UNITED STATES SECURITIES AND EXCHANGE COMMISSION









Washington, D.C. 20549











Form 10-KSB







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













For the Fiscal Year Ended:  June30, 2003













Commission file number: 000-49903







PRODIGITAL FILM LABS, INC.

















(Name of small business issuer in its charter)

















Nevada, United States

(State or other jurisdiction of incorporation or
organization)



91-2048620

(I.R.S. Employer ID Number)





















3675 Pecos-Mcleod, Suite 1400, Las Vegas, Nevada 89121-3881

(Address of principal executive offices)













(877) 804-3394



(Issuer's Telephone Number)





Page
1

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







Securities
to be registered pursuant to Section 12(g) of the Act:   Common Shares, $0.0001 par value







(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 report(s), and (2) has been
subject to such filing requirements for the past 90 days. Yes X  No













Check if 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. X











State the
issuer's revenues for its most recent fiscal year:   $ None











The aggregate market value of the voting and non-voting common equity held by
non-affiliates based upon the average bid and asked price at September 30, 2003
was $2,513,484.











As of
September 30, 2003, issuer had 4,928,400 shares of common equity issued and
outstanding.











Transitional Small Business Disclosure Format: Yes ___ No X





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PRODIGITAL FILM LABS, INC.











Form 10-KSB









TABLE OF CONTENTS

















PART I











Item
1.     Description of Business























Item
2.     Description of Property











Item
3.     Legal Proceedings











Item
4.     Submission of Matters to a Vote of Securities
Holders











PART II











Item
5.     Market for Common Equity and Related Stockholder
Matters











Item
6.     Management's Discussion and Analysis or Plan of
Operation











Item
7.     Financial Statements











Item
8.     Changes In and Disagreements With Accountants on
AccountingAnd Financial Disclosure













PART III











Item
9.     Directors, Executive Officers, Promoters and Control
Persons,Compliance With Section 16(a) of the Exchange
Act













Item
10.    Executive Compensation











Item
11.    Security Ownership of Certain Beneficial Owners
andManagement













Item
12.    Certain Relationships and Related Transactions











Item
13.    Exhibits and Reports on Form 8-K



Item 14.   
Controls and Procedures





Page 3





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PART I











ITEM 1.     DESCRIPTION OF
BUSINESS











History and Development of the Company



Prodigital Film Labs, Inc. (The
"Company" or "Prodigital") was originally incorporated in the State of Nevada on May 2, 2000,
for the purpose of providing Film and Television production studios and digital
equipment, and full and complete digital post-production editing suites. Currently, Prodigital does not own any production
facilities or digital post- production labs. It is a development stage company
that currently has no revenues nor employees, either full time or part time.







Business of the Company



Prodigital has been created to provide
"Class A" digital production studio sound stages and digital post-production
facilities (editing suites and animation studios) to meet an increasingly unmet
market demand.  The eventual business goal will be that Prodigital will create
its own purely digital productions.  The Company will become a technologically
advanced Digital Movie and High Definition television production company that
uses only digital imaging processes in the creation, development, and production
of movies and High Definition television features.  Prodigital is a "New-Media
Technology" business.







British Columbia was
chosen as the location for these Studios because of the incredible growth of the
Film Industry in this Province, arising from the interest and activity in and
around the city of Vancouver, B.C., also known as "Hollywood North." 
According to data released by the BC Film Commission, from 1999 and through 2002, the Film Industry spent over
4 billion dollars in British
Columbia, creating an economic impact of  billions of dollars more.

Lions Gate, The Bridge, and Vancouver
Film Studios are the three major studios in Vancouver.  Through our research and
interviews with the BC Film Commission, we have found that, because of the
tremendous growth of the industry, there is a shortage of "Class A" Production
sound stages.  "Class A" production sound stages are purpose-built, architecture-specific
buildings - they are not converted warehouses, or steel clad buildings. 
There is not much competition for owners of Class A sound stages as there are
more productions than there are professional facilities.



Although most of the filming activity in
B.C. takes place in and around Vancouver, the Okanagan Valley, (in close
proximity-less than an hour flight) has been the location of such noteworthy
full-length feature films as The Pledge, Snow Falling on Cedars, My American
Cousin, and Lunch With Charles.  Many TV commercials and other TV shows have
been filmed there also.  Prodigital will have the only "Class A" sound stages in
the Okanagan, where the real-estate costs are
considerably lower than Vancouver and vacinity. Available to Prodigital's production needs, a large talent pool of key and supportive film
industry personnel currently reside in the Okanagan Valley, and a local film
school will serve as a resource of cutting-edge talent.  The Okanagan Valley
offers, within less than an hour's drive: vineyards,  orchards, semi-desert
locales, alpine vistas and mountain lakes, beaches, ski hills, working
paddle-wheelers and a steam locomotive running on 20km of track.  Cities of the Okanagan, such as Kelowna and Penticton, are popular resort destinations for
golfing, beach and water activities, and skiing.  All in all, the Okanagan is a
very sensible and attractive business alternative to the congestion, stress,
frustrating coastal weather/shooting conditions, and lengthy waits for urban
Class A sound stages: factors which negatively impact big city studio
production, and will make Prodigital very competitive.





For these reasons, the founders of
Prodigital Film Labs, Inc., Darone Davis and David Huck have, over the last
three
years, searched the Okanagan valley for just the right property to serve the
needs of both production sound stages and post-production facilities.  Two
separate properties were located that met all of the carefully researched
criteria.  The first property, located in the City of Penticton, BC, is slated
to become the site of the post-production facility.  It consists of two city
lots with a 3000-square foot building on the first, and a parking lot on the
bordering second lot.  The location is a prime spot on Main Street, very visible
and desirable, and easily expandable.  The second separate property, which has
been chosen as the site of the production sound stages, is a beautiful 102-acre
mountain-view lot located approximately 10 minutes highway driving from the
post-production property.


Page
4



During 2000-2001 an option to purchase the
102-acre property was negotiated.  This offer
contained several conditions that had to be met before Prodigital bought the
property.  The conditions included: the ability for the property to be
appropriately rezoned to fit Prodigital's projected use;  the property needed an
Environmental Impact Study and Assessment completed based on Prodigital's
planned use and;  the last pre-condition was based on Prodigital's ability to obtain
financing to purchase the land.  The
founders worked to re-zone the property from a rural classification to a
commercial classification in order that the zoning matched Prodigital's
projected use.  After an Environmental Impact Study and Assessment of the
property was completed, municipal meetings held and public notices provided,
Prodigital was successful in working with the Regional District to create a
completely new zoning classification, and the district re-zoned this property
with this new classification to enable the building of production sound stages. 
This rezoning makes this 102-acre property the only site in the entire Okanagan
Valley on which large sound stages can be constructed.  By comparison, Lion's
Gate Studios, in Vancouver, has only 14 acres for its eight sound stages, with
minimal availability of expansion property, if any.  Since Prodigital
was not able to obtain the necessary financing to purchase
the property within the terms of the offer, an extention was granted.  This
extention period also expired and the vendors took the property off of the
market.  There is a verbal agreement and understanding with the vendor that
Prodigital can still purchase the property at the price previously agreed to. 
There is no current agreement or contract between the vendor and Prodigital.







In August 2002, Prodigital
Film Labs, Inc. secured its option to purchase the post-production site in
Penticton, BC, by issuance of 250,000 common shares of our stock to Sigma
Business Consulting Ltd. ("Sigma"), a company that David Huck is the President
and majority shareholder of (as such Sigma is a related party of Prodigital).  This
exclusive real estate purchase option secures a highly desirable and valuable
piece of property for Prodigital.  The option will expire in 5 years.





The business future of Prodigital is well
underway.  The founders have located several key film industry personnel to
manage the different aspects of the Company. Mr. Terry Edge, a former Operations
Director for Lion's Gate Studios in Vancouver and Mr. Tom Horton, a former
Online Editor at Fox Digital in Los Angeles, have joined the Advisory Board for Prodigital as of June 2002.  The experience, knowledge, and the close working
relationships that these film industry veterans enjoy with other industry
players combine to be a huge and valuable asset to the Company. There are no contracts or written agreements with either
of these gentlemen until Prodigital has finances to fund the company. 
Prodigital has negotiated and obtained "Letters of Intent" from several
potential productions, animations, and TV series, committing them to use of Prodigital's facilities once they are built.







Fiscal Year 2003 was a very busy
year for the principals of Prodigital Film Labs, Inc.  The major focus
during this fiscal year was to locate private placement money and the first
round of financing for the Company.  The first round of financing was to
purchase the land and buildings that we had located and identified as necessary to the Company's
success.


In July 2002, the Company was able to
sub-lease the building that it has leased from Sigma and purchased an option on.  This is
the building and parking lot that ProDigital has targeted to become the post
production facility.  This sub-lease provides some revenue for ProDigital and relieves some of the
operational expenses of the company that have been paid by one of the principal
of the company.  Most of the company expenses, have been, and continue to be
paid by the principals of the company. They will be reimbursed when the company
is more completely funded.

Over the past year, ProDigital Film Labs
principals have been actively searching for investors and other opportunities
that would be compatible with its objectives. Several opportunities were examined
and one in particular was examined in great detail.

Darone Davis and David Huck explored the
possibilities of producing a series of four-minute action drama clips for the
motion simulator / entertainment industry. Our objective was to film four or so
of these at one time, shooting enough material for several shorts. Two people in
Alberta, who are currently active in the entertainment simulator industry,
brought this opportunity to our attention. During our initial exploratory
meeting, it was established that our objectives were compatible and strengths
complementary. It was decided that ProDigital Film Labs would be responsible for
the film production and the other parties would be responsible to attain the
financing. We followed through by completing our due diligence on the project.

Our investigative work took us to Edmonton,
Alberta, where we met with two principals who own one of these entertainment
motion simulators. One of the principals is also the North American
representative for a large simulator manufacturer. They demonstrated that the
need for new "live action" material is quite high. They showed us several of the
current motion movies, which consisted of older animations, often based on a
space or star wars theme. These shows were of inferior quality by today's
standard. Market research shows that the inclusion of high definition and high
quality is now the foundation of a successful clip to entertain today's child
audience.

With the motion simulator industry network
that these two individuals had developed and proposed to take advantage of, they
predicted a handsome income stream from the distribution of these films.  This
significant income stream would provide ProDigital the funding to construct and
develop ProDigital's original business plan- the construction of Production
Sound Stages and a Digital post-production facility.

This whole process took place over several
months. The principals were very disappointed when the funding did not materialise. However, the project is still under consideration as a step to
achieve the financing to pursue ProDigital's original plans.

































Advisory Board Members



One of the Company's goals is to appoint well
known individuals with talent and experience to lead the various aspects of
Prodigital's business.  Initially, these people will serve as the Advisory
Board, where their unique and specific skills, film industry contacts,
experience and expertise will aid the  successful development of the
Company.  They may be compensated with stock or stock options until Prodigital is funded
and at that time and they may become Directors and/or Managers of the specific area
they helped to build.



Property Acquisition



The properties that the Company has located for
the Sound/ Production stages and Post-production facilities are superbly suited
for ProDigital's business.  Negotiations have resulted in an Exclusive Option to
Purchase Agreement for the buildings and property for the Post-production
facility.  This was accomplished by providing a non-refundable deposit of
250,000 common shares of Prodigital to Sigma.  This exclusive real estate purchase option
expires in 5 years.  This agreement is attached to the Company's Form 10-SB as Exhibit 10.1.  Negotiations
are still underway for securing the same type of option agreement for the
102-acre property for the Sound/ Production Stages.



Page 5

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Trading Status















Prodigital
conducted a registered offering in Nevada (Section 90.490 of the Nevada Revised
Statutes) under Federal exemptions available in Rule 504 of Regulation D, and
our stock now trades on the over-the-counter market.  The Company is receiving,
through its website (www.pdfilm.com), more and more inquiries from all over
North America and the rest of the world. Some of these inquiries are leading to
potential business for the Company once the facilities are in place.  Although
there are no specific contracts for sound/production stage use, the Company has
a list of many producers and directors who are regularly updated with the
Company's progress.  Prodigital has received some letters of intent from
production companies for digital animation and other use of the Company's
post-production facilities, once built.



ProDigital recently filed its 10-SB registration statement with
the SEC in order to apply to have its stock quoted on the NASD Over-the-Counter
Bulletin Board.  The 10-SB was declared effective in August 2003 and we now
have approval to trade on the OTC/BB market.





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ITEM 2.     DESCRIPTION OF
PROPERTY







The Company presently maintains offices at 3675
Pecos-McLeod, Suite 1400, Las Vegas, Nevada 89121-3881 (a registered agent), at 1621 S. Latawah
Street, Spokane, Washington 99203 (a home office) and at 749 Main Street, Penticton,
B.C. V2A 5E1 and can be reached at (877) 804-3394.  There is no rent
obligation for the offices in Las Vegas and Spokane.  The term of the
leases is month to month and the cost is $2,400(Canadian Dollars) per month for the Penticton location. 
The Penticton location is leased from Sigma Business Consulting Ltd. on 
month to month basis.  On October 5, 2003, the Company entered into a new
lease agreement with the new owner of the property, a company owned by the
Company's President and a family member for annual lease payments of
approximately $21,815 ($29,400 Canadian translated at exchange rates as at June
30, 2003).  The lease will expire on October 1, 2006.  A copy of this
new lease agreement is filed as Exhibit 10.4 to this Form 10-KSB.  The real estate purchase option on the above Penticton
location is included in this document as Exhibit 10.1 and the lease agreement
with Sigma for the Penticton location is included in this document as Exhibit 10.2 to the
Company's Form 10-SB.  The
Company at present owns no equipment.





Prodigital has been
working on securing the real estate purchase option for the 102 acre property
that the principals have targeted as the production Sound Stage site.  This
property was rezoned previously by the principals making it the only large piece
of property in the Okanagan Valley suitable to build the production Sound
Stages.

During the year ended June 30, 2003, we subleased our
property to an arm's length party for a monthly lease payment of approximately $2,000
($2,950 Canadian) for a 41-month term, totaling $20,778 for the 12-month period ended June 30, 2003.







---













ITEM 3.     LEGAL
PROCEEDINGS

































To the knowledge of the officers and directors of Prodigital, neither Prodigital
nor any of its officers or directors is a party to any material legal proceeding
or litigation and such person know of no material legal proceeding or litigation
contemplated or threatened.  There are no judgments against Prodigital or its
officers or directors.  None of the officers or directors has been convicted of
a felony or misdemeanor relating to securities or performance in corporate
office.





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













None.



Page 6

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PART II













ITEM 5.     MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS





The Company is currently listed on and
trading its shares in the "pink sheets" marketplace.  At the date of this
filing, the Company has 41 shareholders who acquired 800,000 shares in the Rule
504 offering, an unknown number of shareholders who bought their shares in the
market, and 4 shareholders who have held their shares at least one year, and in
most cases, for more than two years since the date of issuance.  All of the
shareholders holding restricted shares would be eligible for transactions under
Rule 144, governed, however, by the volume limitations of 144(e) with respect to
any existing or former shareholders that are officers, directors or affiliates
(or were at the time of the issuance of the shares).  No dividends have
been earned or declared since the inception of the Company.



Holders of the Company's Common Stock are entitled to receive dividends when
declared by the Board of Directors out of funds legally available for
distribution.  Any such dividends may be paid in cash, property or shares
of the Company common stock.  The Company has not paid any dividends since
its inception, and it is not likely that any dividends on its Common Stock will
be declared at any time in the foreseeable future.  Any dividends will be
subject to the discretion of the Company's Board of Directors, and will depend
upon, among other things, the operating and financial condition of the Company,
its capital requirements and general business conditions.  Therefore, there
can be no assurance that any dividends on the Company's Common Stock will be
paid in the future.

The following quotations reflect the high and low bids for our common stock
based on inter-dealer prices, without retail mark-up, mark-down or commission
and may not represent actual transactions.  the high and low prices of our
common stock for the periods indicated below are as follows:





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Stock Trading Activity







|Quarter
      Ended | High       | Low       
|------------------- | ---------- | ----------
|6-30-03             | 1.00       | 0.10      
|3-31-03             | 0.51       | 0.12      
|12-31-02            | 0.55       | 0.12      
|9-30-02             | 0.60       | 0.10      
|6-30-02             | 0.75       | 0.01      
|3-31-02             | No Trading | No Trading
|12-31-01            | No Trading | No Trading
|9-30-01             | No Trading | No Trading
|6-30-01             | No Trading | No Trading
|3-31-01             | No Trading | No Trading









Our common shares are issued in registered form.  Transfer Online, Inc.,
227 SW Pine Street, Suite 300, Portland, Oregon 97204 (Telephone:
(503) 227-2950, facsimile (503) 227-6874) is the registrar and transfer agent for our
common shares.



As of September 30, 2003, we had 4,928,400 shares of common stock outstanding
and approximately 28 stockholders of record.  This number of
stockholders does not include stockholders who hold our securities in street
name.



Recent Sales of Unregistered Securities



On August 14, 2002, we issued 250,000 shares of our common stock to Sigma
Business Consulting Ltd, a company controlled by David Huck,  in exchange
for a non-refundable exclusive option to purchase real property at a price of
$425,000 for a five-year period.  These shares were issued in reliance upon
Regulation S, as Mr. Huck is a non-U.S. citizen..



Page 7

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







The following discussion should be read in conjunction with our
financial statements and the related notes that appear elsewhere in this annual
report.  the following discussion contains forward-looking statements that
reflect our plans, estimates and beliefs.  Our actual results could differ
materially from those discussed in the forward looking statements.  Our
financial statements are stated in United States dollars and are prepared in
accordance with United States Generally Accepted Accounting Principles.

We are planning on purchasing the latest
in digital movie reproduction equipment and building Class A production Sound
Stages.  We will equip our studios with non-traditional digital equipment and
staff that is acquainted with the digital-production and post-production
processes.  Digital technology enables marketers in this industry to distribute
movies and film through a file medium as opposed to a large "can" holding
hundreds of meters of celluloid tape and weighing ten kilograms.  The digital
film market is a cutting-edge marketplace that will embrace the Internet, the
High Definition Television marketplace and digital movie theatre productions.  Prodigital will position itself to fill the role of satisfying the demand for
digital production and post-production facilities in British Columbia since the
availability of large "Class A" Sound Stages is very limited and the cost saving
advantages of digital imaging are very attractive.

In addition, other film studios have made
statements that they wish to "acquire" smaller companies that have already set
up their studios in the digital format rather than convert their own labs and
substantial non-digital equipment inventory.  These acquisitions are very
attractive in the industry at this time since most production efforts are being
spent on film production to meet the increasing demand for viable products in
the marketplace

We are relying on funds committed by the principals and a moderation of our
growth prospects to sustain operations for the next twelve months. If 
additional cash is not raised, the Company can not maintain its goal of
purchasing the latest in digital movie reproduction equipment and equipping its 
studios with talented staff, experienced and knowledgeable with the digital
production, post-production and animation processes. The search for additional
capital would continue until sufficient funding is located to purchase the
property and equipment and hire the necessary personnel.Plan of Operation

As described elsewhere in this Form 10KSB, we plan to acquire the
appropriate properties, develop a "Class A" production sound stage, purchase the
latest in digital movie reproduction equipment and hire the necessary staff.



Management of our company does not believe that it will be able to generate
revenues without finding and completing the necessary outside financing required
to continue our business. In addition, if no suitable business opportunity is
identified, shareholders will not realize any further return on their investment
in our company, and there will be no market for our common shares.

Management believes that we currently lack sufficient cash flow to provide its
current cash requirements for the next twelve months without additional equity
financing or loans from directors. Until financing is obtained providing the
cash flow necessary to sustain our cash flow requirements, we will continue to
rely on certain of the directors to finance the deficiency of cash from
operations.

We do not presently have any agreements, arrangements or understandings for new
financing. We are actively searching for new financing, but there is no
assurance that our search will find sufficient financing opportunities to allow
us to meet our liabilities and commitments as they come due.

There is substantial doubt about our ability to continue as a going concern as
we have suffered recurring losses from operations and have no established source
of revenue. Accordingly, our independent auditors included an explanatory
paragraph in their audit opinion on our June 30, 2003 financial statements regarding concerns about our ability to continue as a going concern.
Our financial statements contain additional note disclosures describing the
circumstances that lead to this disclosure by our independent auditors.

We are currently relying on our directors and creditors to fund our continuing
operating expenses and to fund the identification and evaluation of a suitable
business opportunity or business combination. As of June 30, 2003 our cash
balance was only $125. We anticipate that we will require additional financing
of at least $4,000,000 to carry out our business plan. Should such external
financing be unavailable, we will continue to rely on advances from directors to
cover administrative expenses. We would likely seek to secure any additional
financing necessary through a private placement of our common shares.

New Accounting Pronouncements

Statement of Financial Accounting Standards No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities" ("SFAS 146") provides guidance on
the recognition and measurement of liabilities for costs associated with exit or
disposal activities.   It requires that a liability for a cost
associated with an exit or disposal activity be recognized when the liability is
incurred rather than recognizing that liability at the date of an entity's
commitment to an exit plan.  The provisions of this Statement are effective for exit or
disposal activities that are initiated after December 31, 2002.

In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others", which addresses the accounting
for and disclosure of guarantees. FIN 45 requires a guarantor to recognize a
liability for the fair value of a guarantee at inception. The recognition of the
liability is required even if it is not probable that payments will be required
under the guarantee. The disclosure requirements are effective for interim and
annual financial statements ending after December 15, 2002. The initial
recognition and measurement provisions are effective for all guarantees within
the scope of FIN 45 issued or modified after December 31, 2002.

FIN 46, "Consolidation of Variable Interest Entities", clarifies the application
of Accounting Research Bulletin No. 51, "Consolidated Financial Statements", to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is applicable immediately for variable
interest entities created after January 31, 2003. For variable interest entities
created prior to January 31, 2003, the provisions of FIN 46 are applicable for
periods ending after December 15, 2003.

The implementation of these new standards is not expected to have a material
effect on our financial statements.

On May 15, 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard ("SFAS") No. 150, "Accounting for
Certain Financial Instruments with Characteristics of both Liabilities and
Equity". SFAS No. 150 changes the accounting for certain financial instruments
that, under previous guidance, could be classified as equity or "mezzanine"
equity, by now requiring those instruments to be classified as liabilities (or
assets in some circumstances) in the balance sheet. Further, SFAS No. 150 requires disclosure regarding the terms of those instruments and
settlement alternatives. SFAS No. 150 affects an entity's classification of the
following freestanding instruments: a) Mandatorily redeemable instruments b)
Financial instruments to repurchase an entity's own equity instruments c)
Financial instruments embodying obligations that the issuer must or could choose
to settle by issuing a variable number of its shares or other equity instruments
based solely on (i) a fixed monetary amount known at inception or (ii) something
other than changes in its own equity instruments d) SFAS No. 150 does not apply
to features embedded in a financial instrument that is not a derivative in its
entirety. The guidance in SFAS No. 150 is generally effective for all financial
instruments entered into or modified after May 31, 2003, and is otherwise
effective at the beginning of the first interim period beginning after June 15,
2003.
The implementation of this new standard is not expected to have a material
effect on our financial statements.

Application of Critical Accounting PoliciesUse of Estimates

The preparation of financial statements in accordance with United States
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures 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 materially differ from these estimates.







Page 8

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ITEM 7.     FINANCIAL
STATEMENTS









Our financial
statements are stated in United States dollars and are prepared in accordance
with United States generally accepted accounting principles.  The
Independent Auditors' Report of BDO Dunwoody LLP for the audited financial
statements for the year ended June 30, 2003 and the Independent Auditors' Report
of White Kennedy for the audited financial statements for the year ended June
30, 2002 are included herein immediately preceding the audited financial
statements.







Reference
is made to the financial statements and related notes and supplemental data
under Item 13 filed with this report.



PRODIGITAL FILM LABS, INC.

(A Development Stage Company)

Financial Statements

June 30, 2003 and 2002

(Expressed in US Dollars)





CONTENTS



Independent Auditor's Report



Prior Independent Auditor's Report



Financial Statements



Balance Sheets



Statements of Changes in Capital Deficit



Statements of Operations and Comprehensive Loss



Statements of Cash Flows



Summary of Significant Accounting Policies



Notes to Financial Statements





Page 9

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INDEPENDENT AUDITORS' REPORT



To the Directors and Stockholders of

ProDigital Film Labs, Inc.

(A Development Stage Company)



We have audited
the Balance Sheet of ProDigital Film Labs, Inc. (a development stage company) as
at June 30, 2003 and the Statements of Changes in Capital Deficit, Operations
and Comprehensive Loss and Cash Flows for the year then ended and for the period
from May 2, 2000 (inception) to June 30, 2003.  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 did not
audit the financial statements of ProDigital Film Labs, Inc. for the period from
May 2, 2000 (inception) to June 30, 2002. Such statements are included in the
cumulative inception to June 30, 2003 totals on the Statements of Operations and
Comprehensive Loss and Cash Flows and reflect a net loss of 68% of the related
cumulative total. Those statements were audited by other auditors whose report
has been furnished to us and our opinion, insofar as it relates to amounts for
the period from May 2, 2000 (inception) to June 30, 2002 included in the
cumulative totals, is based solely upon the report of the other auditors.







We conducted
our audit in accordance with United States generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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. 
We believe that our audit and the report of other auditors provide a reasonable
basis for our opinion.







In our opinion,
based on our audit and the report of other auditors, these financial statements
present fairly, in all material respects, the financial position of ProDigital
Film Labs, Inc. (a development stage company) as at June 30, 2003 and the
results of its operations and its cash flows for the year then ended and for the
period from May 2, 2000 (inception) to June 30, 2003 in conformity with United
States generally accepted accounting principles.







The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.  As discussed in Note 1 to the financial
statements, the Company has no established source of revenue, has accumulated
operating losses of $202,123 since its inception, has a working capital
deficiency of $102,177 and has essentially been inactive during the recent
years.  These conditions raise substantial doubt about the Company's ability to
continue as a going concern.  Management's plans in regard to these matters are
described in Note 1.  These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.



/s/ BDO Dunwoody LLP

Chartered Accountants



Vancouver, Canada

October 5, 2003



Page 10

---

PRIOR INDEPENDENT AUDITORS' REPORT



To the Directors and Stockholders of

ProDigital Film Labs, Inc.

(A Development Stage Company)



We have audited
the Balance Sheet of ProDigital Film Labs, Inc. (a development stage company) as
at June 30, 2002 and the Statements of Changes in Capital Deficit, Operations
and Comprehensive Loss and Cash Flows for the year then ended.  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 United States generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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. 
We believe that our audit provides a reasonable basis for our opinion.





In our opinion,
these financial statements present fairly, in all material respects, the
financial position of ProDigital Film Labs, Inc. (a development stage company)
as at June 30, 2002 and the results of its operations and its cash flows for the
year then ended in conformity with United States generally accepted accounting
principles.





The
accompanying financial statements have been prepared assuming the Company will
continue as a going concern.  The Company has incurred operating losses for the
past few years and has a working capital deficiency as at June 30, 2002.  These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.  Management's plans in regard to these matters are described in
Note 1.  These financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

/s/ White Kennedy

Chartered Accountants

Penticton, Canada

October 5, 2002



Page 11

---

PRODIGITAL FILM LABS, INC.

(A Development Stage Company)

Balance Sheets

(Expressed in US Dollars)



|June
    30                                           | 2003                     |  | 2002                   
|----------------------------------------------------- | ------------------------ |  | -----------------------
|                                                      |                          |  |                        
|ASSETS                                                |                          |  |                        
|                                                      |                          |  |                        
|Current                                               |                          |  |                        
|Cash                                                  | $               
    125 |  | $              
    113
|Receivables                                           | 667                      |  | 1,771                  
|Prepaid expenses                                      | 1,781                    |  | 6,675                  
|                                                      |                          |  |                        
|Total current assets                                  | 2,573                    |  | 8,559                  
|                                                      |                          |  |                        
|Deposit(Note 6)                                       | 12,500                   |  | -                      
|Property
    and equipment (Note 2)                   | 175                      |  | 219                    
|                                                      |                          |  |                        
|Total
    Assets                                      | $         15,248         |  | $          
    8,778  
|                                                      |                          |  |                        
|LIABILITIES AND CAPITAL DEFICIT                       |                          |  |                        
|                                                      |                          |  |                        
|LIABILITIES                                           |                          |  |                        
|                                                      |                          |  |                        
|Current                                               |                          |  |                        
|Accounts payable and accrued liabilities              | $         55,100         |  | $         22,496       
|Convertible notes (Note 3)                            | 7,420                    |  | 7,000                  
|Due to related parties (Note 4)                       | 35,441                   |  | 7,744                  
|Unearned rental income and deposits                   | 6,789                    |  | -                      
|                                                      |                          |  |                        
|Total liabilities                                     | 104,750                  |  | 37,240                 
|                                                      |                          |  |                        
|Capital
    deficit                                   |                          |  |                        
|Capital Stock (Note 5)                                |                          |  |                        
|Authorized                                            |                          |  |                        
|10,000,000 common shares, par value $0.0001 per share |                          |  |                        
|Issued                                                |                          |  |                        
|4,928,400 (2002 - 4,678,400)                          | 493                      |  | 468                    
|Additional paid-in capital                            | 121,707                  |  | 109,232                
|Deficit accumulated during the development stage      | (202,123)                |  | (138,162)              
|Other comprehensive loss                              |                          |  |                        
|- cumulative translation adjustment                   | (9,579)                  |  | -                      
|                                                      |                          |  |                        
|Total capital deficit                                 | (89,502)                 |  | (28,462)               
|                                                      |                          |  |                        
|Total
    Liabilities and Capital Deficit             | $         15,248         |  | $          
    8,778  
|                                                      |                          |  |                        



The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.



Page 12

---

PRODIGITAL FILM LABS, INC.

(A Development Stage Company)

Statements of Changes in Capital Deficit

(Expressed in US Dollars)







|                                                                                                                        | Common Stock | Additional Paid-In Capital | Deficit Accumulated during the Development Stage | Other Comprehensive Loss        | Total Capital
    Deficit
|----------------------------------------------------------------------------------------------------------------------- | ------------ | -------------------------- | ------------------------------------------------ | ------------------------------- | -------------------------
|                                                                                                                        | Shares       | Amount                    
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Issuance of stock
    at inception at $0.0001
    per share                                                             | 3,000,000    | $             
    300     | $                       
    -                   | $                        
    - | $                  
    -
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Net loss for the period                                                                                                 | -            | -                          | -                                                | (13,021)                        | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Balance, June 30, 2000                                                                                                  | 3,000,000    | 300                        | -                                                | (13,021)                        | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Issuance of stock for
    cash at $0.05 per share in May 2001                                                           | 780,000      | 78                         | 38,922                                           | -                               | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Issuance of stock for
    cash at $0.25 per share in May 2001                                                           | 40,000       | 4                          | 9,996                                            | -                               | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Net loss for the year                                                                                                   | -            | -                          | -                                                | (54,427)                        | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Balance, June 30, 2001                                                                                                  | 3,820,000    | 382                        | 48,918                                           | (67,448)                        | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Issuance of stock for
    private placement, net of share issuance costs at $0.05 per share in August
    2001 (Note 5) | 800,000      | 80                         | 39,920                                           | -                               | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Issuance of stock for
    services at $0.05 per share in August 2001 (Note 5)                                           | 40,000       | 4                          | 1,996                                            | -                               | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Issuance of stock for
    convertible note at $1.00 per share in June 2002 (Note 5)                                     | 18,400       | 2                          | 18,398                                           | -                               | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Net loss for the year                                                                                                   | -            | -                          | -                                                | (70,714)                        | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Balance, June 30, 2002                                                                                                  | 4,678,400    | 468                        | 109,232                                          | (138,162)                       | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Issuance of stock for
    option to acquire a property at $0.05 per share in August 2002 (Note 5)                       | 250,000      | 25                         | 12,475                                           | -                               | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Net loss for the year                                                                                                   | -            | -                          | -                                                | (63,961)                        | -                        
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Cumulative translation
    adjustment                                                                                   | -            | -                          | -                                                | -                               | (9,579)                  
|                                                                                                                        |              |                            |                                                  |                                 |                          
|Balance, June 30, 2003                                                                                                  | 4,928,400    | $              
    493    | $         
    121,707                           | $          
    (202,123)       | $          
    (9,579)  
|                                                                                                                        |              |                            |                                                  |                                 |                          

The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.



Page 13

---

PRODIGITAL FILM LABS, INC.

(A Development Stage Company)

Statements of Operations and Comprehensive Loss

(Expressed in US Dollars)



|                                            | For the years ended June 30, |  | For the period from May 2, 2000 (inception) to June 30, 2003
|------------------------------------------- | ---------------------------- |  | ------------------------------------------------------------
|                                            | 2003                         |  | 2002                                                        
|                                            |                              |  |                                                             
|Expenses                                    |                              |  |                                                             
|Automotive                                  | $                 
    235   |  | $              
    4,256                                   
|Bank charges and interest                   | 1,033                        |  | 1,127                                                       
|Brokerage fees                              | 2,960                        |  | 5,085                                                       
|Contract fees                               | -                            |  | 5,303                                                       
|Depreciation                                | 44                           |  | 55                                                          
|Insurance                                   | 393                          |  | 577                                                         
|Office and miscellaneous                    | 610                          |  | 2,525                                                       
|Professional fees                           | 39,213                       |  | 11,299                                                      
|Property taxes                              | 11,525                       |  | 5,529                                                       
|Rent                                        | 18,018                       |  | 21,026                                                      
|Telephone and utilities                     | 3,502                        |  | 7,446                                                       
|Travel                                      | 3,574                        |  | 5,479                                                       
|                                            | (81,107)                     |  | (69,707)                                                    
|                                            |                              |  |                                                             
|Other income
    (expenses)                 |                              |  |                                                             
|Gain (loss) on foreign exchange             | 881                          |  | (1,007)                                                     
|Rent, net of commission                     | 16,265                       |  | -                                                           
|                                            | 17,146                       |  | (1,007)                                                     
|                                            |                              |  |                                                             
|Net loss for the
    period                 | (63,961)                     |  | (70,714)                                                    
|                                            |                              |  |                                                             
|Foreign currency
    translation adjustment | (9,579)                      |  | -                                                           
|                                            |                              |  |                                                             
|Comprehensive loss
    for the period       | $         
    (73,540)      |  | (70,714)                                                    
|                                            |                              |  |                                                             
|Loss per share -
    basic and diluted      | $             
    (0.01)    |  | $              
    (0.02)                                  
|                                            |                              |  |                                                             
|Weighted average
    shares outstanding     | 4,897,150                    |  | 4,590,767                                                   
|                                            |                              |  |                                                             



The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.



Page 14

---

PRODIGITAL FILM LABS, INC.

(A Development Stage Company)

Statements of Cash Flows

(Expressed in US Dollars)



|                                                                            | For the years ended June 30, |  | For the period from May 2, 2000 (inception) to June 30, 2003
|--------------------------------------------------------------------------- | ---------------------------- |  | ------------------------------------------------------------
|                                                                            | 2003                         |  | 2002                                                        
|                                                                            |                              |  |                                                             
|Cash flows from
    operating activities                                    |                              |  |                                                             
|Net loss for the period                                                     | $         
    (63,961)      |  | $              
    (70,714)                                
|Adjustments to reconcile net loss for the period                            |                              |  |                                                             
|to cash used in operating activities:                                       |                              |  |                                                             
|Depreciation                                                                | 44                           |  | 55                                                          
|Stock issued for interest expense                                           | -                            |  | 400                                                         
|Stock issued for services                                                   | -                            |  | 2,000                                                       
|Accrued interest in convertible notes                                       | 420                          |  | -                                                           
|(Increase) decrease in assets:                                              |                              |  |                                                             
|Receivables                                                                 | 1,189                        |  | (1,771)                                                     
|Prepaid expenses                                                            | 5,136                        |  | 3,717                                                       
|Increase in liabilities:                                                    |                              |  |                                                             
|Accounts payable and accrued liabilities                                    | 27,927                       |  | 15,855                                                      
|Unearned rental income and deposits                                         | 6,068                        |  | -                                                           
|                                                                            |                              |  |                                                             
|Cash used in operating activities                                           | (23,177)                     |  | (50,458)                                                    
|                                                                            |                              |  |                                                             
|Cash flows from
    investing activity                                      |                              |  |                                                             
|Acquisition of property and equipment                                       | -                            |  | -                                                           
|                                                                            |                              |  |                                                             
|Cash flows from
    financing activities                                    |                              |  |                                                             
|Received from related party                                                 | 23,189                       |  | 6,014                                                       
|Net proceeds from issuance of share capital                                 | -                            |  | 7,500                                                       
|Proceeds from convertible notes                                             | -                            |  | 25,000                                                      
|                                                                            |                              |  |                                                             
|Cash provided by financing activities                                       | 23,189                       |  | 38,514                                                      
|                                                                            |                              |  |                                                             
|Net increase
    (decrease) in cash                                         | 12                           |  | (11,944)                                                    
|                                                                            |                              |  |                                                             
|Cash,beginning
    of period                                                | 113                          |  | 12,057                                                      
|                                                                            |                              |  |                                                             
|Cash, end of
    period                                                     | $               
    125     |  | $                   
    113                                
|                                                                            |                              |  |                                                             
|Supplementary
    disclosure of cash flow information:                      |                              |  |                                                             
|Cash paid during year for:                                                  |                              |  |                                                             
|Interest                                                                    | $                    
    -  |  | $                       
    -                              
|Income taxes                                                                | $                    
    -  |  | $                       
    -                              
|                                                                            |                              |  |                                                             
|Supplemental
    disclosure of non-cash investing and financing activities: |                              |  |                                                             
|Issuance of stock upon conversion of note                                   |                              |  |                                                             
|payable and accrued interest                                                | $                    
    -  |  | $             
    18,400                                   
|Issuance of stock for broker services                                       | $                    
    -  |  | $               
    2,000                                  
|Issuance of stock for option to acquire property                            | $         
    12,500        |  | $                       
    -                              
|                                                                            |                              |  |                                                             





The accompanying summary of significant accounting policies and notes are an
integral part of these financial statements.



Page 15

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PRODIGITAL FILM LABS, INC.

(A Development Stage Company)

Summary of Significant Accounting Policies

(Expressed in US Dollars)

June 30, 2003 and 2002



|Basis of Presentation                           | These financial statements are stated in US dollars and are prepared in
    accordance with US generally accepted accounting principles.  The
    Company is currently in the development stage and presents its financial
    statements in accordance with Statement of Financial Accounting Standard ("SFAS") No. 7,
    "Accounting and Reporting by Development Stage Enterprises".                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|----------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Property and Equipment                          | Property and equipment are recorded at cost.  Depreciation is provided over
    the estimated useful life of the property and equipment using the
    declining-balance method at the rate as set out below:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                | Furniture and equipment                
    - 20%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Use of Estimates                                | The preparation of financial
    statements in accordance with generally accepted accounting principles
    requires management to make estimates and assumptions that affect the
    reported amounts of assets and liabilities and disclosure of contingent
    assets and liabilities at the date of the financial statements, and the
    reported amounts of revenues and expenses during the reporting period. 
    Actual results could differ from management's best estimates as additional
    information becomes available in the future.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Income Taxes                                    | The Company follows the provisions
    of SFAS No. 109, "Accounting for Income Taxes", which requires the Company
    to recognize deferred tax liabilities and assets for the expected future tax
    consequences of events that have been recognized in the Company's financial
    statements or tax returns using the liability method. Under this method,
    deferred tax liabilities and assets are determined based on the temporary
    differences between the financial statement carrying amounts and tax bases
    of assets and liabilities using enacted rates in effect in the years in
    which the differences are expected to reverse.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Financial Instruments                           | The Company's financial
    instruments consist of cash, receivables, accounts payable and accrued
    liabilities, convertible notes and amounts due to related parties.  Unless
    otherwise noted, it is management's opinion that the Company is not exposed
    to significant interest, currency or credit risks arising from these
    financial instruments. The fair value of these financial instruments
    approximates their carrying values due to the short-term or demand nature of
    the instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|*Foreign Currency Translation and Transactions* | The Company's functional currency is
    the Canadian dollar as substantially all of the Company's operations are in
    Canada.  The Company uses the United States dollar as its reporting currency
    for consistency with other registrants of the Securities and Exchange
    Commission ("SEC").                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                | The Company translates assets and
    liabilities denominated in a foreign currency at the rate of exchange at the
    balance sheet date.  Revenues and expenses are translated at the average
    rate of exchange for the year.  Translation gains and losses are deferred as
    a separate component of capital deficit.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                | Transactions undertaken in currencies other than the functional currency of
    the entity are translated using the exchange rate in effect as of the
    transaction date. Any exchange gains and losses are included in Other Income
    (Expenses) on the Statement of Operations and Comprehensive Loss.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Loss Per Share                                  | Loss per share is computed in
    accordance with SFAS No. 128, "Earnings Per Share". Basic loss per share is
    calculated by dividing the net loss available to common stockholders by the
    weighted average number of common shares outstanding for the year.  Diluted
    earnings per share reflects the potential dilution of securities that could
    share in earnings of an entity.  In a loss year, dilutive common equivalent
    shares are excluded from the loss per share calculation as the effect would
    be anti-dilutive.  Basic and diluted loss per share are the same for the
    years presented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                | Common equivalent shares,
    consisting of shares issuable on conversion of convertible notes, totalling
    7,420 shares (2002 - 7,000)
    were not included in the computation of diluted earnings per share because
    the effect is anti-dilutive. No other adjustments were made for purposes of
    per share calculations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Comprehensive Income                            | The Company has adopted SFAS No. 130,
    "Reporting Comprehensive Income", which establishes standards for reporting
    and display of comprehensive income, its components and accumulated
    balances.  The Company is disclosing this information on its Statements of
    Operations and Comprehensive Loss.  Comprehensive income (loss) is comprised
    of net income (loss) and all changes to capital deficit except those
    resulting from investments by owners and distributions to owners.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Rental Income                                   | The Company recognizes rental income over the term of the lease of 41
    months.  Security deposits and rental income received in advance from the
    tenant are recorded as Unearned Rental Income and Deposits on the Company's
    Balance Sheets.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|New Accounting Pronouncements                   | Statement of Financial Accounting Standards No. 146, "Accounting for Costs
    Associated with Exit or Disposal Activities" ("SFAS 146") addresses
    financial accounting and reporting for costs associated with exit or
    disposal activities and nullifies Emerging Issues Task Force ("EITF") Issue
    No. 94-3. It requires that a liability for a cost associated with an exit or
    disposal activity be recognized when the liability is incurred rather than
    recognizing the liability at the date of an entity's commitment to an exit
    plan as defined in Issue 94-3.  The provisions of this Statement are
    effective for exit or disposal activities that are initiated after December
    31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                | In November 2002, the FASB issued FASB Interpretation ("FIN") No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
    Including Indirect Guarantees of Indebtedness of Others", which addresses
    the accounting for and disclosure of guarantees.  FIN 45 requires a
    guarantor to recognize a liability for the fair value of a guarantee at
    inception.  The recognition of the liability is required even if it is not
    probable that payments will be required under the guarantee.  The disclosure
    requirements are effective for interim and annual financial statements
    ending after December 15, 2002.  The initial recognition and measurement
    provisions are effective for all guarantees within the scope of FIN 45
    issued or modified after December 31, 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                | FIN 46, "Consolidation
    of Variable Interest Entities", clarifies the application of Accounting
    Research Bulletin No. 51, "Consolidated Financial Statements", to certain
    entities in which equity investors do not have the characteristics of a
    controlling financial interest or do not have sufficient equity at risk for
    the entity to finance its activities without additional subordinated
    financial support from other parties.  FIN 46 is applicable immediately for
    variable interest entities created after January 31, 2003.  For variable
    interest entities created prior to January 31, 2003, the provisions of FIN
    46 are applicable for periods ending after December 15, 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                | The implementation of these standards did not have a material effect on the
    Company's financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                | On May 15, 2003, the Financial Accounting Standards Board ("FASB") issued
    Statement of Financial Accounting Standard ("SFAS") No. 150, "Accounting for
    Certain Financial Instruments with Characteristics of both Liabilities and
    Equity". SFAS No. 150 changes the accounting for certain financial
    instruments that, under previous guidance, could be classified as equity or
    "mezzanine" equity, by now requiring those instruments to be classified as
    liabilities (or assets in some circumstances) in the balance sheet. 
    Further, SFAS No. 150 requires disclosure regarding the terms of those
    instruments and settlement alternatives. SFAS No. 150 affects an entity's
    classification of the following freestanding instruments: a) Mandatory
    redeemable instruments b) Financial instruments to repurchase an entity's
    own equity instruments c) Financial instruments embodying obligations that
    the issuer must or could choose to settle by issuing a variable number of
    its shares or other equity instruments based solely on (i) a fixed monetary
    amount known at inception or (ii) something other than changes in its own
    equity instruments d) SFAS No. 150 does not apply to features embedded in a
    financial instrument that is not a derivative in its entirety. The guidance
    in SFAS No. 150 is generally effective for all financial instruments entered
    into or modified after May 31, 2003, and is otherwise effective at the
    beginning of the first interim period beginning after June 15, 2003.
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|                                                | The implementation of this new standard is not expected to have a material
    effect on the Company's financial statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|Comparative
    Figures                         | Certain comparative figures have been reclassified to conform to the current
    year's presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     





Page 16

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PRODIGITAL FILM LABS, INC.

(A Development Stage Company)

Notes to Financial Statements

(Expressed in US Dollars)

June 30, 2003 and 2002



1.   
Nature of Business and Ability to Continue Operations





The Company was
incorporated on May 2, 2000 under the laws of the State of Nevada and
substantially all operations are located in Canada.  Its principal business
activity consists of developing a post production digital film studio and a
digital film studio facility.







These accompanying
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.  As at June 30, 2003, the Company
has no established source of revenue, has accumulated operating losses of
$202,123 since its inception, has a working capital deficiency of $102,177 and
has no active operations during the recent years.  The continuation of the
Company is dependent upon pursuing and developing a sustainable business, the
continuing financial support of creditors and stockholders and obtaining
long-term financing as well as achieving a profitable level of operations.
Management plans to raise approximately $4.1 million for the development of a
sound stage and operating funds through a combination of debt and equity
instruments. While the Company is expending its best efforts to achieve the
above plans, there is no assurance that any such activity will generate funds
that will be available for operations.







These conditions
raise substantial doubt about the Company's ability to continue as a going
concern.



The
Company was incorporated on May 2, 2000 under the laws of the State of Nevada
and substantially all operations are located in Canada.  Its principal business
activity consists of developing a post production digital film studio and a
digital film studio facility. These financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
amounts or amounts and classification of liabilities that might arise from this
uncertainty.



2.   
Property and Equipment



|                        |            |                          | 2003           | 2002          
|----------------------- | ---------- | ------------------------ | -------------- | --------------
|                        |            |                          |                |               
|                        | Cost       | Accumulated Depreciation | Net Book Value | Net Book Value
|                        |            |                          |                |               
|Furniture and equipment | $      338 | $    163                 | $   175        | $   219       
|                        |            |                          |                |               





3.   
Convertible Notes



|                                                          | 2003       | 2002      
|--------------------------------------------------------- | ---------- | ----------
|                                                          |            |           
|Unsecured note payable                                    |            |           
|bearing interest at
    6% per annum,                     |            |           
|due on demand                                             | $    5,000 | $    5,000
|                                                          |            |           
|Unsecured note payable                                    |            |           
|issued to a family
    member of the Company's president, |            |           
|bearing interest at
    6% per annum, due on demand       | 2,000      | 2,000     
|                                                          |            |           
|Accrued interest                                          | 420        | -         
|                                                          |            |           
|                                                          | $    7,420 | $    7,000
|                                                          |            |           

The notes payable and any accrued interest are convertible, at
the option of the holder, into the Company's common stock at a price of $1 per
share for each $1 of liability commencing one year after the closing date of the
note payable agreement.

4.    Due to Related Parties

|                                                     | 2003            | 2002            
|---------------------------------------------------- | --------------- | ----------------
|                                                     |                 |                 
|Due to stockholders                                  | $   
    25,441 | $     
    7,744
|Due to a company controlled by a
    common director | 10,000          | -               
|                                                     |                 |                 
|                                                     | $    35,441     | $      7,744    
|                                                     |                 |                 

The amounts due to related parties are unsecured, non-interest
bearing and have no specific terms of repayment.

5.    Capital Stock

a)
During the year ended June 30,
2003, the Company issued 250,000 shares of common stock at $0.05 per share
(based on the fair value of the Company's common stock on the agreement date) to
a company controlled by a significant stockholder for the exclusive option to
purchase a property at a price of $425,000 for a five-year period. The Company
currently leases the property from the company (a stockholder) on a
month-to-month basis for approximately $1,600 (CDN$2,400). It consists a
building and a parking lot which the Company currently subleases to an
independent third party for a term of 41 months for a monthly lease payment of
approximately $2,000 (CDN$2,950).



The annual minimu8m lease payment to be received through the
sublease for the next three years are approximately:

2004                      
$    24,000

2005                            
24,000

2006                     
12,000

$    60,000

b)
During the year ended June 30, 2002, the Company completed a private placement
to issue 800,000 shares of common stock at $0.05 per share for proceeds of
$40,000. During the year, the Company also issued 40,000 common shares at $0.05
per share for services.



c)
During the year ended June 30, 2002, $18,400 of a convertible note and accrued
interest were converted into 18,400 shares of common stock at a price of $1 per
share (based on the agreed conversion price of the note).



d)
During the year ended June 30, 2001, 820,000 common shares were issued pursuant
to two private placements for proceeds totalling $49,000.





Page 17

---



6.    Related Party Transactions

Related party transactions not disclosed elsewhere in these
financial statements include:

|                                                                    | 2003        | 2002               
|------------------------------------------------------------------- | ----------- | -------------------
|                                                                    |             |                    
|Rental expenses incurred with a stockholder                         | $    18,018 | $    21,026        
|Non-refundable deposit for option to purchase
    property (Note 5) | $    12,500 | $            
    -
|                                                                    |             |                    

Transactions with related parties are recorded at the exchange
amount, being the amount established and agreed to by the related parties.



7.    Income Taxes

The tax effects of temporary differences that give rise to the
Company's deferred tax assets are as follows:

|                                   | 2003                  | 2002                
|---------------------------------- | --------------------- | --------------------
|                                   |                       |                     
|Net
    operating losses           | $    76,000           | $    52,000         
|Valuation
    Allowance            | $ (76,000)            | $ (52,000)          
|                                   |                       |                     
|Deferred
    tax asset (liability) | $              
    - | $             
    -
|                                   |                       |                     

The provision for income taxes differs from the amount
computed using the federal statutory income tax rate as follows:

|                                                      | For the year ended June 30, 2003 | For the year ended June 30, 2002
|----------------------------------------------------- | -------------------------------- | --------------------------------
|                                                      |                                  |                                 
|Provision (benefit) at
    the federal statutory rate | $   
    (24,000)                | $   
    (27,000)               
|Increase in valuation
    allowance                   | 24,000                           | 27,000                          
|                                                      |                                  |                                 
|                                                      | $                 
    -         | $               
    -          
|                                                      |                                  |                                 



At June 30,
2003, the Company had losses available for income tax purposes of approximately
$202,000 (2002 - $138,000) which, if not used, will expire between the years
2007 and 2010.



The Company
evaluates its valuation allowance requirements based on projected future
operations.  Management has recorded a valuation allowance because it believes
it is more likely than not that the future income tax benefits of the current
loss will not be realized.  When circumstances change and this causes a change
in management's judgement about the recoverability of deferred tax assets, the
impact of the change on the valuation allowance will be reflected in current
income.

8.    Subsequent Events

a)
Subsequent to June
30, 2003, the Company issued a convertible note to a company controlled by a
director for proceeds of $30,000. The unsecured note bears interest at 10% per
annum and will be due on September 11, 2004. The note payable and any accrued
interest are convertible, at the option of the holder, into the Company's common
stock at a price of $1 per share for each $1 of liability commencing one year
after the closing date of the note payable agreement.



b)    On October 5, 2003,
the Company entered into a lease agreement with a company owned by the Company's
president and a family member for the subleased property for an  annual lease
payment of approximately $21,815 (CDN$29,400 translated at the exchange rate as
at June 30, 2003). The lease will expire on October 1, 2006 and requires minimum
annual lease payments as follows:



|For the
    year ended June 30: |                  
|------------------------------- | -----------------
|                                |                  
|2004                            | $     
    14,543
|2005                            | 21,815           
|2006                            | 21,815           
|2007                            | 5,454            
|                                | $     63,627     
|                                | Page 18          

---





PART II (continued)



ITEM 8.     CHANGES IN AND
DISAGREEMENTS WITH ACCOUNTANTS













(a) Previous
independent accountants

(i)
Effective September 18, 2003, Prodigital Film Labs, Inc. ("Registrant"),
confirmed with its auditors, White Kennedy, Chartered Accountants ("White
Kennedy"), that the firm would no longer be representing the Registrant as its
independent auditors. As of that date, Registrant informed White Kennedy that it
was engaging a new audit firm as the Registrant's independent auditors.

(ii) White Kennedy last reported
on the Registrant's financial statements as of June 30, 2002. Prodigital's
financial statements for the past two years, as audited by White Kennedy, did
not contain an adverse opinion or disclaimer of opinion, and were not qualified
or modified as to uncertainty, audit scope, or accounting principles, except
with respect to an explanatory paragraph concerning going concern contingencies.

(iii) The change of independent accountants was ratified by
the Board of Directors of Prodigital on September 18, 2003.

(iv) During the two most recent
fiscal years as well as any subsequent interim periods preceding the date of
this report, there were no disagreements with White Kennedy on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which, if not resolved, to White Kennedy's
satisfaction, would have caused it to make reference to the subject matter of
the disagreement in connection with its report.  However, White Kennedy's reports on the
Company's  financial statements contained an explanatory paragraph
describing the uncertainty as to the Company's ability to continue as a going
concern.



(v)
During the two most recent fiscal years as well as any subsequent interim
periods preceding the date of this report, there have been no reportable events (as defined in Regulation S-K Item 304(a)(1)(v)).



(a) During the two most recent fiscal years as well as any subsequent interim
periods preceding the date of this report, White Kennedy did not advise Prodigital that the internal controls necessary for the registrant to develop reliable
financial statements do not exist.



(b)  During the two most recent fiscal years as well as any subsequent
interim periods preceding the date of this report, White Kennedy did not advise Prodigital that any
information had come to their attention which had led them to no longer be able
to rely on management's representation, or that had made White Kennedy unwilling to be associated with the financial statements
prepared by management.



(c)  During the two most recent fiscal years as well as any subsequent
interim periods preceding the date of this report, White Kennedy did not advise Prodigital that the scope of any audit needed to be expanded significantly or
that more investigation was necessary.



(d)  During the two most recent fiscal years as well as any subsequent
interim periods preceding the date of this report, White Kennedy did not advise Prodigital that there was any information which the accountants concluded would
materially impact the fairness and reliability of either (i) a previously issued
audit report or the underlying financial statements, or (ii) the financial
statements issued or to be issued covering the fiscal period(s) subsequent to
the date of the most recent financial statements covered by an audit report
(including information that, unless resolved to the accountant's satisfaction,
would prevent it from rendering an unqualified audit report on those financial
statements.

(vi) The
Registrant has requested that White Kennedy Corporation furnish it with a letter addressed to the SEC stating whether or not it agrees with the above statements. A copy of such letter, dated
October 7, 2003, is filed as Exhibit 16.1 to the Company's Form 8-K filed with
the SEC on October 15, 2003.



(b) New independent accountants



The Registrant has engaged BDO
Dunwoody LLP as its new independent auditors on September 18, 2003. Prior to
September 18, 2003, the Registrant had not consulted with BDO Dunwoody LLP regarding (i)
the application of accounting principles to a specified transaction, either
completed or proposed, or the type of audit opinion that might be rendered on
the Registrant's financial statements, and no written report or oral advice was
provided to the Registrant by BDO Dunwoody LLP concluding there was an important factor to be considered by the Registrant in reaching a decision as to an accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K, or a reportable event, as that term is defined in Item 304(a)(1)(iv) of Regulation S-K.



Page 19

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PART III





ITEM
9.     DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS, COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT











The table below lists, as of June 30, 2003, the names of the Directors and Executive
Officers of the Company. The Directors have served in their respective
capacities since their election and/or appointment and will serve until the next
Annual Shareholders' Meeting or until a successor is duly elected, unless the
office is vacated in accordance with the Articles/By-Laws of the Company. The
Executive Officers serve at the pleasure of the Board of Directors. All
Directors and Executive Officers are residents and citizens of the United
States.







Directors and Executive Officers







> Name
>     Age
>     Date Elected or
>       AppointedDarone Davis,
>     President/Director
>     39
>     May 2, 2002Christopher Dieterich, Director
>     55
>     September 20, 2002David Huck,
>     Secretary/Treasurer/Director*
>     57
>     May 2, 2002

*  On September 30, 2003, David Huck resigned from his positions at the
Company.  Darone Davis has been serving the President, Secretary and
Treasurer of Prodigital Film Labs, Inc. while the Board of Directors looks for a
replacement for Mr. Huck.



The following is a brief account of the education and business experience during
at least the past five years of each director, executive officer and key
employee, indicating the principal occupation during that period, and the name
and principal business of the organization in which such occupation and
employment were carried out.



Darone Davis

Darone Davis, 39,
President, Secretary, Treasurer and Director of Prodigital, is an entrepreneur with several years of
experience in the Capital Markets industry and in asset management.  He brings
to Prodigital this experience and is a very active President working full time on this project.  He has
aggressive and dedicated skills in building investment oriented working
companies.

During the two years
before creating Prodigital Film Labs Inc., Mr. Davis was instrumental in the
initial strategies involved in creation and successful structuring of several US
companies, believing strongly that there is no replacement for a public company
to start with a good foundations, sound direction and talented management. He
has served as different officers and director of many companies. After the
creation of these companies, he was directly involved in raising start-up
financing, including a $6 million private placement for a company developing an
AIDS vaccine.



During the last 7
years, Mr. Davis has served as an Asset and Financial Manager, managing many
different wealthy family and International Trusts, and provided other sound and
creative Estate Planning solutions.

David Huck

David Huck, 57,
was the Secretary, Treasurer and Director of Prodigital until September 30, 2003
when he resigned from his positions with the Company.  He is an entrepreneur
who has over twenty years of proactive successful business projects under his
belt.  He is a Financial Analyst and is also a Computer Systems Analyst.  He has
over 15 years of successful Management Consulting experience and brings with him
International Business Marketing expertise.  David
splits his time between conducting
and teaching business classes for a university, finishing his masters degree and
working on this project.

David has over 16
years of direct Business Management and Consulting Experience. During the past
five years, David has been active in the field of Business Consulting for many
corporations completing contracts for Market Analysis, Feasibility Studies and
other business management tasks including Business Planning.  The Summerland
Credit Union and the South Okanagan Regional Health Services have been David's
clients.

For over 10
years, in his capacity as an Instructor, David has delivered business courses
under a private contract for a local University and for several government
funded agencies. David is also qualified as a Trust Officer, and has acted as a
trustee on several trusts carrying out fiduciary responsibilities where
necessary.

Christopher Dieterich



Christopher H. Dieterich, 55, was appointed as a Director of Prodigital by the Board of Directors on September 20, 2002. Mr. Dieterich graduated from Virginia Polytechnic Institute in 1969 with a B.S. in Engineering. Subsequently, Mr. Dieterich attended the University of California at Berkeley where, in 1970, he received his Masters degree in Engineering. In 1979, Mr. Dieterich graduated from the University of California at Los Angeles with JD. Mr. Dieterich served in United States Air Force as an instructor pilot from 1971 to 1976, and maintains licenses as multi-engine, jet and piston, instrument instructor for FAA ratings. Christopher Dieterich has been an attorney licensed to practice in California for the past 24 years, and, during the last 5 years, has remained in private practice with between 2 and 3 associate lawyers, specializing in SEC filings and venture capital arrangements.









Involvement in Certain Legal Proceedings













None of the
officers or directors has been involved in a bankruptcy, criminal conviction, or
subject to any order, judgment or decree, not subsequently reversed, suspended
or vacated by any court of competent jurisdiction, permanently or temporarily
enjoining, barring, suspending or otherwise limiting his involvement in any type
of business, securities or banking activities, or found to be guilty of any
securities laws infractions.















Family Relationships













There are
no family relationships between any of the officers and/or directors.



Section
16(a) Beneficial Ownership Compliance



Section 16(a)
of the Securities Exchange Act of 1934, as amended, requires our executive
officers and directors and persons who own more than 10% of a registered class
of our equity securities to file with the Securities and Exchange Commission
initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership of our common stock and other equity
securities, on Forms 3, 4 and 5 respectively.  Executive officers,
directors and greater that 10% shareholders are required by the Securities and
Exchange Commission regulations to furnish our company with copies of all
Section 16(a) reports they file.



To the best of
our knowledge, all executive officers, directors and greater than 10%
shareholders filed the required reports in a timely manner.



Page 20













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ITEM 10.     EXECUTIVE
COMPENSATION









The following table
summarizes the compensation of our President, Darone Davis, and our
Secretary-Treasurer, David Huck, during the period from inception (May 2, 2000)
to June 30, 2003.  No officers or directors received annual compensation in
excess of $100,000 during the last three complete fiscal years.









SUMMARY COMPENSATION TABLE

> Name and
>       Principal Position
>       (a)
>       Year
>       (b)
>       Annual Compensation
>       Long-Term Compensation
>       All Other Compensation
>       ($)
>       (i)Salary
>       ($)
>       (c)
>       Bonus
>       ($)
>       (d)
>       Other Annual
>       Compensation
>       ($)
>       (e)
>       Awards
>       PayoutsRestricted
>       Stock Award(s)
>       ($)
>       (f)
>       Securities
>       Underlying Options/SARs
>       (#)
>       (g)
>       LTIP Payouts
>       ($)
>       (h)Darone Davis
>       2003
>       0
>       0
>       0
>       0
>       0
>       0
>       0President
>       2002
>       0
>       0
>       0
>       0
>       0
>       0
>       02001
>       0
>       0
>       0
>       0
>       0
>       0
>       0David
>       Huck
>       2003
>       0
>       0
>       0
>       0
>       0
>       0
>       0Secretary/Treas.
>       2002
>       0
>       0
>       0
>       0
>       0
>       0
>       02001
>       0
>       0
>       0
>       0
>       0
>       0
>       0Christopher Dieterich
>       2003
>       0
>       0
>       0
>       0
>       0
>       0
>       0Director
>       2002
>       0
>       0
>       0
>       0
>       0
>       0
>       02001
>       0
>       0
>       0
>       0
>       0
>       0
>       0
> 
>   Employment/Consulting Agreements
>   We have not entered into any employment or consulting agreements with any of
>   our current officers, directors or employees. There are no arrangements or
>   plans in which we provide pension, retirement or similar benefits for
>   directors or executive officers. We do not have any material bonus or profit
>   sharing plans pursuant to which cash or non-cash compensation is or may be
>   paid to our directors or executive officers.
>   Stock Options/SAR Grants
>   We do not have a stock option plan Accordingly, no options were granted during
>   the year ended June 30, 2003.
>   Director Compensation
>   We do not have a compensation committee. We reimburse our directors for
>   expenses incurred in connection with attending board meetings but did not pay
>   director's fees or other cash compensation for services rendered as a director
>   in the year ended June 30, 2003.
>   We have no formal plan for compensating our directors for their service in
>   their capacity as directors. No director received and/or accrued any
>   compensation for his or her services as a director, including committee
>   participation and/or special assignments.
> 
> 
> 
> Page 21

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ITEM 11.     SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT













The Registrant is a publicly owned corporation, the shares of which are owned by
Canadian residents. The Registrant is not controlled directly or indirectly
by another corporation or any foreign government.











The table below lists, as of September 30, 2003, all persons/companies the Registrant is
aware of as being the beneficial owner of more than five percent (5%) of the
common stock of the Registrant.



5% Shareholders



> Title of Class
>     Name of Beneficial Owner
>     Amount &
>       Nature of
>       Beneficial
>       Ownership
>     Percent of ClassCommon
>     Darone Davis
>     1,500,000
>     30.55%Common
>     David Huck
>     1,750,000*
>     30.55%Common
>     Summer Holdings,
>     LLC
>     820,000
>     16.70%Common
>     Spectrum
>     Management
>     600,000
>     12.22%Common
>     Sigma Business
>     Consulting, Ltd.
>     250,000*
>     5.09%Total
>     
>     4,670,000**
>     95.11%







*  This number is the sum of 1,500,000 and 250,000.  David Huck owns
1,500,000 in his own name and 250,000 shares belong to Sigma Business
Consulting, Ltd., a company that David Huck is President and majority
shareholder of.



**  The total number excludes the 250,000 shares held by Sigma Business
Consulting Ltd. are they are already included in the number of shares of which
David Huck has beneficial ownership.



The table below lists all Directors and Executive Officers who beneficially own
the Registrant's voting securities and the amount of the Registrant's voting
securities owned by the Directors and Executive Officers as a group, as of
September 30, 2003.









Shareholdings of Directors and Executive Officers



> Title of Class
>     Name of Beneficial Owner
>     Amount &
>       Nature of
>       Beneficial
>       Ownership
>     Percent of ClassCommon
>     Darone
>     Davis
>     1,500,000
>     30.55%Common
>     David
>     Huck
>     1,750,000*
>     35.51%Total
>     
>     3,250,000
>     66.06%

















*  This number is the sum of 1,500,000 and 250,000. 
David Huck owns 1,500,000 in his own name and 250,000 shares belong to Sigma
Business Consulting, Ltd., a company that David Huck is President and majority
shareholder of.



The above ownership percentages are based in 4,928,400 shares
of common stock issued and outstanding as of September 30, 2003.  Except as
otherwise indicated, we believe that the beneficial owners of the common stock
listed above, based on information furnished by such owners, have sole
investment and voting power with respect to such shares, subject to community
property laws where applicable.  Beneficial ownership is determined in
accordance with the rules of the SEC and generally includes voting or investment
power with respect to securities.  There are no shares of common stock
subject to options or warrants currently exercisable, or exercisable within 60
days.



Change in Control



We are unaware of any contract or other arrangement, the
operation of which may, at a subsequent date, result in a change of control of
our company.



Page 22

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ITEM 12.    CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS









Except as discussed
above and below, there have been no transactions, or proposed transactions,
which have materially affected or will materially affect us in which any
director, executive officer or beneficial holder of more than 10% of the
outstanding common stock, or any of their respective relatives, spouses,
associates or affiliates, has had or will have any direct or material indirect
interest.
* As at June 30, 2003, $35,441 is due to Darone Davis (and companies he controls)
and David Huck (and companies he controls). Amounts owing are
unsecured, non-interest bearing and without specific terms of repayment.



*  As at June 30,
2003, a convertible note's payable and accrued interest of $2,120 were due to a
family member of the Company's president.

* On August 14, 2002, we issued 250,000 shares of our common stock to Sigma
Business Consulting Ltd. 
in exchange for a non-refundable exclusive option to purchase real property at a
price of $425,000 for a five-year period.

* During the year ended June 30, 2003, we incurred rental expenses to Sigma
Business Consulting Ltd. for our property totaling $18,018 (2002 - $21,026). Our property
was rented from June 1, 2000 to May 31, 2001 and continues on a month-to-month basis
after the lease expired.

* On September 11, 2003, we received proceeds of $30,000 and issued a convertible note
payable to Golden Terra, LLC, a company that Darone Davis controls. The unsecured note bears interest at
10% per annum and
is due on September 11, 2004. The note payable and accrued interest are
convertible at the option of the holder into our common stock at a price of $1
per share.
As at the date of this annual report, we do not have any policies in place with
respect to whether we will enter into agreements with related parties in the
future.









ITEM 13.    EXHIBITS AND REPORTS ON FORM
8-K













(a) The
following documents are filed as part of this report:









I. Financial Information
Independent Auditors' Report
Prior Independent Auditors' Report
Balance Sheets at June 30, 2003 and 2002 
Statements of Operations for the years ended June 30, 2003 and 2002 and the
cumulative period from May 2, 2000 (inception) to June 30, 2003 
Statements of Statement of Changes in Capital Deficit for the period from May 2,
2000 (inception) to June 30, 2003 
Statements of Cash Flows for the years ended June 30, 2003 and 2002 and the
period from May 2, 2000 (inception) to June 30, 2003 
Summary of Significant Accounting Policies
Notes to Financial Statements
II. Reports on Form 8-K
On October 15, 2003, we filed a current report on Form 8-K announcing the
resignation of White Kennedy as our independent auditors and the appointment of BDO Dunwoody LLP in their place. Our Board of Directors approved the change of
auditor to BDO Dunwoody LLP effective September 18, 2003.
III. The exhibits are listed in the index of exhibits
The index of exhibits
3.1 -   Articles of Incorporation, dated May 2, 2000*
3.2 -   ByLaws, adopted on May 15, 2000*
10.1 - Option to Purchase Contract entered into between Sigma Business 
          Consulting, Ltd. and
Prodigital on February 26, 2002*
10.2 - Commercial Property Lease entered into between Sigma Business 
          Consulting, Ltd. and
Prodigital on June 1, 2000*
10.3 - Commercial Auto Sublease entered into between Sigma Business 
           Consulting, Ltd.
and Prodigital on June 13, 2000*

10.4 - Commercial Property Lease entered into between Orchard Breezes Property
Development and Prodigital on October 5, 2003
31.1 - Certification of Principal Executive and Financial Officer as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 - Certification of Principal Executive Officer Pursuant to 18 U.S.C Section
1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
* previously filed
Item 14. Controls and Procedures 
As of the end of the period covered by this annual report, we carried out an
evaluation, under the supervision and with the participation of our management,
including the Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure controls and
procedures pursuant to Rule 15d-15 under the Securities Exchange Act of 1934.
Based on that evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective in
ensuring that the information required to be disclosed in the reports we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in the SEC's rules and
forms.
There have been no changes in internal control over financial reporting that has
materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting subsequent to the date the Chief Executive
Officer and Chief Financial Officer completed their evaluation. 
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Company has duly caused this report to be signed on its behalf

by the undersigned, thereunto duly authorized.
PRODIGITAL FILM LABS, INC.
a Nevada corporation
Date: October 21, 2003
By: /s/ Darone Davis
Darone Davis, President and Director



Date: October 21, 2003
By: /s/ Christopher Dieterich
Christopher Dieterich, Director

Page 23

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Exhibit 10.4



Commercial Lease







This lease is made in duplicate between:



Orchard Breezes Property Development, Inc., (the "Landlord")









and







(2)    ProDigital Film Labs Inc., (the "Tenant")







The Landlord and the Tenant hereby agree as follows:







The Landlord hereby grants the Tenant a lease of the premises in their entirety
located at 749 Main St., Penticton, B.C. V2A 5E1 and 761 Main Street., Penticton, B.C.
(the "Premises.")













The parties agree that the Premises have a rented area of 3,200 square feet, excluding the
exterior walls but also including the adjacent parking lot.







2.    The term of this lease commences on October 5, 2003 and ends on October 1,
2006









If the Tenant continues in occupation of the Premises with the consent of the Landlord
after expiry of the term of this lease, the Tenant shall be deemed to be leasing the
Premises on a month-to-month basis but otherwise on the same terms as set out in this
lease.







3.   
The Tenant may use the premises for Film Post-Production Services and
Executive Offices or sublet to another tenant approved in writing by the landlord.









4. 
(a)    The Tenant shall pay the Landlord a "base rent" of Twenty-nine Thousand
Four Hundred dollars ($29,400.00) per year in equal monthly installments of  Twenty-four Hundred Fifty dollars ($2,450.00) in advance on or before the first of each month
commencing on November 1st, 2003 with the base rent for any broken portion of a
calendar month in which this lease terminates being prorated.







(b)    The Landlord shall invoice the Tenant monthly for additional rent incurred
during the preceding calendar month. Each invoice is payable in full thirty days after
delivery. The Tenant is deemed to have admitted the accuracy of the amount charged in
any invoice for additional rent which he or she has not challenged in writing within the
same thirty days.







(c)    The Tenant shall also pay the Landlord as "additional rent," on demand,
100% of the total costs reasonably incurred by the Landlord including, but not limited to
legal fees, of curing any default of the Tenant under this lease, including but not limited
to enforcing payment of rent and regaining lawful possession of the Premises.









5.    The following services and expenses are the sole responsibility and expense of the
Tenant:









1.    Electricity







2.    Natural Gas







3.    Property Taxes







4.    Water Rates







5.    Normal Building Maintenance Re-Modeling Costs, with the permission of the Landlord.













6.     The following services and expenses are the sole responsibility and expense of the
Landlord:









Any exterior structural repairs or building services equipment failures.













7.    The Landlord shall also be solely responsible for repairs or improvements to the
structure and to the exterior of the building.









8.    Any services and expenses relevant to the use by the Tenant of the Premises and
not mentioned in this lease are the responsibility and expense of the Tenant.









9.    The Landlord covenants with the Tenant that so long as the Tenant complies with
the terms of this lease, the Tenant may occupy and enjoy the Premises without any
interruption from the Landlord.









10.    The Landlord is not liable for any damage to the Tenant's property or for any
injury to any person in or coming to or from the Premises, however caused, and the
Tenant agrees to indemnify the Landlord against the financial consequences of any such
liability. In this regard, the Tenant shall purchase and maintain public liability insurance
in the amount of no less than One Million dollars ($1,000,000.00) and shall provide proof
of this insurance to the Landlord on request.









11.    The Landlord may terminate this lease for any one of the following or any other
cause permitted by law:











(a)    fifteen days' arrears of rent or additional rent;











(b)    the bankruptcy or insolvency of the Tenant;









(c)    a material change in the use of the Premises by the Tenant and, in
particular (without limiting the generality of this provision), any change
that affects the Landlord's building insurance or that constitutes a
nuisance.











(d)    any unauthorized assignment or subletting of this lease by the Tenant;











(e)    substantial damage to or destruction of the Premises;











(f)    any sale or material change in use of the building in which the Premises
are located by the Landlord;











(g)    any significant willful or negligent damage to the Premises caused by the
Tenant or by persons permitted on the Premises by the Tenant.









12.    The Tenant may not assign or sublet the Premises, in whole or in part, or allow
the Premises to be used by any other person without the written consent of the Landlord,
which consent may not be unreasonably withheld.









13.    The Tenant shall keep the Premises in a reasonable state of repair and cleanliness
and shall not make improvements or alterations to the Premises without the written
consent of the Landlord, which consent shall not be unreasonably withheld.









14.    At the end of the lease, the Tenant shall deliver vacant possession to the Landlord
of the Premises in the same condition as at the commencement of the lease, reasonable
wear and tear excepted and except that the Landlord may, in the Landlord's sole
discretion, elect to keep any of the Tenant's improvements, alterations, or fixtures.









15.    Any written notice required or permitted to be given by this lease is sufficiently
given if sent in proper form by ordinary mail to the last known address of the party for
whom the notice is intended. Any written notice sent by ordinary mail in accordance with
this paragraph is deemed, for the purposes of this lease, received by the addressee on the
seventh day after mailing unless actually received before. Nothing in this paragraph
prevents giving written notice in any other manner recognized by law.









16.    In this lease, words importing the singular include the plural, and vice versa, and
importing the masculine gender include the feminine, and importing an individual
include a corporation and vice versa. This lease binds and benefits the parties and their
respective heirs, successors, and permitted assigns.









17.     If not in default under this lease, or by agreement between the parties, the tenant
may exercise their option to purchase without notice or penalty, by providing written
notice of intention to exercise the purchase option to the landlord.









18.    If not in default under this lease, the Tenant has the right to renew this lease for a
further term of three years exercisable by giving written notice of renewal to the
Landlord in the six-month period immediately before the expiry of the original fixed term
of this lease. The renewed lease is granted on the same terms as set out in this lease
except as to base rent and without any further right of renewal. The base rent payable by
the Tenant in the renewed term may be agreed between the Landlord and Tenant but,
failing such agreement before commencement of the renewed term of the lease, the
amount of the base rent shall be referred to and settled by a single arbitrator agreed upon
by the parties or, in default of such agreement, to a single arbitrator appointed pursuant to
the legislation governing submissions to arbitration in the jurisdiction whose laws govern
this agreement. The decision of the arbitrator is final and binding on the parties with no
right of appeal.









Executed under seal on October 5, 2003         .















Janet Cornett-Ching



___________________________







for the Landlord







Orchard Breezes Property Development, Inc.







Darone M. Davis



___________________________







for the Tenant







ProDigital Film Labs, Inc.











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Exhibit
31.1



| | 
| | 

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Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. Section 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of
Prodigital Film Labs, Inc. on Form 10-KSB for the year ending June 30, 2003, as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I,
Darone Davis, Principal Executive and Financial Officer of the Company, certify, pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1)
the Report fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and (2) the information contained in the Report
fairly presents, in all material respects, the financial condition and result of
operations of the Company.

/s/ Darone Davis

Darone Davis

Principal Executive
and Financial Officer

October 21, 2003