SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549




___________________________




FORM
10-KSB


___________________________




Annual
Report Under Section 13 or 15(d) of the


SECURITIES
EXCHANGE ACT OF 1934




x
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934




For
Fiscal Year Ended


December
31, 2002




Commission
File #0-32029




CONCEPT
DIGITAL, INC.


(Exact
name of registrant as specified in its charter)




Delaware


(State or
other jurisdiction of incorporation or organization)




22-3698370


(IRS
Employer Identification Number)




298
Fifth Avenue


New
York, NY, 10001


(Address
of principal executive offices)(Zip Code)






(212)
564-1600


(Registrant’s
telephone no., including area code




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




Title of
each class Name of each exchange on which registered






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




Common Stock, $0.001 par
value


(Title of
class)




(Former
name, former address and former fiscal year,


if
changed since last report)












Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.




Yes  £       No   x




Indicate
by check mark whether the registrant is a shell company as defined in Rule12b-2
of the Exchange Act.




Yes  £         No  x




Check if
there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B not contained in this form, and no disclosure will be contained,
to the best of the 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. ( )




Revenues
for year ended December 31, 2002: $96,000




Aggregate
market value of the voting common stock held by non-affiliates of the registrant
as of April 7, 2008, was: $0




Number of
shares of the registrant’s common stock outstanding as of April 7, 2008 is:
39,683,381




Transfer
Agent as of April 7,
2008:                  
Corporate Stock Transfer


3200 Cherry Creek Drive, Suite
430


Denver, CO 80209













TABLE OF CONTENTS
  Part
      I.ITEM
      1.
                DESCRIPTION
      OF BUSINESS
                1ITEM
      2.
                DESCRIPTION
      OF PROPERTY
                5ITEM
      3.
                LEGAL
      PROCEEDINGS
                5ITEM
      4.
                SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY HOLDERS
                5Part
      II.ITEM
      5.
                MARKET
      FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
                5ITEM
      6.
                MANAGEMENT’S
      DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
                6ITEM
      7.
                FINANCIAL
      STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA
                8Part
      III.ITEM
      8.
                CHANGES
      IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
      DISCLOSURE
                11ITEM
      9.
                DIRECTORS,
      EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS:
                12ITEM
      10.
                EXECUTIVE
      COMPENSATION
                13ITEM
      11.
                SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                13ITEM
      12.
                CERTAIN
      RELATIONSHIPS AND RELATED TRANSACTIONS.
                14ITEM
      13.
                EXHIBITS
      AND REPORTS ON FORM 8-K
                14SIGNATURES
                
                15











Forward-Looking
Statements




This Form
10-KSB contains “forward-looking statements” relating to Concept Digital, Inc.
(the “Company”), which
represent the Company’s current expectations or beliefs including, but not
limited to, statements concerning the Company’s operations, performance,
financial condition and growth. For this purpose, any statements contained in
this Form 10-KSB that are not statements of historical fact are forward-looking
statements. Without limiting the generality of the foregoing, words such as
“may”, “anticipation”, “intend”, “could”, “estimate”, or “continue” or the
negative or other comparable terminology are intended to identify
forward-looking statements. These statements by their nature involve substantial
risks and uncertainties, such as losses, dependence on management, variability
of quarterly results, and the ability of the Company to develop a growth
strategy and compete with other companies in its industry, certain of which are
beyond the Company’s control. Should one or more of these risks or uncertainties
materialize or should the underlying assumptions prove incorrect, actual
outcomes and results could differ materially from those indicated in the
forward-looking statements.




Any
forward-looking statement speaks only as of the date on which such statement is
made, and the Company undertakes no obligation to update any forward-looking
statement or statements to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events. New factors emerge from time to time and it is not possible for
management to predict all of such factors, nor can it assess the impact of each
such factor on the business or the extent to which any factor, or combination of
factors, may cause actual results to differ materially from those contained in
any forward-looking statements.














PART
I




ITEM
1. DESCRIPTION OF
BUSINESS





As of
December 31, 2000, i-AntiqueAuction.com, Inc. (the "Company" or "i-Antique") was
a development stage company which was anticipating the completion of a
specialized online person- to-person trading website dedicated to bringing
together antique sellers and buyers. The website would have resided at
WWW.I-ANTIQUEAUCTION.COM, and will attempt to serve as a centralized auction for
buyers and sellers to meet, negotiate sales, and finally consummate transactions
directly, thereby bypassing the time and expense of
intermediaries.  In addition, i-Antique owns the domain names
"i-AntiqueAuction.com" and "i-AntiqueAuction.net". Anticipated sales would have
been conducted by a traditional rising price auction (the highest bid wins), and
will be hosted by the Company. The Company's goal was to create an integrated
antique site for individuals on both sides of the transaction, and thus would
offer additional value added services through links to its strategic partners.
i-Antique anticipated that it will achieve this goal by growing through
acquisitions of companies and businesses in complimentary industries. In
addition to the auction, anticipated products offered through strategic partners
will include: loan services, insurance, antique appraisal, moving and shipping
companies, interior design specialists, content links for researching antiques
and collectibles, and image hosting services for showing an item on
line.





Our
corporate offices were located at 136 West 32nd Street,
New York, NY 10001.  Our corporate offices are currently located at
298 Fifth Avenue, New York, NY 10001.  Our corporate staff consists of
one person experienced in the online market. The Company's telephone number is
(212) 564-1600.





Concurrently
with the share exchange discussed below,, the Company changed its business plan
to become a development stage company whose goal is to become a leading provider
of digital imaging services and changed its name to Concept Digital,
Inc.





In
September 2001, the Company completed a share exchange with PhotoAmerica,
Inc.  a New York corporation ("PAI") where the Company would acquire
all the issued and outstanding shares of capital stock of PAI in exchange solely
for shares of Concept Digital common stock. PAI operates the website
photoamerica.com, which enables digital camera users to upload their photographs
via the Internet to our outsourced developing facility for
processing.





DIGITAL
CAMERAS





Today,
consumers can buy a digital camera with mega-pixel resolution, offering all the
features of top-of-the-line 35mm cameras, such as zoom lenses and manual
controls. Most digital cameras also come equipped with a built in monitor that
allows the photographer to review the picture immediately after taking it. The
most commonly quoted benefit of digital cameras is that it allows the
photographer to immediately determine if he is satisfied with the image. If not,
the image is simply deleted and the picture can be re-shot.  Digital
cameras also allow photographers to transfer their images to a computer and
digitally manipulate and enhance the photo before printing it. This is a far
more desirable alternative than film based cameras, where the photographer can
only determine if a picture is to their liking after it has been developed
(industry surveys show that the average consumer typically only likes four out
of every 36 pictures printed).





COMPUTERS
AND THE INTERNET IN THE PHOTOGRAPHY INDUSTRY





The
continuing evolution of the Internet as an entertainment medium coupled with
rapid advances in technology has had a significant impact on the traditional
chemical film based photo-processing model. Traditionally, photographers finish
a complete roll of film, bring the film to their local photo processor, and then
return for a second visit to retrieve the pictures. The photos are evaluated to
determine the interest in additional prints, at which point the consumer must
place another order and return again to pick up the reprints. Digital
photography, the Internet and advances in printing technology are introducing
attractive alternatives. Photographs can be stored on a PC or uploaded to the
Internet where they can be viewed, edited and reprinted at any time using a
color desk top printer or professional processing techniques.





PRODUCTS
AND SERVICES





THE
WEBSITE





Our
website will be the primary tool through which customers will purchase products
and services and through which we will conduct marketing initiatives for its
Profit Partners. The website is expected to feature related content and
advertising targeted to the Company's customer base, and links to other
appropriate sites. The following is an overview of the site's
features:





CUSTOMER
ACTIVATION





The
website has been planned to be straightforward and minimally intrusive;
customers will review and fully evaluate all services of the site, short of
placing an order, without providing us with any personal
information.  Customers will be able to immediately begin to upload
images upon entering the site.





Specifically,
we have planed to accept customer images in virtually any format compatible with
digital images, including jpegs (.jpg), bitmaps (.bmp), tiffs (.tif),
encapsulated post script (.eps) and more.






1




GENERAL
CONTENT





In
addition to serving as the primary interface to customers, our website will
provide a community environment, offering visitors advice regarding digital
photography, cameras and related products.





ARTICLES





Additionally,
it is anticipated that our website will feature articles written to inform
digital camera users on a broad variety of topics such as photography
techniques, industry trends, accessory introductions, and "Ask the
Expert".





BUYING
GUIDE





We plan
to engage a professional writer to prepare a buying guide that will be updated
regularly.  This service can attract potential customers to our
planned website and may also induce digital camera manufacturers and retailers
to advertise on the website.





CUSTOMER
SERVICE





The
regularly updated FAQ section of the site will assist customer with
issues.  Also, the customer service department will be able to be
contacted via email from the website.





WARRANTY
REGISTRATION





Although
many manufacturers enable customers to do so through their own site, the vast
majority of consumer do not register their electronic purchases, either on-line
or by mail.  We may work with manufacturers to offer incentives, such
as a free reprint, to consumers that use the site to register their electronic
purchases. This information can then be shared with the manufacturer for
additional marketing purposes.





DIRECTORY
OF PROFIT PARTNERS





As a part
of our planned Profit Partner program, we plan to feature the names, addresses
and phone numbers of all future merchant partners and companies on the
website.





ADVERTISING
AND RESOURCE LINKS





We plan
to sell advertising to a variety of camera and related equipment manufacturers
in addition to other e-tailers seeking to target its customer base on our
site.





Longer
term, we may provide links to resources for our customers to photography
magazines.





PROCESSING
SYSTEMS





Our
primary activity will be the production of images from digital
feeds.  Customers can upload selected images to our server where they
will be stored in a file database, from which they can be retrieved, modified
and printed as often as desired. Using state-of-the-art equipment, outsourced
technicians will apply the silver-halide chemical process used to process
film-based photographic images.





Digital
processing activities will be outsourced to major digital processor
facilities.  The photo finishing process will begin with the entry of
each order into a customer database, primarily using information provided by the
anticipated customer. Each order will receive a bar-coded identification number
that will enable the tracking of the order throughout the production
process.  Once the files have been uploaded, each image will be
computer analyzed and color-corrected as warranted or instructed, then printed
on photographic paper.  Shipping information will then be printed on
labels and forwarded to the traffic department to await completion of the order.
After a visual quality inspection, the orders will be packaged for delivery.
Orders for which recipients will provide e-mail addresses will be digitized and
delivered through the our Internet Service Provider







2




STANDARD
REPRODUCTIONS





Using the
information gathered during customer registration and order placing, we will
provide a selection of printing alternatives.  We plan to offer a
variety of print packages including the following:





o
Single image prints in a variety of sizes from 4" X 6" to 11" X 14"
o


Pre-printed
frame templates in hundreds of designer patterns o Package


prints
(e.g. 4 copies of the same image on one sheet) o Multi-image


package
prints (e.g., up to 10 different images on a single sheet) o


Passport
photos o Photo business cards





Pricing
for development will be dependant upon the size and complexity of the
process.





ACCESSORIES
AND NOVELTIES





We plan
to offer an extensive array of accessory products and novelties including frames
and photo-personalized gifts ranging from mugs to T-shirts to greeting
cards.  Pricing for these items will be in the $2.35 to $29.95 range
and will be sold on the website.





ELECTRONIC
GREETING CARDS





We plan
to develop an extensive library of electronic cards, designer frame templates
and email backgrounds that can be applied to a customer's printout. Customers
will be able to choose from an array of designs, including birthdays,
anniversaries, holidays and other standard occasions.  Customers will
also be able to create customized cards with a personalized
greeting.





DISTRIBUTION





It is
anticipated that completed orders will be shipped to the addresses designated by
the customer upon completion of the order. Standard distribution will be United
States Postal Service, First Class, however customers will have the option of
selecting priority or overnight delivery service for an extra cost.





ON-LINE
ADDRESS BOOK





It is
anticipated that customers may provide us with multiple addresses for delivery
of their photographs or other products. For example, a customer might wish to
order multiple copies of a Christmas card to be mailed to list of family and
friends. These names and addresses will then be stored in the customer's file
for future use.





IMAGE
STORAGE AND MANAGEMENT





Current
plans will allow us to offer our customers the ability to store and access their
images (even those that are not printed) on our server at no
charge.





ACCOUNT
MANAGEMENT





Customers
will be offered a database management tool which will enable them to manage all
aspects of the electronic distribution of their library. Using these tools, a
customer will be able to enter addresses, calendar reminders, etc. The site will
also enable the customer to keep track of pending and completed orders with the
Company.





MARKETING
AND ROLL OUT STRATEGY





We are in
the process of developing a rollout strategy. We anticipate that it will enable
us to penetrate the market and overtime, establish a leadership position in the
online processing of digital images. This strategy comprises the following
steps.





O        INTRODUCE
PRODUCTS AND SERVICES TO INDUSTRY PARTICIPANTS


O        ESTABLISH
PROFIT PARTNER DEALER NETWORK


O        IMPLEMENT
AGGRESSIVE SALES AND MARKETING CAMPAIGNS







3






INTRODUCE
PRODUCTS AND SERVICES TO INDUSTRY PARTICIPANTS





We
expects to utilize a variety of tools to present the website and services to
potential Profit Partners, however we believe it will have broadest access to
its target audience at industry trade shows.  We anticipate signing up
vendors for the Profit Partner program at these types of shows. Management
believes that trade shows and other industry events provide it with the ideal
environment to feature the product.





ESTABLISH
PROFIT PARTNER DEALER NETWORK





Concept
Digital plans to create an affiliate program designed to attract vendors from
around the country to assist in the marketing of its products and
services.  We anticipate that these retailers and e-tailers, in
exchange for a recurring commission, will hand out or deliver at point of
purchase, a ConceptDigital.com free offer coupon to the digital camera buyer.
The retailer's Profit Partner code will be embedded in the coupon. When the
consumer sets up an account on the site to redeem the free offer coupon, they
will be assigned in the database to the Profit Partner that referred them. From
that point on the Profit Partner will receive a preset commission on any
purchases that consumer makes. We believe that this highly targeted marketing
approach should yield much greater, more cost effective results than an
aggressive advertising campaign.





Profit
Partners are expected to come from the following sectors:





INDEPENDENT
PHOTOGRAPHY SHOPS





There are
more than an estimated 5,000 independent photography shops throughout the
country and they continue to lose market share. This sector is increasingly
faced with competition from three sources; two national photography chains, Ritz
Camera Centers and Wolf Camera; mass merchandisers such as Wal-Mart and K-mart,
as well as Internet vendors. The changing face of the market is forcing
specialty shops to cut their margins or risk losing business.





EQUIPMENT
MANUFACTURERS





We will
seek to establish affiliations with digital camera manufacturers.  Our
site will not sell any merchandise or services other than its own from the site,
however it will provide links to the sites of Profit Partner manufacturers.
Profit Partner manufacturers will feature our website by including the logo on
packaging, coupon inserts with their products or through mention in users'
manuals or newsletters.





RELATED
VENDORS





We will
seek to establish relationships with appropriate related vendors such as event
photographers and frame manufacturers. Through these relationships, we
anticipate vendors will offer the services of our Company as an added value to
their customers. For example, wedding guests will be able to view the
photographer's proofs in order to select and order their own set of photographs;
frame buyers might get a discounted reproduction with the purchase of multiple
frames.





We
anticipate that our Profit Partner program will provide participants with
significant benefits as discussed below:





COMPETITIVE
EDGE





We
anticipate that our program will enable Profit Partners to provide their
customers with a unique and value-added service which will positively
differentiate them from their competitors.





ADDITIONAL
INCOME





It is
anticipated that Profit Partners will be provided with a recurring commission in
exchange for encouraging their customers to visit our website. This program will
provide Profit Partners with a stream of income that would otherwise not be
generated, and at no cost to them. Vendors will receive a fee on any
transactions conducted by a referral throughout the term of their association
with us. We will track all revenues and will forward Profit Partners checks on a
quarterly basis.






4





COMPETITION





While
there are few companies that compete directly with us, the Company anticipates
competing indirectly with a variety of sources as described below.





PROCESSING
OF TRADITIONAL FILM TO DIGITAL IMAGES





Kodak
gives consumer the ability to develop non-digital film and receive prints as
well as digital images of the photo via e-mail or on disk for viewing on a
personal computer. Wal-Mart Stores Inc. and Fuji also offer Internet-based photo
centers.





SPECIALTY
RETAIL SHOPS AND MASS MERCHANDISERS





RITZ
CAMERA CENTERS is the United States' largest photo-specialty chain with more
than 1,000 stores in 47 states and the District of Columbia that provide
one-hour photo finishing, digital imaging, and other services.





WOLF
CAMERA operates one-hour photo labs at each of its 750-plus stores. Film
processing and related services make up a third of Wolf Camera's business.
Located in 34 states, its stores sell cameras, camcorders, film and accessories
and feature Kodak do-it-yourself enlargement centers where customers make
digital-quality reprints from photos or computer files. Wolf's also offers
digital imaging services, including alteration, restoration, and transferring
customers' photos to floppy disks.





PICTUREWORKS
(formerly Seattle FilmWorks) markets 35mm film, photo processing, photofinishing
services and products, and a variety of digital photo services, including
"PhotoMail" (digital-photo delivery to the customer via the Internet) and
"Pictures On Disk" (digitized photos on a disk or CD). It markets primarily on a
mail-order basis and through about 40 retail stores in Oregon and Washington.
Pictureworks has recently added digital imaging technology in order to compete
with faster in-store retail processors.





Most mass
merchandisers and drug store chains provide customers with developing services.
Some offer on-site capabilities, others send the work out to independent
processors. However, these services, like Kodak's Picture Maker and Pictureworks
require the consumer bring their film to a remote facility for processing before
they can take advantage of the services.





Employees





As of
December 31, 2002, the Company did not have any employees.





ITEM
2. DESCRIPTION OF
PROPERTY





During
the period ended December 31, 2002, the Company shared office space in a
building located at 136 West 32nd Street,
New York, NY 10001 until June 30, 2002. The Company rented this
office space on a month-to-month basis from an affiliated entity, Douek
Holdings, Ltd., rent expense aggregated $24,000 in 2002.





The
company presently shares office space with an affiliated company in a building
located at 298 Fifth Avenue, New York, NY 10001 at no charge.





ITEM
3. LEGAL
PROCEEDINGS





The
Company is not presently parties to any litigation, nor to the Company’s
knowledge and belief is any litigation threatened or contemplated.





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





None.





PART
II




ITEM
5. MARKET FOR COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS





As of
December 31, 2002, there is no public market for our common stock.  As
such, the Company’s common stock is not currently available for
trading.







5




Holders





As of
December 31, 2002, in accordance with our transfer agent records, there were 133
shareholders of record of the Company’s common stock.





Dividends





The
Company does not intend to issue dividends. However, should we decide to issue
dividends, any payment of cash dividends in the future will be dependent upon:
the amount of funds legally available therefore; the Company's earnings;
financial condition; capital requirements; and other factors which the Board of
Directors deems relevant.





Recent Sales of Unregistered
Securities





During
the fiscal year ended December 31, 2002, we did not issue any shares of our
common stock.





Stock Options
Grants





As of
December 31, 2002, we have stock options outstanding on 1,880,000 shares of our
common stock.





ITEM
6. MANAGEMENT’S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS





The
following management’s discussion and analysis provides information which
management believes is relevant to an assessment and understanding of our
results of operations and financial condition.  The discussion should
be read along with our consolidated financial statements and notes
thereto.





The
following discussion and analysis contains forward-looking statements, which
involve risks and uncertainties.  The Company’s actual results may
differ significantly from the results, expectations and plans discussed in these
forward-looking statements.





The
accompanying consolidated financial statements have been on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business.  As reflected in the
consolidated financial statements, losses from June 15, 1999 (date of inception)
through December 31, 2002 aggregated ($1,895,000) raise substantial doubt about
the Company’s ability to continue as a going concern.  The Company’s
cash flow requirements during this period have been met by contributions of
capital and debt financing, primarily from related parties.  The
Company anticipates that financing will be required until such time that the
Company has been able to develop its own business or find an appropriate merger
candidate.  Currently, the Company cannot determine when either will
occur and as such the Company will need to obtain financing to cover its costs
for the foreseeable future.  No assurance can be given that these
sources of financing will continue to be available.  If the Company is
unable to generate profits, or unable to obtain additional funds for its working
capital needs, it may have to cease operations.





CRITICAL
ACCOUNTING POLICIES





Our
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which require our
management to make estimates that affect the amounts of revenues, expenses,
assets and liabilities reported. The following are critical accounting policies
which are important to the portrayal of our financial condition and results of
operations and which require some of management’s most difficult, subjective and
complex judgments. The accounting for these matters involves the making of
estimates based on current facts, circumstances and assumptions which could
change in a manner that would materially affect management’s future estimates
with respect to such matters. Accordingly, future reported financial conditions
and results could differ materially from financial conditions and results
reported based on management’s current estimates.





Revenue
recognition:




Revenue
from processing images is recognized upon delivery of the images.  The
Company recognizes revenue from warranties over the term of the
warranty.








6








Income
taxes:





The
Company utilizes Statement of Financial Standards (“SFAS”) No. 109, “Accounting
for Income Taxes”, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in financial statements or tax returns.  Under this method,
deferred income taxes are recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each period based on enacted tax laws and statutory tax
rates applicable to the period in which the differences are expected to affect
taxable income.  Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be
realized.  The accompanying consolidated financial statements have no
provision for deferred assets or liabilities.




YEARS
ENDED DECEMBER 31, 2002 AND 2001





Revenues
during the year ended December 31, 2002 totaled $30,000 as compared to $3,000
for the year ended December 31, 2001. The increase in revenues is primarily
related to the recognition of revenues for the warranties sold during the year
ended December 31, 2001 for which the manufacturers warranty expired. There were
no warranty sales during the year ended December 31, 2000 nor was any revenue
from warranties recognized during the year ended December 31, 2001.





Losses
during the year ended December 31, 2002 were ($228,000) compared to ($582,000)
for the year ended December 31, 2001.





Expenses
during the year ended December 31, 2002 the Company incurred were various
professional fees such as accounting ($64,000), legal services ($15,000), and
commissions ($56,000). Other operating expenses consist primarily of rent
($24,000), internet access ($24,000), website development and maintenance
($58,000) and general office ($12,000).





Expenses
during the year ended December 31, 2001 the Company incurred were various
professional fees such as accounting ($22,000), legal services ($84,000), and
commissions ($28,000). Other operating expenses consist primarily of rent
($48,000), internet access ($16,000), website development and maintenance
($56,000), advertising ($17,000), salary ($55,000), director’s fees ($12,000)
and general office ($33,000).





Liquidity and Capital
Resources





Despite
capital contributions and both related party and third party loan commitments,
the Company from time to time experienced, and continues to experience, cash
flow shortages that have slowed the Company’s growth.





The
Company has primarily financed its activities from issuance of common stock of
the Company and from loans from related and third parties.  A
significant portion of the funds raised from the loans has been used to cover
working capital needs.





In June
1999, the Company issued 22,000,000 common shares to the founder, in
consideration for management services valued at $0.10.  Joseph Douek
is deemed to be a founder and affiliate of the Company.





In
November 1999 and December 1999, the Company entered into a private offering of
securities pursuant to Regulation D, Rule 504, promulgated by the Securities Act
of 1933.  Common stock was offered to accredited and non-accredited
investors for cash consideration of $.10 per share.  8,350,260 shares
were issued to several unaffiliated investors and the Company received net
proceeds totaling approximately $786,000.  That offering is now
closed.





In
November 1999, the Company issued 1,600,000 common shares in exchange for
equipment valued at $113,000 to Douek Holdings Ltd., a company controlled by the
Company’s majority shareholder.







7




In
December 1999, The Company issued 350,000 common shares for services performed
valued at $35,000.





In
February 2000, the Company entered into a private offering of securities
pursuant to Regulation D, Rule 504, promulgated by the Securities Act of
1933.  Common stock was offered to accredited and non-accredited
investors for cash consideration of $.10 per share.  200,000 shares
were issued to several unaffiliated investors and the Company received net
proceeds totaling approximately $20,000.  That offering is now
closed.





In May
2000, the Company entered into a private offering of securities pursuant to
Regulation D, Rule 504, promulgated by the Securities Act of
1933.  Common stock was offered to accredited and non-accredited
investors for cash consideration of $.12 per share.  850,000 shares
were issued to several unaffiliated investors and the Company received net
proceeds totaling approximately $102,000.  That offering is now
closed.





In
December 2000, The Company issued 505,000 common shares for compensation of
services valued at $51,000.





In
December 2000, 200,000 options were exercised at $.10 per share with the Company
receiving $20,000 in proceeds.





In March
2001, the Company exchanged 800,143 common shares for monies loaned by an
affiliate of CDI and the Company recognized an extra ordinary loss of
$71,000.





In June
2001, the Company issued 195,000 common shares in exchange of an advance by
unaffiliated individual and the company recognized an extraordinary loss of
$17,000.





In June
2001, the Company granted, as compensation for services, stock options to
purchase 300,000 shares of the Company’s common stock at an exercise price of
$.12 per share.





In
September 2001, a company controlled by the Company’s majority stockholder,
exchanged for 1,500,000 shares of the Company’s common stock (valued at
$180,000) agreed to fund substantially all current sales, marketing and
administrative expenses for one year.  This was being amortized
through September 30, 2002 and the unamortized balance was included as a
component of the capital deficiency.





On
September 26, 2001, Photo America, Inc. merged with Concept Digital, Inc.
(“CDI”) a publicly traded development stage enterprise that had 3,032,978 shares
of common stock outstanding prior to the merger.  Pursuant to the
merger agreement, the Company acquired all of the outstanding common stock of
Photo America, Inc. in exchange for 36,650,403 shares of CDI common
stock.  The merger has been accounted for as a recapitalization by
Photo America, Inc.  The equity accounts of PAI have been restated to
give effect to the CDI shares issued by the PAI shareholder.





In
September 2001, 100,000 common shares were issued in exchange for services
rendered valued at $12,000.





In
September 2001, the Company granted, as compensation for services, stock options
to purchase 300,000 shares of the Company’s common stock at an exercise price of
$.12 per share.





The
Company’s cash flow requirements during this period have been met by
contributions of capital and debt financing.  The Company anticipates
that financing will be required until such time that the Company has been able
to develop its own business or find an appropriate merger
candidate.  Currently, the Company can not determine when either will
occur and as such the Company will need to obtain financing to cover its costs
for the foreseeable future.  No assurance can be given that these
sources of financing will continue to be available.  If the Company is
unable to generate profits, or unable to obtain additional funds for its working
capital needs, it may have to cease operations.





ITEM
7. FINANCIAL
STATEMENTS





The
financial statements of the Company, together with the report of auditors, are
included in this report after the signature pages.








8





CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 
 TABLE OF
CONTENTS
 
 Page(s)
 
 REPORTS OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING
FIRMS                                    
F-1-F-2
 
 CONSOLIDATED FINANCIAL
STATEMENTS
 AS OF DECEMBER 31, 2002 AND FOR THE
YEARS
 ENDED DECEMBER 31, 2002 AND 2001
 
 Consolidated balance
sheet                                                                                                                             
F-3
 
 Consolidated statements of
operations                                                                                                          F-4
 
 Consolidated statements of
stockholders’
deficit                                                                                         F-5
 
 Consolidated statements of cash
flows                                                                                                          F-6-
F-7
 
 Note to consolidated financial
statements                                                                                                     F-8-F-19
 
   
   
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 To the
Stockholders and
 Board of
Directors
 Concept
Digital, Inc and Subsidiary
 
 
 We have
audited the accompanying consolidated balance sheet of Concept Digital, Inc. and
Subsidiary as of December 31, 2002 and the related consolidated statements of
operations, change in stockholders’ deficit and cash flows for the year ended
December 31, 2002.  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 audits.
 
 We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe the audits provide a reasonable basis for
our opinion.
 
 In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Concept Digital, Inc.
and Subsidiary as of December 31, 2002, and the consolidated results of their
operations and their consolidated cash flows for the year ended December 31,
2002 in conformity with accounting principles generally accepted in the United
States of America.
 
 The
accompanying consolidated 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 sustained significant net
losses.  The realization of a major portion of its assets is dependent
upon its ability to meet its future financing requirements, and the success of
future operations.  These factors raise substantial doubt about the
Company’s ability to continue as a going concern. Management’s plans concerning
these matters are also described in Note 1. The consolidated financial
statements do not include any adjustments that might result from this
uncertainty.
 
 
 Seligson
and Giannattasio, LLP
 White
Plains, NY
 November
13, 2006
 
  
 F-1
 
 
 REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 Board of
Directors and Stockholders
 Concept
Digital, Inc.
 New York,
New York
 
 
 We have
audited the accompanying consolidated statements of operations, stockholders'
equity and cash flows of Concept Digital, Inc. and subsidiary for the year ended
December 31, 2001.  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 auditing standards generally accepted in
the United States of America.  Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
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, the consolidated financial statements referred to above present fairly,
in all material respects, the results of their operations and cash flows of
Concept Digital, Inc. and subsidiary for the year ended December 31,
2001.
 
 Eisner
LLP
 Florham
Park, New Jersey
 March 25,
2002
 
 
 F-2
 
 
 CONCEPT
DIGITAL, INC. AND SUBSIDIARY
  Consolidated
Balance Sheet
 
 December
      31,2002ASSETSCURRENT
      ASSETS:Cash
              
              $
              3,000Accounts
    receivable
              
              
              20,000Accounts receivable related
      party
              
              
              24,000Prepaid expenses
              
              
              3,000Total current
    assets
              
              
              50,000Trade name, net of accumulated
      amortizationof $25,000
              
              
              0TOTAL ASSETS
              
              $
              50,000LIABILITIES
      AND STOCKHOLDERS’ DEFICITCURRENT
      LIABILITIES:Accounts payable and accrued
      expenses
              
              $
              74,000Accounts payable – related
      party
              
              
              9,000Deferred revenue
              
              
              207,000Convertible note payable –
      related party, in default
              
              
              17,000Note payable -  related
      party
              
              
              130,000Total current
      liabilities
              
              
              437,000STOCKHOLDERS’
      DEFICIT:Common stock, par value $.0001
      per shares;50,000,000 shares authorized;
      39,683,381shares issued and
      outstanding
              
              
              4,000Additional paid-in
      capital
              
              
              1,504,000Retained deficit
              
              
              (1,895,000
              )Total stockholders’
      deficit
              
              
              (387,000
              )TOTAL LIABILITIES
    ANDSTOCKHOLDERS’
      DEFICIT
              
              $
              50,000
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
   F-3
   CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 
 Consolidated
Statements of Operations
 Years
      EndedDecember 31,2002
              
              
              2001Revenues
              
              $
              30,000
              
              
              $
              3,000Cost
      of services
              
              
              0
              
              
              
              2,00030,000
              
              
              
              1,000Operating
      expensesWebsite
    development
              
              
              58,000
              
              
              
              56,000General and
      administrative
              
              
              272,000
              
              
              
              435,000Loss
      from operations
              
              
              (300,000
              )
              
              
              (490,000
              )Other
      income (expense)Interest
expense
              
              
              (2,000
              )
              
              
              (4,000
              )Abandonment of
      property
              
              
              (25,000
              )
              
              
              0Debt settlement
              
              
              99,000
              
              
              
              072,000
              
              
              
              (4,000
              )Loss
      before extraordinary item
              
              
              (228,000
              )
              
              
              (494,000
              )Extraordinary
      item – extinguishment of debt
              
              
              0
              
              
              
              (88,000
              )Net
      loss
              
              
              (228,000
              )
              
              
              (582,000
              )Basic
      and diluted per share data:Loss
      before extraordinary item
              
              $
              (0.00
              )
              
              $
              (0.02
              )Extraordinary
      item – extinguishment of debt
              
              
              (0.00
              )
              
              
              (0.00
              )Net
      loss
              
              $
              (0.00
              )
              
              $
              (0.02
              )Weighted-average
      number of commonshares
    outstanding
              
              
              39,683,381
              
              
              
              39,683,381
  The
accompanying notes are an integral part of these consolidated financial
statements.
 
 F-4
  CONCEPT
DIGITAL, INC. AND SUBSIDIARY
  Consolidated
Statement of Stockholder’s Deficit
 
 CommonStock
      IssuedAdditional
              
              
              
              
              
              in
      ExchangeCommon Stock
              
              
              Paid-in
              
              
              Accumulated
              
              
              FundingShares
              
              
              Amount
              
              
              Capital
              
              
              Deficit
              
              
              Obligation
              
              
              TotalBalance,
      January 1, 2001
              
              
              34,055,260
              
              
              
              3,000
              
              
              
              1,165,000
              
              
              
              (1,050,000
              )
              
              
              
              
              
              118,000Stock
      issued in exchange for debt
              
              
              995,143
              
              
              
              
              
              
              
              119,000
              
              
              
              
              
              
              
              
              
              
              119,000Stock
      issued to a company controlled by the Company’s majoritystockholder in September
      2001
              
              
              1,500,000
              
              
              
              
              
              
              
              180,000
              
              
              
              
              
              
              $
              (180,000
              )Stock
      issued as compensation for services rendered
              
              
              100,000
              
              
              
              
              
              
              
              12,000
              
              
              
              
              
              
              
              
              
              
              
              12,000Stock
      options issued as compensation for services rendered
              
              
              
              
              
              
              
              
              
              
              28,000
              
              
              
              
              
              
              
              
              
              
              
              28,000Stock
      issued in reverse acquisition
              
              
              3,032,978
              
              
              
              1,000
              
              
              
              
              
              
              
              (35,000
              )
              
              
              
              
              
              
              (34,000
              )Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (582,000
              )
              
              
              60,000
              
              
              
              (522,000
              )Balance,
      December 31, 2001
              
              
              39,683,381
              
              
              
              4,000
              
              
              
              1,504,000
              
              
              
              (1,667,000
              )
              
              
              (120,000
              )
              
              
              (279,000
              )Net
      loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (228,000
              )
              
              
              120,000
              
              
              
              (108,000
              )Balance,
      December 31, 2002
              
              
              39,683,381
              
              
              $
              4,000
              
              
              $
              1,504,000
              
              
              $
              (1,895,000
              )
              
              $
              0
              
              
              $
              (387,000
              )
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
   F-5
   CONCEPT
DIGITAL, INC. AND SUBSIDIARY
  Consolidated
Statements of Cash Flows
 Years
      EndedDecember 31,2002
              
              
              2001OPERATING
      ACTIVITIES:Net loss before extraordinary
      item
              
              $
              (228,000
              )
              
              $
              (494,000
              )Adjustments to reconcile net loss
      to net cashused in operating
      activities:Depreciation and
      amortization
              
              
              64,000
              
              
              
              92,000Provision for uncollectible
      accounts
              
              
              (9,000
              )
              
              
              9,000Common
      stock and options issued inexchange for
      services
              
              
              120,000
              
              
              
              100,000Abandonment of
      assets
              
              
              25,000
              
              
              
              0Changes in assets and
      liabilities:Decrease (increase) in accounts
      receivable
              
              
              24,000
              
              
              
              (44,000
              )(Increase) decrease in
      accountsreceivable - related
      parties
              
              
              (15,000
              )
              
              
              10,000Decrease (increase) in prepaid
      expenses
              
              
              1,000
              
              
              
              (4,000
              )Increase in deferred
      revenue
              
              
              85,000
              
              
              
              122,000(Decrease) increase in accounts
      payable
              
              
              (36,000
              )
              
              
              123,000(Decrease) increase in
      accountspayable related
      parties
              
              
              (69,000
              )
              
              
              0Net cash used in operating
      activities
              
              
              (38,000
              )
              
              
              (86,000
              )FINANCING
      ACTIVITIES:Increase in bank
      overdraft
              
              
              0
              
              
              
              (3,000
              )Due to related
    party
              
              
              (102,000
              )
              
              
              (120,000
              )Proceeds from loans payable –
      related party
              
              
              130,000
              
              
              
              0Net cash provided by financing
      activities
              
              
              28,000
              
              
              
              99,000(Decrease)
      increase in cash
              
              
              (10,000
              )
              
              
              13,000Cash
      at beginning of period
              
              
              13,000
              
              
              
              0Cash
      at end of period
              
              $
              3,000
              
              
              $
              13,000
  The
accompanying notes are an integral part of these consolidated financial
statements.
   F-6
 
 CONCEPT
DIGITAL, INC. AND SUBSIDIARY
  Consolidated
Statements of Cash Flows
 
 SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
 Years
      EndedDecember 31,2002
              
              
              2001Supplemental
      cash flow information:Interest paid
              
              $
              0
              
              
              $
              4,000Income taxes paid
              
              $
              0
              
              
              $
              0Noncash
      investing and financing activities:Common stock issued in exchange
      for debt
              
              $
              0
              
              
              $
              31,000Net
      noncash liabilities assumed inreverse
      acquisition
              
              $
              0
              
              
              $
              (34,000
              )Exchange of $31,000 of debt
      for995, 143 shares of its common
      stock,valued at
    $119,000
              
              $
              0
              
              
              $
              (88,000
              )
  The
accompanying notes are an integral part of these consolidated financial
statements.
   F-7
   CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
  NOTE
1 - GOING CONCERN MATTERS
 
 The
Company’s activities from inception to December 31, 2001 consisted of developing
a business plan, and raising capital for future operations and administrative
functions.  During 2002, the Company began recognizing revenues from
the sale of warranties. During the year ended December 31, 2002, the Company’s
revenues were not sufficient to sustain its operations. In addition, the Company
had negative working capital. The ability of the Company to achieve its business
objectives is contingent upon it success in raising additional capital until
adequate revenues are realized from operations.
 
 The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business.  As reflected in the
consolidated financial statements, net losses from June 15, 1999 (date of
inception) through December 31, 2002 aggregated ($1,895,000).  The
Company’s cash flow requirements during this period have been met by
contributions of capital and debt financing primarily from related
parties.  The Company anticipates that financing will be required
until such time that the Company has been able to develop its own business or
find an appropriate merger candidate.  Currently, the Company can not
determine when either will occur and as such the Company will need to obtain
financing to cover its costs for the foreseeable future.  No assurance
can be given that these sources of financing will continue to be
available.  If the Company is unable to generate profits, or unable to
obtain additional funds for its working capital needs, it may have to cease
operations.  These factors raise substantial doubt about the Company’s
ability to continue as a going concern.
 
 The
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of assets or liabilities that might be
necessary should the company be unable to continue as a going
concern.
 
 NOTE
2 - ORGANIZATION
 Concept
Digital, Inc. (the “Company”) was incorporated on June 15, 1999, under the laws
of the State of Delaware.  Through its wholly owned subsidiary, Photo
America, Inc. (“PAI”) the company is engaged in the marketing and issuing
warranties primarily for digital cameras.  Previously, PAI was
developing an Internet facility for processing digital images.
 
 
 F-8
  CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
 
 NOTE
2 – ORGANIZATION (continued)
  On
September 26, 2001, Photo America, Inc. merged with Concept Digital, Inc.
(“CDI”) a publicly traded company that had 3,032,978 shares of common stock
outstanding prior to the merger.  Pursuant to the merger agreement,
the Company acquired all of the outstanding common stock of Photo America, Inc.
in exchange for 36,650,403 shares of CDI common stock.  The merger has
been accounted for as a recapitalization by Photo America, Inc.  The
equity accounts of PAI have been restated to give effect to the CDI shares
issued by the PAI shareholders.  No goodwill has been recorded in
connection with the transaction.  The results of CDI have been
included in operations commencing September 26, 2001.
 
 From
inception to December 31, 2001, the Company was a development stage
enterprise.
 
 NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
 Principles
of Consolidation:
 
 The
consolidated financial statements include the accounts of Concept Digital, Inc.
and its subsidiary Photo America, Inc.  All significant intercompany
balances and transactions have been eliminated in consolidation.
 
 Use
of Estimates:
 
 The
presentation of consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America, requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosures of contingent assets and liabilities as
of the date of the consolidated financial statements and the reported amount of
income and expenses during the reporting period.  Accordingly, actual
results could differ from those estimates.
 
 Cash:
 
 For
purposes of reporting cash flows, the company considers all highly liquid
investments purchased with an original maturity of three months or less to be
cash.
 
 Carrying
Value:
 
 The
Company reviews the carrying values of its long-lives and identifiable
intangible assets for possible impairment.  Whenever events or changes
in circumstances indicates that the carrying amount of assets may be
recoverable, the Company will reduce the carrying value of the assets and charge
operations in the period the impairment occurs.
  NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Equipment:
 
 Equipment
is recorded at cost less accumulated depreciation.  Depreciation is
computed using the straight-line method over the estimated useful lives of the
assets.  Depreciation expense for the years ended December 31, 2002
and 2001 aggregated $52,000 and $77,000, respectively.  On September
1, 2002, the Company abandoned all of the equipment and took a loss on
abandonment of equipment of $25,000.
   F-9
  CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
  NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Website
development costs:
 
 The
Company accounts for its website development costs in a manner consistent with
the Emerging Issues Task Force Issue 00-2, “Accounting for Website Development
Costs” and American Institute of Certified Public Accountants Statement of
Position 98-1, “Accounting for the Costs of Computer Software Developed or
Obtained for Internal Use”.  Accordingly, costs related to the
development of internal use software other than those incurred during the
application development stage are expensed as incurred.  Costs
incurred during the application development stage are required to be capitalized
and amortized over the estimated useful life of the software.
 
 Trade
      names:
 
 Purchased
trade names are recorded at cost less accumulated amortization and are included
in other assets.  Trade names are being amortized over 2 years from
the initial date of use.
 
 Amortization
expense for the years ended December 31, 2002 and December 31, 2001 were $11,000
and $14,000, respectively.  Accumulated amortization as of December
31, 2002 aggregated $25,000.
 
 Revenue
      recognition:
 
 Revenue
from processing images is recognized upon delivery of the images.  The
Company recognizes revenue from warranties over the term of the
warranty.
 
 Advertising:
 
 The
Company’s policy for reporting advertising expenditures is to expense them as
they are incurred.  For the years ended December 31, 2002 and 2001,
advertising expense aggregating $0 and $17,000, respectively.
    F-10
  CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
  NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Income
taxes
 
 The
Company utilizes Statement of Financial Standards (“SFAS”) No. 109, “Accounting
for Income Taxes”, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in financial statements or tax returns.  Under this method,
deferred income taxes are recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each period based on enacted tax laws and statutory tax
rates applicable to the period in which the differences are expected to affect
taxable income.  Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be
realized.  The accompanying consolidated financial statements have no
provision for deferred assets or liabilities.
 
 Stock-based
compensation:
 
 Even
though the intrinsic method is being used, the Company is still accounting for
the stock options in accordance with FAS 123. Stock based compensation is
recognized using the intrinsic value method prescribed in Accounting Principles
Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and
related interpretations.  Accordingly, compensation expense for stock
options is measured as the excess, if any, of the fair value of the Company’s
stock at the date of the grant over the amount an employee must pay to acquire
the stock and is amortized over the vesting period.  The Company has
adopted the disclosure provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, which requires the Company to disclose the pro forma effects on
earnings and earnings per share as if SFAS No. 123 had been
adopted.
 
 Net
Loss Per Share:
 
 The
Company reports net income (loss) per share pursuant to SFAS No. 128 “Earnings
Per Share”. Basic loss per share is computed by dividing the loss available to
common shareholders by the weighted-average number of common shares
outstanding.  Diluted loss per share is computed in a manner similar
to the basic loss per share, except that the weighted-average number of shares
outstanding is increased to include all common shares, including those with the
dilutive potential to be issued by virtue of warrants, options, convertible debt
and other such convertible instruments. Diluted earnings per share contemplates
a complete conversion to common shares of all convertible instruments only if
they are dilutive in nature with regards to earnings per share.  Since
the Company has incurred net losses for all periods basis loss per share and
diluted loss per share are the same. Options and warrants excluded from the
computation for the diluted loss per share were 2,730,000 in 2002 and 2,730,000
in 2001.
  F-11
  CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
  NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Recently issued accounting
pronouncements
  In February 2006, the
Financial Accounting Standards Board (“FASB”) issued Statement of Financial
Accounting Standard (“SFAS”) No. 155, “Accounting for
Certain   Hybrid Financial Instruments—an amendment of SFAS
Statements No. 133 and 140” (“SFAS No. 155”).  SFAS No. 155 amends
SFAS Statements No. 133, Accounting for Derivative Instruments and Hedging
Activities, and No. 140, Accounting for Transfers and Servicing of Financial
Assets and Extinguishments of Liabilities. SFAS No. 155 resolves issues
addressed in SFAS No. 133 Implementation Issue No. D1, “Application of statement
133 to Beneficial Interests in Securitized Financial Assets.”
  SFAS No. 155:
  a.
              Permits
      fair value remeasurement for any hybrid financial instrument that contains
      an embedded derivative that otherwise would require
      bifurcation
  b.
              Clarifies
      which interest-only strips and principal-only strips are not subject to
      the  requirements of SFAS No.
133
  c.
              Establishes
      a requirement to evaluate interests in securitized financial assets to
      identify interests that are freestanding derivatives or that are hybrid
      financial instruments that contain an embedded derivative requiring
      bifurcation
  d.
              Clarifies
      that concentrations of credit risk in the form of subordination are not
      embedded derivatives
  e.
              Amends
      SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose
      entity from holding a derivative financial instrument that pertains to a
      beneficial interest other than another derivative financial
      instrument.
  SFAS No.
155 is effective for all financial instruments acquired or issued after the
beginning of an entity’s first fiscal year that begins after September 15, 2006.
The fair value election provided for in paragraph 4(c) of SFAS No. 155 may also
be applied upon adoption of SFAS No. 155 for hybrid financial instruments that
had been bifurcated under paragraph 12 of SFAS No. 133 prior to the adoption of
SFAS No. 155. Earlier adoption is permitted as of the beginning of an entity’s
fiscal year, provided the entity has not yet issued financial statements,
including financial statements for any interim period for that fiscal year.
Provisions of SFAS No. 155 may be applied to instruments that an entity holds at
the date of adoption on an instrument-by-instrument basis.
   
 F-12
 CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
  NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Recently
issued accounting pronouncements (continued)
  At
adoption, any difference between the total carrying amount of the individual
components of the existing bifurcated hybrid financial instrument and the fair
value of the combined hybrid financial instrument should be recognized as a
cumulative-effect adjustment to beginning retained earnings. The
cumulative-effect adjustment should be disclosed gross (that is, aggregating
gain positions separate from loss positions) determined on an
instrument-by-instrument basis. Prior periods should not be
restated.  The Company does not believe there will be any effect on
the financial statements upon adopting SFAS No. 155.
  In March
2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial
Assets—an amendment of SFAS No. 140” (SFAS No. 156”).  SFAS No. 156
amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities, with respect to the accounting for
separately recognized servicing assets and servicing
liabilities.  SFAS No. 156 is effective for years beginning after
September 15, 2006.  The Company does not believe SFAS No. 156 will
have a material effect on the Company’s financial statements.
  In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS
No. 157”).   SFAS No. 157 defines fair value, establishes a
framework for measuring fair value in generally accepted accounting principles
(GAAP), and expands disclosures about fair value measurements. SFAS No. 157
applies under other accounting pronouncements that require or permit fair value
measurements, the Board having previously concluded in those accounting
pronouncements that fair value is the relevant measurement attribute.
Accordingly, this Statement does not require any new fair value measurements.
However, for some entities, the application of this Statement will change
current practice.
  SFAS No.
157 is effective for financial statements issued for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. Earlier
application is encouraged, provided that the reporting entity has not yet issued
financial statements for that fiscal year, including financial statements for an
interim period within that fiscal year.  The Company is currently
reviewing the potential effect of this statement on its financial
statements.
  
 F-13
  CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
  NOTE
3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
 Recently
issued accounting pronouncements (continued)
  In
September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined
Benefit Pension and Other Postretirement Plans—an amendment of SFAS Statements
No. 87, 88, 106, and 132R” (“SFAS No. 158”).  This Statement improves
financial reporting by requiring an employer to recognize the overfunded or
underfunded status of a defined benefit postretirement plan (other than a
multiemployer plan) as an asset or liability in its statement of financial
position and to recognize changes in that funded status in the year in which the
changes occur through comprehensive income of a business entity or changes in
unrestricted net assets of a not-for-profit organization. This Statement also
improves financial reporting by requiring an employer to measure the funded
status of a plan as of the date of its year-end statement of financial position,
with limited exceptions.
  An
employer with publicly traded equity securities is required to initially
recognize the funded status of a defined benefit postretirement plan and to
provide the required disclosures as of the end of the fiscal year ending after
December 15, 2006.  The Company does not believe SFAS No. 158 will
have any material effect on its financial statements.
 
 Fair
Value of Financial Instruments:
 
 SFAS No.
107 “Disclosure about Fair Value of Financial Instruments” requires the
disclosure of the fair value of financial instruments. The Company has a number
of financial instruments, none of which is held for trading
purposes.  The carrying value of cash, accounts receivable, accounts
payable and accrued expenses approximate their fair value because of the
short-term nature of these financial instruments. Considerable judgment is
necessarily required in interpreting market data to develop the estimates of
fair value, and accordingly, the estimates are not necessarily indicative of the
amounts that the Company could realize in a current market
exchange.
 
 
 F-14
 
 CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
 NOTE
4 - RELATED PARTY TRANSACTIONS
 
 During
2001, the Company sold digital camera warranties aggregating $17,000 to three
separate companies controlled by the Company’s majority
stockholder.  During 2002, the Company recognized revenues totaling
approximately $4,000 from warranties from related parties. As of December 31,
2002, due from related parties and accounts receivable – related party
represents amounts due from the sale of warranties to these
companies.
 
 In
September 2001, a company controlled by the Company’s majority stockholder, in
exchange for 1,500,000 shares of the Company’s common stock (valued at $180,000)
agreed to fund substantially all current sales, marketing and administrative
expenses for one year.  This was amortized through September 30,
2002.
 
 The
Company rents office space on a month-to-month basis from an affiliated entity.
Rent expense aggregated $24,000 and $48,000 in 2002 and 2001,
respectively.
 
 A member
of the board of directors is a partner in the Company’s principal law
firm.  During the year ended December 31, 2002 and 2001, the Company
incurred legal fees to the firm aggregating $4,000 and $79,000, respectively. At
December 31, 2002, accounts payable to the related party in the amount of
$74,000 was written off as a forgiveness of debt and is included as a component
of debt settlement income.
 
 NOTE
5 – NOTES PAYABLE – RELATED PARTIES
 
 A
convertible note payable of $17,000 which bears interest at 6% per annum is due
to Atlas Equity Group, Inc. (“Atlas”) an entity related to the Company through
common ownership.  The note matured in May 2002 and is convertible to
730,468 shares of common stock at the discretion of Atlas.  At
December 31, 2002 the entire balance of the note was outstanding. As a result of
the note not being repaid at the due date, the note is in default.
 
 
 
 F-15
 
 CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
  NOTE
5 – NOTES PAYABLE – RELATED PARTIES, Continued
 
 Note
payable to related party is a loan due to 529 Empire Realty, an affiliated
company of the majority stockholder, which bears interest at 9.46% and is due on
demand.  Interest expense aggregated $1,000 as of December 31, 2002.
The note payable matures as follows:
 
 Year
ended December 31,
 2003
              
              $
              02004
              
              
              02005
              
              
              130,000$
              130,000
   
 NOTE
6 – INCOME TAXES
 
 No
provisions for income taxes have been made because the Company has sustained
cumulative losses since the commencement of operations on June 15,
1999.  At December 31, 2002, the Company had a net operating loss
carryforward (“NOL”) of ($423,000) available to reduce future taxable income and
expense through 2022.
 
 In
accordance with SFAS No. 109 the Company has computed the components of deferred
income taxes as follows:
 
 December
      31,
                2002Deferred
      tax assets:Net
      operating losses
              
              $
              196,000Deferred
      tax liability:Deferred
      revenue
              
              
              (70,000
              )Net
      deferred tax assets
              
              
              126,000Valuation
      allowance
              
              
              (126,000
              )Deferred
      tax assets, net
              
              $
              -
 
 At
December 31, 2002, a full valuation allowance has been provided as realization
of the deferred tax benefit is not likely.
 
 The
effective tax rate varies from the U.S. Federal statutory tax rates for the
periods ended December 31, 2002 and 2001 principally due to the
following:
    2002
              
              2001U.S. statutory
      rate
              
              
              34.0
              %
              
              
              34.0
              %State and
      local taxes
              
              
              8.0Other
              
              
              0.0
              
              
              
              1.0Valuation
      allowance
              
              
              (42.0
              )
              
              
              (
    35.0
              )0.0
              %
              
              
              0.0
              %
  F-16
  CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
  NOTE
7 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES
 
 Accounts
payable and accrued expenses at December 31, 2002 consisted of the
following:
 
 December
      31,
                2002Accounts
      payable
              
              $
              31,000Accrued
      professional fees
              
              
              40,000Accrued
      income taxes
              
              
              2,000Accrued
      interest
              
              
              1,000Total
      accounts payable and accrued expenses
              
              $
              74,000
  NOTE
8 – STOCK OPTIONS AND WARRANTS
  Stock
Options
 During
the year ended December 31, 1999, the board of directors authorized the issuance
of employee stock options to purchase 1,200,000 shares of common
stock.  The options, which vested immediately, have an exercise price
of $0.10 per share.
 
 In
January 2000, the Company’s board of directors authorized an employee stock
option plan under which 1,210,000 shares of common stock were reserved for
issuance upon exercise of either incentive or non-incentive stock options, which
may be granted from time to time by the Board of Directors to
employees.  The Board of Directors determines the option price (not to
be less than estimated fair value for incentive options) vesting period and
expiration date (note to exceed 10 years) at the date of grant.
 
 The
Company applies APB 25 in accounting for its stock option plan and, accordingly,
recognizes compensation expense for the difference between the intrinsic value
of the underlying common stock and the exercise price of the option at the date
of grant.  Had compensation cost for the Company’s stock option plan
been determined based upon the fair value of the option at the grant date for
awards under the plan consistent with the methodology prescribed under SFAS No.
123, the Company’s pro forma loss and pro forma loss per share for 2002 and 2001
have been approximately ($228,000) and ($585,000), and ($.00) and $(0.02) per
share, respectively.  The weighted average fair value of the options
granted during 2001 $0.04 per share on the dates of grant using the
Black-Scholes option pricing model with the following assumptions; dividend
yield 0%, volatility 0% (since the options were granted prior to the reverse
acquisition of CDI), expected life 10 years, risk free interest rates ranging
from 4.7% to 5.4%. No stock options were granted during 2002.
   F-17
  CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
  NOTE
8 – STOCK OPTIONS AND WARRANTS (continued)
 
 The
following summarizes stock option transactions
 
 2002
              
              
              2001Shares
              
              
              Weighted
                Average
                Exercise
                Price
              
              
              Shares
              
              
              Weighted
                Average
                Exercise
                PriceOutstanding
      options at the beginningof year
              
              
              1,880,000
              
              
              $
              0.11
              
              
              
              1,235,000
              
              
              $
              0.10Options
      granted
              
              
              0
              
              
              
              0
              
              
              
              645,000
              
              
              
              0.12Outstanding
      options at end of year
              
              
              1,880,000
              
              
              $
              0.11
              
              
              
              1,880,000
              
              
              $
              0.11
 
 The
following table summarizes information about the plan’s options outstanding at
December 31, 2002:
 
 Options Outstanding
              Options ExercisableRange
      of
                Exercise
                Prices
              Number
                Outstanding
              Weighted
                Average
                Remaining
                Contractual
                Life
                (In Years)
              Weighted
                Average
                Exercise
                Price
              Number
                Exercisable
              Weighted
                Average
                Exercise
                Price$0.10-$0.12
              1,880,000
              7.4
              $0.11
              1,880,000
              $0.11
  On
September 2, 2002, the Company’s Board of Directors held a meeting and voted to
terminate the stock option plan. The termination of the stock option plan did
not affect options issued previously. There were no options granted during 2002
to date of termination.
 
 
 
 F-18
  CONCEPT
DIGITAL, INC. AND SUBSIDIARY
 
 Notes
to Consolidated Financial Statements
  NOTE
8 – STOCK OPTIONS AND WARRANTS (continued)
 
 Warrant
and Non-Employee Options
 
 In
connection with a private placement in 2000, the Company granted warrants to
purchase 100,000 shares of the Company’s common stock at an exercise price of
$0.10 per share expiring in 2010.
 
 In 2000,
the Company issued warrants to purchase 750,000 shares with an exercise price of
$.10 per share expiring in 2010 to a consultant and granted, to various
consultants, options under the stock option plan to purchase 135,000 shares of
common stock with an exercise price of $.12 per share and expiring from 2005 to
2010.  These warrants and options were valued using the Black-Scholes
options pricing model with the following assumptions: dividend yield 0%,
volatility 0%, expected life ranging from 5 to 10 years, risk free interest
rates ranging from 5.8% to 6.3%.  The changes to operations aggregated
$41,000.
 
 In 2001,
the Company issued options to purchase 600,000 shares with an exercise price of
$.10 per share expiring in 2011 to a consultant and a director.  These
options were valued using the Black-Scholes option pricing model with the
following assumptions: dividend yield 0%, volatility 0% (since the options were
granted prior to the reverse acquisition of CDI), expected life 10 years, risk
free interest rates ranging from 4.7% to 5.35%.  The charge to
operations aggregated $28,000.
 
 The
number of shares reserved for issuance of stock upon exercise of options and
warrants totaled 3,465,000 at December 31, 2002.
 
 NOTE
9 – EXTRAORDINARY ITEM
 
 In August
2000, an unaffiliated individual, advanced $6,000 to the Company. In June 2001,
the loan was exchanged for 195,000 shares of the Company’s common stock and the
Company recognized an extraordinary loss of $17,000.
 
 In
connection with the initial merger proposal with CDI, an affiliate of CDI,
loaned the Company $25,000. In March 2001, this loan was exchanged for 800,143
shares of the Company’s common stock and the Company recognized an extraordinary
loss of $71,000.
 
 NOTE
10 – LAWSUIT
 
 In April
2002, PAI settled a lawsuit brought by The Works, Inc. for breach of contract
for services performed.  The settlement required PAI to turn over the
stock certificate for 350,000 shares of common stock that was to be previously
issued to The Works, Inc. in December 1999.
 
 
 F-19


Item
2.  Management’s Discussion and Analysis





The
following management’s discussion and analysis provides information which
management believes is relevant to an assessment and understanding of our
results of operations and financial condition.  The discussion should
be read along with our consolidated financial statements and notes
thereto.    Because the Company has generated minimal
revenues, it intends to report its plan of operation below.





The
following discussion and analysis contains forward-looking statements, which
involve risks and uncertainties.  The Company’s actual results may
differ significantly from the results, expectations and plans discussed in these
forward-looking statements.





The
accompanying consolidated financial statements have been on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business.  As reflected in the
consolidated financial statements, losses from June 15, 1999 (date of inception)
through December 31, 2002 aggregated ($1,895,000) raise substantial doubt about
the Company’s ability to continue as a going concern.  The Company’s
cash flow requirements during this period have been met by contributions of
capital and debt financing, primarily from related parties.  The
Company anticipates that financing will be required until such time that the
Company has been able to develop its own business or find an appropriate merger
candidate.  Currently, the Company cannot determine when either will
occur and as such the Company will need to obtain financing to cover its costs
for the foreseeable future.  No assurance can be given that these
sources of financing will continue to be available.  If the Company is
unable to generate profits, or unable to obtain additional funds for its working
capital needs, it may have to cease operations.





CRITICAL
ACCOUNTING POLICIES





Our
accompanying financial statements have been prepared in conformity with
accounting principles generally accepted in the United States, which require our
management to make estimates that affect the amounts of revenues, expenses,
assets and liabilities reported. The following are critical accounting policies
which are important to the portrayal of our financial condition and results of
operations and which require some of management’s most difficult, subjective and
complex judgments. The accounting for these matters involves the making of
estimates based on current facts, circumstances and assumptions which could
change in a manner that would materially affect management’s future estimates
with respect to such matters. Accordingly, future reported financial conditions
and results could differ materially from financial conditions and results
reported based on management’s current estimates.





Revenue
recognition:




Revenue
from processing images is recognized upon delivery of the images.  The
Company recognizes revenue from warranties over the term of the
warranty.




Income
taxes:





The
Company utilizes Statement of Financial Standards (“SFAS”) No. 109, “Accounting
for Income Taxes”, which requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in financial statements or tax returns.  Under this method,
deferred income taxes are recognized for the tax consequences in future years of
differences between the tax basis of assets and liabilities and their financial
reporting amounts at each period based on enacted tax laws and statutory tax
rates applicable to the period in which the differences are expected to affect
taxable income.  Valuation allowances are established when necessary
to reduce deferred tax assets to the amount expected to be
realized.  The accompanying consolidated financial statements have no
provision for deferred assets or liabilities.




YEARS
ENDED DECEMBER 31, 2002 AND 2001





Revenues
during the year ended December 31, 2002 totaled $30,000 as compared to $3,000
for the year ended December 31, 2001. The increase in revenues is primarily
related to the recognition of revenues for the warranties sold during the year
ended December 31, 2001 for which the manufacturers warranty expired. Warranty
sales during the year ended December 31, 2000 were not material as reflected in
the minimal revenues recognized at December 31, 2001.





Losses
during the year ended December 31, 2002 were ($228,000) compared to ($582,000)
for the year ended December 31, 2001.







9




Expenses
during the year ended December 31, 2002 the Company incurred were various
professional fees such as accounting ($64,000), legal services ($15,000), and
commissions ($56,000). Other operating expenses consist primarily of rent
($24,000), internet access ($24,000), website development and maintenance
($58,000) and general office ($12,000).





Expenses
during the year ended December 31, 2001 the Company incurred were various
professional fees such as accounting ($22,000), legal services ($84,000), and
commissions ($28,000). Other operating expenses consist primarily of rent
($48,000), internet access ($16,000), website development and maintenance
($56,000), advertising ($17,000), salary ($55,000), director’s fees ($12,000)
and general office ($33,000).





Liquidity and Capital
Resources





Despite
capital contributions and both related party and third party loan commitments,
the Company from time to time experienced, and continues to experience, cash
flow shortages that have slowed the Company’s growth.





The
Company has primarily financed its activities from issuance of common stock of
the Company and from loans from related and third parties.  A
significant portion of the funds raised from the loans has been used to cover
working capital needs.





In June
1999, the Company issued 22,000,000 common shares to the founder, in
consideration for management services valued at $0.10.  Joseph Douek
is deemed to be a founder and affiliate of the Company.





In
November 1999 and December 1999, the Company entered into a private offering of
securities pursuant to Regulation D, Rule 504, promulgated by the Securities Act
of 1933.  Common stock was offered to accredited and non-accredited
investors for cash consideration of $.10 per share.  8,350,260 shares
were issued to several unaffiliated investors and the Company received net
proceeds totaling approximately $786,000.  That offering is now
closed.





In
November 1999, the Company issued 1,600,000 common shares in exchange for
equipment valued at $113,000 to Douek Holdings Ltd., a company controlled by the
Company’s majority shareholder.





In
December 1999, The Company issued 350,000 common shares for services performed
valued at $35,000.





In
February 2000, the Company entered into a private offering of securities
pursuant to Regulation D, Rule 504, promulgated by the Securities Act of
1933.  Common stock was offered to accredited and non-accredited
investors for cash consideration of $.10 per share.  200,000 shares
were issued to several unaffiliated investors and the Company received net
proceeds totaling approximately $20,000.  That offering is now
closed.





In May
2000, the Company entered into a private offering of securities pursuant to
Regulation D, Rule 504, promulgated by the Securities Act of
1933.  Common stock was offered to accredited and non-accredited
investors for cash consideration of $.12 per share.  850,000 shares
were issued to several unaffiliated investors and the Company received net
proceeds totaling approximately $102,000.  That offering is now
closed.





In
December 2000, The Company issued 505,000 common shares for compensation of
services valued at $51,000.





In
December 2000, 200,000 options were exercised at $.10 per share with the Company
receiving $20,000 in proceeds.






10





In March
2001, the Company exchanged 800,143 common shares for monies loaned by an
affiliate of CDI and the Company recognized an extra ordinary loss of
$71,000.





In June
2001, the Company issued 195,000 common shares in exchange of an advance by
unaffiliated individual and the company recognized an extraordinary loss of
$17,000.





In June
2001, the Company granted, as compensation for services, stock options to
purchase 300,000 shares of the Company’s common stock at an exercise price of
$.12 per share.


In
September 2001, a company controlled by the Company’s majority stockholder,
exchanged for 1,500,000 shares of the Company’s common stock (valued at
$180,000) agreed to fund substantially all current sales, marketing and
administrative expenses for one year.  This was being amortized
through September 30, 2002 and the unamortized balance was included as a
component of the capital deficiency.





On
September 26, 2001, Photo America, Inc. merged with Concept Digital, Inc.
(“CDI”) a publicly traded development stage enterprise that had 3,032,978 shares
of common stock outstanding prior to the merger.  Pursuant to the
merger agreement, the Company acquired all of the outstanding common stock of
Photo America, Inc. in exchange for 36,650,403 shares of CDI common
stock.  The merger has been accounted for as a recapitalization by
Photo America, Inc.  The equity accounts of PAI have been restated to
give effect to the CDI shares issued by the PAI shareholder.





In
September 2001, 100,000 common shares were issued in exchange for services
rendered valued at $12,000.





In
September 2001, the Company granted, as compensation for services, stock options
to purchase 300,000 shares of the Company’s common stock at an exercise price of
$.12 per share.





The
Company’s cash flow requirements during this period have been met by
contributions of capital and debt financing.  The Company anticipates
that financing will be required until such time that the Company has been able
to develop its own business or find an appropriate merger
candidate.  Currently, the Company can not determine when either will
occur and as such the Company will need to obtain financing to cover its costs
for the foreseeable future.  No assurance can be given that these
sources of financing will continue to be available.  If the Company is
unable to generate profits, or unable to obtain additional funds for its working
capital needs, it may have to cease operations.




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





The
Company's independent auditor for the fiscal year ended on December 31, 2001 was
Eisner LLP.  The Company’s current independent auditor is Seligson and
Giannattasio, LLP of White Plains, New York. The Company changed auditors for
the fiscal year ended on December 31, 2002 as a cost effective
move.  The Company does not presently intend to change independent
auditors. At no time have there been any disagreements with such independent
auditors regarding any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure.






11





PART
III





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





The
directors and officers of the Company and its subsidiaries, as of April 7, 2008,
are set forth below. The directors hold office for their respective term and
until their successors are duly elected and qualified. Vacancies in the existing
Board are filled by a majority vote of the remaining directors. The officers
serve at the will of the Board of Directors.





NAME
            AGE
            WITH COMPANY SINCE
            DIRECTOR/POSITIONJoseph
      Douek,
              Director
            33
            2001
            Chairman,
      Chief Executive OfficerRichard
      Darrow,
            53
            2001
            Director





JOSEPH DOUEK, 33.CHAIRMAN OF THE BOARD OF DIRECTORS,
CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER




Mr.
Joseph Douek was born, raised and currently resides in Brooklyn,
NY.  He is the Chief Executive Officer and owner of Willoughby’s since
1994.  Established in 1898, Willoughby’s is NYC’s oldest photographic
retailer.  Mr. Douek’s responsibilities include overseeing the day to
day activities of Willoughby’s and its long term strategic
planning.





In
December 2001, Mr. Douek was appointed by The Honorable Mayor Rudolph Giuliani
as Brooklyn’s representative to the NYC Economic Development Corporation Board
of Directors.  Since 2001 Mr. Douek has continued to serve as an EDC
Board Member and has been reappointed by NYC Mayor, The Honorable Michael
Bloomberg.





In
addition to serving as an appointed official in the capacity of a NYC Economic
Development Corporation Board Member, in February 2002 Mr. Douek was appointed
by The Honorable Mayor Mike Bloomberg to serve as the Brooklyn representative to
the NYC Industrial Development Agency Board of Directors Mr. Douek continues to
serve as an IDA Board Member and has initiated efforts to promote economic
development in Brooklyn and all the five Boroughs of NYC.





RICHARD
DARROW, 53.DIRECTOR.





All
officers and directors listed above will remain in office until the next annual
meeting of our stockholders, and until their successors have been duly elected
and qualified. There are no agreements with respect to the election of
Directors. We have not compensated our Directors for service on our Board of
Directors, any committee thereof, or reimbursed for expenses incurred for
attendance at meetings of our Board of Directors and/or any committee of our
Board of Directors. Officers are appointed annually by our Board of Directors
and each Executive Officer serves at the discretion of our Board of
Directors.  We do not have any standing committees. Our Board of
Directors may in the future determine to pay Directors' fees and reimburse
Directors for expenses related to their activities.





None of
our Officers and/or Directors have filed any bankruptcy petition, been convicted
of or been the subject of any criminal proceedings or the subject of any order,
judgment or decree involving the violation of any state or federal securities
laws within the past five (5) years.





CERTAIN
LEGAL PROCEEDINGS





No
director, nominee for director, or executive officer of the Company has appeared
as a party in any legal proceeding material to an evaluation of his ability or
integrity during the past five years.







12




Compliance with Section
16(a) of the Exchange Act





Section
16(a) of the Securities Exchange Act of 1934 requires the Company's officers and
directors, and persons who own more than 10 percent of a registered class of the
Company's equity securities, to file reports of ownership and changes in
ownership with the Securities and Exchange Commission (SEC). Officers,
directors, and greater than 10 percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms they
file.





To the
Company's knowledge, based solely on a review of the copies of such reports
furnished to the Company, all reports under Section 16(a) required to be filed
by its officers and directors and greater than ten percent beneficial owners
were not filed as of the date of this filing.





Code of
Ethics





We have
not adopted a Code of Ethics.





ITEM
10. EXECUTIVE COMPENSATION





The
following information relates to compensation received by the Chief Executive
Officer of the Company in fiscal years ended December 31, 2002 and December 31,
2001 for the executive officers who were serving as of fiscal years ended
December 31, 2002 and December 31, 2001, whose salary and bonus during fiscal
years ended December 31, 2002 and December 31, 2001 exceeded $100,000. In 2002,
no officer received compensation in excess of $100,000.





Summary
Compensation Table




NAME AND PRINCIPAL POSITION
            YEAR
            SALARY
              ($)
            BONUS
              ($)
            RESTRICTED STOCK AWARD ($)
            TOTAL
              ($)Joseph
      Douek,
              Chief
      Executive Officer
            2002
            0
            0
            0
            0Joseph
      Douek,
              Chief
      Executive Officer
            2001
            0
            0
            0
            0





Employment
Agreements





No
officer or director has been granted an employment contract or been provided a
future benefit to be received upon separation from service with the
Company.





ITEM
11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT





The
following table sets forth as of December 31, 2002 information with respect to
the beneficial ownership of the Company's Common Stock by (i) each person known
by the Company to own beneficially 5% or more of such stock, (ii) each Director
of the Company who owns any Common Stock, and (iii) all Directors and Officers
as a group, together with their percentage of beneficial holdings of the
outstanding shares.





Security
Ownership of Beneficial Owners (1):





TITLE OF CLASS
            NAME & ADDRESS
            AMOUNT
            PERCENT (2)Common
      Stock
            Joseph
      Douek
              Chief
      Executive Officer
            18,616,120
            46.91%Common
      Stock
            Richard
      Darrow
              Director
            100,000
            0.25%All
      directors and executive officers as a group (2 persons)
            
            19,616,120
            47.163%




(1)
            The
      persons named in this table have sole voting and investment power with
      respect to all shares of common stock reflected as beneficially owned by
      each.





(2)
            For
      purposes of this table only, this percentage is based on 39,683,381 shares
      outstanding as of December 31,
2002.









13




ITEM
12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.





During
2002, the Company sold digital camera warranties to a company controlled by the
Company’s majority stockholder totaling $58,572.  As of December 31,
2002, due from related parties and accounts receivable – related party
represents amounts due from the sale of warranties to these
companies.





In
September 2001, a company controlled by the Company’s majority stockholder, in
exchange for 1,500,000 shares of the Company’s common stock (valued at $180,000)
agreed to fund substantially all current sales, marketing and administrative
expenses for one year.  This was being amortized through September 30,
2002.





The
Company rents office space on a month-to-month basis from an affiliated entity.
Rent expense aggregated $24,000 and $48,000 in 2002 and 2001,
respectively.





A member
of the board of directors is a partner in the Company’s principal law
firm.  During the year ended December 31, 2002 and 2001, the Company
incurred legal fees to the firm aggregating $3,991 and $78,391, respectively. At
December 31, 2002, accounts payable to the related party in the amount of
$74,382 was written off as a forgiveness of debt.





PART
IV





ITEM
13. EXHIBITS AND REPORTS ON FORM 8-K





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





1.   Financial
statements; see index to financial statement and schedules under Item 7
herein.





2.   Financial
statement schedules; see index to financial statements and schedules under Item
7 herein.





3.  Exhibits:





The
following exhibits are filed with this Form 10-KSB and are identified by the
numbers indicated: see index to exhibits immediately following financial statements
and schedules of this report.





3(i)      Certificate
of Incorporation, as amended (1)





3.2       Bylaws,
as amended (1)




31.1
              Certification
      of Certifying Officer Pursuant To 18 U.S.C. Section 1350, As Adopted
      Pursuant To Section 302 Of The Sarbanes-Oxley Act Of
  2002
  32.1
              Certification
      of Certifying Officer Pursuant To 18 U.S.C. Section 1350 As Adopted
      Pursuant To Section 906 Of The Sarbanes-Oxley Act Of
  2002


(1)
Incorporated by reference to the Registrant's Form 10-SB, filed on November 29 (SEC
File No. 000-32029).





(b)  Reports
on Form 8-K





We did
not file any reports on Form 8-K for the year ended December 31,
2002.







14







SIGNATURES





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





CONCEPT
      DIGITAL, INC.




Dated:
            April
      7, 2008
            By:
      /s/
      Joseph DouekChief
      Executive Officer,
              Principal
      Financial Officer,
              Principal
      Accounting Officer




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





Dated:
            April
      7, 2008
            By:
      /s/
      Joseph DouekChief
      Executive Officer,
              Principal
      Financial Officer,
              Principal
      Accounting Officer and Director





Dated:
            April
      7, 2008
            By:/s/
      Richard DarrowDirector








15