UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark One)

[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2006

[_]   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
      FOR THE TRANSITION PERIOD FROM __________ TO __________
      COMMISSION FILE NUMBER ________________________________

                                    DIGICORP
              (Exact name of small business issuer in its charter)

              UTAH                                    87-0398271
              ----                                    ----------
   (State or other jurisdiction of         (I.R.S. Employer Identification No.)
    incorporation or organization)

                  4143 Glencoe Avenue, Marina Del Rey, CA 90292
                 ----------------------------------------------
                    (Address of principal executive offices)

                    Issuer's telephone Number: (310) 728-1450
                                               --------------

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

Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act). Yes [_] No [X]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of August 14, 2006, the issuer had
37,239,002 outstanding shares of Common Stock, $.001 par value.

Transitional Small Business Disclosure Format (check one): Yes [_] No [X]


<PAGE>


                                TABLE OF CONTENTS



                                                                            Page
                         PART I - FINANCIAL INFORMATION

Item 1.       Financial Statements (Unaudited)                                 1
Item 2.       Management's Discussion and Analysis or Plan of Operation       11
Item 3.       Controls and Procedures                                         20

                           PART II - OTHER INFORMATION

Item 1.       Legal Proceedings                                               20
Item 2.       Unregistered Sales of Equity Securities and Use of Proceeds     20
Item 3.       Defaults Upon Senior Securities                                 20
Item 4.       Submission of Matters to a Vote of Security Holders             21
Item 5.       Other Information                                               21
Item 6.       Exhibits                                                        21

SIGNATURES                                                                    23







<PAGE>

                         PART I - FINANCIAL INFORMATION

Item 1.           Financial Statements.

                                DIGICORP
================================================================================

Condensed Consolidated Balance Sheets (Unaudited)

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                        June 30,       December 31,
                                                                          2006             2005
                                                                      -----------      -----------
<S>                                                                   <C>              <C>
ASSETS

CURRENT ASSETS

Cash and cash equivalents                                             $    22,956      $    54,518
Accounts receivable, net                                                   73,630           64,408
Inventories                                                               136,204          130,168
Other current assets                                                      250,417          253,633
                                                                      -----------      -----------

TOTAL CURRENT ASSETS                                                      483,207          502,727

Other long term assets                                                         --           48,922
Property and equipment, net                                               259,533           83,016
Intangible assets, net                                                    922,799          796,256
                                                                      -----------      -----------

TOTAL ASSETS                                                          $ 1,665,539      $ 1,430,921
                                                                      ===========      ===========

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

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable                                                      $   381,424      $   189,095
Accrued liabilities                                                       216,050          128,145
Revolving credit line - related party                                      50,000               --
Note payable - related party                                               73,000           73,000
Deferred revenue                                                           80,211           80,211
                                                                      -----------      -----------

TOTAL CURRENT LIABILITIES                                                 800,685          470,451

LONG TERM LIABILITIES

Convertible note payable - related party                                  556,307          556,307
Debt discount - beneficial conversion feature                            (174,324)        (193,694)
                                                                      -----------      -----------

TOTAL LONG TERM LIABILITIES                                               381,983          362,613

TOTAL LIABILITIES                                                       1,182,668          833,064

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY

Common stock, $0.001 par value: 50,000,000 shares authorized;
    37,239,002 shares issued and outstanding as of June 30, 2006;
    36,737,184 shares issued and outstandingat December 31, 2005           37,239           36,737
Paid-in capital                                                         3,217,078          958,982
Accumulated deficit                                                    (2,771,446)        (397,862)
                                                                      -----------      -----------

TOTAL STOCKHOLDERS' EQUITY                                                482,871          597,857
                                                                      -----------      -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                            $ 1,665,539      $ 1,430,921
                                                                      ===========      ===========
</TABLE>

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

              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.

                                       1
<PAGE>

                                    DIGICORP
================================================================================

Condensed Consolidated Statements of Operations (Unaudited)

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

<TABLE>
<CAPTION>
                                                         Three Months Ended                Six Months Ended
                                                     June 30,         June 30,          June 30,         June 30,
                                                       2006              2005             2006             2005
                                                   ------------     ------------      ------------     ------------
<S>                                                <C>              <C>               <C>              <C>
REVENUE
  Sales                                            $    224,279     $      1,039      $    667,797     $      3,082
  Licensing fees                                             --           41,946                --           80,986
                                                   ------------     ------------      ------------     ------------

  Total revenue                                         224,279           42,985           667,797           84,068

OPERATING EXPENSES
  Cost of sales                                         157,844            7,559           419,132           12,032
  Selling, general and administrative expenses        1,312,094           68,398         2,621,449          128,559
                                                   ------------     ------------      ------------     ------------

  Total operating expenses                            1,469,938           75,957         3,040,581          140,591
                                                   ------------     ------------      ------------     ------------

LOSS BEFORE INCOME TAXES                             (1,245,659)         (32,972)       (2,372,784)          (56,523)

PROVISION FOR INCOME TAXES                                   --               --               800              800
                                                   ------------     ------------      ------------     ------------

NET LOSS                                           $ (1,245,659)    $    (32,972)     $ (2,373,584)     $   (57,323)
                                                   ============     ============      ============     ============

BASIC AND DILUTED NET LOSS PER COMMON SHARE        $      (0.03)    $      (0.00)     $      (0.06)    $      (0.00)
                                                   ============     ============      ============     ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING           37,193,637       15,530,104        37,056,978       15,530,104
                                                   ============     ============      ============     ============
</TABLE>

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

              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                       2
<PAGE>


                                    DIGICORP
================================================================================

Condensed Consolidated Statements of Cash Flows (Unaudited)

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

<TABLE>
<CAPTION>
                                                                                        Six Months Ended
                                                                                    June 30,         June 30,
                                                                                      2006             2005
                                                                                  -----------      -----------
<S>                                                                               <C>              <C>
Cash flows from operating activities:
  Net loss                                                                        $(2,373,584)     $   (57,323)
  Adjustments to reconcile net loss to net cash used in operating activities:
    Depreciation                                                                        3,101              577
    Amortization of licenses                                                           67,056           55,815
    Amortization of debt discount                                                      19,369               --
    Stock-based compensation to employees and directors                             1,669,077               --
    Stock-based compensation to consultants                                             4,121               --
    Changes in operating assets and liabilities:
      Accounts receivable                                                              (9,222)          (2,455)
      Inventories                                                                      (6,036)          (3,419)
      Other current assets                                                             33,216           (1,364)
      Other long term assets                                                           48,922               --
      Accounts payable and accrued liabilities                                        280,234           (5,177)
      Deferred revenue                                                                     --          (80,986)
                                                                                  -----------      -----------

    Net cash used in operating activities                                            (263,746)         (94,332)
                                                                                  -----------      -----------

Cash flows from investing activities:
  Purchases of licenses and developed content                                        (128,599)        (302,500)
  Proceeds from disposal of licenses                                                   65,000               --
  Purchases of property and equipment                                                 (27,617)          (5,253)
                                                                                  -----------      -----------

    Net cash used in investing activities                                             (91,216)        (307,753)
                                                                                  -----------      -----------

Cash flows from financing activities:
  Proceeds from issuance of common stock                                              273,400               50
  Proceeds from revolving credit line - related party                                  50,000               --
  Proceeds from related party note                                                         --          400,108
                                                                                  -----------      -----------

    Net cash provided by financing activities                                         323,400          400,158
                                                                                  -----------      -----------

Net decrease in cash and cash equivalents                                             (31,562)          (1,927)

Cash and cash equivalents at beginning of period                                       54,518            7,856
                                                                                  -----------      -----------

Cash and cash equivalents at end of period                                        $    22,956      $     5,929
                                                                                  ===========      ===========

  Supplemental disclosures of cash flow information:

         Income taxes                                                             $     1,200      $        --
         Interest paid                                                            $        --      $        --

  Non-cash investing and financing activity:

         Acquisition of intangible assets for common stock                        $   160,000      $        --
         Acquisition of fixed assets for common stock                             $   152,000      $        --
</TABLE>

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

              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.


                                       3
<PAGE>


DIGICORP
Notes to Condensed Consolidated Financial Statements - Unaudited
June 30, 2006

1.    DESCRIPTION OF BUSINESS

Digicorp  ("the  Company") was organized  under the laws of the State of Utah on
July  19,  1983.  On July 1,  1995,  the  Company  became  a  development  stage
enterprise as defined in Statements of Financial  Accounting  Standards ("SFAS")
No. 7 when it sold its assets and changed its  business  plan.  On December  29,
2005, the Company ceased being a development  stage  enterprise when it acquired
all of the issued and  outstanding  capital  stock of Rebel Crew Films,  Inc., a
California  corporation  ("Rebel  Crew  Films"),  pursuant  to a reverse  merger
transaction (see note 4).

Rebel Crew Films operates as a wholly-owned operating subsidiary of the Company.
Rebel  Crew Films was  organized  under the laws of the State of  California  on
August 7, 2002 to  distribute  Latino home  entertainment  products.  Rebel Crew
Films distributes Spanish language films and serves wholesale,  retail, catalog,
and e-commerce  accounts.  Rebel Crew Film's titles can be found at major retail
outlets and  independent  video outlets  across the United States of America and
Canada.

The Company,  including its operating subsidiary,  generated revenue through the
direct sales of licensed  content and  licensing  agreements  with third parties
that distributed the Company's  licensed  content.  The Company is expanding its
sales  force to focus on direct  sales of its  licensed  content  and intends to
significantly  reduce  or  eliminate  future  licensing  agreements  with  third
parties.

The Company is organized in a single  operating  segment.  All of the  Company's
revenues are generated in the United  States,  and the Company has no long-lived
assets outside the United States.

2.    BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying  condensed consolidated financial statements do not include all
the  information  and disclosures  required by accounting  principles  generally
accepted  in  the  United  States  of  America.  The  preparation  of  financial
statements in conformity with accounting  principles  generally  accepted in the
U.S.  requires  management  to make  estimates and  assumptions  that affect the
amounts reported in the financial  statements and accompanying notes. The actual
results may differ from management's estimates.

The interim  condensed  consolidated  financial  information  is unaudited,  but
reflects  all  normal  adjustments  that  are,  in the  opinion  of  management,
necessary  to  provide a fair  statement  of  results  for the  interim  periods
presented. The condensed consolidated balance sheet as of December 31, 2005, was
derived from the Company's audited financial  statements.  Operating results for
the interim periods  presented are not necessarily  indicative of the results to
be expected for the fiscal year ending December 31, 2006. The condensed  interim
consolidated  financial  statements  should  be  read  in  connection  with  the
Company's audited financial statements for the year ended December 31, 2005.

Principles of Consolidation

The  accompanying   condensed  consolidated  financial  statements  include  the
accounts of the Company and its wholly-owned  subsidiary,  Rebel Crew Films. All
significant  intercompany  accounts and  transactions  have been  eliminated  in
consolidation.


                                       4
<PAGE>


DIGICORP
Notes to Condensed Consolidated Financial Statements - Unaudited (continued)
June 30, 2006

Going Concern

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern which  contemplates  the realization of
assets and satisfaction of liabilities in the normal course of business. At June
30, 2006, the Company has an accumulated  deficit of approximately  $2.8 million
and a working  capital  deficit of $317,000,  which includes a deferred  revenue
balance of $80,000,  as  discussed  below.  During the six months ended June 30,
2006, the Company incurred a loss of approximately $2.4 million.  During the six
months ended June 30, 2006, the Company primarily relied upon revenues generated
from the direct sales of its Latino home  entertainment  content and on debt and
equity  investments to fund its operations.  These conditions raise  substantial
doubt about the Company's ability to continue as a going concern.  Management is
currently seeking additional  financing and believes,  however no assurances can
be made, that these avenues will continue to be available to the Company to fund
its  operations.  The  accompanying  financial  statements  do not  include  any
adjustments that might result from the outcome of this uncertainty.

Recent Accounting Pronouncements

In June 2006, the Financial  Accounting  Standards  Board  ("FASB")  issued FASB
Interpretation  Number  48 ("FIN  48"),  Accounting  for  Uncertainty  in Income
Taxes--an  interpretation of FASB Statement No. 109. The interpretation contains
a two step  approach  to  recognizing  and  measuring  uncertain  tax  positions
accounted for in accordance with SFAS No. 109. The first step is to evaluate the
tax position for recognition by determining if the weight of available  evidence
indicates  it is more likely than not that the  position  will be  sustained  on
audit, including resolution of related appeals or litigation processes,  if any.
The second step is to measure the tax  benefit as the  largest  amount  which is
more than 50% likely of being realized upon ultimate  settlement.  Effective for
the Company beginning January 1, 2007, FIN 48 is not expected to have any impact
on the Company's financial position, results of operations or cash flows.

3.    ACCOUNTS RECEIVABLE

Accounts receivable are recorded at the invoice amount and do not bear interest.
Accounts  receivable at June 30, 2006 and December 31, 2005 are presented net of
an allowance for doubtful accounts of $25,000 and $15,000, respectively.

4.    RECAPITALIZATION

On December 29, 2005, the Company completed the acquisition of Rebel Crew Films.
Pursuant  to the stock  purchase  agreement,  the  Company  acquired  all of the
outstanding  equity  stock  of  Rebel  Crew  Films  from the  Rebel  Crew  Films
Shareholders.  As consideration  for the acquisition the Company agreed to issue
21,207,080  shares of the Company's  common stock (the "Purchase  Price") to the
shareholders of Rebel Crew Films.

Following  completion of the  acquisition  the Company's  previous  shareholders
owned  15,530,104  common  shares  and  Rebel  Crew  Films   shareholders  owned
21,207,080,  or approximately  57.7% of the outstanding  shares of the Company's
common stock.  For  accounting  purposes the  transaction  is considered to be a
recapitalization  where Digicorp is the surviving  legal entity,  and Rebel Crew
Films is considered to be the accounting acquirer.  Accordingly,  the historical
financial  statements  prior to December 29, 2005 are those of Rebel Crew Films.
Following the acquisition,  Digicorp changed its fiscal year end from June 30 to
December 31.


                                       5
<PAGE>


DIGICORP
Notes to Condensed Consolidated Financial Statements - Unaudited (continued)
June 30, 2006

5.    OTHER CURRENT ASSETS

The  Company  has  an  agreement  with  Sichenzia  Ross  Friedman   Ference  LLP
("Sichenzia") for legal  representation  that extends through March 31, 2007. In
consideration  for  Sichenzia's  services,  the Company agreed to a fixed fee of
$50,000 and to issue Sichenzia 500,000 shares of the Company's common stock. The
common stock issued to Sichenzia  was valued at $325,000 and is being  amortized
over the term of the  agreement.  At June 30, 2006, the  unamortized  balance is
$147,000 and is included in other current assets. The remaining balance recorded
in other current  assets  relates to an amount due the Company for  reimbursable
expenses  from a related  party of $21,000,  a  receivable  from the disposal of
certain licenses of $30,000, security deposits of $31,000, and other items which
amount to $21,000.

6.    INTANGIBLE ASSETS

Intangible  assets consist of capitalized  license fees for licensed content the
Company  acquired from owners including  producers,  studios and distributors as
well as the Company's  iCodemedia and Perreoradio suite of websites and internet
properties and all related intellectual property (the "iCodemedia Assets").

The  Perreoradio  suite of websites  consists of the following  Internet  domain
names  and  all  materials,  intellectual  property,  goodwill  and  records  in
connection  therewith:   Perreoradio.com,   Radioperreo.com,   Perreomobile.com,
Perreotv.com,     Puroperreo.com,     Puroreggaeton.com,     Purosandungueo.com,
Sandungueoradio.com,  Machetemusic.net,  Machetemusic.org, Machetemusica.com and
Musicamachete.com.  As  consideration  for the Perreoradio  Assets,  the Company
issued an aggregate of 100,000 shares of its common stock valued at $160,000.

The iCodemedia  suite of websites  consists of the websites  www.icodemedia.com,
www.iplaylist.com, www.tunecast.com, www.tunebucks.com,  www.podpresskit.com and
www.tunespromo.com. The Company intends to use these websites to provide a suite
of applications  and services to enable content  creators to publish and deliver
content to existing  and next  generation  devices.  The  iCodemedia  Assets are
presently under  development.  As consideration for the iCodemedia  Assets,  the
Company issued 1,000,000 shares of its common stock valued at $300,000.

The  Perreoradio  and  iCodemedia  Assets were  determined to have an indefinite
useful life based primarily on the renewability of the proprietary domain names.
Intangible  assets with an indefinite life are not subject to amortization,  but
will be subject to periodic evaluation for impairment

Licensed  content  acquired is capitalized at the time of purchase.  The term of
the  licensed  content  agreements  usually  vary between one to five years (the
"Title  Term").  At the end of the Title  Term,  the Company  generally  has the
option of discontinuing distribution of the title or extending the Title Term.

The Company  amortizes  the  capitalized  license fees, on a straight line basis
over the  Title  Term.  During  the six  months  ended  June 30,  2006 and 2005,
amortization  expense  related to the licensed  content was $67,000 and $56,000,
respectively.


                                       6
<PAGE>


DIGICORP
Notes to Condensed Consolidated Financial Statements - Unaudited (continued)
June 30, 2006

Intangible assets and accumulated amortization at June 30, 2006 and December 31,
2005 are comprised of the following:


                                     June 30,      December 31,
                                      2006            2005

iCodemedia Assets                $    300,000    $    300,000
Perreoradio Assets                    160,000            --
Licensed and developed
content                               719,599         686,000
Less: accumulated
amortization                         (256,800)       (189,744)
                                 ------------    ------------

  Intangible assets, net         $    922,799    $    796,256
                                 ============    ============

7.    INCOME (LOSS) PER COMMON SHARE

Income (loss) per common share is based on the weighted average number of common
shares  outstanding.  The  Company  complies  with SFAS No. 128,  "Earnings  Per
Share," which requires dual presentation of basic and diluted earnings per share
on the face of the  statements of  operations.  Basic per share earnings or loss
excludes  dilution and is computed by dividing income (loss) available to common
stockholders by the  weighted-average  common shares outstanding for the period.
Diluted per share  earnings or loss reflects the  potential  dilution that could
occur if convertible preferred stock or debentures, options and warrants were to
be exercised or converted or otherwise  resulted in the issuance of common stock
that then shared in the earnings of the entity.

Options and warrants  issued pursuant to our Stock Option Plan and warrants that
were issued outside our Stock Option Plan which were  outstanding as of June 30,
2006 to purchase 8,762,500 and 550,000 shares of common stock, respectively, and
500,000 shares issuable upon conversion of an outstanding  convertible note were
not  included in the  computation  of diluted net loss per common  share for the
three and six months ended June 30,  2006,  as their  inclusion  would have been
antidilutive.  At June 30, 2005 there were no outstanding  options,  warrants or
convertible notes.

8.    ACCRUED LIABILITIES

Accrued  liabilities at June 30, 2006 and December 31, 2005 are comprised of the
following:

                                   June 30,     December 31,
                                     2006           2005
                                 ------------   ------------
Obligations on license
   agreements                    $     86,100   $     58,500
Accrued salaries                      112,500         37,500
Accrued professional fees                --           29,000
Accrued interest                       15,105           --
Income taxes payable                     --              800
Other                                   2,345          2,345
                                 ------------   ------------
                                 $    216,050   $    128,145
                                 ============   ============


                                       7
<PAGE>


DIGICORP
Notes to Condensed Consolidated Financial Statements - Unaudited (continued)
June 30, 2006

9.    CONVERTIBLE NOTE PAYABLE - RELATED PARTY

In connection with the acquisition of Rebel Crew Films on December 29, 2005, the
Company  entered  into  a  Securities   Purchase   Agreement  with  one  of  the
shareholders  of Rebel Crew Films,  Rebel  Holdings,  LLC, a California  limited
liability company ("Rebel Holdings"),  pursuant to which the Company purchased a
$556,000  principal  amount  loan  receivable  owed by Rebel Crew Films to Rebel
Holdings,  LLC in  exchange  for the  issuance  of a $556,000  principal  amount
secured  convertible note to Rebel Holdings,  LLC. The secured  convertible note
accrues simple interest at the rate of 4.5%, matures on December 29, 2010 and is
secured by all of the  Company's  assets now owned or  hereafter  acquired.  The
secured  convertible  note is  convertible  into 500,000 shares of the Company's
common stock at the rate of $1.112614 per share. Jay Rifkin, the Company's Chief
Executive Officer and a director, is the sole managing member of Rebel Holdings,
LLC.

As the effective  conversion price of the note on the date of issuance was below
the fair market value of the underlying  common stock, the Company recorded debt
discount  in the  amount  of  $194,000  based  on  the  intrinsic  value  of the
beneficial  conversion  feature of the note.  The debt  discount  recorded  as a
result of the  beneficial  conversion  feature  will be  amortized  as  non-cash
interest  expense  over the term of the debt.  During  the three and six  months
ended June 30, 2006, interest expense of $19,000 and $10,000,  respectively, has
been recorded from the debt discount amortization,  and as of June 30, 2006, the
remaining  debt  discount  balance  attributable  to the  beneficial  conversion
feature was $174,000.

10.   REVOLVING LINE OF CREDIT AGREEMENT - RELATED PARTY

Revolving Line of Credit Agreement

Effective  March 23, 2006 the Company  entered  into a Revolving  Line of Credit
Agreement (the "Revolving  Line of Credit") with Ault Glazer Bodnar  Acquisition
Fund,  LLC ("AGB  Acquisition  Fund").  The Revolving  Line of Credit allows the
Company to request  advances  totaling an aggregate  of up to $150,000  from AGB
Acquisition  Fund.  The initial  term of the  Revolving  Line of Credit is for a
period of six months and may be extended  for one or more  additional  six-month
periods upon mutual agreement of the parties.  At June 30, 2006, the Company had
borrowed  $50,000  against the  Revolving  Line of Credit and incurred  interest
expense  of $600.  The  Company's  Chief  Financial  Officer  is also the  Chief
Financial Officer of AGB Acquisition Fund.

11.   STOCK BASED COMPENSATION

Effective July 20, 2005, the Board of Directors of the Company approved the 2005
Stock Option and  Restricted  Stock Plan (the "2005  Plan").  The Plan  reserves
15,000,000  shares  of common  stock for  grants  of  incentive  stock  options,
nonqualified  stock options,  warrants and restricted stock awards to employees,
non-employee  directors  and  consultants  performing  services for the Company.
Options and warrants  granted under the Plan have an exercise  price equal to or
greater than the fair market value of the underlying common stock at the date of
grant and become exercisable based on a vesting schedule  determined at the date
of grant.  The options  expire 10 years from the date of grant whereas  warrants
generally expire 5 years from the date of grant. Restricted stock awards granted
under the Plan are subject to a vesting period determined at the date of grant.

The Company accounts for stock-based  compensation awards in accordance with the
provisions  of  SFAS  No.  123(R),  Share-Based  Payment,  which  addresses  the
accounting for employee stock options. SFAS 123(R) requires that the cost of all
employee stock options, as well as other equity-based compensation arrangements,
be reflected in the financial  statements  over the vesting  period based on the
estimated  fair value of the  awards.  The  Company  adopted  SFAS  123(R) as of
January 1, 2005.  Prior to the  adoption  date,  there were no stock  options or
other equity-based compensation awards outstanding.


                                       8
<PAGE>


DIGICORP
Notes to Condensed Consolidated Financial Statements - Unaudited (continued)
June 30, 2006

A summary of stock  option  activity  for the six months  ended June 30, 2006 is
presented below:

<TABLE>
<CAPTION>
                                                                   Outstanding Options
                                                                                           Weighted
                                                                         Weighted           Average
                                     Shares                               Average          Remaining
                                    Available          Number of         Exercise         Contractual
                                    for Grant           Shares             Price          Life (years)
                                 ---------------    ---------------   ---------------   ---------------
<S>                              <C>                <C>               <C>               <C>
December 31, 2005                      6,687,500          8,312,500   $          0.75              8.64
   Grants                               (450,000)           450,000   $          1.54              9.08

June 30, 2006                          6,237,500          8,762,500   $          0.79              8.23
                                 ---------------    ---------------   ---------------   ---------------
Options exercisable at:
 December 31, 2005                                        2,137,500   $          0.25              5.34
 June 30, 2006                                            2,141,667   $          0.25              4.84
</TABLE>


All outstanding  stock-based  compensation awards were granted by the Company at
the per share fair market value on the grant date. The fair value of each option
grant is estimated on the date of grant using the  Black-Scholes  option-pricing
model.  For  options  granted  during the six months  ended June 30,  2006,  the
following assumptions were used: volatility 143% to 155%; expected life 5 years;
risk-free interest rate 3.75%; dividend yield 0%.

During the three and six months  ended June 30,  2006  stock-based  compensation
totaling $778,000 and $1,669,000,  respectively, was recorded by the Company. As
of June 30, 2006, total unrecognized compensation cost related to unvested stock
options was $3,606,000.

12.   EQUITY TRANSACTIONS

During  February  2006, the Company  entered into a Subscription  Agreement with
several accredited  investors,  relating to the issuance and sale by the Company
of shares of its  common  stock  (the  "Shares").  The  Company  received  gross
proceeds of $235,000 from the issuance of 213,636 Shares at a price of $1.10 per
share.

During April 2006, the Company  entered into a  Subscription  Agreement with its
Chief  Financial  Officer  relating to the  issuance  and sale by the Company of
shares of its common stock.  The Company received gross proceeds of $55,000 from
the issuance of 50,000 Shares at a price of $1.10 per share.

On April 24,  2006,  the  Company  purchased  a  software  application  known as
ITunesBucks  and  its  associated  assets  therewith  (the  "Assets")  from  EAI
Technologies,  LLC, a Virginia corporation. As consideration for the Assets, the
Company  issued EAI  Technologies  an aggregate of 138,182  shares of its common
stock. The cost of the software application,  which was valued at $152,000,  was
recorded as capitalized  software.  Capitalized software is depreciated over its
estimated useful life when development is complete.

13.   WARRANTS

During 2005, the Company issued a total of 550,000  warrants to purchase  shares
of common stock at prices ranging from $0.145 to $0.65 per share to consultants.
No warrants,  other than  warrants  that were issued  pursuant to the 2005 Plan,
were issued by the Company during the six months ended June 30, 2006.


                                       9
<PAGE>


DIGICORP
Notes to Condensed Consolidated Financial Statements - Unaudited (continued)
June 30, 2006

The following table summarizes information about common stock warrants
outstanding at June 30, 2006:

<TABLE>
<CAPTION>
                        Outstanding                                                Exercisable
---------------------------------------------------------------------   ---------------------------------
                                       Weighted
                                        Average
                                       Remaining         Weighted                            Weighted
  Exercise            Number          Contractual         Average           Number            Average
    Price          Outstanding        Life (Years)    Exercise Price      Exercisable     Exercise Price
---------------   ---------------   ---------------   ---------------   ---------------   ---------------
<C>               <C>               <C>               <C>               <C>               <C>
$ 0.10 - 0.25             250,000              5.00   $         0.145           250,000   $         0.145

$ 0.50 - 0.75             300,000              4.75              0.65           300,000              0.65
---------------   ---------------   ---------------   ---------------   ---------------   ---------------

$ 0.10 - 0.75             550,000              4.86   $          0.42           550,000   $          0.42
===============   ===============   ===============   ===============   ===============   ===============
</TABLE>


14.   RELATED PARTY TRANSACTIONS

At June 30, 2006 and  December  31, 2005 the Company has a liability  of $73,000
due to the sole member of Rebel Holdings,  LLC, a California  limited  liability
company  ("Rebel  Holdings"),  an  entity  whose  sole  managing  member  is the
Company's  Chief  Executive   Officer  that  owned   approximately  52%  of  the
outstanding shares of the Company's common stock at June 30, 2006. In connection
with the  borrowings,  the  Company  issued a  promissory  note in the amount of
$73,000 to the member (the "Note") on December 29,  2005.  The monies  loaned by
the member to the Company were utilized to pay for certain  capitalized  license
agreements  and  operating  expenses  of the  Company.  The  Note  has a term of
approximately six months and bears 5.0% simple interest.

Other current  assets at June 30, 2006  includes  $21,000 owed to the Company by
Ault Glazer Bodnar & Company,  Inc.  ("AGB & Company")  based on an agreement to
reimburse the Company for salaries paid in connection with the  recapitalization
of the  Company.  The  Company's  Chief  Financial  Officer  is also  the  Chief
Financial Officer of AGB & Company.

15.   SUBSEQUENT EVENTS

On July 13, 2006, William Horne, the Company's Chief Financial  Officer,  loaned
the Company $5,000.  As consideration for the loan, the Company issued Mr. Horne
a demand promissory note at a rate equal to the prime rate published in The Wall
Street Journal from time to time to the date of payment in full.

From July 14, 2006 through August 16, 2006, Jay Rifkin,  the Company's  Chairman
and  Chief  Executive  Officer,  loaned  the  Company  a total of  $135,000.  As
consideration  for the loans,  the Company  issued Mr. Rifkin demand  promissory
notes at a rate equal to the prime rate  published  in The Wall  Street  Journal
from time to time to the date of payment in full.


                                       10
<PAGE>


Item  2. Management's Discussion and Analysis or Plan of Operation.

      The  following  discussion  and analysis of our  financial  condition  and
results  of  operations  should  be  read  in  conjunction  with  our  financial
statements  and the  related  notes  thereto  contained  elsewhere  in this Form
10-QSB. This discussion contains  forward-looking  statements that involve risks
and uncertainties.  All statements regarding future events, our future financial
performance and operating results, our business strategy and our financing plans
are forward-looking  statements. In many cases, you can identify forward-looking
statements  by  terminology,  such as  "may,"  "should,"  "expects,"  "intends,"
"plans," "anticipates,"  "believes,"  "estimates,"  "predicts,"  "potential," or
"continue" or the negative of such terms and other comparable terminology. These
statements  are only  predictions.  Known and unknown risks,  uncertainties  and
other factors  could cause our actual  results to differ  materially  from those
projected in any forward-looking statements. In evaluating these statements, you
should  specifically  consider various factors,  including,  but not limited to,
those set forth under "Risk Factors"  appearing at the end of this  Management's
Discussion and Analysis ("MD&A").

      The following  "Overview"  section is a brief  summary of the  significant
issues addressed in this MD&A.  Investors  should read the relevant  sections of
the MD&A for a complete  discussion of the issues  summarized  below. The entire
MD&A should be read in conjunction with Item 1. Financial Statements.

OVERVIEW

      On June 30, 1995, Digicorp, a Utah corporation, (referred to herein as the
"Company," "we," "us," and "our") became a development  stage enterprise when we
sold our  assets.  Until  September  19,  2005 we had no  operations  other than
issuing  shares of common  stock for  financing  the  preparation  of  financial
statements and for preparing filings for the SEC.

      On September 19, 2005, we entered into an asset  purchase  agreement  with
Philip Gatch, our Chief Technology  Officer,  and thereby completed the purchase
of certain assets from Mr. Gatch  consisting of the iCodemedia suite of websites
and internet properties and all related  intellectual  property (the "iCodemedia
Assets").   The   iCodemedia   suite  of  websites   consists  of  the  websites
www.icodemedia.com,   www.iplaylist.com,   www.tunecast.com,  www.tunebucks.com,
www.podpresskit.com and www.tunespromo.com.

      On  December  29,  2005,  we  acquired  all of the issued and  outstanding
capital  stock  of  Rebel  Crew  Films  in  consideration  for the  issuance  of
21,207,080 shares of common stock to the shareholders of Rebel Crew Films. Rebel
Crew Films was organized  under the laws of the State of California on August 7,
2002  to  distribute  Latino  home  entertainment  products.  Rebel  Crew  Films
currently maintains  approximately 300 Spanish language films and plans to serve
the nation's largest wholesale, retail, catalog, and e-commerce accounts.

      On February 7, 2006, we entered into an asset purchase  agreement pursuant
to which we purchased the  following  Internet  domain names and all  materials,
intellectual  property,  goodwill  and  records  in  connection  therewith  (the
"Perreoradio  Assets"):  Perreoradio.com,   Radioperreo.com,   Perreomobile.com,
Perreotv.com,     Puroperreo.com,     Puroreggaeton.com,     Purosandungueo.com,
Sandungueoradio.com,  Machetemusic.net,  Machetemusic.org, Machetemusica.com and
Musicamachete.com.

      We are  primarily  engaged in the business of  developing,  marketing  and
distributing programming content, multi-media technologies,  and advertising via
the  internet.  We  expect  that we will  expand  our  advertising  to video and
music-on-demand  ("VOD"),  and other  alternative  music  and video  programming
formats in the United  States and  internationally.  We will focus a significant
amount of our available  resources to obtain the exclusive  distribution  rights
for   additional   content   through   development,   acquisition  or  licensing
arrangements.

      We currently generate the majority our revenue through direct sales of our
film  content.  In the  past we  generated  the  majority  of our  revenue  from
licensing  agreements  which  consisted  of three to  five-year  contracts  that
carried a 15% - 50% royalty on gross sales of licensed product. We are currently
expanding  our sales force to focus on direct sales of our licensed  content and
expect to see a  significant  shift in revenues,  which have  historically  been
predominately from licensing agreements, to direct sales.


                                       11
<PAGE>


      Our primary  operations are conducted through our wholly owned subsidiary:
Rebel Crew Films,  Inc. In addition,  we have focused and will continue to focus
development efforts in our Perreoradio and iCodemedia Assets.

      Our goal is to become a leading  distributor of Latino home  entertainment
products.  Our products are developed to target Spanish  speaking  consumers who
increasingly  demand new Latino content and classic Spanish language movies.  We
offer producers and  content-providers a flexible option to the larger Hollywood
studio  distributors  and have emerged as a company that attracts  premiere home
entertainment products.

      We currently  maintain and distribute  approximately  300 Spanish language
films. Our titles can be found at Wal-Mart,  Best Buy, Blockbuster,  K-Mart, and
hundreds of  independent  video outlets  across the United States of America and
Canada. Our diverse programming includes: new releases,  classic Mexican cinema,
animation, cult, sports, martial arts, family entertainment, and more.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

      The below  discussion and analysis of our financial  condition and results
of  operations  is  based  upon  the  accompanying  financial  statements.   The
preparation of financial  statements in conformity  with  accounting  principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements.  Critical  accounting  policies are those that are both important to
the  presentation  of our  financial  condition  and results of  operations  and
require management's most difficult,  complex, or subjective judgments. Our most
critical  accounting  policies  relate  to  the  determination  of  stock  based
compensation,  revenue  recognition  and the  assessment  of  impairment  of our
intangible assets.

Stock-Based Compensation

      The Company  accounts for  stock-based  compensation  awards in accordance
with the provisions of SFAS No. 123(R), Share-Based Payment, which addresses the
accounting  for  employee  stock  options.  SFAS 123(R)  revises the  disclosure
provisions of SFAS 123 and supercedes  APB Opinion No. 25. SFAS 123(R)  requires
that the  cost of all  employee  stock  options,  as well as other  equity-based
compensation  arrangements,  be reflected in the financial  statements  over the
vesting period based on the estimated  fair value of the awards.  This statement
is effective for the Company as of the  beginning of the first annual  reporting
period that begins  after June 15, 2005.  The Company  adopted SFAS 123(R) as of
January 1, 2005.

Revenue Recognition

      The Company  generates revenue through either the direct sales of licensed
content or through  licensing  agreements  whereby the Company  receives advance
payments as  consideration  for rights granted to third parties that  distribute
the  Company's  licensed  content.  Revenues from direct sales are recorded upon
shipment.  Advance  payments  received under licensing  agreements are initially
recorded as deferred revenue. The Company recognizes revenue under its licensing
agreements  as  royalties  are  earned  upon  shipment  of  licensed  content to
customers by the sub-licensor. The Company may be entitled to receive additional
royalty  payments  under the licensing  agreements,  but only to the extent that
royalties  calculated  under the terms of the  licensing  agreements  exceed the
amount of the advance payments.

Intangible Assets

      The Company  accounts for  intangible  assets in accordance  with SFAS No.
142,  "Goodwill and Other  Intangible  Assets",  which  provides  accounting and
reporting standards for acquired intangible assets. Under SFAS No. 142, goodwill
and other intangible assets with indefinite useful lives are no longer amortized
but tested  for  impairment  at least  annually.  The  Company  will  perform an
impairment  test on all  intangible  assets,  in  accordance  with the  guidance
provided  by SFAS  No.  144,  "Accounting  for the  Impairment  of  Disposal  of
Long-Lived Assets", at least annually,  unless events and circumstances indicate
that such assets might be impaired.


                                       12
<PAGE>


LIQUIDITY AND CAPITAL RESOURCES

      Our total assets were  $1,666,000  at June 30, 2006 versus  $1,431,000  at
December 31,  2005.  The change in total  assets is  primarily  attributable  to
increases  in property  and  equipment  of  $177,000  and  intangible  assets of
$127,000.

      The increase in property and  equipment  is  primarily  attributed  to our
April 24, 2006, purchase of a software  application known as ITunesBucks and its
associated assets therewith (the "Assets") from EAI Technologies, LLC, ("EAI") a
Virginia  corporation.  As  consideration  for  the  Assets,  we  issued  EAI an
aggregate of 138,182 shares of our common stock valued at $152,000.  Such amount
represented  both the cost to develop  ITunesBucks as well as the April 24, 2006
closing  price of our common stock,  $1.10 per common share,  as reported on OTC
Bulletin Board.

      The  increase  in  intangible  assets  is due to both the  acquisition  of
additional  licensed content as well as our acquisition of the Perreoradio suite
of websites.  During the six months ended June 30, 2006, we acquired  additional
licensed  content for  $110,000  and produced our first music video for $18,000.
These increases were offset by the  amortization of our licensed  content in the
amount of  $67,000  and the  disposal  of  certain  licenses  for an  additional
$95,000.  As  consideration  for  assets  acquired  in  the  acquisition  of the
Perreoradio  suite of websites,  we issued an aggregate of 100,000 shares of our
common stock valued at $160,000.  The Perreoradio assets were determined to have
an indefinite useful life based primarily on the renewability of the proprietary
domain  names.  Intangible  assets  with an  indefinite  life are not subject to
amortization, but will be subject to periodic evaluation for impairment

      We had a working capital deficit of $317,000 at June 30, 2006 and we
continue to have recurring losses. In the past we have primarily relied upon
loans from related parties to fund our operations and, to a lesser extent,
revenues generated from licensing our film content, on a non-exclusive basis, to
other distributors of Latino home entertainment content. We believe that future
revenues combined with either loans or direct equity investments into the
Company will be sufficient to fund our operations for the 12 months subsequent
to June 30, 2006. We expect to undertake additional debt and equity financings
to better enable us to grow and meet our future operating and capital
requirements, however, there is no assurance that we will be successful in
obtaining the necessary level of funding. On April 26, 2006 we entered into a
placement agent agreement with Ault Glazer Bodnar Securities LLC ("AGB
Securities") to assist us in raising additional debt and equity financings. We
engaged AGB Securities as our non-exclusive placement agent in connection with a
proposed best efforts private placement of up to $3 million of our common stock
to prospective accredited investors. The placement agent agreement was to expire
on September 30, 2006. On July 12, 2006, we were notified by AGB Securities that
it had terminated its placement agent agreement with the Company. From July 13,
2006 through August 16, 2006, as a result of the absence of any funds being
received through our placement agent agreement with AGB Securities, a series of
loans totaling $140,000 were made to us primarily from Jay Rifkin, our Chairman
and Chief Executive Officer. As consideration for the loans, we have issued
demand promissory notes at a rate equal to the prime rate published in The Wall
Street Journal from time to time to the date of payment in full. We cannot
guarantee that Mr. Rifkin would be willing to further invest in the Company and
if we are unable to secure additional sources of financing our operations would
be negatively materially impacted.

      During the three  months ended June 30,  2006,  the only equity  financing
that we  entered  into was a  Subscription  Agreement  with our Chief  Financial
Officer in April 2006 relating to the issuance and sale of our common stock.  We
received gross proceeds of $55,000 from the issuance of 50,000 shares at a price
of $1.10 per share. During the three months ended March 31, 2006 we entered into
subscription  agreements with unrelated accredited investors,  pursuant to which
we sold a total of 213,636  shares of our  common  stock at a price of $1.10 per
share.  We  received  gross  proceeds  of  $235,000  from the sale of the stock.
Additionally,  on March 23,  2006,  we entered  into a Revolving  Line of Credit
Agreement (the "Revolving  Line of Credit") with Ault Glazer Bodnar  Acquisition
Fund, LLC ("AGB  Acquisition  Fund").  The Revolving Line of Credit allows us to
request  advances  totaling an aggregate of up to $150,000 from AGB  Acquisition
Fund.  The initial term of the  Revolving  Line of Credit is for a period of six
months and may be extended  for one or more  additional  six-month  periods upon
mutual  agreement of the  parties.  At June 30,  2006,  we had borrowed  $50,000
against the Revolving Line of Credit.


                                       13
<PAGE>


      Operating  activities  used  $264,000 of cash during the six months  ended
June 30, 2006,  compared to using  $94,000  during the six months ended June 30,
2005.

      Cash used in investing  activities  for the six months ended June 30, 2006
and 2005 of $91,000,  and $308,000,  respectively,  resulted  primarily from the
purchases of licensed Spanish language film content that was capitalized. During
the six months ended June 30, 2006,  purchases of licensed Spanish language film
content was partially offset by proceeds of $65,000 from the disposal of certain
licenses.


RESULTS OF OPERATIONS

REVENUES

      We  generated  revenues of  $224,000  and  $668,000  for the three and six
months ended June 30, 2006,  respectively,  as compared with revenues of $43,000
and  $84,000  for the three and six months  ended June 30,  2005,  respectively.
During the three and six months  ended June 30, 2005 almost all of our  revenues
were generated through licensing  agreements.  The licensing  agreements provide
for us to receive advance payments as consideration  for rights granted to third
parties that distribute our licensed content. The advance payments are initially
recorded as deferred revenue and subsequently  recognized in income as royalties
are earned upon shipment of licensed  content to customers by the  sub-licensor.
Deferred  revenue  balances  of $80,000 at June 30, 2006 and  December  31, 2005
represent  advance  royalty  payments  that are  expected  to be earned over the
subsequent twelve month periods.

      During the three and six months ended June 30, 2006,  we did not recognize
any  licensing  revenue.  All of our $224,000  and  $668,000,  respectively,  in
revenue  represents  revenue  generated through the direct sales of our licensed
content.  We expect that direct sales,  as a percentage of total  revenue,  will
comprise the majority of revenues over the next year as we continue to focus our
efforts on expanding  our sales force.  Further,  we anticipate  that  licensing
revenues will significantly be reduced or eliminated in future years as we shift
our focus away from licensing agreements with third parties.

EXPENSES

      Operating expenses, which were $3,041,000 during the six months ended June
30, 2006 as compared  with  $141,000  during the six months ended June 30, 2005,
reflected  an increase of  $2,900,000.  A  significant  component of the overall
increase  that occurred in operating  expenses  during the six months ended June
30,  2006,  related to cost of sales of  $419,000,  an increase in salaries  and
employee benefits of $398,000 and stock based  compensation  expense from grants
of  nonqualified  stock options to our employees and  non-employee  directors of
$1,669,000 and. All outstanding stock-based  compensation awards were granted by
us at the per share fair market value on the grant date.  The fair value of each
option  grant  is  estimated  on the  date  of  grant  using  the  Black-Scholes
option-pricing  model.  For options granted during the six months ended June 30,
2006, the following  assumptions  were used:  volatility 143% to 155%;  expected
life 5 years;  risk-free  interest  rate  3.75%;  dividend  yield 0%.  The costs
associated with cost of sales,  increases in salaries and employee benefits, and
stock based  compensation,  which were insignificant or non-existent  during the
six months ended June 30, 2005,  reflect a shift in our revenue mix from revenue
generated primarily through licensing  agreements which do not have any costs of
sales to that of  direct  sales  which  not only have cost of sales but also the
need  of  a  sales  force.  The  remaining   operating   expenses  consisted  of
professional   fees,  rent  expense,   amortization   expense  and  general  and
administrative expenses.

      Professional  fees were  $250,000  higher during the six months ended June
30,  2006  compared  to the six months  ended June 30,  2005 due to  significant
increases in amounts paid for legal,  consulting and accounting fees. Legal fees
comprised the majority of this increase,  representing  an increase of $212,000.
Of this increase,  $94,000 related to the  amortization of prepaid legal fees to
Sichenzia Ross Friedman Ference LLP  ("Sichenzia")  pursuant to the terms of the
May 5, 2005 legal  retainer  agreement,  as amended.  We entered into this legal
retainer  agreement in anticipation of an increased level of legal work required
by a  public  operating  company.  Under  the  terms of the  amended  agreement,
Sichenzia  agreed to represent us in connection  with our  continuing  reporting
requirements,  as  well  as our  general  corporate  matters.  The  term  of the
agreement is from May 1, 2005 through March 31, 2007. The remaining  increase is
attributed to work performed on content licensing agreements, an ongoing royalty
audit, and acquisition  related work, all of which were outside the scope of our
agreement with Sichenzia.


                                       14
<PAGE>


      Amounts paid to  consultants  increased  by $13,000  related to an ongoing
royalty audit that we initiated during the quarter ended March 31, 2006 combined
with  amounts  paid  to  primarily  two  consultants.  Amounts  paid  to the two
consultants  related to services in generating  direct sales at a large retailer
and operational services.

      Rent  expense  increased  by $41,000  during the six months ended June 30,
2006  compared  to the  six  months  ended  June  30,  2005  due in  part to our
relocation into commercial office space in August 2005, with base rent of $6,000
per month combined with periods of low rates of rent during the six months ended
June 30, 2005.

      Amortization expense increased by $11,000 during the six months ended June
30,  2006  compared to the six months  ended June 30,  2005 due to an  increased
number of license agreements.

      General and  administrative  expense  increased by $123,000 during the six
months ended June 30, 2006 compared to the six months ended June 30, 2005 and is
attributed  to the  overall  expansion  of the  business  during  the year ended
December 31, 2005  combined  with the  financial  constraints  placed on us as a
result of limited  amounts of available  working  capital  during the six months
ended June 30, 2005.

OFF-BALANCE SHEET ARRANGEMENTS

      We do not have any off  balance  sheet  arrangements  that are  reasonably
likely to have a current or future effect on our financial condition,  revenues,
results of operations, liquidity or capital expenditures.

RISK FACTORS

      Our business  involves a high degree of risk.  Potential  investors should
carefully  consider the risks and  uncertainties  described  below and the other
information  in this report before  deciding  whether to invest in shares of our
common stock.  Each of the following  risks may materially and adversely  affect
our business,  results of operations  and financial  condition.  These risks may
cause the market  price of our common  stock to decline,  which may cause you to
lose all or a part of the money you paid to buy our common stock.

RISKS RELATED TO OUR BUSINESS

WE HAVE A HISTORY OF LOSSES WHICH MAY CONTINUE AND WHICH MAY  NEGATIVELY  IMPACT
OUR ABILITY TO ACHIEVE OUR BUSINESS OBJECTIVES AND OUR FINANCIAL RESULTS.

      For the  six-month  periods  ended June 30,  2006 and 2005,  we  generated
revenues of $668,000  and  $84,000,  respectively,  and  incurred  net losses of
$2,373,000 and $57,000, respectively. At June 30, 2006, we had a working capital
deficit of $317,000 and an  accumulated  deficit of  $2,771,000.  Our failure to
increase our revenues  significantly  or improve our gross margins will harm our
business. Even if we do achieve profitability,  we may not be able to sustain or
increase  profitability  on a quarterly  or annual  basis in the future.  If our
revenues grow more slowly than we anticipate, our gross margins fail to improve,
or our operating  expenses exceed our  expectations,  our operating results will
suffer.  If we are unable to sell or license our products at  acceptable  prices
relative to our costs,  or if we fail to develop and introduce on a timely basis
new products from which we can derive additional revenues, our financial results
will suffer.


                                       15
<PAGE>


OUR LICENSE  REVENUES ARE DEPENDENT UPON THE REVENUES OF OUR  CUSTOMERS.  IF THE
CONTENT WHICH WE LICENSE TO CUSTOMERS IS NOT USED IN VIDEOS WHICH BECOME POPULAR
AMONG THE VIEWING PUBLIC, OUR REVENUES MAY DECLINE.

      We generate revenue through either licensing agreements with third parties
that  distribute  our  licensed  content or through  direct  sales.  Our typical
licensing agreement consists of a three to five-year contract that carries a 15%
- 50%  royalty on gross  sales of  licensed  product.  If the  content  which we
license  to  customers  is not used in videos  which  become  popular  among the
viewing public, our revenues may decline.


                                       16
<PAGE>


OUR OPERATING SUBSIDIARY REBEL CREW FILMS HAS A LIMITED OPERATING HISTORY AND
THEREFORE WE CANNOT ENSURE THE LONG-TERM SUCCESSFUL OPERATION OF OUR BUSINESS OR
THE EXECUTION OF OUR BUSINESS PLAN.

      Our operating  subsidiary Rebel Crew Films was organized under the laws of
the State of  California  on August 7,  2002.  Because  Rebel  Crew  Films has a
limited  operating  history,  our  prospects  must be considered in light of the
risks, expenses and difficulties  frequently encountered by growing companies in
evolving markets,  such as the Latino home video distribution market in which we
operate. While to date we have not experienced these problems, we must meet many
challenges including:

      o     Establishing and maintaining broad market acceptance of our products
            and converting that  acceptance into direct and indirect  sources of
            revenue;
      o     Establishing and maintaining our brand name;
      o     Timely and successfully developing new content and films;
      o     Developing content that results in high popularity among the viewing
            public;
      o     Developing and maintaining  strategic  relationships  to enhance the
            distribution and features of our video content.

      Our business  strategy may be unsuccessful and we may be unable to address
the risks we face in a  cost-effective  manner,  if at all.  If we are unable to
successfully  address  these  risks  our  business  will  be  harmed  and we may
experience a decrease in revenues.

IF WE ARE UNABLE TO LICENSE OR ACQUIRE COMPELLING CONTENT AT REASONABLE COSTS OR
IF WE DO NOT DEVELOP COMPELLING CONTENT, THE NUMBER OF USERS OF OUR SERVICES MAY
NOT GROW AS ANTICIPATED, OR MAY DECLINE, WHICH COULD HARM OUR OPERATING RESULTS.

      Our  future  success  depends  in  part  upon  our  ability  to  aggregate
compelling  content  and  deliver  that  content  through  our  online and other
multi-media properties and programming and delivery technologies.  We distribute
some of the content that we license on our online properties,  such as audio and
video content from third parties.  We have been providing  increasing amounts of
audio and video  content to our users as  reflected  in the  increase  in direct
sales  of our  content  and we  believe  that  users  will  increasingly  demand
high-quality  audio and video  content,  such as music,  film, and other special
events.  Such  content  may  require us to make  substantial  payments  to third
parties  from  whom we  license  or  acquire  such  content.  For  example,  our
entertainment  properties  rely on film  producers and  distributors,  and other
organizations  for a large portion of the content  available on our  properties.
Our  ability  to  maintain  and build  relationships  with  third-party  content
providers  will be  critical to our  success.  In  addition,  as new methods for
accessing  and  delivering  content  through media  formats  becomes  available,
including through alternative devices, we may need to enter into amended content
agreements with existing third-party content providers to cover the new devices.
We may be unable to enter into new, or preserve existing, relationships with the
third parties whose content we seek to obtain.  In addition,  as competition for
compelling content increases both domestically and internationally,  our content
providers  may increase the prices at which they offer their  content to us, and
potential  content  providers may not offer their content on terms  agreeable to
us. An increase in the prices  charged to us by  third-party  content  providers
could harm our operating results and financial condition.  Further,  some of our
content licenses with third parties may be non-exclusive.  Accordingly,  content
providers  and other media  sources such as radio or  television  may be able to
offer  similar  or  identical  content  and  technologies.  This  increases  the
importance of our ability to deliver  compelling  content and media technologies
in order to differentiate from other businesses.  If we are unable to license or
acquire  compelling  content at reasonable  prices,  if other companies  acquire
develop  and/or  distribute  content  that  is  similar  to or the  same as that
provided  by  us,  or  if  we  do  not  develop   compelling  content  or  media
technologies,  the number of users of our services may not grow as  anticipated,
or may decline, which could harm our operating results.


                                       17
<PAGE>


WE MAY INCUR  SUBSTANTIAL  COSTS ENFORCING OUR INTELLECTUAL  PROPERTY RIGHTS AND
ANY  DIFFICULTY  WITH  ENFORCING SUCH RIGHTS MAY CAUSE OUR RESULTS OF OPERATIONS
AND FINANCIAL CONDITION TO SUFFER.

      The  decreasing  cost of  electronic  and computer  equipment  and related
technology  has made it  easier  to create  unauthorized  versions  of audio and
audiovisual  products such as compact  discs,  videotapes  and DVDs.  Similarly,
advances in Internet  technology have increasingly made it possible for computer
users to share audio and audiovisual  information  without the permission of the
copyright   owners  and  without  paying  royalties  to  holders  of  applicable
intellectual  property or other rights.  Unauthorized copies and piracy of these
products compete against  legitimate  sales of these products.  Our revenues are
derived  from  our  licensed  video  content  that  is  potentially  subject  to
unauthorized  copying  and  widespread,   uncompensated   dissemination  on  the
Internet.  If our proprietary  video content is copied and  distributed  without
authorization we may incur substantial costs enforcing our intellectual property
rights.  If we fail to obtain  appropriate  relief or  enforcement  through  the
judicial  process,  or if we fail to develop  effective  means of protecting our
intellectual  property,  our results of operations  and financial  condition may
suffer.

OUR  CONTENT  ASSETS MAY NOT BE  COMMERCIALLY  SUCCESSFUL  WHICH WOULD CAUSE OUR
REVENUES TO DECLINE.

      Our revenue comes from the  production and  distribution  of video content
for use in Latino home video. The success of content offerings depends primarily
upon their acceptance by the public,  which is difficult to predict.  The market
for these  products  is highly  competitive  and  competing  products  are often
released into the  marketplace  at the same time.  The  commercial  success of a
video production depends on several variable factors,  including the quality and
acceptance of competing  offerings  released into the marketplace at or near the
same time and the availability of alternative forms of entertainment and leisure
time  activities.  Our  business is  particularly  dependent on the success of a
limited number of releases,  and the  commercial  failure of just a few of these
releases can have a significant adverse impact on results. Our failure to obtain
broad  consumer  appeal  in the  Latino  community  could  materially  harm  our
business, financial condition and prospects for growth.

FAILURE  TO  PROPERLY   MANAGE  OUR  POTENTIAL   GROWTH   POTENTIAL  WOULD  BE
DETRIMENTAL TO HOLDERS OF OUR SECURITIES.

      Since we have limited  operating  history and our total assets at June 30,
2006 consisted only of $23,000 in cash and total current assets of $483,000, any
significant growth will place considerable strain on our financial resources and
increase  demands on our management and on our  operational  and  administrative
systems,  controls  and  other  resources.  There can be no  assurance  that our
existing personnel,  systems, procedures or controls will be adequate to support
our operations in the future or that we will be able to  successfully  implement
appropriate  measures  consistent  with  our  growth  strategy.  As part of this
growth,  we may  have  to  implement  new  operational  and  financial  systems,
procedures  and controls to expand,  train and manage our employees and maintain
close coordination among our technical,  accounting,  finance,  marketing, sales
and editorial  staff. We cannot guarantee that we will be able to do so, or that
if we are able to do so, we will be able to effectively  integrate them into our
existing  staff and systems.  We may fail to adequately  manage our  anticipated
future  growth.  We will also need to continue to attract,  retain and integrate
personnel  in all  aspects  of our  operations.  Failure  to manage  our  growth
effectively could hurt our business.

IF WE DO NOT MAINTAIN THE CONTINUED  SERVICE OF OUR EXECUTIVE  OFFICERS,  WE MAY
NEVER DEVELOP BUSINESS OPERATIONS.

      Our  success  is  dependent  upon the  continued  service  of our  current
executive officers. To date, we have entered into a written employment agreement
with Jay  Rifkin,  our Chief  Executive  Officer,  and Philip  Gatch,  our Chief
Technology Officer, and none of our other executive officers. We do not have key
man life insurance on any of our executive officers. While none of our executive
officers  currently has any  definitive  plans to retire or leave our company in
the near  future,  any of such  persons  could decide to leave us at any time to
pursue  other  opportunities.  The  loss  of  services  of any of our  executive
management team could cause us to lose revenue.


                                       18
<PAGE>


RISKS RELATED TO OUR COMMON STOCK

OUR HISTORIC  STOCK PRICE HAS BEEN  VOLATILE AND THE FUTURE MARKET PRICE FOR OUR
COMMON STOCK IS LIKELY TO CONTINUE TO BE VOLATILE.  FURTHER,  THE LIMITED MARKET
FOR OUR SHARES WILL MAKE OUR PRICE MORE VOLATILE. THIS MAY MAKE IT DIFFICULT FOR
YOU TO SELL OUR COMMON STOCK FOR A POSITIVE RETURN ON YOUR INVESTMENT.

      The  public  market  for our  common  stock  has  historically  been  very
volatile.  Over the past two fiscal years subsequent  interim quarterly periods,
the market price for our common  stock as quoted on the OTC  Bulletin  Board has
ranged  from $0.06 to $2.05.  The  closing  sale  price for our common  stock on
August 14, 2006 was $0.55 per share.  Any future  market price for our shares is
likely to continue to be very volatile.  This price  volatility may make it more
difficult for you to sell shares when you want at prices you find attractive. We
do not know of any one particular factor that has caused volatility in our stock
price.  However,  the stock market in general has experienced  extreme price and
volume  fluctuations that have often been unrelated or  disproportionate  to the
operating  performance  of  companies.  Broad market  factors and the  investing
public's  negative  perception  of our  business  may  reduce  our stock  price,
regardless  of our  operating  performance.  Further,  the market for our common
stock is  limited  and we cannot  assure you that a larger  market  will ever be
developed or  maintained.  The average daily trading  volume of our common stock
has historically been insignificant. Market fluctuations and volatility, as well
as general economic,  market and political  conditions,  could reduce our market
price. As a result, this may make it difficult or impossible for you to sell our
common  stock  or to  sell  our  common  stock  for a  positive  return  on your
investment.

OUR  COMMON  STOCK IS  SUBJECT  TO THE  "PENNY  STOCK"  RULES OF THE SEC AND THE
TRADING MARKET IN OUR  SECURITIES IS LIMITED,  WHICH MAKES  TRANSACTIONS  IN OUR
STOCK CUMBERSOME AND MAY REDUCE THE VALUE OF AN INVESTMENT IN OUR STOCK.

      The SEC has adopted  Rule 3a51-1 which  establishes  the  definition  of a
"penny stock," for the purposes  relevant to us, as any equity security that has
a market  price of less than $5.00 per share or with an  exercise  price of less
than  $5.00 per  share,  subject  to  certain  exceptions.  For any  transaction
involving a penny stock, unless exempt, Rule 15g-9 requires:

      o     that a broker or dealer approve a person's  account for transactions
            in penny stocks; and
      o     the broker or dealer  receive from the investor a written  agreement
            to the  transaction,  setting forth the identity and quantity of the
            penny stock to be purchased.

      In order to approve a person's  account for  transactions in penny stocks,
the broker or dealer must:

      o     obtain financial information and investment experience objectives of
            the person; and
      o     make a  reasonable  determination  that  the  transactions  in penny
            stocks are  suitable  for that person and the person has  sufficient
            knowledge  and  experience  in  financial  matters  to be capable of
            evaluating the risks of transactions in penny stocks.

      The broker or dealer  must also  deliver,  prior to any  transaction  in a
penny stock, a disclosure  schedule  prescribed by the SEC relating to the penny
stock market, which, in highlight form:

      o     sets  forth  the  basis on  which  the  broker  or  dealer  made the
            suitability determination; and
      o     that the broker or dealer received a signed,  written agreement from
            the investor prior to the transaction.


                                       19
<PAGE>


      Disclosure  also has to be made  about  the  risks of  investing  in penny
stocks  in  both  public  offerings  and in  secondary  trading  and  about  the
commissions payable to both the broker-dealer and the registered representative,
current  quotations for the securities and the rights and remedies  available to
an  investor  in cases of fraud in penny stock  transactions.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stock held in the account and information on the limited market in penny stocks.

      Generally,  brokers  may  be  less  willing  to  execute  transactions  in
securities  subject to the "penny stock" rules.  This may make it more difficult
for  investors  to dispose of our common stock and cause a decline in the market
value of our stock.

Item  3. Controls and Procedures.

      As of the end of the  period  covered  by this  report,  we  conducted  an
evaluation,  under  the  supervision  and with the  participation  of our  chief
executive  officer and chief  financial  officer of our disclosure  controls and
procedures  (as defined in Rule  13a-15(e)  and Rule  15d-15(e)  of the Exchange
Act).  Based  upon  this  evaluation,  our  chief  executive  officer  and chief
financial  officer  concluded  that our  disclosure  controls and procedures are
effective to ensure that all  information  required to be disclosed by us in the
reports that we file or submit under the  Exchange Act is: (1)  accumulated  and
communicated to our management,  including our chief executive officer and chief
financial officer,  as appropriate to allow timely decisions  regarding required
disclosure;  and (2) recorded,  processed,  summarized and reported,  within the
time periods specified in the Commission's  rules and forms. There was no change
in our internal  controls or in other  factors that could affect these  controls
during our last fiscal  quarter that has materially  affected,  or is reasonably
likely to materially affect, our internal control over financial reporting.

                                     PART II

Item  1. Legal Proceedings.

      We are not a party to any pending  legal  proceeding,  nor is our property
the subject of a pending legal proceeding, that is not in the ordinary course of
business or otherwise material to the financial condition of our business.  None
of our directors,  officers or affiliates is involved in a proceeding adverse to
our business or has a material interest adverse to our business.

Item  2. Unregistered Sales of Equity Securities and Use of Proceeds.

      On April 3,  2006,  the  Company  sold  50,000  shares of common  stock to
William B. Horne, the Company's Chief Financial officer and current director, at
a price of $1.10 per  share,  resulting  in gross  proceeds  of  $55,000.  These
securities were sold pursuant to Rule 506  promulgated  under the Securities Act
of 1933, as amended.  These  securities were sold in reliance upon the exemption
provided by Section 4(2) of the  Securities  Act and the safe harbor of Rule 506
under  Regulation D promulgated  under the  Securities  Act. No  advertising  or
general  solicitation  was employed in offering the  securities,  the sales were
made to a limited number of persons, all of whom represented to the Company that
they are accredited  investors,  and transfer of the securities is restricted in
accordance with the requirements of the Securities Act.

      On  April  24,  2006,  we  purchased  a  software   application  known  as
ITunesBucks  and  its  associated  assets  therewith  (the  "Assets")  from  EAI
Technologies,  LLC, a Virginia corporation.  As consideration for the Assets, we
issued EAI  Technologies  an aggregate of 138,182 shares of common stock.  These
securities were issued pursuant to the exemption from registration  requirements
provided by Section 4(2) of the Securities Act of 1933, as amended.

Item  3. Defaults Upon Senior Securities.

      Not applicable.


                                       20
<PAGE>


Item  4. Submission of Matters to a Vote of Security Holders.

The following  proposals were submitted to shareholders at our annual meeting of
stockholders  held July 14,  2006 and were  approved by a majority of the shares
present at the meeting.

      1. The  authorization  and approval to change the Company's  domicile from
Utah to Delaware effected by the merger of the Company, a Utah corporation, with
and into, Digicorp,  Inc., a newly formed wholly owned subsidiary of the Company
that was incorporated under the Delaware General Corporation Law for the purpose
of effecting the change of domicile. This proposal was approved.  Results of the
voting were as follows:

<TABLE>
<CAPTION>
<S>                <C>                <C>                <C>                <C>
                                       No. of Shares
----------------   ----------------   ----------------   ----------------   ----------------
                      Shares For          Against            Abstain        Broker non-votes
----------------   ----------------   ----------------   ----------------   ----------------
Common Stock             26,435,446              6,400                200                  0
</TABLE>

      2. To authorize  and approve the  Company's  Stock  Option and  Restricted
Stock Plan. This proposal was approved. Results of the voting were as follows:


<TABLE>
<CAPTION>
<S>                <C>                <C>                <C>                <C>
                                       No. of Shares
----------------   ----------------   ----------------   ----------------   ----------------
                      Shares For          Against           Abstain         Broker non-votes
----------------   ----------------   ----------------   ----------------   ----------------
Common Stock             26,402,046             21,400             18,600                  0
</TABLE>


      No other matters were  submitted to a vote of security  holders during the
second quarter ended June 30, 2006.

Item  5. Other Information.

      Not applicable.

Item  6. Exhibits.

Exhibit
Number                                    Description
--------------------------------------------------------------------------------

4.1*      Demand  Promissory Note in the principal  amount of $5,000 issued July
          13, 2006 to William Horne
4.2*      Demand  Promissory Note in the principal amount of $30,000 issued July
          14, 2006 to Jay Rifkin
4.3*      Demand  Promissory Note in the principal amount of $30,000 issued July
          20, 2006 to Jay Rifkin
4.4*      Demand  Promissory  Note in the  principal  amount of  $50,000  issued
          August 8, 2006 to Jay Rifkin
4.5*      Demand  Promissory  Note in the  principal  amount of  $25,000  issued
          August 16, 2006 to Jay Rifkin
10.1*     Asset Purchase  Agreement dated April 24, 2006 by and between Digicorp
          and EAI  Technologies  in  connection  with the  $152,000  purchase of
          ITunesBucks and its associated assets
31.1      Certification by Chief Executive  Officer,  required by Rule 13a-14(a)
          or Rule 15d-14(a) of the Exchange Act


                                       21
<PAGE>


31.2      Certification by Chief Financial  Officer,  required by Rule 13a-14(a)
          or Rule 15d-14(a) of the Exchange Act
32.1      Certification by Chief Executive  Officer,  required by Rule 13a-14(b)
          or Rule  15d-14(b)  of the Exchange Act and Section 1350 of Chapter 63
          of Title 18 of the United States Code
32.2      Certification by Chief Financial  Officer,  required by Rule 13a-14(b)
          or Rule  15d-14(b)  of the Exchange Act and Section 1350 of Chapter 63
          of Title 18 of the United States Code
-----------------------------
      * Filed herewith.


                                       22
<PAGE>


                                   SIGNATURES

      In accordance  with the  requirements  of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                                                  DIGICORP


           Date: August 21, 2006              By: /S/ Jay Rifkin
                                                  -----------------------
                                                  Jay Rifkin
                                                  Chief Executive Officer


           Date: August 21, 2006              By: /S/ William B. Horne
                                                  -----------------------
                                                  William B. Horne
                                                  Chief Financial Officer


                                       23