ITEM 1. DESCRIPTION OF BUSINESS
As of December 31, 2000, i-AntiqueAuction.com, Inc. (the "Company" or "i-Antique") was a development stage company which was anticipating the completion of a specialized online person- to-person trading website dedicated to bringing together antique sellers and buyers. The website would have resided at WWW.I-ANTIQUEAUCTION.COM, and will attempt to serve as a centralized auction for buyers and sellers to meet, negotiate sales, and finally consummate transactions directly, thereby bypassing the time and expense of intermediaries. In addition, i-Antique owns the domain names "i-AntiqueAuction.com" and "i-AntiqueAuction.net". Anticipated sales would have been conducted by a traditional rising price auction (the highest bid wins), and will be hosted by the Company. The Company's goal was to create an integrated antique site for individuals on both sides of the transaction, and thus would offer additional value added services through links to its strategic partners. i-Antique anticipated that it will achieve this goal by growing through acquisitions of companies and businesses in complimentary industries. In addition to the auction, anticipated products offered through strategic partners will include: loan services, insurance, antique appraisal, moving and shipping companies, interior design specialists, content links for researching antiques and collectibles, and image hosting services for showing an item on line.
Our corporate offices were located at 136 West 32nd Street, New York, NY 10001. Our corporate offices are currently located at 298 Fifth Avenue, New York, NY 10001. Our corporate staff consists of one person experienced in the online market. The Company's telephone number is (212) 564-1600.
Concurrently with the share exchange discussed below, the Company changed its business plan to become a development stage company whose goal is to become a leading provider of digital imaging services and changed its name to Concept Digital, Inc.
In September 2001, the Company completed a share exchange with PhotoAmerica, Inc. a New York corporation ("PAI") where the Company would acquire all the issued and outstanding shares of capital stock of PAI in exchange solely for shares of Concept Digital common stock. PAI operates the website photoamerica.com, which enables digital camera users to upload their photographs via the Internet to our outsourced developing facility for processing.
DIGITAL CAMERAS
Today, consumers can buy a digital camera with mega-pixel resolution, offering all the features of top-of-the-line 35mm cameras, such as zoom lenses and manual controls. Most digital cameras also come equipped with a built in monitor that allows the photographer to review the picture immediately after taking it. The most commonly quoted benefit of digital cameras is that it allows the photographer to immediately determine if he is satisfied with the image. If not, the image is simply deleted and the picture can be re-shot. Digital cameras also allow photographers to transfer their images to a computer and digitally manipulate and enhance the photo before printing it. This is a far more desirable alternative than film based cameras, where the photographer can only determine if a picture is to their liking after it has been developed (industry surveys show that the average consumer typically only likes four out of every 36 pictures printed).
COMPUTERS AND THE INTERNET IN THE PHOTOGRAPHY INDUSTRY
The continuing evolution of the Internet as an entertainment medium coupled with rapid advances in technology has had a significant impact on the traditional chemical film based photo-processing model. Traditionally, photographers finish a complete roll of film, bring the film to their local photo processor, and then return for a second visit to retrieve the pictures. The photos are evaluated to determine the interest in additional prints, at which point the consumer must place another order and return again to pick up the reprints. Digital photography, the Internet and advances in printing technology are introducing attractive alternatives. Photographs can be stored on a PC or uploaded to the Internet where they can be viewed, edited and reprinted at any time using a color desk top printer or professional processing techniques.
PRODUCTS AND SERVICES
THE WEBSITE
Our website will be the primary tool through which customers will purchase products and services and through which we will conduct marketing initiatives for its Profit Partners. The website is expected to feature related content and advertising targeted to the Company's customer base, and links to other appropriate sites. The following is an overview of the site's features:
CUSTOMER ACTIVATION
The website has been planned to be straightforward and minimally intrusive; customers will review and fully evaluate all services of the site, short of placing an order, without providing us with any personal information. Customers will be able to immediately begin to upload images upon entering the site.
Specifically, we have planed to accept customer images in virtually any format compatible with digital images, including jpegs (.jpg), bitmaps (.bmp), tiffs (.tif), encapsulated post script (.eps) and more.
GENERAL CONTENT
In addition to serving as the primary interface to customers, our website will provide a community environment, offering visitors advice regarding digital photography, cameras and related products.
ARTICLES
Additionally, it is anticipated that our website will feature articles written to inform digital camera users on a broad variety of topics such as photography techniques, industry trends, accessory introductions, and "Ask the Expert".
BUYING GUIDE
We plan to engage a professional writer to prepare a buying guide that will be updated regularly. This service can attract potential customers to our planned website and may also induce digital camera manufacturers and retailers to advertise on the website.
CUSTOMER SERVICE
The regularly updated FAQ section of the site will assist customer with issues. Also, the customer service department will be able to be contacted via email from the website.
WARRANTY REGISTRATION
Although many manufacturers enable customers to do so through their own site, the vast majority of consumer do not register their electronic purchases, either on-line or by mail. We may work with manufacturers to offer incentives, such as a free reprint, to consumers that use the site to register their electronic purchases. This information can then be shared with the manufacturer for additional marketing purposes.
DIRECTORY OF PROFIT PARTNERS
As a part of our planned Profit Partner program, we plan to feature the names, addresses and phone numbers of all future merchant partners and companies on the website.
ADVERTISING AND RESOURCE LINKS
We plan to sell advertising to a variety of camera and related equipment manufacturers in addition to other e-tailers seeking to target its customer base on our site.
Longer term, we may provide links to resources for our customers to photography magazines.
PROCESSING SYSTEMS
Our primary activity will be the production of images from digital feeds. Customers can upload selected images to our server where they will be stored in a file database, from which they can be retrieved, modified and printed as often as desired. Using state-of-the-art equipment, outsourced technicians will apply the silver-halide chemical process used to process film-based photographic images.
Digital processing activities will be outsourced to major digital processor facilities. The photo finishing process will begin with the entry of each order into a customer database, primarily using information provided by the anticipated customer. Each order will receive a bar-coded identification number that will enable the tracking of the order throughout the production process. Once the files have been uploaded, each image will be computer analyzed and color-corrected as warranted or instructed, then printed on photographic paper. Shipping information will then be printed on labels and forwarded to the traffic department to await completion of the order. After a visual quality inspection, the orders will be packaged for delivery. Orders for which recipients will provide e-mail addresses will be digitized and delivered through the our Internet Service Provider.
STANDARD REPRODUCTIONS
Using the information gathered during customer registration and order placing, we will provide a selection of printing alternatives. We plan to offer a variety of print packages including the following:
o Single image prints in a variety of sizes from 4" X 6" to 11" X 14"
o Pre-printed frame templates in hundreds of designer patterns
o Package prints (e.g. 4 copies of the same image on one sheet)
o Multi-image package prints (e.g., up to 10 different images on a single sheet)
o Passport photos
o Photo business cards
Pricing for development will be dependant upon the size and complexity of the process.
ACCESSORIES AND NOVELTIES
We plan to offer an extensive array of accessory products and novelties including frames and photo-personalized gifts ranging from mugs to T-shirts to greeting cards. Pricing for these items will be in the $2.35 to $29.95 range and will be sold on the website.
ELECTRONIC GREETING CARDS
We plan to develop an extensive library of electronic cards, designer frame templates and email backgrounds that can be applied to a customer's printout. Customers will be able to choose from an array of designs, including birthdays, anniversaries, holidays and other standard occasions. Customers will also be able to create customized cards with a personalized greeting.
DISTRIBUTION
It is anticipated that completed orders will be shipped to the addresses designated by the customer upon completion of the order. Standard distribution will be United States Postal Service, First Class, however customers will have the option of selecting priority or overnight delivery service for an extra cost.
ON-LINE ADDRESS BOOK
It is anticipated that customers may provide us with multiple addresses for delivery of their photographs or other products. For example, a customer might wish to order multiple copies of a Christmas card to be mailed to list of family and friends. These names and addresses will then be stored in the customer's file for future use.
IMAGE STORAGE AND MANAGEMENT
Current plans will allow us to offer our customers the ability to store and access their images (even those that are not printed) on our server at no charge.
ACCOUNT MANAGEMENT
Customers will be offered a database management tool which will enable them to manage all aspects of the electronic distribution of their library. Using these tools, a customer will be able to enter addresses, calendar reminders, etc. The site will also enable the customer to keep track of pending and completed orders with the Company.
MARKETING AND ROLL OUT STRATEGY
We are in the process of developing a rollout strategy. We anticipate that it will enable us to penetrate the market and overtime, establish a leadership position in the online processing of digital images. This strategy comprises the following steps.
O INTRODUCE PRODUCTS AND SERVICES TO INDUSTRY PARTICIPANTS
O ESTABLISH PROFIT PARTNER DEALER NETWORK
O IMPLEMENT AGGRESSIVE SALES AND MARKETING CAMPAIGNS
INTRODUCE PRODUCTS AND SERVICES TO INDUSTRY PARTICIPANTS
We expects to utilize a variety of tools to present the website and services to potential Profit Partners, however we believe it will have broadest access to its target audience at industry trade shows. We anticipate signing up vendors for the Profit Partner program at these types of shows. Management believes that trade shows and other industry events provide it with the ideal environment to feature the product.
ESTABLISH PROFIT PARTNER DEALER NETWORK
Concept Digital plans to create an affiliate program designed to attract vendors from around the country to assist in the marketing of its products and services. We anticipate that these retailers and e-tailers, in exchange for a recurring commission, will hand out or deliver at point of purchase, a ConceptDigital.com free offer coupon to the digital camera buyer. The retailer's Profit Partner code will be embedded in the coupon. When the consumer sets up an account on the site to redeem the free offer coupon, they will be assigned in the database to the Profit Partner that referred them. From that point on the Profit Partner will receive a preset commission on any purchases that consumer makes. We believe that this highly targeted marketing approach should yield much greater, more cost effective results than an aggressive advertising campaign.
Profit Partners are expected to come from the following sectors:
INDEPENDENT PHOTOGRAPHY SHOPS
There are more than an estimated 5,000 independent photography shops throughout the country and they continue to lose market share. This sector is increasingly faced with competition from three sources; two national photography chains, Ritz Camera Centers and Wolf Camera; mass merchandisers such as Wal-Mart and K-mart, as well as Internet vendors. The changing face of the market is forcing specialty shops to cut their margins or risk losing business.
EQUIPMENT MANUFACTURERS
We will seek to establish affiliations with digital camera manufacturers. Our site will not sell any merchandise or services other than its own from the site, however it will provide links to the sites of Profit Partner manufacturers. Profit Partner manufacturers will feature our website by including the logo on packaging, coupon inserts with their products or through mention in users' manuals or newsletters.
RELATED VENDORS
We will seek to establish relationships with appropriate related vendors such as event photographers and frame manufacturers. Through these relationships, we anticipate vendors will offer the services of our Company as an added value to their customers. For example, wedding guests will be able to view the photographer's proofs in order to select and order their own set of photographs; frame buyers might get a discounted reproduction with the purchase of multiple frames.
We anticipate that our Profit Partner program will provide participants with significant benefits as discussed below:
COMPETITIVE EDGE
We anticipate that our program will enable Profit Partners to provide their customers with a unique and value-added service which will positively differentiate them from their competitors.
ADDITIONAL INCOME
It is anticipated that Profit Partners will be provided with a recurring commission in exchange for encouraging their customers to visit our website. This program will provide Profit Partners with a stream of income that would otherwise not be generated, and at no cost to them. Vendors will receive a fee on any transactions conducted by a referral throughout the term of their association with us. We will track all revenues and will forward Profit Partners checks on a quarterly basis.
COMPETITION
While there are few companies that compete directly with us, the Company anticipates competing indirectly with a variety of sources as described below.
PROCESSING OF TRADITIONAL FILM TO DIGITAL IMAGES
Kodak gives consumer the ability to develop non-digital film and receive prints as well as digital images of the photo via e-mail or on disk for viewing on a personal computer. Wal-Mart Stores Inc. and Fuji also offer Internet-based photo centers.
SPECIALTY RETAIL SHOPS AND MASS MERCHANDISERS
RITZ CAMERA CENTERS is the United States' largest photo-specialty chain with more than 1,000 stores in 47 states and the District of Columbia that provide one-hour photo finishing, digital imaging, and other services.
WOLF CAMERA operates one-hour photo labs at each of its 750-plus stores. Film processing and related services make up a third of Wolf Camera's business. Located in 34 states, its stores sell cameras, camcorders, film and accessories and feature Kodak do-it-yourself enlargement centers where customers make digital-quality reprints from photos or computer files. Wolf's also offers digital imaging services, including alteration, restoration, and transferring customers' photos to floppy disks.
PICTUREWORKS (formerly Seattle FilmWorks) markets 35mm film, photo processing, photofinishing services and products, and a variety of digital photo services, including "PhotoMail" (digital-photo delivery to the customer via the Internet) and "Pictures On Disk" (digitized photos on a disk or CD). It markets primarily on a mail-order basis and through about 40 retail stores in Oregon and Washington. Pictureworks has recently added digital imaging technology in order to compete with faster in-store retail processors.
Most mass merchandisers and drug store chains provide customers with developing services. Some offer on-site capabilities, others send the work out to independent processors. However, these services, like Kodak's Picture Maker and Pictureworks require the consumer bring their film to a remote facility for processing before they can take advantage of the services.
Employees
As of December 31, 2005, the Company did not have any employees.
ITEM 2.
ITEM 2. DESCRIPTION OF PROPERTY
Our corporate offices were located at 136 West 32nd Street, New York, NY 10001. The Company presently shares office space in a building located at 298 Fifth Avenue, New York, NY 10001, for an indefinite amount of time at no charge. The Company's telephone number is (212) 564-1600.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
The Company is not presently parties to any litigation, nor to the Company’s knowledge and belief is any litigation threatened or contemplated.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
As of December 31, 2005, there is no public market for our common stock. As such, the Company’s common stock is not currently available for trading.
Holders
As of December 31, 2005, in accordance with our transfer agent records, there were 133 shareholders of record of the Company’s common stock.
Dividends
The Company does not intend to issue dividends. However, should we decide to issue dividends, any payment of cash dividends in the future will be dependent upon: the amount of funds legally available therefore; the Company's earnings; financial condition; capital requirements; and other factors which the Board of Directors deems relevant.
Recent Sales of Unregistered Securities
During the fiscal year ended December 31, 2005, we did not issue any shares of our common stock.
Stock Options Grants
As of December 31, 2005, we have stock options outstanding on 1,815,000 shares of our common stock.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our consolidated financial statements and notes thereto. Concept Digital Inc. is a development - stage company. Because the Company has generated minimal revenue, it intends to report its plan of operation below.
The following discussion and analysis contains forward-looking statements, which involve risks and uncertainties. The Company’s actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements.
The Company’s operations have been devoted primarily to developing a business plan and raising capital for future operations and administrative functions. The Company intends to grow through internal development, strategic alliances, and acquisitions of existing businesses. Because of uncertainties surrounding its development, the Company anticipates incurring development stage losses in the foreseeable future. The ability of the Company to achieve its business objectives is contingent upon its success in raising additional capital until adequate revenues are realized from operations.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As reflected in the consolidated financial statements, development stage losses from June 15, 1999 (date of inception) through December 31, 2005 aggregated ($1,983,180) and raise substantial doubt about the Company’s ability to continue as a going concern. The Company’s cash flow requirements during this period have been met by contributions of capital and debt financing, primarily from related parties. The Company anticipates that financing will be required until such time that the Company has been able to develop its own business or find an appropriate merger candidate. Currently, the Company cannot determine when either will occur and as such the Company will need to obtain financing to cover its costs for the foreseeable future. No assurance can be given that these sources of financing will continue to be available. If the Company is unable to generate profits, or unable to obtain additional funds for its working capital needs, it may have to cease operations.
CRITICAL ACCOUNTING POLICIES
Our accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which require our management to make estimates that affect the amounts of revenues, expenses, assets and liabilities reported. The following are critical accounting policies which are important to the portrayal of our financial condition and results of operations and which require some of management’s most difficult, subjective and complex judgments. The accounting for these matters involves the making of estimates based on current facts, circumstances and assumptions which could change in a manner that would materially affect management’s future estimates with respect to such matters. Accordingly, future reported financial conditions and results could differ materially from financial conditions and results reported based on management’s current estimates.
Revenue recognition:
Revenue from processing images is recognized upon delivery of the images. The Company recognizes revenue from warranties over the term of the warranty.
Income taxes:
The Company utilizes Statement of Financial Standards (“SFAS”) No. 109, “Accounting for Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each period based on enacted tax laws and statutory tax rates applicable to the period in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The accompanying consolidated financial statements have no provision for deferred assets or liabilities.
YEARS ENDED DECEMBER 31, 2005 AND 2004
Development stage losses during the year ended December 31, 2005 were ($25,078) compared to ($49,694) for the year ended December 31, 2004.
During the year ended December 31, 2005, the Company incurred various operating expenses consist primarily of management fees ($9,000), transfer agent fees ($1,952), general office ($1,320) and interest expense ($14,474).
During the year ended December 31, 2004, the Company incurred various professional fees such as accounting ($21,750), management fees ($9,000), general office ($4,299) and interest expense ($13,221).
PERIOD FROM JANUARY 1, 2004 (COMMENCEMENT OF DEVELOPMENT STAGE) THROUGH DECEMBER 31,
Losses from operations since commencement of development stage have amounted to ($74,772) primarily consisting of accounting ($21,750), office general ($5,619), management fees ($18,000) and interest expense ($27,695).
Liquidity and Capital Resources
Despite capital contributions and related party loan commitments, the Company from time to time experienced, and continues to experience, cash flow shortages that have slowed the Company’s growth and development.
The Company has primarily financed its activities from issuance of common stock of the Company and from loans from related parties. A significant portion of the funds raised from the loans has been used to cover working capital needs.
In June 1999, the Company issued 22,000,000 common shares to the founder, in consideration for management services valued at $0.10. Joseph Douek is deemed to be a founder and affiliate of the Company.
In November 1999 and December 1999, the Company entered into a private offering of securities pursuant to Regulation D, Rule 504, promulgated by the Securities Act of 1933. Common stock was offered to accredited and non-accredited investors for cash consideration of $.10 per share. 8,350,260 shares were issued to several unaffiliated investors and the Company received net proceeds totaling approximately $786,000. That offering is now closed.
In November 1999, the Company issued 1,600,000 common shares in exchange for equipment at $.07 share to Douek Holdings Ltd., a company controlled by the Company’s majority stockholder.
In December 1999, the Company issued 350,000 common shares for services performed which was valued at $35,000.
In February 2000, the Company entered into a private offering of securities pursuant to Regulation D, Rule 504, promulgated by the Securities Act of 1933. Common stock was offered to accredited and non-accredited investors for cash consideration of $.10 per share. 200,000 shares were issued to several unaffiliated investors and the Company received net proceeds totaling approximately $20,000. That offering is now closed.
In May through October 2000, the Company entered into a private offering of securities pursuant to Regulation D, Rule 504, promulgated by the Securities Act of 1933. Common stock was offered to accredited and non-accredited investors for cash consideration of $.12 per share. 850,000 shares were issued to several unaffiliated investors. The Company received net proceeds totaling approximately $102,000. That offering is now closed.
In December 2000, the Company issued 505,000 common shares for compensation of services valued at $51,000.
In December 2000, the Company exercised 200,000 options at $.10 per share, receiving $20,000 in proceeds.
In March 2001, the Company exchanged 800,143 common shares for monies loaned by an affiliate of CDI and the Company recognized a loss of $71,000.
In June 2001, the Company issued 195,000 common shares in exchange for an advance by an unaffiliated individual and the Company recognized a loss of $17,000.
In June 2001, the Company granted as compensation for services, stock options to purchase 300,000 shares of the Company’s common stock at an exercise price of $.12 per share.
In September 2001, a company controlled by the Company’s majority stockholder, in exchange for 1,500,000 shares of the Company’s common stock (valued at $180,000), agreed to fund substantially all current sales, marketing and administrative expenses for one year. This was amortized through September 30, 2002 and the unamortized balance was included as a component of the capital deficiency.
In September 2001, 100,000 common shares were issued in exchange for services rendered valued at $12,000.
On September 26, 2001, Photo America, Inc. merged with Concept Digital, Inc. (“CDI”) a publicly traded development stage enterprise that had 3,032,978 shares of common stock outstanding prior to the merger. Pursuant to the merger agreement, the Company acquired all of the outstanding common stock of Photo America, Inc. in exchange for 36,650,403 shares of CDI common stock. The merger has been accounted for as a recapitalization by Photo America, Inc. The equity accounts of PAI have been restated to give effect to the CDI shares issued by the PAI shareholder.
In September 2001, the Company granted as compensation for services, stock options to purchase 300,000 shares of the Company’s common stock at an exercise price of $.12 per share.
The Company’s cash flow requirements during this period have been met by contributions of capital and debt financing. The Company anticipates that financing will be required until such time that the Company has been able to develop its own business or find an appropriate merger candidate. Currently, the Company can not determine when either will occur and as such the Company will need to obtain financing to cover its costs for the foreseeable future. No assurance can be given that these sources of financing will continue to be available. If the Company is unable to generate profits, or unable to obtain additional funds for its working capital needs, it may have to cease operations.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Market risk is the risk of loss from adverse changes in market prices and interest rates. We do not have substantial operations at this time so they are not susceptible to these market risks. If, however, they begin to generate substantial revenue, their operations will be materially impacted by interest rates and market prices.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2005 AND 2004 AND FOR THE YEARS ENDED
DECEMBER 31, 2005 AND 2004 AND FOR THE PERIOD
JANUARY 1, 2004 (COMMENCEMENT OF DEVELOPMENT
STAGE) THROUGH DECEMBER 31, 2005
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE COMPANY)
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and
Board of Directors
Concept Digital, Inc and Subsidiary
We have audited the accompanying consolidated balance sheet of Concept Digital, Inc. and Subsidiary (a development stage company) as of December 31, 2005 and 2004 and the related consolidated statements of operations, change in stockholders’ deficit and cash flows for the years ended December 31, 2005 and 2004 and for the period January 1, 2004 (commencement of development stage) to December 31, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe the audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Concept Digital, Inc. and Subsidiary as of December 31, 2005 and 2004 and the consolidated results of their operations and their consolidated cash flows for the years ended December 31, 2005 and 2004 and for the period January 1, 2004 (commencement of development stage) to December 31, 2005 in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company is a development stage company. The realization of a major portion of its assets is dependent upon its ability to meet its future financing requirements, and the success of future operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans concerning these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from this uncertainty.
Seligson and Giannattasio, LLP
White Plains, NY
May 4,
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Balance Sheets
The accompanying notes are an integral part of these consolidated financial statements.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Operations
The accompanying notes are an integral part of these consolidated financial statements.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Stockholder’s Deficit
The accompanying notes are an integral part of these consolidated financial statements.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
The accompanying notes are an integral part of these consolidated financial statements.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(A Development Stage Company)
Consolidated Statements of Cash Flows
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
The accompanying notes are an integral part of these consolidated financial statements.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements
NOTE 1 - DEVELOPMENT STAGE OPERATIONS AND GOING CONCERN MATTERS
Subsequent to December 31, 2002, the Company’s activities have been devoted to developing a business plan, and raising capital for future operations and administrative functions. The ability of the Company to achieve its business objectives is contingent upon its success in raising additional capital until adequate revenues are realized from operations.
The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As reflected in the consolidated financial statements, losses from June 15, 1999 (date of inception) through December 31, 2005 aggregated ($1,983,180). The Company’s cash flow requirements during this period have been met by contributions of capital and debt financing primarily from related parties. The Company anticipates that financing will be required until such time that the Company has been able to develop its own business or find an appropriate merger candidate. Currently, the Company can not determine when either will occur and as such the Company will need to obtain financing to cover its costs for the foreseeable future. No assurance can be given that these sources of financing will continue to be available. If the Company is unable to generate profits, or unable to obtain additional funds for its working capital needs, it may have to cease operations. These factors raise substantial doubt about the Company’s ability to continue as a going concern.
The consolidated financial statements do not include any adjustments relating to the recoverability and classification of assets or liabilities that might be necessary should the company be unable to continue as a going concern.
NOTE 2 - ORGANIZATION
Concept Digital, Inc. (the “Company”) was incorporated on June 15, 1999, under the laws of the State of Delaware. Through its wholly owned subsidiary, Photo America, Inc. (“PAI”) is a development stage enterprise engaged in the marketing and issuing warranties primarily for digital cameras. Previously, PAI was developing an Internet facility for processing digital images.
On September 26, 2001, Photo America, Inc. merged with Concept Digital, Inc. (“CDI”) a publicly traded development stage enterprise that had 3,032,978 shares of common stock outstanding prior to the merger. Pursuant to the merger agreement, the Company acquired all of the outstanding common stock of Photo America, Inc. in exchange for 36,650,403 shares of CDI common stock. The merger has been accounted for as a recapitalization by Photo America, Inc. The equity accounts of PAI have been restated to give effect to the CDI shares issued by the PAI shareholders. No goodwill has been recorded in connection with the transaction. The results of CDI have been included in operations commencing September 26, 2001.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation:
The consolidated financial statements include the accounts of Concept Digital, Inc. and its wholly-owned subsidiary Photo America, Inc. All significant intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates:
The presentation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the consolidated financial statements and reporting period. Accordingly, actual results could differ from those estimates.
Cash and Cash Equivalents:
For purposes of reporting cash flows, the company considers all highly liquid investments purchased with an original maturity of three months or less to be cash.
Carrying Value:
The Company reviews the carrying values of its long-lives and identifiable intangible assets for possible impairment. Whenever events or changes in circumstances indicates that the carrying amount of assets may not be recoverable, the Company will reduce the carrying value of the assets and charge operations in the period the impairment occurs.
Trade names:
Purchased trade names are recorded at cost less accumulated amortization and are included in other assets. Trade names are being amortized over 2 years from the initial date of use. Accumulated amortization as of December 31, 2005 aggregated $25,000.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Revenue recognition:
Revenue from processing images is recognized upon delivery of the images. The Company recognizes revenue from warranties over the term of the warranty.
Advertising:
The Company’s policy for reporting advertising expenditures is to expense them as they are incurred. For the years ended December 31, 2005 and 2004, the Company did not incur any advertising expenditures.
Income taxes
The Company utilizes Statement of Financial Standards (“SFAS”) No. 109, “Accounting for Income Taxes”, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax basis of assets and liabilities and their financial reporting amounts at each period based on enacted tax laws and statutory tax rates applicable to the period in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The accompanying consolidated financial statements have no provision for deferred assets or liabilities.
Stock-based compensation:
Stock based compensation is recognized using the intrinsic value method prescribed in Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations. Accordingly, compensation expense for stock options is measured as the excess, if any, of the fair value of the Company’s stock at the date of the grant over the amount an employee must pay to acquire the stock and is amortized over the vesting period. The Company has adopted the disclosure provisions of SFAS No. 123, Accounting for Stock-Based Compensation, which requires the Company to disclose the pro forma effects on earnings and earnings per share as if SFAS No. 123 had been adopted. There were no compensation expenses pursuant to SFAS No. 123 for the fiscal years ended December 31, 2005 and 2004.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Net Loss Per Share:
The Company reports net income (loss) per share pursuant to SFAS No. 128 “Earnings Per Share”, Basic loss per share is computed by dividing the loss available to common shareholders by the weighted-average number of common shares outstanding. Diluted loss per share is computed in a manner similar to the basic loss per share, except that the weighted-average number of shares outstanding is increased to include all common shares, including those with the potential to be issued by virtue of warrants, options, convertible debt and other such convertible instruments. Diluted earnings per share contemplates a complete conversion to common shares of all convertible instruments only if they are dilutive in nature with regards to earnings per share. Since the Company has incurred net losses for all periods basis loss per share and diluted loss per share are the same.
Fair Value of Financial Instruments:
SFAS No. 107 “Disclosure about Fair Value of Financial Instruments” requires the disclosure of the fair value of financial instruments. The Company has a number of financial instruments, none of which is held for trading purposes. The carrying value of cash, accounts receivable, accounts payable and accrued expenses approximate their fair value because of the short-term nature of these financial instruments. Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange.
Recently Issued Accounting Pronouncements:
In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 155, “Accounting for Certain Hybrid Financial Instruments-an amendment of SFAS Statements No. 133 and 140” (“SFAS No. 155”). SFAS No. 155 amends SFAS Statements No. 133, Accounting for Derivative Instruments and Hedging Activities, and No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155 resolves issues addressed in SFAS No. 133 Implementation Issue No. D1, “Application of Statement 133 to Beneficial Interests in Securitized Financial Assets.”
SFAS No. 155:
a.
Permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently issued accounting pronouncements (continued)
b.
Clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No.
c.
Establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation
d.
Clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives
e.
Amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument.
SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The fair value election provided for in paragraph 4(c) of SFAS No. 155 may also be applied upon adoption of SFAS No. 155 for hybrid financial instruments that had been bifurcated under paragraph 12 of SFAS No. 133 prior to the adoption of SFAS No. 155. Earlier adoption is permitted as of the beginning of an entity’s fiscal year, provided the entity has not yet issued financial statements, including financial statements for any interim period for that fiscal year. Provisions of SFAS No. 155 may be applied to instruments that an entity holds at the date of adoption on an instrument-by-instrument basis.
At adoption, any difference between the total carrying amount of the individual components of the existing bifurcated hybrid financial instrument and the fair value of the combined hybrid financial instrument should be recognized as a cumulative-effect adjustment to beginning retained earnings. The cumulative-effect adjustment should be disclosed gross (that is, aggregating gain positions separate from loss positions) determined on an instrument-by-instrument basis. Prior periods should not be restated. The Company does not believe there will be any effect on the financial statements upon adopting SFAS No. 155.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Recently issued accounting pronouncements (continued)
In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets-an amendment of SFAS No. 140” (SFAS No. 156”). SFAS No. 156 amends SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. SFAS No. 156 is effective for years beginning after September 15, 2006. The Company does not believe SFAS No. 156 will have a material effect on the Company’s financial statements.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (SFAS No. 157”). SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting pronouncements that require or permit fair value measurements, the Board having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practice.
SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Earlier application is encouraged, provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period within that fiscal year. The Company is currently reviewing the potential effect of this statement on its financial statements.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans-an amendment of SFAS Statements No. 87, 88, 106, and 132R” (“SFAS No. 158”). This Statement improves financial reporting by requiring an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through comprehensive income of a business entity or changes in unrestricted net assets of a not-for-profit organization. This Statement also improves financial reporting by requiring an employer to measure the funded status of a plan as of the date of its year-end statement of financial position, with limited exceptions.
An employer with publicly traded equity securities is required to initially recognize the funded status of a defined benefit postretirement plan and to provide the required disclosures as of the end of the fiscal year ending after December 15, 2006. The Company does not believe SFAS No. 158 will have any material effect on its financial statements.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements
NOTE 4 - RELATED PARTY TRANSACTIONS
During 2003, the Company sold digital camera warranties to a company controlled by the Company’s majority stockholder. As of December 31, 2005, accounts receivable - related party represents amounts due from the sale of warranties to these companies.
Effective January 1, 2002 Photo America, Inc. signed an agreement with Willoughby’s, a related party through common ownership, to pay $750 per month due in quarterly installments of $2,250 in exchange for bookkeeping, secretarial and managerial services. This agreement terminates on June 30, 2006.
NOTE 5 - LOANS PAYABLE
The convertible note payable of $16,953 which bears interest at 6% per annum is due to Atlas Equity Group, Inc. (“Atlas”), an entity related to the Company through common ownership. The note matured in May 2002 and is convertible to 730,468 shares of common stock at the discretion of Atlas. At December 31, 2005 the entire balance of the note was outstanding. As a result of the note not being paid at the due date, the note is in default.
Note payable to related party is due to 529 Empire Realty, an affiliated company of the majority stockholder, which bears interest at 9.46% and is due on demand. Interest expense aggregated $13,197 as of December 31, 2005.
NOTE 6 - INCOME TAXES
No provisions for income taxes have been made because the Company has sustained cumulative losses since the commencement of operations on June 15, 1999. At December 31, 2005, the Company had a net operating loss carryforward (“NOL”) of ($376,971) available to reduce future taxable income and expense through 2025.
In accordance with SFAS No. 109 the Company has computed the components of deferred income taxes as follows:
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements
NOTE 6 - INCOME TAXES (continued)
At December 31, 2005, a full valuation allowance has been provided as realization of the deferred tax benefit is not likely.
The effective tax rate varies from the U.S. Federal statutory tax rates for the period ended December 31, 2005 principally due to the following:
NOTE 7 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses at December 31, 2005 consisted of the following:
NOTE 8 - STOCK OPTIONS AND WARRANTS
Stock Options
During the year ended December 31, 1999, the board of directors authorized the issuance of employee stock options to purchase 1,200,000 shares of common stock. The options, which vested immediately, have an exercise price of $0.10 per share.
In January 2000, the Company’s board of directors authorized an employee stock option plan under which 1,200,000 shares of common stock were reserved for issuance upon exercise of either incentive or non-incentive stock options, which may be granted from time to time by the Board of Directors to employees. The Board of Directors determines the option price (not to be less than estimated fair value for incentive options) vesting period and expiration date (note to exceed 10 years) at the date of grant.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements
NOTE 8 - STOCK OPTIONS AND WARRANTS (continued)
Stock Options (continued)
The following summarizes stock option transactions
The following table summarizes information about the plan’s options outstanding at December 31, 2005:
On September 2, 2002, the Company’s Board of Directors held a meeting and voted to terminate the stock option plan. The termination of the stock option plan did not affect options issued previously.
CONCEPT DIGITAL, INC. AND SUBSIDIARY
(a development stage enterprise)
Notes to Consolidated Financial Statements
NOTE 8 - STOCK OPTIONS AND WARRANTS (continued)
Warrant and Non-Employee Options
In connection with a private placement in 2000, the Company granted warrants to purchase 100,000 shares of the Company’s common stock at an exercise price of $0.10 per share expiring in 2010.
In 2000, the Company issued warrants to purchase 750,000 shares with an exercise price of $.10 per share expiring in 2010 to a consultant and granted, to various consultants, options under the stock option plan to purchase 135,000 shares of common stock with an exercise price of $.12 per share and expiring from 2005 to 2010. These warrants and options were valued using the Black-Scholes options pricing model with the following assumptions: dividend yield 0%, volatility 0%, expected life ranging from 5 to 10 years, risk free interest rates ranging from 5.8% to 6.3%. The charges to operations aggregated $41,000.
In 2001, the Company issued options to purchase 600,000 shares with an exercise price of $.10 per share expiring in 2011 to a consultant and a director. These options were valued using the Black-Scholes option pricing model with the following assumptions: dividend yield 0%, volatility 0% (since the options were granted prior to the reverse acquisition of CDI), expected life 10 years, risk free interest rates ranging from 4.7% to 5.35%. The change to operating aggregated $28,000. As of December 31, 2005, 2,730,000 shares were reserved of common stock for other stock options and warrants outstanding.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
The Company's independent auditor for the fiscal year ended on December 31, 2001 was Eisner LLP. The Company’s current independent auditor is Seligson and Giannattasio, LLP of White Plains, New York. The Company changed auditors for the fiscal year ended on December 31, 2002 as a cost effective move. The Company does not presently intend to change independent auditors. At no time have there been any disagreements with such independent auditors regarding any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure.
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), as of December 31, 2005. Based on this evaluation, our principal executive officer and principal financial officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules based on the material weakness described below:
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of the Company is responsible for establishing and maintaining effective internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. The Company’s internal control over financial reporting is designed to provide reasonable assurance to the Company’s management and Board of Directors regarding the preparation and fair presentation of published financial statements in accordance with United State’s generally accepted accounting principles (US GAAP), including those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with US GAAP and that receipts and expenditures are being made only in accordance with authorizations of management and directors of the company, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Management conducted an evaluation of the effectiveness of internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of our internal control over financial reporting. Based on this assessment, Management concluded the Company maintained effective internal control over financial reporting as of December 31, 2005.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this Annual Report.
PART III
ITEM 10.
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The directors and officers of the Company and its subsidiaries, as of May 26, 2009, are set forth below. The directors hold office for their respective term and until their successors are duly elected and qualified. Vacancies in the existing Board are filled by a majority vote of the remaining directors. The officers serve at the will of the Board of Directors.
JOSEPH DOUEK, 33. CHAIRMAN OF THE BOARD OF DIRECTORS, CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER
Mr. Joseph Douek was born, raised and currently resides in Brooklyn, NY. He is the Chief Executive Officer and owner of Willoughby’s since 1994. Established in 1898, Willoughby’s is NYC’s oldest photographic retailer. Mr. Douek’s responsibilities include overseeing the day to day activities of Willoughby’s and its long term strategic planning.
In December 2001, Mr. Douek was appointed by The Honorable Mayor Rudolph Giuliani as Brooklyn’s representative to the NYC Economic Development Corporation Board of Directors. Since 2001 Mr. Douek has continued to serve as an EDC Board Member and has been reappointed by NYC Mayor, The Honorable Michael Bloomberg.
In addition to serving as an appointed official in the capacity of a NYC Economic Development Corporation Board Member, in February 2002 Mr. Douek was appointed by The Honorable Mayor Mike Bloomberg to serve as the Brooklyn representative to the NYC Industrial Development Agency Board of Directors Mr. Douek continues to serve as an IDA Board Member and has initiated efforts to promote economic development in Brooklyn and all the five Boroughs of NYC.
RICHARD DARROW, 53. DIRECTOR.
All officers and directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. We have not compensated our Directors for service on our Board of Directors, any committee thereof, or reimbursed for expenses incurred for attendance at meetings of our Board of Directors and/or any committee of our Board of Directors. Officers are appointed annually by our Board of Directors and each Executive Officer serves at the discretion of our Board of Directors. We do not have any standing committees. Our Board of Directors may in the future determine to pay Directors' fees and reimburse Directors for expenses related to their activities.
None of our Officers and/or Directors have filed any bankruptcy petition, been convicted of or been the subject of any criminal proceedings or the subject of any order, judgment or decree involving the violation of any state or federal securities laws within the past five (5) years.
CERTAIN LEGAL PROCEEDINGS
No director, nominee for director, or executive officer of the Company has appeared as a party in any legal proceeding material to an evaluation of his ability or integrity during the past five years.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's officers and directors, and persons who own more than 10 percent of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (SEC). Officers, directors, and greater than 10 percent stockholders are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company, all reports under Section 16(a) required to be filed by its officers and directors and greater than ten percent beneficial owners were not filed as of the date of this filing.
Code of Ethics
We have not adopted a Code of Ethics.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Compensation of Executive Officers
The following information relates to compensation received by the Chief Executive Officer of the Company in fiscal years ended December 31, 2005 and December 31, 2004 for the executive officers who were serving as of fiscal years ended December 31, 2005 and December 31, 2004, whose salary and bonus during fiscal years ended December 31, 2005 and December 31, 2004 exceeded $100,000. In 2004, no officer received compensation in excess of $100,000.
Summary Compensation Table
Employment Agreements
No officer or director has been granted an employment contract or been provided a future benefit to be received upon separation from service with the Company.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of December 31, 2005 information with respect to the beneficial ownership of the Company's Common Stock by (i) each person known by the Company to own beneficially 5% or more of such stock, (ii) each Director of the Company who owns any Common Stock, and (iii) all Directors and Officers as a group, together with their percentage of beneficial holdings of the outstanding shares.
Security Ownership of Beneficial Owners (1):
(1) The persons named in this table have sole voting and investment power with respect to all shares of common stock reflected as beneficially owned by each.
(2) For purposes of this table only, this percentage is based on 39,683,381 shares outstanding as of December 31, 2005.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During 2003, the Company sold digital camera warranties to a company controlled by the Company’s majority stockholder. As of December 31, 2005, accounts receivable - related party represents amounts due from the sale of warranties to these companies.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTION, AND DIRECTOR INDEPENDENCE
None
ITEM 14.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
For the Company’s fiscal years ended December 31, 2005 and 2004, we were billed approximately $20,000 and $20,000 for professional services rendered for the audit and review of our financial statements.
Audit Related Fees
There were no fees for audit related services for the years ended December 31, 2005 and 2004.
Tax Fees
For the Company’s fiscal years ended December 31, 2005 and 2004, we were not billed for professional services rendered for tax compliance, tax advice, and tax planning.
All Other Fees
The Company did not incur any other fees related to services rendered by our principal accountant for the fiscal years ended December 31, 2005 and 2004.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Effective May 6, 2003, the Securities and Exchange Commission adopted rules that require that before our auditor is engaged by us or our subsidiaries to render any auditing or permitted non-audit related service, the engagement be:
-approved by our audit committee; or
-entered into pursuant to pre-approval policies and procedures established by the audit committee, provided the policies and procedures are detailed as to the particular service, the audit committee is informed of each service, and such policies and procedures do not include delegation of the audit committee's responsibilities to management.
We do not have an audit committee. Our entire board of directors pre-approves all services provided by our independent auditors. The pre-approval process has just been implemented in response to the new rules. Therefore, our board of directors does not have records of what percentage of the above fees were pre-approved. However, all of the above services and fees were reviewed and approved by the entire board of directors either before or after the respective services were rendered.
PART IV
ITEM 15.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.
a) Documents filed as part of this Annual Report
1. Consolidated Financial Statements
2. Financial Statement Schedules
3. Exhibits
Exhibits # Title
31.1
Certification of President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board of Directors Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2
Certification of President, Chief Executive Officer, Chief Financial Officer, Chairman of the Board of Directors Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.