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, 2006

                                       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, ESQ.
                   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 March 15, 2007, 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 March 15, 2007 of $0.06 per share, the
approximate aggregate market value of the Company's common stock held by
non-affiliates was approximately $298,900.

                       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, Esq. 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 beyond those few remaining
receivables not purchased by IIS and not yet collected by the Company.
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. The proceeds
from the sale of assets plus the additional payment due from IIS (collection of
which is uncertain), together with assets not sold to IIS may not be sufficient
to repay substantially all remaining liabilities 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 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 and directors. The transaction is subject to the normal
conditions for closing, including satisfactory due diligence by the parties.

On July 27, 2006, the Company and NPOWR determined to abandon the contemplated
merger between the parties. Pursuant to the LOI, NPOWR is obligated to pay all
expenses of the Company as specified in the LOI to the date of termination. On
September 29, 2006, NPOWR executed a promissory note (the "NPOWR Note") in the
amount of $18,253 representing amounts due to the Company under the LOI. The
note is payable in four installments, the first due November 1, 2006 in the
amount of $4,753 followed by three additional payments of $4,500 on or before
December 31, 2006, February 28, 1997 and April 30, 2007.

On January 29, 2007, the Registrant signed a letter of intent with New Century
Structures, Inc. ("NCSI") a Florida corporation, whereby NCSI will merge with
the Company. K2 Acquisition Corp. ("Merger Sub") and NCSI intend to enter into a
merger agreement whereby Merger Sub will merge with and into NCSI. In connection
with the merger, the shareholders of NCSI will acquire a controlling interest in
K2. NCSI's designees will be appointed as directors of K2 and the Board and
shareholders will approve a 1 for 10 reverse split of K2 shares such that the
current shareholders of K2 own approximately 500,000 post merger shares
representing 10% of the post merger shares issued and outstanding. In connection
with this transaction, Avante Holding Group, Inc. ("Avante") entered into an
agreement with NPOWR to acquire 1,000,000 shares of K2 preferred stock which is
convertible into 1,500,000 common shares. In addition, NCSI assumed the
liability of NPOWR under the NPOWR Note. Further, prior to closing of the
transaction, K2 shall be entitled to issue up to 500,000 stock options with an
exercise price of $0.085 per share to its officers and directors.

Incorporated in Florida in July 2001, NCSI provides architectural/engineering,
manufacturing and construction services for modular facilities utilizing
concrete and structural insulated panels (SIPS) for use in commercial,
educational and municipalities and residential developments. The Company
utilizes processes that meet the scrutiny for classrooms as well as several
government agencies, including NASA and the Smithsonian.

The parties anticipate closing the merger transaction during K2's second fiscal
quarter. The transaction is subject to the normal conditions for closing,
including satisfactory due diligence by the parties.

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.

                                       -2-


<PAGE>

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, 2006, 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
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 NCSI 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
2006.


                                       -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, 2005 through December
31, 2006. 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, 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

       March 31, 2006                        $0.06           $0.06

       June 30, 2006                         $0.08           $0.08

       September 30, 2006                    $0.07           $0.05

       December 31, 2006                     $0.06           $0.06


The approximate number of record holders of the Company's common stock at
December 31, 2006 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 2006 or 2005. At December 31,
2006, 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.

In connection with the proposed merger with NPOWR Digital Media, Inc. ("NPOWR"),
the Company issued 1,000,000 shares of convertible preferred stock which is
convertible into 1,500,000 shares of the Company's common stock. After
termination of the merger discussions with NPOWR, Avante purchased the
convertible preferred stock from NPOWR for consideration of $112,500 or 11.25
cents per preferred share plus assumption of NPOWR's liability under the
promissory note due to the Company. The principals of Avante are affiliated with
NCSI.

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, 2006 and 2005:


                                                         2006            2005
                                                       --------        --------

Other income                                           $ 43,244        $ 39,422
General and administrative expenses                     (70,784)        (60,186)
                                                       --------        --------

Net loss                                               $(27,540)       $(20,764)

In 2006, other income primarily represents reimbursement from NPOWR of expenses
incurred by the Company pursuant to the letter of intent relating to the
proposed merger, of which $34,753 was paid in cash and remaining unpaid amounts
in the form of a promissory note. In 2005, 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. 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.

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, collecting
accounts receivable 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 would 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 $73,248 at December 31, 2006, increased by $71,888
or 5,386% compared to the $1,360 cash balance at December 31, 2005. This
increase was primarily due to proceeds from the sale of convertible preferred
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,
collecting accounts receivable, 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 Merge

On December 22, 2005, the Company signed a letter of intent with NPOWR Digital
Media, Inc. ("NPOWR"), a California corporation, whereby NPOWR would 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 intended
to enter into a merger agreement whereby Merger Sub would merge with and into
NPOWR. In connection with the merger, the shareholders of NPOWR would acquire a
controlling interest in K2. NPOWR's designees would be appointed as directors of
K2 and the Board and shareholders would approve a 3 x 1 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 and directors. The transaction is subject to the normal
conditions for closing, including satisfactory due diligence by the parties.

On July 27, 2006, the Company and NPOWR determined to abandon the contemplated
merger between the parties. Pursuant to the LOI, NPOWR is obligated to pay all
expenses of the Company as specified in the LOI to the date of termination. On
September 29, 2006, NPOWR executed a promissory note in the amount of $18,253
representing amounts due to the Company under the LOI. The note is payable in
four installments, the first due November 1, 2006 in the amount of $4,753
followed by three additional payments of $4,500 on or before December 31, 2006,
February 28, 2997 and April 30, 2007. NPOWR paid $4,753 of the promissory note
and owed $13,500 at December 31, 2006.

On January 29, 2007, the Registrant signed a letter of intent with New
CenturyStructures, Inc. ("NCSI") a Florida corporation, whereby NCSI will merge
with the Company. K2 Acquisition Corp. ("Merger Sub") and NCSI intend to enter
into a merger agreement whereby Merger Sub will merge with and into NCSI. In
connection with the merger, the shareholders of NCSI will acquire a controlling
interest in K2. NCSI's designees will be appointed as directors of K2 and the
Board and shareholders will approve a 1 for 10 reverse split of K2 shares such
that the current shareholders of K2 own approximately 500,000 post merger shares
representing 10% of the post merger shares issued and outstanding. In connection
with this transaction, Avante Holding Group, Inc. has entered into an agreement
with NPOWR Digital Media, Inc. to acquire 1,000,000 shares of K2 preferred stock
which is convertible into 1,500,000 common shares. In addition, NCSI assumed the
obligations of NPOWR under the promissory note. Further, prior to closing of the
transaction, K2 shall be entitled to issue up to 500,000 stock options with an
exercise price of $0.085 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 Florida in July 2001, NCSI provides architectural/engineering,
manufacturing and construction services for modular facilities utilizing
concrete and structural insulated panels (SIPS) for use in commercial,
educational and municipalities and residential developments. The Company
utilizes processes that meet the scrutiny for classrooms as well as several
government agencies, including NASA and the Smithsonian.

The parties anticipate closing the merger transaction during K2's second fiscal
quarter. The transaction is subject to the normal conditions for closing,
including satisfactory due diligence by the parties.

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.

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.

                                       -6-


<PAGE>

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 five 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 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.

                                       -7-

<PAGE>

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, 2006

   Consolidated Statements of Operations and Comprehensive Loss             F-3
   For the Years Ended December 31, 2006 and 2005

   Consolidated Statements of Stockholders' Deficit                         F-4
   For the Years Ended December 31, 2006 and 2005

   Consolidated Statements of Cash Flows                                    F-5
   For the Years Ended December 31, 2006 and 2005

   Notes to Consolidated Financial Statements                          F-6 - 13


                                       -8-
<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, 2006, 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, 2006. 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, 2006, and the results of their operations and
their cash flows for each of the years in the two-year period ended December 31,
2006, 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, 2006, the Company had significant cumulative
losses, a diminutive cash balance and negative 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
March 21, 2007

                                       F-1


<PAGE>

                         K2 DIGITAL, INC. AND SUBSIDIARY
                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2006




                                     ASSETS


CURRENT ASSETS:

  Cash                                                              $    73,248
  Note receivable - net                                                   4,500
  Investment in available-for-sale security                              18,100

                                                                    -----------
Total current assets and total assets                               $    95,848

                                                                    ===========



                       LIABILITIES & STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Accounts payable                                                  $   116,202
  Other accrued expenses                                                  9,000
                                                                    -----------
    Total current liabilities                                           125,202
                                                                    -----------

Commitments and contingencies


STOCKHOLDERS' DEFICIT
  Preferred Stock, $0.01 par value, authorized 1,000,000 shares;
    issued and outstanding, 1,000,000 shares                            165,000
  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                                 15,800
  Accumulated deficit                                                (7,762,769)
                                                                    -----------
                                                                        789,942


Less: Treasury stock, 417,417 shares at cost                           (819,296)
                                                                    -----------
Total stockholders' deficit                                             (29,354)
                                                                    -----------
Total liabilities and stockholders' deficit                         $    95,848
                                                                    ===========



        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, 2006 AND 2005


<TABLE>
<S>                                                           <C>            <C>
Revenues                                                      $        --    $        --
Other income                                                       43,244         39,422
General and administrative expenses                               (70,784)       (60,186)
                                                              -----------    -----------
Net loss                                                      $   (27,540)   $   (20,764)
                                                              ===========    ===========

Comprehensive loss:

Net loss                                                      $   (27,540)   $   (20,764)
Other comprehensive income (loss) -
  Available-for-sale security:
  Unrealized holding gain (loss) arising during year                3,420         10,350
  Reclassification adjustment for gain included in net loss            --        (39,310)
                                                              -----------    -----------
                                                                    3,420        (28,960)
                                                              -----------    -----------

Comprehensive loss                                            $   (24,120)   $   (49,724)
                                                              ===========    ===========


Net loss per common share-
     basic and diluted                                        $    (0.006)   $    (0.004)
                                                              -----------    -----------
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, 2006 AND 2005


<TABLE>
<CAPTION>
                                                                                      ADDITIONAL       OTHER
                                   PREFERRED STOCK              COMMON STOCK            PAID-IN     COMPREHENSIVE    ACCUMULATED
                                SHARES         AMOUNT        SHARES        AMOUNT       CAPITAL        INCOME          DEFICIT
                              -----------   -----------   -----------   -----------   -----------   -------------    -----------

<S>                           <C>           <C>             <C>         <C>           <C>           <C>               <C>
Balances, January 1, 2005              --   $        --     5,400,116   $    54,001   $ 8,317,910   $      41,340    $(7,714,465)

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

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

Balances, December 31, 2005            --            --     5,400,116   $    54,001   $ 8,317,910   $      12,380    $(7,735,229)

Issuance of Preferred Stock     1,000,000   $   165,000            --            --            --              --             --

Other comprehensive income,
  net of reclassification
  adjustment                           --            --            --            --            --           3,420             --

Net loss                               --            --            --            --            --              --        (27,540)

                              -----------   -----------   -----------   -----------   -----------   -------------    -----------
Balances, December 31, 2006     1,000,000   $   165,000     5,400,116   $    54,001   $ 8,317,910   $      15,800    $(7,762,769)
                              ===========   ===========   ===========   ===========   ===========   =============    ===========


<CAPTION>
                                                 TOTAL
                                TREASURY      STOCKHOLDERS'
                                 STOCK          DEFICIT
                              -----------    -------------

<S>                           <C>            <C>
Balances, January 1, 2005     $  (819,296)   $    (120,510)

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

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

Balances, December 31, 2005   $  (819,296)   $    (170,234)

Issuance of Preferred Stock            --          165,000

Other comprehensive income,
  net of reclassification
  adjustment                           --            3,420

Net loss                               --          (27,540)

                              -----------    -------------
Balances, December 31, 2006   $  (819,296)   $     (29,354)
                              ===========    =============
</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, 2006 AND 2005

<TABLE>
<CAPTION>
                                                                 2006         2005

<S>                                                            <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                       $ (27,540)   $ (20,764)
Adjustments to reconcile net loss to net cash used in
  operating activities:
  Realized gain on sale of available-for-sale security                --      (39,310)
  Changes in operating assets and liabilities:
     Note receivable - net                                        (4,500)          --
     Accounts payable                                            (61,072)      10,103
     Accrued expenses                                                 --       (7,995)
                                                               ---------    ---------
Net cash used in operating activities                            (93,112)     (57,966)
                                                               ---------    ---------

NET CASH PROVIDED BY INVESTING ACTIVITIES
Gross proceeds from sale of available-for-sale security               --       51,960
                                                               ---------    ---------
ET CASH PROVIDED BY FINANCING ACTIVITIES
Gross proceeds from sale of convertible preferred securities     165,000           --
                                                               ---------    ---------


Net increase (decrease) in cash                                   71,888       (6,006)

CASH, beginning of year                                            1,360        7,366
                                                               ---------    ---------
CASH, end of year                                              $  73,248    $   1,360
                                                               =========    =========
</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, 2006, the Company has cumulative losses of
approximately $7.8 million, a diminutive cash balance and negative working
capital and stockholders' deficits of approximately $29,000. 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 ("LOI") with NPOWR
Digital Media, Inc. ("NPOWR"), a California corporation, whereby NPOWR would
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 intended
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.

On July 27, 2006, the Company and NPOWR determined to abandon the contemplated
merger between the parties. Pursuant to the LOI, NPOWR is obligated to pay all
expenses of the Company as specified in the LOI to the date of termination. On
September 29, 2006, NPOWR executed a promissory note in the amount of $18,253
representing amounts due to the Company under the LOI. The note is payable in
four installments, the first due November 1, 2006 in the amount of $4,753
followed by three additional payments of $4,500 on or before December 31, 2006,
February 28, 2997 and April 30, 2007. NPOWR paid $4,753 of the promissory note
and owed $13,500 at December 31, 2006.

On January 29, 2007, the Registrant signed a letter of intent with New Century
Structures, Inc. ("NCSI") a Florida corporation, whereby NCSI will merge with
the Company. K2 Acquisition Corp. ("Merger Sub") and NCSI intend to enter into a
merger agreement whereby Merger Sub will merge with and into NCSI. In connection
with the merger, the shareholders of NCSI will acquire a controlling interest in
K2. NCSI's designees will be appointed as directors of K2 and the Board and
shareholders will approve a 1 for 10 reverse split of K2 shares such that the
current shareholders of K2 own approximately 500,000 post merger shares
representing 10% of the post merger shares issued and outstanding. In connection
with this transaction, Avante Holding Group, Inc. has entered into an agreement
with NPOWR Digital Media, Inc. to acquire 1,000,000 shares of K2 preferred stock
which is convertible into 1,500,000 common shares. In addition, NCSI assumed the
obligations of NPOWR under the promissory note. Further, prior to closing of the
transaction, K2 shall be entitled to issue up to 500,000 stock options with an
exercise price of $0.085 per share to its officers and directors.

                                       F-6

<PAGE>

Incorporated in Florida in July 2001, NCSI provides architectural/engineering,
manufacturing and construction services for modular facilities utilizing
concrete and structural insulated panels (SIPS) for use in commercial,
educational and municipalities and residential developments. The Company
utilizes processes that meet the scrutiny for classrooms as well as several
government agencies, including NASA and the Smithsonian.

The parties anticipate closing the merger transaction during K2's second fiscal
quarter. The transaction is subject to the normal conditions for closing,
including satisfactory due diligence by the parties.

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-7

<PAGE>

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

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, 2006.

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.

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, 2006, the Company did not sell any shares of
24/7 stock. For 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. At December 31, 2006, the Company had an
approximate $15,800 gross unrealized holding gain on the remaining 2,000 shares
of 24/7 stock. During the years ended December 31, 2006 and 2005, the change in
unrealized holding gain from available-for-sale security was approximately
$3,400 and $10,000, 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.

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, 2006 and 2005 were the same.

                                       F-8


<PAGE>

2. Summary of significant accounting policies (continued)


STOCK-BASED COMPENSATION

During the year ended December 31, 2006 the Company adopted the Statement of
Financial Accounting Standards ("SFAS") No. 123(R), "Share-Based Payment."
("SFAS No. 123R") This statement requires an entity to measure the cost of
employee services received in exchange for an award of entity instruments based
on the grant-date fair value of the award. The cost will be recognized over the
period during which an employee is required to provide service in exchange for
the reward.

In the fiscal year ended December 31, 2005 the Company complied with SFAS No.
123 "Accounting for Stock-Based Compensation." ("SFAS No. 123R") 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.

In 2005, the Company accounted 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. 123R, the Company's net loss and basic and diluted net loss
per common share for the year ended December 31, 2005 would have been the
following pro forma amounts (in thousands, except for per share data):



                                                          2005
                                                         ------

            Net loss, as reported                        $   (21)

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

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

            Net loss per common share,
              basic and diluted:

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

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


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%.

NEW ACCOUNTING PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS
No. 157, Fair Value Measurements ("SFAS 157"). SFAS 157 provides a common
definition of fair value and establishes a framework to make the measurement of
fair value in generally accepted accounting principals more consistent and
comparable. SFAS 157 also requires expanded disclosures to provide information
about the extent to which fair value isused to measure assets and liabilities,
the methods and assumptions used to measure fair value, and the effect of fair
value measures on earnings. SFAS 157 is effective on January 1, 2008 although
early adoption is permitted. The Company is currently assessing the potential
effect of SFAS 157 on the financial statements.

                                       F-9

<PAGE>

            2. Summary of significant accounting policies (continued)

In July 2006, the FASB issued FASB Interpretation No. 48, Accounting for
Uncertainty in Income Taxes ("FIN 48"). FIN 48 clarifies the accounting for
income taxes by prescribing a minimum probability threshold that a tax position
must meet before a financial statement benefit is recognized. The minimum
threshold is defined in FIN 48 as a tax position that is more likely than not to
be sustained upon examination by the applicable taxing authority, including
resolution of any related appeals or litigation processes, based on the
technical merits of the position. the tax benefit to be recognized is measured
as the largest amount of benefit that is estimated to be greater than fifty
percent likely of being realized upon ultimate settlement. FIN 48 must be
applied to all existing tax positions upon initial adoption . The cumulative
effect of applying FIN 48 at adoption, if any, is to be reported as an
adjustment to opening retained earnings for the adoption year. FIN 48 is
effective on January 1, 2007. The Company is currently assessing the potential
effect of FIN 48 on the financial statements.

                                      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, 2006, 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, 2006 and 2005 differs from the amount computed by applying the
Federal statutory rate due to the following:




                                      2006      2005
                                    --------   --------
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, 2006, 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, 2006. 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, 2006, there were 2,142,250 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, 2006, and 2005 is presented in the table
below:

                                                             Weighted Average
                                   Shares       Range         Exercise Price
                                   -------   -------------   ----------------

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
Granted                                 --              --                 --
Expired                                 --              --                 --
                                   -------   -------------   ----------------
Outstanding at December 31, 2006   982,750   $0.05 - $5.81   $           2.40


At December 31, 2006,
  substantially all outstanding
  shares are exercisable           982,750

No options were granted for the year ended December 31, 2006.

Further information about the Company's outstanding stock options at December
31, 2006 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                     5.6   $           0.05
$0.66 to $1.09                       181,000                     4.1               0.74
$1.50 to $1.75                       435,000                     1.8               1.52
$2.50 to $2.94                        37,500                     2.5               2.60
$5.00 to $5.81                       289,250                     3.4               5.05
                                   ---------   ---------------------   ----------------

Outstanding at December 31, 2006     982,750                     2.9               2.40
</TABLE>

                                      F-12

<PAGE>

6.   Subsequent Events

On January 29, 2007, the Registrant signed a letter of intent with New Century
Structures, Inc. ("NCSI") a Florida corporation, whereby NCSI will merge with
the Company. K2 Acquisition Corp. ("Merger Sub") and NCSI intend to enter into a
merger agreement whereby Merger Sub will merge with and into NCSI. In connection
with the merger, the shareholders of NCSI will acquire a controlling interest in
K2. NCSI's designees will be appointed as directors of K2 and the Board and
shareholders will approve a 1 for 10 reverse split of K2 shares such that the
current shareholders of K2 own approximately 500,000 post merger shares
representing 10% of the post merger shares issued and outstanding. In connection
with this transaction, Avante Holding Group, Inc. has entered into an agreement
with NPOWR Digital Media, Inc. to acquire 1,000,000 shares of K2 preferred stock
which is convertible into 1,500,000 common shares. In addition, NCSI assumed the
obligations of NPOWR under the promissory note. Further, prior to closing of the
transaction, K2 shall be entitled to issue up to 500,000 stock options with an
exercise price of $0.085 per share to its officers and directors.

Incorporated in Florida in July 2001, NCSI provides architectural/engineering,
manufacturing and construction services for modular facilities utilizing
concrete and structural insulated panels (SIPS) for use in commercial,
educational and municipalities and residential developments. The Company
utilizes processes that meet the scrutiny for classrooms as well as several
government agencies, including NASA and the Smithsonian.

The parties anticipate closing the merger transaction during K2's second fiscal
quarter. The transaction is subject to the normal conditions for closing,
including satisfactory due diligence by the parties.

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-13

<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.

                                       -9-
<PAGE>

                                    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 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 44, 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, Broadband & Consumer Applications at The Weather
Channel Interactive. For TWCi, Mr. de Ganon is responsible for leading the
company's rapidly expanding efforts in new broadband programming and the
consumer applications space. 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 44, 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.

Gary W. Brown, age 53, 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. Mr. Brown is a
member of the Board of Trustees of Mercy College and a member of the Executive
Board of Mercy Ships International.

                                      -10-
<PAGE>

David R. Sklaver, age 55, 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, 2006.

                                      -11-
<PAGE>

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 are
entitled to receive options to purchase up to 5,000 shares of the Company's
common stock upon their election to the Board of Advisors. There were no members
serving on a Board of Advisors for the years ending December 31, 2006 or
December 31, 2005.

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 2006
and had aggregate compensation in excess of $100,000.



<TABLE>
<CAPTION>
                                                                           Annual Compensation (1)      Long Term Compensation
                                                                           -----------------------      ----------------------
                Name and Principal Position                     Year         Salary         Bonus     Restricted         Option
                ---------------------------                     ----         ------         -----     -----------        ------
                                                                                                      Stock Awards       Awards
                                                                                                      ------------       ------

<S>                                                             <C>           <C>             <C>         <C>            <C>
Gary W. Brown, President, Chief Financial Officer and
Secretary (1)(2)                                                2006           --             --          --               --
                                                                2005           --             --          --               --
                                                                2004           --             --          --               --
</TABLE>


(1) 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. (2) 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

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 2006 AND 2005

No stock options were granted under the 1996 Plan or the 1997 Plan for the years
ended December 31, 2006 and December 31, 2005.

                                      -12-
<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>
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
2006.

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, 2006 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, 2006             2006 ($)(1)
                               on         Value      ----------------------------      -----------------------------
Name                        Exercise     Realized    Exercisable    Unexercisable      Exercisable    Unexercisable
-------------------------------------------------------------------------------------------------------------------

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



(1) Based on the closing price of the Company's common stock on December 31,
2006, the last day in fiscal 2006 on which the markets were open for business,
which was $0.06.
(2) Represents 346,000 options granted under the 1997 Plan and 22,000 options
granted under the 1996 Plan.

                                      -13-
<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 30, 2007 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 Owned        Percent of Class (1)
                              ----------------------      --------------------

Matthew G. de Ganon                          426,335(2)                    8.6

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                2,213,685(5)                   44.4

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. and subsequently acquired
by Avante Holding Group, 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. The Voting Agreement expired on July 26, 2006.

(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
2,711,843 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.

                                      -14-
<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.

                                      -15-
<PAGE>

                                     PART IV


ITEM 13. EXHIBITS 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, 2006..............................F-2

Consolidated Statements of Operations and Comprehensive Loss -
  For the years ended December 31, 2006 and 2005............................F-3

Consolidated Statements of Stockholders' Deficit - For the years
  ended December 31, 2006 and 2005..........................................F-4

Consolidated Statements of Cash Flows - For the years ended
  December 31, 2006 and 2005 ...............................................F-5

  Notes to Consolidated Financial Statements......... .................F-6 - 13


(b)  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).

      10.4  Consulting Agreement with Harvey Berlent*

      10.5  Employment Agreement with Matthew G. de Ganon*

                                      -16-
<PAGE>

      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*

      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.

(c) REPORTS ON FORM 8-K

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

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

                                      -17-
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees

Audit fees for the fiscal years ended December 31, 2006 and 2005 were
approximately $20,000 and $17,500 respectively.

Audit Related Fees

Audit related fees for the fiscal years ended December 31, 2006 and 2005 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, 2006 and 2005 were $0.

                                       -18-
<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 30, 2007


                                        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 30, 2007
--------------------------
Matthew G. de Ganon


/s/ Gary W. Brown               President, Chief Operating Officer, Chief Financial           March 30, 2007
--------------------------       Officer (Principal Financial and Accounting Officer),
Gary W. Brown                    Secretary and Director

/s/ Douglas E. Cleek            Director                                                      March 30, 2007
--------------------------
Douglas E. Cleek

/s/ David R. Sklaver            Director                                                      March 30, 2007
--------------------------
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.