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

                                   FORM 10-KSB

(Mark One)

|X|   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
      ACT OF 1934 for the fiscal year ended December 31, 2004

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

      For the transition period from ____________ to ____________

COMMISSION FILE NUMBER   0-50119

                         IMAGE INNOVATIONS HOLDINGS INC.

(Name of small business issuer in its charter)

                 Nevada                                 91-1898414
-------------------------------------------     --------------------------------
    (State or other jurisdiction of                   (I.R.S. Employer
     incorporation or organization)                    Identification No.)

         432 Park Avenue South
           New York, New York                              10016
-------------------------------------------     --------------------------------
(Address of principal executive offices)                (Zip Code)

Issuer's telephone number  518-589-9400

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

Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock, par value $0.001
--------------------------------------------------------------------------------
                                (Title of class)

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

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will 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. |_|

The Registrant's revenues for the fiscal year ended December 31, 2004 were
$6,059,704.

The aggregate market value of the common stock held by non-affiliates, based on
the average closing bid and asked price of the common stock on April 11, 2005,
was $130,777,500.

As or April 11, 2005, there were 24,910,000 shares of common stock issued and
outstanding.

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

<PAGE>


Cautionary Note Regarding Forward-Looking Statements

In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"), Image Innovations Holdings
Inc. ("we", "us" or the "Company") is hereby providing cautionary statements
identifying important factors that could cause our actual results to differ
materially from those projected in forward-looking statements (as such term is
defined in the Reform Act) made by or on behalf of Image herein, in other
filings made by Image with the Securities and Exchange Commission, in press
releases or other writings, or orally, whether in presentations, in response to
questions or otherwise. Any statements that express, or involve discussions as
to, expectations, beliefs, plans, objectives, assumptions or future events or
performance (often, but not always, through the use of words or phrases such as
"will result," "are expected to," "anticipated," "plans," "intends," "will
continue," "estimated," and "projection") are not historical facts and may be
forward-looking and, accordingly, such forward-looking statements involve known
and unknown risks, uncertainties and other factors that may cause the actual
results or performance of Image to be materially different from any future
results or performance expressed or implied by such forward-looking statements.
Such known and unknown risks, uncertainties and other factors include, but are
not limited to, the following:

      (i)   history of operating losses;

      (ii)  competition in the marketplace;

      (iii) dependence on current management and future ability to obtain
            qualified management personnel;

      (iv)  risks associated with expansion into additional markets where Image
            does not have a presence or significant market penetration;

      (v)   the effect of economic conditions in the United States generally on
            Image's business;

      (vi)  the failure to manage growth properly and integrate acquired assets
            and operations successfully;

      (vii) the ability to secure outside financing at rates or on terms
            acceptable to Image;

      (viii) other factors which are described in further detail in this Annual
            Report on Form 10-KSB and in other filings by Image with the
            Securities and Exchange Commission.

The Company cautions that the factors described above could cause actual results
or outcomes to differ materially from those expressed in any forward-looking
statements made by or on behalf of the Company. Any forward-looking statement
speaks only as of the date on which such statement is made, and Image undertakes
no obligation to update any forward-looking statement or statements to reflect
events or circumstances after the date on which such statement is made or to
reflect the occurrence of unanticipated events. New factors emerge from time to
time, and it is not possible for management to predict all of such factors.
Further, management cannot assess the impact of each such factor on the business
or the extent to which any factor, or combination of factors, may cause actual
results to differ materially from those contained in any forward-looking
statements.


                                       2
<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

Overview

Image Innovations Holdings Inc., a Nevada corporation (the "Company", "our",
"us" or "we"), is in the business of selling high- and medium-value sports and
entertainment celebrity artwork and collectibles, and low-cost consumer items
branded under license with the logos of professional sport leagues and teams.
The Company has three wholly-owned subsidiaries (collectively referred to as
"Image Group"), as follows:

o     Image Innovations Sports & Entertainment Inc., a Delaware corporation
      ("ISE"), sells celebrity artwork and collectibles through a targeted
      distribution network. ISE is becoming a recognized leader in the fast
      growing, multi-billion dollar industries of artwork collectibles. ISE has
      retained some of the most recognized names in the celebrity art world,
      including well-known artists such as Carlo Beninati and Doug London, to
      create celebrity artwork for sale and distribution.

o     Image Innovations Inc., a Delaware corporation ("Image Innovations"), is
      in the business of adding value to a wide variety of relatively low-cost,
      but desirable electronic products, by endorsing them with the brand logos
      of sports teams and leagues and/or other recognized trademarks. Image
      Innovations creates, sources and markets these officially-licensed
      electronic products.

o     Imaging Innovations Sports and Entertainment Inc. , a New York corporation
      ("Imaging"), was incorporated to acquire a warehouse and storage facility
      in Tannersville, New York, located near ISE's existing facility in
      Tannersville. Both ISE and Image Innovations operate their fulfillment
      centers from this facility. The facility is approximately 9,000 square
      feet.

Corporate Organization

Acquisition of Image Innovations

Effective June 30, 2003, we completed the acquisition of all of the issued and
outstanding shares of Image Innovations, a Delaware corporation incorporated on
January 14, 2003, pursuant to our offer to all of the shareholders of Image
Innovations to purchase their shares in exchange for an aggregate of 10,000,000
shares of our common stock, on the basis of 10,000 shares of our common stock
for each outstanding share of Image Innovations. As a result of this
transaction, Image Innovations became a wholly-owned subsidiary of the Company.
Shortly after the acquisition, we changed our corporate name from Busanda
Explorations Inc. to Image Innovations Holdings Inc.

ISE

ISE was incorporated under the laws of the State of Delaware on January 20, 2004
as our wholly-owned subsidiary to compete in the celebrity memorabilia and
collectibles industry. ISE acquired all of the celebrity memorabilia and
collectibles inventory owned by MDK Sports & Entertainment Inc. ("MDK Sports")
during our first fiscal quarter of 2004 pursuant to an asset purchase agreement
among the Company, ISE and MDK Sports (the "Asset Purchase Agreement"). As
consideration for the sale and transfer of the celebrity memorabilia inventory
by MDK Sports to ISE, we issued to MDK Sports an aggregate of 4,000,000
restricted shares of our common stock. The inventory was valued at $3,015,278.

                                       3
<PAGE>

We also agreed to deliver to MDK Sports additional shares of our common stock
upon achievement of certain milestones. On September 30, 2004 the Company, ISE
and MDK Sports reached an agreement pursuant to which MDK Sports waived its
right to receive the shares issuable under the Asset Purchase Agreement;
accordingly, the Company and ISE have no further obligations to MDK Sports
thereunder.

Imaging

Imaging was incorporated under the laws of the State of New York on August 13,
2004 as our wholly-owned subsidiary. On September 9, 2004, Imaging acquired a
9,000 square foot warehouse and storage facility located near ISE's existing
facility in Tannersville. Both ISE and Image Innovations operate fulfillment
centers from the Imaging warehouse.

Current Developments

Title-4-Art and Title-4-Sports

The Image Group has conceived and developed a process to issue a registered
title to owners of fine art and memorabilia. The Image Group has received
approval from a major cruise line to register titles for all art and sports
memorabilia sold on their ships. The cruise line has estimated that it will
register approximately 150,000 titles with the Company in 2005. The proposed
cost to the purchaser of each title registration is is expected to be
approximately $40. The Image Group intends to market this concept not only to
the ships within our own distribution network but to other channels retailing
fine art and memorabilia.

Celebrity Endorsement Agreement

Effective January 2005, ISE signed a three-year contract with Peyton Manning, a
leading NFL quarterback who ranks among the highest-achieving quarterbacks in
NFL history. Pursuant to the agreement, ISE will commission portraits of Mr.
Manning as well as have exclusive rights with respect to Mr. Manning's signature
on specific memorabilia to be distributed by ISE and certain non-exclusive
appearance rights. Under the agreement, ISE has agreed to pay Mr. Manning's
company, Pey Dirt, Inc., royalties as specified in the agreement, subject to
aggregate minimum royalty payments of $2.5 million, of which the first $1.25
million was paid in the first quarter of 2005.

Potential Acquisition of Art Company

The Image Group has executed a letter of intent for the acquisition of a
privately-owned art company that supplies art for sale through the cruise-line
industry. The Company believes that the synergy between ISE and the target
entity has the potential to augment the revenue base of ISE, while the
reputation of the target entity will greatly enhance the Image Group as a leader
in the fields of art and sport. Although negotiations for definitive
documentation are proceeding, there can be no assurance that this transaction
will be consummated.

Potential Distribution Arrangement

In conjunction with the above-mentioned potential acquisition, ISE is currently
in discussions with a major cruise line for an exclusive six-year agreement to
provide art for auctions on its entire fleet of twelve cruise ships. This
transaction, if consummated, has the potential to increase the distribution
ability of the Image Group and generate substantial additional revenues for ISE.
It would, however, require us to raise significant additional funding in order
to guarantee its performance obligations under the proposed arrangement, and
there can be no assurance that we would be able to raise such additional capital
on favorable terms, if at all. Even if we are able to raise the capital, there
can be no assurance that we will be able to consummate this distribution
agreement on favorable terms, or at all.

                                       4
<PAGE>

Formation of sports marketing and management division

The Image Group has formed a sports marketing and management division. It is
currently negotiating with the principals of Axiom Sports and Entertainment
Company to join the Image Group to assist in the management of this division.
The principals are comprised of Rob Raju, who has several years of experience in
sports management, and Ken Danekyo, a former player in the National Hockey
League and a member of the Image Group's advisory board. There can be no
assurance that an agreement with Axiom will be consummated on favorable terms to
the Company, if at all.

The Business of ISE

ISE is our wholly-owned celebrity artwork and collectibles marketing and sales
business, supplying original collectible sports memorabilia through an
established distribution network that includes select retailers and the
Internet, cruise ships, military installations in both the U.S. and overseas,
and celebrity auctions. We commission established artists to produce
authenticated limited edition products of well- known sports and entertainment
figures. The products feature the personal signatures of both the artist and the
celebrity. Artists include Carlo Beninati, Doug London and James Fiorentino. ISE
combines the skills of these artists with the appeal of sports personalities
such as Peyton Manning, Alex Rodriquez, Muhammad Ali, Joe Frazier, Larry Holmes,
Tiger Woods, Arnold Palmer and Joe Montana in order to create memorabilia that
is then marketed to suitable buyers. Each collector series consists of the
original artwork, artist's proofs, and limited edition prints signed by both the
artist and the celebrity. As part of the contract, celebrities typically
autograph the original artwork, artist's proofs and limited edition prints
created by us, as well as memorabilia specific to the celebrity, such as balls,
bats, jerseys and helmets.

ISE also has an exclusive license from The Livve Licensing Group to use the
image of the Breast Cancer Research stamp in fine art pieces, posters, mini-art
pieces, officially minted coins and other similar products. In July 1998, the
U.S. Postal Service ("USPS") issued the first Breast Cancer Research semi-postal
stamp. The stamp sells at a premium, and the premium proceeds are divided
between the National Institutes of Health and the U.S. Defense Department's
Health Research Division to help fund the fight to "find a cure." In the six
years since the stamp was first issued, more than 560 million stamps have been
sold raising more than $40 million for breast cancer research.

ISE has created an exclusive embellishment of the stamp, which we anticipate
will be sold in various types of prints through our distribution network of
select retailers, cruise ships and military bases. We have obtained the
exclusive rights to the image and expect to work jointly with Dr. Balazs (Ernie)
Bodai, an individual involved in the creation of the Breast Cancer Stamp, on
these printed works as well as develop jointly with Dr. Bodai an official
commemorative coin to be minted by the Morgan Mint. We also plan to produce fine
art pieces, posters, mini-art pieces, and other similar products using the
embellishment. A percentage of sales of each item will be paid to
CureBreastCancer, Inc., a non-profit organization.

ISE has entered into an agreement with the Quigley Corporation to distribute
Pain Goes, a topical pain relief spray, through our distribution channels.
Quigley will reimburse us for display and marketing costs. We plan on developing
a marketing program that will involve the endorsement of the product by a
popular NASCAR driver.

                                       5
<PAGE>

We generate revenues by wholesaling autographed products. Additional revenues
are generated through retail sales of individual products and fine art
assemblages. ISE generates revenue by selling its artwork and collectibles at
wholesale to select retailers, cruise ships and military installations. It also
sells its products at retail on the Internet.

We plan to continue to develop new celebrity-based art works and collectibles
for resale to consumers as discussed below. These art works and collectibles
will be created for ISE under a contractual arrangement with, and endorsed by,
the artist and sports or entertainment celebrity. The artist will be paid a fee
for creation of the work of art, and the celebrity will be paid an endorsement
fee. Once endorsed by a celebrity, the product becomes subject to a verification
and validation process in order to demonstrate to consumers that it has been
endorsed by the celebrity and is not the subject of fraud. An example of a
celebrity-endorsed art creation is a limited edition print of images of a famous
sports celebrity printed on canvas and signed by the celebrity and artist. The
limited edition prints are sold through distributors to consumers in markets
which offer the greatest ability to access consumers who are likely to have
substantial interest in such products.

Our ISE business can be classified as follows:

1.    Fine Art & Assemblages Products - Products in this category include the
      following:

      (i) Authentic Legends Art - Consists of limited edition, high-quality
      artwork by renowned artists. ISE will commission the artists to produce
      authenticated limited edition products of top-tier sports and
      entertainment figures with the personal signatures of both the artist and
      sports celebrity. The original artwork will then be used to create
      artist's proofs and limited edition prints that are then signed by both
      the artist and the celebrity.

      (ii) Embellishments - Consists of limited edition photographs or images
      that are superimposed on a canvas and embellished by overpainting by the
      original artists, and signed by the artist and, where relevant, the
      celebrity.

      (iii) Historic Athlete Assemblages - Consists of an assemblage of
      collectible items of "Hall of Fame" athletes, including such items as
      uniforms, equipment and signed documentation.

      (iv) Unique Collectibles - Consists of products that are not generally
      available in the market but are distinguishable by their authenticity and
      rarity. These products may include pieces commissioned specifically by
      ISE.

2.    Sports and Celebrity Memorabilia Products - Consists of memorabilia items
      from sports celebrities, including baseballs, bats, boxing gloves, sports
      jerseys, footballs, etc.

3.    Mass Market Products - Consists of collectible reproductions of art
      created by retained artists, including posters and cards. Included in this
      category will be the products produced under the The Livve Licensing Group
      contract and the distribution of the Quigley products.

The Business of Image Innovations

Image Innovations is in the business of adding value to a wide variety of
relatively low-cost products, by endorsing them under license with the brand
logos of sports teams and/or other recognized trademarks. The principal
components of the business strategy are as follows:

                                       6
<PAGE>

1.    License Agreements

o     NHL Enterprises, LP for the license of the National Hockey League name and
      other NHL logos and indicia for use in connection with batteries and other
      battery-related products. The license is a non-exclusive license for the
      United States and expired on December 31, 2004. The current NHL season has
      been cancelled and the Company is attempting to negotiate the renewal of
      this license with the NHL.

o     NHL Enterprises Canada, LP for the license of the National Hockey League
      name and other NHL logos and indicia for use in connection with batteries
      and other battery-related products in Canada. The license is a
      non-exclusive license for Canada and expires on December 31, 2005.

o     NFL Properties LLC for the grant of a license to use the National Football
      League mark and other related marks in connection with batteries,
      flashlights with batteries, e-badge with batteries, radios with batteries,
      and universal remote controls with batteries. The license is limited to
      the United States and expired on March 31, 2005. The Company is in the
      process of determining whether to negotiate a renewal of this license.

o     Riddell Sports Group. Riddell is the official supplier of football helmets
      to the NFL and supplies helmets to most football teams of the National
      Collegiate Athletic Association and the Canadian Football League. Under
      the terms of the agreement, Image Innovations will manufacture and
      distribute a pocket-size AM/FM radio with ear jacks, replicating the
      Riddell-style football helmet. The license is for a term expiring April
      30, 2005. The Company is in the process of determining whether to
      negotiate a renewal of this license.

o     MLB Properties, for the license to use Major League Baseball trademarks,
      service marks, copyright, and trade dress. Under the terms of the
      agreement, Image Innovations will manufacture and distribute alkaline
      batteries, keychain flashlights, and cell phone holders all featuring
      baseball club logos. The license is for a term expiring December 31, 2005.

      We will consider pursuing negotiations with additional sports leagues and
      teams to obtain additional license rights.

2.    Manufacturing Arrangements

      Image Innovations does not manufacture any of its consumer products; it
      out sources manufacturing to third party manufacturers located primarily
      in China, principally for reasons of price competitiveness and advanced
      technology for batteries and battery related products in China. Image
      Innovations has established relationships with suppliers in Asia who are
      believed to be capable of delivering innovative and quality products with
      the brand recognition, colors and symbols of licensed properties.

      Once manufacturing relationships are established, Image Innovations goes
      through a six-step process designed to establish quality control and
      compliance with our license agreements.

      We need additional financing to purchase new products from manufacturers.
      Manufacturers of targeted products will require that we have in place
      letters of credit in favor of manufacturers prior to the start of
      manufacturing. Due to our current working capital deficit, we will require
      additional financing before we are able to post letters of credit.

                                       7
<PAGE>

3.    Distribution

      Image Innovations sells to the retail trade through a network of brokers.
      If and when its existing business levels so justify, Image Innovations
      will consider establishing a network of salesmen in the United States to
      support its penetration of retail markets.

4.    Marketing

      Image Innovations' marketing strategy is to focus on premier sports
      franchises and create demand for its products by combining high profile
      brand names and trademarks with desirable consumer products. Its plan is
      to establish itself as a specialized brand licensing and promotional
      merchandising company.

Competition

There are numerous companies that compete in the same businesses that we do.
Many of these competitors have established recognized brand names and presence
in the market place and have substantially greater financial and business
resources than we do.

In the field of officially licensed products, we compete with some of the
largest consumer goods companies in the U.S., as well as with numerous specialty
manufacturers and distributors. In the field of sports memorabilia, we compete
with such companies as Steiner Sports (part of Omnicom Group), Field of Dreams,
Tristar Productions Inc., Upper Deck and Gottahaveit.

We plan to compete against this competition using the following strategies:

1.    We plan to continue to develop relationships with celebrities and artists
      with the objective of introducing unique pieces of art to the marketplace.
      We plan to develop these relationships by making use of the wide range of
      existing relationships that we have acquired in connection with our
      acquisition of certain of the assets of MDK Sports.

3.    We plan continuously to develop and bring to market innovative proprietary
      products that are unique to us because of our license arrangements and
      difficult to copy because of the long lead times for development,
      packaging, manufacturing, contract negotiation and sales distribution.

4.    We plan to secure licensed properties and rights from licensors for
      products in particular categories in order to differentiate our products
      from those of our competitors. These license agreements typically require
      up-front royalty payments, which may act as a barrier to entry to certain
      of our smaller competitors who lack the financing to make these payments.

Presentation of Financial Information

As discussed above, we completed the acquisition of Image Innovations effective
June 30, 2003. Under accounting principles generally accepted in the United
States ("GAAP"), our financial statements have been prepared using
reverse-acquisition accounting principles, which resulted in Image Innovations
acquiring Image Innovations Holdings for accounting purposes. Accordingly, Image
Innovations is treated as the acquiror for accounting purposes, even though
Image Innovations Holdings is the legal acquiror. Under GAAP, comparative
figures for prior periods are based on the operating results of Image
Innovations, but the type of share capital and number of issued and outstanding
shares continue to reflect those of Image Innovations Holdings. Image
Innovations was incorporated on January 14, 2003.

                                       8
<PAGE>

Web Site

We maintain three web sites that are integrated and targeted to provide
information on our individual companies. The Company maintains a web site at
www.ImageiiHoldings.com to provide general information on the Image Group and
information for investors. ISE maintains a web site at www.ImageiiSportsEnt.com
which was developed to support ISE and the sports and entertainment memorabilia
division of our business. ISE customers can purchase ISE products on the web
site. Image Innovations maintains a web site at www.Imageii.com, which was
developed to support Image Innovations and the licensed products division of our
business.

Advisory Board

To enhance our management team's depth and breadth of industry contacts, we have
established an advisory board consisting of well-know industry players. Listed
below are the members of our advisory board:

Larry Holmes: his record of 44 knockouts places him among boxing's elite. He won
48 consecutive bouts and had the longest uninterrupted heavyweight reign in
boxing history, from 1978 until 1985.

Gerry Cooney: a heavyweight title contender against Larry Holmes in 1982 and,
although defeated in that fight, ended his career with a 28 - 3 record. He
founded FIST (Fighters Initiative for Support and Training), a non-profit
organization dedicated to helping retired boxers re-enter mainstream life.

"Rollie" Fingers: a legendary relief pitcher for the Oakland As, the San Diego
Padres and the Saint Louis Cardinals, he was inducted into the Baseball Hall of
Fame in 1992 with a career 341 saves. He is a winner of the Cy Young Award.

Dave Kingman: known throughout his career as "Skyking" and "Kong" for his home
runs, he played 16 seasons with the Giants, Mets, Padres, Angels, Yankees, Cubs
and A's. He won the National League Home Run crown in 1979 and 1982.

Debbie Meyer: in 1972, she became the first woman to win gold medals in three
individual swimming events in the Olympics. Since her retirement, one of her
main activities has been working with young people.

George Gervin; considered one of the greatest players in the history of the San
Antonio Spurs basketball franchise, he scored 23,602 points in his 12-year
career with the Spurs, and holds several club scoring record. He was an ABA All
Star three times and an NBA All Star nine consecutive times.

Ken Danekyo: appearing in 1,283 career regular-season National Hockey League
games, and winning three Stanley Cups with the New Jersey Devils, he holds the
highest games-played total in team history and ranks 35th in league history.

Government Regulation

We are not aware of any existing or pending governmental regulation that will
have a material impact on the operation of our business.

                                       9
<PAGE>

Employees

We presently have 15 employees.

Research and Development Expenditures

We did not incur any research and development expenditures during the year ended
December 31, 2004.

Intellectual Property

We do not own, either legally or beneficially, any patent or trademark.

We commission established artists to produce authenticated limited edition
products of well-known sports and entertainment figures. The products feature
the personal signatures of both the artist and celebrity. Artists include Carlo
Beninati, Doug London and James Fiorentino. On all works commissioned by us, we
own copyrights enabling us to reproduce the original work in any format.

ITEM 2. DESCRIPTION OF PROPERTY.

We maintain a mailing address at 432 Park Avenue South New York, New York 10016
at the offices of James Armenakis, one of our non-management directors.

We maintain an office for the operations of ISE in leased premises at 6061 Main
Street, Suite 1A, Tannersville, New York 12485. These premises comprise
approximately 7,000 square feet and are leased for a term expiring August 11,
2005. The lease has renewal rights through August 11, 2008. This office space is
leased to us at a monthly lease rate of $2,850 by Rad-Place LLC, a company
partially owned by Joseph Radcliffe, the father of Michael Radcliffe, one of our
directors and the Chief Executive Officer of ISE.

We maintain an office for the operations of Image Innovations in leased premises
at 615-100 Park Royal, West Vancouver, B.C., V7T 1A2, Canada. These premises
comprise approximately 3,000 square feet and are leased for a term expiring
March 31, 2009.

We own a warehouse fulfillment center at 6093 Main Street Tannersville, New York
12485. This warehouse comprises approximately 9,000 square feet that is used for
warehousing and inventory storage.

ITEM 3. LEGAL PROCEEDINGS.

On January 31, 2005 and February 8, 2005, our former Chief Executive Officer,
Alain Kardos, who resigned as a Director from the Company on February 3, 2004,
filed actions in the Supreme Court of British Columbia, naming the Company,
Image Innovations, ISE and Derick Sinclair, our Chief Financial Officer, as
defendants, respectively. Mr. Kardos alleged (i) that the defendants wrongfully
refused or neglected to return to him two certificates representing 700,000
shares of our common stock (the "Certificates", "Certificate", and "Shares",
respectively) and (ii) that he was wrongfully dismissed from his position as an
officer and employee of the Company and Image Innovations on October 21, 2004.
Mr. Kardos seeks a declaration that the Shares and Certificates are his
property; an injunction restraining and enjoining the defendants, and their
directors, officers, employees, servants, agents and contractors, or others with
knowledge of the injunction, from directly or through any other, selling,
disposing of or in way dealing with the Shares or Certificates without the
consent of Mr. Kardos; an order for the delivery by the defendants to Mr.
Kardos, of the Certificates; and damages for their detention and/or conversion.
In respect of the wrongful termination action, Mr. Kardos seeks damages in
respect of inadequate notice, an extended notice period, general and special
damages and costs.

                                      10
<PAGE>

We believe that Mr. Kardos' allegations are erroneous and that his claims are
without merit. We intend to defend the actions vigorously, and filed a Statement
of Defense with the Supreme Court of British Columbia on March 4, 2005.

On March 25, 2005, Mr. Kardos filed a third party complaint in the United States
District Court for the District of Nevada, naming the Company, Image
Innovations, ISE and Derick Sinclair as third party defendants, with
substantially the same claims and requested relief as described above.

On January 13, 2005, we received a letter from Constellation Capital Corp.
("Constellation") demanding issuance by the Company to Constellation of warrants
to purchase an aggregate of 2,500,000 shares of common stock at share prices
ranging from $3.50 to $4.50 per share. The letter makes reference to a
Consulting Agreement between the Company and Constellation dated July 7, 2004
pursuant to which Constellation agreed to perform certain advisory services for
the Company in exchange for the grant of the warrants. The letter indicated that
Constellation would consider litigation against the Company if it did not
receive an "appropriate response" by January 20, 2005. The Company did not
respond to the demand or issue the warrants, and the Company has not received
notice of litigation.

We intend to defend vigorously any action brought by Constellation.

We are not party to any other material legal proceedings and to our knowledge,
no such proceedings are threatened or contemplated.

                                      11
<PAGE>


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

At the annual meeting held on December 6, 2004 shareholders voted and elected
the Board of Directors and shareholders approved the Company's 2004 Stock Option
Plan, as amended. There were no other matters submitted to our security holders
for a vote during the fourth quarter of our fiscal year ended December 31, 2004.

The aggregate number of shares of common stock of the Company entitled to vote
at the meeting was 24,910,000. Present at the meeting, in person and by proxy,
were the holders of 19,757,450 shares of common stock representing 79.32% of the
total number of shares entitled to vote and constituting a quorum. The holders
of our common stock elected Derick Sinclair, Alain Kardos, Michael Radcliffe,
James Armenakis, David Whittle, Jack Jacobs and Arthur Gononsky as directors,
and approved the Company's 2004 Stock Option Plan, as amended, as follows:

(i) ELECTION OF DIRECTORS:

                        Number of Votes         Number of
                            Cast For          Votes Withheld
                        -----------------     ---------------
Derick Sinclair           19,757,450            15,000
Alain Kardos              19,692,250            80,200
Michael Radcliffe         19,757,450            15,000
James Armenakis           19,757,450            15,000
David Whittle             19,757,450            15,000
Jack Jacobs               19,757,450            15,000
Arthur Gononsky           19,757,450            15,000

(ii) APPROVAL OF THE COMPANY'S 2004 STOCK OPTION PLAN, AS AMENDED

        Number of Votes Cast
For            Against    Abstain
---            -------    -------
19,757,450      0          15,000


                                      12
<PAGE>

                                     PART II


ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Market Information

Our shares of common stock are quoted on the OTC Bulletin Board under the stock
symbol "IMGV." The Company changed its name in August 2003 from Busanda
Explorations Inc. to Image Innovations Holdings Inc. The high and the low bid
information for our shares of common stock for each quarter of trading were:

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

QUARTER                   HIGH ($)                 LOW ($)

---------------------------------------------------------------------------
First Quarter 2003        $0.05                    $0.05

---------------------------------------------------------------------------
Second Quarter 2003       $0.02                    $0.02

---------------------------------------------------------------------------
Third Quarter 2003        $1.15                    $0.05

---------------------------------------------------------------------------
Fourth Quarter 2003       $1.15                    $1.00

---------------------------------------------------------------------------
First Quarter 2004        $2.75                    $1.26

---------------------------------------------------------------------------
Second Quarter 2004       $3.40                    $2.40

---------------------------------------------------------------------------
Third Quarter 2004        $4.85                    $3.30

---------------------------------------------------------------------------
Fourth Quarter 2004       $6.75                    $4.80

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

The source of the high and low bid information is the NASD OTC Bulletin Board.
The market quotations provided reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions.

Holders of Common Stock

The Company had 412 shareholders of record on April 11, 2005.

Dividends

There are no provisions in our Articles of Incorporation or bylaws that restrict
us from declaring dividends. The Nevada Revised Statutes, however, prohibit us
from declaring dividends where, after giving effect to the distribution of the
dividend:

      (A)   We would not be able to pay our debts as they become due in the
            usual course of business; or

                                      13
<PAGE>

      (B)   Our total assets would be less than the sum of our total
            liabilities, plus the amount that would be needed to satisfy the
            rights of shareholders who have preferential rights superior to
            those receiving the distribution.

We have neither declared nor paid any cash dividends on our capital stock and do
not anticipate paying cash dividends in the foreseeable future. Our current
policy is to retain any earnings in order to finance the expansion of our
operations. Our board of directors will determine future declaration and payment
of dividends, if any, in light of the then-current conditions they deem relevant
and in accordance with the Nevada Revised Statutes.

We have a loan agreement with H.E Capital for a non-revolving secured $5 million
dollar loan, bearing interest at 9% per annum and due upon demand by H.E.
Capital. The loan is secured by a general security agreement granted by us
against all of our assets. The H.E. Capital agreement contains certain
restrictions that limit our ability to pay dividends and redeem shares of common
stock. There is no assurance that H.E. Capital will continue to advance
additional amounts in order to fund the business of the Company or that they
will not demand repayment.

Recent Sales of Unregistered Securities

We had no sales of our common stock during our fiscal year ended December 31,
2004, other than sales of our common stock that have been previously reported on
our Quarterly Reports on Form 10-QSB that we have filed with the Securities and
Exchange Commission.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.

Introduction and Overview

The Image Group supplies both high- and low-cost products related to the sports
and entertainment industry through its two operating subsidiaries, ISE and Image
Innovations.

ISE creates and sells celebrity-based fine art and sports and entertainment
memorabilia. Established portrait artists specializing in the sports and
entertainment field are commissioned to create original fine art pieces of
sports and entertainment celebrities. The originals of these pieces are copied
by a special process onto canvas in limited quantities. Our primary source of
revenue is derived from the sales of such pieces. Our primary end-customers are
individuals with an interest both in fine art and sports and entertainment
memorabilia. We believe we are becoming a recognized leader in the fast-growing,
multi-billion dollar industries of artwork collectibles and officially licensed
products. ISE has retained some well-known names in the celebrity art world,
including Carlo Beninati, Doug London and James Fiorentino, and has established
relationships in the sports world with major sports figures such as Muhammad
Ali, Larry Holmes, Arnold Palmer, Tiger Woods, Joe Montana, Alex Rodriguez and
Peyton Manning.

Effective January 2005, ISE signed a three-year contract with Peyton Manning, a
leading NFL quarterback who ranks among the highest-achieving quarterbacks in
NFL history. Pursuant to the agreement, ISE will commission portraits of Mr.
Manning as well as have exclusive rights with respect to Mr. Manning's signature
on memorabilia and certain non-exclusive appearance rights. Under the agreement,
ISE has agreed to pay Mr. Manning's company, Pey Dirt, Inc., royalties as
specified in the agreement, subject to aggregate minimum royalty payments of
$2.5 million, of which the first $1.25 million was paid in the first quarter of
2005.

                                      14
<PAGE>

The retail market for sports memorabilia in the U.S. is currently estimated at
over $3 billion dollars per annum. It is believed to be growing at an annual
rate of over 8%. Historically, the industry has centered around cards,
photographs and memorabilia specific to a particular individual or team, such as
balls, bats, jerseys and helmets. While we are also active in this sector of the
industry, we believe we have been at the forefront of the trend to generate
high-value collectibles by commissioning paintings of sports celebrities from
well known artists and creating limited edition reproductions of them. We have
also been active in developing new channels of distribution such as land- and
sea-based auctions.

The Company is at an early stage of development, but we have already achieved
recognition in the marketplace as a result of the arrangements, exclusive and
non-exclusive, into which we have entered with leading sports personalities and
of the quality of the artists who have accepted our commissions. We have also
developed distribution capacity for our officially-licensed products. From both
of these areas of activity, we are being presented with many opportunities to
increase the number of sporting figures under contract as well as to market
additional officially-licensed products. We are also presented with
opportunities to exploit our standing in the sports world for other commercial
projects. Our challenge is, within the financial constraints within which we
will be operating from time to time, to select those opportunities with the
greatest market appeal and staying power and only enter into arrangements where
the potential return justifies the expenditure commitment involved. In the
longer term, our challenge is to coordinate our opportunities into a coherent
and cohesive business strategy that is capable of world wide expansion.

Image Innovations is in the business of adding value to a wide variety of
relatively low-cost electronic consumer products by endorsing them under license
with the brand logos of sports teams and/or other recognized trademarks. Image
Innovations creates, sources and markets these officially-licensed electronic
products.

Results of Operations for the fiscal year ended December 31, 2004 as compared
with the fiscal period ended December 31, 2003

Revenue

Our total revenue in fiscal 2004 was approximately $6.1 million, as compared
with approximately $102,000 in fiscal 2003. ISE generated approximately $5.8
million of our fiscal 2004 revenue, principally attributable to the sale of
celebrity and fine art collectibles, and Image Innovations generated
approximately $300,000, principally attributable to the sale of battery products
under our NFL, Riddell and NHL license agreements. The significant increase in
fiscal 2004 revenue as compared with fiscal 2003 is directly attributable to the
acquisition of the MDK Sports inventory in the first quarter of 2004 and the
related expansion of the ISE business.

During 2003 the Company operated only its promotional licensing and branding
business and spent most of the year developing products and relationships with
manufacturers in China and a distribution network. By the end of the second
quarter of 2004, those products were manufactured and delivered to our warehouse
and we began fulfilling orders sold through the network established during the
prior year. Our revenues in the third quarter were $240,000, but we discovered
that we had breached a copyright with respect to our Light Chaser product. We
were required to destroy all Light Chaser inventory and earned no revenues from
that product. Our fourth quarter revenues dropped to $30,000 resulting from the
loss of the Light Chaser product line and discovery that a shipment of radios
that passed inspection prior to leaving our manufacturer in China were found to
have faulty batteries on arrival at our warehouse making them unsuitable for
sale. Sales were further hampered by the NHL strike.

                                      15
<PAGE>

In January, 2004 we formed ISE to create and sell celebrity-based fine art and
sports and entertainment memorabilia. In the first and second quarters of 2004
we purchased various sports and memorabilia collections, the most significant
being a collection from MDK Sports for four million shares of the Company's
common stock. The memorabilia collection was valued at $3,015,278. As the target
customers for our fine art memorabilia have substantial disposable income, the
acquisition of the collection provides the opportunity to enhance our fine art
business, with the objective of providing additional revenues and profits.

In the first and second quarter of 2004, the majority of the revenues from our
ISE subsidiary was derived from sales of existing memorabilia from the
collections we purchased. At the same time, we created new celebrity-based fine
art pieces and produced limited editions of them, and contracted to have both
the artist and the subject autograph the originals and limited editions. Our
contracts with the sports and entertainment celebrities also included their
signing of other memorabilia similar to the memorabilia we purchased in the
first part of the year. At the end of the second quarter, we made our first
sales of fine art collectibles and by the fourth quarter, fine art collectibles
accounted for substantially all of our revenues.

Cost of Sales

Cost of sales was approximately $3.1 million for the year ended December 31,
2004 compared with approximately $55,000 in fiscal 2003. The significant
increase in fiscal 2004 cost of sales as compared with fiscal 2003 is directly
attributable to the acquisition of the MDK Sports inventory in the first quarter
of 2004. Cost of sales comprised approximately $2.3 million for celebrity-based
art created for ISE and approximately $740,000 for Image Innovations' battery
products. The $2.3 million of ISE products consisted of original fine art pieces
produced under contractual arrangements with artists and sports or entertainment
personalities. The artists were paid a fee for the creation of the work of art
and the celebrity was paid an endorsement fee. The celebrities also signed a
limited number of collectibles which were sold or held for sale. In addition, we
sold items that were purchased for resale.

The $740,000 of cost relating to Image Innovations consisted of $200,000 for
battery products sold by Image Innovations and approximately $548,000 for the
write-off of inventory. All our Image Innovations products are manufactured in
China under our NFL, Riddell and NHL license agreements and shipped to our
warehouse in Tannersville, New York for delivery to our customers in the United
States. The $548,000 write-off of Image Innovations inventory related to a
breach of copyright by us on our Light Chaser product line, which was not
discovered until after the product had been manufactured and a defective
shipment of radios arrived at our warehouse. We are investigating the cause of
the defect and the extent to which all or part of our loss may be recoverable
from the manufacturers. Our write-down of NHL product inventory was in
recognition that these products are not selling as a result of the cancellation
of the current NHL season.

Gross Profit

Gross profit in fiscal 2004 was approximately $3 million as compared with gross
profit of approximately $47,000 in fiscal 2003. The significant increase in
fiscal 2004 gross profit as compared with fiscal 2003 is directly attributable
to the acquisition of the MDK Sports inventory in the first quarter of 2004. ISE
produced gross profits of $3.4 million and a gross profit percentage of 60%.
Image Innovations produced a gross profit of approximately $107,000 and a gross
profit percentage of 34% before charges related to the write-offs of inventory.
We wrote off inventory valued at approximately $548,000 producing a gross loss
of $430,000 for Image Innovations for 2004.

                                      16
<PAGE>

Expenses

We incurred expenses totaling approximately $4 million for the year ended
December 31, 2004, compared with approximately $666,000 in fiscal 2003.

Expenses attributable to ISE were approximately $1 million, which related to
salaries, professional fees, marketing expenses, general and administration and
travel and entertainment. Expenses attributable to Image Innovations were
approximately $1 million, which related to development of products and expansion
of distribution channels during the first six months, as well as lost sales
opportunities. Expenses attributable to the Company were approximately $1.8
million. A significant portion of these expenses were for consulting and
professional services. ISE was incorporated in January 2004.

We incurred consulting expenses of $1.3 million for services provided by various
professionals. These professionals provided the Company with a range of
corporate consultancy services, including developing business and financial
models, financial advice, strategic planning, development of business plans,
investor presentations, identifying, structuring and negotiating potential
mergers and acquisition transactions, and advice and assistance to the Company
in connection with the preparation of registration statements and other SEC
filings. These professionals were paid a combination of cash and shares of the
Company's common stock. The Company issued 490,000 shares of common stock valued
at approximately $1.1 million and paid approximately $200,000 in cash. There
were no shares issued for services in 2003.

Payroll expenses were approximately $1.1 million, of which approximately
$450,000 was paid to employees and full-time consultants at Image Innovations,
approximately $400,000 to employees and full-time consultants at ISE, and
approximately $225,000 to employees, full-time consultants and directors of the
Company. Approximately $240,000 of these fees were satisfied by issuing options
to purchase 240,000 shares of our common stock at exercise prices ranging
between $2.04 and $2.60 per share. These options were valued using the Black
Scholes valuation method. Payroll expenses were approximately $296,000 in 2003
for Image Innovations employees only.

In fiscal 2004, the Company paid approximately $389,000 in professional fees,
primarily to the Company's lawyers, accountants and auditors, as compared with
approximately $6,400 in fiscal 2003.

The Company paid approximately $608,000 in general and administration expenses
in fiscal 2004 as compared with approximately $235,000 in fiscal 2003. General
and administration expenses include rent, utilities, postage and delivery,
offices supplies, etc. The increase is directly related to increased activity
resulting from the operations of ISE.

The Company incurred approximately $300,000 in travel and entertainment
expenses. Image Innovations incurred approximately $105,000, ISE approximately
$165,000 and the Company approximately $30,000. The Company's travel and
entertainment related primarily to travel between the New York and Vancouver
offices, attending meetings in respect of potential financings and potential
acquisitions. Image Innovations' travel and entertainment related primarily to
travel to manufacturing facilities in China, travel to sales distributors across
the United States, visiting customers, and attending industry related trade
shows and conventions. ISE's travel and entertainment related to attending
meetings in respect of potential financings and potential acquisitions, and
hosting events to promote ISE's celebrity endorsements. Travel and entertainment
in 2003 was approximately $74,000 related primarily to travel to manufacturing
facilities in China, travel to sales distributors across the United States,
visiting customers, and attending industry-related trade shows and conventions.

                                      17
<PAGE>

The Company incurred interest expense of approximately $174,000 in fiscal 2004,
as compared with zero for fiscal 2003. Interest expense consisted of
approximately $59,000 in cash payments, $24,000 was payable at December 31,
2004, and approximately $91,000 was expensed as interest when the Company
retired $400,000 in debt due to a related party by issuing 266,667 units
consisting of one (1) share of common stock and one (1) warrant exercisable at
$2.00 per share. The approximately $91,000 expense was the difference between
the debt retired and the trading price of the Company's shares on the date of
the transaction plus the value of the warrants issued using the Black Scholes
valuation method. There were no interest expenses in 2003.

Net Loss

We incurred a net loss of approximately $983,000 for the period ended December
31, 2004 as compared with a net loss of approximately $619,000 in fiscal 2003.
We incurred high costs associated with professional services and consulting
services during this growth and development stage, which contributed to our
losses. In 2004 we issued shares and warrants/options to consultants to provide
short term services to the Company. These shares and warrants/options were
valued at approximately $1.1 million.

Liquidity and Financial Condition

We had working capital of approximately $4.9 million including cash of
approximately $297,000 as of December 31, 2004.

We anticipate that we will require approximately $6 million over the next twelve
months in order to continue our operations as presently contemplated. Our
ability to generate revenues will depend on our ability to obtain financing to
fund our operations and our success in expanding our business. The Company is
currently in discussions with a number of sources with respect to potential
financing to fund our operations. Several of these sources have made financing
proposals to the Company for debt, equity or a combination of the two, and we
are actively pursuing these proposals. However, there can be no assurance that
any of these proposals will lead to fruition or that the required funding will
be obtained in order to enable us to carry out our continuing operations. In the
event that we are unable to secure adequate financing on acceptable terms, we
may be compelled to cease or significantly curtail our operations, or
alternatively, seek protection in bankruptcy.

H.E. Capital S.A. ("H.E Capital") has been a major source of funding for the
Company to date. The Company has a loan agreement with H.E Capital for a
non-revolving secured $5 million dollar loan, bearing interest at 9% per annum
and due upon demand by H.E. Capital. As of April 11, 2005, $1.1 million was
outstanding under this loan agreement. Additionally, H.E Capital has invested
$1.5 million in the Company through a combination of conversion of debt and a
private placement.

The Company also issued a promissory note in the principal amount of $800,000 to
a third party on April 27, 2004, which note became due and payable on October
27, 2004. The note bears interest monthly at the rate of 18% per annum. As of
April 11, 2005, we had repaid $100,000 of the principal amount; the remaining
$700,000 is past due and we are currently negotiating repayment terms with the
lender. The loan is secured by first lien against all the assets of the Company.

On September 9, 2004, Imaging acquired a 9,000 square foot warehouse and storage
facility for $300,000. Both ISE and Image Innovations operate fulfillment
centers from the Imaging warehouse. The Company has spent approximately $60,000
on equipment for the warehouse. The remainder of the assets owned by the Company
consist of office furniture and equipment.

                                      18
<PAGE>

Historically, the Company has been financed primarily by loans from related
parties. The planned expansion of the business will require a variety of
financing sources, including new equity capital, long-and short-term debt and
the provision of third-party bonding for the Company's operational performance
obligations. The cost of such financing will be determined in part by our stock
price and in part by third party assessment of our operating prospects.

The Company operates subject to normal manufacturing financial profiles, except
that the nature of its product development requires it to build and accumulate
significant inventories. Similarly, its contractual arrangements with its sports
celebrities requires it to make advance royalty payments in order to secure the
contracts. Its ability to retain new sports personalities is therefore subject
to the constraint as to the availability of funds.

As a young business with a limited history and a small equity capital base, the
Company has not yet been able to establish a high credit rating. As the
Company's operations grow in size and as new equity is introduced into the
business, we expect that we will be able to establish a higher credit rating,
although there can be no assurance that this will be achieved.

The Company has based its anticipated liquidity requirements on its operating
experience to date and on the business opportunities and negotiations in which
it is currently engaged. This liquidity requirement could be adversely affected
by various events outside the Company's control, such as an interruption in the
operations of the cruise line industry or the failure of, or any difficulties
suffered by, any of its customers. The Company intends to develop a spread of
distribution channels and customers to mitigate the effect on its liquidity of
any individual adverse factor.

Critical Accounting Policies

General.

In accordance with generally accepted accounting principles ("GAAP"), we record
certain assets at the lower of cost and fair value. In determining the fair
value of certain of our assets, we must make judgments, estimates and
assumptions regarding circumstances or trends that could affect the value of
those assets, such as economic conditions. Those judgments, estimates and
assumptions are made based on current information available to us at that time.
Many of those conditions, trends and circumstances are outside our control and
if changes were to occur in the events, trends or other circumstances on which
our judgments or estimates were based, we may be required under GAAP to adjust
those of our earlier estimates that are affected by those changes. Changes in
such estimates may require that we reduce the carrying value of the affected
assets on our balance sheet (which are commonly referred to as "write downs" of
the assets involved).

It is our practice to establish reserves or allowances to record downward
adjustments or "write-downs" in the carrying value of assets, such as accounts
receivable and inventory. Such write-downs are recorded as charges to income or
increases in expense in our statement of operations in the periods when such
reserves or allowances are established or increased to take account of changed
conditions or events. As a result, our judgments, estimates and assumptions
about future events can, and will, affect not only the amounts at which we
record such assets on our balance sheet, but also our results of operations.

In making our estimates and assumptions, we follow GAAP and accounting practices
applicable to our business and those that we believe will enable us to make fair
and consistent estimates of the fair value of assets and establish adequate
reserves or allowances. Set forth below is a summary of the accounting policies
that we believe are material to an understanding of our financial condition and
results of operations.

                                      19
<PAGE>

Revenue Recognition

Image Innovations has a large volume of small sales, typically under $5,000
each. Sales transactions are recorded automatically and posted to the general
ledger from the invoice produced by the inventory sub-ledger when shipment of
the product is completed. Invoices and sales returns are reconciled monthly.
Each Image Innovation customer completes a credit application and a credit check
is completed before credit is granted. Credit terms vary between 30 and 45 days
and are dependent on the size of the customer.

ISE has a small number of large transactions, typically over $100,000 each.
Sales transactions are recorded when the product is delivered to the customer.
Credit terms vary significantly and are dependent on agreements with individual
customers.

Inventory

Image Innovations inventory consists of a large volume of low-value, battery
operated items, typically valued below $10 each. All of our products are
manufactured in China. Our inventory is valued at the lower of cost and market
value. We need rapid inventory turnover to ensure that the product is delivered
with a battery in good working condition. We establish an allowance as soon as
we determine that our inventory value is impaired.

ISE inventory consists of high-value items that typically increase in value with
time. Such inventory is a mix of memorabilia that we have purchased and
memorabilia that we have created. The items that are purchased are recorded at
the purchase price. We commission established artists to produce authenticated
limited edition products of well-known sports and entertainment figures. The
products feature the personal signatures of both the artist and celebrity. These
items are valued on a project cost basis under which the cost of the artist, the
costs associated with the contract with the celebrity, and the costs associated
with the creation of the limited editions are accumulated and assigned to the
units produced. Annually, we hire independent appraisers with expertise in
sports and entertainment memorabilia to value our inventory and we record any
impairment in the value of each item appraised by reducing the carrying value of
that item in our inventory records.

Stock based transactions

We have concluded various transactions where we paid the consideration in shares
of our common stock, and/or warrants or options to purchase our common stock.
These transactions include:

o     Acquiring the services of various professionals who provided the Company
      with a range of corporate consultancy services, including developing
      business and financial models, financial advice, strategic planning,
      development of business plans, investor presentations, identifying,
      structuring and negotiating potential mergers and acquisition
      transactions, and advice and assistance in connection with the preparation
      of registration statements and other SEC filings.

o     Retaining the services of our Advisory Board to promote the celebrity
      image memorabilia business of ISE.

o     Settlement of indebtedness of the Company.

o     Purchasing sports memorabilia inventory.

o     Providing incentives to attract, retain and motivate employees,
      officers, directors and consultants of the Company or of any subsidiary
      who are important to the success of the Company and its subsidiaries.

                                      20
<PAGE>

When our stock is used in transactions, the transactions are generally valued
using the price of the shares being transferred at the time the shares are
issued for the services provided, except where the transaction is so large and
the number of shares transferred is significantly higher than the historical
trading activity in the Company's stock. In these circumstances, if the value of
the asset or service being acquired is available and is believed to fairly
represent its market value, the transaction is valued using the value of the
asset or service being provided.

When options or warrants to purchase our stock are used in transactions with
third parties, the transaction is valued using the Black-Scholes valuation
method. The Black-Scholes valuation method is widely accepted as providing the
fair market value of an option or warrant to purchase stock at a fixed price for
a specified period of time. Black-Scholes uses five variables to establish
market value of stock options or warrants: (i) strike price (the price to be
paid for a share in the company's stock), (ii) price of the company's stock on
the day the options or warrants are granted, (iii) number of days that the
options or warrants can be exercised before they expire, (iv) trading volatility
of the company's stock, and (v) annual interest rate on the day the option or
warrant is granted. The determination of expected volatility requires management
to make an estimate and the actual volatility may vary significantly from that
estimate. Accordingly, the determination of the resulting expense is based on a
management estimate.

When options or warrants to purchase our stock are used as incentives for
employees, officers or directors, we use the intrinsic value method in
accordance with the recognition and measurement principles of Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," as
permitted by Statement of Financial Accounting Standards "SFAS" No. 123. The
intrinsic value method calculates the value of the option or warrant at the
difference between the strike price and the price of the stock on the day the
option or warrant is granted, except that such value is zero if the strike price
is higher than the price of the stock.

When the instruments are provided for past services or are provided fully vested
and are not subject to return, the shares are valued at the market price at the
time the instrument is delivered. When the instrument is provided for future
services, the expense is based on the fair market value of the instruments when
the services are provided.

Once the transaction value is determined, GAAP requires us to record the
transaction value as an expense or asset as determined by the transaction and to
record an increase in paid-up capital of the Company.

ITEM 7. FINANCIAL STATEMENTS.

Included with this Annual Report on Form 10-KSB are our audited financial
statements for the year ended December 31, 2004 that comprise the following:

1. Report of Independent Registered Public Accounting Firm;

2. Audited Financial Statements for the year ended December 31, 2004, including:

      a.    Consolidated Balance Sheet as at December 31, 2004;

      b.    Consolidated Statement of Operations for the year ended December 31,
            2004 and the period ended December 31, 2003;

      c.    Consolidated Statement of Changes in Shareholders' Equity for the
            year ended December 31, 2004 and the period ended December 31, 2003;

      d.    Consolidated Statement of Cash Flows for the year ended December 31,
            2004 and the period ended December 31, 2003;

      e.    Notes to Consolidated Financial Statements.

                                       21

<PAGE>

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

On January 13, 2005, the Audit Committee of the Board of Directors of the
Company dismissed Clyde Bailey P.C. as its independent accountant, effective
January 11, 2005, and retained Goldstein Golub Kessler LLP to act as the
Company's independent public accountants to audit and certify the Company's
financial statements for the year ended December 31, 2004.

Clyde Bailey P.C.'s report on the Company's financial statements for the year
ended December 31, 2003, did not contain an adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles. In connection with its audit for the year ended December
31, 2003, and through January 14, 2005, there were no disagreements between the
Company and Clyde Bailey P.C. on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to Clyde Bailey P.C.'s satisfaction, would have
caused it to make reference to the subject matter of the disagreement in
connection with its report on the financial statements for such year.

ITEM 8A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the
"Exchange Act"), our management carried out an evaluation of the effectiveness
of the design and operation of our disclosure controls and procedures as of our
most recently completed fiscal year ended December 31, 2004. This evaluation was
carried out under the supervision and with the participation of our Chief
Financial Officer, who was also performing the function of our principal
executive officer at that time. We did not have a chief executive officer at the
time we performed such evaluation. Based upon that evaluation, our management
concluded that our disclosure controls and procedures were not as effective as
they should be with respect to timely alerting management to material
information required to be included in our periodic SEC filings. Specifically,
our internal reporting processes and procedures did not ensure that full,
accurate and timely disclosure of matters required to be reported to the SEC in
our periodic filings were made. Nevertheless, our management has determined that
all matters required to be disclosed in this report have been reported. We are
in the process of diligently developing processes and procedures to assure full,
accurate and timely disclosure in the current fiscal year, with the expectation
of establishing effective disclosure controls and procedures as soon as
reasonably practicable.

Changes in Internal Control Over Financial Reporting

During our most recently completed fiscal year ended December 31, 2004, there
were no changes in our internal control over financial reporting that have
materially affected, or are reasonably likely to affect, our internal control
over financial reporting.

                                      22
<PAGE>

                                    PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Our directors and their respective ages are as follows:

Name                      Age
----                      ---

Michael Preston           59

Derick Sinclair           49

Michael Radcliffe         35

James Armenakis           62

David Whittle             40

Arthur Gononsky           66

Jack Jacobs               59

Our executive officers, ages and respective positions are as follows:

Name                      Age        Position
----                      ---        --------

Michael Preston           59         President, Chief Executive Officer and
                                     Secretary

Derick Sinclair           49         Chief Financial Officer and Treasurer

Michael Radcliffe         35         Chief Executive Officer of ISE

Set forth below is the background and experience of each of our current officers
and directors.

Michael Preston has been our President, Chief Executive Officer and Director
since April 2005. Over the last 30 years, Mr. Preston has been involved with
many growing companies, in the U.K. and U.S., as an entrepreneur and financial
and strategic advisor. Two of the companies he founded, Sterling Publishing
Group and Broad Street Group, were engaged in marketing and media and were
publicly traded in the U.K.. Since 1994, in addition to his business interests,
Mr. Preston has been actively engaged in Alberdale & Co., an FSA-regulated
corporate finance and business advisory firm in the U.K. of which he is a
founder and 50% owner. Alberdale specializes in media, technology and life
sciences, and is joint founder and manager of the First IsraTech Fund, an
Israel-based high technology venture capital fund. Mr. Preston has for three
years been an advisor to, and is currently, a director of Phosphagenics Limited,
an Australian biotechnology company listed on the Australian Stock Exchange and
on the Alternative Investment Market of the London Stock Exchange. He was also a
founder of, and until 2002 served on the board of, the PowerChannel companies,
which in 2000 formed a strategic partnership with Granada Media, the U.K.'s
largest non-governmental television group. Mr. Preston joined Price Waterhouse
from Exeter College, Oxford University in 1968 and qualified as a Chartered
Accountant before leaving in 1973. He is a Fellow of the Institute of Chartered
Accountants in England and Wales.

                                      23
<PAGE>

Derick Sinclair has been our Chief Financial Officer and a Director since
February 2004. Mr. Sinclair has been our Secretary since April 5, 2005. Mr.
Sinclair was president, secretary and treasurer of Busanda Explorations Inc.,
our predecessor entity, from its inception in 1998 to June 2003. Since March
1998, he has also been President and a director of Natalma Industries Inc., a
publicly-traded exploration stage mining company traded on the OTCBB. Since
March 1997, Mr. Sinclair has served as President of Cosmah Industries, Inc., a
privately-held exploratory mining company in Vancouver, Canada. From March 1996
to November 2003, he was Chief Financial Officer and Vice President of
Administration for Navigata Communications Inc, formerly RSL COM Canada Inc.,
and Westel Telecommunications in Vancouver, B.C. Based in North Vancouver,
British Columbia with regional offices in Ontario, Quebec and Alberta, Navigata
is a communications company providing data and voice services.

Michael Radcliffe is one of our Directors and is the Chief Executive Officer of
ISE. Mr. Radcliffe joined us following the acquisition of the inventory of MDK
Sports on March 5, 2004. Mr. Radcliffe has substantial experience in product
development of innovative products, mergers and acquisitions and real estate. He
has been the chief executive officer of several private companies that he has
helped become public companies.

James Armenakis has been a Director since March 2004. Mr. Armenakis is an
attorney admitted to the practice of law in the states of New York and South
Carolina. He is a graduate of the New York University School of Law, where he
received an LLM in International Law. He has specialized in international
transactions, litigation, mergers and acquisitions and negotiation of complex
transnational, commercial and real estate transactions. His responsibilities
have included advising and restructuring companies and their operations in the
United States, Canada and Europe. He has sat on a number of public and private
boards of directors.

David Whittle joined the Company as a Director on March 15, 2004 and is Chairman
of our Audit Committee. Currently, he also serves as a director and chair of the
audit committee of Mountain  Province  Diamonds Inc., a public company listed on
the Toronto  Stock  Exchange and on the American  Stock  Exchange.  Since August
2004,  Mr.  Whittle has served as the Chief  Financial  Officer of  Hillsborough
Resources Limited, a mining company based in Vancouver Canada, which is a public
company  listed on the Toronto  Stock  Exchange.  From October 2002 until August
2004, he was a partner in the chartered  accounting  firm of Gregory,  Whittle &
Associates,  located in Port Moody, B.C.  From 1994 to 2002, Mr. Whittle was the
President  of  Glenmore  Highlands  Inc.,  a  mineral   exploration  company  in
Vancouver,  B.C. that is publicly  listed in Canada.  For several years prior to
October 2002, he was the  proprietor of his own chartered  accounting  practice.
Mr.  Whittle has also been a senior  officer  and  director of a number of other
public companies  during the past several years. Mr. Whittle  graduated from the
University  of  British  Columbia  with a  BComm,  and  received  his  chartered
accounting  designation  from the Institute of Chartered  Accountants of British
Columbia in Canada.

Arthur Gononsky joined the Company as a director on September 22, 2004 and is
Chairman of our Board of Directors and Chairman of our Compensation Committee.
Since January 1994, Mr. Gononsky has been the President and Chairman of the
Board of Directors of Cementex Latex Corporation, a New York company that
imports and compounds natural latex and distributes polyurenthane and silicone
rubber compounds. Since January 1971, he has also been the President and
Chairman of the Board of Directors of Standard Screen Supply Corporation, a New
York company that manufactures screen printing supplies. Mr. Gononsky has also
been the President of Active Process Supply Co., Inc., a New York company that
imports and distributes bolting cloth and stencil silk. Mr. Gononsky received a
Bachelor's degree from Yeshiva University and a Master's degree in Science
Education from New York University.

Jack Jacobs joined the Company as a Director on September 3, 2004 and is
Chairman of our Governance Committee. Since June 1996, Mr. Jacobs has been a
principal of The Fitzroy Group, a firm that specializes in the development of
residential real estate in London, England. Since October 2001, Mr. Jacobs has
also served as an on-camera military and political analyst for NBC News. Mr.
Jacobs received a Bachelor's degree and Master's degree from Rutgers University.
He is a trustee of Aegis Investments. Mr. Jacobs received three bronze stars,
two Silver Stars and the Congressional Medal of Honor for his service in the
U.S. Army, from which he retired with the rank of Colonel.

                                      24
<PAGE>

Term of Office

Our Directors are elected for a one-year term to hold office until the next
annual meeting of our shareholders and until their successors are duly elected
and qualified. Our officers are appointed by our board of directors and hold
office until removed by the board.

Audit Committee

We have an audit committee consisting of David Whittle, Chairman, Jack Jacobs
and Arthur Gononsky. Our board of directors has determined that Mr. Whittle is
an "audit committee financial expert" based on his qualification as a chartered
accountant and his prior experience.

Code of Ethics

We adopted a Code of Ethics applicable to our Chief Executive Officer, Chief
Financial Officer and certain other finance executives. Our Code of Ethics is
attached to this Annual Report on Form 10-KSB. If we make any amendments to our
Code of Ethics other than technical, administrative, or other non-substantive
amendments, or grant any waivers, including implicit waivers, from a provision
of our Code of Ethics to our chief executive officer, chief financial officer,
or certain other finance executives, we will disclose the nature of the
amendment or waiver, its effective date and to whom it applies in a Current
Report on Form 8-K filed with the SEC.

                                      25
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION.

The Summary Compensation Table below sets forth compensation paid by the Company
for the fiscal years ended December 31, 2004, 2003, and 2002 for services to its
principal executive officer and other executive officers who received a total
annual salary and bonus which exceeded $100,000. Information with respect to
Alain Kardos, our former President and Chief Executive Officer, is also
included.

Summary Compensation Table
--------------------------------------------------------------------------

                                ANNUAL COMPENSATION
--------------------------------------------------------------------------
                                                             Other Annual
Name        Title          Year    Salary        Bonus       Compensation
--------------------------------------------------------------------------
Alain       President and  2004    $89,500         0               0
Kardos(1)   Chief
            Executive
            Officer        2003    $90,000         0               0


                           2002         --        --              --


--------------------------------------------------------------------------
Clifford    Chief          2004        n/a       n/a             n/a
Wilkins(2)  Executive
            Officer
                           2003          0         0               0


                           2002          0         0               0
--------------------------------------------------------------------------

(1)   Mr. Kardos was appointed our Chief Executive Officer effective December 1,
      2003 and was terminated on February 3, 2005. Mr. Kardos was paid in
      Canadian dollars. Compensation is calculated based on $1.20 CDN per $1.00
      U.S. as at April 11, 2005.

(2)   Mr. Wilkins was our Chief Executive Officer from June 30, 2003 to December
      1, 2003.

Stock Option Grants

We granted 1,360,000 stock options to our officers, directors or employees
during our most recent fiscal year ended December 31, 2004. In fiscal 2005, we
granted 380,000 stock options to our officers, directors and employees. In
addition, during fiscal 2004, we granted 210,000 stock options to contractors in
consideration of services performed. We have not granted any additional stock
options to contractors in fiscal 2005.

Exercises of Stock Options and Year-End Option Values

No stock options were exercised by our officers, directors or employees during
the fiscal year ended December 31, 2004.

                                      26
<PAGE>

Employment Agreements

We presently have an employment agreement with Derrick Sinclair, our Chief
Financial Officer. Pursuant to the terms of the agreement, Mr. Sinclair is
employed by the Company for a term of two years commencing on January 1, 2005,
with provision for automatic renewal. Mr. Sinclair is entitled to base
compensation of $156,000 per annum, subject to adjustment during the second year
of the term, as well as a discretionary bonus. Mr. Sinclair received upon
commencement of the term, as part of his compensation, 100,000 shares of
fully-vested common stock.

Compensation of Directors

Our directors receive an annual retainer of $10,000 plus $1,000 for attending
each board meeting and $500 for attending each committee meeting. Our directors
are eligible to receive grants of stock options pursuant to our 2004 Stock
Option Plan.

Stock Option Plan

At the annual shareholders meeting held on December 6, 2004, the 2004 Stock
Option Plan, as amended ("the Plan") was approved. The Plan is designed to
provide incentives to attract, retain and motivate eligible persons whose
present and potential contributions are important to the success of the Company
and its subsidiaries, by offering them an opportunity to participate in the
Company's future performance through awards of stock options. The total number
of shares reserved and available for grant and issuance pursuant to the Plan is
2,500,000 or such lesser number of shares as permitted under the laws of Nevada.

Long-Term Incentive Plans

We do not have any long-term incentive plans, pension plans, or similar
compensatory plans for our directors or executive officers.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers, directors and
persons who beneficially own more than 10% of a registered class of our equity
securities to file with the Commission initial reports of ownership and reports
of changes in ownership of Common Stock and other equity securities of the
Company. Such persons are required by Commission regulations to furnish us with
copies of all Section 16(a) forms they file. Based solely upon a review of (i)
Forms 3 and 4 and amendments thereto furnished to the Company pursuant to Rule
16a-3(e), promulgated under the Exchange Act during our fiscal year ended
December 31, 2004, and (ii) Forms 5 and amendments thereto and/or written
representations furnished to us by any director, officer or ten percent security
holder of the Company stating that he or she was not required to file a Form 5
during our fiscal year ended December 31, 2004, it has been determined all
officers, directors and persons who beneficially own more than 10% of a
registered class of our equity securities have met their reporting obligations
set forth in Section 16(a) of the Exchange Act.


                                      27
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The following table sets forth certain information concerning the number of
shares of our common stock owned beneficially as of April 11, 2005 by: (i) each
person (including any group) known to us to own more than five percent (5%) of
our common stock, (ii) each of our directors and each of our named executive
officers, (iii) each person proposed to be appointed as a director of the
Company and (iv) officers and directors as a group. Unless otherwise indicated,
the shareholders listed possess sole voting and investment power with respect to
the shares shown.

-----------------------------------------------------------------
                                 Number of
Name and address                 Shares of        Percentage of
of beneficial owner              Common Stock     Common Stock1
-----------------------------------------------------------------
Michael Preston(9)                     0(2)       4.0%

-----------------------------------------------------------------
Alain Kardos(9)                  822,807(10)      3.3%

-----------------------------------------------------------------
Derick Sinclair(9)               250,000(3)       1.0%

-----------------------------------------------------------------
Michael Radcliffe(9)             315,000(4)       1.3%

-----------------------------------------------------------------
James Armenakis(9)               80,000(5)        *

-----------------------------------------------------------------
Arthur Gononsky(9)               134,000(6)       *

-----------------------------------------------------------------
David Whittle(9)                 95,000(7)        *

-----------------------------------------------------------------
Jack Jacobs(9)                     30,000(8)      *

-----------------------------------------------------------------
All Officers and Directors as a  2,670,667        10.7%
Group (7 persons)

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

----------

* Represents ownership of less than one percent.

(1)   Under Rule 13d-3, a beneficial owner of a security includes any person
      who, directly or indirectly, through any contract, arrangement,
      understanding, relationship, or otherwise has or shares: (i) voting power,
      which includes the power to vote, or to direct the voting of shares; and
      (ii) investment power, which includes the power to dispose or direct the
      disposition of shares. Certain shares may be deemed to be beneficially
      owned by more than one person (if, for example, persons share the power to
      vote or the power to dispose of the shares). In addition, shares are
      deemed to be beneficially owned by a person if the person has the right to
      acquire the shares (for example, upon exercise of an option) within 60
      days of the date as of which the information is provided. In computing the
      percentage ownership of any person, the amount of shares outstanding is
      deemed to include the amount of shares beneficially owned by such person
      (and only such person) by reason of these acquisition rights. As of April
      11, 2005, there were 24,910,000 shares of our common stock issued and
      outstanding.

                                      28
<PAGE>

(2)   Does not include up to 1,000,000 shares which may be issuable to which Mr.
      Preston will be entitled under economic arrangements to be finalized
      within 30 days of the date of Mr. Preston's Employment Agreement with the
      Company dated as of April 14, 2005.
(3)   Includes 250,000 shares that may be acquired upon exercise of vested
      options held by Mr. Sinclair.
(4)   Includes 175,000 shares that may be acquired upon exercise of vested
      options held by Mr. Radcliffe.
(5)   Includes 80,000 shares that may be acquired upon exercise of vested
      options held by Mr. Armenakis.
(6)   Includes 30,000 shares that may be acquired upon exercise of vested
      options held by Mr. Gononsky.
(7)   Includes 95,000 shares that may be acquired upon exercise of vested
      options held by Mr. Whittle.
(8)   Includes 30,000 shares that may be acquired upon exercise of vested
      options held by Mr. Jacobs.
(9)   The beneficial owner's address is: C/o Image Innovations Holdings Inc.,
      432 Park Avenue South, New York, NY 10016.
(10)  Includes 122,807 shares that may be acquired upon exercise of vested
      options held by Mr. Kardos. Information with respect to Mr. Kardos'
      beneficial  ownership is based solely upon a review of Forms 3 and 4 filed
      with the SEC. Mr. Kardos was  terminated in all  capacities as an officer,
      employee and director of the Company and its  subsidiaries  on February 3,
      2005.

CHANGE IN CONTROL

We are not aware of any arrangement that might result in a change in control in
the future.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Except as described below, none of the following parties has, during the last
two years, had any material interest, direct or indirect, in any transaction
with us or in any presently proposed transaction that has or will materially
affect us:

o     Any of our directors or officers;

o     Any person proposed as a nominee for election as a director;

o     Any person who beneficially owns, directly or indirectly, shares carrying
      more than 5% of the voting rights attached to our outstanding shares of
      common stock;

o     Any of our promoters;

o     Any relative or spouse of any of the foregoing persons who has the same
      house as such person.

HE Capital

H.E. Capital S.A. ("H.E Capital") has been a major source of funding for the
Company to date. The Company has a loan agreement with H.E Capital for a
non-revolving secured $5 million dollar loan, bearing interest at 9% per annum
and due upon demand by H.E. Capital. The loans are secured by a general security
agreement granted by the Company against all of its assets.

On December 30, 2003 the Company sold 1,200,000 Units consisting of one (1)
Common Share and one (1) Warrant to H.E. Capital at a purchase price equal to
$0.75 per Unit, for an aggregate purchase price of $900,000, in accordance with
The Regulation S Subscription Agreement made between the Company an H.E.
Capital. The Purchase Price was paid by H.E. Capital by the settlement of
$900,000 of indebtedness of the Company to H.E. Capital.

                                      29
<PAGE>

On March 4, 2004 the Company issued 266,667 Units consisting of one (1) Common
Share and one (1) Warrant to H.E. Capital at a price equal to $1.50 per Unit,
for an aggregate purchase price of $400,000, in accordance with The Regulation S
Subscription Agreement made between the Company an H.E. Capital. Each warrant
had an exercise price of $2.00 per share. The Purchase was completed by the
cancellation of $400,000 of indebtedness to H.E. Capital. As H.E. Capital was a
related party the shares and warrants issued were valued at $491,093 of which
$400,000 was to settle the debt and $91,093 was recorded as a financing expense.

On September 30, 2004 H.E. Capital exercised 600,000 warrants to purchase
600,000 restricted Common Shares. The Purchase by H.E. Capital was completed by
the settlement of $900,000 of indebtedness to H.E. Capital.

At December 31, 2004, the balance of H.E Capital's advances to the Company under
the loan agreement totaled $1,085,541. During 2004 H.E. Capital advanced
$2,218,647 against the loan agreement and, as described above, cancelled
indebtedness of $1,300,000 in exchange for the issuance of common stock and
warrants. In addition, H.E. Capital purchased 133,333 units of common stock and
warrants for $200,000. There is no assurance that H.E. Capital will continue to
advance additional amounts in order to fund the business of the Company or that
they will not demand repayment.

The H.E. Capital agreement contains certain restrictions that limit the
Company's ability to pay dividends and redeem shares of common stock.

James Armenakis, one of our non-management directors, serves as counsel to the
Image Group on a semi-regular basis. In 2004, fees payable by the Image Group to
Mr. Armenakis in respect of services performed by Mr. Armenakis amounted to
$118,400.

We maintain an office for the operations of ISE in leased premises at 6061 Mains
Street, Suite 1A, Tannersville, New York 12485. These premises are comprised of
approximately 7,000 square feet and are leased for a term expiring August 11,
2005. The lease has renewal rights through August 11, 2008. This office space is
leased to us at a monthly lease rate of $2,850 by Rad-Place LLC, a company
partially owned by Joseph Radcliffe, the father of Michael Radcliffe, one of our
directors and the Chief Executive Officer of ISE.

MDK Sports & Entertainment Inc. ("MDK Sports")

Michael Radcliffe, one of our directors and the Chief Executive Officer of ISE,
together with Mr. Radcliffe's father and several other family members, were
promoters and controlling principals of MDK Sports.

ISE acquired all of the celebrity memorabilia inventory owned by MDK Sports
during our first quarter of 2004. As consideration of the sale and transfer by
MDK Sports to ISE of its celebrity memorabilia inventory, the Company issued to
MDK Sports an aggregate of 4,000,000 restricted shares of our common stock on
closing. The inventory was valued at $3,015,278.

The negotiations between the Company and MDK Sports concluded in January 2004.
Because the Company's stock was not actively traded, the Company and MDK Sports
agreed that the inventory value was the most reliable basis for valuing the
transaction.

                                      30
<PAGE>

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

(a) Exhibits and Index of Exhibits

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

3.1            Articles of Incorporation (1)

3.2            Bylaws (1)

3.3            Certificate of Amendment to Articles of Incorporation (4)

10.1           Offer Letter dated June 23, 2003 to the shareholders of Image
               Innovations Inc. to acquire all of the issued and outstanding
               shares of Image Innovations Inc., a Delaware corporation (2)

10.2           Loan Agreement dated January 14, 2003 between H.E. Capital SA and
               Image Innovations Inc. (3)

10.3           Amendment to Loan Agreement dated November 5, 2003 between H.E.
               Capital SA and Image Innovations Inc. (4)

                                      31
<PAGE>

10.4           Asset Purchase Agreement dated March 4, 2004 among Michael
               Radcliffe, MDK Sports & Entertainment Inc., Image Innovations
               Holdings Inc. and , Image Innovations Sports & Entertainment Inc.
               (5)

10.5           2004 Stock Option Plan, as Adopted by the Board Of Directors on
               January 2, 2004, and amended February 19, 2004 (5)

10.6           Employment Agreement, dated as of December 29, 2004, by and
               between Image Innovations Holdings Inc and Derick G Sinclair. (5)

31.1           Certification of Chief Executive Officer pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002 (5)

31.2           Certification of Chief Financial Officer pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002 (5)

32.1           Certification of Chief Executive Officer pursuant to 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002 (5)

32.2           Certification of Chief Financial Officer pursuant to 18 U.S.C.
               Section 1350, as adopted pursuant to Section 906 of the
               Sarbanes-Oxley Act of 2002 (5)
--------------------------------------------------------------------------------

      (1)   Previously filed with the Securities and Exchange Commission as an
            exhibit to our Form 10-SB registration statement filed on December
            6, 2002, as amended.
      (2)   Previously filed with the Securities and Exchange Commission as an
            exhibit to our Current Report on Form 8-K filed on July 11, 2003.
      (3)   Previously filed with the Securities and Exchange Commission as an
            exhibit to Amendment No. 2 to our Current Report on Form 8-K
            originally filed on July 11, 2003.
      (4)   Previously filed as an Exhibit to our Quarterly Report on Form
            10-QSB filed on November 14, 2003.
      (5)   Filed herewith.

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

(b)   Reports on Form 8-K

During our fiscal quarter ended December 31, 2004, we filed one Current Report
on Form 8-K, on October 5, 2004, to disclose our acquisition of a warehouse
facility in Tannersville, New York as well as our entering into a loan agreement
with H.E. Capital S.A., under which H.E. Capital S.A. agreed to provide us with
a secured non-revolving loan of up to an aggregate principal amount of
$5,000,000 for general working capital purposes.


                                      32
<PAGE>


ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

During fiscal years 2004 and 2003, we retained our independent auditor to
provide services in the following categories and amounts:

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

           Fee Category            2004           2003

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

           Audit Fees              $45,000        $1,500

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

           Audit Related Fees      $0             $0

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

           Tax Fees                $0             $0

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

           All Other Fees          $0             $0

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

           Total                   $45,000        $1,500

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

Our auditor has not provided us with any non-audit services during the last two
fiscal years.

                                      33
<PAGE>

                                   SIGNATURES

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

                                          IMAGE INNOVATIONS HOLDINGS INC.



                                          By: /s/ Michael Preston
                                              --------------------------------
                                                Michael Preston
                                                Principal Executive Officer


Dated: April 15, 2005


      In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.


/s/ Michael Preston             Director and Chief          April 15, 2005
------------------------        Executive Officer
    Michael Preston

/s/ Derick Sinclair             Director and Chief          April 15, 2005
------------------------        Financial Officer
     Derick Sinclair

/s/ Arthur Gononsky          Chairman of the Board of       April 15, 2005
------------------------              Directors
    Arthur Gononsky

/s/ David Whittle                    Director               April 15, 2005
------------------------
    David Whittle

/s/ Jack Jacobs                      Director               April 15, 2005
------------------------------
    Jack Jacobs

                                     Director               April 15, 2005
------------------------
    James Armenakis

/s/ Michael Radcliffe                Director               April 15, 2005
------------------------
    Michael Radcliffe


<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors
Image Innovations Holdings Inc.

We have audited the accompanying consolidated balance sheet of Image Innovations
Holdings Inc. as of December 31, 2004, and the related statements of operations,
changes in stockholders' equity and cash flows for the year ended December 31,
2004. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company's internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Image Innovations Holdings Inc.
as of December 31, 2004 and the results of its operations and its cash flows for
the year then ended in conformity with United States generally accepted
accounting principles.


/s/ GOLDSTEIN GOLUB KESSLER LLP

GOLDSTEIN GOLUB KESSLER LLP
New York, New York

February 25, 2005, except for the last paragraph of Note 12, as to which the
date is April 1, 2005, the last paragraph of Note 14, as to which the date is
April 4, 2005, and the last paragraph on Note 19, as to which the date is April
14, 2005
<PAGE>

                          INDEPENDENT AUDITOR'S REPORT

To the Board of Directors
Image Innovation Holdings Inc.

I have audited the accompanying consolidated balance sheet of Image Innovation
Holdings Inc. (a development stage company), ("Company") as of December 31, 2003
and the related consolidated statement of operations, consolidated statement of
stockholders' equity, and consolidated statement of cash flows for the period
from inception (January 14, 2003) to December 31, 2003. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these statements based on my audit.

I conducted my audits in accordance with generally accepted auditing standards
in the United States. Those standards require that I plan and perform the audit
to obtain reasonable assurance about whether the 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. I believe that my audit provide a reasonable basis for my opinion.

In my opinion, the financial statements referred to about present fairly, in all
material respects, the financial position of Image Innovation Holdings, Inc. (a
development state company) as of December 31, 2003 and the results of its
operations and its cash flows for the period from inception (January 14, 2003)
to December 31, 2003, in conformity with generally accepted accounting
principles in the United States.

                                /s/ Clyde Bailey

                                Clyde Bailey P.C.


San Antonio, Texas
March 10, 2004

<PAGE>

IMAGE INNOVATIONS HOLDINGS INC. AND SUBSIDIARIES
Consolidated Balance Sheet


                                                              December 31,
                                                                  2004

ASSETS


Current Assets
    Cash                                                      $    297,011
    Accounts receivable net                                      3,491,029
    Inventory                                                    3,155,017
    Other current assets                                           147,283
    Total current assets                                         7,090,340

Property and Equipment, Net                                        411,166
Total Assets                                                  $  7,501,506

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities
    Demand loan H.E. Capital S.A.                             $  1,085,541
    Promissory Note                                                700,000
    Accounts Payable                                               266,059
    Accrued Expenses                                               167,940
    Total current liabilities                                    2,219,540
Contingencies and Commitments

Stockholders' Equity
    Preferred Stock                                                     --
     1,000,000 authorized preferred shares,
      par value $.01
     Nil shares issued and outstanding

    Common Stock                                                    24,910
     50,000,000 authorized shares,
       par value $.01
     24,910,000 shares issued and
       outstanding

    Additional Paid in Capital                                   6,878,295

    Accumulated Deficit                                         (1,621,239)
    Total stockholders' equity                                   5,281,966
Total liabilities and stockholders' equity                    $  7,501,506


                The accompanying notes are integral part of the
                       consolidated financial statements.

                                       F-2
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statement of Operations

--------------------------------------------------------------------------------
                                                           For the Period from
                                                             January 14, 2003
                                     For the Year ended      (inception) to
                                      December 31, 2004     December 31, 2003
--------------------------------------------------------------------------------
Revenues                               $     6,059,704        $       101,743
--------------------------------------------------------------------------------
Cost of sales                                3,059,608                 54,768
--------------------------------------------------------------------------------
Gross Profit                                 3,000,096                 46,975
--------------------------------------------------------------------------------
Expenses:
     Consulting Services                     1,309,668                     --
     Depreciation and amortization              24,080                  1,342
     General and administration                607,993                234,844
     Interest                                  173,761                     --
     Marketing and promotions                   42,707                     --
     Payroll and compensation                1,081,953                296,408
     Product development                        46,981                 52,303
     Professional fees                         389,144                  6,354
     Travel and entertainment                  301,353                 74,419
--------------------------------------------------------------------------------
Total expenses                               3,977,640                665,670
--------------------------------------------------------------------------------
Net Income before Taxes                       (977,544)              (618,695)
--------------------------------------------------------------------------------
Provision for Income Taxes                       5,000                     --
--------------------------------------------------------------------------------
Net Loss                               $      (982,544)       $      (618,695)
================================================================================
Loss Per Common Share:
Basic and Diluted                      $         (0.04)       $         (0.06)
Weighted Average number of Common
 Shares
Outstanding:
Basic and Diluted                           23,546,462              9,532,328

                The accompanying notes are integral part of the
                       consolidated financial statements.






                                      F-3
<PAGE>

MAGE INNOVATIONS HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statement of Changes in Stockholders' Equity
For the year ended December 31, 2004 and the period from January 14, 2003
(inception) to December 31, 2003

<TABLE>
<CAPTION>

                                                                           Number of                           Additional
                                                                        Common Stock          Amount         Paid-In Capital

<S>                                                                      <C>                  <C>               <C>
Shares issued on incorporation on January 14, 2003                           1,000      $        --     $         1,000
Adjustment to accumulated deficit to recognize costs
 related to the acquisition of Image Innovations as
 described in Note 1                                                            --               --                  --

Prior Image share capital, replaced by Image Holdings                       (1,000)              --                  --
 share capital upon consolidation under reverse
 takeover accounting

Current Image share capital, replaced by Image Holdings                 18,170,000           18,170              (1,000)
 share capital upon consolidation under reverse takeover
 accounting

Net monetary liabilities of Busanda acquired by Image                           --               --                  --

Transferred to additional paid in capital                                       --               --             (39,547)
Shares issue for payment of debt                                         1,200,000            1,200             898,800

Net Loss                                                                        --               --                  --

Balance, December 31, 2003                                              19,370,000           19,370             859,253

Common stock issued to acquire Inventory of MDK Sports                   4,000,000            4,000           3,011,279
Common stock and warrants issued for settlement of debt
  and interest                                                             866,667              867           1,390,226
Common stock and warrants issued for cash                                  183,333              183             274,817
Common stock issued for services                                           490,000              490           1,101,287
Options and warrants issued for services                                        --               --             241,433
Net Loss                                                                        --               --                  --
Balance December 31, 2004                                               24,910,000      $    24,910     $     6,878,295


<CAPTION>
                                                                      Accumulated        Stockholders'
                                                                        Deficit              Equity

<S>                                                                 <C>                 <C>
Shares issued on incorporation on January 14, 2003                  $           --      $        1,000
Adjustment to accumulated deficit to recognize costs
 related to the acquisition of Image Innovations as
 described in Note 1                                                       (20,000)            (20,000)

Prior Image share capital, replaced by Image Holdings                           --                  --
 share capital upon consolidation under reverse
 takeover accounting

Current Image share capital, replaced by Image Holdings                    (17,170)                 --
 share capital upon consolidation under reverse takeover
 accounting

Net monetary liabilities of Busanda acquired by Image                      (22,377)            (22,377)

Transferred to additional paid in capital                                   39,547                  --

Shares issue for payment of debt                                                --             900,000

Net Loss                                                                  (618,695)           (618,695)

Balance, December 31, 2003                                                (638,695)            239,928

Common stock issued to acquire Inventory of MDK Sports                          --           3,015,279
Common stock and warrants issued for settlement of debt
  and interest                                                                  --           1,391,093
Common stock and warrants issued for cash                                       --             275,000
Common stock issued for services                                                --           1,101,777
Options and warrants issued for services                                        --             241,433
Net Loss                                                                  (982,544)           (982,544)
Balance December 31, 2004                                           $   (1,621,239)     $    5,281,966


</TABLE>

                The accompanying notes are integral part of the
                       consolidated financial statements.

                                      F-4
<PAGE>


IMAGE INNOVATIONS HOLDINGS INC. AND SUBSIDIARIES
Consolidated Statement of Cash Flows
For the year ended December 31, 2004 and the period from January 14, 2003
(inception) to December 31, 2003
<TABLE>
<CAPTION>

                                                                 2004                2003
<S>                                                      <C>                 <C>
Operating
Activities
Net Loss                                                 $     (982,544)     $     (618,695)
Adjustments to reconcile net loss to net
  cash used in operating activities:
      Depreciation and amortization                              24,080               1,342
      Interest on debt conversion                                91,093
      Write off of inventory                                    547,985
      Common stock issued for services                        1,101,777                  --
      Options and warrants issued for services                  241,433                  --
      Changes in operating assets and liabilities
           Increase in accounts receivable                   (3,491,029)                 --
           Increase in inventory                               (687,723)
           Decrease/(increase) in other assets                      271            (147,554)
           Increase in accounts payable                         243,709              22,350
           Increase in accrued expenses                         167,940
      Net cash used in operating activities                  (2,743,008)           (742,557)

Cash flows from investing activity -
      Purchase of property and equipment                       (417,929)            (18,659)

Cash flows from financing activities:
      Proceeds from promissory note - net                       700,000
      Proceeds from demand notes                              2,209,837           1,075,704
      Proceeds from sale of stock and warrants                  275,000               1,000
      Charges to stock holders equity on acquisition                 --             (42,377)
      Net Cash provided by financing activities               3,184,837           1,034,327

      Net increase in Cash                                       23,900             273,111

      Cash at beginning of period                               273,111                  --
      Cash at end of period                              $      297,011      $      273,111


Supplemental Disclosure
  Cash paid for interest                                 $       58,668      $           --

Non cash financing activities:
  Common stock issued for inventory                      $    3,015,279      $           --
  Common stock and warrants issued to settle debt        $    1,300,000      $      900,000


                The accompanying notes are integral part of the
                       consolidated financial statements.
</TABLE>

                                      F-5
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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


1. Organization

      Image  Innovation  Holdings Inc.,  formerly known as Busanda  Explorations
      Inc.  ("the  Company")  was  incorporated  under  the laws of the State of
      Nevada on March 3, 1998.  Prior to June 30, 2003,  the Company had entered
      into an agreement to purchase  mineral property claims in the Laird Mining
      Division,  British  Columbia,  Canada,  but lost the  claim due to lack of
      funding.  The Company had no other business.  The Company was therefore an
      inactive company with nominal net non-monetary assets, the shares of which
      were and continue to be quoted on the OTC Bulletin Board.

      Acquisition of Image Innovations Inc.

      Image  Innovations,  Inc. ("Image") was incorporated under the laws of the
      State of Delaware on January 14, 2003.  Image was  established to become a
      recognized player in the field of promotional licensing and branding.  The
      Company  completed the  acquisition  of Image  effective  June 30, 2003 by
      exchanging  10,000,000  shares  of the  Company's  common  stock  for  all
      outstanding  stock  of  Image  on the  basis  of  10,000  shares  for each
      outstanding  share of Image. It was a condition  precedent to closing that
      all  shareholders of Image accept the Company's offer and that the audited
      financial  statements  of Image had been  delivered to the  Company.  As a
      result of this transaction,  Image became a wholly owned subsidiary of the
      Company.

      Notwithstanding  its legal form,  the  acquisition  was accounted for as a
      reverse   acquisition,   as  the  former   shareholders   of  Image  owned
      approximately  55% of the Company's common shares after the closing of the
      acquisition  and  constituted  the majority  shareholders  of the Company.
      Accordingly the financial  statements  reflect the operations of Image and
      the acquisition as if Image acquired the Company. Also, as the Company was
      inactive  with nominal  assets,  the  acquisition  was accounted for as an
      issuance of stock by Image accompanied by a recapitalization.

      Image Innovations Sports & Entertainment Inc.

      Image   Innovations   Sports  &  Entertainment   Inc.   ("Image  Sports  &
      Entertainment")  was incorporated  under the laws of the State of Delaware
      on January 20, 2004 as the Company's wholly owned subsidiary to compete in
      the celebrity memorabilia industry.  Image Sports & Entertainment acquired
      all  of  the  celebrity  memorabilia  inventory  owned  by  MDK  Sports  &
      Entertainment  Inc. ("MDK Sports") pursuant to an asset purchase agreement
      dated March 4, 2004. As consideration of the purchase,  the Company issued
      to MDK Sports an aggregate of 4,000,000  restricted  shares of it's common
      stock. The acquired inventory had a value of approximately $3,015,000.

      Imaging Innovations Sports and Entertainment Inc.

      Imaging  Innovations  Sports  and  Entertainment,   Inc.  ("Imaging")  was
      incorporated under the laws of the State of New York on August 13, 2004 as
      the  Company's  wholly  owned  subsidiary.  On  September  9, 2004 Imaging
      acquired  a  8,625  square  foot   warehouse   and  storage   facility  in
      Tannersville,  NY located  near Image  Sports &  Entertainment's  existing
      facility in Tannersville, NY.


2. Basis of Preparation and Presentation:

      The accompanying consolidated financial statements include the accounts of
      the Company and its wholly owned subsidiaries.  All intercompany  accounts
      and transactions have been eliminated in consolidated.


                                      F-6
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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

3. Liquidity:

      The Company has sustained  net  operating  losses over the past two years.
      During  2004 the  Company  exited the  development  stage.  Management  is
      continuing  to develop its celebrity  memorabilia  business and is pursing
      additional  capital to continue  this  endeavor.  The Company  anticipates
      issuing equity securities to meet working capital requirements and to fund
      development costs in connection with this business.


4. Summary of Significant Accounting Policies:

      a)    Development Stage Enterprise

            The 2003  financial  statements  reflect  the  Company  being in the
            development  stage. The Company exited the development stage when it
            acquired  inventory  from MDK on January 20, 2004.

      b)    Cash and Cash Equivalents

            The Company considers all highly liquid  investments with maturities
            of three  months or less at the time of purchase to be cash and cash
            equivalents.  The Company maintains  balances in accounts,  which at
            times may  exceed  Federal  Deposit  Insurance  Corporation  insured
            limits.  The Company believes that such risk is minimal based on the
            reputation of the  financial  institution  where these  accounts are
            maintained.

      c)    Accounts Receivable

            Accounts  receivable are recorded at the outstanding  amounts net of
            the  allowance  for  doubtful  accounts.  The Company  utilizes  the
            allowance method for recognizing the  collectibility of its accounts
            receivable.  The allowance method  recognizes bad debt expense based
            on  review  of the  individual  accounts  outstanding  based  on the
            surrounding  facts.  The  Company  writes  off  accounts  receivable
            against  the   allowance   when  a  balance  is   determined  to  be
            uncollectible.  The allowance  for doubtful  account at December 31,
            2004 was approximately $16,000.

      d)    Inventory

            Inventory is valued at the lower of cost or net realizable value and
            is  determined  on the  first-in,  first-out  method.  Inventory  is
            comprised  of  finished  goods  and work in  progress.  The fine art
            celebrity  memorabilia inventory is valued using job costing and the
            Company commissions an annual year end appraisal of its inventory to
            validate  the  carrying   value.  At  December  31,  2004  inventory
            consisted  of   approximately   $3,060,000  in  fine  art  celebrity
            memorabilia  inventory and approximately $95,000 in license products
            inventory.

      e)    Property and Equipment

            Property  and  equipment  is  recorded  at  cost.  Depreciation  and
            amortization  of  property  and  equipment  is  provided  for by the
            straight-line   method  over  the  estimated  useful  lives  of  the
            respective  assets.  The  estimated  useful lives of  furniture  and
            fixtures is seven years,  and office  equipment  and  machinery  and
            equipment are six to seven years.  The building is depreciated  over
            ten years. Computer equipment is depreciated over four to five years
            and  software  is  depreciated  over  two-three   years.   Leasehold
            improvements are depreciated over the remaining lives of the leases.
            Repairs and maintenance costs are expensed as incurred.

      f)    Income Taxes

            The  Company  accounts  for  income  taxes  in  accordance  with the
            "liability  method" of  accounting  for income  taxes.  Accordingly,
            deferred  tax assets and  liabilities  are  determined  based on the
            difference  between the financial  statement and tax bases of assets
            and  liabilities,  using enacted tax rates in effect for the year in
            which the differences are expected to reverse.  Current income taxes
            are based on the  respective  periods'  taxable  income for federal,
            state and city income tax reporting purposes.  A valuation allowance
            is established  when necessary to reduce  deferred tax assets to the
            amount expected to be realized.


                                      F-7
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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

      g)    Revenue Recognition

            The Company's revenues are derived principally from the sale of
            limited edition fine art prints, sports memorabilia and licensed
            products. Revenues are recognized upon delivery and acceptance of
            the product to the customers.

      h)    Shipping Costs

            Shipping costs included in Cost of Sales amounted to approximately
            $50,000 and $7,000 for the year ended December 31, 2004 and the
            period ended December 31, 2003, respectively.

      i)    Stock-based Compensation

            In December 2004,  the FASB issued  Statement No. 123 (revised 2004)
            ("123R") Share Based Payment.  Statement 123R supersedes APB Opinion
            No. 25, and its  related  implementation  guidance.  This  statement
            establishes  standards for the accounting for  transactions in which
            an entity  exchanges its equity  instruments for goods and services.
            It also addresses transactions in which an entity incurs liabilities
            in exchange for goods and services  that are based on the fair value
            of the  entity's  equity  instruments  or that may be settled by the
            issuance of those  equity  instruments.  123R  focuses  primarily on
            accounting  for  transactions  in which an entity  obtains  employee
            services  in  share-based  payment  transactions.   The  Company  is
            considered a small business issuer for which the  implementation  of
            123R is required as of the  beginning of the first interim or annual
            reporting period after December 15, 2005. The Company is required to
            implement  123R  beginning in the fiscal year  beginning  January 1,
            2006. The effect of this  pronouncement  on the Company for the year
            ended December 31, 2004 is reflected in the table below.

            The Company  currently  accounts  for its employee  incentive  stock
            option plans using the intrinsic value method in accordance with the
            recognition  and  measurement  principles of  Accounting  Principles
            Board Opinion No. 25, "Accounting for Stock Issued to Employees," as
            permitted by Statement of Financial  Accounting Standards "SFAS" No.
            123.

                                      F-8
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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


            Had the Company  determined  compensation  expense based on the fair
            value at the grant dates for those awards consistent with the method
            of SFAS 123, the Company  would have an increase in net loss and net
            loss per share for the year ended December 31, 2004.:

--------------------------------------------------------------------------------
                                                                     2004
================================================================================
Net loss for the period, as reported                            $    (982,544)
Add: Stock based compensation included in net loss                     22,593
Deduct: Total stock based employee compensation expense
determined under fair value based methods for all awards             (526,172)
--------------------------------------------------------------------------------
Pro forma net loss                                              $  (1,486,123)
================================================================================
Basic and diluted net loss per share as reported                $       (0.04)

Pro forma basic and diluted net loss per share                  $       (0.06)
--------------------------------------------------------------------------------

            The above  pro forma  disclosure  may not be  representative  of the
            effects on reported net  operations for future years as options vest
            over five years and the  Company may  continue  to grant  options to
            employees.

            The fair market  value of each option grant is estimated at the date
            of grant  using  the  Black-Scholes  option-pricing  model  with the
            following weighted-average assumptions:



                       Dividend yield                               0.00%

                       Expected volatility                        30 to 40%

                       Risk-free interest rate                  2.74 to 3.84%

                       Expected life                               5 years


      j)    Loss per Common Share

            Loss per  common  share  are  computed  pursuant  to SFAS  No.  128,
            "Earnings Per Share." Basic loss per share is computed as net income
            (loss)  available  to common  shareholders  divided by the  weighted
            average number of common shares outstanding for the period.  Diluted
            earnings per share reflects the potential  dilution that could occur
            from common shares issuable  through stock options and warrants.  In
            2004 potential common stock amounting to approximately 2,620,000 has
            not been included in the  computation  of diluted loss per share for
            2004 as the effect would be  antidilutive.  In 2003 potential common
            stock amounting to approximately  1,200,000 has not been included in
            the  computation  of  diluted  loss per share for 2003 as the effect
            would be antidilutive as well.

                                      F-9
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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

      k)    Use of Estimates

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

      l)    Fair Value Disclosure

            The  carrying  value for cash,  receivables  and  accounts and notes
            payable   approximate  fair  values  because  of  the  immediate  or
            short-term maturities of these financial instruments.

      m)    New Accounting Pronouncements

            The Company does not believe that any other recently issued, but not
            yet effective,  accounting standards would have a material effect on
            the accompanying financial statements.

      n)    Royalty and License Agreements

            The Company has royalty and license agreements, as described in Note
            13.  Amounts paid for licenses  are  amortized  over the life of the
            agreement,  usually one year. The Company prepays minimum  royalties
            and amortizes then based on units sold.

      o)    Reclassification

            For  comparability,  certain 2003  amounts  have been  reclassified,
            where appropriate,  to conform to the financial presentation used in
            2004.


      p)    Advertising Expense

            Advertising   costs  are   expensed  as  incurred  and  amounted  to
            approximately $5,000 and $18,000 in the year ended December 31, 2004
            and for the period ending December 31, 2003 respectively.


      5.    Other Current Assets

            Other current assets at December 31, 2004 consist of the following:

================================================================================
Prepaid royalties on licenses                                     91,642

Other (none in excess of 5% of total current assets)              55,641
--------------------------------------------------------------------------------
                                                           $     147,283
================================================================================


                                     F-10
<PAGE>


6. Property and Equipment

--------------------------------------------------------------------------------
                                                Depreciation and     Net book
                                   Cost          Amortization          Value
================================================================================
 Warehouse Building          $     268,200    $       7,500    $    260,700
 Warehouse Land                     31,800                -          31,800
 Furniture and equipment            29,359            3,277          26,082
 Warehouse Equipment                61,865            4,840          57,025
 Computer equipment                 25,911            4,246          21,665
 Computer software                  19,454            5,560          13,894
================================================================================
                             $     436,589    $      25,423    $    411,166
================================================================================


      Depreciation  expense for the year ended  December 31, 2004 and the period
      ended  December  31,  2003  amounted to  approximately  $24,000 and $1,000
      respectively.

7. Accrued Expenses

      Accrued expenses at December 31, 2004, consists of the following:

     ===========================================================================
     Salaries & directors fees                                          92,832
     Other (none in excess of 5% of total current liabilities)          75,108
     ---------------------------------------------------------------------------
                                                               $       167,940
     ===========================================================================


8. Promissory Note

      A  promissory  note in the  principal  amount of $800,000  was issued to a
      third party on April 27, 2004 and was due on October  27,  2004.  The note
      bears interest  monthly at the rate of 18% per annum. At December 31, 2004
      the Company  had repaid  $100,000 of the  principal  amount the  remainder
      $700,000 was past due and the Company was negotiating repayment terms with
      the lender.  The loan is secured by first charge against all the assets of
      the Company.  Although the note is past due, the Company is still accruing
      interest at the rate of 18% per annum.


                                     F-11
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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

9. Demand Loan H. E. Capital S. A.

      H.E.  Capital S.A. ("H.E  Capital") has been a major source of funding for
      the Company to date. The Company has a loan agreement with H.E Capital for
      a non-revolving secured $5 million dollar loan, bearing interest at 9% per
      annum and due upon  demand by H.E.  Capital.  The loans are  secured  by a
      general  security  agreement  granted by the  Company  against  all of its
      assets.

      On December 30, 2003 the Company sold  1,200,000  Units  consisting of one
      (1) Common Share and one (1) Warrant to H.E.  Capital at a purchase  price
      equal to $0.75 per Unit, for an aggregate  purchase price of $900,000,  in
      accordance  with The Regulation S Subscription  Agreement made between the
      Company an H.E.  Capital.  The Purchase Price was paid by H.E.  Capital by
      the settlement of $900,000 of indebtedness of the Company to H.E. Capital.

      On March 4, 2004 the Company  issued  266,667 Units  consisting of one (1)
      Common Share and one (1) Warrant to H.E. Capital at a price equal to $1.50
      per Unit, for an aggregate purchase price of $400,000,  in accordance with
      The Regulation S  Subscription  Agreement made between the Company an H.E.
      Capital.  Each  warrant  had an  exercise  price of $2.00 per  share.  The
      Purchase was completed by the  settlement of $400,000 of  indebtedness  to
      H.E. Capital.  As H.E. Capital was a related party the shares and warrants
      issued were valued at  $491,093 of which  $400,000  was to cancel the debt
      and $91,093 was recorded as a financing expense.

      On September 30, 2004 H.E. Capital  exercised 600,000 warrants to purchase
      600,000  restricted  Common  Shares.  The  Purchase  by H.E.  Capital  was
      completed by the settlement of $900,000 of indebtedness to H.E. Capital.

      At December 31, 2004, the balance of H.E Capital's advances to the Company
      under the loan  agreement  totaled  $1,085,541.  During 2004 H.E.  Capital
      advanced  approximately  $2,200,000  against  the  loan  agreement  and as
      described  above  converted  $1,300,000 of the amounts  advanced to common
      stock and warrants.  In addition H.E. Capital  purchased,  as described in
      Note 10, 133,333 units of common stock and warrants for $200,000. There is
      no assurance that H.E. Capital will continue to advance additional amounts
      in order to fund the  business of the Company or that they will not demand
      repayment.

      The H.E. Capital  agreement  contains certain  restrictions that limit the
      Company's ability to pay dividends and redeem shares of common stock.


10. Common Stock

      Shares  issued to third  parties for  services  rendered are valued at the
      closing  price of the  Company's  common stock on the date of the services
      are performed.

      During 2004,  the Company  issued common stock to acquire  inventory  (see
      Note 1) and settle debt payable to a shareholder (see Note 9)

      On March 12, 2004, the Company issued 183,333 units, of which 133,333 were
      purchased by H.E. Capital, for $275,000 in cash. Each unit consists of one
      common  share and one  warrant to purchase  one common  share at $2.00 per
      share exercisable for 2 years from the date of issuance.

      On March 13, 2004,  the Company  issued 200,000 common shares for services
      received in connection with the MDK Sports  acquisition.  The value of the
      common stock was $274,000 and was expensed at the time of issuance.

                                     F-12
<PAGE>


IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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

      Between February 28 and March 16, 2004 the Company appointed seven members
      to an  Advisory  Board and  issued a total of  150,000  common  shares for
      service. The value of the common stock is $318,250 and was expensed at the
      time of issuance.

      Between April 2 and June 8, 2004, the Company issued 140,000 common shares
      to three consulting groups for financial  consulting  services.  The value
      for the  common  stock  was  $509,527  and  was  expensed  at the  time of
      issuance.


11. Warrants

      At December  31,  2004,  the Company had  outstanding  1,050,000  warrants
      issued to various parties to purchase shares of the Company's common stock
      at prices ranging from $1.50 to $2.00.

      Warrants  issued  to third  parties  for  services  are  valued  using the
      Black-Scholes and expensed as the services are provided.

      A summary of the  Company's  warrants as of December 31, 2004 and 2003 and
      changes during the period then ended is presented below:

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
                                                 2004                        2003
-----------------------------------------------------------------------------------------
                                                   Weighted                     Weighted
                                      Number of    average       Number of     average
                                       shares    exercise price   shares   exercise price
=========================================================================================
<S>                                    <C>        <C>                        <C>
Outstanding, beginning of period       1,200,000  $   1.50             --    $      --
Granted                                  450,000      2.00      1,200,000         1.50
Exercised                               (600,000)    (1.50)            --           --
Forfeited                                     --        --             --           --
-----------------------------------------------------------------------------------------
Outstanding, end of period             1,050,000  $   1.71      1,200,000    $    1.50
-----------------------------------------------------------------------------------------
</TABLE>

12. Contingencies

      On July 7, 2004,  the Company  entered  into a consulting  agreement  with
      Constellation Capital Corp.  ("Constellation"),  whereby Constellation was
      to provide consulting  services  including  corporate planning & marketing
      strategies,   identifying   and  assisting  with  merger  and  acquisition
      opportunities,  conducting market and research  activities,  and assisting
      with  new   business   development   activities.   For   these   services,
      Constellation  was to receive  warrants to  purchase a total of  2,500,000
      shares of common  stock at prices  ranging  from $3.50 to $4.50 per share.
      The company has taken the position that services were never rendered,  and
      therefore the  consultant  is not entitled to the warrants.  Constellation
      has made demand for the  warrants,  but has taken no further  action.  The
      Company intends to vigorously defend any action or proceeding commenced by
      Constellation.


                                     F-13
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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

      On August 25, 2004, the Company  entered into a consulting  agreement with
      Aries  Equities  Corp.  ("Aries")  whereby  Aries was to  provide  certain
      financial consulting services. For these services, Aries received warrants
      to purchase 200,000 shares of common stock at prices ranging from $5.14 to
      $6.17 per share.  The warrants were contingent upon the performance of the
      services by Aries.  The  services  were not provided and on April 1, 2005,
      both parties  agreed that the warrants were voided and that each party had
      no further obligation to the other.


13. Stock Incentive Plans

      On January 2, 2004 the  Company  implemented  a Stock  Option  Plan ("2004
      Stock Option Plan"),  which allows the Board of Directors to grant options
      to  employees,  members  of  the  Board  of  Directors,   consultants  and
      contractors.  The 2004 Stock  Option Plan  provides the Board of Directors
      the ability to determine the type,  size, terms and vesting periods of the
      awards under the Plan.

      The  number  of  shares  available  under the 2004  Stock  Option  Plan is
      2,500,000.  As of December  31, 2004  1,585,000  options have been granted
      under the 2004 Stock  Option  Plan.  Purchase  options are granted  having
      exercise  prices  equal to the  closing  price of the stock on the date of
      grant.

      The Company issued no options during the period ended December 31, 2003. A
      summary of the status of the Company's options as of December 31, 2004 and
      changes during the year then ended is presented below:

--------------------------------------------------------------------------------
                                                    2004
--------------------------------------------------------------------------------
                                                          Weighted
                                         Number of         average
                                          shares        exercise price
================================================================================
Outstanding, beginning of period               --      $         --
Granted                                 1,585,000              1.73
Exercised                                      --                --
Forfeited                                 (15,000)             2.60
--------------------------------------------------------------------------------
Outstanding, end of year                1,570,000      $       1.72
================================================================================

Options exercisable at year end         1,126,929
================================================================================

                                     F-14
<PAGE>



IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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

      The following table summarizes information about stock options outstanding
      at December 31, 2004:

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------
                      Options Outstanding                             Options Exerciseable
------------------------------------------------------------------    ------------------------
                                         Weighted-
                                          Average       Weighted-                      Weighted-
     Range of             Number         Remaining      Average          Number         Average
     Exercise          Outstanding      Contractual     Exercise       Exercisable     Exercise
                       at December         Life                        at December
      Prices             31,2004          (Years)        Price           31, 2004        Price
==================================================================    ========================
<S>                     <C>              <C>            <C>           <C>            <C>
      $1.26              845,000         4.01         $   4.01           601,140     $    1.26
  $1.60 - $2.50          440,000         4.19             4.19           323,333          1.90
  $2.60 - $4.55          285,000         4.72             4.72           202,456          2.78
                       =========                                       =========
  $1.26 - $4.55        1,570,000         4.19         $   4.19         1,126,929     $    1.72
                       =========                                       =========
----------------------------------------------------------------------------------------------
</TABLE>

      The weighted  average fair value of options  issued  during the year ended
      December 31, 2004 was $0.62.

      The Company charged operations for $22,593 which represented the intrinsic
      value of options  issued to  employees  at exercise  prices  below  market
      prices at the date of grant.


14. Private Placement Agent

      On  September  14, 2004 the Company  engaged J Giordano  Securities  Group
      ("JGSG") as its exclusive agent in the private placements of securities of
      the Company or any of its  affiliates in one or more related  transactions
      to one or more  investors  in the  form of  convertible  preferred  stock,
      convertible debt securities,  equity-linked  securities or other equity or
      equity-linked arrangements, including debt securities with warrants.

      Upon the  consummation  of any sale of debt or  equity  securities  of the
      Company in  connection  with the Private  Placements  the Company will pay
      JGSG a fee (the  "Placement  Fee")  equal to 8.0% of the total  equity and
      6.0% of the total debt consideration received by the Company in connection
      with the Private Placements (the "Transaction Consideration").

      In  addition  to the  Placement  Fee,  upon  the  closing  of the  sale of
      securities in connection  with the Private  Placements,  the Company shall
      issue to JGSG warrants to purchase the same securities of the Company (the
      "Warrants") in an amount equal to 10% of the Transaction  Consideration to
      be priced on the same terms as the  Investors  in the Private  Placements.
      The  Warrants  shall  expire  five  years from the date of  issuance.  The
      Warrants  shall  carry  the same  registration  rights  and  anti-dilution
      provisions as the securities sold in the Private  Placements.  At December
      31, 2004 no fees had been incurred in relation to this agreement.

      On April 4, 2005 the Company terminated the agreement with JGSG.


                                     F-15
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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

15. Commitments

      Image license  agreements - Image has entered into the  following  license
      agreements:

      o     NHL  Enterprises,  LP for the license of the National  Hockey League
            name and  other NHL logos and  indicia  for use in  connection  with
            batteries  and other  battery  related  products.  The  license is a
            non-exclusive  license for the United  States.  The license is for a
            term  expiring  December 31, 2004.  The NHL current  season has been
            cancelled.  The company is negotiating  renewal of this license with
            the NHL.

      o     NHL  Enterprises  Canada,  LP for the license of the National Hockey
            League name and other NHL logos and  indicia  for use in  connection
            with  batteries and other battery  related  products in Canada.  The
            license is a non-exclusive  license for Canada. The license is for a
            term expiring December 31, 2005.

      o     NFL  Properties  LLC for the grant of a license to use the  National
            Football  League mark and other  related  marks in  connection  with
            batteries,  flashlights  with  batteries,  e-badge  with  batteries,
            radios with batteries, and universal remote controls with batteries.
            The license will be limited to the United States. The license is for
            a term expiring March 31, 2005.

      o     Riddell Sports Group.  Riddell is the official  supplier of Football
            helmets to the NFL and supplies  helmets to most  football  teams of
            the NCAA and the CFL.  Under the terms of the  agreement  Image will
            manufacture and distribute a pocket size AM/FM radio with ear jacks,
            replicating Riddell-style football helmet. The license is for a term
            expiring April 30, 2005.

      o     MLB  Properties,  for  the  license  to use  Major  league  Baseball
            trademarks,  service marks,  copyright,  and trade dress.  Under the
            terms  of  the  agreement  Image  will  manufacture  and  distribute
            alkaline batteries, keychain flashlights, and cell phone holders all
            featuring Club Logos. The initial term of the agreement is from June
            1, 2004 to  December  31,  2005  with a  royalty  rate of 11% of net
            sales. The license is for a term expiring December 31, 2005.

      Image plans to pursue  negotiations with further sports leagues and sports
      teams to obtain additional license rights.

      The payments due in 2005 under these existing  licenses terms is $127,500.
      None of these licenses extend beyond 2005.

      (b)   Office Lease

      In April 2004 the Company  entered into a lease  agreement for its offices
      in West Vancouver,  British Columbia,  Canada.  The lease expires in March
      2009 and requires annual rent payments of approximately $51,000.

      The Company has office space in Tannersville,  New York. The lease is with
      an officer of the Company,  expires in August 2005,  and requires  monthly
      payments of approximately $3,000.

     Rent expense charged to operations  amounted to  approximately  $86,000 and
     $20,000 for the years ended December 31, 2004 and 2003, respectively.

      (c)   Office Equipment lease

      In September 2003 the Company  entered into an equipment  lease for a high
      resolution  color  printer.  The lease expires in August 2005 and requires
      annual rent of approximately $3,000.

      In August 2004 the Company entered into an equipment lease for a black and
      white printer/fax. The lease expires in July 2009 and requires annual rent
      of approximately $2,000.


                                     F-16
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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

16. Significant Customers

      The top five  customers for the year ended December 31, 2004 generated 71%
      of the revenues,  41%, 10%, 7%, 7%, and 5%, respectively.  In 2003 all the
      Company's revenues were from one customer.

      Two of our  top  five  customers  represent  85%  of the  Company's  total
      accounts receivable at December 31, 2004.


17. Income Taxes

      The tax effects of  temporary  differences,  loss  carry-forwards  and the
      valuation  allowance  that give rise to deferred  income tax assets are as
      follows:

--------------------------------------------------------------------------------
                                                       December 31   December 31
                                                          2004          2003
                                                          ----          ----
Fair value of warrants and common stock                 $   221,000  $       --
Net operating losses                                        113,000     210,000
Less valuation allowance                                   (334,000)   (210,000)
--------------------------------------------------------------------------------
Deferred tax assets                                     $        --  $       --
================================================================================
The reconciliation of the effective income tax rate
to the federal statutory rate for the years ended
December 31, 2004 and 2003 is as follows:

Federal income tax rate                                        (34%)       (34%)
State and local taxes
Change in valuation allowance on net operating
State and local taxes                                            1%
carry-forwards                                                  34%         34%
--------------------------------------------------------------------------------
Effective income tax rate:                                       1%          0%
================================================================================

      The  Company  has  net  operating  losses  carryforward  of  approximately
      $650,000 available to offset taxable income through the year 2023.


18. Related Party Transactions

      Image Sports & Entertainment paid  approximately  $19,000 to an officer of
      the Company for rent of office space in Tannersville New York.

      The Company had no other related party transactions.


                                     F-17
<PAGE>

IMAGE INNOVATIONS HOLDINGS INC.
Notes to Consolidated Financial Statements
For the year ended December 31, 2004

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

19. Subsequent events

      Effective January 2005, the Company  completed a three-year  contract with
      Peyton Manning, a leading NFL quarterback.  Pursuant to the agreement, the
      Company will commission portraits of Mr. Manning as well as have exclusive
      rights with respect to Mr. Manning's  signature on memorabilia and certain
      non-exclusive  appearance  rights.  Under the  agreement,  the Company has
      agreed  to pay  Mr.  Manning's  company,  Pey  Dirt,  Inc.,  royalties  as
      specified in the agreement,  subject to aggregate minimum royalty payments
      of $2.5  million,  of which the first $1.25  million was paid in the first
      quarter of 2005.

      On January 31, 2005 Alain Kardos CEO and  Director  filed an action in the
      Supreme Court of British Columbia, naming the Company and Derick Sinclair,
      Chief Financial Officer of the Company, as defendants.  Mr. Kardos alleged
      (i) that the defendants  wrongfully  refused or neglected to return to him
      certificates representing 700,000 shares of the Company's common stock and
      (ii) that he was wrongfully  dismissed from his position as an officer and
      employee of the  Company  and the  Subsidiary  on October  21,  2004.  The
      Company  believes that Mr. Kardos'  allegations are erroneous and that his
      claims are without  merit.  The Company  intends to vigorously  defend the
      action.  Mr.  Kardos'  claim that he is entitled to 700,000  shares of the
      Company's  common  stock  is  disputed  by H.E.  Capital  S.A.  who are in
      possession of the shares.

      On February 9, 2005, the board of directors authorized, approved, ratified
      and  confirmed  the  termination  of Alain Kardos in all  capacities as an
      officer, employee and director of the Company and its subsidiaries.

      On April 14, 2005, the Company entered into an employment  contract with a
      new Chief Executive  Officer whereby the new Chief Executive  Officer will
      be entitled to receive up to 1,000,000  shares of common stock at terms to
      be finalized during the second quarter of 2005.

                                     F-18