses.

We anticipate that our cost of revenue with respect to income from entertainment
and consumer products will increase significantly in 2005 as we enter into the
production stages of more television show episodes and increased marketing
efforts for the sale of consumer goods. It is anticipated that the cost of
revenue for our television shows will initially increase in relation to our
entertainment revenues, until such time that the television episodes are
completed, at which time the significant costs will have been incurred. Since
costs for entertainment comprise mostly of non-recurring episode production
costs, we expect such costs to decrease as a percentage of revenues as we
distribute the shows and generate revenues from more and more markets. It is
anticipated that the cost of revenue for our consumer products will increase in
direct relation to an increase in revenues.


                                       23
<PAGE>

Operating Expenses

Selling, General and Administrative Expenses. Selling, general and
administrative costs were $1,169,730 and $739,759 for the six and three months
ended June 30, 2005 compared to $1,576,124 and $820,997 for the six and three
months ended June 30, 2004. Selling, general and administrative costs decreased
by 26% and 10% for the six and three months ended June 30, 2005 as compared to
the three and six months ended June 30, 2004.This decline represents management
focus on controlling spending. The significant and noteworthy expenses were
principally costs incurred from legal, accounting and other professional
services related to the ongoing SEC filings and investment within the company.
Such costs have been a significant factor affecting the business operations at a
time when we lack sufficient revenues from operations to finance the production
of our television shows and rely upon financing from third parties. We will
continue to incur such expenses in 2005 as the company is in the financing
stages of its animation projects and general investment into the company. We
anticipate that expenses for legal, accounting and other professional services
will continue to be a significant factor during 2005, due to our continuing need
to raise capital and our securities law reporting obligations as a publicly-held
company.

Non-cash expense

Non cash expense for the six and three months ended June 30, 2005 was $1,422,137
and $949,246 as compared to $280,118 and $237,986 in 2004, respectively an
increase of $1,142,019 and $711,260. The increase in non cash expense is
primarily related to the Company increased efforts to raise capital for its
operations.


LIQUIDITY AND CAPITAL RESOURCES

Cash Requirements

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

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

We rely on short-term outside funding to meet our short-term liquidity needs, as
the internal cash flows generated by sales of our toys and gift products have
been insufficient to fully meet our short-term liquidity needs. We anticipate
that in fiscal year 2006, we will be in position to meet our short-term and
long-term liquidity needs through the internal cash flows generated from
broadcast sales from our current entertainment projects, Monster Quest and The
Wumblers, which are scheduled for production in late 2005 to early 2006. Because
our current operations did not generate any significant revenues and our
principal planned products are still in production stages, we are in constant
need of cash to pay for our ordinary operating expenses, and more significantly,
to pay for the production costs of three projects currently in various stages of
production. Accordingly, until our entertainment projects can be funded and full
television production activities commenced, we will continue to rely on
short-term outside funding. If we are unable to obtain funding for the projects,
we may be forced to curtail or terminate operations.


                                       24
<PAGE>

Sources and Uses of Cash

To date, the Company has financed its operations primarily through the sale of
equity securities and debt. At June 30, 2005, we had $27,361 in cash and used
$320,896 to fund its operations and net loss for the six months ended June 30,
2005. The Company's consolidated financial statements for December 31, 2004 had
been prepared on the assumption that the Company will continue as a going
concern. The Company's independent auditors issued there audit report for the
December 31, 2004 financial statements dated May 16, 2005 that includes an
explanatory paragraph stating that the Company's recurring losses and
accumulated deficit, among other things, raised substantial doubt about the
Company's ability to continue as a going concern. The Company's historical sales
have never been sufficient to cover its expenses and it has been necessary to
rely upon financing from the sale of equity securities and debt to sustain
operations. The Company's ultimate future capital requirements will depend on
many factors, including cash flow from operations, customer acquisition, and the
Company's ability to successfully market its products.

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

         Sources and Uses of Cash from Operating Activities

For the six months ended June 30, 2005, cash flows from operating activities
resulted in negative cash flows of $320,896. The net loss of $2,603,463, gain on
settlement of convertible debentures of $37,559 and accounts payable and other
accrued liabilities of $146,723 were offset by non-cash charges of $2,221,078
for depreciation, amortization of intangible assets, amortization of discount on
debentures, non-cash professional and consulting fees. Cash has benefited due to
a decrease of $50,380 in accounts receivable, $91,743 in inventory and $103,648
in other current assets offset by an increase of $146,723 in accounts payable
and other accrued liabilities.

         Sources and Uses of Cash from Investing Activities -

Cash flows from investing activities resulted in positive cash flows of $220,186
for the six months ended June 30, 2005, as compared to $404,226 in 2004. In the
six months ended June 30, 2005 we raised $360,000 of cash from debt and
purchased $35,714 in equipment and $104,100 to purchase intangibles.
In 2005, our focus will be on production and investment in new product licenses
from third parties. We may expend significant resources in investing activities
in 2005.

         Sources and Uses of Cash from Financing Activities-

Cash flows from financing activities resulted in negative cash flows of $177,056
for the six months ended June 30, 2005, compared to same period in 2004 of
negative $313,671. In 2005, we intend to continue to rely upon capital raised
from third party investors in private placements to fund our operations, as well
as any entertainment production financing partners we can obtain. Entertainment
production financing partners will share in the proceeds of the sale of the
produced product.

In 2005, we intend to continue to rely upon capital raised from third party
investors in private placements to fund the Company's operations, as well as any
entertainment production financing partners we can obtain. Entertainment
production financing partners will share in the proceeds of the sale of the
produced product.


                                       25
<PAGE>

Sales of Securities in 2005

On January 29, 2004, we entered into a Securities Purchase Agreement with an
individual investor. Pursuant to the agreement, we sold $50,000 in 8%
convertible debentures due January 29, 2007 and 100,000 common stock purchase
warrants. The purchase price was $50,000. The principal amount of the
debentures, plus any accrued and unpaid interest on the debentures may be
converted into shares of common stock at the conversion price of $0.30 per
share. Annual interest payments on the debentures are due on January 29 of each
year, commencing January 29, 2005. At our option, interest payments may be
accrued beyond the annual interest payment date, in which event the debenture
holder shall have the option to accrue the interest payment then due to another
interest payment period, or cause us to issue common stock in exchange for
interest. We used the proceeds for working capital purposes. On January 26,
2005, the investor converted these $50,000 in debentures, plus $4,000 in accrued
interest, into an aggregate of 180,000 shares.

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

CASH MANAGEMENT

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

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


                                       26
<PAGE>

PLAN OF OPERATIONS TO ADDRESS GOING CONCERN

In its report dated May 16, 2005, the independent registered public accounting
firm stated that our financial statements for the year ended December 31, 2004
were prepared assuming that we would continue as a going concern. Our ability to
continue, as a going concern is an issue raised as a result of historical losses
from operations, cash flow deficits and a net capital deficiency. As a result of
the foregoing, the auditors have expressed substantial doubt about our ability
to continue as a going concern.

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

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

      o     seeking institutional investors for equity investments;
      o     complete negotiations to secure short term financing through
            promissory notes or other debt instruments on an as needed basis;
      o     focusing on, and continue to expand, revenues, through sales of
            consumer products and pre-sales on our projects in development;
      o     renegotiate payments terms of existing contractual obligations;
      o     develop co-production financing opportunities for our entertainment
            projects;
      o     consider third-party licensing alliances for the products in our
            entertainment division; and
      o     seek acquisition and partnership opportunities with third party
            companies to expand our fully integrated media business.

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

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

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

(1)   Revenue Recognition.

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


                                       27
<PAGE>

      (a)   persuasive evidence of a sale or licensing arrangement with a
            customer exists,
      (b)   the television episode is complete and, in accordance with the terms
            of the arrangement, has been delivered or is available for immediate
            and unconditional delivery,
      (c)   the license period of the arrangement has begun and the customer can
            begin its exploitation, exhibition or sale, and
      (d)   the arrangement fee is fixed or determinable.

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

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

(2)   Film and Television Costs.

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

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

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

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

RECENT ACCOUNTING PRONOUNCEMENTS

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

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


                                       28
<PAGE>

ITEM 3. CONTROLS AND PROCEDURES

Our management, with the participation of our Chief Executive Officer and
Principal Financial Officer, evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) or Rule 15a-15(e) of the
Exchange Act) as of the end of the period covered by this report. Based on that
evaluation, our Chief Executive Officer and Principal Financial Officer
concluded that our disclosure controls and procedures as of the end of the
period covered by this report were effective in ensuring that information
required to be disclosed by us in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.

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


                                       29
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

In 2002, we entered into an agreement with CK Supermarket to provide working
capital on a short-term basis secured against certain inventory of our
subsidiary, Jusco UK Ltd. The lender has a security interest on the assets of
our subsidiary, Jusco UK Ltd., but does not have a security interest in our
parent company or our other subsidiaries. The debt was originally due on January
10, 2003. At March 31, 2004, it was envisaged that the loan would be repaid in
2004 from revenues from the sale of inventory. In May 2004, the lender notified
us regarding immediate payment of the balance owed. As of May 2004, we were in
discussions with the lender regarding the repayment of the debt through a
combination of cash from the sale of certain inventory and the issuance of our
securities and for us to guarantee the repayment by Jusco UK Ltd. At December
31, 2004, the balance was $386,095 including interest of $115,596. On or about
May 6, 2005, CK Supermarket commenced a legal proceeding before the Supreme
Court of the State of New York, County of New York, Index No. 05-601612, seeking
payment of $376,482 plus interest. We intend to vigorously contest the pending
proceeding, which we believe has several technical defenses, particularly as to
the forum and certain allegations that are believed to be material and
erroneous. However, ultimately, we anticipate that a properly instituted lawsuit
in a proper venue is likely to result in payment obligations of the subsidiary
to CK Supermarket, and if not paid by our subsidiary, then we may be required to
pay such obligation if so determined by a proper forum.

On January 5, 2004, we completed a transaction, pursuant to a Settlement
Agreement and Release dated as of December 22, 2003, with former debenture
holders: AJW Partners, LLC, New Millennium Capital Partners II, LLC, AJW
Offshore, Ltd, and AJW Qualified Partners, LLC. Pursuant to the terms of the
settlement agreement, the former debenture holders had the right, thirteen
months after the closing of the transaction, to provide notice to the Company of
an exercise of a "put" right pursuant to which we would buy from the former
debenture holders all of the 1,000,000 shares of common stock issued to them
pursuant to the settlement agreement, at the price of $0.75 per share. Pursuant
to the terms of the settlement agreement, the former debenture holders were to
provide us with written notice if they wished to exercise the put right after
thirteen months and prior to one year and two months after the closing of the
transaction, at the expiration of which, the put right was to terminate. Closing
on the put was to occur within ten business days from receipt of notice of the
put. On or about January 10, 2005, the former debenture holders submitted a
notice to exercise the put right. On or about January 26, 2005, the former
debenture holders resent the January 10, 2005 notice to exercise the put right.
We believe that the notice was not properly submitted in accordance with the
notice procedures provided in the settlement agreement. To the best of our
knowledge, and after inquiry to the counsel for the former debenture holders of
the "put", no notice of exercise of the "put" was sent to us, as required.
Accordingly, we considered the notice ineffective and did not honor the notice.
In or about April 11, 2005, the former debenture holders commenced a legal
proceeding before the Supreme Court of the State of New York, County of New
York, Index No. 05-600993, seeking payment of $750,000. We intend to contest
this matter vigorously as we believe we have a meritorious defense to the
claims. If we do not prevail, we may ultimately be required to repurchase
1,000,000 shares from the debenture holders for $750,000 plus interest and
costs.


                                       30
<PAGE>

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

On August 10, 2005, we sold to one accredited investor a 10% convertible
promissory note in the principal amount of $100,000 due November 8, 2005, and
warrants to purchase 333,333 shares of common stock. Interest on the note is due
at maturity. Interest is to accrue on the principal amount at a fixed simple
rate of ten percent per year, calculated on the actual number of days elapsed on
the basis of a 360 day year. The principal amount and accrued interest on the
note may be converted into shares of common stock at the conversion price of
$0.30 per share. The warrants are exercisable at a price of $0.30 per share for
three years. The obligations of the Company under the note are protected by a
subordinated lien on our intellectual property, that is subordinate to the liens
of prior lenders. We used the proceeds for general corporate purposes. We relied
on an exemption from registration for a private transaction not involving a
public distribution provided by Section 4(2) under the Securities Act.


ITEM 6. EXHIBITS

The following exhibits are filed with this report:

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

4.1               Form of Securities Purchase Agreement, May 2005 (Incorporated
                  by reference to Exhibit 4.1 of Form 8-K filed on July 15,
                  2005)

4.2*              Securities Purchase Agreement, August 10, 2005

11                Statement re: computation of per share earnings is hereby
                  incorporated by reference to "Financial Statements" of Part I
                  - Financial Information, Item 1 - Financial Statements,
                  contained in this Form 10-QSB.

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

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

32.1*             Certification of Chief Executive Officer Pursuant to 18 U.S.C.
                  Section 1350

32.2*             Certification of Principal Financial Officer Pursuant to 18
                  U.S.C. Section 1350

------


* Filed herewith.


                                       31
<PAGE>

                                   SIGNATURES

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

                                           PEAK ENTERTAINMENT HOLDINGS, INC.

Dated:  August 16, 2005                    By:  /s/ WILFRED SHORROCKS
                                                ---------------------
                                           Wilfred Shorrocks,
                                           Chairman and Chief Executive Officer

Dated:  August 16, 2005                    By:  /s/ NICOLA YEOMANS
                                                ------------------
                                           Nicola Yeomans
                                           Principal Financial Officer





                                       32