##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-KSB
  þ
    
    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the fiscal year ended March 31, 2006
 o
    
    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File No. 000-51152
 DIGITAL ECOSYSTEMS CORP.
  Nevada
    
    98-0431245(State or jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)1313 East Maple Street, Suite 223, Bellingham, WA
    
    98225(Address of principal executive offices)
    
    (Zip Code)
 (360) 685-4240
  
  
  o
 þ o
 þ
 o þ
 0
 
 
 *
    
    Without assuming that any of the issuers
directors or executive officers or the entity that owns shares of common stock
are affiliates, the shares of which they are beneficial owners have been deemed
to be owned by affiliates solely for this calculation.




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##### 



TABLE OF CONTENTS
 Page No.PART I
    
    
    
    
    1ITEMS 1 AND 2. DESCRIPTION OF BUSINESS
    
    
    1ITEM 3.
    
    LEGAL PROCEEDINGS
    
    
    13ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
    
    
    13PART II
    
    
    
    
    13ITEM 5.
    
    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
    
    
    13ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
    
    
    14ITEM 7.
    
    FINANCIAL STATEMENTS
    
    
    16ITEM 8.
    
    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
    
    
    16ITEM 8A.
    
    CONTROLS AND PROCEDURES
    
    
    16ITEM 8B.
    
    OTHER INFORMATION
    
    
    16PART III
    
    
    
    
    16ITEM 9.
    
    DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
    
    
    16ITEM 10.
    
    EXECUTIVE COMPENSATION
    
    
    18ITEM 11.
    
    Security Ownership of certain beneficial owners and
management and related stockholder matters
    
    
    19ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    
    
    21ITEM 13.
    
    EXHIBITS
    
    
    21ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
    
    
    21SIGNATURES
    
    
    22BALANCE SHEETS
    
    
    F-2STATEMENTS OF OPERATIONS
    
    
    F-3STATEMENTS OF CASH FLOWS
    
    
    F-4STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIENCY)
    
    
    F-5NOTES TO FINANCIAL STATEMENTS
    
    
    F-62005 Stock Option PlanManagement and Development AgreementCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO Pursuant to Section 906Certification of CFO Pursuant to Section 906




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PART I
 
 ITEMS 1 AND 2. DESCRIPTION OF BUSINESS AND PROPERTY
 Corporate History
  Business Prior to Share Exchange
  Business Subsequent to Share Exchange
  Competition
  1




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Employees
  Environmental Matters
      2




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Heavy Oil Properties
 Great Salt Lake  Utah
   3




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Montana Heavy Oil
  Piceance Basin, Colorado Properties
 Buckskin Mesa
   4




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Piceance II  Colorado
    Australia Properties
   Development Agreement
  5




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Oil and Gas Drilling Activities
    Oil and Gas Interests
  Developed
    
    
    UndevelopedLocation
    
    Gross Acres
    
    
    Net Acres
    
    
    Gross Acres
    
    
    Net AcresColorado
    
    
    -0-
    
    
    
    -0-
    
    
    
    30,000
    
    
    
    25,000Utah
    
    
    -0-
    
    
    
    -0-
    
    
    
    173,851
    
    
    
    173,851Montana
    
    
    -0-
    
    
    
    -0-
    
    
    
    40,000
    
    
    
    29,000Australia
    
    
    -0-
    
    
    
    -0-
    
    
    
    7,000,000
    
    
    
    7,000,000
  Year of
    
    
    Fee
    
    
    State
    
    
    FederalExpiration
    
    
    Leases
    
    
    Leases
    
    
    Leases
    
    
    TOTALSCOLORADO
    
    
    2006
    
    
    
    5002007
    
    
    
    400
    
    
    
    150
    
    
    
    6402008
    
    
    
    1,000
    
    
    
    
    
    
    
    2,5602009
    
    
    
    5,000
    
    
    
    
    
    
    
    5,1202010 andafter
    
    
    5,000
    
    
    
    
    
    
    
    5,12025,000UTAH
    
    
    2008
    
    
    
    1,000
    
    
    
    3,8402009
    
    
    
    5,000
    
    
    
    2,5602010 andafter
    
    
    5,000
    
    
    
    167,451173,851MONTANA
    
    
    2009
    
    
    
    
    
    
    
    5,120
    
    
    
    5,1202010 andafter
    
    
    
    
    
    
    3,400
    
    
    
    15,36029,000AUSTRALIA
    
    
    2008
    
    
    
    
    
    
    
    
    
    
    
    3,000,0002009
    
    
    
    
    
    
    
    
    
    
    
    4,000,0007,000,000
 6




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RISK FACTORS
 Risks Related to the Companys and GSLs Business
 GSL is a newly formed company with no operating history, which makes it difficult to evaluate our
business prospects.
  Reserve estimates depend on many assumptions that may turn out to be inconclusive, subject to
varying interpretations, or inaccurate.
   7




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Market conditions or operation impediments may hinder our access to natural gas and oil markets or
delay our production.
   
    
    the lack of pipeline transmission facilities or carrying capacity;
    
    government regulation of natural gas and oil production;
    
    government transportation, tax and energy policies;
    
    changes in supply and demand; and
    
    general economic conditions.
 We might incur additional debt in order to fund our exploration and development activities, which
would continue to reduce our financial flexibility and could have a material adverse effect on our
business, financial condition or results of operations.
  8




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We have significant future capital requirements. If these obligations are not met, our growth and
operations could be non-functional.
  
    
    the success of the leases;
    
    success in locating and producing new reserves; and
    
    prices of natural gas and oil.
  
    
    a substantial portion of operating cash flow being dedicated to the payment of
principal and interest;
    
    the Company being more vulnerable to competitive pressures and economic downturns;
and
    
    restrictions on the Companys operations.
  The leases and/or future properties might not produce as anticipated, and the Company might not be
able to determine reserve potential, identify liabilities associated with the properties or obtain
protection from sellers against them, which could cause the Company to incur losses.
  9




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We do not plan to insure against all potential operating risks. We might incur substantial
losses and be subject to substantial liability claims as a result of our natural gas and oil
operations.
  
    
    environmental hazards, such as uncontrollable flows of natural gas, oil, brine, well
fluids, toxic gas or other pollution into the environment, including groundwater and
shoreline contamination;
    
    abnormally pressured formations;
    
    mechanical difficulties, such as stuck oil field drilling and service tools and
casing collapse;
    
    fires and explosions;
    
    personal injuries and death;
    
    regulatory investigations and penalties; and
    
    natural disasters.
  Risks Relating to the Oil and Gas Industry
 A substantial or extended decline in natural gas and oil prices may adversely affect our ability to
meet our capital expenditure obligations and financial commitments.
  10




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
    
    changes in supply and demand for natural gas and oil;
    
    levels of production and other activities of the Organization of Petroleum Exporting
Countries, or OPEC, and other natural gas and oil producing nations;
    
    market expectations about future prices;
    
    the level of global natural gas and oil exploration, production activity and
inventories;
    
    political conditions, including embargoes, in or affecting other oil producing
activity; and
    
    the price and availability of alternative fuels.
  Drilling for and producing natural gas and oil are high-risk activities with many uncertainties
that could adversely affect our business, financial condition or results of operations.
  
    
    unexpected drilling conditions;
    
    pressure or irregularities in geological formations;
    
    equipment failures or accidents;
    
    pipeline and processing interruptions or unavailability;
    
    title problems;
    
    adverse weather conditions;
    
    lack of market demand for natural gas and oil;
 11




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
    
    delays imposed by or resulting from compliance with environmental and other
regulatory requirements;
    
    shortages of or delays in the availability of drilling rigs and the delivery of
equipment; and
    
    reductions in natural gas and oil prices.
  Competition in the oil and gas industry is intense, and many of our competitors have greater
financial, technological and other resources than we do, which may adversely affect our ability to
compete.
  
    
    seeking oil and gas exploration licenses and production licenses;
    
    acquiring desirable producing properties or new leases for future exploration;
    
    marketing natural gas and oil production;
    
    integrating new technologies; and
    
    acquiring the equipment and expertise necessary to develop and operate properties.
  Shortages of rigs, equipment, supplies and personnel could delay or otherwise adversely affect our
cost of operations or our ability to operate according to our business plans.
  12




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To the extent that we establish natural gas and oil reserves, it will be required to replace,
maintain or expand its natural gas and oil reserves in order to prevent its reserves and production
from declining, which would adversely affect cash flows and income.
   
 ITEM 3.
    
    LEGAL PROCEEDINGS
  
 ITEM 4.
    
    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  
 PART II
 
 ITEM 5.
    
    MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 Market Information
  QUARTER
    
    HIGH ($)
    
    LOW ($)1stQuarter 2005
    
    $
    0.53
    
    
    $
    0.062nd Quarter 2005
    
    $
    1.50
    
    
    $
    0.063rd Quarter 2005
    
    $
    1.79
    
    
    $
    0.054th Quarter 2005
    
    $
    3.36
    
    
    $
    1.11st Quarter 2006
    
    $
    4.22
    
    
    $
    2.74
 13




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Dividends
  Recent Sales of Unregistered Securities
  
 ITEM 6.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
 Plan of Operation
  1.
    
    Unconventional natural gas exploration in Colorado,2.
    
    Heavy crude exploration and processing in Montana and Utah,3.
    
    Exploration of an oil and gas field in Australia.
  
    
    Drilling of wells in our 1,000 acre holdings in Piceance Basin. We expect to
complete approximately 8 wells and have gas production by the end of the 2006
calendar year.
 14




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
    
    Exploration of our 16,000 acre lease near Buckskin Mesa/Powell Park discovery
wells in the northern Piceance Basin. Our plan is to reprocess 3-D seismic data.
Based on results of this analysis, we anticipate three (3) well exploration program
will be undertaken in calendar year 2006. These wells will be to an estimated depth
of 10,000 to 12,000 feet, to test the Williams Fork, Cameo and Ft. Union
formations.
  
    
    $15,000,000 to $25,000,000 in connection with the Piceance II project, to
include seismic, drilling, completion and production facilities.
    
    $5,000,000 to $14,000,000 in connection with the Buckskin Mesa project, to
include seismic, and drilling.
  
    
    The development of at least 15,000 acres of prime heavy oil acreage in Montana.
    
    The development of 173,000 acres owned or under contract in the Great Salt Lake.
  
    
    $7,000,000 to $12,500,000 to add land in Montana in areas where we have already
completed acquisitions
    
    $5,000,000 to $11,000,000 in connection with the Fiddler Creek project, to
include drilling, completion and production facilities
    
    $1,000,000 to $2,000,000 in connection with the Great Salt Lake project, to
include project design, and project equipment procurement
    15




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ITEM 7.
    
    FINANCIAL STATEMENTS
  
 ITEM 8.
    
    CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
  
 ITEM 8A.
    
    CONTROLS AND PROCEDURES
  
 ITEM 8B.  OTHER INFORMATION
  
 PART III
 
 ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 Directors and Executive Officers
 Directors
  16




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Officers
   Project Management Handbook
 17




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Committees of the Board Of Directors
  Audit Committee Financial Expert
  Section 16(a) Beneficial Ownership Reporting Compliance:
   Code of Ethics:
  
 ITEM 10.
    
    EXECUTIVE COMPENSATION
  18




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Long-Term CompensationAwards SecuritiesAnnual Comp
    
    UnderlyingName and Position
    
    Year
    
    Salary
    
    Stock OptionsGregory Leigh Lyons,
President, Secretary,
Treasurer, Chief
Executive Officer and
Chief Financial
Officer (1)
    
    
    2006
    
    
    $
    70,000
    
    
    
    0
 
 (1)
    
    Mr. Lyons was appointed as an officer of the Company on September 15, 2005. Mr. Lyons
resigned from all of his officer positions with the Company on May 12, 2006.
  Equity Compensation
 th
 Director Compensation
  ITEM 11.
    
    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
  19




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Amount and Nature
    
    Percentage ofName and Address
    
    of Beneficial
    
    CommonTitle of Class
    
    of Beneficial Owner
    
    Ownership
    
    Stock(1)DIRECTORS AND OFFICERSCommon Stock
    
    Kelly H. Nelson(2)
    
    
    950,000
    
    
    
    *170 South Main, Suite 1025Salt Lake City, Utah  84101Carmen T. Lotito(3)
    
    
    1,000,000
    
    
    
    *1875 Lawrence Street, Suite 1400Denver, Colorado  80202Garry Lavold(4)1875 Lawrence StreetDenver, CO 80202
    
    
    800,000
    
    
    
    *Common Stock
    
    All Officers and Directorsas a Group (3 persons)
    
    
    2,750,000
    
    
    
    1.22
    %5% STOCKHOLDERSCommon Stock
    
    MAB Resources LLC(5)
    
    
    105,200,000
    
    
    
    46.69
    %
 
 *
    
    Less than one percent.(1)
    
    Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or
shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and
(ii) investment power, which includes the power to dispose or direct the disposition of shares.
Certain shares may be deemed to be beneficially owned by more than one person (if, for example,
persons share the power to vote or the power to dispose of the shares). In addition, shares are
deemed to be beneficially owned by a person if the person has the right to acquire the shares (for
example, upon exercise of an option) within 60 days of the date as of which the information is
provided. In computing the percentage ownership of any person, the amount of shares outstanding is
deemed to include the amount of shares beneficially owned by such person (and only such person) by
reason of these acquisition rights. As a result, the percentage of outstanding shares of any person
as shown in this table does not necessarily reflect the persons actual ownership or voting power
with respect to the number of shares of common stock actually outstanding on the date of this Proxy
Statement. As of July 1, 2006, the Company had 225,373,000 shares of common stock issued and
outstanding.(2)
    
    Consists of (i) 150,000 shares of Company common stock held by Mr. Nelson, and (ii) an option to
acquire 800,000 shares of Company common stock at an exercise price of $.50, which expires on
August 10, 2010.(3)
    
    Consists of (i) 200,000 shares of Company common stock held by Mr. Lotito, and (ii) an option to
acquire 800,000 shares of Company common stock at an exercise price of $.50, which expires on
August 10, 2010.(4)
    
    Consists of an option to acquire 800,000 shares of Company common stock at an exercise price of
$.50, which expires on August 10, 2010.(5)
    
    Consists of (i) 98,000,000 shares of Company common stock held by MAB Resources LLC, an entity
100%
 20




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owned by Mr. Bruner and his family trust; (ii) 2,000,000 shares of Company common stock held
by MABio Materials Corporation, an entity 68.83% owned by Mr. Bruner, and over which Mr. Bruner has
investment and voting control; and (iii) an option to purchase 5,200,000 shares of Company common stock at an
exercise price of $.50, which expires on August 10, 2010.
 Equity Compensation Plan Information
 Equity Compensation Plan InformationNumber of SecuritiesRemaining Availablefor Future IssuanceNumber of Securities
    
    
    
    
    
    under Equityto be Issued Upon
    
    Weighted-Average
    
    Compensation PlansExercise of
    
    Exercise Price of
    
    (Excluding SecuritiesOutstanding Options,
    
    Outstanding Options,
    
    Reflected in ColumnPlan Category
    
    Warrants and Rights
    
    Warrants and Rights
    
    (a))(a
    )
    
    
    (b
    )
    
    
    (c
    )Equity compensation
plans approved by
security holders
    
    
    
    
    
    
    
    
    
    
    Equity compensation
plans not approved
by security holders
    
    
    19,000,000
    (1)
    
    
    0.50
    
    
    
    21,000,000Total
    
    
    19,000,000
    
    
    
    0.50
    
    
    
    21,000,000
 
 (1)
    
    Represents options assumed in the first quarter of fiscal year 2007 in connection with
the transaction with GSL as described in Compensation of Directors and Executive Officers  Equity
Compensation. ITEM 12.
    
    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
    ITEM 13.
    
    EXHIBITS
  ITEM 14.
    
    PRINCIPAL ACCOUNTANT FEES AND SERVICES
 Audit Fees
  Year Ended March 31, 2006
    
    Year Ended March 31, 2005Audit Related Fees
    
    $11,720
    
    $5,850Tax Fees
    
    
    
    All Other Fees
    
    
    
    Total
    
    $11,720
    
    $5,850
 21




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SIGNATURES
 th
 Digital Ecosystems Corp./s/ Kelly NelsonKelly NelsonChief Executive Officer  Signature
    
    Title
    
    Date/s/ Kelly Nelson
Kelly
Nelson
    
    Chief Executive Officer
    
    July 14, 2006/s/ Carmen J. Lotito
Carmen
J. Lotito
    
    Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary
    
    July 14, 2006/s/ Dr. Anthony K. Yeats
Dr. Anthony
K. Yeats
    
    Director
    
    July 14, 2006
 22




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Exhibit Index
 ExhibitNo.
    
    Description3(i)
    
    Articles of Incorporation of the Company. (Incorporated by
reference from the Companys Form SB-2, filed on September 16,
2004.)3(ii)
    
    Bylaws of the Company. (Incorporated by reference from the
Companys Form SB-2, filed on September 16, 2004.)4(i)
    

2005 Stock Option Plan.10(i)
    
    Business Consulting Agreement dated October 1, 2005
(Incorporated by reference from the Companys Form 8-K, filed
on October 28, 2005.)10(ii)
    
    Marketing Management Contract dated October 15, 2005
(Incorporated by reference from the Companys Form 8-K, filed
on October 28, 2005.)10(iii)
    
    Stock Exchange Agreement dated February 10, 2006 between the
Company, GSL, and certain stockholders of GSL named therein
(Incorporated by reference from the Companys Form 10-QSB for
the period ended December 31, 2005, filed on February 16,
2006.)10(iv)
    

Management
and Development Agreement dated July 1, 2005,
between GSL and MAB Resources, LLC.14(i)
    
    Code of Ethics. (Incorporated by reference from Exhibit 14(i)
to the Companys Form 10-KSB for the fiscal year ending March
31, 2005, filed on July 13, 2005.)31.1
    
    Certification of Chief Executive Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    
    Certification of Chief Financial Officer pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    
    Certification of Chief Executive Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    
    Certification of Chief Financial Officer pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
 23




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 To the Board of Directors and Stockholders of
Digital Ecosystems Corp.
(A Development Stage Company)
 Digital Ecosystems Corp.
  Digital Ecosystems Corp.
  TELFORD SADOVNICK, P.L.L.C.
 CERTIFIED PUBLIC ACCOUNTANTS
 
 F-1




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DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
 BALANCE SHEETS
(Stated in U.S. Dollars)
 MARCH 312006
    
    2005ASSETSCurrentCash
    
    $
    8,401
    
    
    $
    4,014Prepaid expenses
    
    
    34,786
    
    
    
    $
    43,187
    
    
    $
    4,014LIABILITIESCurrentAccounts payable and accrued liabilities
    
    $
    15,765
    
    
    $
    26,932Due to related party
    
    
    100
    
    
    
    1,000Convertible notes payable
    
    
    361,589
    
    
    
    377,454
    
    
    
    27,932Commitments(Note 8)STOCKHOLDERS DEFICIENCYCapital StockAuthorized:1,000,000,000 voting common stock with a
par value of $0.001 per share100,000,000 preferred stock with a par
value of $0.001 per shareIssued and outstanding:28,700,000 common shares at March 31, 2006
    
    
    28,700
    
    
    
    91,20091,200,000 common shares at March 31, 2005Additional paid-in capital
    
    
    124,767
    
    
    
    50,267Deficit Accumulated During The Development Stage
    
    
    (487,734
    )
    
    
    (165,385
    )(334,267
    )
    
    
    (23,918
    )$
    43,187
    
    
    $
    4,014
  F-2




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DIGITAL ECOSYSTEMS CORP.  (A Development Stage Company)
 STATEMENTS OF OPERATIONS
(Stated in U.S. Dollars)
 CUMULATIVE PERIODFROM INCEPTION ONYEARS ENDED
    
    FEBRUARY 21, 2002MARCH 31
    
    TO MARCH 312006
    
    2005
    
    2006Revenue
    
    $
    
    
    
    $
    
    
    
    $
    ExpensesConsulting  Officers and directors
    
    
    12,000
    
    
    
    24,000
    
    
    
    56,700Consulting  Other
    
    
    70,259
    
    
    
    6,446
    
    
    
    93,205Consulting  Website development
    
    
    
    
    
    
    299
    
    
    
    10,094Foreign exchange (gain)
    
    
    58
    
    
    
    (3,386
    )
    
    
    (3,757
    )Management fees
    
    
    65,000
    
    
    
    
    
    
    
    65,000Marketing management
    
    
    67,340
    
    
    
    
    
    
    
    67,340Office and miscellaneous
    
    
    32,679
    
    
    
    8,150
    
    
    
    45,024Professional fees
    
    
    65,639
    
    
    
    67,728
    
    
    
    143,244Rent
    
    
    3,550
    
    
    
    
    
    
    
    3,550Research
    
    
    6,214
    
    
    
    
    
    
    
    6,214Telephone
    
    
    2,340
    
    
    
    367
    
    
    
    3,170Transfer agent
    
    
    2,473
    
    
    
    
    
    
    
    3,153Travel and entertainment
    
    
    11,970
    
    
    
    
    
    
    
    11,970Loss Before Other Items
    
    
    (339,522
    )
    
    
    (103,604
    )
    
    
    (504,907
    )Gain On Extinguishment Of Debt
    
    
    17,173
    
    
    
    
    
    
    
    17,173Loss For The Periods
    
    $
    (322,349
    )
    
    $
    (103,604
    )
    
    $
    (487,734
    )Loss Per Share Basic and Diluted
    
    $
    (0.01
    )
    
    $
    (0.01
    )Weighted Average Number Of Common Shares
Outstanding
    
    
    57,467,123
    
    
    
    89,857,530
  F-3




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DIGITAL ECOSYSTEMS CORP.  (A Development Stage Company)
 STATEMENTS OF CASH FLOWS
(Stated in U.S. Dollars)
 CUMULATIVE PERIODFROM INCEPTION ONFEBRUARY 21, 2002MARCH 31
    
    TO MARCH 312006
    
    2005
    
    2006Cash Flows From Operating ActivitiesLoss for the periods
    
    $
    (322,349
    )
    
    $
    (103,604
    )
    
    $
    (487,734
    )Items Not Involving CashNon-cash services from officers and directors
    
    
    12,000
    
    
    
    24,000
    
    
    
    56,700Changes in non-cash working capital items:Decrease in accounts receivable
    
    
    
    
    
    
    1,134
    
    
    
    Increase in prepaid expenses
    
    
    (34,786
    )
    
    
    
    
    
    
    (34,786
    )Increase (Decrease) in due to related party
    
    
    (900
    )
    
    
    
    
    
    
    100Increase (Decrease) in accounts payable
and accrued liabilities
    
    
    (11,167
    )
    
    
    22,932
    
    
    
    15,765(357,202
    )
    
    
    (55,538
    )
    
    
    (449,955
    )Cash Flows From Financing ActivitiesConvertible notes payable
    
    
    361,589
    
    
    
    
    
    
    
    361,589Proceeds from issuance of common stock
    
    
    
    
    
    
    37,569
    
    
    
    96,767361,589
    
    
    
    37,569
    
    
    
    458,356Net Increase (Decrease) In Cash
    
    
    4,387
    
    
    
    (17,969
    )
    
    
    8,401Cash, Beginning Of Period
    
    
    4,014
    
    
    
    21,983
    
    
    
    Cash, End Of Period
    
    $
    8,401
    
    
    $
    4,014
    
    
    $
    8,401Supplemental Disclosure Of Cash Flow
InformationInterest paid
    
    $
    
    
    
    $
    
    
    
    $
    Income taxes paid
    
    
    
    
    
    
    
    
    
    
    
  F-4




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.  (A Development Stage Company)
 STATEMENT OF STOCKHOLDERS EQUITY (DEFICIENCY)
 PERIOD FROM INCEPTION, FEBRUARY 21, 2002, TO MARCH 31, 2006
(Stated in U.S. Dollars)
 DEFICITACCUMULATEDADDITIONAL
    
    STOCK
    
    DURING THENUMBER OF
    
    
    
    
    
    PAID-IN
    
    SUBSCRIPTIONS
    
    DEVELOPMENTSHARES
    
    AMOUNT
    
    CAPITAL
    
    RECEIVED
    
    STAGE
    
    TOTALCommon stock issued for cash
    
    
    15,000,000
    
    
    $
    15,000
    
    
    $
    (13,500
    )
    
    $
    
    
    
    $
    
    
    
    $
    1,500Net loss for the period
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,770
    )
    
    
    (1,770
    )Balance, March 31, 2002
    
    
    15,000,000
    
    
    
    15,000
    
    
    
    (13,500
    )
    
    
    
    
    
    
    (1,770
    )
    
    
    (270
    )Common stock issued for cash
    
    
    50,000,000
    
    
    
    50,000
    
    
    
    (45,000
    )
    
    
    
    
    
    
    
    
    
    
    5,000Cash received for stock
subscriptions
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,200
    
    
    
    
    
    
    
    31,200Non-cash services from
officers and directors
    
    
    
    
    
    
    
    
    
    
    9,900
    
    
    
    
    
    
    
    
    
    
    
    9,900Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,484
    )
    
    
    (20,484
    )Balance, March 31, 2003
    
    
    65,000,000
    
    
    
    65,000
    
    
    
    (48,600
    )
    
    
    31,200
    
    
    
    (22,254
    )
    
    
    25,346Common stock issued for cash
    
    
    16,200,000
    
    
    
    16,200
    
    
    
    36,498
    
    
    
    (31,200
    )
    
    
    
    
    
    
    21,498Non-cash services from
officers and directors
    
    
    
    
    
    
    
    
    
    
    10,800
    
    
    
    
    
    
    
    
    
    
    
    10,800Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (39,527
    )
    
    
    (39,527
    )Balance, March 31, 2004
    
    
    81,200,000
    
    
    
    81,200
    
    
    
    (1,302
    )
    
    
    
    
    
    
    (61,781
    )
    
    
    18,117Common stock issued for cash
    
    
    10,000,000
    
    
    
    10,000
    
    
    
    27,569
    
    
    
    
    
    
    
    
    
    
    
    37,569Non-cash services from
officers and directors
    
    
    
    
    
    
    
    
    
    
    24,000
    
    
    
    
    
    
    
    
    
    
    
    24,000Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (103,604
    )
    
    
    (103,604
    )Balance, March 31, 2005
    
    
    91,200,000
    
    
    
    91,200
    
    
    
    50,267
    
    
    
    
    
    
    
    (165,385
    )
    
    
    (23,918
    )Non-cash services from
officers and directors
    
    
    
    
    
    
    
    
    
    
    12,000
    
    
    
    
    
    
    
    
    
    
    
    12,000Cancellation of 62,500,000
common shares
    
    
    (62,500,000
    )
    
    
    (62,500
    )
    
    
    62,500
    
    
    
    
    
    
    
    
    
    
    
    Net loss for the year
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (322,349
    )
    
    
    (322,349
    )Balance, March 31, 2006
    
    
    28,700,000
    
    
    $
    28,700
    
    
    $
    124,767
    
    
    $
    
    
    
    $
    (487,734
    )
    
    $
    (334,267
    )
  F-5




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
 NOTES TO FINANCIAL STATEMENTS
 MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 1. ORGANIZATION AND BASIS OF PRESENTATION
 a)
    
    Organization
    b)
    
    Basis of Presentation
  F-6




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 1. ORGANIZATION AND BASIS OF PRESENTATION
 b)
    
    Basis of Presentation (Continued)
   2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 a)
    
    Estimates
  b)
    
    Start Up and Development Costs
  c)
    
    Financial Instruments
  d)
    
    Cash
  F-7




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 e)
    
    Comprehensive Income (Loss)
  f)
    
    Development Stage Company
  g)
    
    Research and Development
  h)
    
    Convertible Notes Payable
   F-8




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 h)
    
    Convertible Notes Payable (Continued)
    i)
    
    Foreign Currency Translation
   j)
    
    Net Income (Loss) Per Share
  F-9




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 k)
    
    Revenue Recognition
   i)
    
    sales of private labels upon title transfer on shipment;ii)
    
    advertising revenue straight-line over the term of the advertising term;iii)
    
    commission revenue on a net basis as the Company acts as the broker for the
products originating from the website.
 l)
    
    Advertising Expenses
  m)
    
    Website Development Costs
  F-10




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 n)
    
    Income Taxes
  o)
    
    Segmented Information
   3. NEW ACCOUNTING PRONOUNCEMENTS
  a)
    
    In March 2005, the Emerging Issue Task Force issued EITF Issue 04-6, Accounting for
Stripping Costs in the Mining industry (EITF Issue 04-6) effective for financial
statements issued for the first reporting period in fiscal years beginning after December
15, 2005.b)
    
    In March 2005, the FASB issued Interpretation No. 47 (FIN 47) Accounting for
Conditional Asset Retirement Obligations  an interpretation of FASB Statement No. 143
effective no later than the end of fiscal years ending after December 15, 2005.c)
    
    SFAS No. 151, Inventory Costs  an amendment of ARB No. 43, Chapter 4 effective for
inventory costs incurred during fiscal years beginning after June 15, 2005.d)
    
    SFAS No. 153, Exchanges of Nonmonetary Assets  an amendment of APB Opinion No. 29
effective for nonmonetary asset exchanges occurring in fiscal years beginning after June
15, 2005.
 F-11




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 4. RELATED PARTY TRANSACTIONS
 a)
    
    Due to Related Party
   b)
    
    Non-Cash Services Rendered by Related Parties
   5. CONVERTIBLE NOTES PAYABLE
 a)
    
    The Company entered into a loan agreement on October 11, 2005 in the amount of
$100,000. The loan bears interest at 12% per annum, is due on or before October 11, 2006,
is unsecured, and is convertible at the option of the lender at a price per share equal to
the closing price of the Companys common shares on the Over-The-Counter Bulletin Board
(OTC.BB) market on the day preceding notice from the lender of its intent to convert the
loan.b)
    
    The Company entered into a loan agreement on December 5, 2005 in the amount of
$100,000. The loan bears interest at 12% per annum, is due on or before December 5, 2006,
is unsecured, and is convertible at the option of the lender at a price per share equal to the closing price of the Companys common shares on the OTC.BB market on the day
preceding notice from the lender of its intent to convert the loan.
 F-12




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 5. CONVERTIBLE NOTES PAYABLE
 c)
    
    The Company entered into a loan agreement on February 2, 2006 in the amount of $50,000.
The loan bears interest at 12% per annum, is due on or before February 2, 2007, is
unsecured, and is convertible at the option of the lender at a price per share equal to the
closing price of the Companys common shares on the OTC.BB market on the day preceding
notice from the lender of its intent to convert the loan.d)
    
    The Company entered into a loan agreement on February 22, 2006 in the amount of
$100,000. The loan bears interest at 12% per annum, is due on or before February 22, 2007,
is unsecured, and is convertible at the option of the lender at a price per share equal to
the closing price of the Companys common shares on the OTC.BB market on the day preceding
notice from the lender of its intent to convert the loan.
 6. CAPITAL STOCK
       7. INCOME TAXES
  F-13




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 7. INCOME TAXES
 a)
    
    Income tax provision
  2006
    
    2005Loss for the year
    
    $
    (322,349
    )
    
    $
    (103,604
    )Non-cash services from officers and directors
    
    
    12,000
    
    
    
    24,000Taxable loss for the year
    
    
    (310,349
    )
    
    
    (79,604
    )Computed expected (benefit of) income taxes
    
    
    (105,519
    )
    
    
    (27,065
    )Increase in valuation allowance
    
    
    105,519
    
    
    
    27,065$
    
    
    
    $
    
 b)
    
    Significant components of the Companys deferred income tax assets are as follows:
 2006
    
    2005Total income tax operating loss carry forward
    
    $
    487,734
    
    
    $
    165,385Statutory tax rate
    
    
    34
    %
    
    
    34
    %Deferred income tax asset
    
    
    165,830
    
    
    
    56,231Non-cash services from officers and directors
    
    
    (19,278
    )
    
    
    (15,198
    )Deferred income tax asset
    
    
    146,552
    
    
    
    41,033Valuation allowance
    
    
    (146,552
    )
    
    
    (41,033
    )$
    
    
    
    $
    
 F-14




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 7. INCOME TAXES
 c)
    
    The Company has incurred operating losses of approximately $431,034, which, if
unutilized, will expire through to 2026. Future tax benefits, which may arise as a result
of these losses, have not been recognized in these financial statements, and have been
offset by a valuation allowance. The following table lists the fiscal year in which the
loss was incurred and the expiration date of the operating loss carry forwards:
 Income Tax Operating LossCarry ForwardAmount
    
    
    Expiration Date2002
    
    $
    1,770
    
    
    
    20222003
    
    
    10,584
    
    
    
    20232004
    
    
    28,727
    
    
    
    20242005
    
    
    79,604
    
    
    
    20252006
    
    
    310,349
    
    
    
    2026Total income tax operating loss carry forward
    
    $
    431,034
  8. COMMITMENTS
 a)
    
    The Company entered into a business consulting agreement with Beneficial Designs Inc.
The term of the agreement is for thirteen months commencing October 1, 2005. In
consideration for the marketing and investor relations services provided, the Company will
pay to Beneficial Designs Inc. a fee in the amount of $10,000 per month, payable at the
beginning of each month.b)
    
    The Company entered into a marketing management services agreement with Chorus
Marketing Ltd. The term of the agreement is for one year commencing October 15, 2005. In
consideration for the marketing services provided, the Company will pay a monthly retainer of $5,000 plus any additional expenditures that may be incurred. Payment
is due at the beginning of each month.c)
    
    There is no other commitment or contractual obligation. Rental of the premise is on a
month to month basis.
 F-15




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##### Table of Contents



DIGITAL ECOSYSTEMS CORP.
 (A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2006 AND 2005
(Stated in U.S. Dollars)
 9. SHARE EXCHANGE AGREEMENT
   F-16