U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended March 31, 2004
[_] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ______________ to ______________.
Commission File No.: 000-27777
INNOVATION HOLDINGS, INC.
(f/k/a Blagman Media International, Inc.)
--------------------------------------------------------------------------------
(Exact name of Registrant as specified in its Charter)
Nevada 91-1923501
------------------------------ ---------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
14622 Ventura Blvd., Suite 1015
Sherman Oaks, CA 91403
-------------------------------------- --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 818-426-8737
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(G) of the Act:
COMMON STOCK -- $.001 PAR VALUE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [_]
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: 325,586,000 shares of common stock as
of June 1, 2004.
Transitional Small Business Disclosure Format (check one): YES [_] NO [X]
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION PAGE
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31, 2004 (UNAUDITED) AND DECEMBER 31, 2003 1
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED) 2
CONDENSED CONSOLIDATED STATEMENT OF CHANGES ON
STOCKHOLDERS' DEFICIENCY FOR THE THREE MONTHS ENDED
MARCH 31, 2004 (UNAUDITED) 3
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31,
2004 AND 2003 (UNAUDITED) 4
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF MARCH 31, 2004 (UNAUDITED) 5-10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS 11-14
ITEM 3. CONTROLS AND PROCEDURES 14
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15-16
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS 16
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 16
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 16
ITEM 5. OTHER INFORMATION 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 16
SIGNATURES 17
CERTIFICATIONS 19
INNOVATION HOLDINGS, INC.
(FORMERLY BLAGMAN MEDIA INTERNATIONAL, INC.)
AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
INNOVATION HOLDINGS, INC. AND SUBSIDIARIES
(FORMERLY BLAGMAN MEDIA INTERNATIONAL, INC.)
CONTENTS
PAGE 1 CONDENSED CONSOLIDATED BALANCE SHEETS AS OF MARCH 31,
2004 (UNAUDITED) AND DECEMBER 31, 2003
PAGE 2 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
PAGE 3 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
STOCKHOLDERS' DEFICIENCY FOR THE THREE MONTHS ENDED
MARCH 31, 2004 (UNAUDITED)
PAGE 4 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE
THREE MONTHS ENDED MARCH 31, 2004 AND 2003 (UNAUDITED)
PAGES 5-13 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS
OF MARCH 31, 2004 (UNAUDITED)
INNOVATION HOLDINGS, INC.
(FORMERLY BLAGMAN MEDIA INTERNATIONAL, INC.)
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
March 31, 2004 December 31,
(Unaudited) 2003
------------------ ------------------
CURRENT ASSETS
Cash $ 2 $ 2
Prepaid expenses 200,000 --
Assets related to discontinued operations 9,645 9,645
------------------ ------------------
Total Current Assets 209,647 9,647
------------------ ------------------
PROPERTY & EQUIPMENT - NET 66,753 73,751
------------------ ------------------
OTHER ASSETS
License agreement, net of amortization of $11,518 and $7,781 respectively 137,950 141,687
------------------ ------------------
TOTAL ASSETS $ 414,350 $ 225,085
================== ==================
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
Notes and loans payable - current portion $ 359,725 $ 359,725
Accounts payable 835,422 830,006
Accrued expenses 1,023,509 950,018
Accrued compensation - officers 2,039,844 1,897,344
Due to officer 100,753 68,406
Capital lease obligation - current portion 33,540 33,540
Liabilities related to discontinued operations 10,835,472 10,835,472
------------------ ------------------
Total Current Liabilities 15,228,265 14,974,511
------------------ ------------------
LONG-TERM LIABILITIES
Notes and loans payable - long-term portion 445,500 445,500
------------------ ------------------
TOTAL LIABILITIES 15,673,765 15,420,011
------------------ ------------------
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' DEFICIENCY
Preferred stock, series A, $.001 par value, super convertible redeemable
preferred stock, 10,000,000 shares authorized, 0
shares issued and outstanding -- --
Preferred stock, series B, $.001 par value, super convertible
redeemable preferred stock, 100 shares authorized, 100 shares
issued and outstanding 1 1
Common stock, $.001 par value, 20,000,000,000 shares authorized
43,968,095 and 31,682,095shares issued and outstanding 43,968 31,682
Additional paid-in capital 42,426,767 41,824,753
Accumulated deficit (57,402,651) (57,051,362)
Deferred stock based compensation (327,500) --
------------------ ------------------
Total Stockholders' Deficiency (15,259,415) (15,194,926)
------------------ ------------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 414,350 $ 225,085
================== ==================
See accompanying notes to condensed consolidated financial statements.
1
INNOVATION HOLDINGS, INC.
(FORMERLY BLAGMAN MEDIA INTERNATIONAL, INC.)
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three For the Three
Months Ended Months Ended
March 31, 2004 March 31, 2003
------------------
------------------
REVENUES - NET $ -- $ 83,778
----------------- -----------------
OPERATING EXPENSES
Selling, general and administrative 324,063 889,971
Depreciation 10,735 7,717
----------------- -----------------
Total Operating Expenses 334,798 897,688
----------------- -----------------
LOSS FROM OPERATIONS (334,798) (813,910)
----------------- -----------------
OTHER (EXPENSE)
Interest expense (16,491) (16,589)
----------------- -----------------
NET LOSS $ (351,289) $ (830,499)
================= =================
NET LOSS PER COMMON SHARE
- BASIC AND DILUTED $ (0.01) $ (68.74)
================= =================
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING - BASIC AND DILUTED 37,032,246 12,083
================= =================
See accompanying notes to condensed consolidated financial statements.
2
INNOVATION HOLDINGS, INC.
(FORMERLY BLAGMAN MEDIA INTERNATIONAL, INC.)
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES ON STOCKHOLDERS' DEFICIENCY
FOR THE THREE MONTHS ENDED MARCH 31, 2004
(UNAUDITED)
Preferred Stock Common Stock Additional Deferred Stock
Paid-In Accumulated Based
Shares Amount Shares Amount Capital Deficit Compensation Total
-------- -------- ----------- ---------- ------------ ------------ ------------ ------------
Balance,
December 31, 2003 100 $ 1 31,682,095 $ 31,682 $ 41,824,753 $(57,051,362) $ -- $(15,194,926)
Stock issued
for prepaid
legal fees -- -- 2,000,000 2,000 98,000 -- -- 100,000
Stock issued
for consulting -- -- 9,286,000 9,286 455,014 -- -- 464,300
Stock issued
for settlement of
accrued expenses -- -- 1,000,000 1,000 49,000 -- -- 50,000
Deferred
stock compensation -- -- -- -- -- -- (457,500) (457,500)
Amortization of
deferred stock
compensation -- -- -- -- -- -- 130,000 130,000
Net loss -- -- -- -- -- (351,289) -- (351,289)
------ -------- ------------ ------------ ------------ ------------ ------------ ------------
BALANCE,
MARCH 31, 2004 100 $ 1 43,968,095 $ 43,968 $ 42,426,767 $(57,402,651) $ (327,500) $(15,259,415)
====== ======== ============ ============ ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements.
3
INNOVATION HOLDINGS, INC.
(FORMERLY BLAGMAN MEDIA INTERNATIONAL, INC.)
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Three For the Three
Months Ended Months Ended
March 31, March 31,
2004 2003
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(351,289) $ (830,499)
Adjustments to reconcile net loss
to net cash (used in) operating activities:
Depreciation and amortization 10,735 7,717
Provision for bad debt -- 18,667
Stock issued for compensation and services 136,800 464,765
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable -- (43,368)
Prepaid expenses, media and other current assets (100,000) 46,081
Increase (decrease) in:
Accounts payable and accrued expenses 128,907 102,510
Accrued compensation - officers -- 170,358
Deferred revenue -- 4,982
Accrued compensation - officer 142,500 29,530
--------- -----------
Net Cash (Used In) Operating Activities (32,347) (29,257)
--------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Loan proceeds -- 45,100
Due from officer 32,347 --
Cash overdraft -- (11,047)
Payments under capital lease obligation -- (4,796)
--------- -----------
Net Cash Provided By Financing Activities 32,347 29,257
--------- -----------
NET INCREASE (DECREASE) IN CASH -- --
CASH - BEGINNING OF PERIOD 2 --
--------- -----------
CASH - END OF PERIOD $ 2 $ --
========= ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ -- $ --
========= ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the period ended March 31, 2004, the Company issued 2,000,000 shares of
common stock having a fair market value of $100,000 to its legal counsel for
future legal services recorded as a prepaid expense.
During the period ended March 31, 2004, the Company issued 9,286,000 shares of
common stock having a fair market value of $464.300 to various consultants for
consulting fees recorded as deferred stock compensation.
During the period ended March 31, 2004, the Company issued 1,000,000 shares of
common stock in settlement of accrued expenses totaling $50,000.
During the period ended March 31, 2003, the Company issued 12,490 shares of
common stock having a fair market value of $874,300 to its former legal counsel
for future legal services recorded as a prepaid expense.
See accompanying notes to condensed consolidated financial statements.
4
INNOVATION HOLDINGS, INC.
(FORMERLY BLAGMAN MEDIA INTERNATIONAL, INC.)
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2004
(UNAUDITED)
NOTE 1 BASIS OF PRESENTATION
On February 10, 2003, the stockholders of the Blagman Media International,
Inc. approved an amendment to the articles of incorporation to change its
name to Innovation Holdings, Inc.
The accompanying unaudited condensed consolidated financial statements
include the accounts of Innovation Holdings, Inc. and its subsidiaries
(the "Company"). All significant inter-company transactions and balances
have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with accounting principles generally
accepted in the United States of America and the rules and regulations of
the Securities and Exchange Commission for interim financial information.
Accordingly, they do not include all the information necessary for a
comprehensive presentation of financial position and results of
operations.
It is management's opinion, however, that all material adjustments
(consisting of normal recurring adjustments) have been made which are
necessary for a fair financial statement presentation. The results for the
interim period are not necessarily indicative of the results to be
expected for the year.
The condensed consolidated balance sheet information was derived from the
Company's Annual Report Form 10-KSB/A.
The accompanying condensed consolidated financial statements and the
information included under the heading "Management's Discussion and
Analysis or Plan of Operation" should be read in conjunction with the
Company's Annual Report Form 10-KSB for the year ended December 31, 2003,
filed on May 19, 2004.
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
the disclosure of contingent assets and liabilities at the date of the
financial statements and revenues and expenses during the reported period.
Actual results could differ from those estimates.
Certain reclassifications have been made to the prior period consolidated
financial statements to conform to the current presentation.
Basic loss per common share is based on net loss divided by the weighted
average number of common shares outstanding. Common stock equivalents were
not included in the calculation of diluted loss per share because their
effect would be anti-dilutive.
NOTE 2 DISCONTINUED OPERATIONS
Pursuant to an Agreement and Plan of Reorganization dated March 4, 2002,
effective March 22, 2002, the Company acquired 100% of the outstanding
stock of Century Media, Inc., a California corporation ("Century") by
merging Blagman USA, Inc., into Century. Pursuant to the transaction, the
Company acquired all of the capital stock of Century for cash and common
stock of the Company, assumed current debt obligations and unexercised
option and stock appreciation rights of Century and assumed accrued and
ongoing trade and other ordinary course obligations and relationships.
Prior to the closing, the parties negotiated with the holders of portions
of the outstanding Century debt to restructure the term and payments of
such debt and in certain cases, to allow for the issuance of shares of
common stock of the Company in lieu of cash payments. Currently, the
Company remains obligated on certain contingent obligations including
$1.25 million from the TMT Media Corporation acquisition by Century in
2000. (See Note 4(A)).
5
At closing, holders of Century shares received twenty cents per Century
share, of which two and one-half cents was payable in cash and the balance
of seventeen and one-half cents was payable by the delivery of shares of
common stock of the Company, for a total of $903,292 and 14,377 options.
In relation to the acquisition, the Company recorded goodwill in the
amount of $3,048,484 and recorded an intangible asset of $5,855,286
related to the customer list acquired. The Company evaluated the customer
list and assigned it a three-year life.
The Company's management performs on-going business reviews based on
quantitative and qualitative measures and assesses the need to record
impairment losses when impairment indicators are identified. In the third
quarter of 2002, the review made by management of the Company determined
that the goodwill related to Century's business and the customer list
acquired in the acquisition were not recoverable. The Company then
recorded impairment charges of $3,048,484 and $5,599,007 (net of
amortization) related to the goodwill and customer list, respectively.
In December 2002, management of the Company determined that it would no
longer invest its capital and human resources into Century and entered
into a plan to discontinue and abandon the operations of Century.
Effective with the fourth quarter of 2002, this operating entity is
reflected as a discontinued operation.
For the three months ended March 31, 2004, Century was not operating and
therefore did not have any revenues or operating expenses.
Assets and liabilities of the discontinued
operations as of March 31, 2004 were as follows:
Assets
Cash $ 313
Prepaid expenses 7,005
Deposits 2,327
-------------
Total Assets $ 9,645
-------------
Liabilities
Accounts payable $ 5,606,399
Accrued expenses 1,478,352
Deferred revenue 1,364,866
Notes payable 2,356,575
Capital lease obligation 29,280
-------------
Total Liabilities 10,835,472
-------------
Net liabilities of discontinued operations $ 10,825,827
=============
6
The creditors of Century Media have filed various actions for breach of
contract. Said actions arose out of obligations incurred by Century Media
prior to the merger with the Company. The Company disputes these claims
and is actively seeking to resolve these matters.
NOTE 3 STOCKHOLDERS' DEFICIENCY
In February 2003, the Board of Directors authorized a 5,000 for 1 reverse
stock split. In April 2004, the Board of Directors authorized a 500 for 1
reverse stock split. All share and per share amounts in the accompanying
condensed consolidated financial statements and footnotes have been
restated to give effect to such reverse stock splits (See Note 7).
During the three months ended March 31, 2004, 2,000,000 shares of common
stock were issued to the Company's attorney for an agreement to provide
future legal services valued at $100,000. The amount has been recorded as
a prepaid expense in the accompanying condensed consolidated balance sheet
at March 31, 2004. The fair value of the issued shares was based upon the
market price of the Company's stock on the date of grant.
During the three months ended March 31, 2004, the Company issued 9,286,000
shares of common stock for consulting services valued at $464,300. The
fair value of the issued shares was based upon the market price of the
Company's stock on the date of grant. Of the total value, $130,000 has
been expensed to selling, general and administrative expenses in the
accompanying condensed consolidated statement of operations for the three
months ended March 31, 2004 and $327,500 is presented as deferred stock
based compensation in the accompanying condensed consolidated balance
sheet. In connection with certain consulting agreements, the Company is
obligated to pay additional cash of $100,000 or issue common stock
equivalent to $100,000. This amount was recorded to prepaid expenses and
accrued expenses in the accompanying condensed consolidated financial
statements as of March 31, 2004.
On March 8, 2004, the Company issued 1,000,000 shares of common stock
valued at $50,000 to satisfy certain accrued liabilities related to a
legal settlement reached in 2003. (See Note 4(d)) The fair value of the
issued shares was based upon the market price of the Company's stock on
the date of grant.
NOTE 4 LITIGATION
(A) Subsequent to the Blagman/Century merger transaction described in Note 2,
TMT Media Corporation ("TMT") has asserted that under the April 2000
acquisition agreement (whereby Century acquired TMT), as a result of the
transaction between the Company and Century, it is entitled, as of April
22, 2002, to the $1,250,000 contingent amount and to the payment in full
of the balance of $609,564 due on the $700,000 note delivered in the 2000
acquisition by Century.
The Company and Century dispute this position and are seeking to resolve
the matter. In May 2002, TMT initiated a proceeding, TMT MEDIA CORPORATION
vs. BLAGMAN CENTURY MEDIA, INC. et al. (Superior court of California,
County of Los Angeles, Case BC273368) against the Company, Century and a
shareholder personally, claiming the accelerated amount of $1,859,564.
Management has filed a general denial to TMT's allegations and has
asserted numerous affirmative defenses and plans to begin mediation in
June to resolve this case. In December 2003, TMT was granted a Summary
Judgment against the Company in the accelerated amount of $2,242,975,
which includes additional interest on the $1,250,000 contingent amount and
the $609,564 note plus attorney's fees and costs incurred by TMT. The
Company's former attorney failed to file any opposition to the summary
judgment motion. The Company's current attorney filed a motion to be
relieved of the default as to this summary judgment. As of March 31, 2004,
the Company has recorded additional liabilities in the amount of $383,411
in order to record the full liability of $2,242,975 as per the summary
judgment. This liability is included in Liabilities from Discontinued
Operations in the accompanying consolidated balance sheet at March 31,
2004.
7
(B) In March 2002, the Company advised authorities, market members and
regulators and initiated an internal reconciliation investigation relating
to a substantial amount of common shares of the Company improperly and
fraudulently issued and possibly transferred, including possible improper
releases of restrictions and transfers of restricted securities warrant
negotiations or an exemption from registration, without the knowledge of
the Company ("Curative Review Process"). The Curative Review Process is
continuing. The Company filed a Registration Statement on Form S-8 for a
2002 Employee Stock Compensation Plan ("Registration Statement") effective
August 2002 to register shares. In connection with the Curative Review
Process, the Company subsequently placed stop transfer orders on all of
the original certificates and derivatives of those certificates, advised
market members and depositories of its actions and has been working with
these parties and its transfer agent and other resources to ascertain
which shares of Common Stock need to remain in commerce to recognize the
interests of the transferee, which shares should be cancelled or returned
to the Company and therefore removed from registration ("Removed Shares")
and which shares are held by or were delivered to parties who were
eligible to receive and hold the same pursuant to the Plan. The Company
intends to file an amendment to this Registration Statement as soon as
practicable when the reconciliation in the curative Review Process is
complete to withdraw the Removed shares from registration. In connection
with this, the Company has had a suit filed against them by a third party
pending the circuit court of Cook County, Illinois. The Company has
responded to this matter and is actively cooperating in other
investigations relating to the plaintiff and others. The Company expects
additional litigation from the plaintiff and is intending to assert the
indemnification and disgorgement rights under its agreements with the
plaintiff. As stated above, more information on issues related to the
collateral damage of the company's association with certain financial
advisors and organizations can be found on the Securities and Exchange
Commission (SEC) website. Additional lawsuits may be filed by the Company
against all parties involved in the fraud if any issues related to such
fraud have an adverse effect on the company. The Company has initiated a
complaint against a third party in the Superior court of California in the
County of Los Angeles for breach of contract, fraud and deceit,
intentional misrepresentation of facts, and rescission. The third party
filed a general denial to the complaint, has asserted numerous affirmative
defenses, and has filed a cross-complaint alleging breach of written
contract, breach of the implied covenant of good faith and fair dealing,
conversion, common counts, breach of fiduciary duties, fraud and deceit,
negligent misrepresentation, imposition of constructive trust and/or
resulting trust, intentional and tortuous inducement to breach and
interference with contract and prospective economic advantage, and unfair
trade practices. The Company has filed a general denial to the
allegations. The parties are currently seeking a business settlement.
On March 31, 2003, the SEC filed a complaint for injunctive and other
equitable relief, obtained a temporary restraining order and has frozen
the assets of this third party. The SEC complaint specifically alleges
that this third party and his associates forged stock issuance resolutions
and entered into bogus consulting agreements in an effort to wrongfully
convert the Company's S-8 shares. The SEC has alleged that this third
party and his associates stole approximately 2,160 shares of the Company's
stock valued at $3,300,000.
(C) A claim has been brought against the Company by a corporation for breach
of contract. On January 30, 2004, this corporation was granted a summary
judgment in the amount of $203,064, which includes interest plus
attorney's fees and costs incurred by the corporation. The Company's
current attorney filed a motion to be relieved of the default as to this
8
summary judgment. As of March 31, 2004, the Company has recorded
additional liabilities in the amount of $51,064 in order to record the
full liability of $203,064 as per the summary judgment. This liability is
included in Liabilities from Discontinued Operations in the accompanying
consolidate balance sheet at March 31, 2004. There are currently
cross-actions in the case that are pending for binding arbitration in
November 2004.
(D) On November 11, 2003, the Company reached a settlement with a corporation
as a result of a claim brought against the corporation by the Company on
May 6, 2002 and a cross complaint filed by the corporation on June 14,
2002. As part of the terms and conditions of the settlement, the Company
will pay to the corporation $260,000 and 10% simple interest over one
year. This will be accomplished by the issuance of 2 million shares of
free trading stock 30 days after the execution of the agreement. The
shares will be held in a trust account for the purpose of selling the
stock and paying the corporation on a continuous basis. In the event the
Company does not pay the corporation the total amount of the settlement on
or before one year and 30 days from the execution date of the settlement
agreement, the corporation will enforce a stipulated judgment in the
amount of $750,000 against the Company. The Company has recorded a
liability of $260,000 and this amount is included in accrued expenses in
the accompanying consolidated balance sheet as of December 31, 2003. As of
March 31, 2004, the liability was $210,000. (See Note 3) As of the date of
this report, the liability has been paid in full.
Other than the litigation discussed in the above paragraphs, the Company
is a party to a number of lawsuits and claims that the Company believes
will ultimately have a favorable outcome and are not material in dollar
amounts.
NOTE 5 CAPITAL LEASE OBLIGATIONS
The Company is in default of its capital lease agreement at March 31,
2004. The Company is also in discussions with the lessor to settle the
matter. Due to the default, the entire amount due under the lease has been
classified as current in the accompanying condensed consolidated balance
sheet.
NOTE 6 GOING CONCERN
The Company's condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of
assets and the satisfaction of liabilities and commitments in the normal
course of business. The Company incurred a net loss of $351,289 and a
negative cash flow from operations of $32,347 for the three months ended
March 31, 2004, and has a working capital deficiency of $15,018,618 and a
stockholders deficiency of $15,259,415 at March 31, 2004 which raises
substantial doubt about its ability to continue as a going concern. The
Company's working capital deficiency as of March 31, 2004 may not enable
it to meet such objectives as presently structured. The condensed
consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
The ability of the Company to continue as a going concern is dependent on
the Company's ability to raise additional capital and implement its
business plan. Management believes that actions presently taken to obtain
additional funding provide the opportunity for the Company to continue as
a going concern. The Company is also actively seeking businesses to
acquire.
9
NOTE 7 SUBSEQUENT EVENTS
In April 2004, the Board of Directors and a vote of the majority of the
shareholders entitled to vote authorized a 500 for 1 reverse stock split.
All share and per share amounts in the accompanying consolidated financial
statements and footnotes have been restated to give effect to such reverse
stock split.
In May 2004, a total of 60,000,000 shares of common stock were issued to
the Company's current legal counsel as compensation for legal services
rendered and for future legal services.
In April and May 2004, the Company issued 169,300,000 common shares, in
the aggregate, to twelve different consultants for consulting services to
be provided over varying terms, which expire at various dates during the
fiscal year 2005.
On May 21, 2004, the Company issued 39,000,000 shares of common stock for
employee bonus compensation.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
Innovation Holdings, Inc. f/k/a Blagman Media International, Inc. is a Nevada
corporation (collectively with its subsidiaries, the "Company"), which is the
successor to a corporation founded in 1961. We are a direct marketing, direct
response and media enterprise based in Century City, California which
principally provides direct market services and media buying for our clients and
their products and services through television, radio, Internet, print and
outdoor advertising media. In addition, we organize direct response media
campaigns on radio, television and in print and provide assistance in backend
marketing and creative production.
We began operations in 1994 as a sole proprietorship and formed a corporation,
Blagman Media International, Inc., in early 1999. On August 2, 1999, we
completed a reverse acquisition with Unisat, Inc., an inactive, public
non-reporting company, founded in 1961 and formerly known as Combined Companies,
Inc. On the same date, Unisat, Inc. changed its name to Blagman Media
International, Inc. and we therefore have two Nevada entities with the same
name. The transaction was structured as a share exchange, in which Robert
Blagman exchanged all of his shares in the privately held entity for 8,200,000
common shares of Unisat, Inc. In April 2000, we entered into a share exchange
agreement with MNS Eagle Equity Group I, an inactive, reporting Nevada
corporation, which resulted in our becoming the parent reporting company.
The primary purpose of these transactions was to give us access to a public
market, to create a new corporate vehicle with which to build a more expansive
media-buying infrastructure, thereby allowing us to leverage our direct
marketing and direct response efforts. Currently, we are actively pursuing
acquisitions and various strategic and working relationships which, if
successful, will allow us to create a "network" of alliance partners with the
capacity to deliver a broader range of services in a more cost-efficient manner.
In 2001, internally we focused on our core competencies by making quantitative
media buys and in assisting our clients in implementing traditional radio,
television and out of home media strategies. Given the general uncertainties in
Internet advertising and Internet business models that developed in late 2000,
and which continue, we plan to monitor the use and styles of Internet
advertising. In this way, we can assess the opportunities available to us in
Internet advertising while not making any firm financial commitments to an
Internet strategy. In addition to considering merger and acquisition
opportunities for consolidation and industry growth, we are continuing to pursue
an expansion in the television production field through strategic alliances.
In 2001, we also actively pursued acquisitions and completed our first industry
acquisition transaction in March 2002 when Century Media, Inc. ("Century")
became a wholly-owned subsidiary under the name Blagman-Century Media, Inc.
("Blagman-Century"), subsequently renamed Century Media, Inc. We had been
negotiating since early 2001 to acquire Century Media, a Santa Monica based
advertising agency in business for over ten years with historical billings and
placements that ranged from $35 million to $110 million. In 2001, we entered
into agreements to acquire all of the outstanding stock of Century, but certain
requirements were not satisfied. In October 2001, we concluded that the purchase
price for Century, which was then set at $5.7 million cash plus the assumption
of significant debt, needed to be substantially reduced as a result of our due
diligence conclusions.
In March 2002, we completed the transaction through a merger of a wholly-owned
special purpose subsidiary into Century in exchange for the payment of the
equivalent of $0.20 per share to the shareholders of Century ($0.025 in cash and
the balance in shares of the common stock of the parent company (hereafter
"Common Shares"), repayment of $749,778 in debentures through the issuance of
Common Shares, and the recognition of debts. As a result, at closing
approximately $600,000 in cash and $2.2 million in restricted Common Shares were
distributed to holders of existing Century shares, debentures, and certain stock
rights. Under the merger agreement, the Common Shares were valued at the closing
bid price over the seven days prior to the date of the agreement or $0.0008857,
resulting in the issuance of 2,555,651,387 new Common Shares to the holders of
Century shares, debentures and certain stock rights. Century also had continuing
debt obligations due to affiliates and third parties of approximately $1.6
million, exclusive of trade and contingency obligations. In connection with our
interest in the Century transaction, we provided management services to Century
from late 2001 to early 2002, essentially on a reimbursement basis. As a result
of the overwhelming debt and departures by members of Century, we no longer
consider this acquisition viable. We are in the process of resolving all issues
related to the Century acquisition.
11
Following the acquisition of Century Media in March 2002, the Company has
determined that Century Media was not strategic to the Company's ongoing
objectives and has discontinued capital and human resource investment in Century
Media effective as of December 2002.
Results of Operations
Three Months Ended March 31, 2004 Compared to Three Months Ended March 31, 2003
2004 2003
------------- -------------
Total net revenues $ -- $ 83,778
Operating Expenses:
General and Administrative $ 324,063 $ 889,971
Net Loss from Operations $ (334,798) $ (813,910)
Net Loss Per Share $ (0.01) $ (0.14)
Net Revenues
Net Revenues for the three months ended March 31, 2004 as compared to the three
months ended March 31, 2003 decreased from $83,778 to $0.
Operating Expenses
Total operating expenses decreased 63% from $897,688 in 2003 to $334,798 in 2004
for the three months ending March 31. Included in operating expenses are general
and administrative expenses which decreased 64% from $889,971 for the three
month period ended March 31, 2003 to $324,063 for the three month period ended
March 31, 2004.
The total net loss of the Company for the three-month period ending March 31,
2004 was $(351,289) compared to $(830,499) for 2003, a 58% decrease.
Other (Expenses)
Other expenses for the three month period ending March 31 decreased from
$(16,589) in 2003 to $(16,491) (1%) in 2004 due to lower interest expenses.
Liquidity and Capital Resources
The Company's current assets increased from $9,647 at December 31, 2003 to
$209,647 for the three month period ended March 31, 2004, due to the issuance of
stock valued at $100,000 as a retainer for legal counsel and $100,000 for the
prepaid portion of accrued consulting fees.
In connection with the various initiatives being pursued by management to expand
the Company's operations internally and through strategic alliances or
acquisitions with other industry partners, additional capital funding will be
required. The Company hopes to raise these funds through an increase in general
business profits due to a shift in the main focus of its core business. The
Company plans to pass low profit making activity such as media buying to third
party contracted companies. The Company also plans to invest in product
ownership and development as well as actively pursue opportunities to expand the
marketing aspects of these products. As the advertising industry goes through
its transitions, the Company plans to react by adjusting its focus away form
pure media buying to product development. Product development continues to be a
strong avenue for the direct response advertising business. Affiliations and
associations with other advertising agencies will also expand the Company's
ability to increase cash flow and revenues without adding staff. The Company
also plans to investigate the possibility of additional acquisitions that will
allow the Company to become a holding company in name only. By diversifying and
expanding its base operations The Company will endeavor to create a more
productive future.
12
During 2003 and in the current quarter, the market price of our common shares
has continued to drop precipitously. We believe that there are two underlying
causes. First, we apparently were one of the companies targeted in an organized
pattern of depressing prices through "shorting" by a group pursuing a
coordinated effort to effect and profit from a falling share price and from
attempts to extort favorable stock issuances from the Company without fair
consideration. Management initiated referrals to appropriate regulatory agencies
for their action. While actions from these referrals may reduce future
manipulation, it cannot eliminate the impact of the downward price spiral. The
second factor apparently affecting our price was the market reaction to the
increase in authorized and issued common shares which we undertook to compensate
consultants in our industry, to support Company growth to effect the Century
transaction. Following the acquisition of Century Media in March 2002, the
Company has determined that Century Media was not strategic to the Company's
ongoing objectives and has discontinued capital and human resource investment in
Century Media effective as of December 2002.
Management is currently unwinding the Century transaction, evaluating other
opportunities and pursuing other initiatives to expand the Company's operations
internally and through strategic alliances or acquisitions with other industry
partners. These endeavors will be funded in part from operations but will also
require additional capital funding which the Company hopes to raise through debt
or equity financing arrangements, if appropriate financing is available, on
reasonable and acceptable terms.
During 2003, we focused a significant effort to the unwinding of Century Media.
While the Century Media transaction adds existing debt and trade payables,
management believes that these obligations are being contained and can be funded
from operations, internal organic growth, increased billings, legal avenues and
extensive operating cost reductions and efficiencies. We have departed from our
earlier strategy to assist in funding selected aspects of the growth of Century
Media and new strategic hires and alliances that will not facilitate positive
financial growth.
The Company intends to continue to seek additional working capital to meet its
operating requirements and to provide further capital for expansion,
acquisitions or strategic alliances with businesses that are complementary to
the Company's long-term business objectives. Additional capital will be needed
to maintain the growth plans of the Company. In addition negotiations and
payment plans will be established for preexisting Century debt.
Another factor which has taken a substantial amount of time and funding to
overcome is the Company's victimization at the hands of a specific financial
firm now under investigation with the SEC. More details are available at
http://www.sec.gov/litigation/complaints/comp18057.htm.
If substantial additional working capital does not become available, management
believes that the active search and completion of key acquisitions along with
proper legal restructuring and planning will be sufficient to meet essential
capital requirements for the next 12 months but will not support growth.
However, the Company currently has a deficit. As a result, the Company's
financial statements for the period ended March 31, 2004 have been prepared on a
going concern basis which contemplated the realization of assets and the
settlement of liabilities and commitments in the normal course of business. The
Company incurred a net loss of $351,289 for the three months ended March 31,
2004, and has a working capital deficiency of $15,018,618 and a stockholders
deficiency at March 31, 2004 of $15,259,415, and may not enable it to meet such
objectives as presently structured. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.
The Company intends to continue to seek additional working capital to meet its
operating requirements and to provide further capital for expansion,
acquisitions or strategic alliances with businesses that are complementary to
the Company's long-term business objectives. Additional capital will be needed
to maintain the growth plans of the Company.
13
FORWARD-LOOKING STATEMENTS
Safe Harbor statement under the Private Securities Litigation Reform Act of
1995: Except for historical information contained herein, the matters discussed
in this filing are forward-looking statements that involve risks and
uncertainties, including but not limited to economic, competitive, governmental
and technological factors affecting the Company's operations, markets, products
and prices and other factors discussed in the Company's various filings with the
Securities and Exchange Commission.
CRITICAL ACCOUNTING POLICIES.
The Securities and Exchange Commission ("SEC") recently issued Financial
Reporting release No. 60, "Cautionary Advice Regarding Disclosure About Critical
Accounting Policies" (FRR 60"), suggesting companies provide additional
disclosure and commentary on their most critical accounting policies. In FRR 60,
the SEC defined the most critical accounting policies as the ones that are most
important to the portrayal of a company's financial condition and operating
results, and require management to make its most difficult and subjective
judgments, often as a result of the need to make estimates of matters that are
inherently uncertain.
Based upon the foregoing definition, the registrant's most critical accounting
policies include:
Revenue Recognition
The Company has historically recognized revenue from the sale of media time to
advertising clients. Included in the monies received from advertising clients
are amounts which represent the reimbursement of media time purchased on behalf
of the customer for the related advertisements. These media purchase
reimbursements have been accounted for as an offset to the related media
purchases for the respective advertisement and not as gross revenues as required
under EITF 99-19 and SAB 101. Monies received prior to the broadcast of the
related advertisement are recorded as deferred revenue. In addition, the Company
has earned commissions in connection with the procurement of media time on
behalf of advertising clients in the past. Such commissions are also considered
earned when the underling advertisement is broadcasted. Additionally, the
Company has entered into contractual agreements with other advertising firms to
share revenues based upon the terms of the specific agreements. The income
produced by these revenue-sharing contracts are recognized as media or
commission income depending upon the nature of the income earned from the
agreement.
Asset Impairment
The Company reviews its long-lived assets and identifiable intangibles for
impairment whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. In performing the review
for recoverability, the Company estimates the future cash flows expected to
result from the use of the asset and its eventual disposition. If the sum of the
expected future cash flows (undiscounted and without interest charges) is less
than the carrying amount of the asset, an impairment loss is recognized.
Otherwise, an impairment loss is not recognized. Measurement of an impairment
loss for long-lived assets and identifiable intangibles would be based on the
fair value of the asset.
ITEM 3. CONTROLS AND PROCEDURES
Our Chief Executive Officer and Chief Financial Officer, in consultation with
advisors as appropriate, carried out an evaluation of the effectiveness of our
disclosure controls and procedures as of the end of the period covered by this
Quarterly Report on Form 10-QSB pursuant to Rule 13a-15(e) promulgated under the
Securities and Exchange Act of 1934 ("Exchange Act"). Based upon that
evaluation, our Chief Executive Officer and Chief Financial Officer concluded
that, as of the date of the evaluation, our disclosure controls and procedures
are effective in making known to them on a timely basis material information
relating to our company (including any consolidated subsidiaries) required to be
included in this report. There were no significant changes to our internal
controls or in other factors that could significantly affect these controls,
known to our Chief Executive Officer or Chief Financial Officer, subsequent to
the date of the evaluation, including any significant deficiencies or material
weaknesses that would require corrective action.
14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
(A) Subsequent to the Blagman/Century merger transaction described in Note 2,
TMT Media Corporation ("TMT") has asserted that under the April 2000
acquisition agreement (whereby Century acquired TMT), as a result of the
transaction between the Company and Century, it is entitled, as of April
22, 2002, to the $1,250,000 contingent amount and to the payment in full
of the balance of $609,564 due on the $700,000 note delivered in the 2000
acquisition by Century.
The Company and Century dispute this position and are seeking to resolve
the matter. In May 2002, TMT initiated a proceeding, TMT MEDIA CORPORATION
vs. BLAGMAN CENTURY MEDIA, INC. et al. (Superior court of California,
County of Los Angeles, Case BC273368) against the Company, Century and a
shareholder personally, claiming the accelerated amount of $1,859,564.
Management has filed a general denial to TMT's allegations and has
asserted numerous affirmative defenses and plans to begin mediation in
June to resolve this case. In December 2003, TMT was granted a Summary
Judgment against the Company in the accelerated amount of $2,242,975,
which includes additional interest on the $1,250,000 contingent amount and
the $609,564 note plus attorney's fees and costs incurred by TMT. The
Company's former attorney failed to file any opposition to the summary
judgment motion. The Company's current attorney filed a motion to be
relieved of the default as to this summary judgment. As of March 31, 2004,
the Company has recorded additional liabilities in the amount of $383,411
in order to record the full liability of $2,242,975 as per the summary
judgment. This liability is included in Liabilities from Discontinued
Operations in the accompanying consolidated balance sheet at March 31,
2004.
(B) In March 2002, the Company advised authorities, market members and
regulators and initiated an internal reconciliation investigation relating
to a substantial amount of common shares of the Company improperly and
fraudulently issued and possibly transferred, including possible improper
releases of restrictions and transfers of restricted securities warrant
negotiations or an exemption from registration, without the knowledge of
the Company ("Curative Review Process"). The Curative Review Process is
continuing. The Company filed a registration statement on Form S-8 for a
2002 Employee Stock Compensation Plan ("Registration Statement") effective
August 2002 to register shares. In connection with the Curative Review
Process, the Company subsequently placed stop transfer orders on all of
the original certificates and derivatives of those certificates, advised
market members and depositories of its actions and has been working with
these parties and its transfer agent and other resources to ascertain
which shares of Common Stock need to remain in commerce to recognize the
interests of the transferee, which shares should be cancelled or returned
to the Company and therefore removed from registration ("Removed Shares")
and which shares are held by or were delivered to parties who were
eligible to receive and hold the same pursuant to the Plan. The Company
intends to file an amendment to this Registration Statement as soon as
practicable when the reconciliation in the curative Review Process is
complete to withdraw the Removed shares from registration. In connection
with this, the Company has had suit filed against them by a third party
pending the circuit court of Cook County, Illinois. The Company has
responded to this matter and is actively cooperating in other
investigations relating to the plaintiff and others. The Company expects
additional litigation from the plaintiff and is intending to assert the
indemnification and disgorgement rights under its agreements with the
plaintiff. As stated above, more information on issues related to the
collateral damage of the company's association with certain financial
advisors and organizations can be found on the Securities and Exchange
Commission (SEC) website. Additional lawsuits may be filed by the Company
against all parties involved in the fraud if any issues related to such
fraud have an adverse effect on the company. The Company has initiated a
complaint against a third party in the Superior court of California in the
County of Los Angeles for breach of contract, fraud and deceit,
intentional misrepresentation of facts, and rescission. The third party
filed a general denial to the complaint, has asserted numerous affirmative
defenses, and has filed a cross-complaint alleging breach of written
contract, breach of the implied covenant of good faith and fair dealing,
15
conversion, common counts, breach of fiduciary duties, fraud and deceit,
negligent misrepresentation, imposition of constructive trust and/or
resulting trust, intentional and tortuous inducement to breach and
interference with contract and prospective economic advantage, and unfair
trade practices. The Company has filed a general denial to the
allegations. The parties are currently seeking a business settlement.
On March 31, 2003, the SEC filed a complaint for injunctive and other
equitable relief, obtained a temporary restraining order and has frozen
the assets of this third party. The SEC complaint specifically alleges
that this third party and his associates forged stock issuance resolutions
and entered into bogus consulting agreements in an effort to wrongfully
convert the Company's S-8 shares. The SEC has alleged that this third
party and his associates stole approximately 2,160 shares of the Company's
stock valued at $3,300,000.
(C) A claim has been brought against the Company by a corporation for breach
of contract. On January 30, 2004, this corporation was granted a summary
judgment in the amount of $203,064, which includes interest plus
attorney's fees and costs incurred by the corporation. The Company's
current attorney filed a motion to be relieved of the default as to this
summary judgment. As of March 31, 2004, the Company has recorded
additional liabilities in the amount of $51,064 in order to record the
full liability of $203,064 as per the summary judgment. This liability is
included in Liabilities from Discontinued Operations in the accompanying
consolidate balance sheet at March 31, 2004. There are currently
cross-actions in the case that are pending for binding arbitration in
November 2004.
(D) On November 11, 2003, the Company reached a settlement with a corporation
as a result of a claim brought against the corporation by the Company on
May 6, 2002 and a cross complaint filed by the corporation on June 14,
2002. As part of the terms and conditions of the settlement, the Company
will pay to the corporation $260,000 and 10% simple interest over one
year. This will be accomplished by the issuance of 2 million shares of
free trading stock 30 days after the execution of the agreement. The
shares will be held in a trust account for the purpose of selling the
stock and paying the corporation on a continuous basis. In the event the
Company does not pay the corporation the total amount of the settlement on
or before one year and 30 days from the execution date of the settlement
agreement, the corporation will enforce a stipulated judgment in the
amount of $750,000 against the Company. The Company has recorded a
liability of $260,000 and this amount is included in accounts payable and
accrued expenses in the accompanying consolidated balance sheet as of
December 31, 2003. As of March 31, 2004, the liability was $210,000. As of
the date of this report, the liability has been paid in full. The fair
value of the shares issued was based upon the market price of the
Company's common stock on the date of grant.
Other than the litigation discussed in the above paragraphs, the Company
is a party to a number of lawsuits and claims that the Company believes
will ultimately have a favorable outcome and are not material in dollar
amounts.
ITEM 2. CHANGES IN SECURITIES.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
16
On April 26, 2004, the Company filed a Form 8-K stating the Company had
effectuated a 1-for-500 reverse stock split in order to foster shareholder
value, and that it had entered into an exclusive marketing rights agreement with
CrossGel, Inc., a privately held Utah corporation, pursuant to which the Company
would create and provide all media and marketing for CrossGel.
--------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Issuer has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
INNOVATION HOLDINGS, INC. F/K/A
BLAGMAN MEDIA INTERNATIONAL, INC.
Dated: June 21, 2004 /s/ ROBERT BLAGMAN
-----------------------------------
Robert Blagman, President and CEO
17
EXHIBIT LIST
2.11 Agreement and Plan of Reorganization (Incorporated by reference; Form 8-K
filed on March 11, 2002)
3.1 Articles of Incorporation (Incorporated by reference; Form 8-K of MNS
Eagle Equity Group I, Inc. filed on April 27, 2000)
3.2 Bylaws (Incorporated by reference; Form 8-K of MNS Eagle Equity Group I,
Inc. filed on April 27, 2000)
3.3 Certificate of Designation for Series B Convertible Preferred Stock
(Incorporated by reference; Form 8-K of MNS Eagle Equity Group I, Inc.
filed on April 27, 2000)
10.1 Employment Agreement with Robert Blagman (Incorporated by reference; Form
10-KSB/A filed on April 30, 2001)
10.2 Employment Agreement with Leslie Blagman (Incorporated by reference; Form
10-KSB/A filed on April 30, 2001)
10.3 Equity Line of Credit Agreement dated July 12, 2001 with GazelleGroup LLP
and DRH Investment Company LLP (Incorporated by reference; Form SB-2/A
filed on November 1, 2001)
10.4 Registration Rights Agreement dated July 12, 2001 with GazelleGroup LLP
and DRH Investment Company LLP (Incorporated by reference; Form SB-2/A
filed on November 1, 2001)
10.5 Securities Purchase Agreement dated July 12, 2001 with certain named
buyers (Incorporated by reference; Form SB-2/A filed on November 1, 2001)
10.6 Placement Agent Agreement dated July 12, 2001 with May Davis Group, Inc.
(Incorporated by reference; Form SB-2/A filed on November 1, 2001)
10.7 Registration Rights Agreement dated July 12, 2001 with certain named
persons (Incorporated by reference; Form SB-2/A filed on November 1, 2001)
10.8 2000 Employee Stock Compensation Plan (Incorporated by reference; Form S-8
for MNS Eagle Equity Group I, Inc. filed on September 11, 2000)
10.9 2001 Employee Stock Option Plan (Incorporated by reference; Form S-8 filed
on August 27, 2001)
10.10 1-for-500 stock split and marketing rights agreement (Incorporated by
reference; Form 8-K filed on April 26, 2004)
21.1 List of Subsidiaries (Incorporated by reference, Form 10KSB, as amended
filed on April 15, 2002)
31 Certification Pursuant to Section 302, Of The Sarbanes-Oxley Act Of 2002
(filed herewith)
32 Certification pursuant to 18 U.S.C. section 1350, as adopted pursuant to
section 906 of the Sarbanes-Oxley act of 2002
18