SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

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

                                   FORM 10-KSB

[X]    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
OR
[ ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO _______

                          Commission File No. 000-27777

                            INNOVATION HOLDINGS, INC.
                     F/K/A BLAGMAN MEDIA INTERNATIONAL, INC.
        (Exact Name of Small Business Issuer as Specified in its Charter)

              Nevada                                           91-1923501
-------------------------------                           ----------------------
(State or other jurisdiction of                             (I.R.S. Employer
 incorporation or organization)                           Identification Number)

                 14622 Ventura Boulevard, Suite 1015
                      Sherman Oaks, California              91403
               -----------------------------------------------------
              (Address of Principal Executive Offices)    (Zip Code)

                                 (818) 426-8737
                ------------------------------------------------
                (Issuer's Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: Common
Stock $.001 par value

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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. [X] Yes [ ] No

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

Indicate by check mark whether the issue has filed all documents and reports
required to be file by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court. [X] Yes [ ] No

Issuer's net revenues for 2003 were $83,652.

The number of shares outstanding of each of the Issuer's classes of common
stock, as of December 31, 2003 was 31,682,095. Currently the stock totals
39,397,187 to reflect the 1-500 split effective on April 23, 2004.

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

<PAGE>

                                TABLE OF CONTENTS


PART I                                                                      PAGE

Item 1.     Description of Business..........................................  4
Item 2.     Description of Property.......................................... 10
Item 3.     Legal Proceedings................................................ 10
Item 4.     Submission of Matters to a Vote of Security Holders.............. 12


PART II

Item 5.     Market for Registrant's Common Equity and Related
                   Stockholders Matters...................................... 12
Item 6.     Management's Discussion and Analysis of Financial Condition
                   and Results of  Operations................................ 13
Item 7.     Financial Statements............................................. 18
Item 8.     Changes In and Disagreements with Accountants on Accounting
                   and Financial Disclosure.................................. 18
Item 8.A    Controls and Procedures.......................................... 18

PART III

Item 9.     Directors, Executive Officers, Promoters and Control Persons;
                   Compliance with Section 16(a) of the Exchange Act......... 18
Item 10.    Executive Compensation........................................... 19
Item 11.    Security Ownership of Certain Beneficial Owners and Management... 21
Item 12.    Certain Relationships and Related Transactions................... 23
Item 13.    Exhibits, List and Reports on Form 8-K........................... 23
Item 14.    Controls and Procedures.......................................... 23


Signatures................................................................... 24


Certification................................................................ 25




                                      -ii-
<PAGE>


                          NOTE RELATING TO STOCK SPLIT

On April 23, 2004, we effectuated a 1-for-500 reverse stock split with respect
to our Common Shares. Whenever we make any reference in this annual report to
the grant or issuance of Common Shares, or options or warrants to purchase
Common Shares, such references shall, for comparison purposes, be made in
reference to post-reverse numbers and, in the case of options and warrants,
post-reverse exercise prices, unless we state otherwise.


                SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

In this annual report we make a number of statements, referred to as
"forward-looking statements," which are intended to convey our expectations or
predictions regarding the occurrence of possible future events or the existence
of trends and factors that may impact our future plans and operating results.
These forward-looking statements are derived, in part, from various assumptions
and analyses we have made in the context of our current business plan and
information currently available to us and in light of our experience and
perceptions of historical trends, current conditions and expected future
developments and other factors we believe to be appropriate in the
circumstances. You can generally identify forward-looking statements through the
words and phrases such as "seek," "anticipate," "believe," "expect," "intend,"
"plan," "budget," "project," "may be," "may continue," "may likely result," and
similar expressions. When reading any forward-looking statement, you should
remain mindful that all forward-looking statements are inherently uncertain as
they are based on current expectations and assumptions concerning future events
or future performance of our company, and that actual results or developments
may vary substantially from those expected as expressed in or implied by that
statement for a number of reasons or factors, including those relating to:

o whether or not markets for our products develop and, if they do develop, the
pace at which they develop; o our ability to attract the qualified personnel to
implement our growth strategies; o our ability to develop sales, marketing and
distribution capabilities; o the accuracy of our estimates and projections; o
our ability to fund short-term and long-term financing needs; o changes in our
business plan and corporate strategies; and o other risks and uncertainties
discussed in greater detail in the section of this annual report entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."

Each forward-looking statement should be read in context with, and with an
understanding of, the various other disclosures concerning our company and our
business made elsewhere in this annual report, as well as other public reports
filed with the United States Securities and Exchange Commission (the "SEC"). You
should not place undue reliance on any forward-looking statement contained in
this annual report to reflect new events or circumstances unless and to the
extent required by applicable law.


                                      iii
<PAGE>

PART I

ITEM 1.     DESCRIPTION OF BUSINESS.

OVERVIEW

Innovation Holdings, Inc. f/k/a Blagman Media International, Inc. is a Nevada
corporation (collectively with its subsidiaries, the "Company," "we," "us," or
"our"), which is the successor to a corporation founded in 1961. We are a direct
marketing firm that has transitioned into a form of a holding company seeking
out business opportunities and product ownership focused on direct response
opportunities. Through these investments and ownership opportunities, Innovation
will through direct response advertising, market products directly to consumers.
Innovation Holdings is based in Sherman Oaks, California and principally
provides direct market services for our clients and their products and services
through television, radio, Internet, print and outdoor advertising media. In
addition, we provide extensive assistance in backend marketing and creative
production.


CORPORATE HISTORY AND DEVELOPMENT

We began operations in 1994 as a sole proprietorship and formed a corporation,
Blagman Media International, Inc., in early 1999. On August 2, 1999, we
completed a reverse acquisition with Unisat, Inc., an inactive, public
non-reporting company, founded in 1961 and formerly known as Combined Companies,
Inc. On the same date, Unisat, Inc. changed its name to Blagman Media
International, Inc. and we therefore have two Nevada entities with the same
name. The transaction was structured as a share exchange, in which Robert
Blagman exchanged all of his shares in the privately held entity for 8,200,000
common shares of Unisat, Inc. In April 2000, we entered into a share exchange
agreement with MNS Eagle Equity Group I, an inactive, reporting Nevada
corporation, which resulted in our becoming the parent reporting company.

The primary purpose of these transactions was to give us access to a public
market, to create a new corporate vehicle with which to build a more expansive
media-buying infrastructure, thereby allowing us to leverage our direct
marketing and direct response efforts. Currently, we are actively pursuing
acquisitions and various strategic and working relationships which, if
successful, will allow us to create a "network" of alliance partners with the
capacity to deliver a broader range of services in a more cost-efficient manner.

In 2001, internally we focused on our core competencies by making quantitative
media buys and in assisting our clients in implementing traditional radio,
television and out of home media strategies. Given the general uncertainties in
Internet advertising and Internet business models that developed in late 2000,
and which continue, we plan to monitor the use and styles of Internet
advertising. In this way, we can assess the opportunities available to us in
Internet advertising while not making any firm financial commitments to an
Internet strategy. In addition to considering merger and acquisition
opportunities for consolidation and industry growth, we are continuing to pursue
an expansion in the television production field through strategic alliances.


                                      -4-
<PAGE>

In 2001, we also actively pursued acquisitions and completed our first industry
acquisition transaction in March 2002 when Century Media, Inc. ("Century")
became a wholly-owned subsidiary under the name Blagman-Century Media, Inc.
("Blagman-Century"), subsequently renamed Century Media, Inc. We had been
negotiating since early 2001 to acquire Century Media, a Santa Monica based
advertising agency in business for over ten years with historical billings and
placements that ranged from $35 million to $110 million. In 2001, we entered
into agreements to acquire all of the outstanding stock of Century, but certain
requirements were not satisfied. In October 2001, we concluded that the purchase
price for Century, which was then set at $5.7 million cash plus the assumption
of significant debt, needed to be substantially reduced as a result of our due
diligence conclusions.

In March 2002, we completed the transaction through a merger of a wholly-owned
special purpose subsidiary into Century in exchange for the payment of the
equivalent of $100 per share to the shareholders of Century ($12.50 in cash and
the balance in shares of the common stock of the parent company (hereafter
"Common Shares"), repayment of $749,778 in debentures through the issuance of
Common Shares, and the recognition of debts. As a result, at closing
approximately $600,000 in cash and $2.2 million in restricted Common Shares were
distributed to holders of existing Century shares, debentures, and certain stock
rights. Under the merger agreement, the Common Shares were valued at the closing
bid price over the seven days prior to the date of the agreement or $0.4429
resulting in the issuance of 5,111,303 new Common Shares to the holders of
Century shares, debentures and certain stock rights. Century also had continuing
debt obligations due to affiliates and third parties of approximately $1.6
million, exclusive of trade and contingency obligations. In connection with our
interest in the Century transaction, we provided management services to Century
from late 2001 to early 2002, essentially on a reimbursement basis. As a result
of the overwhelming debt and departures by members of Century, we no longer
consider this acquisition viable. We are in the process of resolving all issues
related to the Century acquisition.

Following the acquisition of Century Media in March 2002, the Company had
determined that Century Media was not strategic to the Company's ongoing
objectives and has discontinued the operations as of December 2002.


BUSINESS ACTIVITIES

Our principal business is media buying, with a specific focus on direct
marketing and direct response advertising. Direct marketing is any communication
or advertisement to a consumer or business that is designed to generate a direct
interest in the form of an order for a specific product of service, a request
for information, or a visit to a place of business with a predetermined
demographic audience. Direct marketing efforts generally attract the response by
offering an incentive to the targeted audience through a broad range of media
vehicles including catalogs, bill inserts, coupon mailings, telemarketing,
events, and traditional direct mail. Direct marketing is intended to gain
consumer interest and awareness and produce sales over a period of time through


                                      -5-
<PAGE>

a response to the materials or the broadcast but, generally, direct marketing
does not solicit an immediate response or purchase. The Company's revenues for
direct marketing services are generated from media commissions which are paid in
advance to us as media is placed and purchased and from fees for direct services
to the client.

In contrast to direct marketing, direct response utilizes direct marketing's
array of media vehicles, but also targets a non-specific demographic audience
through media time available as "remnants" or "surplus" after normal network and
prime advertising has been purchased. When there is a slowdown or recession in
the "general advertiser" market, as existed in the 2001 economic slowdown, the
direct response industry can flourish because of the excess media inventory.
That trend has slowed due to the dramatic extent of the economic slowdown.
Direct response's main purpose is to generate an immediate profitable
transaction from the broad non-targeted audience it reaches. Direct response
firms handle all aspects of a media campaign by merging the roles of product
developer, marketer, and merchant. They often receive a percentage of sales
revenues, as well as fees based on time purchased or actual services rendered.
While direct response media buys and programming can be either long form (more
than 2 minutes and generally 30 minutes in length) or short form (generally 30
to 120 seconds in length), the most commonly recognized direct response format
is the "infomercial," a 30-minute television program demonstrating a product,
providing testimonials, offering additional tie-in merchandise and motivating
the audience to order the product while they are watching.

To date, our major focus has been on direct marketing services. According to the
Direct Marketing Association (DMA), overall sales through direct marketing
(during 2002, the most recent period available) in the United States were
approximately $1.8 trillion and are expected to continue to increase. The
proliferation of cable, network and non-network television, Internet and radio
has made traditional media choices less effective and audiences harder to reach.
This proliferation has increased the obstacles to reaching a mass audience in
traditional media formats and increased the cost of capturing a consumer's
attention. In contrast to traditional general media marketing, the results of a
direct marketing or a direct response campaign are easily quantifiable because
any responses can be tied directly to the marketing dollars used to generate
them. Clients utilizing direct marketing and direct response campaigns have
immediate feedback on whether or not their advertising has effectively
translated into sales or revenues.

The direct marketing system requires advertisers to focus on the most effective
time and media slots for the product they are selling. As a result, media buying
has become more precise and agencies have tended to specialize in certain
product lines or media outlets. We believe that there is a need to reverse the
fragmentation through business and service consolidation so clients can benefit
from broader marketing, increased buying power and the economies of scale.

The following chart compares the characteristics of traditional advertising with
the direct marketing and direct response approaches:


                                      -6-
<PAGE>

            GENERAL ADVERTISING VS. DIRECT MARKET AND DIRECT RESPONSE

           GENERAL ADVERTISING               DIRECT MARKET AND DIRECT RESPONSE
---------------------------------------     ------------------------------------

Purpose is to create positive awareness     Purpose is to create an instant sale
                                            or inquiry for a product or service
                                            for product of service

Builds                                      awareness for a sale Makes a sale or
                                            contact now, directly with time and
                                            place, under the buyer's control.
                                            The customer, at a time and place
                                            under the seller's control.

Provides                                    information Seller tests and
                                            receives information from the
                                            advertiser.

Sells products                              Sells offers.

Creates markets                             Discovers markets.

Seeks to influence behavior                 Seeks to model or repeat behavior.

Creates sales                               Creates customers.

Vaguely measurable                          Fully accountable. Every response is
                                            a "market share" measured
                                            (cost/order, cost/lead, etc.).


If advertising is an "art," direct mail and direct response are a "science"
because variables are documented, tested, and turned into constants, which are
"replicated" in further "applications" to achieve the same or better results.
Direct response employs a range of strategies and techniques and tests them in
various combinations to achieve maximum marketing results at the lowest cost.
Based on the current and continuing trends in advertising, direct marketing will
be a common form of advertising as the century continues, especially as more and
more companies embrace direct marketing to improve their operations results and
consumer exposure.


                                      -7-
<PAGE>

REVENUE SOURCES

The Company expects to generate revenue from the investment of capital in
certain opportunities it is now seeking out in the direct response arena.
Revenues have been curtailed over the past year while the firm regroups and
evolves out of the problems associated with its association with a financial
firm now being investigated by the SEC.

For full details please refer to
http://www.sec.gov/litigation/litreleases/lr18057.htm. The ramifications of the
association with the group named in the SEC investigation have caused a dramatic
slowdown of the company's day to day business.

The Company also represents its advertising clients for exclusive placement of
services covering productions, advertising, marketing/media, telemarketing and
fulfillment activities. These services generally include a monthly fee for
developing and advising on the complete marketing strategy and tactics, and
related market research to establish the target identity and demographic for TV,
radio and outdoor placements and a commission on the actual production series.
Consistent with industry practice, we approve the media purchase orders, receive
full payment from the client before the media airs and remit the media payments
after deducting commissions and the media charges as they are billed to us.

COMPETITION

We compete with much larger advertising agencies that have greater financial and
personnel resources to service their accounts. We seek to meet the competitive
challenges these larger agencies pose. Our boutique size, ability to offer
advanced client services and personal attention allows the Company to
differentiate itself from many competitors. We compete through our thorough
research, selective competitive intelligence on consumer and customer trends,
use of our growing database on what motivates people to buy, and the quality and
reliability in executing our client's direct response targeted programs. Our
main competitors are Hawthorne Media, Cmedia, Mercury Media and most general/
traditional advertising firms.

DEPENDENCE ON LIMITED CLIENTS

During 2002, the firm had a small group of clients that included Greenpeace,
Amnesty International, the Red Skelton Estate and a variety of other small
companies. During 2003 due to a refocus of our business direction, most if not
all of our media and advertising transactions are being outsourced to third
party entities to enhance the financial growth of Innovation Holdings. By year's
end Innovation Holdings held no client contracts as it regroups and prepares to
invest and acquire new product opportunities.


                                      -8-
<PAGE>

ALLIANCES

We originally expanded our market presence through alliances with larger
enterprises and associations where our particular expertise was valuable and our
ability, as a smaller entity, to respond quickly in a flexible manner allowed
the larger organization to enhance its marketing and advertising services.
Historically, our main alliance was with Eicoff & Company, a subsidiary of
Ogilvy & Mather. Eicoff & Company is the oldest, largest, and one of the most
successful direct marketing firms in the country and the number one short
form-advertising agency in the world with billings exceeding $150 million. After
becoming a publicly traded company, this alliance was compromised due to
possible conflicts with our pending acquisitions, we are currently actively
seeking new affiliations.

FINANCING TRANSACTIONS

On July 12, 2001, we entered into an equity line of credit agreement for up to
$15 million in credit with Gazelle Group LLP ("Gazelle") and DRH Investment
Company LLC ("DRH"). This agreement covers a total of 900,000 Common Shares
pursuant to the equity line of credit agreement from time to time during a
three-year period beginning on the date of the agreement. The amount of issuable
securities is tied to the market price of our Common Stock and as a result of
our low stock price during 2002 and 2003; we have been unable to draw against
the equity line of credit.

Pursuant to the terms of the equity line of credit agreement, the dollar amount
of each sale is to be determined by us, subject to a maximum limit based on our
Common Shares' trading volume. At least 13 trading days must occur between
sales. In turn, Gazelle and DRH may sell our stock in the open market, sell our
stock to other investors through negotiated transactions or hold our Common
Shares in their own portfolios. As a practical matter, access to the equity line
also requires an effective registration statement for the resale of such
securities and our registration statement is not yet effective.

In July 2001, the Company entered into an agreement with May Davis Group, Inc.
to act as exclusive agent in connection with a Securities Purchase Agreement for
issuance and sale by the Company through a private placement of 100 Series B
convertible preferred shares with a par value of $0.001 per share at a
securities purchase price of $10,000 per share for an aggregate amount of
$1,000,000 for which the Company has received a full net amount of $810,000 and
has issued the Series B Preferred Stock which is convertible as specified, into
Common Shares.

INTELLECTUAL PROPERTY

We have no patents, trademarks, licenses or any other intangible assets that
would impact its value or earnings.


                                      -9-
<PAGE>

RESEARCH AND DEVELOPMENT OF ADVERTISING ACTIVITIES

We estimate that we currently spend approximately 68% of our time on research
and development activities related to marketing strategies or techniques. We
believe research on consumer trends is one of our competitive advantages.


ENVIRONMENTAL REGULATION

The cost and effects of compliance with environmental laws for federal, state or
local governments are inconsequential.

EMPLOYEES

As of December 31, 2003, we had one full-time employee, the Chief Executive
Officer/Chief Financial Officer, who is not represented by a collective
bargaining unit. We also have one independent contractor working for us on an
as-needed basis to assist in the bookkeeping for the Company.


ITEM 2.   DESCRIPTION OF PROPERTY

The lease term on our office space located at 1901 Avenue of the Stars, Los
Angeles, California, ended on April 30, 2003. We currently are renting a small
executive office on a month-to-month basis and are looking for new space in
which to relocate our executive offices when cash flow permits.


ITEM 3.   LEGAL PROCEEDINGS

The following discusses all known or anticipated material legal proceedings
commenced by or against the Company or its wholly owned subsidiaries:

Subsequent to the Century Media transaction, TMT Media Corporation asserted that
under the April 2000 Acquisition Agreement with Century Media, as a result of
the transaction between the Company and Century Media, it is entitled, as of
April 22, 2002, to a $1,250,000 contingent amount and to the payment in full of
the balance of $609,564 due on the $700,000 note delivered in the 2000
acquisition of TMT by Century Media. The Company and Century Media dispute this
position and are seeking to resolve the matter. In May 2002, TMT filed a lawsuit
captioned TMT Media Corporation v. Blagman Century Media, Inc. et al, in
Superior Court of California, County of Los Angeles, Case No. BC273368, naming
the Company, Century Media and Robert Blagman personally, seeking the
accelerated amount of approximately $1,859,564. The named defendants have filed
a general denial to TMT Media's allegations and have asserted numerous
affirmative defenses. Mr. Blagman demurred to the allegations raised against him
and since the pleading was successful, Mr. Blagman is no longer a party to this


                                      -10-
<PAGE>

lawsuit. On December 2, 2003, TMT Media Corporation was granted Summary Judgment
against Blagman-Century Media, Inc., Blagman Media International, Inc. and
Century Media, Inc. in the amount of $2,081,292. The Company's prior legal
counsel failed to file any opposition to the summary judgment motion which
resulted in attorneys' fees and costs being granted for $152,321 and $9,362
respectively. Newly retained legal counsel for the Company's has found that
former counsel failed to file any opposition to the motion. The Company's
current legal counsel will aggressively and vigorously file a motion to be
relieved of the default as to the summary judgment motion, file the proposed
opposition to reopen the case and seek damages against prior legal counsel based
upon a theory of legal malpractice.

Prinvest Capital Corp. v. Century Media, Inc. et al, is pending in the Superior
Court of Los Angeles County, Case No. BC292131. This litigation was initiated by
a creditor of Century Media in regards to an obligation incurred prior to the
merger of Innovation with Century Media. Prinvest Capital is claiming an amount
owed of $166, 653.67. On January 30, 2004, Prinvest Capital Corp. was granted
Summary Judgment against Century Media, Inc. and Blagman Media International,
Inc. a/k/a Innovation Holdings in the amount of $166,654 and interest in the
amount of $72,399. The Company's prior legal counsel failed to file any
opposition to the summary judgment motion. On May 4, 2004, motion for attorneys'
fees and costs was granted for $35,115 and $1,294 respectively. The motion was
vigorously opposed by the Company's new legal counsel on the grounds there was
an unethical conflict of interest with plaintiff's counsel, Buchalter Nemer
Fields &Younger, associating with Reed Smith. There are currently cross-actions
in this case brought by Century Media, Inc. and Innovation Holdings, Inc.
against former management Peter Lambert and Al Lapin and Peter Lambert, Yona
Lapin and Al Lapin against Innovation Holdings, Inc., Blagman Media
International, Inc. and Century Media, Inc. A settlement was recently reached
with Reed Smith Crosby Heafy LLP. The remaining cross-actions are set for
binding arbitration on November 2004. On May 18, 2004 a hearing for a charging
order is pending against co-defendants Lambert and Lapin. The Company's new
legal counsel will aggressively and vigorously file a motion to be relieved of
the default as to the summary judgment motion and file the proposed opposition
to reopen the case for a defense. An appeal of the attorneys' fees and costs
will also be filed. The binding arbitration will be aggressively prosecuted to
indemnify the companies against any liability that may occur by the summary
judgment and attorneys' fees and costs awarded to date.

Yigal I. Bosch v. Blagman Media International, Inc., Innovation Holdings, Inc.
is pending in U.S.D.C. So. Dist., Texas, Case No. H032860. This is a shareholder
action against the Company for alleged mismanagement and issuing alleged
misleading statements. The Company is engaging counsel in Texas to represent the
Company to aggressively defend this action that management strongly believes was
brought in bad faith.

The Company is a party to other pending litigation matters which are deemed to
be in the ordinary course of business, none of which the Company deems to be
material.


                                      -11-
<PAGE>

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

There were no matters were submitted during the fourth quarter of the fiscal
year covered by this report to a vote of security holders, through the
solicitation of proxies or otherwise.

PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDERS MATTERS.

Until March 10, 2003, our Common Shares traded on the Over the Counter on the
Bulletin Board under the symbol BMII.OB. From March 10, 2003 until April 23,
2004, our Common Shares traded Over the Counter on the Bulletin Board under the
symbol INOV.OB. In April 2004, the Company effectuated a 1-for-500 reverse split
and NASDAQ assigned the Company a new trading symbol, IVHO.OB, under which our
Common Shares are now trading. All references to the number of shares issued and
the sales price of our Common Shares have been adjusted to reflect the 1-for-500
reverse split.

The following table sets forth the high and low sales price of our Common Shares
on its principal market for the fiscal years ended December 31, 2002 and
December 31, 2003.

                                                      BID PRICE
                                                ---------------------
PERIOD                                            HIGH           LOW
---------------------------------------------------------------------
2003*:
Fourth Quarter                                  $0.0001       $0.0001
Third Quarter                                   $0.0001       $0.0001
Second Quarter                                  $0.0001       $0.0001
First Quarter                                   $0.0001       $0.0001

2002*:
Fourth Quarter                                  $0.0001       $0.0001
Third Quarter                                   $0.0001       $0.0001
Second quarter                                  $0.0001       $0.0001
First Quarter                                   $0.0001       $0.0001


*  Throughout the fiscal years ended December 31, 2003 and 2002, our Common
   Shares traded at prices well below $0.001 per share.


                                      -12-
<PAGE>

DIVIDEND POLICY

We have not paid any cash dividends on our Common Shares, and we do not
anticipate that we will pay any dividends with respect to those securities in
the foreseeable future. Our current business plan is to retain any future
earnings to finance the expansion development of our business. Any future
determination to pay cash dividends will be at the discretion of our board of
directors, and will be dependent upon our financial condition, results of
operations, capital requirements and other factors as our board may deem
relevant at that time.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion of our financial condition and results of operations
should be read in conjunction with the consolidated financial statements and the
related notes included as part of this annual report. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of many factors.

GENERAL

RESULTS OF OPERATIONS

Year Ended December 31, 2003 Compared to the Year Ended December 31, 2002

NET REVENUES

Net Revenues for the year ended December 31, 2003 as compared to the year ended
December 31, 2002 decreased from $437,241 to $83,652.

Operating expenses decreased to $7,419,165 (71%) from $4,003,297 in 2001 to
$25,434,569 in 2002 due primarily to the Company canceling consultant contracts
and a decrease in stock issuances for legal, wages, consulting, board fees and
license agreements as well as an overall decrease in overhead. Stock issued for
compensation and services decreased from $23,182,439 to $6,011,658 (74%).

The Company also recognized in 2002 a $3,300,000 expense which represented the
market value of fraudulently issued common shares of the Company, and a loss
from discontinued operations of $12,966,399. In 2003 no such event took place
reducing the total other income expense to $265,699 in 2003 from $3,358,421 in
2002 a decrease of 92%. During 2002, the Company acquired Century Media, Inc.
and subsequent to the acquisition the Company determined that Century Media,
Inc. did not meet its strategic objectives and decided to discontinue and


                                      -13-
<PAGE>

abandon the operations of Century Media, Inc. Therefore, the operations of
Century Media, Inc. are included in discontinued operations.

The total net loss of the Company in 2003 was $8,035,686 compared to $41,322,148
for 2002 or an 81% decrease.

The Company is continuing to rationalize its operating expenses to its revenues
and the needs of a public entity. While management believes that it has now
addressed the principal effects of the direct and indirect Non-Cash Compensation
and other equity commitments and dilution matters which arose from the Unisat
and MNS transactions, from the Company's early experiences as a public entity
and from consultant payments, the Company may continue to use equity, debt and
cash to complete acquisitions or to fund other compensation matters, including
amounts due to Mr. Blagman as deferred salary and signing bonus amounts under
his employment agreement and the pre-existing Board commitment to allow Mr.
Blagman to maintain up to 51% equity ownership in the Company.

Interest expense was not a significant item in 2002 or 2003 and decreased from
$58,958 in 2002 to $53,304 (9.6%) in 2003. Because the Company records revenues
as received and generally commits to time expenditures only when there is
assurance of payment from its clients, interest costs and advertising revenue
adjustments are small.

LIQUIDITY AND CAPITAL RESOURCES

For the year ended December 31, 2003, compared to December 31, 2002, there was
no appreciable cash available. In 2002 there was $31,779 in accounts receivable
while posting at $0 in 2003. These conditions, including the addition of $9,645
at December 31, 2003 of assets related to discontinued operations, resulted in
an overall decrease in current assets from $382,985 to $9,647 (98% decrease)
from December 31, 2002 to December 31, 2003.

Accounts payable and accrued expenses, including cash overdraft at December 31,
2003 was $1,780,024 compared to $1,554,758 at December 31, 2002 (15% increase).
Accrued compensation to officer and amounts due to officer increased from
$1,314,392 at December 31, 2002 to $1,897,344 at December 31, 2003 (44%
increase). Additionally, the Company reflected $10,835,472 as total liabilities
related to discontinued operations. The significant decrease in the working
capital of the Company continues to be a direct result of the acquisition of
Century Media as well as the adverse effects of the departure of key employees
in third quarter 2002. As the employees departed most of the active accounts
departed Century as well. The debt associated with Century was the single and
most devastating factor. The attempt to manage the debt, the layoffs,
resignations and loss of major accounts resulted in a total shut down of the
Century operation. The Century operation also caused a tremendous drain on all
cash flow, time, focus and assets at Innovation Holdings.

During 2003, the Company issued Common Shares of which 23,323,315 related to
consulting, 302,540 were issued as Non-Cash Compensation, 5,052,490 were issued
for legal fees, and 2,989,351 were for license agreements. These transactions
resulted in 31,682,095 Common Shares outstanding at December 31, 2003.


                                      -14-
<PAGE>

During 2003, the market price of our Common Shares continued to be well below
expected levels. We believe that there continues to be pertinent underlying
causes. First, we apparently were one of the companies targeted in an organized
pattern of depressing prices through shorting by a group pursuing a coordinated
effort to effect and profit from a falling share price and from attempts to
extort favorable stock issuances from the Company without fair consideration.
Management initiated referrals to appropriate regulatory agencies for their
action. While actions from these referrals may reduce future manipulation, it
cannot eliminate the impact of the downward price spiral. The second factor
apparently affecting our price was the market reaction to the increase in
authorized and issued Common Shares which we undertook to compensate consultants
in our industry, to support Company growth and to effect the Century
transaction.

Management is currently sorting out the Century transaction and collateral
issues associated with that transaction and pursuing other initiatives to expand
the Company's operations internally and through strategic alliances or
acquisitions with other industry partners. These endeavors will be funded in
part from operations but will also require additional capital funding which the
Company hopes to raise through debt or equity financing arrangements, if
appropriate financing is available, on reasonable and acceptable terms.

During 2003, we focused a significant effort to the unwinding of Century Media.
While the Century Media transaction adds existing debt and trade payables,
management believes that these obligations are being contained and can be funded
from operations, internal organic growth, increased billings, legal avenues and
extensive operating cost reductions and efficiencies. We have departed from our
earlier strategy to assist in funding selected aspects of the growth of Century
Media and new strategic hires and alliances that will not facilitate positive
financial growth.

The Company intends to continue to seek additional working capital to meet its
operating requirements and to provide further capital for expansion,
acquisitions or strategic alliances with businesses that are complementary to
the Company's long-term business objectives. Additional capital will be needed
to maintain the growth plans of the Company. In addition negotiations and
payment plans will be established for preexisting Century debt.

Another factor which has taken a substantial amount of time and funding to
overcome is the Companies victimization at the hands of a specific financial
firm now under investigation with the SEC. More details are available at
http://www.sec.gov/litigation/complaints/comp18057.htm

If substantial additional working capital does not become available, management
believes that the active search and completion of key acquisitions along with


                                      -15-
<PAGE>

proper legal restructuring and planning will be sufficient to meet essential
capital requirements for the next 12 months but will not support growth.

However, the Company currently has a deficit. As a result, the Company's
financial statements for the period ended December 31, 2003 have been prepared
on a going concern basis which contemplated the realization of assets and the
settlement of liabilities and commitments in the normal course of business. The
Company incurred a net loss of $8,035,686 for the year ended December 31, 2003,
and has a working capital deficiency of $14,964,866 and a stockholders
deficiency at December 31, 2003 of $15,194,926, and may not enable it to meet
such objectives as presently structured. These matters raise substantial doubt
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

NEW FINANCIAL PRONOUNCEMENTS

The Financial Accounting Standards Board has recently issued new accounting
pronouncements. Please see Note 1 to the financial statements for a summary of
these pronouncements. Management does not believe that the adoption of these
pronouncements will have a material effect on the financial position or results
of operations of the Company.


FORWARD-LOOKING STATEMENTS

Except for historical information contained herein, the matters discussed herein
are forward-looking statements that involve risks and uncertainties, including
but not limited to economic, competitive, governmental and technological factors
affecting the Company's operations, markets, products and prices and other
factors discussed in this annual report. (See page iii of this report, "Special
Note Regarding Forward-Looking Statements.")

CRITICAL ACCOUNTING POLICIES

The Securities and Exchange Commission ("SEC") recently issued Financial
Reporting release No. 60, "Cautionary Advice Regarding Disclosure About Critical
Accounting Policies" (FRR 60"), suggesting companies provide additional
disclosure and commentary on their most critical accounting policies. In FRR 60,
the SEC defined the most critical accounting policies as the ones that are most
important to the portrayal of a company's financial condition and operating
results, and require management to make its most difficult and subjective
judgments, often as a result of the need to make estimates of matters that are
inherently uncertain.

Based upon the foregoing definition, the Registrant's most critical accounting
policies include:


                                      -16-
<PAGE>

Revenue Recognition

The Company recognizes revenue from the sale of media time to advertising
clients when the related advertisement is broadcasted. Included in the monies
received from advertising clients are amounts which represent the reimbursement
of media time purchased on behalf of the customer for the related
advertisements. These media purchase reimbursements have been accounted for as
an offset to the related media purchases for the respective advertisement and
not as gross revenues as required under EITF 99-19 and SAB 101. Monies received
prior to the broadcast of the related advertisement are recorded as deferred
revenue. In addition, the Company earns commissions in connection with the
procurement of media time on behalf of advertising clients. Such commissions are
also considered earned when the underling advertisement is broadcasted.
Additionally, the Company has entered into contractual agreements with other
advertising firms to share revenues based upon the terms of the specific
agreements. The income produced by these revenue-sharing contracts are
recognized as media or commission income depending upon the nature of the income
earned from the agreement.


                                      -17-
<PAGE>

Asset Impairment

The Company reviews its long-lived assets and identifiable intangibles for
impairment in accordance with SFAS 144, and whenever events or changes in
circumstances indicate that the carrying amount of the asset may not be
recoverable. In performing the review for recoverability, the Company estimates
the future cash flows expected to result from the use of the asset and its
eventual disposition. If the sum of the expected future cash flows (undiscounted
and without interest charges) is less than the carrying amount of the asset, an
impairment loss is recognized. Otherwise, an impairment loss is not recognized.
Measurement of an impairment loss for long-lived assets and identifiable
intangibles would be based on the fair value of the asset.


ITEM 7.  FINANCIAL STATEMENTS

Financial statements as of and for the year ended December 31, 2003 and for the
year ended December 31, 2002 are presented in a separate section of this report
following Item 14.


ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

ITEM 8A.  CONTROLS AND PROCEDURES

As of the end of the period covered by this report (the "Evaluation Date"), we
carried out an evaluation under the supervision and with the participation of
our management of the effectiveness of the design and operation of our
disclosure controls and procedures pursuant to Rule 13a-15 under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Based upon this
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that, as of the Evaluation Date, our disclosure controls and procedures were
effective under Rule 13a-15.

There was no change in our internal control over financial reporting that
occured during the period covered by this Annual Report on Form 10-KSB that has
materially effected, or is reasonably likely to materially effect our internal
control over financial reporting.


PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCEWITH SECTION 16(A) OF THE EXCHANGE ACT.

The following table sets forth certain information with respect to our directors
and executive officers:

NAME                  AGE        POSITION
-----------------     ---        -----------------------------------------------
Robert Blagman        47         Chairman of the Board, Chief Executive Officer,
                                 Secretary
Andrew Given          45         Director
Walter Lubars (1)     73         Director
Jeff Wald (1)         52         Director


                                      -18-
<PAGE>

BUSINESS EXPERIENCE OF DIRECTORS

ROBERT BLAGMAN founded our business as a sole proprietorship in 1994 and has
been the Chief Executive Officer of the Company and Chairman of the Board of
Directors since the transactions with Unisat, Inc. in August 1999. Prior to
founding the enterprise, he was an executive in advertising marketing at: Disney
KCAL Channel in Los Angeles (national advertising sales manager 1992-1994); KCOP
in Los Angeles (local advertising sales manager 1989-1992); and Katz
Communications (various titles leading to national advertising sales manager
1978-1989).

ANDREW GIVEN has served as President of Production for The Shooting Gallery and
as head of Gun For Hire (motion picture/television production). From 1990 to
1999, he held numerous management and other positions at Universal Studios,
including an executive producer focused on cost management of films. Mr. Givens
has served on the Company's Board of Directors since August 1999.

WALTER LUBARS has been a professor of advertising at Boston University for over
30 years. Mr. Lubars now is semi-retired and works part-time as a professor
emeritus. He has served on the Board of Directors of the Company since August
1999.

JEFF WALD has been the News Director for KTLA Channel 5 in Los Angeles for the
past five years. KTLA is part of the Tribune Company. He has served on the Board
of Directors of the Company since August 1999.

Each director will hold office until the next annual meeting of shareholders and
until the election and qualification of his successor. None of the directors is
a director of any other reporting company.


COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

All of the directors and executive officers of the Company did not file initial
reports on Form 3 until November 2000 when they were first aware of the
requirement. Based solely on the review of Form 4 and 5 filed since then, all
subsequent reports were filed without delinquencies.


ITEM 10.       EXECUTIVE COMPENSATION.

The following table sets forth for 2001, 2002, and 2003 each component of
compensation paid or awarded to, or earned by, our executive officers.


                                      -19-
<PAGE>

<TABLE>
<CAPTION>
                                                                                    LONG-TERM COMPENSATION
                                                                                    -----------------------------
                                   ANNUAL COMPENSATION                                AWARDS      PAYOUTS
                                   -------------------                              ----------   ---------
                                                                                    Securities                  All
                                                                                    Underlying      Long       Other
Name of Executive and                                                 Restricted    Options &       Term      Compen-
Principal Position        Year       Salary        Bonus      Other      Stock         SARS      Incentive    sation
                         ------   -----------     --------    ------  ----------    ----------   ---------    -------
<S>                      <C>      <C>           <C>           <C>         <C>           <C>          <C>        <C>
Robert Blagman           2003     $376,200(1)   $150,000(4)   $  --       --            --           --         --
Chief Executive          2002     $342,000(2)   $150,000(4)   $  --       --            --           --         --
Officer / Chief          2001     $300,000(3)   $150,000(4)   $  --       --            --           --         --
Financial Officer
</TABLE>

----------
(1) Includes $ 376,200 of 2003 compensation which Mr. Blagman has deferred under
    his employment agreement dated January 1, 2000.

(2) Includes $204,750 of 2002 compensation which Mr. Blagman has deferred under
    his employment agreement dated January 1, 2000.

(3) Includes $77,500 of 2001 compensation which Mr. Blagman has deferred under
    his employment agreement dated January 1, 2000.

(4) Bonuses for Mr. Blagman for the years 2001, 2002 and 2003 have been
    deferred.


Pursuant to a pre-existing Board commitment which allows Mr. Blagman to maintain
up to a 51% equity ownership in the Company, Mr. Blagman may elect to use all or
a portion of his deferred salary and signing bonus amounts to acquire Common
Shares of the Company.


OTHER COMPENSATION

(a) There are no annuity, pension or retirement benefits proposed to be paid to
officers, directors, or employees of the Registrant in the event of retirement
at normal retirement date as there was no existing plan as of December 31, 2003
provided for, or contributed to, by the Registrant.

(b) No remuneration is proposed to be paid in the future directly or indirectly
by the Registrant to any officer or director since there was no existing plan as
of December 31, 2003 which provides for such payment, except for an employee
stock incentive plan. The Registrant had granted options to purchase 37,200
shares of common stock pursuant to the 2002 Stock Compensation Plan during the
fiscal year ended December 31, 2002.


                                      -20-
<PAGE>

COMPENSATION OF DIRECTORS

The directors have served without cash compensation. In November 2000 and
January 2001, each of the directors was granted options to acquire 50,000 100
and 100,000 200 Common Shares, respectively, at an exercise price of $0.25 and
$0.09 per share, respectively, the market price on that date. The options are
fully vested and exercisable until September 30, 2005 and January 23, 2006,
respectively.


EMPLOYMENT AGREEMENTS

On January 1, 2000, we entered into an employment agreement with Robert Blagman,
our Chairman and Chief Executive Officer, for a term of five years. The
employment agreement calls for a base salary, after annual incremental
increases, ranging from $240,000 to $420,000. The agreement also calls for a
signing bonus of $750,000 to be paid over the term of the employment agreement.
In addition, pursuant to a pre-existing Board commitment which allows Mr.
Blagman to maintain up to a 51% equity ownership in the Company, Mr. Blagman may
elect to use all or a portion of his deferred salary and signing bonus amounts
to acquire Common Shares of the Company.


ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information regarding the beneficial ownership of
shares of the Company's common stock as of December 31, 2003, (31,682,095 issued
and outstanding) by (i) all stockholders known to the Company to be beneficial
owners of more than 5% of the outstanding common stock; and (ii) all directors
and executive officers of the Company, individually and as a group:



                                      -21-
<PAGE>

<TABLE>
<CAPTION>
     Name and Address                                              Amount of      Percent
  of Beneficial Owner (1)                       Title of Class    Ownership(2)    of Class
-------------------------------------------------------------------------------------------

<S>                                             <C>                <C>             <C>
Robert Blagman
14622 Ventura Boulevard
Suite 1015                                      Common Shares        1,256,128        3.2%
Sherman Oaks, CA  91403

Andrew Given
14622 Ventura Boulevard
Suite 1015                                      Common Shares              300(3)  0.0008%
Sherman Oaks, CA  91403

Walter Lubars
14622 Ventura Boulevard                         Common Shares           10,300(3)     .03%
Suite 1015
Sherman Oaks, CA  91403

Jeff Wald
14622 Ventura Boulevard
Suite 1015                                      Common Shares              300(3)  0.0008%
Sherman Oaks, CA  91403

Marc R. Tow, Esq.
3900 Birch Street                               Common Shares       40,001,000(4)    10.1%
Suite 113
Newport Beach, CA  92660

Leanna Sidhu
6720 Muirlands Drive                            Common Shares          600,000        1.5%
La Jolla, CA  92037

Directors and executive officers as a group     Common Shares        1,267,028        3.2%
</TABLE>

----------
(1) Except as noted in any footnotes below, each person has sole voting power
    and sole dispositive power as to all of the shares shown as beneficially
    owned by them.

(2) The amount owned is based on issued common stock, as well as stock options
    that are currently exercisable.

(3) Includes 100 common shares issuable upon the exercise of fully vested common
    share purchase options at an exercise price of $0.025 per share, granted on
    November 8, 2002 pursuant to the Company's Employee Stock Incentive Plan,
    which expire on September 30, 2005. Includes 200 common shares issuable upon
    the exercise of fully vested common share purchase options at an exercise
    price of $0.09 per share, granted on November 23, 2001 pursuant to the
    Company's Employee Stock Incentive Plan, which expire on January 23, 2006.

(4) These common shares were issued for legal services.

* Owns less than 1%


                                      -22-
<PAGE>

ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the year ended December 31, 2003, and subsequently through March 2004,
the Company issued 40,001,000 common shares to Marc R. Tow, as compensation for
legal services to be rendered to the Company. These shares represent 10.15% of
the issued and outstanding shares of the Company. In March 2004, the Company
terminated the services of Mr. Tow. Pending a review of legal bills and value or
services rendered, the stock issued to Mr. Tow has been placed on hold.

During the fiscal year ended December 31, 2003, there have not been any other
transactions that have occurred between the Registrant and its officers,
directors, and five percent or greater shareholders.


ITEM 13.    EXHIBITS, LIST AND REPORTS ON FORM 8-K.

a) Exhibits.

Exhibits included or incorporated by reference herein are set forth under the
Exhibit Index

b) Reports on Form 8-K.

There were no reports on Form 8-K filed during the last quarter of the fiscal
year covered by this report.


ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

(1)   Audit Fees

      The aggregate fees billed for each of the last two fiscal years for
professional services rendered by the principal accountant for our audit of
annual financial statements and review of financial statements included in our
Form 10-KSB and 10-QSB are services that are normally provided by the accountant
in connection with statutory and regulatory filings or engagements for those
fiscal years were:

      2003:  $58,182  - Weinberg & Company, P.A.
      2002:  $105,022 - Weinberg & Company, P.A.

(2)   Tax Fees

      The aggregate fees billed in each of the last two fiscal years for tax
services were:

      2003:  $17,031 - Weinberg & Company, P.A.
      2002:  $10,535 - Weinberg & Company, P.A.

(3)   All Other Fees

      The aggregate fees billed in each of the last two fiscal years for the
products and services provided by the principal accountant, other than the
services reported in paragraph (1) were:

      2003:  $0
      2002:  $13,441 - Weinberg & Company, P.A.

                                      -23-
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

Dated: May 19, 2004                         Innovation Holdings, Inc.


                                            By: /s/ ROBERT J. BLAGMAN
                                                ------------------------------
                                                    Robert J. Blagman,
                                                    Chief Executive Officer

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

Date:   May 19, 2004                            /s/ ANDREW GIVEN
                                                ------------------------------
                                                    Andrew Given



Date:   May 19, 2004                            /s/ WALTER LUBARS
                                                ------------------------------
                                                    Walter Lubars



Date:   May 19, 2004                            /s/ JEFFREY WALD
                                                ------------------------------
                                                    Jeffrey Wald


                                      -24-
<PAGE>

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER PURSUANT TO THE SECURITIES EXCHANGE
ACT OF 1934, RULES 13A-14 AND 15D-14 AS ADOPTED PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Innovation Holdings, Inc. (the
"Company") on Form 10-KSB for the year ended December 31, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Robert
Blagman, Chief Executive Officer of the Company, certify, pursuant to Rules
13a-14 and 15d-14 of the Securities Exchange Act of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002, that:

1. I have reviewed this annual report on Form 10-KSB of Innovation Holdings,
Inc.;

2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4. The Registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a) designed such disclosure controls and procedures to ensure that material
information relating to the Registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;

b) evaluated the effectiveness of the Registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and

c) presented in this annual report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;

5. The Registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the Registrant's auditors and the audit committee of
Registrant's board of directors (or persons performing the equivalent
functions):

a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the Registrant's ability to record, process,
summarize and report financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and


                                      -25-
<PAGE>

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the Registrant's internal controls; and

6. The Registrant's other certifying officer and I have indicated in this annual
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.


/s/ Robert Blagman
-------------------------------------
    Robert Blagman
    President/Chief Executive Officer

May 19, 2004



                                      -26-
<PAGE>

                  INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN
                  MEDIA INTERNATIONAL, INC.) AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                        AS OF DECEMBER 31, 2003 AND 2002

<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES



                                    CONTENTS


PAGE         1     INDEPENDENT AUDITORS' REPORT

PAGE         2     CONSOLIDATED  BALANCE  SHEETS AS OF  DECEMBER  31, 2003 AND
                   2002

PAGE         3     CONSOLIDATED  STATEMENTS OF OPERATIONS  FOR THE YEARS ENDED
                   DECEMBER 31, 2003 AND 2002

PAGE        4-5    CONSOLIDATED   STATEMENTS   OF  CHANGES  IN   STOCKHOLDERS'
                   DEFICIENCY FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

PAGE         6     CONSOLIDATED  STATEMENTS  OF CASH FLOWS FOR THE YEARS ENDED
                   DECEMBER 31, 2003 AND 2002

PAGES      7 - 24  NOTES TO CONSOLIDATED  FINANCIAL  STATEMENTS AS OF DECEMBER
                   31, 2003 AND 2002

<PAGE>

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors of:
Innovation Holdings, Inc.
(Formerly Blagman Media International, Inc.)

We have audited the accompanying consolidated balance sheets of Innovation
Holdings, Inc. (f/k/a Blagman Media International, Inc.) and Subsidiaries (the
"Company") as of December 31, 2003 and 2002 and the related consolidated
statements of operations, changes in stockholders' deficiency and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly in all material respects, the financial position of Innovation Holdings,
Inc. (f/k/a Blagman Media International, Inc.) and Subsidiaries as of December
31, 2003 and 2002 and the consolidated results of their operations and their
cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 12 to
the consolidated financial statements, the Company has a net loss of $8,035,776
and a negative cash flow from operations of $248,707 for the year ended December
31, 2003, and a working capital deficiency of $14,964,866 and a stockholders'
deficiency of $15,194,926 at December 31, 2003. These matters raise substantial
doubt about the Company's ability to continue as a going concern. Management's
plans in regards to these matters is also described in Note 12. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.


WEINBERG & COMPANY, P.A.

Boca Raton, Florida
May 18, 2004

<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
                        AS OF DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>
                                               ASSETS
                                                                                 2003               2002
                                                                              ------------      ------------
<S>                                                                           <C>               <C>
Current assets
 Cash                                                                         $          2      $         --
 Accounts receivable                                                                    --            31,779
 Prepaid media and other current assets, net of allowance of
  236,418 at December 31, 2003                                                          --           341,561
 Assets related to discontinued operations                                           9,645             9,645
                                                                              ------------      ------------
   Total Current Assets                                                              9,647           382,985
                                                                              ------------      ------------

PROPERTY & EQUIPMENT - NET                                                          73,751           104,902
                                                                              ------------      ------------

OTHER ASSETS
 License agreement, net of amortization of $7,781                                  141,687                --
 Deposits                                                                               --             4,576
                                                                              ------------      ------------
   Total Other Assets                                                              141,687             4,576
                                                                              ------------      ------------

TOTAL ASSETS                                                                  $    225,085      $    492,463
                                                                              ============      ============

                                 LIABILITIES AND STOCKHOLDERS' DEFICIENCY

CURRENT LIABILITIES
 Cash overdraft                                                               $         --      $     11,782
 Notes payable - current portion                                                   359,725            50,000

 Accounts payable                                                                  830,006           893,108
 Accrued expenses                                                                  950,018           649,868
 Accrued compensation - officers                                                 1,897,344         1,314,392
 Due to officer                                                                     68,406           112,844
 Capital lease obligation - current portion                                         33,540            19,978
 Liabilities related to discontinued operations                                 10,835,472        10,400,999
                                                                              ------------      ------------
   Total Current Liabilities                                                    14,974,511        13,452,971
                                                                              ------------      ------------

LONG-TERM LIABILITIES
 Notes payable                                                                     445,500           445,500
 Capital lease obligation - long-term portion                                           --            18,358
                                                                              ------------      ------------
   Total Long-Term Liabilities                                                     445,500           463,858
                                                                              ------------      ------------

Total Liabilities                                                               15,420,011        13,916,829
                                                                              ------------      ------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIENCY
 Preferred stock, series A, $.001 par value, super convertible redeemable
  preferred stock, 10,000,000 shares authorized, 0
  shares issued and outstanding                                                         --                --
 Preferred stock, series B, $.001 par value, super convertible
  redeemable preferred stock, 100 shares authorized, 100 shares
  issued and outstanding                                                                 1                 1
 Common stock, $.001 par value, 20,000,000,000 shares authorized,
  31,682,095 and 7,639 shares issued and outstanding in 2003 and
  2002, respectively                                                                31,682             3,819
 Additional paid in capital                                                     41,824,753        35,587,400
 Accumulated deficit                                                           (57,051,362)      (49,015,586)
                                                                              ------------      ------------

   Total Stockholders' Deficiency                                              (15,194,926)      (13,424,366)
                                                                              ------------      ------------

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY                                $    225,085      $    492,463
                                                                              ============      ============
</TABLE>

                See accompanying notes to consolidated financial statements.

                                       2
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


<TABLE>
<CAPTION>
                                                                     2003              2002
                                                                 ------------      ------------
<S>                                                              <C>               <C>
REVENUES - NET                                                   $     83,652      $    437,241
                                                                 ------------      ------------

OPERATING EXPENSES
 Selling, general and administrative                                7,382,234        25,401,245
 Depreciation and amortization                                         36,931            33,324
                                                                 ------------      ------------
    Total Operating Expenses                                        7,419,165        25,434,569
                                                                 ------------      ------------

LOSS FROM OPERATIONS                                               (7,335,513)      (24,997,328)
                                                                 ------------      ------------

OTHER INCOME (EXPENSE)
 Loss on fraudulent issuance of common stock                               --        (3,300,000)
 Interest expense                                                     (53,304)          (58,958)
 Legal settlement                                                    (224,212)               --
 Interest income                                                            4               537
 Other income                                                          11,723                --
                                                                 ------------      ------------
    Total Other Income (Expense)                                     (265,789)       (3,358,421)
                                                                 ------------      ------------

LOSS FROM CONTINUING OPERATIONS                                    (7,601,302)      (28,355,749)

LOSS FROM DISCONTINUED OPERATIONS                                    (434,474)      (12,966,399)
                                                                 ------------      ------------

NET LOSS                                                         $ (8,035,776)     $(41,322,148)
                                                                 ============      ============

NET LOSS PER COMMON SHARE - BASIC AND DILUTED - CONTINUING
 OPERATIONS                                                      $      (2.50)     $  (7,308.18)
                                                                 ============      ============

NET LOSS PER COMMON SHARE - BASIC AND DILUTED - DISCONTINUED
 OPERATIONS                                                      $      (0.14)     $  (3,341.86)
                                                                 ============      ============

NET LOSS PER COMMON SHARE - BASIC AND DILUTED                    $      (2.64)       (10,650.04)
                                                                 ============      ============

WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING - BASIC
 AND DILUTED                                                        3,043,747             3,880
                                                                 ============      ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                       3
<PAGE>

              INNOVATION HOLDINGS, INC. AND (FORMERLY BLAGMAN MEDIA
                        INTERNATIONAL, INC.) SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002



<TABLE>
<CAPTION>
                                                          Additional                                 Deferred Stock
                      Preferred Stock    Common Stock      Paid-In     Accumulated   Subscriptions       Based
                      Shares   Amount  Shares   Amount     Capital       Deficit       Receivable     Compensation        Total
                      ------  -------  ------  --------  -----------   ------------   -------------  ---------------   ------------

<S>                      <C>        <C>   <C>        <C>  <C>            <C>                <C>          <C>               <C>
Balance, January 1,
 2002                    100        1     303        --   24,709,705     (7,693,438)        (15,334)     (17,965,923)      (964,989)

Stock issued for
 acquisition of
 Century Media, Inc.      --       --     408        --      903,292             --              --               --        903,292

Stock issued for
 Century Media
 debentures               --       --     589         1    1,304,539             --              --               --      1,304,540

Stock issued for
 services                 --       --   4,379         4    5,216,512             --              --               --      5,216,516

Stock issued for
 failed acquisition       --       --      30        --      172,500             --              --               --        172,500

Stock issued
 fraudulently             --       --   1,930         2    3,299,998             --              --               --      3,300,000

Subscription
 receivable               --       --      --        --      (15,334)            --          15,334               --             --

Deferred stock
 compensation             --       --      --        --           --             --              --       17,965,923     17,965,923

Net Loss 2002             --       --      --        --           --    (41,322,148)             --               --    (41,322,148)
                      ------  -------  ------  --------  -----------   ------------   -------------  ---------------   ------------

BALANCE,
 DECEMBER 31, 2002       100  $     1   7,639  $      7  $35,591,212   $(49,015,586)  $          --  $            --   $(13,424,366)
                      ======  =======  ======  ========  ===========   ============   =============  ===============   ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                       4
<PAGE>

<TABLE>
<CAPTION>
                                                             Additional                                Deferred Stock
                     Preferred Stock       Common Stock        Paid-In    Accumulated   Subscriptions      Based
                     Shares   Amount    Shares      Amount     Capital      Deficit       Receivable    Compensation       Total
                     ------  -------  -----------  --------  -----------  ------------  -------------  --------------  ------------
<S>                                     <C>        <C>         <C>                                                        <C>
Stock issued for
 legal fees                             5,052,490  $  5,052    1,179,248            --             --              --     1,184,300

Stock issued for
 consulting                            23,323,315    23,323    4,595,884                                                  4,619,208

Stock issued for
 wages                                    302,540       303       81,287            --             --              --        81,590

Stock issued for
 board of
 directors  fees                            1,262         1      220,499            --             --              --       220,500

Stock issued for
 license agreement                      2,989,351     2,989      146,479            --             --              --       149,468

Stock issued for
 settlement of
 accounts payable                           5,600         6       27,994            --             --              --        28,000

Stock cancelled in
 association with
 board of
 directors fees                              (102)       --      (17,850)           --             --              --       (17,850)

Net Loss, 2003                                                              (8,035,776)            --              --    (8,035,776)
                     ------   ------  -----------  --------  -----------  ------------  -------------  --------------  ------------

BALANCE,
 DECEMBER 31, 2003      100   $    1   31,682,095  $ 31,682  $41,824,753  $(57,051,362)            --  $           --  $(15,194,926)
                     ======   ======  ===========  ========  ===========  ============  =============  ==============  ============
</TABLE>

          See accompanying notes to consolidated financial statements

                                       5
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

                                                       2003             2002
                                                   ------------    ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net loss from continuing operations               $ (7,601,302)   $(28,355,749)
 Adjustments to reconcile net loss from
  continuing operations to net cash (used in)
  operating activities:
 Depreciation and amortization                           36,932          33,324
 Provision for bad debt                                 311,565          24,474
 Loss on fraudulent issuance of common stock                 --       3,300,000
 Stock issued for failed acquisition                         --         172,500
 Stock issued for compensation and services           6,011,658      23,182,439
 Changes in operating assets and liabilities:
  (Increase) decrease in:
   Accounts receivable                                  (43,368)        (50,359)
   Prepaid media and other current assets               105,143         (77,235)
   Deposits                                               4,576         154,920
  Increase (decrease) in:
   Accounts payable and accrued expenses                343,137       1,200,734
   Accrued compensation - officers                      582,952         592,482
   Deferred revenue                                          --        (240,000)
                                                   ------------    ------------
      Net Cash (Used In) Operating Activities          (248,707)        (62,470)
                                                   ------------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchase of property and equipment                          --         (27,401)
 Deposit on investment                                       --        (367,213)
                                                   ------------    ------------
      Net Cash (Used In) Investing Activities                --        (394,614)
                                                   ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Due from officer                                       (44,438)        259,281
 Loan proceeds                                          309,725              --
 Cash overdraft                                         (11,782)         11,782
 Payments under capital lease obligation                 (4,796)        (13,903)
                                                   ------------    ------------
      Net Cash Provided By Financing Activities         248,709         257,160
                                                   ------------    ------------

NET (DECREASE) INCREASE IN CASH                               2        (199,924)

Cash - beginning of YEAR                                     --         199,924
                                                   ------------    ------------

Cash - end of YEAR                                 $          2    $         --
                                                   ============    ============

Cash paid during the year for - interest           $         --    $     43,252
                                                   ============    ============

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

In March 2002, the Company issued 859 shares of common stock with a fair value
of $1,901,582 for the acquisition of Century Media, Inc. including the payoff of
existing debentures, options and notes on the books of the acquiree.

The Company acquired $52,239 of property and equipment through capitalized
leases during the year ended December 31, 2002.

In June 2003, the Company entered into a license agreement with a value of
$149,468 paid by the issuance of 2,989,351 shares of common stock valued at the
fair market value of the stock on the date of grant.

In September 30, 2003, the Company settled $2,000 of accrued payroll by giving
the employees a computer with a net book value of $2,000.

          See accompanying notes to consolidated financial statements

                                       6
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION

      (A) Organization

      On March 22, 2002, the Company acquired 100% of the outstanding common
      stock of Century Media, Inc., a California corporation engaged in the
      media business (See Note 2).

      On February 10, 2003, the stockholders of the Company approved an
      amendment to the articles of incorporation changing the name of the
      Company to Innovation Holdings, Inc. (referred to as the "Company").

      In February 2003, the Board of Directors authorized a 5,000 for 1 reverse
      stock split. All share and par share amounts in the accompanying
      consolidated financial statements and footnotes have been restated to give
      effect to such reverse stock split.

      In April, 2004, the Board of Directors authorized a 500 for 1 reverse
      stock split. All share and per share amounts in the accompanying
      consolidated financial statements and footnotes have been restated to give
      effect to such reverse stock split.

      (B) Principles of Consolidation

      The accompanying 2003 and 2002 consolidated financial statements of the
      Company include the accounts of the parent entity and its wholly owned
      subsidiaries. All significant inter-company transactions and balances have
      been eliminated in consolidation.

      (C) Use of Estimates

      In preparing consolidated financial statements in conformity with
      generally accepted accounting principles, management is required to make
      estimates and assumptions that affect the reported amounts of assets and
      liabilities and the disclosure of contingent assets and liabilities at the
      date of the consolidated financial statements and revenues and expenses
      during the reported period. Actual results could differ from those
      estimates.

      (D) Fair Value of Financial Instruments

      The fair value of a financial instrument is the amount at which the
      instrument could be exchanged in a current transaction between willing
      parties other than in a forced sale or liquidation.

      The carrying amounts of the Company's accounts payable and accrued
      expenses, accrued compensation, capital lease obligation and notes and
      loans payable, approximate fair value due to the relatively short period
      to maturity for these instruments.

                                       7
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


      (E) Property and Equipment

      Property and equipment are stated at cost and depreciated using the
      straight-line method over the estimated economic useful lives of 5 to 7
      years. Expenditures for maintenance and repairs are charged to expense as
      incurred. Major improvements are capitalized.

      (F) Impairment of Long-Lived Assets

      Beginning January 1, 2002, the Company reviews long-lived assets for
      impairment under Statement of Financial Accounting Standards ("SFAS") No.
      144, "Accounting for the Impairment or Disposal of Long-Lived Assets."
      Long-lived assets to be held and used are reviewed for impairment whenever
      events or changes in circumstances indicate that the carrying amount of an
      asset may not be recoverable. The carrying amount of a long-lived asset is
      not recoverable if it exceeds the sum of the undiscounted cash flows
      expected to result from the use and eventual disposition of the asset.
      Long-lived assets to be disposed of are reported at the lower of carrying
      amount or fair value less cost to sell. During the year ended December 31,
      2002, the Company recorded impairment charges of $3,048,484 created during
      the Century Media acquisition and $5,599,007 related to the customer list
      obtained during the Century Media acquisition and $167,649 for fixed
      assets acquired in the Century Media acquisition as the Company determined
      these assets were not recoverable (See Note 2).

      (G) Revenue Recognition

      The Company recognizes revenue from the sale of media time to advertising
      clients when the related advertisement is broadcasted. Included in the
      monies received from advertising clients are amounts which represent the
      reimbursement of media time purchased on behalf of the customer for the
      related advertisements. These media purchase reimbursements have been
      accounted for as an offset to the related media purchases for the
      respective advertisement and not as gross revenues as required under EITF
      99-19 and Staff Accounting Bulletin No. 101. Monies received prior to the
      broadcast of the related advertisement are recorded as deferred revenue.
      In addition, the Company earns commissions in connection with the
      procurement of media time on behalf of advertising clients. Such
      commissions are also considered earned when the underling advertisement is
      broadcasted. Additionally, the Company has entered into contractual
      agreements with other advertising firms to share revenues based upon the
      terms of the specific agreements. The income produced by these
      revenue-sharing contracts are recognized as media or commission income
      depending upon the nature of the income earned from the agreement.

      (H) Income Taxes

      Deferred tax assets and liabilities are recognized for the future tax
      consequences attributable to differences between the financial statement
      carrying amounts of existing

                                       8
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


      assets and liabilities and their respective tax bases. Deferred tax assets
      and liabilities are measured using enacted tax rates expected to apply to
      taxable income in the years in which those temporary differences are
      expected to be recovered or settled. The effect on deferred tax assets and
      liabilities of a change in tax rates is recognized in income in the period
      that includes the enactment date.

      (I) Loss Per Common Share

      Basic loss per common share is based on net loss divided by the weighted
      average number of common shares outstanding. All share and per share
      amounts have been restated to give effect to a 5,000 for 1 reverse stock
      split in February 2003, and a 500 for 1 reverse stock split in April 2004,
      as discussed in Note 6.

      (J) Recent Accounting Pronouncements

      In November 2002, the Emerging Issues Task Force ("EITF") reached a
      consensus on Issue 00-21, addressing how to account for arrangements that
      involve the delivery or performance of multiple products, services, and
      /or rights to use assets. Revenue arrangements with multiple deliverables
      are divided into separate units of accounting if the deliverables in the
      arrangement meet the following criteria: (1) the delivered item has value
      to the customer on a stand-alone basis; (2) there is objective and
      reliable evidence of the fair value of undelivered items; and (3) delivery
      of any undelivered items is probable. Arrangement consideration should be
      allocated among the separate units of accounting based on their relative
      fair values, with the amount allocated to the delivered item being limited
      to the amount that is not contingent on the delivery of additional items
      or meeting other specified performance conditions. The final consensus is
      applicable to agreements entered into in fiscal periods beginning after
      June 15, 2003.

      In April 2003, the Financial Accounting Standards Board ("FASB") issued
      SFAS No. 149, "Amendment of Statement 133 on Derivative Instruments and
      Hedging Activities". SFAS No. 149 amends and clarifies financial
      accounting and reporting for derivative instruments, including certain
      derivative instruments embedded in other contracts (collectively referred
      to as derivatives) and for hedging activities under SFAS No. 133,
      "Accounting for Derivative Instruments and Hedging Activities". The
      changes in SFAS No. 149 improve financial reporting by requiring that
      contracts with comparable characteristics be accounted for similarly. This
      statement is effective for contracts entered into or modified after June
      30, 2003 and all of its provisions should be applied prospectively.

                                       9
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


      In May 2003, the FASB issued SFAS No. 150, "Accounting For Certain
      Financial Instruments with Characteristics of both Liabilities and
      Equity". SFAS No. 150 changes the accounting for certain financial
      instruments with characteristics of both liabilities and equity that,
      under previous pronouncements, issuers could account for as equity. The
      new accounting guidance contained in SFAS No. 150 requires that those
      instruments be classified as liabilities in the balance sheet.

      SFAS No. 150 affects the issuer's accounting for three types of
      freestanding financial instruments. One type is mandatorily redeemable
      shares, which the issuing company is obligated to buy back in exchange for
      cash or other assets. A second type includes put options and forward
      purchase contracts, which involves instruments that do or may require the
      issuer to buy back some of its shares in exchange for cash or other
      assets. The third type of instruments that are liabilities under this SFAS
      is obligations that can be settled with shares, the monetary value of
      which is fixed, tied solely or predominantly to a variable such as a
      market index, or varies inversely with the value of the issuers' shares.
      SFAS No. 150 does not apply to features embedded in a financial instrument
      that is not a derivative in its entirety.

      Most of the provisions of Statement 150 are consistent with the existing
      definition of liabilities in FASB Concepts Statement No. 6, "Elements of
      Financial Statements". The remaining provisions of this SFAS are
      consistent with the FASB's proposal to revise that definition to encompass
      certain obligations that a reporting entity can or must settle by issuing
      its own shares. This SFAS is effective for financial instruments entered
      into or modified after May 31, 2003 and otherwise shall be effective at
      the beginning of the first interim period beginning after June 15, 2003,
      except for mandatorily redeemable financial instruments of a non-public
      entity, as to which the effective date is for fiscal periods beginning
      after December 15, 2004.

      In January 2003, and as revised in December 2003, the FASB issued
      Interpretation No. 46, "Consolidation of Variable Interest Entities"
      "Interpretation No. 46"), an interpretation of Accounting Research
      Bulletin ("ARB") No. 51", "Consolidated Financial Statements".
      Interpretation No. 46 addresses consolidation by business enterprises of
      variable interest entities, which have one or both of the following
      characteristics: (i) the equity investment at risk is not sufficient to
      permit the entity to finance its activities without additional
      subordinated support from other parties, which is provided through another
      interest that will absorb some or all of the expected losses of the
      entity; (ii) the equity investors lack

                                       10
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

      one or more of the following essential characteristics of a controlling
      financial interest: the direct or indirect ability to make decisions about
      the entity's activities through voting rights or similar rights; or the
      obligation to absorb the expected losses of the entity if they occur,
      which makes it possible for the entity to finance its activities; the
      right to receive the expected residual returns of the entity if they
      occur, which is the compensation for the risk of absorbing the expected
      losses. Interpretation No. 46, as revised, also requires expanded
      disclosures by the primary beneficiary (as defined) of a variable interest
      entity and by an enterprise that holds a significant variable interest in
      a variable interest entity but is not the primary beneficiary.

      Interpretation No. 46, as revised, applies to small business issuers no
      later than the end of the first reporting period that ends after December
      15, 2004. This effective date includes those entities to which
      Interpretation No. 46 had previously been applied. However, prior to the
      required application of Interpretation No. 46, a public entity that is a
      small business issuer shall apply Interpretation No. 46 to those entities
      that are considered to be special-purpose entities no later than as of the
      end of the first reporting period that ends after December 15, 2003.

      Interpretation No. 46 may be applied prospectively with a
      cumulative-effect adjustment as of the date on which it is first applied
      or by restating previously issued financial statements for one or more
      years with a cumulative-effect adjustment as of the beginning of the first
      year restated.

      In June 2003, the FASB issued an Exposure Draft for proposed SFAS entitled
      "Qualifying Special Purpose Entities ("QSPE") and Isolation of transferred
      Assets", an amendment of SFAS No. 140 ("The Exposure Draft"). The Exposure
      Draft is a proposal that is subject to change and as such, is not yet
      authoritative. If the proposal is enacted in its current form, it will
      amend and clarify SFAS 140. The Exposure Draft would prohibit an entity
      from being a QSPE if it enters into an agreement that obliged a transferor
      of financial assets, its affiliates, or its agents to deliver additional
      cash or other assets to fulfill the special-purposes entity's obligation
      to beneficial interest holders.

      The adoption of these recent pronouncements are not expected to have a
      material effect on the Company's consolidated financial position or
      results of operations.

      (K) Stock Based Compensation

      The Company accounts for employee stock option plans in accordance with
      Accounting Principles Board Opinion No. 25, "According for Stock Issued to
      Employees". Under APB 25, no compensation expense is recorded when the
      terms of the award are fixed and the exercise price of the employee stock
      option equals or exceeds the fair value of the

                                       11
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


      underlying stock on the date of grant. The Company adopted the
      disclosure-only provisions of No. 123, "Accounting for Stock-Based
      Compensation".

      (L) Reclassification

      Certain reclassifications have been made to previously reported amounts to
      conform to the current years presentation.

NOTE 2  DISCONTINUED OPERATIONS

      Pursuant to an Agreement and Plan of Reorganization dated March 4, 2002,
      effective March 22, 2002, the Company acquired 100% of the outstanding
      stock of Century Media, Inc., a California corporation ("Century") by
      merging Blagman USA, Inc., into Century.

      Pursuant to the transaction, the Company acquired all of the capital stock
      of Century for cash and common stock of the Company, assumed current debt
      obligations and unexercised option and stock appreciation rights of
      Century and assumed accrued and ongoing trade and other obligations. Prior
      to the closing, the parties negotiated with the holders of portions of the
      outstanding Century debt to restructure the term and payments of such debt
      and in certain cases, to allow for the issuance of shares of common stock
      of the Company in lieu of cash payments. Currently, the Company remains
      obligated on certain contingent obligations including $1.25 million from
      the TMT Media Corporation acquisition by Century in 2000 (See Note 10(A)).

      At closing, holders of Century shares received twenty cents per Century
      share, of which two and one-half cents was payable in cash and the balance
      of seventeen and one-half cents was payable by the delivery of shares of
      common stock of the Company, for a total of $903,292, and 14,377 options.

      In relation to the acquisition, the Company recorded goodwill in the
      amount of $3,048,484, and recorded an intangible asset of $5,855,286
      related to the customer list acquired. The Company evaluated the customer
      list and assigned it a three-year life.

      The Company's management performs on-going business reviews based on
      quantitative and qualitative measures and assesses the need to record
      impairment losses when impairment indicators are identified. In the third
      quarter of 2002, the review made by management of the Company determined
      that the goodwill related to Century's business and the customer list
      acquired in the acquisition were not recoverable. The Company then
      recorded impairment charges of $3,048,484 and $5,599,007 (net of
      amortization) related to the goodwill and customer list, respectively.

                                       12
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

      In December 2002, management of the Company determined that it would no
      longer invest its capital and human resources into Century and entered
      into a plan to discontinue and abandon the operations of Century.
      Effective with the fourth quarter of 2002, this operating entity is
      reflected as a discontinued operation.

      For the period from acquisition to December 31, 2002, revenues and loss
      from discontinued operations were as follows:

      Revenues                                                   $   3,459,294
      Net loss from discontinued operations                      $  12,966,399


      For the year-ended December 31, 2003, a loss from discontinued operations
      of $434,474 was incurred. This was primarily for additional interest
      expense on notes payable and legal costs of defending lawsuits (See Note
      11).

      Assets and liabilities of the discontinued operations as of December 31,
      2003 were as follows:

      Assets
       Cash                                                      $         313
       Prepaid expenses                                                  7,005
       Deposits                                                          2,327
                                                                   -------------
         Total Assets                                            $       9,645
                                                                   -------------

      Liabilities
       Accounts payable                                          $   5,606,399
       Accrued expenses                                              1,478,352
       Deferred revenue                                              1,364,866
       Notes payable                                                 2,356,575
       Capital lease obligation                                         29,280
                                                                   -------------
         Total Liabilities                                          10,835,472
                                                                   -------------

      Net liabilities of discontinued operations                 $  10,855,107
                                                                   =============

      The creditors of Century Media have filed various actions for breach of
      contract. Said actions arise out of obligations incurred by Century Media
      prior to the merger with the Company. The Company disputes these claims
      and is actively seeking to resolve these matters.

                                       13
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


NOTE 3  DUE TO OFFICER

      During the years ended December 31, 2003 and 2002, an officer of the
      Company made advances to the Company to assist with operations. These
      advances were non-interest bearing and have no set repayment terms. As of
      December 31, 2003 and 2002, the Company owed the officer $68,406 and
      $112,844, respectively.

NOTE 4  PROPERTY AND EQUIPMENT

      The following is a summary of property and equipment as of December 31:

                                                          2003          2002
                                                       -----------   -----------

      Computer equipment                               $ 103,415      $ 106,083
      Furniture and fixtures                              43,851         43,852
      Office equipment                                    14,974         14,973
      Leasehold improvements                                  --          2,876
                                                       ---------      ---------
                                                         162,240        167,784
      Less: Accumulated depreciation                     (88,489)       (62,882)
                                                       ---------      ---------
           Property and equipment - net                $  73,751      $ 104,902
                                                       =========      =========

      Depreciation expense was $29,150 and $33,324 in 2003 and 2002,
      respectively.

NOTE 5  NOTES PAYABLE

      The following schedule reflects notes and loans payable as of December 31:

                                                          2003           2002
                                                       ----------    -----------
      Note  payable,  interest  at 6% due March 31,
       2001.  The  holder of the note is  currently
       not demanding payment and the note
       continues to accrue interest.                  $   50,000    $    50,000

      Note  payable - related party, interest at
       6%, due March 30, 2006, unsecured.                163,500        163,500

      Note payable -  stockholder,  interest at 6%,
       due April 2, 2006, unsecured.                      85,000         85,000

      $197,000 note payable - stockholder,
       interest at 6%, principal and interest due
       April 9, 2006, unsecured.                         197,000        197,000

                                       14
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


                                                         2003          2002
                                                       ----------    ----------
      $100,000  note  payable,  interest  at  3.8%,
       principal   and  interest  due  January  10,      93,450           -
       2004, unsecured.

      $75,000   note   payable,   interest  at  4%,
       principal   and  interest  due  January  27,      41,200           -
       2004, unsecured.

      $10,000  note  payable,   interest  at  2.8%,
       principal  and  interest  due  February  11,      10,000           -
       2004, unsecured.

      $45,000   note   payable,   interest  at  4%,
       principal  and  interest  due April 2, 2004,
       face amount $45,000, unsecured.                   33,075           -

      $112,000  note   payable,   interest  at  4%,
       principal  and  interest  due June 24, 2004,
       face amount $112,000, unsecured.                 112,000           -

      $20,000   note   payable,   interest  at  4%,
       principal  and  interest  due  September  8,      20,000           -
       2004, unsecured.
                                                       ----------    -----------

      Less: current portion                             805,225        495,500
                                                       (359,725)       (50,000)
                                                       ----------    -----------
      Notes and loans payable - long-term portion     $ 445,500   $    445,500
                                                       ==========    ===========

      On January 10, 2003, the Company entered into a note payable whereby the
      lender agreed to fund the Company on an as needed basis up to $100,000 at
      an interest rate of 3.8% per annum. Principal and interest were due no
      later than January 10, 2004. As of the report date, this loan has not been
      repaid.

      On January 27, 2003, the Company entered into a note payable whereby the
      lender agreed to fund the Company on an as needed basis up to $75,000 at
      an interest rate of 4% per annum. Principal and interest were due no later
      than January 27, 2004. As of the report date, this loan has not been
      repaid.

      On February 11, 2003, the Company entered into a note payable whereby the
      lender agreed to fund the Company on an as needed basis up to $10,000 at
      an interest rate of 2.8% per annum. Principal and interest were due no
      later than February 11, 2004. As of the report date, this loan has not
      been repaid.

                                       15
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


      On June 24, 2003, the Company entered into a note payable whereby the
      lender agreed to fund the Company on an as needed basis up to $112,000 at
      an interest rate of 4% per annum. Principal and interest are due no later
      than June 24, 2004.

      On April 2, 2003, the Company entered into a note payable whereby the
      lender agreed to fund the Company on an as needed basis up to $45,000 at
      an interest rate of 4% per annum. Principal and interest were due no later
      than April 2, 2004. As of the report date this loan has not been repaid.

      On September 8, 2003, the Company entered into a note payable whereby the
      lender agreed to fund the Company on an as needed basis up to $20,000 at
      an interest rate of 4% per annum. Principal and interest are due no later
      than September 8, 2004.

NOTE 6  STOCKHOLDERS' DEFICIENCY

      In February 2003, the Board of Directors authorized a 5,000 for 1 reverse
      stock split. All share and per share amounts in the accompanying
      consolidated financial statements and footnotes have been restated to give
      effect to such reverse stock split.

      In April 2004, the Board of Directors authorized a 500 for 1 reverse stock
      split. All share and per share amounts in the accompanying consolidated
      financial statements and footnotes have been restated to give effect to
      such reverse stock split.

      On August 18, 2003, the Company issued 1,000,000 shares of common stock
      valued at $50,000 to an attorney for services rendered in connection with
      the establishment of the trust agreements. The fair value of the shares
      issued was based upon the market price of the Company's common stock on
      the date of grant.

      During 2003 the Company issued 2,989,351 shares of restricted common stock
      to an unrelated party as consideration for a license agreement entered
      into on June 28, 2003 valued at $149,468. The fair value of the issued
      shares was based upon the market price of the Company's stock on the date
      of grant. The amount is included in other assets in the accompanying
      consolidated balance sheet as of December 31, 2003.

      During 2003, the Company issued 302,540 shares of common stock for
      employee bonus compensation valued at $81,590. The fair value of the
      issued shares was based upon the market price of the Company's stock on
      the date of grant. The amount was expensed to selling, general and
      administrative expenses in the accompanying consolidated statement of
      operations for the year ended December 31, 2003.

      During 2003, the Company issued approximately 12,600 shares of restricted
      common stock to the Chief Executive Officer and subsequently cancelled and
      rescinded the issuance. Accordingly, the Company has not included these
      shares in its equity. The Company also issued 1,262 shares of common stock
      to three directors of the Company for services valued at $220,500. The
      fair value of the issued shares was based upon the market price of the
      Company's stock on the date of grant. The amount was expensed to selling,
      general and administrative expenses in the accompanying statement of
      operations for the year ended December 31, 2003.

                                       16
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002

      During 2003, the Company issued 23,323,315 shares of common stock for
      consulting services valued at $4,619,208. The fair value of the issued
      shares was based upon the market price of the Company's stock on the date
      of grant. The total value, has been expensed to selling, general and
      administrative expenses in the accompanying consolidated statement of
      operations for the year ended December 31, 2003.

      During 2003, 4,052,490 shares of common stock were issued to the Company's
      attorney for services valued at $1,134,300. The amount has been expensed
      to selling, general and administrative expenses in the accompanying
      consolidated statement of operations for the year ended December 31, 2003.
      The fair value of the issued shares was based upon the market price of the
      Company's stock on the date of grant.

      During 2002, management of the Company deemed that 1,930 shares of common
      stock were fraudulently issued. However these shares were not recorded by
      the Company until December 31, 2002, when it was discovered that as part
      of the fraud, such shares were also subsequently sold in the open market
      and are no longer recoverable. These shares were recorded on the books at
      their fair value and the Company recognized a charge of $3,300,000 as a
      loss on fraudulent issuance of common stock at December 31, 2002.

      During 2002, 4,379 shares of common stock with a fair value of $5,216,516
      were issued for consulting services. The fair value of the issued shares
      was based upon the market price of the Company's stock on the date of
      grant.

      On July 25, 2002, the Board of Directors of the Company increased the
      total authorized common stock from 5,000,000,000 to 20,000,000,000 par
      value $.001 per share.

      In 2001, the Company issued 294 shares of common stock for compensation,
      consulting, legal and other services having a fair value of $19,680,219
      based upon the per share fair value at the date of the issuance. At
      December 31, 2001, $17,965,923 of this amount was for future services, and
      had been deferred and shown as a contra to equity. During 2002, the
      underlying contracts and agreements for the above services and stock-based
      compensation were cancelled, terminated or expired and therefore the
      entire $17,965,923 was expensed for the year ended December 31, 2002.

      On February 16, 2000, the Board of Directors agreed to offer up to .50
      shares of common stock, pursuant to Regulation D, Section 4(6) of the
      Securities and Exchange Act of 1933, as amended. The offer was fully
      subscribed to by September 30, 2000 and $984,666 of the $1,000,000
      subscription has been received as of December 31, 2001. In 2002, the
      balance due on the subscription receivable of $15,334 was deemed
      uncollectable and written off against additional paid-in capital.

                                       17
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


      Pursuant to the terms and conditions of two separate trust agreements,
      shares of the Company's common stock were transferred in trust to an
      attorney who will act as trustee of the Innovative Holdings, Inc.
      Shareholder and Creditor Trusts ("Shareholder Trust" or "Creditor Trust").
      In addition to the shares, the Company has assigned to the trusts the
      results and possible proceeds of pending future litigation.

      The Shareholder Trust has been established to respond to the Company's
      concern that shareholders of record as of January 1, 2002 through July 31,
      2002 were adversely affected by the action of outside parties effecting
      the share price and value of the Company throughout these dates. The
      Company intends to provide some measure of compensation to its
      shareholders for their related losses.

      The Creditor Trust has been established to return the maximum amount to
      Century Media's creditors (assumed by the Company as a result of the
      Century Media acquisition) and to allow the Company to continue to operate
      without interruption. Following the submission of claims and validation of
      such claims, the trustee will liquidate the trust property and distribute
      the proceeds to the trust beneficiaries in a manner the trustee deems most
      beneficial.

      During 2003, the Company issued 4 million shares of restricted stock to
      the trusts. The trust shares are not included in the outstanding shares
      because they are being held in escrow by the trustee. Additional stock
      will be required to be issued to achieve this financial goal.

NOTE 7  COMMITMENTS AND CONTINGENCIES

      Employment Agreements

      On January 1, 2000, the Company entered into employment agreements with
      the Chief Executive Officer (CEO) and Chief Operations Officer (COO) for
      five and three years, respectively. The agreements call for a base salary,
      after annual incremental increases, ranging from $240,000 to $420,000 for
      the CEO and $135,000 to $180,000 for the COO. The agreements also call for
      signing bonuses of $750,000 for the CEO and $350,000 for

                                       18
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


      the COO to be paid in equal monthly payments over the term of the
      respective employment agreements. For the years ended December 31, 2003
      and 2002, the Company incurred expenses related to these agreements in the
      aggregate of $582,952 and $788,667, and $1,897,344 and $1,314,392 has been
      accrued at December 31, 2003 and 2002, respectively. Effective January
      2002, the COO resigned her position with the Company. The employment
      agreement will be fulfilled by the Company in accordance with its original
      terms.

NOTE 8  CONCENTRATIONS

      Approximately 90% and 97% of revenues were derived from three and one
      customers, respectively, for the years ended 2003 and 2002. Approximately
      87% of accounts receivable was due from one customer as of December 31,
      2002.

NOTE 9  INCOME TAXES

      Income tax expense (benefit) for the years ended December 31, 2003 and
      2002 is summarized as follows:

                                                        2003           2002
                                                    -------------   ------------
      Current:
        Federal                                   $        -      $       -
        State                                              -              -
        Deferred - Federal and State                       -              -
                                                    -------------   ------------
      Income tax expense (benefit)                $        -      $       -
                                                    =============   ============

      The Company's tax expense differs from the "expected" tax expense for the
      years ended December 31, 2003 and 2002 as follows:

                                                        2003           2002
                                                    -------------   ------------

      U.S. Federal income tax benefit             $   2,924,986   $ (11,135,569)

      Effect of unused net operating loss
      carryforward                                   (2,924,986)     11,135,569
                                                    -------------   ------------

                                                  $        -      $        -
                                                    =============   ============

      The tax effects of temporary differences that give rise to significant
      portions of deferred tax assets and liabilities as of December 31, 2003
      and 2002 are as follows:

                                       19
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


                                                        2003           2002
                                                    -------------   ------------
      Deferred tax assets:
      Net operating loss carryforward             $  16,518,432   $ 13,593,446
                                                    -------------   ------------
        Total gross deferred tax assets              16,518,432     13,593,446
      Less valuation allowance                       16,518,432     13,593,446
                                                    -------------   ------------

        Net deferred tax assets                   $        -      $       -
                                                    =============   ============

      As of December 31, 2003, the Company had a net operating loss carryforward
      of approximately $48,584,000 for U.S. Federal income tax purposes
      available to offset future taxable income expiring on various dates
      beginning in 2019 through 2023. This net operating loss may be restricted
      in future years under Section 382 of the Internal Revenue Code.

      The valuation allowance as of January 1, 2003 was $13,593,446. The net
      change in the valuation allowance during the year ended December 31, 2003
      was an increase of approximately $2,925,000.

NOTE 10  CAPITAL LEASE OBLIGATIONS

     The Company is in default of its capital lease agreement at December 31,
     2003. The Company is also in discussions with the lessor to settle the
     matter. Due to the default, the entire amount due under the lease has been
     classified as current in the accompanying consolidated balance sheets.

NOTE 11  LITIGATION

      (A)   Subsequent to the Blagman/Century merger transaction described in
            Note 2, TMT Media Corporation ("TMT") has asserted that under the
            April 2000 acquisition agreement (whereby Century acquired TMT), as
            a result of the transaction between the Company and Century, it is
            entitled, as of April 22, 2002, to the $1,250,000 contingent amount
            and to the payment in full of the balance of $609,564 due on the
            $700,000 note delivered in the 2000 acquisition of TMT by Century.

            The Company and Century dispute this position and are seeking to
            resolve the matter. In May 2002, TMT initiated a proceeding TMT
            Media Corporation vs. Blagman Century Media, Inc. et al. (Superior
            Court of California, County of Los Angeles, Case BC273368) against
            the Company, Century and a shareholder personally, claiming the
            accelerated amount of $1,859,564. Management has filed a general
            denial to TMT's allegations and has asserted numerous affirmative
            defenses and plans to begin a mediation in June to resolve this
            case.

                                       20
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


            In December 2003, TMT was granted a Summary judgement against the
            Company in the accelerated amount of $2,242,975, which includes
            additional interest on the $1,250,000 contingent amount and the
            $609,564 note plus attorney's fees and costs incurred by TMT. The
            Company's former attorney failed to file any opposition to the
            summary judgement motion. The Company's current attorney will file a
            motion to be relieved of the default as to this summary judgement.
            As of December 31, 2003, the Company has recorded additional
            liabilities in the amount of $383,411 in order to record the full
            liability of $2,242,975 as per the summary judgement. This liability
            is included in Liabilities from Discontinued Operations in the
            accompanying consolidated balance sheet at December 31, 2003.

      (B)   In March 2002, the Company advised authorities, market members and
            regulators and initiated an internal reconciliation investigation
            relating to a substantial amount of common shares of the Company
            improperly and fraudulently issued and possibly transferred,
            including possible improper releases of restrictions and transfers
            of restricted securities warrant negotiations or an exemption from
            registration, without the knowledge of the Company ("Curative Review
            Process"). The Curative Review Process is continuing. The Company
            filed a registration statement on Form S-8 for a 2002 Employee Stock
            Compensation Plan ("Registration Statement") effective August 2002
            to register shares. In connection with the Curative Review Process,
            the Company subsequently placed stop transfer orders on all of the
            original certificates and derivatives of those certificates, advised
            market members and depositories of its actions and has been working
            with these parties and its transfer agent and other resources to
            ascertain which shares of Common Stock need to remain in commerce to
            recognize the interests of the transferee, which shares should be
            cancelled or returned to the Company and therefore removed from
            registration ("Removed Shares") and which shares are held by or were
            delivered to parties who were eligible to receive and hold the same
            pursuant to the Plan. The Company intends to file an amendment to
            this Registration Statement as soon as practicable when the
            reconciliation in the Curative Review Process is complete to
            withdraw the Removed Shares from registration. In connection with
            this, the Company has had suit filed against them by a third party
            pending in the Circuit Court of Cook County, Illinois. The Company
            has responded to this matter and is actively cooperating in other
            investigations relating to the plaintiff and others. The Company
            expects additional litigation from the plaintiff and is intending to
            assert the indemnification and disgorgement rights under its
            agreements with the plaintiff. As stated above, more information on
            issues related to the collateral damage of the Company's association
            with certain financial advisors and organizations can be found on
            the Securities and Exchange Commission (SEC) website. Additional
            lawsuits may be filed by the Company against all parties involved in
            the fraud if any issues related to such fraud have an adverse effect
            on the Company.

                                       21
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


            The Company has initiated a complaint against a third party in the
            Superior Court of California in the County of Los Angeles for breach
            of contract, fraud and deceit, intentional misrepresentation of
            facts, and rescission. The third party filed a general denial to the
            complaint, has asserted numerous affirmative defenses, and has filed
            a cross-complaint alleging breach of written contract, breach of the
            implied covenant of good faith and fair dealing, conversion, common
            counts, breach of fiduciary duties, fraud and deceit, negligent
            misrepresentation, imposition of constructive trust and/or resulting
            trust, intentional and tortuous inducement to breach and
            interference with contract and prospective economic advantage, and
            unfair trade practices. The Company has filed a general denial to
            the allegations. The parties are currently seeking a business
            settlement.

            On March 31, 2003, the SEC filed a complaint for injunctive and
            other equitable relief, obtained a temporary restraining order and
            has frozen the assets of this third party. The SEC complaint
            specifically alleges that this third party and his associates forged
            stock issuance resolutions and entered into bogus consulting
            agreements in an effort to wrongfully convert the Company's S-8
            shares. The SEC has alleged that this third party and his associates
            stole approximately 2,160 shares of the Company's stock valued at
            $3,300,000.

      (C)   A claim has been brought against the Company by a corporation for
            breach of contact. On January 30, 2004, this corporation was granted
            a summary judgement in the amount of $203,064, which includes
            interest plus attorney's fees and costs incurred by the corporation.
            The Company's current attorney will file a motion to be relieved of
            the default as to this summary judgement. As of December 31, 2003,
            the Company has recorded additional liabilities in the amount of
            $51,064 in order to record the full liability of $203,064 as per the
            summary judgement. This liability is included in Liabilities from
            Discontinued Operations in the accompanying consolidated balance
            sheet at December 31, 2003. There are currently cross-actions in the
            case that are pending for binding arbitration in November 2004.

      (D)   On November 11, 2003, the Company reached a settlement with a
            corporation as a result of a claim brought against the corporation
            by the Company on May 6, 2002 and a cross complaint filed by the
            corporation on June 14, 2002. As part of the terms and conditions of
            the settlement, the Company will pay to the corporation $260,000 and
            10% simple interest over one year. This will be accomplished by the
            issuance of 2 million shares of free trading stock 30 days after the
            execution of the agreement. The shares will be held in a trust
            account for the purpose of selling the stock and paying the
            corporation on a continuous basis. In the event the Company does not
            pay the corporation the total amount of the settlement on or before
            one year and 30 days from the execution date of the settlement
            agreement, the corporation will enforce a stipulated judgment in the
            amount of $750,000 against the Company. The Company

                                       22
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


            has recorded a liability of $260,000 as of December 31, 2003 and
            this amount is included in accounts payable and accrued expenses in
            the accompanying consolidated balance sheet as of December 31, 2003.
            As of December 31, 2003, the Company had not yet issued the
            corporation the 2 million shares as per the terms of the settlement.
            As of the report date, the Company has issued 21 million shares to
            the corporation valued at $250,000. The fair value of the shares
            issued was based upon the market price of the Company's common stock
            on the date of grant.

            Other than the litigation discussed in the above paragraphs, the
            Company is a party to a number of lawsuits and claims that the
            Company believes will ultimately have a favorable outcome and are
            not material in dollar amounts.

NOTE 12  GOING CONCERN

      The Company's financial statements for the year ended December 31, 2003
      have been prepared on a going concern basis which contemplated the
      realization of assets and the settlement of liabilities and commitments in
      the normal course of business. The Company has a net loss of $8,035,776
      and a negative cash flow from operations of $248,707 for the year ended
      December 31, 2003, and a working capital deficiency of $14,964,866 and a
      stockholders' deficiency of $15,194,926 at December 31, 2003. These
      matters raise substantial doubt about the Company's ability to continue as
      a going concern. The financial statements do not include any adjustments
      that might result from the outcome of this uncertainty.

      The ability of the Company to continue as a going concern is dependent on
      the Company's ability to raise additional capital, and implement its
      business plan. Management believes that actions presently taken to obtain
      additional funding provide the opportunity for the Company to continue as
      a going concern. The Company is also actively seeking businesses to
      acquire.

NOTE 13  SUBSEQUENT EVENTS

      During the period from January 1, 2004 through May 4, 2004, the Company
      has issued 74,036,000 common shares in the aggregate, to eleven different
      consultants for consulting services to be provided over varying terms,
      which expire at various dates during the fiscal year 2005.

      In March and May 2004, a total of 17,000,000 shares of common stock were
      issued to the Company's Securities and Exchange attorney as compensation
      for legal services rendered.

                                       23
<PAGE>

               INNOVATION HOLDINGS, INC. (FORMERLY BLAGMAN MEDIA
                     INTERNATIONAL, INC.) AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2003 AND 2002


      In April 2004, the Board of Directors authorized a 500 for 1 reverse stock
      split. All share and per share amounts in the accompanying consolidated
      financial statements and footnotes have been restated to give effect to
      such reverse stock split.

                                       24