SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB
                /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 2005

                                       OR

          / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the transition period from _____ to _____

                         COMMISSION FILE NUMBER: 1-11873

                                K2 DIGITAL, INC.

             (Exact name of registrant as specified in its charter)

           Delaware                                    13-3886065
(State or other jurisdiction of          (I.R.S. Employer Identification Number)
 incorporation or organization)

                               c/o Thomas G. Amon
                500 Fifth Avenue, Suite 1650, New York, NY 10110
          (Address of principal executive offices, including zip code)

                    Issuer's telephone number: (212) 810-2430

      SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE EXCHANGE ACT:

                                      None.

      SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE EXCHANGE ACT:

                                  COMMON STOCK
                                (Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days. Yes X No

Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation SB contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) (Pursuant to rule 33-8587) Yes X No

State issuer's revenues for its most recent fiscal year:

$0

<PAGE>

As of February 28, 2006, there were 4,982,699 shares (not including treasury
shares) of the Company's common stock outstanding. Based on the closing sales
price of the Company's common stock on February 28, 2006 of $0.10 per share, the
approximate aggregate market value of the Company's common stock held by
non-affiliates was approximately $315,000.

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain exhibits are incorporated by reference to the Company's Registration
Statement on Form SB-2 and the amendments thereto, as listed in response to Item
13(a)(2).

           TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):

                                    Yes No X

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

HISTORY

K2 Digital, Inc. (the "Company" or "K2") was founded in 1993 as a general
partnership and initially operated a traditional graphic design business. In
August 1994, the Company shifted its principal business to Web site design and
creation. Thereafter, the Company incorporated as a Delaware corporation. After
the Company's initial public offering on July 26, 1996, the Company began to
develop its business as a full-service digital professional services company.
The Company historically provided consulting and development services including
analysis, planning, systems design, creative and implementation. In November
2000, the Company changed its name from K2 Design, Inc. to K2 Digital, Inc. As
discussed below, the Company effectively ceased its operations in August 2001.

The Company's offices are located in c/o Thomas G. Amon, 500 Fifth Avenue, Suite
1650, New York, New York 10110 and its telephone number is (212) 810-2430.

DISCONTINUED OPERATIONS

DISPOSITION OF ASSETS

On May 15, 2001, the Company entered into a non-binding letter of intent with
SGI Graphics LLC, a Delaware limited liability company ("SGI") pursuant to which
SGI expressed its interest in purchasing shares of restricted common stock of
the Company that would have represented fifty-one percent (51%) of the issued
and outstanding capital stock of the Company on a fully diluted basis.
Concurrently with the execution of the letter of intent, the Company borrowed
$250,000 from an affiliate of SGI, for working capital purposes pursuant to a
promissory note secured by a first priority security interest in all of the
assets of the Company. The Company and SGI were ultimately not able to agree on
the definitive terms of the transaction and, in July 2001, the Company and SGI
terminated negotiations and the letter of intent.

On August 29, 2001, the Company sold certain of its fixed and intangible assets
to Integrated Information Systems, Inc., a Delaware corporation ("IIS"),
including certain of the Company's customer contracts, furniture, fixtures,
equipment and intellectual property, for an aggregate purchase price of
$444,000, of which $419,000 was paid in cash and $25,000 of capital lease
obligations were assumed by IIS. IIS also assumed certain deferred revenues and
customer deposits. The Company recognized an approximate $218,000 gain on the
transaction.

Under the terms of the purchase agreement governing the transaction (the
"Purchase Agreement"), IIS assumed the Company's office lease obligations, took
up occupancy in the Company's premises and made offers of employment to
substantially all of the remaining employees of the Company, which offers were
accepted.

In addition to the purchase price and as consideration of the Company's release
of certain employees from the non-competition restrictions contained in their
agreements with the Company, the Company received from IIS at closing a
recruitment and placement fee of $75,000. In addition, the Purchase Agreement
provided for the Company to receive from IIS an additional placement fee of
$7,500 per key employee and $2,500 per other employee that remained employed by
IIS through December 31, 2001. This additional contingent placement fee was to
be paid by IIS in cash in five monthly installments beginning August 31, 2001,
pro rated monthly for the number of employees retained. As of December 31, 2001,
$31,000 of these contingent fees had been paid to the Company and $36,500 due to
the Company remained unpaid by IIS (which was fully reserved for at December 31,
2001). In October 2002, the Company received approximately $9,000 from IIS as a
final payment pursuant to a June 2002 settlement agreement pertaining to the
unpaid balance.


                                       1
<PAGE>

Under the Purchase Agreement, the Company also received from IIS a cash fee of
$50,000 in return for entering into certain non-competition provisions contained
in the Purchase Agreement, which provide that the Company will not, for a period
of five years, (i) engage in any business of substantially the same character as
the business engaged in by the Company prior to the transaction, (ii) solicit
for employment any employee of IIS (including former employees of the Company),
or (iii) solicit any client or customer of IIS (including any customer
transferred to IIS under the Purchase Agreement) to do business with the
Company.

Accordingly, the aggregate cash consideration delivered to the Company at
closing was $544,000, of which approximately $258,000 was paid directly to K2
Holdings LLC, an affiliate of SGI, the Company's principal secured creditor, in
order to release SGI's security interest in the assets of the Company.

Subsequent to the sale of assets to IIS, the Company effectively ceased
operations and has been in the process of liquidating assets, collecting
accounts receivable and paying creditors. The Company does not have any ongoing
business operations or any remaining revenue sources. Accordingly, the Company's
remaining operations will be limited to either a business combination with an
existing business (such as one described below) or the winding up of the
Company's remaining business and operations, subject, in either case, to the
approval of the stockholders of the Company.

AGREEMENT AND PLAN OF MERGER

On December 22, 2005, the Company signed a letter of intent with NPOWR Digital
Media, Inc. ("NPOWR"), a California corporation, whereby NPOWR will acquire K2
preferred shares convertible into 1,500,000 shares of K2 common stock for
$165,000 and subsequently enter into a merger agreement with the Company.

On January 24, 2006, the Company completed the sale of 1,000,000 shares of its
convertible preferred shares to NPOWR at a purchase of $165,000. K2, its
wholly-owned subsidiary, K2 Acquisition Corp. ("Merger Sub") and NPOWR intend to
enter into a merger agreement whereby Merger Sub will merge with and into NPOWR.
In connection with the merger, the shareholders of NPOWR will acquire a
controlling interest in K2. NPOWR's designees will be appointed as directors of
K2 and the Board and shareholders will approve a 1 x 3 reverse split of K2
shares such that the current shareholders of K2 own approximately 2.16 million
post merger shares representing 5% of the post merger shares issued and
outstanding. Further, prior to closing of the transaction, K2 shall be entitled
to issue up to 500,000 stock options with an exercise price of $0.11 per share
to its officers and directors. The transaction is subject to the normal
conditions for closing, including satisfactory due diligence by the parties.

Incorporated in California in July 2001, NPOWR will compete in the sector
addressing next generation technology that fulfills the long-awaited promise of
a convergence between television and the Internet. As progressive websites
increasingly focus on integrating rich media into otherwise dry presentations,
NPOWR believes that its proprietary technology is generating wide-ranging
interest. NPOWR's pilot initiative, stimTV(TM), will utilize its technologies in
addressing the dramatically growing markets for interactive television and
video-on-demand.

NPOWR's mission is to create practical technology and programming solutions for
the dynamic interactive television and video-on-demand marketplace. NPOWR
expects its technology and related media products to establish it as a media
industry leader in the delivery of personalized television programming. NPOWR's
management believes that its technology, which facilitates the customization of
programming from a database of stored media assets, will allow significant
improvements and innovations to be brought to the growing market for interactive
television and video-on-demand, as well as for on-line broadband media delivery
to homes and businesses for entertainment, distance-learning, training and
marketing.

There can be no assurance that the merger transaction will be consummated. If
not, the Company will consider other options, which may include a merger or
similar transaction with another entity or liquidation of the Company under
Chapter 7 of the U.S. Bankruptcy Code.

GOVERNMENT REGULATION

Having effectively ceased operations in August 2001, the Company is not
currently subject to direct regulation by any government agency, other than
regulations applicable to businesses generally. Web site developers such as the
Company face potential liability for the actions of clients and others using
their services, including liability for infringement of intellectual property
rights, rights of publicity, defamation, libel and criminal activity under the
laws of the U.S. and foreign jurisdictions. Any imposition of liability from the
Company's prior operations could have a material adverse effect on the Company.

EMPLOYEES

As a result of the transaction entered into with IIS in August 2001 and the fact
that the Company has effectively ceased operations, at December 31, 2005, the
Company had only one employee, Gary W. Brown, the Company's current President,
Chief Financial Officer and Secretary. Since August 2001, Mr. Brown's employment
with the Company has been limited to structuring and negotiating merger


                                       2
<PAGE>

transactions, as well as liquidating assets, collecting accounts receivable and
paying creditors. Since December 31, 2001, Mr. Brown has received no salary,
compensation or benefits. Prior to the closing of the NPOWR merger, it is
expected that Mr. Brown will be issued additional options to purchase shares of
the Company's common stock.

ITEM 2. DESCRIPTION OF PROPERTY

NONE

ITEM 3. LEGAL PROCEEDINGS

The Company is not a party to any material legal proceedings as of the date
hereof.

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

The Company did not submit any matters to a vote of its stockholders, through
the solicitation of proxies or otherwise, during the fourth quarter of fiscal
2005.









                                       3
<PAGE>


                                     PART II

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

The Company's common stock was delisted from the Nasdaq SmallCap Market
("NASDAQ") effective August 15, 2001 and currently trades in the
over-the-counter market under the symbol "KTWO.OB." Prior to its delisting, the
Company's common stock was traded on NASDAQ under the symbol "KTWO." The
following table sets forth, for the periods indicated, the range of high and low
price quotes of the Company's common stock as reported by the over-the-counter
bulletin board (for periods subsequent to the delisting) and NASDAQ (for periods
prior to the delisting) from the quarter ended March 31, 2004 through December
31, 2005. These quotations reflect inter-dealer prices, without retail mark-up,
mark-down or commission, and may not necessarily represent actual transactions.

              Fiscal Quarter Ended           High              Low
              --------------------           ----              ---

              March 31, 2004                 $0.09             $0.03

              June 30, 2004                  $0.06             $0.03

              September 30, 2004             $0.07             $0.02

              December 31, 2004              $0.05             $0.02

              March 31, 2005                 $0.08             $0.03

              June 30, 2005                  $0.12             $0.04

              September 30, 2005             $0.12             $0.05

              December 31, 2005              $0.10             $0.05



The approximate number of record holders of the Company's common stock at
December 31, 2005 was 27, not including beneficial owners whose shares are held
by banks, brokers and other nominees.

There were no repurchases by the Company of its common stock on the open market
or from any of its stockholders in fiscal year 2005 or 2004. At December 31,
2005, the Company held a total of 417,417 shares of treasury stock at a cost of
$819,296.

On December 11, 2000, the Company entered into a common stock purchase agreement
(the "Fusion Facility") with Fusion Capital Fund II, LLC ("Fusion Capital"), a
Chicago-based institutional investor. On January 26, 2001, the Company issued to
Fusion Capital, as a commitment fee for the Fusion Facility, 380,485 shares of
common stock, as well as warrants to purchase 297,162 shares of common stock at
an exercise price of $.01 per share, exercisable at any time over a five year
period. In May 2001, the Company issued 862,069 shares of common stock under the
Fusion Facility to an officer of the Company, in exchange for net proceeds of
$250,000. On August 14, 2001, Fusion Capital exercised a warrant to purchase an
additional 297,162 shares of the Company's common stock at an exercise price of
$.01 per share. After applying the net exercise provisions of the warrant, based
upon the closing sale price of the Company's common stock of $0.15 per share on
August 13, 2001, Fusion Capital received 277,351 shares of common stock upon
exercise of the warrant. The shares of common stock and warrants issued to
Fusion Capital were sold pursuant to the exemption from registration provided by
Section 4 (2) of the Securities Act of 1933, as amended, as an offering not
involving any public offering. Because the common stock and warrants were issued
to Fusion Capital as a commitment fee under the Fusion Facility, no proceeds
were received by the Company upon issuance of such common stock and warrants. On
March 4, 2003, the Fusion Facility was terminated.

The Company has not paid any dividends. The Company does not expect to pay cash
dividends on its common stock in the foreseeable future. Declaration of
dividends in the future will remain within the discretion of the Company's Board
of Directors.



                                       4
<PAGE>


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

The following presentation of management's discussion and analysis of the
Company's financial condition and results of operations should be read in
conjunction with the Company's consolidated financial statements, the
accompanying notes thereto and other financial information appearing elsewhere
in this report. This section and other parts of this report contain
forward-looking statements that involve risks and uncertainties. The Company's
actual results may differ significantly from the results discussed in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in the section entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Factors
Affecting Operating Results and Market Price of Stock" commencing on page 7.

OVERVIEW

Founded in 1993, the Company was a digital professional services company that,
until August 2001, provided consulting and development services, including
analysis, planning, systems design, creative and implementation. In August 2001,
the Company sold certain fixed and intangible assets of the Company to IIS,
including certain of the Company's customer contracts, furniture, fixtures,
equipment and intellectual property, and effectively became a "shell" company
with no revenues and continuing general and administrative expenses.

SUMMARY OF RESULTS

Following is a summary of the Company's operations for the years ended December
31, 2005 and 2004:

                                           2005             2004
                                           ----             ----

Other income                             $ 39,422          $2,641
General and administrative expenses       (60,186)         (4,186)
                                         ------------------------

Net loss                                 $(20,764)        $(1,545)

In 2005 and 2004, other income primarily represents gain from the sale of 24/7
Real Media, Inc. common stock. During the year ended December 31, 2005, the
Company sold 11,000 shares of 24/7 stock for aggregate proceeds of approximately
$52,000, recognizing a realized gain of approximately $39,000. During the year
ended December 31, 2004, the Company sold 1,000 shares of 24/7 stock for
aggregate proceeds of approximately $4,000, recognizing a realized gain of
approximately $3,000. General and administrative expenses primarily represent
ongoing legal and accounting costs and other public company expenses. The
increase in general and administrative expenses is attributable to increased
activities in connection with potential merger candidates. Further, in 2004
only, general and administrative expenses were reduced by amounts paid by
potential merger candidates.

CONTINUING OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES

Subsequent to the sale of assets to IIS, the Company effectively ceased
operations and has been in the process of liquidating assets and paying
creditors. The Company does not have any ongoing business operations or revenue
sources beyond those assets not purchased by IIS. Accordingly, the Company's
remaining operations will be limited to either a business combination with an
existing business or the winding up of the Company's remaining business and
operations, subject, in either case, to the approval of the stockholders of the
Company. The proceeds from the sale of assets plus the additional contingent
payments from IIS, together with assets not sold to IIS may not be sufficient to
repay substantially all of the liabilities of the Company. These, among other
matters, raise substantial doubt about the Company's ability to continue as a
going concern.

The Board of Directors of the Company has determined that, subject to
stockholder approval, the best course of action for the Company is to complete a
business combination with an existing business.

On December 22, 2005, the Company signed a letter of intent with NPOWR Digital
Media, Inc. ("NPOWR"), a California corporation, whereby NPOWR will acquire K2
preferred shares convertible into 1,500,000 shares of K2 common stock for
$165,000 and subsequently enter into a merger agreement with the Company.

The Company's cash balance of $1,360 at December 31, 2005, decreased by $6,006
or 82% compared to the $7,366 cash balance at December 31, 2004. This decrease
was primarily due to proceeds from the sale of 24/7 Real Media, Inc. common
stock offset by ongoing costs of operating as a public shell company.



                                       5
<PAGE>


FACTORS AFFECTING OPERATING RESULTS AND MARKET PRICE OF STOCK

THE COMPANY HAS EFFECTIVELY DISCONTINUED ITS OPERATIONS.

In August 2001, the Company sold certain fixed and intangible assets essential
to its business operations and entered into a purchase agreement containing
provisions restricting the Company's ability to continue to engage in the
business engaged in by the Company prior to the transaction. Accordingly, the
Company's remaining operations have been limited to liquidating assets, paying
creditors, and negotiating and structuring the transactions contemplated by the
Merger Agreement or the winding up of the Company's remaining business and
operations, subject, in either case, to the approval of the stockholders of the
Company.

AGREEMENT AND PLAN OF MERGER

On December 22, 2005, the Company signed a letter of intent with NPOWR Digital
Media, Inc. ("NPOWR"), a California corporation, whereby NPOWR will acquire K2
preferred shares convertible into 1,500,000 shares of K2 common stock for
$165,000 and subsequently enter into a merger agreement with the Company.

On January 24, 2006, the Company completed the sale of 1,000,000 shares of its
convertible preferred shares to NPOWR at a purchase of $165,000. K2, its
wholly-owned subsidiary, K2 Acquisition Corp. ("Merger Sub") and NPOWR intend to
enter into a merger agreement whereby Merger Sub will merge with and into NPOWR.
In connection with the merger, the shareholders of NPOWR will acquire a
controlling interest in K2. NPOWR's designees will be appointed as directors of
K2 and the Board and shareholders will approve a 3 x 1 reverse split of K2
shares such that the current shareholders of K2 own approximately 2.16 million
post merger shares representing 5% of the post merger shares issued and
outstanding. Further, prior to closing of the transaction, K2 shall be entitled
to issue up to 500,000 stock options with an exercise price of $0.11 per share
to its officers and directors. The transaction is subject to the normal
conditions for closing, including satisfactory due diligence by the parties.

Incorporated in California in July 2001, NPOWR will compete in the sector
addressing next generation technology that fulfills the long-awaited promise of
a convergence between television and the Internet. As progressive websites
increasingly focus on integrating rich media into otherwise dry presentations,
NPOWR believes that its proprietary technology is generating wide-ranging
interest. NPOWR's pilot initiative, stimTV(TM), will utilize its technologies in
addressing the dramatically growing markets for interactive television and
video-on-demand.

NPOWR's mission is to create practical technology and programming solutions for
the dynamic interactive television and video-on-demand marketplace. NPOWR
expects its technology and related media products to establish it as a media
industry leader in the delivery of personalized television programming. NPOWR's
management believes that its technology, which facilitates the customization of
programming from a database of stored media assets, will allow significant
improvements and innovations to be brought to the growing market for interactive
television and video-on-demand, as well as for on-line broadband media delivery
to homes and businesses for entertainment, distance-learning, training, and
marketing.

There can be no assurance that the merger transaction described above will be
consummated. If not, the Company will consider other options, which may include
a merger or similar transaction with another entity or liquidation of the
Company under Chapter 7 of the U.S. Bankruptcy Code.

THE COMPANY'S STOCK HAS BEEN DELISTED FROM THE NASDAQ SMALLCAP MARKET

The Company's common stock was delisted from the Nasdaq SmallCap Market
effective August 15, 2001 and currently trades in the over-the-counter market.
On March 13, 2001, the Staff of the Nasdaq Stock Market notified the Company
that it had failed to demonstrate a closing bid price of at least $1.00 per
share for 30 consecutive trading days and was in violation of Nasdaq Marketplace
Rule 4310(c)(4). In accordance with applicable Nasdaq Marketplace rules, the
Company was provided a 90-day grace period, through June 11, 2001, during which
to regain compliance. On June 20, 2001, the Company requested a hearing, which
effectively stayed the delisting. However, after submission of materials in
support of the Company's position to the Panel, the Panel decided to delist the
Company's common stock from the Nasdaq SmallCap Market as of the open of
business on August 15, 2001. The delisting of the Company's common stock from
The Nasdaq SmallCap Market is likely to materially and adversely decrease the
already limited liquidity and market price of the common stock, and may increase
both volatility and the "spread" between bid and asked prices of the common
stock.

FOR THE PAST FOUR YEARS, THE COMPANY HAS BEEN A "SHELL" COMPANY WITH NO
OPERATIONAL REVENUES AND CONTINUING GENERAL AND ADMINISTRATIVE EXPENSES

In August 2001, the Company sold certain fixed and intangible assets essential
to its business operations and entered into a purchase agreement containing
provisions restricting the Company's ability to continue to engage in the
business engaged in by the Company prior to the transaction. Accordingly, the
Company's remaining operations have been limited to liquidating assets,
collecting accounts receivable, paying creditors, and negotiating and
structuring the transactions contemplated in the non-binding letter of intent or
the



                                       6
<PAGE>

winding up of the  Company's  remaining  business and  operations,  subject,  in
either case, to the approval of the stockholders of the Company.

THE TRANSACTIONS CONTEMPLATED MAY NEVER BE CONSUMMATED

To date, the Company has been unsuccessful in finding a suitable merger partner.
The Company's remaining assets may not be sufficient to meet its ongoing costs
of remaining a shell company and paying its liabilities. The Company's Board of
Directors is considering other options, which may include a merger or similar
transaction with another entity, or liquidation of the Company under Chapter 7
of the U.S. Bankruptcy Code.


ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                         K2 DIGITAL, INC. AND SUBSIDIARY
                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm                 F-1

Consolidated Financial Statements

   Consolidated Balance Sheet                                           F-2
   December 31, 2005

   Consolidated Statements of Operations and Comprehensive  Loss        F-3
   For the Years Ended December 31, 2005 and 2004

   Consolidated Statements of Stockholders' Deficit                     F-4
   For the Years Ended December 31, 2005 and 2004

   Consolidated Statements of Cash Flows                                F-5
   For the Years Ended December 31, 2005 and 2004

   Notes to Consolidated Financial Statements                           F-6 - 12










<PAGE>


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF K2 DIGITAL, INC.

We have audited the accompanying consolidated balance sheet of K2 Digital, Inc.
and Subsidiary as of December 31, 2005, and the related consolidated statements
of operations and comprehensive loss, stockholders' deficit and cash flows for
each of the years in the two-year period ended December 31, 2005. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with 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. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audit included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of K2 Digital, Inc. and
Subsidiary as of December 31, 2005, and the results of their operations and
their cash flows for each of the years in the two-year period ended December 31,
2005, in conformity with accounting principles generally accepted in the United
States of America.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, during 2001, the Company sold fixed and
intangible assets essential to its business operation and effectively became a
"shell" company with no revenues and continuing general and administrative
expenses. Further, at December 31, 2005, the Company had significant cumulative
losses, a diminutive cash balance and working capital and stockholders'
deficits. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans regarding those matters are
also described in Note 1. The consolidated financial statements do not include
any adjustments that might result from the outcome of this uncertainty.


                                      /s/ ROTHSTEIN, KASS & COMPANY, P.C.

ROSELAND, NEW JERSEY
FEBRUARY 28, 2006









                                       F-1
<PAGE>


                         K2 DIGITAL, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2005


<TABLE>
<CAPTION>
                                         ASSETS
<S>                                                                       <C>
CURRENT ASSETS:
    Cash                                                                  $     1,360
    Investment in available-for-sale security                                  14,680
                                                                          -----------
       Total current  assets                                              $    16,040
                                                                          ===========



                             LIABILITIES & STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
    Accounts payable                                                      $   177,274
    Other accrued expenses                                                      9,000
                                                                          -----------
       Total current liabilities                                              186,274
                                                                          -----------

Commitments and contingencies

STOCKHOLDERS' DEFICIT
    Preferred Stock, $0.01 par value, authorized 1,000,000 shares;
       issued and outstanding, none
    Common Stock, $0.01 par value, authorized 24,000,000 shares;
       issued 5,400,116 shares, outstanding 4,982,699 shares                   54,001
    Additional paid-in-capital                                              8,317,910
    Accumulated other comprehensive income                                     12,380
    Accumulated deficit                                                    (7,735,229)
                                                                          -----------
                                                                              649,062

Less: Treasury stock, 417,417 shares at cost                                 (819,296)
                                                                          -----------
Total stockholders'  deficit                                                 (170,234)
                                                                          -----------
Total liabilities and stockholders' deficit                               $    16,040
                                                                          ===========
</TABLE>



        See the accompanying notes to consolidated financial statements.

                                       F-2
<PAGE>


                         K2 DIGITAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                             AND COMPREHENSIVE LOSS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
                                                                 2005              2004
<S>                                                           <C>               <C>

Revenues                                                      $      --         $      --
Other income                                                       39,422             2,641
General and administrative expenses                               (60,186)           (4,186)
                                                              -----------------------------
Net loss                                                      $   (20,764)      $    (1,545)
                                                              =============================
Comprehensive loss:

Net loss                                                      $   (20,764)      $    (1,545)
Other comprehensive income (loss) -
  Available-for-sale security:
  Unrealized holding gain (loss) arising during year               10,350           (33,730)
  Reclassification adjustment for gain included in net loss       (39,310)           (2,630)
                                                              -----------------------------
                                                                  (28,960)          (36,360)
                                                              -----------------------------

Comprehensive loss                                            $   (49,724)      $   (37,905)
                                                              =============================
Net loss per common share-
  basic and diluted                                           $    (0.004)      $    (0.000)
                                                              -----------------------------
Weighted average common shares outstanding -
  basic and diluted                                             4,982,699         4,982,699
                                                              -----------------------------
</TABLE>


       See the accompanying notes to consolidated financial statements.

                                       F-3


<PAGE>


                         K2 DIGITAL, INC. AND SUBSIDIARY
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
                     YEARS ENDED DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
                                                            ADDITIONAL         OTHER                                     TOTAL
                                    COMMON STOCK              PAID-IN     COMPREHENSIVE  ACCUMULATED     TREASURY     STOCKHOLDERS'
                                 SHARES      AMOUNT            CAPITAL        INCOME      DEFICIT          STOCK         DEFICIT
                                 ------      ------            -------        ------      -------          -----         -------
<S>                             <C>              <C>         <C>              <C>       <C>              <C>             <C>
Balances, January 1, 2004       5,400,116        $54,001     $8,317,910       $77,700   $(7,712,920)     $(819,296)      $(82,605)

Other comprehensive loss,
  net of reclassification
  adjustment                                                                  (36,360)                                    (36,360)

Net loss                                                                                     (1,545)                       (1,545)
                             ----------------------------------------------------------------------------------------------------
Balances, December 31, 2004     5,400,116         54,001      8,317,910        41,340    (7,714,465)      (819,296)      (120,510)

Other comprehensive loss,
  net of reclassification
  adjustment                                                                  (28,960)                                    (28,960)

Net loss                                                                                    (20,764)                      (20,764)

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

Balances, December 31, 2005     5,400,116        $54,001     $8,317,910       $12,380   $(7,735,229)     $(819,296)     $(170,234)
                             ====================================================================================================
</TABLE>





See accompanying notes to consolidated financial statements.



                                       F-4


<PAGE>


                         K2 DIGITAL, INC. AND SUBSIDIARY
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 2005 AND 2004
<TABLE>
<CAPTION>
                                                                       2005           2004
<S>                                                                  <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                             $(20,764)       $(1,545)
Adjustments to reconcile net loss to net cash used in operating
    activities:
    Gain on sales of available-for-sale security                      (39,310)        (2,630)
    Increase (decrease) in cash attributable to changes in
    operating assets and liabilities:
    Accounts payable                                                   10,103         19,173
    Other accrued expenses                                             (7,995)       (28,005)
                                                                     -----------------------
Net cash used in operating activities                                 (57,966)       (13,007)
                                                                     -----------------------

NET CASH PROVIDED BY INVESTING ACTIVITIES,
    proceeds from sales of available-for-sale security                 51,960          3,780
                                                                     -----------------------


Net decrease in cash                                                   (6,006)        (9,227)

CASH, beginning of year                                                 7,366         16,593
                                                                     -----------------------
CASH, end of year                                                      $1,360         $7,366
                                                                     =======================
</TABLE>






See the accompanying notes to consolidated financial statements.





                                       F-5
<PAGE>


                         K2 DIGITAL, INC. AND SUBSIDIARY

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Prior business and going concern consideration

Through August 2001, K2 Digital, Inc. (together with its wholly-owned
subsidiary, the "Company" or "K2") was a strategic digital services company that
provided consulting and development services including analysis, planning,
systems design and implementation. In August 2001, the Company completed the
sale of fixed and intangible assets essential to its business operations to an
unrelated party and effectively became a "shell" company with no revenues and
continuing general and administrative expenses. Thereafter, as a "shell"
company, K2 has been seeking a strategic business combination. Despite attempts
with three candidates, the Company has yet to effectuate a transaction.

The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As indicated above, the Company is
a "shell" company with no revenues and continuing general and administrative
expenses. Further, at December 31, 2005, the Company has cumulative losses of
approximately $7.7 million, a diminutive cash balance and working capital and
stockholders' deficits of approximately $170,000. These conditions raise
substantial doubt about the Company's ability to continue as a going concern.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.

Management's plan includes a strategic business combination with a fourth merger
candidate.

On December 22, 2005, the Company signed a letter of intent with NPOWR Digital
Media, Inc. ("NPOWR"), a California corporation, whereby NPOWR will acquire K2
preferred shares convertible into 1,500,000 shares of K2 common stock for
$165,000 and subsequently enter into a merger agreement the Company.

On January 24, 2006, the Company completed the sale of 1,000,000 shares of its
convertible preferred shares to NPOWR at a purchase of $165,000. K2, its
wholly-owned subsidiary, K2 Acquisition Corp. ("Merger Sub") and NPOWR intend to
enter into a merger agreement whereby Merger Sub will merge with and into NPOWR.
In connection with the merger, the shareholders of NPOWR will acquire a
controlling interest in K2. NPOWR's designees will be appointed as directors of
K2 and the Board and shareholders will approve a 1 x 3 reverse split of K2
shares such that the current shareholders of K2 own approximately 2.15 million
post merger shares representing 5% of the post merger shares issued and
outstanding. Further, prior to closing of the transaction, K2 shall be entitled
to issue up to 500,000 stock options with an exercise price of $0.11 per share
to its officers, directors and professionals. The transaction is subject to the
normal conditions for closing, including satisfactory due diligence by the
parties.

The contemplated merger, which would be a recapitalization of NPOWR, would be
accounted for as a reverse acquisition. For accounting purposes, NPOWR would be
deemed the acquirer and K2, the legal acquirer, would be deemed the acquired
entity. Accordingly, the post-merger company consolidated financial statements
would represent NPOWR on a historical basis. No goodwill would be recorded in
connection with the contemplated transaction since K2 is a "shell" company.

Incorporated in California in July 2001, NPOWR will compete in the sector
addressing next generation technology that fulfills the long-awaited promise of
a convergence between television and the Internet. As progressive websites
increasingly focus on integrating rich media into otherwise dry presentations,
NPOWR believes that its proprietary technology is generating wide-ranging
interest. NPOWR's pilot initiative, stimTV(TM), will utilize its technologies in
addressing the dramatically growing markets for interactive television and
video-on-demand.

NPOWR's mission is to create practical technology and programming solutions for
the dynamic interactive television and video-on-demand marketplace. NPOWR
expects its technology and related media products to establish it as a media
industry leader in the delivery of personalized television programming. NPOWR's
management believes that its technology, which facilitates the customization of
programming from a database of stored media assets, will allow significant
improvements and innovations to be brought to the growing market for interactive
television and video-on-demand, as well as for on-line broadband media delivery
to homes and businesses for entertainment, distance-learning, training and
marketing.

There can be no assurance that the merger transaction will be consummated. If
not, the Company will consider other options, which may include a merger or
similar transaction with another entity or liquidation of the Company under
Chapter 7 of the U.S. Bankruptcy Code.

                                       F-6
<PAGE>


                         K2 DIGITAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Summary of significant accounting policies

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of K2
Digital, Inc. and its wholly-owned subsidiary. All significant intercompany
balances and transactions have been eliminated in consolidation.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair values of the Company's assets and liabilities that qualify as
financial instruments under Statement of Financial Accounting Standards ("SFAS")
No. 107, "Disclosure about Fair Value of Financial Instruments," approximate
their carrying amounts presented in the accompanying consolidated balance sheet
at December 31, 2005.

USE OF ESTIMATES

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


                                       F-7
<PAGE>



                         K2 DIGITAL INC, AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Summary of significant accounting policies (continued)

INVESTMENT IN AVAILABLE-FOR-SALE SECURITY

The Company accounts for its investment in a publicly-traded common stock, 24/7
Real Media, Inc. (formerly 24/7 Media, Inc.) ("24/7 stock"), as
available-for-sale. Available-for-sale securities are carried at fair value
(based upon published closing prices), with the unrealized gains and losses
reported in stockholders' deficit under the caption accumulated other
comprehensive income. Realized gains and losses and declines in value judged to
be other-than-temporary on available-for-sale securities are included in
operations.

During the year ended December 31, 2005, the Company sold 11,000 shares of 24/7
stock for aggregate proceeds of approximately $52,000, recognizing a realized
gain of approximately $39,000. During the year ended December 31, 2004, the
Company sold 1,000 shares of 24/7 stock for aggregate proceeds of approximately
$4,000, recognizing a realized gain of approximately $3,000. At December 31,
2005, the Company had an approximate $12,000 gross unrealized holding gain on
the remaining 2,000 shares of 24/7 stock. During the years ended December 31,
2005 and 2004, the change in unrealized holding gain from available-for-sale
security was approximately $10,000 and $(34,000), respectively.

INCOME TAXES

The Company complies with SFAS No. 109, "Accounting for Income Taxes", which
requires an asset and liability approach to financial accounting and reporting
for income taxes. Deferred income tax assets and liabilities are computed for
differences between the financial statement and tax bases of assets and
liabilities that will result in future taxable or deductible amounts, based on
enacted tax laws and rates to the periods 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.

                                       F-8








<PAGE>




                         K2 DIGITAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. Summary of significant accounting policies (continued)

NET LOSS PER COMMON SHARE

The Company complies with SFAS No. 128, "Earnings Per Share", which requires
dual presentation of basic and diluted earnings per share. Basic earnings loss
per share excluded dilution and is computed by dividing net income (loss)
available to common stockholders by the weighted average common shares
outstanding for the year. Diluted earnings per share reflects the potential
dilution that could occur if securities or other contracts to issue common stock
were exercised or converted to common stock or resulted in the issuance of
common stock that then shared in the earnings of the entity. Since the effect of
outstanding options is anti-dilutive, they have been excluded from the Company's
computation of net loss per common share. Therefore, basic and diluted loss per
common share for the years ended December 31, 2005 and 2004 were the same.

STOCK-BASED COMPENSATION

The Company follows SFAS No. 123 "Accounting for Stock-Based Compensation." The
provisions of SFAS No. 123 allow companies to either expense the estimated fair
value of stock options or to continue to follow the intrinsic value method set
forth in Accounting Principles Board ("APB") Opinion No. 25, "Accounting for
Stock Issued to Employees" but disclose the pro forma effect on net income
(loss) had the fair value of the options been expensed. The Company has elected
to continue to apply APB Opinion No. 25 in accounting for its stock option
incentive plans.

The Company accounts for the Plans under APB Opinion No. 25, "Accounting for
Stock Issued to Employees" under which no compensation cost is recognized for
stock options granted to employees with an exercise price at or above the
prevailing market price on the date of the grant. Had compensation cost for the
Plans been determined consistent with the fair value approach required by SFAS
No. 123, the Company's net loss and basic and diluted net loss per common share
for the years ended December 31, 2005 and 2004 would have been the following pro
forma amounts (in thousands, except for per share data):

                                                   2005         2004
                                                   ----        ------

Net loss, as reported                              $(21)          $(2)

Stock-based employee compensation
determined under the fair value
based method, net of related taxes                   (3)           (3)

                                                   ----          ----

Net loss, pro forma                                $(24)          $(5)

                                                   ====          ====

Net loss per common share, basic and diluted:

As reported                                     $(0.004)      $(0.000)
                                                =======       =======

Pro forma                                       $(0.005)      $(0.001)
                                                =======       =======


The fair value of each option granted is estimated on the date of the grant
using the Black-Scholes option pricing model with following assumptions:
Risk-free interest rate of 4.5%; no expected dividend yields for options
granted; expected lives of 4 years and expected stock price volatility of
approximately 124%.

                                       F-9
<PAGE>


                         K2 DIGITAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NEW ACCOUNTING PRONOUNCEMENTS

In December 2004, the FASB issued SFAS No. 123R, "Share-Based Payment." SFAS No.
123R is a revision of SFAS No. 123, "Accounting for Stock Based Compensation,"
and supersedes APB Opinion No. 25 ("APB No. 25"). Among other items, SFAS No.
123R eliminates the use of APB No. 25 and the intrinsic value method of
accounting, and requires companies to recognize the cost of employee services
received in exchange for awards of equity instruments, based on the grant date
fair value of those awards, in the financial statements. The effective date of
SFAS No. 123R for the Company is the first quarter of 2006. SFAS No. 123R
permits companies to adopt its requirements using either a "modified
prospective" method, or a "modified retrospective" method. Under the "modified
prospective" method, compensation cost is recognized in the financial statements
beginning with the effective date, based on the requirements of SFAS No. 123R
for all share-based payments granted after that date, and based on the
requirements of SFAS No. 123 for all unvested awards granted prior to the
effective date of SFAS No. 123R. Under the "modified retrospective" method, the
requirements are the same as under the "modified prospective" method, but also
permits entities to restate financial statements of previous periods, either for
all prior periods presented or to the beginning of the fiscal year in which the
statement is adopted, based on previous pro forma disclosures made in accordance
with SFAS No. 123. The Company has not yet determined which of the methods it
will use upon adoption.

The Company currently utilizes the Black-Scholes option pricing model to measure
the fair value of stock options granted to employees. While SFAS No. 123R
permits entities to continue to use such a model, it also permits the use of a
"lattice" model. The Company expects to continue using the Black-Scholes option
pricing model upon adoption of SFAS No. 123R to measure the fair value of stock
options.

The adoption of this statement will have the effect of reducing net income and
income per share as compared to what would be reported under the current
requirements. These future amounts cannot be precisely estimated because they
depend on, among other things, the number of options issued in the future, and
accordingly, the Company has not determined the impact of adoption of this
statement on its results of operations.

FAS 123R also requires that the benefits associated with the tax deductions in
excess of recognized compensation cost be reported as a financing cash flow,
rather than as an operating cash flow as required under current literature. This
requirement will reduce net operating cash flows and increase net financing cash
flows in periods after the effective date. These future amounts cannot be
estimated, because they depend on, among other things, when employees exercise
stock options.

                                      F-10


<PAGE>



                         K2 DIGITAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. Commitments and contingencies

Although management believes that it has adequately provided for all of its
known liabilities at December 31, 2005, the Company may be exposed to potential
contingencies related to its business activities that have been discontinued. At
the present time, the Company is not aware of any contingencies that would
require accrual or disclosure in the consolidated financial statements pursuant
to SFAS No. 5.

4. Income taxes

The provision (benefit) for income taxes on the net loss for the years ended
December 31, 2005 and 2004 differs from the amount computed by applying the
Federal statutory rate due to the following:

                                        2005          2004
                                        ----          ----

Statutory Federal income tax rate      (34.0) %      (34.0)%

State and local taxes, net              (5.1)         (5.1)

Valuation allowance and other           39.1          39.1
                                       -------------------

Effective income tax rate                 --%           --%
                                       ===================



As of December 31, 2005, the Company had net operating loss carryforwards of
approximately $8.0 million for federal and state income tax purposes, which are
available to reduce future taxable income and will expire through 2025 if not
utilized. In addition, a 2001 impairment charge related to the investment in
available-for-sale securities of approximately $130,000, net of approximately
$1,277,000 deducted (for tax purposes) during the subsequent years for
subsequent sales, is not deductible until the securities are sold. The future
tax benefits associated with the net operating loss carryforwards and impairment
charge were the primary components of an estimated $3.3 million deferred tax
asset at December 31, 2005. A valuation allowance has been established for the
entire amount of the deferred tax asset since its realization is considered
unlikely. Further, a change in the ownership of a majority of the fair market
value of the Company's common stock (such as the change in ownership that would
occur in the contemplated transaction discussed in Note 1) could significantly
delay or limit the utilization of net operating loss carryforwards.

                                      F-11


<PAGE>


                         K2 DIGITAL, INC. AND SUBSIDIARY
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

5. Stock option plan

The Company has two stock plans, the 1996 Stock Option Plan (the "1996 Plan"),
and the 1997 Stock Incentive Plan (the "1997 Plan", and together with the 1996
Plan, the "Plans"). Pursuant to the Plans, designated employees, including
officers and directors of the Company and certain outside consultants, will be
entitled to receive nonqualified stock options and qualified stock incentive
compensation of up to 225,000 and 500,000 options under the 1996 Plan and 1997
Plan respectively. The number of options available under the 1997 Plan were
increased by an additional 400,000 and 800,000 options in 1999 and 2000,
respectively, to a total of 1,700,000 options. In January 2001, the Board of
Directors and stockholders approved an amendment to the 1997 Plan to increase
the aggregate number of shares reserved for future issuance of the Company's
common stock under the 1997 Plan from 1,700,000 shares to 3,000,000 shares. As
of December 31, 2005, there were 2,005,500 shares of common stock available for
grant under the Plans. The 1996 Plan expired on January 1, 2006 and the 1997
Plan will expire on June 12, 2007. Under the terms of the Plans, the minimum
exercise price of options granted cannot be less than 100% of the fair market
value of the common stock of the Company on the option grant date. Options
granted under the Plan generally expire ten years after the option grant date.
For incentive stock options granted to such persons who would be deemed to have
in excess of a 10% ownership interest in the Company, the option price shall not
be less that 110% of such fair market value for all options granted.

A summary of the Plans at December 31, 2005, and 2004 is presented in the table
below:
<TABLE>
<CAPTION>
                                                                          Weighted Average
                                              Shares         Range         Exercise Price
                                            ----------     ---------     ------------------
<S>                                           <C>         <C>                 <C>
Outstanding at December 31, 2003              982,750     $0.05 - $5.81       $  2.40
Granted                                            --                --            --
Expired                                            --                --            --
                                              -------     -------------       -------
Outstanding at December 31, 2004              982,750     $0.05 - $5.81       $  2.40
Granted                                            --                --            --
Expired                                            --                --            --
                                              -------     -------------       -------
Outstanding at December 31, 2005              982,750     $0.05 - $5.81       $  2.40

At December 31, 2005, substantially all
outstanding shares are exercisable            982,750
</TABLE>
No options were granted for the year ended December 31, 2005.

Further information about the Company's outstanding stock options at December
31, 2005 is as follow:
<TABLE>
<CAPTION>
                                                     Weighted Average
                                    Number of      Remaining Contractual     Weighted Average
Range of Exercise Prices              Shares          Life (in Years)            Exercise
------------------------           -----------     ---------------------    ------------------
<S>                                  <C>                   <C>                     <C>
$0.05                                 40,000               6.6                    $0.05
$0.66 to $1.09                       181,000               5.1                     0.74
$1.50 to $1.75                       435,000               2.8                     1.52
$2.50 to $2.94                        37,500               3.5                     2.60
$5.00 to $5.81                       289,250               4.2                     5.05
                                     -------              -----                    ----

Outstanding at December 31, 2005     982,750               3.8                     2.40
</TABLE>



                                      F-12


<PAGE>


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

None

ITEM 8A. CONTROLS AND PROCEDURES

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). This term refers to the controls and procedures of a company that are
designed to ensure that information required to be disclosed by a company in the
reports that it files under the Exchange Act is recorded, processed, summarized,
and reported within the required time periods. Our Chief Executive Officer and
our Chief Financial Officer have evaluated the effectiveness of our disclosure
controls and procedures as of the end of the period covered by this annual
report. They have concluded that, as of that date, our disclosure controls and
procedures were effective at ensuring that required information will be
disclosed on a timely basis in our reports filed under the Exchange Act.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

No change in our internal control over financial reporting (as defined in Rules
13a-l5(d) and 15d-15(f) under the Exchange Act) occurred during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.

                                    PART III

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

DIRECTORS OF THE COMPANY

Since December 31, 2001, one outside director has tendered his resignation from
the Company's Board of Directors. Dr. Steven N. Goldstein resigned effective
March 31, 2002. Set forth below are the current directors of the Company.

Matthew G. de Ganon, age 43, has been a director since he joined the Company in
July 1995. Mr. de Ganon resigned from his position as an executive officer of
the Company effective August 1, 2001. From that time until April 2002, Mr. de
Ganon was employed by Integrated Information Systems, Inc., which purchased
certain assets of the Company in August 2001. He was President of the Company
from June 1996 to November 1998 and was also the Chief Operating Officer of the
Company from July 1995 to November 1997. Mr. de Ganon is currently Vice
President and General Manager, Consumer Applications Software at The Weather
Channel Interactive. For TWCi, Mr. de Ganon is responsible for leading the
company's rapidly expanding efforts in the consumer applications space, with a
focus on desktop software. Until June 2004, Mr. de Ganon was president for
desktop application developer Arcavista Corporation, a developer of
communications software used to synchronize information from the Internet to a
PC best known for its work with RCA and American Idol. Mr. de Ganon began his
career at NBC, Universal Studio's Motion Pictures Group and also worked as an
agent in Los Angeles. He later became Vice President of New Media of SCS, a
software developer serving clients such as Marvel Entertainment. For the two
years prior to joining the Company, Mr. de Ganon operated a business that
created CD-ROM products and offered consulting services regarding the use of
electronic delivery to publishers of newsletters and directories. Mr. de Ganon
is co-author of the essay, "Overcoming Future Shock on the Superhighway:
Suggestions for Providers and Technocrats," published and presented in the 1994
National Online Conference Proceedings. From August 1992 to July 1993, Mr. de
Ganon was the Vice President of New Media of Superior Computer Systems, Inc., a
software developer. Mr. de Ganon's work focused on UNIX-based 4GL accounting
software customization for corporate clients. From May 1991 to July 1992, Mr. de
Ganon was involved in casting administration for the Motion Picture Group of
Universal Studios, Inc. He was a franchised theatrical agent with the Stone
Manners Agency in Los Angeles, California from August 1987 to May 1991.

Douglas E. Cleek, age 43, who co-founded the Company in 1993, has been a
director of the Company since it was reorganized as a corporation in January
1995. From January 1995 until August 2001, Mr. Cleek served as the Company's
Executive Vice President--Chief Creative Officer. From 1993 until 1995, Mr.
Cleek was a general partner and Co-Creative Director of the Company. While at
the company he helped develop many of the industry's firsts, including one of
the first CASIE awards for the live webcast of IBM's Deep Blue vs. Kasparov. He
has also served as a judge for the CASIE Awards and International Web Page
Awards. He then accepted the position of Creative Director at Integrated
Information Systems, Inc., when IIS purchased certain assets of K2 Digital,
Inc., in August 2001. In March 2002, he resigned his executive position to
pursue other opportunities. He currently holds a position as Partner/Creative
Director at Magnitude 9.6, Inc., headquartered in New York City. For more than
five years prior to that, Mr. Cleek was an art director for William Allen & Co.
and its successor, A.J. Bart & Sons, specializing in graphic promotional
materials for the travel & hospitality industry.


<PAGE>

Gary W. Brown, age 52, has been a director of the Company since February 2000
and joined the Company in April 2000 as Executive Vice President and Chief
Operating Officer. Since August 2001, Mr. Brown has served as President,
Secretary, Chief Financial Officer and Chief Operating Officer of the Company.
In November 2001, Mr. Brown joined Canadian Imperial Bank of Commerce (CIBC
World Markets) as Managing Director of the Risk Management Division in the U.S.
Region. In March 2004, Mr. Brown was appointed Chief Operating Officer - US
Region and in September 2004, President and Chief Executive Officer, CIBC World
Markets Corp. and Head of the US Region. Prior to that, Mr. Brown was employed
from July 1980 through June 1999 in various management roles with UBS AG, the
successor organization to Union Bank of Switzerland, including the role of New
York Branch Manager. There he served as Division Head for Structured Finance,
one of UBS's six operating divisions in the Americas prior to the merger of UBS
with Swiss Bank Corporation in 1998. Post-merger, Mr. Brown was designated Chief
Credit Officer-Americas for UBS' investment banking division, Warburg, Dillon
Read, where he was responsible for capital commitments of the firm. Mr. Brown
held various business development and risk management positions throughout his
19-year career at UBS. He also served as President of the New York Chapter of
The Risk Management Association, the trade association for the financial
services risk management industry, and as an ex-officio member of the RMA
National Board. From 1991-1999, he has served on the Board of Directors of Sefar
Americas, a subsidiary of Sefar AG, a manufacturer of Swiss synthetic fabrics.
Prior to joining UBS in 1980, Mr. Brown was employed from June 1976 through June
1980 with The Chase Manhattan Bank, having served in various business
development functions. Mr. Brown received a Bachelor of Science degree in
Business Administration from Oral Roberts University in May 1976.

David R. Sklaver, age 54, has been a director of the Company since 1999. Since
January 2004, Mr. Sklaver has been President of KSL Media New York, the second
largest independent media buying company in the United States. Prior to that,
Mr. Sklaver was President and Chief Executive Officer of UPOC, Inc., a marketing
company. From June 1997 to October 2001, Mr. Sklaver was a General Partner and
Chief Executive Officer of Artustry Partnership, a strategic and creative
marketing company, of which he was a founder. Since October 1995, Mr. Sklaver
has also served as President of Phase 2, Inc. From 1993 to 1995, Mr. Sklaver
served as President of Wells Rich Greene DDB, an advertising agency handling
Fortune 500 clients. Prior to being promoted to President, Mr. Sklaver served as
Executive Vice President, Director of Client Services of Wells Rich Greene from
1989 to 1993. From 1986 to 1988, Mr. Sklaver was Executive Vice President,
Account Group Head, at advertising agency BBD Needham, New York. From 1984 to
1985, Mr. Sklaver was Managing Director of DDB's Sydney office. From 1978 to
1984, he served in Account Management at DDB New York. Prior to 1978, Mr.
Sklaver held positions at Foote, Cone & Belding Advertising and Standard Brands,
both advertising agencies.

FILING REQUIREMENTS

The Company believes that all filing requirements under Section 16(a) of the
Securities Act of 1934, as amended, applicable to its officers, directors and
greater than 10% beneficial owners were complied with during the fiscal year
ended December 31, 2005.

ITEM 10. EXECUTIVE COMPENSATION

DIRECTOR FEES

Directors who are employees of the Company receive no additional compensation
for their service as directors. Directors not so employed are entitled to
receive $25,000 in compensation annually and are entitled to be reimbursed for
expenses incurred in connection with meeting attendance. In addition, each of
the Company's non-employee Directors are granted options to acquire 5,000 shares
of the Company's common stock upon their election or reelection to the Board.
Current Directors have not received any compensation for their services to the
Company since the year ended December 31, 2002. They may, however, be granted
options to acquire Company common stock in the future.

ADVISOR FEES

All non-employees serving as members of the Company's Board of Advisors receive
options to purchase up to 5,000 shares of the Company's common stock upon their
election to the Board of Advisors. The Company did not engage any advisors for
the year ended December 31, 2005.




<PAGE>

EXECUTIVE COMPENSATION

The following table sets forth, for the last three completed fiscal years, the
total annual compensation paid or accrued by the Company for services in all
capacities for the Chief Executive Officer, and those other executive officers
(the "Named Executives") who served in executive capacities during fiscal 2005
and had aggregate compensation in excess of $100,000. Except for Mr. Brown, each
of the Named Executives has resigned his or her position as an officer of the
Company, effective August 1, 2001.
<TABLE>
<CAPTION>
                                                                           Annual Compensation (1)      Long Term Compensation
                                                                           -----------------------      ----------------------
                Name and Principal Position                     Year         Salary         Bonus     Restricted         Option
                ---------------------------                     ----         ------         -----     -----------        ------
                                                                                                      Stock Awards       Awards
                                                                                                      ------------       ------
<S>                                                             <C>
Matthew G. de Ganon, Chairman of the Board (2)                  2005           --             --          --               --
                                                                2004           --             --          --               --
                                                                2003           --             --          --               --

Douglas E. Cleek, former Executive Vice President -
Chief Creative Officer (2)                                      2005           --             --          --               --
                                                                2004           --             --          --               --
                                                                2003           --             --          --               --


Gary W. Brown, President, Chief Financial Officer and

Secretary (3)(4)                                                2005           --             --          --               --
                                                                2004           --             --          --               --
                                                                2003           --             --          --               --
</TABLE>



(1) The value of perquisites and other personal benefits does not exceed 10% of
the officer's salary. The Company effectively ceased its operations in August
2001.

(2) Resigned as an Officer of the Company effective August 1, 2001.

(3) Mr. Brown accepted compensation less than provided for in his employment
agreement during 2001, and has received no salary, compensation or benefits
since December 31, 2001. (4) 50,000 shares vested on April 14, 2001 and the
remaining 50,000 shares vested on April 14, 2002. Based on the closing price of
the Company's common stock on April 14, 2000 of $5.00 per share, the fair market
value of the restricted stock awards on the date of grant was $500,000.

EMPLOYMENT CONTRACTS FOR EXECUTIVE OFFICERS

Matthew G. de Ganon and Douglas E. Cleek resigned from their positions as
officers of the Company effective August 1, 2001. In connection with their
resignations, Mr. de Gannon and Mr. Cleek executed releases, releasing the
Company from any further liability under their employment agreements with the
Company.

Gary W. Brown joined the Company as Executive Vice President and Chief Operating
Officer on April 14, 2000 and is currently the Company's President, Chief
Financial Officer and Secretary. Mr. Brown signed an employment contract with
the Company that expired on March 31, 2002. The employment contract provided for
an annual salary of $225,000 and a discretionary annual bonus in the form of
stock options up to a maximum of 100,000 shares of the Company's common stock
per year. Upon joining the Company, Mr. Brown also received 100,000 shares of
restricted stock and options to purchase up to 263,000 shares of the Company's
common stock, all of which had vested as of April 14, 2002.

OPTION GRANTS IN FISCAL 2005 AND 2004

No stock options were granted under the 1996 Plan or the 1997 Plan for the
year-ended December 31, 2005 and December 31, 2004.

<PAGE>

OPTION GRANTS IN FISCAL 2001

The following table sets forth individual grants of stock options made under the
Company's 1996 Stock Incentive Plan (the "1996 Plan") and the 1997 Stock
Incentive Plan (the "1997 Plan") during the fiscal year ended December 31, 2001
for the each of the Named Executives.
<TABLE>
<CAPTION>
                                                   Percent of Total
                          Number of Securities    Options Granted to
                           Underlying Options     Employees in Fiscal      Exercise or Base
Name                            Granted                 Year(1)              Price ($/Sh)         Expiration Date
----                      --------------------    -------------------      ----------------       ---------------

<S>                            <C>                       <C>                    <C>               <C>
Matthew G. de                      --                     --                      --                     --
Ganon

Douglas E. Cleek                   --                     --                      --                     --

Gary W. Brown                  100,000(2)                 33%                   $0.75             January 2, 2011
</TABLE>



(1) Calculated as a percentage of total options granted to all employees under
both the 1996 Plan and the 1997 Plan.

(2) Such options were granted under the 1997 Plan.

No stock options were granted under the 1996 Plan and 300,000 stock options were
granted under the 1997 Plan to all executive officers and directors as a group
during the fiscal year ended December 31, 2001. Such options are exercisable at
prices per share (reflecting the fair market value on the dates of grant) of
$0.75 under the 1997 Plan. None of such options were exercised during fiscal
2005.

OPTION EXERCISES AND YEAR-END OPTION VALUE TABLE

The table set forth below shows the value of unexercised options under the 1996
Plan and the 1997 Plan held on December 31, 2005 by each of the Named Executives
or Directors.
<TABLE>
<CAPTION>
                                                                                               Value of
                                                         Number of Securities            Unexercised In-the-Money
                             Shares                     Underlying Unexercised          Options held on December 31,
                            Acquired                 Options at December 31, 2005             2005 ($)(1)
                               on         Value      ----------------------------      -----------------------------
Name                        Exercise     Realized    Exercisable    Unexercisable      Exercisable    Unexercisable
-------------------------------------------------------------------------------------------------------------------

<S>                           <C>          <C>       <C>                  <C>               <C>            <C>
Matthew G. de Ganon            --          --            --               --                --              --

Douglas E. Cleek               --          --            --               --                --              --

Gary W. Brown                  --          --        368,000(2)           --                --              --
</TABLE>



(1) Based on the closing price of the Company's common stock on December 31,
2005, the last day in fiscal 2005 on which the markets were open for business,
which was $0.10.

(2) Represents 346,000 options granted under the 1997 Plan and 22,000 options
granted under the 1996 Plan.


<PAGE>



ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

BENEFICIAL OWNERSHIP

The following table sets forth information, as of March 31, 2005 as to the
beneficial ownership of common stock (including shares which may be acquired
within 60 days pursuant to stock options) of each director of the Company, the
Chief Executive Officer of the Company, all directors and executive officers as
a group and persons known by the Company to beneficially own 5% or more of the
common stock. Except as set forth below, each of the listed persons has sole
voting and investment power with respect to the shares beneficially owned by
such person. Except as otherwise indicated, the address of each person included
in the table to the Company, in c/o Thomas G. Amon, Attorney at Law, 500 Fifth
Avenue, Suite 1650, New York, New York 10110.



                                  Shares of Common Stock
Name of Owner                        Beneficially           Percent of Class (1)
-------------                     ----------------------   ---------------------
 Matthew G. de Ganon                     924,493(2)                 18.6

 Douglas E. Cleek                        424,281(2)                  8.5

 Gary W. Brown                         1,348,069(3)                 27.1

 David Sklaver                            15,000(4)                   *

All Directors and Executive            2,711,843(5)                 54.2
Officers as a group (4 persons)

      *Less than one percent.

(1) Does not give effect to: (i) shares held in treasury and (ii) options held
by persons other than the persons named above. Does not include 1,000,000 shares
of Series A stock issued to NPOWR Digital Media, Inc. which are convertible into
1,500,000 common shares.

(2) Messrs. de Ganon and Cleek resigned from their positions as officers of the
Company effective August 1, 2001. Pursuant to a 10-year voting agreement entered
into by Messrs. de Ganon, Cleek, David Centner (a former Chief Operating Officer
and Director of the Company) and Bradley Szollose (a former Secretary and
Director of the Company), effective July 26, 1996 (the "Voting Agreement"), the
voting control over 498,158 shares held by Messrs. Cleek, Centner and Szollose
and Mr. Cleek are vested in Mr. de Ganon. Such shares subject to the Voting
Agreement must be voted in favor of the election of Mr. de Ganon. In addition,
the Voting Agreement grants each party thereto a right of first refusal as to
the sale of the others' common stock. Messrs. de Ganon, Cleek, Centner and
Szollose each disclaim beneficial ownership of those shares with respect to
which they are not record owners.

(3) Includes 368,000 shares underlying presently exercisable stock options: (i)
136,500 shares underlying options which vested on April 14, 2001, (ii) 131,500
shares underlying options which vested on April 14, 2002, 50,000 shares
underlying options which vested on January 2, 2002 and 50,000 shares underlying
unvested stock options which vested on January 2, 2003; (iii) 50,000 shares of
restricted common stock which vested on April 14, 2001, and (iv) 50,000 shares
of restricted common stock which vested on April 14, 2002. Mr. Brown disclaims
beneficial ownership of all shares underlying unexercised and/or unvested
options.

(4) Includes 15,000 shares underlying presently exercisable stock options.

(5) Includes 760,500 shares underlying presently exercisable stock options and
50,000 shares underlying unvested stock options, all of which vest upon the
occurrence of certain change of control transactions. Note that 430,531 of the
2,720,062 shares are subject to the Voting Agreement described above and are
therefore listed as beneficially owned by both Mr. de Ganon and Mr. Cleek. These
shares are counted only once for purposes of the aggregate number of shares of
common stock beneficially owned by all directors and executive officers as a
group.



<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CERTAIN RELATED TRANSACTIONS

On May 15, 2001, Mr. Brown acquired 862,069 shares of common stock of the
Company for an aggregate purchase price of $250,000. Mr. Brown purchased the
shares through the Fusion Facility described above. Mr. Brown acquired the
shares for personal investment purposes and to further demonstrate to a
potential investor in the Company his confidence in the Company and the
alignment of his interests, as an officer and director of the Company, with the
interests of the stockholders of the Company.

                                     PART IV



ITEM 13. EXHIBIT LIST AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report: Page

1. Report of Independent Registered Public Accounting Firm...................F-1

2. Consolidated Financial Statements

Consolidated Balance Sheet - December 31, 2005...............................F-2

Consolidated Statements of Operations and Comprehensive Loss - For
  the years ended December 31, 2005 and 2004 ................................F-3

Consolidated Statements of Stockholders' Deficit - For the years ended
  December 31, 2005 and 2004 ................................................F-4

Consolidated Statements of Cash Flows - For the years ended
  December 31, 2005 and 2004 ................................................F-5

    Notes to Consolidated Financial Statements..........................F-6 - 12




3.  Exhibits

    3.1      Certificate of Incorporation of the Company*

    3.1(a)   Amendment to Certificate of Incorporation of the Company*

    3.1(b)   Amendment to Certificate of Incorporation of the Company
             (incorporated by reference from the Registrant's Form 10-KSB for
             its fiscal year ended 12/31/00).

    3.2      By-laws of the Company*

    3.2(b)   Amendment to By-laws of the Company*

    4.1      Common Stock Certificate*

    4.2      Warrant Certificate*

    4.4      Warrant Agreement by and between Continental Stock Transfer &
             Trust Company and the Company*

    4.5      Voting Agreement among Messrs. Centner, de Ganon, Cleek and
             Szollose*

    10.1     1996 Stock Incentive Plan and Rules Relating thereto*

    10.2     1997 Stock Option Plan (incorporated by reference from the
             Registrant's Form 10-KSB for its fiscal year ended 12/31/96).

    10.3     Amendment to 1997 Stock Option Plan (incorporated by reference from
             the Registrant's Form 10-KSB for its fiscal year ended 12/31/00).


<PAGE>


    10.4     Consulting Agreement with Harvey Berlent*

    10.5     Employment Agreement with Matthew G. de Ganon*







10.19    Agreement and Plan of Merger, dated as of January 15, 2002, by and
         among First Step Distribution Network, Inc. and its shareholders,
         First Step Acquisition Corp. and the Company (incorporated by
         reference from the Registrant's Current Report on Form 8-K filed
         01/17/02).

10.20    Side Letter dated April 8, 2002, by and between the Company and First
         Step Distribution Network, Inc. (incorporated by reference from the
         Registrant's Annual Report on Form 10-KSB filed 04/16/02).


EXHIBIT NUMBER           DESCRIPTION OF DOCUMENT
--------------           -----------------------

16.1                     Letter from Arthur Andersen LLP regarding change in
                         certifying accountant (incorporated by reference from
                         the Registrant's Current Report on Form 8-K filed
                         04/16/02).

21.1                     Subsidiary List*

31**                     Certification of Chief Executive Officer and Principal
                         Financial Officer Pursuant to Section 302 of the
                         Sarbanes-Oxley Act of 2002.

32**                     Certification of Chief Executive Officer and Principal
                         Officer Pursuant to Title 18, United States Code,
                         Section 1350 Adopted Pursuant to Section 906 of the
                         Sarbanes-Oxley Act of 2002.



*  Incorporated by reference from the Company's Registration Statement on Form
   SB-2, No. 333-4319.

** Filed herewith.

(B) REPORTS ON FORM 8-K

The Company filed two reports on Form 8-K during the last quarter of the period
covered by this report and the current period.

(i) Form 8-K filed October 7, 2005, reporting under Item 1.

(ii) Form 8-K filed December 23, 2005, reporting under Item 1.

(iii) Form 8-K filed January 25, 2006, reporting under Item 1.


<PAGE>



ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

AUDIT FEES

Audit fees for the fiscal years ended December 31, 2005 and 2004 were
approximately $17,500 and $22,000 respectively.

AUDIT RELATED FEES

Audit related fees for the fiscal years ended December 31, 2005 and 2004 were
approximately $0. Audit related services generally included fees for
contemplated business combinations and SEC reporting obligations.

TAX FEES

The Company did not engage Rothstein, Kass & Company, P.C. in connection with
any tax compliance or other matters.

ALL OTHER FEES

All other fees for products and services provided by Rothstein, Kass & Company,
P.C., the Company's principal accountant, for the fiscal years ended December
31, 2005 and 2004 were $0.










<PAGE>




                                   SIGNATURES

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

                                K2 DIGITAL, INC.

Dated: March 27, 2006

                             BY: /s/ GARY W. BROWN
                                 --------------------------------
                                 GARY W. BROWN, PRESIDENT



<TABLE>
<CAPTION>
          Signature                                Title                                          Date
          ---------                                -----                                          ----
<S>                              <C>                                                           <C>
/s/ Matthew G. de Ganon          Chairman of the Board, Director                               March 27, 2006
------------------------------
Matthew G. de Ganon


/s/ Gary W. Brown                President, Chief Operating Officer, Chief Financial           March 27, 2006
------------------------------   Officer (Principal Financial and Accounting Officer),
Gary W. Brown                    Secretary and Director


/s/ Douglas E. Cleek              Director                                                     March 27, 2006
------------------------------
Douglas E. Cleek


/s/ David R. Sklaver              Director                                                     March 27, 2006
------------------------------
David R. Sklaver
</TABLE>







<PAGE>






                                INDEX TO EXHIBITS

EXHIBIT NUMBER          DESCRIPTION OF DOCUMENT

3.1                     Certificate of Incorporation of the Company*

3.1(a)                  Amendment to Certificate of Incorporation of the
                        Company*

3.1(b)                  Amendment to Certificate of Incorporation of the Company
                        (incorporated by reference from the Registrant's Form
                        10-KSB for its fiscal year ended 12/31/00).

3.2                     By-laws of the Company*

3.2(b)                  Amendment to By-laws of the Company*

4.1                     Common Stock Certificate*

4.2                     Warrant Certificate*

4.4                     Warrant Agreement by and between Continental Stock
                        Transfer & Trust Company and the Company*

4.5                     Voting Agreement among Messrs. Centner, de Ganon, Cleek
                        and Szollose*

10.1                    1996 Stock Incentive Plan and Rules Relating thereto*

10.2                    1997 Stock Option Plan (incorporated by reference from
                        the Registrant's Form 10-KSB for its fiscal year ended
                        12/31/96).

10.3                    Amendment to 1997 Stock Option Plan (incorporated by
                        reference from the Registrant's Form 10-KSB for its
                        fiscal year ended 12/31/00).

10.4                    Consulting Agreement with Harvey Berlent*

10.5                    Employment Agreement with Matthew G. de Ganon*

10.6                    Extension of Employment Agreement with Matthew G. de
                        Ganon dated November 2, 1998 (incorporated by reference
                        from the Registrant's Form 10-KSB for its fiscal year
                        ended 12/31/98).

10.7                    Amendment to Employment Agreement of Matthew G. de Ganon
                        dated April 14, 2000 (incorporated by reference from the
                        Registrant's Form 10-QSB for the quarterly period ended
                        03/31/00).

10.8                    Employment Agreement with Douglas E. Cleek*

10.9                    Extension of Employment Agreement with Douglas E. Cleek
                        dated January 15, 1999 (incorporated by reference from
                        the Registrant's Form 10-KSB for its fiscal year ended
                        12/31/98).

10.10                   Employment Agreement with Gary W. Brown dated April 14,
                        2000 (incorporated by reference from the Registrant's
                        Form 10-QSB for the quarterly period ended 03/31/00).


<PAGE>

10.11                   Restricted Stock Agreement of Gary W. Brown
                        (incorporated by reference from the Registrant's Form
                        10-QSB for the quarterly period ended 03/31/00).

10.12                   Employment Agreement with Lynn Fantom dated February 13,
                        2001 (incorporated by reference from the Registrant's
                        Form 10-KSB for its fiscal year ended 12/31/00).

10.13                   Agreement of Lease dated as of April 18, 1997, between
                        30 Broad Associates, L.P., as landlord, and the Company,
                        as tenant, relating to 30 Broad Street, New York, New
                        York (incorporated by reference from the Registrant's
                        Form 10-KSB for its fiscal year ended 12/31/00).

10.14                   Amendment to Lease dated as of April 1, 1998, between 30
                        Broad Associates, L.P., as landlord, and the Company, as
                        tenant, relating to 30 Broad Street, New York, New York
                        (incorporated by reference from the Registrant's Form
                        10-KSB for its fiscal year ended 12/31/00).

10.15                   Second Amendment to Lease dated as of July 10, 2000,
                        between ASC-CSFB 30 Broad, LLC, as landlord, and the
                        Company, as tenant, relating to 30 Broad Street, New
                        York, New York (incorporated by reference from the
                        Registrant's Form 10-QSB for the quarterly period ended
                        06/30/00).

10.16                   Common Stock Purchase Agreement dated as of December 11,
                        2000 between the Company and Fusion Capital Fund II, LLC
                        (incorporated by reference from the Registrant's Current
                        Report on Form 8-K filed 12/11/00).

10.17                   Form of Registration Rights Agreement between the
                        Company and Fusion Capital Fund II, LLC (incorporated by
                        reference from the Registrant's Current Report on Form
                        8-K filed 12/11/00).

10.18                   Master Transaction Agreement, dated as of August 20,
                        2001, between the Company and Integrated Information
                        Systems, Inc. (incorporated by reference from the
                        Registrant's Current Report on Form 8-K filed 8/30/01).

10.19                   Agreement and Plan of Merger, dated as of January 15,
                        2002, by and among First Step Distribution Network, Inc.
                        and its shareholders, First Step Acquisition Corp. and
                        the Company (incorporated by reference from the
                        Registrant's Current Report on Form 8-K filed 01/17/02).

10.20                   Side Letter dated April 8, 2002, by and between the
                        Company and First Step Distribution Network, Inc.
                        (incorporated by reference from the Registrant's Annual
                        Report on Form 10-KSB filed 04/16/02).

16.1                    Letter from Arthur Andersen LLP regarding change in
                        certifying accountant (incorporated by reference from
                        the Registrant's Current Report on Form 8-K filed
                        04/16/02).

21.1                    Subsidiary List*


<PAGE>

31**                    Certification of Chief Executive Officer and Principal
                        Financial Officer Pursuant to Section 302 of the
                        Sarbanes-Oxley Act of 2002.

32**                    Certification of Chief Executive Officer and Principal
                        Officer Pursuant to Title 18, United States Code,
                        Section 1350 Adopted Pursuant to Section 906 of the
                        Sarbanes-Oxley Act of 2002.



*  Incorporated by reference from the Company's Registration Statement on Form
   SB-2, No. 333-4319.

** Filed herewith.