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

                                   Form 10-KSB

(Mark One)

|X|   ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005

|_|   TRANSITION REPORT UNDER SECTION13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
      OF 1934 FOR THE TRANSITION PERIOD FROM __________ TO __________ COMMISSION
      FILE NUMBER ________________________________


                                    DIGICORP
                                    --------
                 (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) (Zip Code)


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

Securities registered under Section 12(b) of the Exchange Act: None.

Securities registered under Section 12(g) of the Exchange Act: Common Stock,
$.001 par value

Check whether the issuer is not required to file reports pursuant to Section 13
or 15(d) of the Exchange Act. |_|

      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 |_| No |X|

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

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

      State issuer's revenues for its most recent fiscal year. $334,110

      The aggregate market value of the voting and non-voting common equity held
by  non-affiliates,  computed by reference to the average bid and asked price of
such common equity as of March 30, 2006, was $18,156,019.

      As of March 30,  2006,  the issuer had  37,028,320  outstanding  shares of
Common Stock.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

      Transitional Small Business Disclosure Format (check one): Yes |_| No |X|
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                                          Page
<S>                                                                                                                       <C>
                                                     PART I
Item 1.     Description of Business..........................................................................................1
Item 2.     Description of Property.........................................................................................10
Item 3.     Legal Proceedings...............................................................................................10
Item 4.     Submission of Matters to a Vote of Security Holders.............................................................10

                                                     PART II
Item 5.     Market for Common Equity and Related Stockholder Matters........................................................10
Item 6.     Management's Discussion and Analysis or Plan of Operation.......................................................13
Item 7.     Financial Statements............................................................................................18
Item 8.     Changes In and Disagreements with Accountants on Accounting and
            Financial Disclosure............................................................................................34
Item 8A.    Controls and Procedures.........................................................................................34
Item 8B.    Other Information...............................................................................................34

                                                    PART III
Item 9.     Directors, Executive Officers, Promoters and Control Persons;
            Compliance With Section 16(a) of the Exchange Act...............................................................35
Item 10.    Executive Compensation..........................................................................................37
Item 11.    Security Ownership of Certain Beneficial Owners and Management
            and Related Stockholder Matters.................................................................................40
Item 12.    Certain Relationship and Related Transactions...................................................................42
Item 13.    Exhibits........................................................................................................43
Item 14.    Principal Accountant Fees and Services..........................................................................45

SIGNATURES..................................................................................................................46
</TABLE>

<PAGE>

                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS.

ORGANIZATIONAL HISTORY

      Digicorp was  incorporated on July 19, 1983 under the laws of the State of
Utah for the purpose of developing  and marketing  computer  software  programs.
From 1983 to 1995, our sales and  investments  were  attributable to the sale of
computer software and investments related to oil, gas and mining.

      On June 30, 1995, we became a development  stage  enterprise  when we sold
our assets.  Since June 30, 1995,  we have been in the  developmental  stage and
until  September  19, 2005 have had no operations  other than issuing  shares of
common stock for  financing  the  preparation  of financial  statements  and for
preparing  filings for the SEC. In August 2001,  we elected to file a Form 10-SB
registration  statement  with the SEC on a voluntary  basis in order to become a
reporting company under the Exchange Act.

      On  December  29,  2005,  we  acquired  all of the issued and  outstanding
capital stock of Rebel Crew Films, Inc., a California  corporation  ("Rebel Crew
Films"),  in consideration for the issuance of 21,207,080 shares of common stock
(the  "Purchase  Price")  to the  shareholders  of Rebel  Crew  Films.  From the
Purchase  Price,  4,000,000  shares are held in escrow pending  satisfaction  of
certain performance milestones. In addition, from the Purchase Price, 16,666,667
shares are subject to lock up  agreements as follows:  (a) 3,333,333  shares are
subject to lockup  agreements for one year; (b) 6,666,667  shares are subject to
lockup  agreements  for two  years;  and (c)  6,666,667  shares,  of  which  the
4,000,000 escrowed shares are a component,  are subject to lockup agreements for
three years.

      In connection  with the  acquisition of Rebel Crew Films,  on December 29,
2005  we  entered  into  a  Securities   Purchase  Agreement  with  one  of  the
shareholders  of Rebel Crew Films,  Rebel  Holdings,  LLC,  pursuant to which we
purchased a $556,307  principal  amount loan receivable owed by Rebel Crew Films
to Rebel  Holdings,  LLC in exchange  for the  issuance of a $556,307  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 our assets now owned or hereafter acquired. The secured
convertible  note is convertible  into 500,000 shares of our common stock at the
rate of $1.112614 per share. Jay Rifkin,  our Chief Executive Officer and one of
our directors, is the sole managing member of Rebel Holdings, LLC.

      Also in connection  with the  acquisition of Rebel Crew Films,  Jay Rifkin
and  certain  other  of  our  shareholders   entered  into  a  voting  agreement
authorizing  Mr. Rifkin to vote the shares of common stock owned by such parties
to designate or elect a simple  majority of our Board of Directors,  one of whom
will be Mr. Rifkin, and to designate or elect the remaining  directors chosen by
Milton "Todd" Ault, III, our former Chairman and Chief Executive Officer.

      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.

      The below  description  of our  business  includes the  operations  of our
wholly owned subsidiary Rebel Crew Films.

OVERVIEW

      We  are  an  aggregator  and  distributor  of  programming  content  and a
developer of multi-media  technologies with operations concentrated primarily in
the internet and television business segments.

      Together with our  subsidiaries,  we are primarily engaged in the business
of developing and distributing  programming content,  multi-media  technologies,
and  advertising  via the internet.  We expect that within the next 12 months we
will expand our  advertising to video and  music-on-demand  ("VOD"),  as well as
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.


                                       1
<PAGE>

      We currently  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. 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.

      We  believe  that  opportunities  exist in the VOD space to reach a larger
customer base for the  distribution  of our content as well as an opportunity to
generate  advertising  revenue. We will actively pursue this potential source of
revenue during the year ending December 31, 2006.

      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 iCodemedia  assets that we acquired on September 19,
2005. We are organized in a single operating  segment with no long-lived  assets
outside of the United  States of America.  All of our revenues to date have been
generated in the United States,  but with the asset  acquisitions  of iCodemedia
and PerreoRadio.com (described below) we expect a portion of our future revenues
will be from other  countries.  Revenue  sources could be from  distribution  of
content, advertising and licensing.

REBEL CREW FILMS, INC.

      Rebel Crew  Films was  founded in 2001 and our goal is to become a leading
distributor of Latino home entertainment  products.  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.

      Our  specialty  orientation  provides  our content  partners  with focused
attention and value-added  marketing services that are not accessible from major
Hollywood  studios or rental  product  distributors.  We currently  maintain and
distribute  approximately  300 Spanish  language  films, of which we control the
exclusive distribution rights to approximately 40. The films in which we control
the exclusive distribution rights are expected to provide us with greater profit
margins  as we expand our  direct  sales  force.  We  believe  that the  overall
percentage  of our titles,  as  compared  to the total  amount of titles that we
distribute,  will  increase  as this  happens.  Our  content  library  currently
consists  of  approximately  130  titles  for  which  we  directly  control  the
distribution  rights and as we expand our direct  sales force and  increase  the
number of customers  that purchase  content  directly from us we believe that we
will be able to  effectively  promote  our  content  such that it will  begin to
represent a larger percentage of the total numbers of films that we distribute.

      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 Spanish language programming includes: new releases, classic
Mexican cinema, animation, cult, sports, martial arts, family entertainment, and
more.

      On February 7, 2006,  we entered  into an asset  purchase  agreement  with
Matthew B. Stuart  pursuant to which we purchased the following  Internet domain
names  and  all  materials,  intellectual  property,  goodwill  and  records  in
connection   therewith   (the   "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.  As consideration  for the Assets, we
issued Mr.  Stuart and his  nominees an  aggregate  of 100,000  shares of common
stock.  All such  shares of common  stock are subject to lock up  agreements  as
follows:  25,000 shares are subject to a lock up agreement for one year;  25,000
shares are subject to a lock up agreement  for two years;  and 50,000 shares are
subject to a lock up agreement for three years.

      On February 7, 2006,  in  accordance  with the purchase of the Assets,  we
entered a three-year employment agreement with Mr. Stuart and granted Mr. Stuart
options to acquire  400,000 shares of common stock at an exercise price equal to
the closing price on the date of grant.  The exercise of such options is subject
to certain vesting provisions.


                                       2
<PAGE>

      PerreoRadio.com  is a Latino based  community  website that offers  online
radio shows from some of the top DJ's in the Reggaeton  genre.  Our intent is to
become a recognized leader in the Spanish-language and Hispanic-targeted markets
by  capturing  the top DJ's in this area and  expanding  into 12 - 15 markets to
syndicate the shows. Currently,  we operate in four markets: San Francisco,  Los
Angeles, Chicago and New York City.

ICODEMEDIA

      On September 19, 2005, upon entering into an asset purchase agreement with
Philip Gatch, our Chief Technology Officer, we completed the initial transaction
to transform us from that of a development  stage  enterprise to a digital media
and content delivery company.  The assets purchased  consisted 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.  We plan to use
these  websites  and the  related  intellectual  property  to provide a suite of
applications  and services to enable content creators the ability to publish and
deliver content to existing and next generation  digital media devices,  such as
the Apple  iPod and the Sony PSP,  based  upon the  consumers'  expectation  for
broader and on-demand access to content and services.

      Initially  the  Company  plans  to  utilize  the  iCodemedia   Assets  for
distribution  of its content but ultimately  the Company  expects to license the
technology to others for distribution of third-party content.

      Ultimately,  we intend to develop our  iCodemedia  Assets as an enterprise
software  publishing  solution for next generation content delivery devices such
as the Apple iPod, Sony Playstation and multimedia enabled mobile phones. We are
developing a suite of  applications  and services that allow for the  enterprise
workflow management,  processing,  distribution and control of content for these
next  generation  devices  and for  emerging  content  delivery  platforms.  The
applications provide content producers,  advertisers,  and marketers new revenue
models built around these emerging platforms with enhanced user data, reporting,
and accountability.

      Our  strategy for the  iCodemedia  Assets is to pinpoint  unexploited  and
unrealized market  opportunities  that emerge from this evolving media landscape
and build solutions  around them. In particular,  the company is focusing on new
markets that arise from the following sources:

      o     Podcasting  (the  distribution  of  audio or  video  files  over the
            Internet  for  listening  or viewing on mobile  devices and personal
            computers); and
      o     Advertising

      We will work with content developers, entertainment companies, advertising
agencies,  music talent,  labels,  reps,  distributors,  as well as software and
engineering  companies  to  address  the  needs  and  requirements  of the  next
generation of content development delivery technologies.

      We have focused on extending our marketing platform and access to Internet
users beyond www.perreoradio.com through our distribution network of third party
entities who have integrated our links to websites and through other co-branding
opportunities.

      We plan to  utilize  the  proprietary  assets  from the  iCodemedia  asset
acquisition  to podcast not only the music videos created and produced by us but
also our library of Spanish  language  films which we licensed or have purchased
form third parties. Source content is available through www.perreoradio.com. The
site also offers the ability to increase our presence  through online traffic to
Rebel Crew Films as well as offline  through  live events in the 12 - 15 markets
that we will target.

CONTENT AND TECHNOLOGY DEVELOPMENT

      We will seek to enhance our  product  suite and  content  library  through
internal development and acquisition opportunities.

      Our programming for PerreoRadio.com  currently originates in four markets:
Los Angeles,  Chicago,  New York City, and San Francisco.  We intend that studio
facilities in Marina Del Rey, CA will house our music  library,  facilities  for
programming  origination,  programming  personnel  and  facilities  to  transmit
programming in those markets.


                                       3
<PAGE>

      Our development and production teams are located in Marina Del Rey, CA. We
did not incur any product development expenses in the prior years but have begun
to incur these expenses as a result of our initial music video  production  that
is scheduled for release in May of 2006.

CUSTOMERS

      For direct sales, our sales associates focus on small retail stores across
the country.  Currently,  the sales force  manages more than 1,100 active retail
store customers.  For other licensing activities,  there are two companies:  BCI
Eclipse   LLC,   which  has   licensed   approximately   20   titles:   and  VAS
Entertainment/Rise   Above   Entertainment   ("VAS/RA"),   which  has   licensed
approximately  20 titles from us. They  function  as  manufacturers  for our DVD
inventory for those titles,  as well as  distributors  to large  retailers  like
Wal-Mart. The agreements with these companies consist of a term of three to five
years granting the companies the right to manufacture,  promote,  and distribute
the licensed movies for a 15% - 50% royalty on gross sales,  depending on title.
Besides our direct selling effort through telemarketing,  we market our products
by placing  print ads in a variety of Latino trade  magazines as well as through
our website. We have a dedicated 1-800 toll free number for sales inquiries.

SUPPLIERS

      We  have  three   categories   of   suppliers  -  movie   licensors,   DVD
manufacturers,   and  finished  goods  suppliers.  Movie  licensors  consist  of
Spanish-language movie license holders primarily from Mexico who enter licensing
agreements with us to manufacture and distribute their movies.  We are currently
in contract with eight different licensors of content. From these agreements, we
have  manufactured  approximately  ten titles.  Agreements  with these companies
consist of either a fixed  license fee or a 40-60%  royalty on net  revenues for
the right to  manufacture,  promote  and  distribute  the films for four to five
years, depending on title.

      For the  manufacture of DVDs,  our principal  supplier is a company called
Reptek.  We do not have a  written  agreement  with this  supplier.  There is no
dependency  on this  supplier as the supply of DVD  manufacturing  companies  is
broad and there are many  potential  firms  that can be  employed  to supply our
products.

      For DVD titles not owned or  licensed  by us, a number of  finished  goods
vendors are  utilized.  Among them are Ventura  Distribution,  Inc.,  Venevision
International,  Inc.,  Universal Music and Video  Distribution,  Inc.  ("UMVD"),
Lions Gate Entertainment Corp and Cozumel Films. Ventura Distribution  currently
supplies us with  approximately 21 movies  distributed by Unicine, a division of
Univision  Communications,  Inc. Venevision International has the highest number
of titles,  providing us with approximately 51 films. UMVD currently supplies us
with  approximately  36 films and Cozumel  Films  provides us with three  films.
There are no written  agreements  with any of these  companies to supply us with
films.

      We are currently expanding our sales force to focus on direct sales of our
licensed  content.  We are  shifting  our  efforts on direct  selling due to two
primary reasons:  (1) poor reliability of third party distributors  generally to
pay  royalties  on  time;  and  (2)  to  eliminate  dependence  on  third  party
distributors  to distribute  our product as one of many other products they also
sell.

MARKETING

      We market our products and services  through a broad array of programs and
media formats, including video, internet, advertising campaigns,  telemarketing,
print advertisements,  retail distribution, and web advertising. Other marketing
strategies  include online and offline  cross-promotion  and co-branding  with a
wide variety of partners.

COMPETITION

      We  operate  in the  market  for  media  products,  services  and  content
development and delivery,  which is a highly competitive market characterized by
rapid change, converging technologies, and increasing competition from companies
offering  communication,  video, music,  on-demand information and entertainment
services integrated into other products and media properties. Globally, our most
significant competition is from Univision Communications, Inc. and Navarre Corp.


                                       4
<PAGE>

      The principal  competitive  factors  relating to attracting  and retaining
users include the quality and relevance of our  advertising;  the  effectiveness
and efficiency of our marketing  services;  the  accessibility,  integration and
personalization  of the online  services  that we offer on our website;  and the
creativity of the marketing solutions that we offer.

      We also face competition from companies focused on markets where expertise
in a particular segment of the market (e.g.,  radio,  internet,  television) may
provide them a competitive advantage.

      Although accurate numbers are difficult to obtain due to the hesitation of
privately owned distribution  companies to divulge sales figures, an independent
study by Estrenos magazine (a Latin  Entertainment Trade Journal) estimates that
the Latino home video distribution  market for the first six months of 2005 sold
more than  three  million  units in the United  States.  According  to  Estrenos
magazine,  of that number three distributors  accounted for approximately 80% of
those  sales  -  Laguna   Films  (43%),   Ventura/Studio   Latino   (26%),   and
Xenon/Televisa  (13%) (data  provided  by each  distributor  or  source).  Other
participants  in  the  Latino  home  video  distribution  market  include  Image
Entertainment  (7%),  Latin Vision (5%),  Brentwood Home Video (3%),  Pro-Active
Entertainment   (2%),  and  Vanguard  Latino  (1%)  (Source:   Estros  magazine,
September/October  2005). Based on these sales performance  figures, our monthly
sales average currently represents approximately 1.25% of the monthly average of
DVD sales volume in the Latino video entertainment industry

      Additionally,  major U.S.  movie studios have ventured into  servicing the
Latino home video market as well, selling approximately 1.5 million units in the
first half of 2005. Of that amount, approximately 60% of sales were dominated by
three studios - MGM Home Entertainment (26%),  Columbia Tri-Star (18%) and Lions
Gate Films  (16%).  Other such  competitors  include  UMVD/Visual  Entertainment
(12%), BVHE/Disney (8%), Warner Home Video (8%), and Fox Home Entertainment (3%)
(Source: Estros magazine, September/October 2005).

      We also  compete  with retail  music and video  stores,  including  online
stores, dominated by large companies such as Netflix,  Blockbuster,  Trans World
Entertainment, and Movie Gallery Inc.

      We may also face  competition from businesses that have announced plans to
deliver  entertainment  and media content through cell phones and other wireless
devices.  Sprint Nextel,  Comcast,  Time Warner Cable,  Cox  Communications  and
Advance/Newhouse  Communications  recently  announced  they are  forming a joint
venture to work toward  accelerating  the  convergence  of video  entertainment,
wireline and wireless data and  communications  products and services to provide
customers   throughout   the  United  States   access  to  advanced   integrated
entertainment,  including streaming television programming,  music, video clips,
games and pre-recorded DVR programs, communications and wireless products.

      We  believe  that we can  effectively  compete  in the  Latino  home video
markets  primarily by offering  competitive  prices on a wide variety of quality
titles  through  direct  selling  efforts  targeted at retail  stores across the
entire United States.

SEASONALITY

      Our  performance  may be  affected by seasonal  revenue  fluctuations  and
variation  in demand  between  local and  national  advertisers.  The  Company's
revenues may vary  throughout  the year.  As is typical in the  distribution  of
content, the first calendar quarter generally produces the lowest revenues.

GOVERNMENT REGULATION

      We are not aware of any existing or probable governmental regulations that
may have a material effect on the normal operations of our business.  There also
are no relevant environmental laws that require compliance by us that may have a
material effect on the normal operations of the business.


                                       5
<PAGE>

EMPLOYEES

      As of March 27, 2006,  we employed 14 full time  employees and 2 part time
employees.  None  of  our  employees  are  covered  by a  collective  bargaining
agreement. We believe that relations with our employees are good.

AVAILABLE INFORMATION

      We file with or submit to the SEC annual,  quarterly and current  periodic
reports,  proxy  statements  and other  information  meeting  the  informational
requirements of the Exchange Act. You may inspect and copy these reports,  proxy
statements  and other  information,  as well as the  registration  statement and
related exhibits and schedules, at the Public Reference Room of the SEC at 100 F
Street,  N.E.,  Washington,  D.C.  20549.  You  may  obtain  information  on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The
SEC maintains an Internet website that contains  reports,  proxy and information
statements and other information  filed  electronically by us with the SEC which
are  available  on the  SEC's  website  at  http://www.sec.gov.  Copies of these
reports, proxy and information statements and other information may be obtained,
after paying a duplicating  fee, by electronic  request at the following  e-mail
address:  publicinfo@sec.gov,  or by writing the SEC's Public Reference Section,
100 F Street, N.E., Washington, D.C. 20549.

                                  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 years ended  December 31, 2005 and 2004, we generated  revenues of
$334,110  and  $27,963,  respectively,  and  incurred net losses of $357,561 and
$37,643, respectively. At December 31, 2005, we had a working capital surplus of
$32,276 and an  accumulated  deficit of  $397,862.  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.

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.


                                       6
<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.


                                       7
<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 December
31, 2005 consisted only of $54,518 in cash and total current assets of $502,727,
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.


                                       8
<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, 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 March 27,  2006 was $1.30 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.

      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.


                                       9
<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY.

      We lease our principal  executive  office located at 4143 Glencoe  Avenue,
Marina Del Rey, California 90292. The leased office space is approximately 3,800
rentable  square  feet.  The lease  contract  term is seven years and two months
commencing  August 1, 2005 and ending  September  30, 2012.  Base rent under the
lease is $5,890  per month  payable  on the first day of each  month  commencing
August 15, 2005.  Additionally,  the first two months (August to September 2005)
had a base rent of $8,835 and a security  deposit  of $5,890 was  required  upon
signing.

ITEM 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

      No matter was  submitted to a vote of security  holders  during the fourth
quarter of the fiscal year covered by this report.

                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

MARKET INFORMATION

      Our common stock is currently  quoted on the OTC Bulletin  Board under the
symbol  "DGCO." For the periods  indicated,  the following  table sets forth the
high and low sales  prices per share of common  stock.  These  prices  represent
inter-dealer  quotations without retail markup,  markdown, or commission and may
not necessarily represent actual transactions.

<TABLE>
<CAPTION>
                                       Fiscal 2006            Fiscal 2005            Fiscal 2004
                                  ---------------------  --------------------- ----------------------
Fiscal Quarter                        High       Low         High       Low        High        Low
--------------------------------- ---------- ----------  ---------- ---------- ----------- ----------

<S>                               <C>        <C>         <C>        <C>        <C>         <C>
First Quarter Ended March 31      $   2.05   $   1.10    $   0.35   $    0.13  $     0.13  $   0.06
Second Quarter Ended June 30      $     --   $     --    $   0.45   $    0.18  $     0.18  $   0.07
Third Quarter Ended September 30  $     --   $     --    $   1.37   $    0.20  $     0.35  $   0.06
Fourth Quarter Ended December 31  $     --   $     --    $   1.90   $    0.65  $     0.35  $   0.07
</TABLE>

HOLDERS

      As  of  March  27,  2006,   our  shares  of  common  stock  were  held  by
approximately 289 stockholders of record.

DIVIDENDS

      We have not declared any dividends to date.  We have no present  intention
of paying any cash dividends on our common stock in the foreseeable  future,  as
we intend to use  earnings,  if any,  to generate  growth.  The payment by us of
dividends,  if any, in the future,  rests within the  discretion of our Board of
Directors and will depend,  among other things,  upon our earnings,  our capital
requirements  and our financial  condition,  as well as other relevant  factors.
There are no  restrictions  in our  articles  of  incorporation  or bylaws  that
restrict us from declaring dividends.

RECENT SALES OF UNREGISTERED SECURITIES

      We sold the  following  equity  securities  during the  fiscal  year ended
December 31, 2005 that were not registered  under the Securities Act of 1933, as
amended (the "Securities Act").

      All of the below  unregistered  issuances of securities were made pursuant
to the exemptions from registration requirements provided by Section 4(2) of the
Securities Act and/or Regulation D, promulgated thereunder.  Except as expressly
set forth below the individuals  and entities to which we issued  securities are
unaffiliated  with  us.  For  each of such  sales,  no  advertising  or  general
solicitation  was employed in offering the  securities.  The offerings and sales
were made to a limited number of persons, all of whom were accredited investors,
business  associates  of  ours  or our  executive  officers,  and  transfer  was
restricted by us in accordance with the  requirements of the Securities Act. For
each  transaction  exempt  pursuant to Regulation D, each of the below  security
holders who were not our executive officers  represented that the are accredited
and sophisticated  investors,  that they are capable of analyzing the merits and
risks of their  investment,  and that they understand the speculative  nature of
their investment. Furthermore, all of the below-referenced persons had access to
our Securities and Exchange Commission filings.


                                       10
<PAGE>

      All warrants  described below generally expire five years from the date of
grant and all options described below expire ten years from the date of grant.

      On May 18,  2005,  we sold  2,941,176  shares of common stock and warrants
(the "May  Warrants")  to purchase an aggregate  of  3,000,000  shares of common
stock  with  exercise  prices  ranging  from  $0.25 to $1.50 per share to Bodnar
Capital Management, LLC ("Bodnar Capital"). On October 27, 2005, we entered into
an agreement  with Bodnar Capital to cancel the May Warrants in exchange for the
issuance  of a warrant  to  purchase  500,000  shares of common  stock with a an
exercise  price of $0.01 per share  exercisable  for a period of five years.  On
November 2, 2005,  Bodnar  Capital  exercised its warrant for cash and we issued
Bodnar Capital 500,000 shares of common stock.  The issuance of these securities
was exempt  from  registration  requirements  pursuant  to  Section  4(2) of the
Securities Act and Rule 506 promulgated thereunder.

      On July 20,  2005,  as  consideration  for  investor  relation  consulting
services,  we granted options to Steve  Jafarzadeh to purchase 100,000 shares of
common stock with an exercise price of $0.25 per share.  25,000 of these options
have vested and the  remaining  75,000  options  were  cancelled on December 29,
2005. This grant was exempt from  registration  requirement  pursuant to Section
4(2) of the Securities Act.

      On July 20, 2005, as  consideration  for business  development  consulting
services,  we granted options to Nicolas  Soichet to purchase  100,000 shares of
common stock with an exercise price of $0.25 per share.  50,000 of these options
have vested and the  remaining  50,000  options  were  cancelled on December 29,
2005. This grant was exempt from  registration  requirement  pursuant to Section
4(2) of the Securities Act.

      On July 20, 2005, as consideration  for service on our Board of Directors,
we granted to each of Melanie Glazer, Alice M. Campbell, Darrell Grimsley, Lynne
Silverstein  and William B. Horne options to purchase  250,000  shares of common
stock with an exercise  price of $0.25 per share.  62,500 of such options vested
to Ms. Glazer,  250,000 vested to Ms.  Campbell,  62,500 vested to Mr. Grimsley,
75,000 vested to Ms. Silverstein, 200,000 vested to Mr. Horne, and the remaining
options of such individuals were cancelled on December 29, 2005. The issuance of
these  stock  options  was exempt  from  registration  requirements  pursuant to
Section 4(2) of the Securities Act.

      On July 20, 2005,  as  consideration  for service as Chairman of our Audit
Committee,  we granted Alice M. Campbell  options to purchase  100,000 shares of
common  stock  with an  exercise  price of $0.25 per share.  All of these  stock
options  are  vested.  The  issuance  of these  stock  options  was exempt  from
registration requirements pursuant to Section 4(2) of the Securities Act.

      On July 20, 2005,  as  consideration  for service as a member of our Audit
Committee, we granted Melanie Glazer options to purchase 50,000 shares of common
stock with an exercise  price of $0.25 per share.  12,500 of such  options  have
vested and the remaining  options were cancelled upon Ms.  Glazer's  resignation
from the Board of Directors  on December  29, 2005.  The issuance of these stock
options was exempt from  registration  requirements  pursuant to Section 4(2) of
the Securities Act.

      On July 20,  2005,  as  consideration  for service as our Chief  Executive
Officer, we granted Milton "Todd" Ault, III options to purchase 2,000,000 shares
of common stock with an exercise  price of $0.25 per share.  These stock options
vest quarterly over two years beginning September 30, 2005.  Effective September
30,  2005,  the Board of  Directors  accelerated  the vesting of 475,000 of such
options  and  fixed  the  expiration  date of the  options  to 18  months  after
completing the acquisition of Rebel Crew Films. The remaining stock options were
cancelled  upon Mr. Ault  resigning as an officer and director.  The issuance of
these  stock  options  was exempt  from  registration  requirements  pursuant to
Section 4(2) of the Securities Act.

      On July 20,  2005,  as  consideration  for  service  as our  President  of
Operations,  we granted  Kathryn  Queen  options to purchase  750,000  shares of
common stock with an exercise price of $0.25 per share. 237,500 of these options
have  vested  and  the  remaining   options  were  cancelled  upon  Ms.  Queen's
resignation on December 29, 2005. Also on July 20, 2005, as an incentive  bonus,
subject to certain  milestones  being  achieved  prior to December 31, 2006,  we
agreed to grant Ms. Queen  options to purchase  750,000  shares of common stock.
These stock options were cancelled upon Ms. Queen's  resignation on December 29,
2005.  The  issuance  of  these  stock  options  was  exempt  from  registration
requirements pursuant to Section 4(2) of the Securities Act.


                                       11
<PAGE>

      On July 20, 2005,  as  consideration  for service as our Chief  Technology
Officer,  we granted  Philip Gatch options to purchase  250,000 shares of common
stock  with an  exercise  price of $0.25 per  share.  All of these  options  are
vested.  Also on July 20, 2005,  we agreed to issue  restricted  stock valued at
$12,500  quarterly  during  the  three-year  term  of his  employment  as  Chief
Technology  Officer.  The  issuance  of these  stock  options  was  exempt  from
registration requirements pursuant to Section 4(2) of the Securities Act.

      On July 20,  2005,  as  consideration  for service as our Chief  Financial
Officer,  we granted  William B. Horne  options to  purchase  250,000  shares of
common stock with an exercise price of $0.25 per share. 200,000 of these options
are vested and the remaining 50,000 were cancelled.  The issuance of these stock
options was exempt from  registration  requirements  pursuant to Section 4(2) of
the Securities Act.

      On July 20,  2005,  as  consideration  for service as our  Controller,  we
granted Jeanne Olsky options to purchase  100,000 shares of common stock with an
exercise  price of $0.25 per share.  These stock options vest quarterly over two
years beginning  September 30, 2005. 50,000 of these options have vested and the
remaining  options were cancelled  upon Ms. Olsky's  resignation on December 29,
2005.  The  issuance  of  these  stock  options  was  exempt  from  registration
requirements pursuant to Section 4(2) of the Securities Act.

      On July 20,  2005,  as  consideration  for  service  as the our  Corporate
Secretary,  we granted Lynne  Silverstein  options to purchase 150,000 shares of
common stock with an exercise price of $0.25 per share. These stock options vest
quarterly over two years beginning  September 30, 2005.  37,500 of these options
have vested and the  remaining  options were  cancelled  upon Ms.  Silverstein's
resignation on December 29, 2005. The issuance of these stock options was exempt
from registration requirements pursuant to Section 4(2) of the Securities Act.

      On July 20, 2005,  as  consideration  for  consulting  services  valued at
$11,563.59,  we granted Sothi Thillairajah warrants to purchase 50,000 shares of
common stock with an exercise  price of $0.25 per share.  50% of these  warrants
vested on July 20, 2005 and the remaining 50% vested on September 30, 2005.  The
issuance of these warrants was exempt from registration requirements pursuant to
Section 4(2) of the Securities Act.

      On September 19, 2005, we purchased the certain  website  domain names and
related intellectual property from Phlip Gatch, our Chief Technology Officer. As
consideration  for these assets we issued Mr. Gatch  1,000,000  shares of common
stock.  The issuance of these  shares to Mr. Gatch was exempt from  registration
requirements  pursuant  to  Section  4(2) of the  Securities  Act and  Rule  506
promulgated thereunder.

      On September 30, 2005, we granted Jay Rifkin, our Chief Executive Officer,
options to purchase  4,400,000  shares of common stock with an exercise price of
$0.85 per share,  which stock options vest annually over a period of three years
from the date of closing the  acquisition  of Rebel Crew Films.  The issuance of
these  stock  options  was exempt  from  registration  requirements  pursuant to
Section 4(2) of the Securities Act.

      On September 30, 2005, we granted Cesar Chatel, as President of Rebel Crew
Films, options to purchase 800,000 shares of common stock with an exercise price
of $0.85 per share,  which stock  options vest  annually  over a period of three
years from the date of closing the acquisition of Rebel Crew Films. The issuance
of these stock  options was exempt from  registration  requirements  pursuant to
Section 4(2) of the Securities Act.

      On September 30, 2005, we granted Oscar  Carreno,  as Director of Sales of
Rebel Crew Films,  options to purchase  150,000  shares of common  stock with an
exercise  price of $0.85 per share,  which stock  options vest  annually  over a
period of four  years  from the date of closing  the  acquisition  of Rebel Crew
Films.  The  issuance  of these  stock  options  was  exempt  from  registration
requirements pursuant to Section 4(2) of the Securities Act.

      On September 30, 2005, we granted Ian Monsod,  as Manager of Operations of
Rebel Crew Films,  options to purchase  125,000  shares of common  stock with an
exercise  price of $0.85 per share,  which stock  options vest  annually  over a
period of four  years  from the date of closing  the  acquisition  of Rebel Crew
Films.  The  issuance  of these  stock  options  was  exempt  from  registration
requirements pursuant to Section 4(2) of the Securities Act.

      On  September  30, 2005,  as  consideration  for M&A advisory  services in
connection  with the  acquisition  of Rebel Crew Films,  Inc.,  we granted Aegis
Equity LLC warrants to purchase  300,000 shares of common stock with an exercise
price of $0.65 per share which were valued at $325,871.59. The issuance of these
warrants was exempt from registration  requirements  pursuant to Section 4(2) of
the Securities Act.

      On December 29, 2005, we granted Alan Morelli warrants to purchase 250,000
shares  of common  stock  with an  exercise  price of $0.145  per  share,  which
warrants  vested  immediately.  These  warrants  were  issued to Mr.  Morelli as
compensation for advisory  services  rendered in connection with structuring the
acquisition of Rebel Crew Films.  The issuance of these stock options was exempt
from registration requirements pursuant to Section 4(2) of the Securities Act.


                                       12
<PAGE>

      On December 29, 2005, we issued Rebel Holdings,  LLC 19,086,372  shares of
common stock as  compensation  for its 90% equity  interest in Rebel Crew Films.
Jay Rifkin,  our Chief Executive  Officer and one of our directors,  is the sole
managing  member of Rebel  Holdings,  LLC.  3,600,000 of such shares are held in
escrow pending satisfaction of certain performance  milestones through March 31,
2007.  This  issuance  was exempt  from  registration  requirements  pursuant to
Section 4(2) of the Securities Act and Rule 506 promulgated thereunder.

      On December 29, 2005,  we issued Cesar Chatel  2,120,708  shares of common
stock as  compensation  for his 10% equity  interest  in Rebel Crew  Films.  Mr.
Chatel is  President  of Rebel Crew  Films.  400,000 of such  shares are held in
escrow pending satisfaction of certain performance  milestones through March 31,
2007.  This  issuance  was exempt  from  registration  requirements  pursuant to
Section 4(2) of the Securities Act and Rule 506 promulgated thereunder.

      On  December  29,  2005 we  issued a  $556,307  principal  amount  secured
convertible  note  to  Rebel  Holdings,  LLC in  exchange  for a  $556,307  loan
receivable  owed by Rebel  Crew  Films  to  Rebel  Holdings,  LLC.  The  secured
convertible  note is convertible into 500,000 shares of common stock at the rate
of $1.112614 per share. Jay Rifkin,  our Chief Executive  Officer and one of our
directors, is the sole managing member of Rebel Holdings, LLC.

      On December 29,  2005,  we granted Alan  Morelli,  as a director  nominee,
options to purchase  350,000  shares of common  stock with an exercise  price of
$1.50 per share,  which stock options vest annually over a period of three years
from the date Mr. Morelli's board appointment was effective, March 26, 2006. The
issuance  of these  stock  options  was exempt  from  registration  requirements
pursuant to Section 4(2) of the Securities Act.

      On December 29, 2005,  we granted  David M. Kaye,  as a director  nominee,
options to purchase  350,000  shares of common  stock with an exercise  price of
$1.50 per share,  which stock options vest annually over a period of three years
from the date Mr. Kaye's board  appointment  was effective,  March 26, 2006. The
issuance  of these  stock  options  was exempt  from  registration  requirements
pursuant to Section 4(2) of the Securities Act.

      On December 29, 2005,  we issued  530,000  shares of common stock to Aegis
Equity LLC as additional  consideration  for M&A advisory services in connection
with the acquisition of Rebel Crew Films, Inc., valued at $795,000. The issuance
of these shares was exempt from  registration  requirements  pursuant to Section
4(2) of the Securities Act.

      On  December  29,  2005,  we issued  300,000  shares  of  common  stock to
Elizabeth Gaynes as consideration  for M&A advisory  services in connection with
the acquisition of Rebel Crew Films,  Inc., valued at $450,000.  The issuance of
these shares was exempt from registration  requirements pursuant to Section 4(2)
of the Securities Act.

ITEM 6. 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-KSB. 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  under "Item 1.  Description of
Business." and elsewhere in this report on Form 10-KSB.

      The following  "Overview"  section is a brief  summary of the  significant
issues  addressed  in  this  Management's   Discussion  and  Analysis  ("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 7.  Financial  Statements and  supplementary  information
appearing elsewhere in this Form 10-KSB.

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.


                                       13
<PAGE>

      On  September  19,  2005,  the  Company  entered  into an  asset  purchase
agreement with Philip Gatch, the Company's 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.

      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  within  the next 12 months 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 a three to five-year  contract  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.

      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 iCodemedia  assets that we acquired on September 19,
2005.

      Rebel Crew  Films was  founded in 2001 and our goal is to become a leading
distributor of Latino home entertainment  products.  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  policy  relates to the  assessment  of  impairment  of our
intangible assets.

      We assess the  impairment of  intangible  assets when events or changes in
circumstances  indicate  that the  carrying  value of the  assets  or the  asset
grouping may not be  recoverable.  Factors that we consider in deciding  when to
perform an impairment review include significant  under-performance of a product
line in  relation to  expectations,  significant  negative  industry or economic
trends,  and  significant  changes or planned  changes in our use of the assets.
Recoverability  of  intangible  assets  that  will  continue  to be  used in our
operations is measured by comparing the carrying amount of the asset grouping to
our estimate of the related total future net cash flows. If an asset  grouping's
carrying  value is not  recoverable  through the related  cash flows,  the asset
grouping  is  considered  to be  impaired.  The  impairment  is  measured by the
difference  between  the asset  grouping's  carrying  amount and its fair value,
based on the best information  available,  including market prices or discounted
cash flow analysis.  Impairments of intangible  assets are determined for groups
of assets related to the lowest level of  identifiable  independent  cash flows.
Due to our limited  operating history and the early stage of development of some
of our intangible  assets, we must make subjective  judgments in determining the
independent cash flows that can be related to specific asset groupings.  To date
we have not recognized impairments on any of our intangible assets.


                                       14
<PAGE>

ACCOUNTING DEVELOPMENTS

      In December 2004, Statement of Financial Accounting Standards ("SFAS") No.
123(R), "Share-Based Payment," which addresses the accounting for employee stock
options, was issued. SFAS 123(R) revises the disclosure  provisions of SFAS 123,
"Accounting for Stock Based Compensation" and supersedes  Accounting  Principles
Board ("APB") Opinion No. 25,  "Accounting for Stock Issued to Employees."  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
based on the estimated fair value of the awards. This statement is effective for
us as of the  beginning  of the first  interim or annual  reporting  period that
begins  after  December  15,  2005.  Since we had no  outstanding  options as of
December  31,  2004,  SFAS  123(R)  would  have had no impact  on our  financial
statements  had we  elected  to adopt the  provisions  of  123(R) in an  earlier
period.

LIQUIDITY AND CAPITAL RESOURCES

      Our total assets were  $1,430,921 at December 31, 2005 versus  $195,981 at
December 31,  2004.  The change in total  assets is  primarily  attributable  to
increases  in every  asset  class as a result of our  acquisition  of Rebel Crew
Films which resulted in an increase in our assets of approximately $750,000.

      On December 29, 2005,  we completed the  acquisition  of Rebel Crew Films.
Pursuant to the stock  purchase  agreement,  we acquired all of the  outstanding
equity  stock of Rebel Crew Films  from the Rebel  Crew Films  Shareholders.  As
consideration  for the acquisition we agreed to issue  21,207,080  shares of our
common stock (the "Purchase  Price") to the shareholders of Rebel Crew Films. In
connection  with the  acquisition  of Rebel Crew Films,  on December 29, 2005 we
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 we purchased a $556,307 principal amount
loan receivable owed by Rebel Crew Films to Rebel Holdings,  LLC in exchange for
the issuance of a $556,307  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 our assets now
owned or hereafter  acquired.  The secured  convertible note is convertible into
500,000  shares of our common  stock at the rate of  $1.112614  per  share.  Jay
Rifkin,  our  Chief  Executive  Officer  and one of our  directors,  is the sole
managing member of Rebel Holdings,  LLC. Following completion of the acquisition
our previous  shareholders now own 14,700,104 common shares.  Upon completion of
the  merger,  Rebel Crew Films  shareholders  owned  approximately  57.7% of the
outstanding  shares of common stock of  Digicorp.  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.

      The  remaining  increase in our assets is  attributed  to monies  borrowed
during the year from Rebel Holdings and the sole member of Rebel  Holdings,  who
is also our Chief Executive  Officer of $519,321 and $73,000,  respectively.  At
December 31, 2005 and December 31, 2004, the Company had a combined liability of
$629,307 and  $48,986,  respectively,  due to either Rebel  Holdings or the sole
member of Rebel  Holdings.  On December 29, 2005, we issued a promissory note in
the  amount of  $73,000  to the sole  member  (the  "Promissory  Note") of Rebel
Holdings.  The Promissory Note  represented  the outstanding  amount borrowed at
December 29, 2005. The Promissory  Note has a term of  approximately  six months
and bears 5.0% simple  interest.  On December 29, 2005, in  connection  with the
closing of the  Acquisition  we also issued a convertible  note in the amount of
$556,307 to Rebel Holdings (the "Note").  The Note has a term of five years from
December 29, 2005,  bears 4.5% simple interest and is convertible into shares of
our common stock at a conversion price of $1.112614 per share.


                                       15
<PAGE>

      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 December 31, 2005. We expect to
undertake  additional debt or 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.  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.

      Operating activities used $305,677 of cash for the year ended December 31,
2005, compared to providing $112,870 for the year ended December 31, 2004.

      Cash used in investing activities for the year ended December 31, 2005 and
2004 of $407,982, and $154,000,  respectively,  resulted almost exclusively from
the purchases of licensed Spanish language film content that was capitalized.

RESULTS OF OPERATIONS

REVENUES

      We generated revenues of $334,110 and $27,963 for the years ended December
31, 2005 and 2004, respectively.  During 2004 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  $80,211  and  $162,971  at  December  31,  2005 and 2004,
respectively,  represent advance royalty payments that are expected to be earned
over the subsequent twelve month periods.

      During the year ended  December  31,  2005,  licensing  revenue of $82,761
accounted for approximately 24.8% of our total revenue. The remaining revenue of
$251,349  represents  revenue generated through the direct sales of our licensed
content.  We expect that direct sales,  as a percentage of total  revenue,  will
significantly  increase  over the next year as we focus our efforts on expanding
our existing 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 were $690,871 and $144,434 in the years ended December
31, 2005 and 2004,  respectively.  A significant component of operating expenses
during the year ended  December 31,  2005,  related to cost of sales of $212,188
and an increase in salaries  and  employee  benefits of  approximately  $72,000.
These costs,  which were  insignificant  or non-existent  during the prior year,
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  approximately  $62,000  higher in the year  ended
December  31,  2005  compared  to  the  year  ended  December  31,  2004  due to
significant  increases  in  amounts  paid to  consultants  as well as legal  and
accounting fees. Amounts paid to various consultants  increased by approximately
$17,000  and  related  to  services  to  locate  Spanish  language  content  for
acquisition,  technical assistance in preparing the content for production,  and
sales and marketing of the titles.  Legal fees increased by approximately $5,000
due to the preparation and review of an increased amount of license  agreements.
Accounting fees, which increased by approximately  $40,000,  primarily relate to
costs  associated  with the audit of our December 31, 2004 financial  statements
and review of our  September 30, 2005  financial  statements.  Additionally,  we
accrued audit fees of  approximately  $29,000 for work  necessary to complete an
audit of our December 31, 2005 financial statements.


                                       16
<PAGE>

      Rent expense increased by approximately $24,000 in the year ended December
31,  2005  compared  to the  year  ended  December  31,  2004 due in part to our
relocation into commercial office space in August 2005, with base rent of $5,890
per month  combined  with  periods  of low rates of rent  during  the year ended
December 31, 2004.

      Amortization expense increased by approximately  $78,000 in the year ended
December  31,  2005  compared  to the year  ended  December  31,  2004 due to an
increased number of license agreements.

      General and administrative  expense increased by approximately  $78,000 in
the year ended  December 31, 2005  compared to the year ended  December 31, 2004
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  in the year  ended
December 31, 2004.

TAXES

      We are taxed  under  Title 26,  Chapter 1,  Subchapter  C of the  Internal
Revenue Code of 1986, as amended, and therefore subject to federal income tax on
the portion of our taxable income.

      At  December  31,  2005,  we  had a net  operating  loss  carryforward  of
approximately  $1,942,000 to offset future taxable income for federal income tax
purposes.  The utilization of the loss  carryforward to reduce any future income
taxes will depend on our ability to generate  sufficient taxable income prior to
the expiration of the net operating loss carryforwards. The carryforward expires
beginning in 2021.

      A change in the  ownership  of a majority of the fair market  value of our
common stock can delay or limit the  utilization  of existing net operating loss
carryforwards  pursuant to Internal  Revenue  Code  Section 382. We believe that
such a  change  occurred  during  the  year  ended  December  31,  2005  and are
evaluating the amount that our net operating loss carryforward  utilization will
be limited to.

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.


                                       17
<PAGE>

ITEM 7. FINANCIAL STATEMENTS.

                                    DIGICORP

                          INDEX TO FINANCIAL STATEMENTS

                                                                            Page

Report of Independent Registered Public Accounting Firm.......................19

Consolidated Balance Sheets as of
         December 31, 2005 and 2004...........................................20

Consolidated Statements of Operations for the years ended
         December 31, 2005, and 2004..........................................21

Consolidated Statements of Stockholders' Equity for the years ended
         December 31, 2005 and 2004...........................................22

Consolidated Statements of Cash Flows for the years ended
         December 31, 2005 and 2004...........................................23

Notes to Financial Statements..............................................24-33


                                       18
<PAGE>

             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Digicorp
Marina Del Rey, California

We have audited the  accompanying  consolidated  balance sheets of Digicorp (the
"Company")  as of December  31,  2005,  and 2004,  and the related  consolidated
statements of operations, stockholders' equity (deficit), and cash flows for the
years then ended. These consolidated financial statements are the responsibility
of the  Company's  management.  Our  responsibility  is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America in  accordance  with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain  reasonable  assurance about whether the
financial  statements  are free of  material  misstatement.  An  audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the  financial  statements.  An audit also  includes  assessing  the  accounting
principles  used  and  significant  estimates  made  by  management,  as well as
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Digicorp and subsidiaries as of
December  31, 2005,  and 2004,  and the results of its  operations  and its cash
flows  for the  years  then  ended  in  conformity  with  accounting  principles
generally accepted in the United States of America.


                                                         /s/ Peterson & Co., LLP

                                                         PETERSON & CO., LLP
                                                         San Diego, California
                                                         March 31, 2006


                                       19
<PAGE>

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

Consolidated Balance Sheets

--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                                        December 31,          December 31,
                                                                                            2005                  2004
                                                                                      ----------------      ----------------
<S>                                                                                   <C>                   <C>
ASSETS

CURRENT ASSETS

Cash and cash equivalents                                                             $        54,518       $         7,856
Accounts receivable, net                                                                       64,408                     --
Inventories                                                                                   130,168                     --
Other current assets                                                                          253,633                     --
                                                                                      ----------------      ----------------

TOTAL CURRENT ASSETS                                                                          502,727                 7,856

Other long term assets                                                                         48,922                     --
Property and equipment, net                                                                    83,016                     --
Intangible assets, net                                                                        796,256               188,125
                                                                                      ----------------      ----------------

TOTAL ASSETS                                                                          $     1,430,921       $       195,981
                                                                                      ================      ================

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

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES

Accounts payable                                                                      $       189,095       $             --
Accrued liabilities                                                                           128,145                 9,700
Due to related party                                                                           73,000                48,986
Deferred revenue                                                                               80,211               162,971
                                                                                      ----------------      ----------------

TOTAL CURRENT LIABILITIES                                                                     470,451               221,657

LONG TERM LIABILITIES

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

TOTAL LONG TERM LIABILITIES                                                                   362,613                     0

TOTAL LIABILITIES                                                                             833,064               221,657

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)

Common stock, $0.001 par value: 50,000,000 shares authorized;
    36,737,184 shares issued and outstanding as of December 31, 2005; 15,530,104
    shares issued and outstanding at December 31, 2004                                         36,737                15,530
Paid-in capital                                                                               958,982                  (905)
Accumulated deficit                                                                          (397,862)              (40,301)
                                                                                      ----------------      ----------------

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)                                                          597,857               (25,676)
                                                                                      ----------------      ----------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                  $     1,430,921       $       195,981
                                                                                      ================      ================
</TABLE>

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

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


                                       20
<PAGE>

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

Consolidated Statements of Operations

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

<TABLE>
<CAPTION>
                                                            Years Ended
                                                  December 31,       December 31,
                                                      2005               2004
                                                ---------------    ---------------
<S>                                             <C>                <C>
REVENUE
Sales                                           $      251,349     $           --
Licensing fees                                          82,761             27,963
                                                ---------------    ---------------

Total revenue                                          334,110             27,963

OPERATING EXPENSES
Cost of sales                                          212,188                 --
                                                ---------------    ---------------

Selling, general and administrative expenses           478,683            144,434
                                                ---------------    ---------------

Total operating expenses                               690,871            144,434
                                                ---------------    ---------------

Operating loss                                        (356,761)          (116,471)

OTHER INCOME                                                 --             79,628
                                                ---------------    ---------------

LOSS BEFORE INCOME TAXES                              (356,761)           (36,843)

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

NET LOSS                                        $     (357,561)    $      (37,643)
                                                ===============    ===============

BASIC AND DILUTED NET LOSS PER COMMON SHARE     $        (0.02)    $        (0.00)
                                                ===============    ===============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING          15,704,409         15,530,104
                                                ===============    ===============
</TABLE>

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

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


                                       21
<PAGE>

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

Consolidated Statements of Stockholders' Equity (Deficit)
Years Ended December 31, 2005 and 2004

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

<TABLE>
<CAPTION>
                                                                                                                         Total
                                                                     Common Stock                                    Shareholders'
                                                                   ----------------------   Paid-In     Accumulated      Equity
                                                                     Shares      Amount     Capital      Deficit       (Deficit)
                                                                   ----------  ----------  ----------   -----------  ------------
<S>                                                                <C>         <C>         <C>          <C>          <C>
BALANCES, December 31, 2003                                        15,530,104  $   15,530  $     (905)  $    (2,658) $     11,967

Net loss                                                                   --          --          --       (37,643)      (37,643)
                                                                   ----------  ----------  ----------   -----------  ------------

BALANCES, December 31, 2004                                        15,530,104  $   15,530  $     (905)  $   (40,301) $    (25,676)

Effects of recapitalization                                        21,207,080      21,207     766,194            --       787,401

Beneficial conversion feature in connection with convertible debt          --          --     193,693            --       193,693

Net loss                                                                   --          --          --      (357,561)     (357,561)
                                                                   ----------  ----------  ----------   -----------  ------------

BALANCES, December 31, 2005                                        36,737,184  $   36,737  $  958,982   $  (397,862) $    597,857
                                                                   ==========  ==========  ==========   ===========  ============
</TABLE>

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

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


                                       22
<PAGE>

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

Consolidated Statements of Cash Flows

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

<TABLE>
<CAPTION>
                                                                                                Years Ended
                                                                                      December 31,     December 31,
                                                                                           2005             2004
                                                                                      -------------    -------------
<S>                                                                                   <C>              <C>
Cash flows from operating activities:
    Net loss                                                                          $    (357,561)   $     (37,643)
    Adjustments to reconcile net loss to net cash provided by operating activities:
      Depreciation                                                                            1,577               --
      Amortization of licenses                                                              123,869           45,875
      Changes in operating assets and liabilities:
        Accounts receivable                                                                 (64,408)              --
        Inventories                                                                        (130,168)              --
        Other current assets                                                                (14,147)              --
        Accounts payable and accrued liabilities                                            217,921          (17,900)
        Deferred revenue                                                                    (82,760)         122,538
                                                                                      -------------    -------------

    Net cash provided by (used in) operating activities                                    (305,677)         112,870
                                                                                      -------------    -------------

Cash flows from investing activities:
  Cash acquired in acquisition                                                               43,408
  Purchases of licenses                                                                    (432,000)        (154,000)
  Purchases of property and equipment                                                       (19,390)              --
                                                                                      -------------    -------------

    Net cash used in investing activities                                                  (407,982)        (154,000)
                                                                                      -------------    -------------

Cash flows from financing activities:
  Proceeds from pre-acquisition advances                                                    180,000               --
  Proceeds from note financing                                                              507,321               --
  Proceeds from related party note                                                           73,000           48,986
                                                                                      -------------    -------------

    Net cash provided by financing activities                                               760,321           48,986
                                                                                      -------------    -------------

Net increase in cash and cash equivalents                                                    46,662            7,856

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

Cash and cash equivalents at end of period                                            $      54,518    $       7,856
                                                                                      =============    =============

  Supplemental disclosures of cash flow information:

  Cash paid during the year for income taxes                                          $       1,600    $          --

  Non-cash investing and financing activity:

        Assets acquired and liabilities assumed for issuance of common stock in
          connection with recapitalization:

          Acquisition of intangible assets                                            $     300,000    $          --
          Acquisition of other current assets                                         $     239,486    $          --
          Acquisition of property and equipment                                       $      65,203    $          --
          Acquisition of other long term assets                                       $      48,922    $          --
          Assumption of accrued liabilities                                           $      89,619    $          --

        Reclassification of amount due to related party                               $      48,986    $          --
          to convertible note payable - related party
</TABLE>

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

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


                                       23
<PAGE>

DIGICORP
Notes to Consolidated Financial Statements
December 31, 2005

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 3).

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

Principles of Consolidation

The accompanying  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.

Liquidity

The  accompanying  financial  statements are prepared  assuming the Company is a
going concern which  contemplates  the realization of assets and satisfaction of
liabilities in the normal course of business.  The Company has a working capital
surplus of $32,276 at December 31, 2005, which includes deferred revenue balance
of $80,211,  as discussed  below.  During the year ended  December 31, 2005, the
Company  primarily  relied upon revenues  generated from the direct sales of its
Latino home  entertainment  content and on loans by a related  party to fund its
operations.  Management believes that future revenues combined with either loans
or direct  equity  investments  into the Company will be  sufficient to fund the
Company's operations for the 12 months subsequent to December 31, 2005 (See Note
16).

Use of Estimates

The  financial  statements  have been  prepared in  accordance  with  accounting
principles generally accepted in the United States ("GAAP").  The preparation of
financial  statements  in  conformity  with  GAAP  requires  management  to make
estimates  and  assumptions  that affect the amounts  reported in the  financial
statements and  accompanying  notes.  These  estimates are based on knowledge of
current events and anticipated future events and accordingly, actual results may
differ from those estimates.

Cash and Cash equivalents

The Company considers only highly liquid  investments such as money market funds
and  commercial  paper with  maturities  of 90 days or less at the date of their
acquisition as cash and cash equivalents.


                                       24
<PAGE>

DIGICORP
Notes to Consolidated Financial Statements (continued)

The Company  maintains cash in bank and deposit  accounts which,  at times,  may
exceed federally  insured limits.  The Company has not experienced any losses in
such accounts.  The Company believes it is not exposed to any significant credit
risk on cash and cash equivalents.

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.

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. Since the Company had no outstanding options as of December 31,
2004, SFAS 123(R) would have had no impact on the Company's financial statements
had the  Company  elected to adopt the  provisions  of SFAS 123(R) in an earlier
period.  During the year  ended  December  31,  2005,  stock-based  compensation
totaling  approximately  $2.90  million was recorded by the Company prior to the
reverse merger with Rebel Crew Films,  and as such is included in the pre-merger
net loss.  Outstanding  stock-based  compensation  awards  were  granted  by the
Company during 2005,  prior to the reverse merger,  at the per share fair market
value on the grant date.  Vesting of  outstanding  options and  warrants  differ
based on the terms of each award.

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.  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.  Advance  payments  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. Deferred revenue balances of $80,211 and $162,971
at December 31, 2005 and 2004, respectively,  represent advance royalty payments
that are  expected  to be  earned  over the  subsequent  twelve  month  periods.
Revenues from direct sales are recorded upon shipment.


                                       25
<PAGE>

DIGICORP
Notes to Consolidated Financial Statements (continued)

Accounts Receivable

Accounts receivable are recorded at the invoice amount and do not bear interest.
Accounts  receivable  at December 31, 2005 are presented net of an allowance for
doubtful accounts of approximately  $15,000. The allowance for doubtful accounts
is the  Company's  estimate  of the  amount  of  probable  credit  losses in the
Company's  existing accounts  receivable.  The Company  determines the allowance
based on historical write-off experience.  The Company reviews its allowance for
doubtful  accounts  monthly.  Past due balances are  reviewed  individually  for
collectibility. Account balances are charged off against the allowance after all
means of collection have been exhausted and potential for recovery is considered
remote. The Company does not have any off-balance-sheet  exposure related to its
customers.

Inventory

Inventories,  consisting primarily of Spanish language DVD titles, are stated at
the lower of cost (average) or market.

Property and Equipment

Property  and  equipment  are  recorded  at  cost  and  depreciated   using  the
straight-line  method over the useful lives of the assets,  generally from three
to seven years.

Income Taxes

Deferred  income  taxes are  provided  in amounts  sufficient  to give effect to
temporary  differences between financial and tax reporting,  principally related
to net operating loss  carryforwards.  Valuation  allowances are provided to the
extent realization of recorded tax assets is not considered likely.

3. 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.


                                       26
<PAGE>

DIGICORP
Notes to Consolidated Financial Statements (continued)

4. PROPERTY AND EQUIPMENT

Property and equipment at December 31, 2005 and 2004 consist of the following:

                                                     2005               2004
                                                  ----------------------------
Computer Software and Equipment                   $  78,698          $      --
Office Furniture and Equipment                        6,629                 --
                                                  ----------------------------
Total Property and Equipment                         85,327                 --
                                                  ----------------------------
Less: accumulated depreciation                       (2,311)                --
                                                  ----------------------------
Property and equipment, net                       $  83,016          $      --
                                                  ============================

Depreciation expense for the year ended December 31, 2005 was $1,577.

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  approximately  $325,000 and is
being  amortized  over the term of the  agreement.  At December  31,  2005,  the
unamortized  balance is $244,565.  Of this balance $195,643 is included in other
current assets and $48,922 is included in other long term assets.  The remaining
balance  recorded in other current  assets  relates to an amount due the Company
for reimbursable  expenses from a related party of $35,794 and other items which
amount to $22,196.

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 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.  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 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  years  ended  December  31,  2005 and 2004,
amortization  expense related to the licensed  content was $123,869 and $45,875,
respectively.

Intangible assets and accumulated amortization consisted of the following:

                                        Years Ended
                                 December 31,    December 31,
                                     2005             2004
                                 ------------    ------------

iCodemedia Assets                $    300,000    $         --
Licensed content                      686,000         254,000
Less: accumulated amortization       (189,744)        (65,875)
                                 ------------    ------------

   Intangible Assets, net        $    796,256    $    188,125
                                 ============    ============


                                       27
<PAGE>

DIGICORP
Notes to Consolidated Financial Statements (continued)

In connection with these agreements, the Company expects to record the following
amortization expense over the next five years:

  Fiscal year ended            Amortization
-----------------------        --------------

December 31, 2006              $     146,675
December 31, 2007              $     146,675
December 31, 2008              $     100,738
December 31, 2009              $      79,977
December 31, 2010              $      22,191

7. INCOME TAXES

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between  carrying  amounts of assets and  liabilities  for  financial  reporting
purposes and the amounts used for tax  purposes.  Significant  components of the
Company's deferred tax assets as of December 31, 2005 and 2004 are as follows:

                                                 2005           2004
                                             -----------    -----------
Deferred tax assets
   Federal net operating loss carryforward   $   660,302    $     9,185
   State net operating loss carryforward         171,386          2,175
   Stock based compensation                      704,137             --
   Deferred revenue                               34,362          5,343
                                             -----------    -----------
     Total gross deferred tax asset            1,570,187         16,703
     Less valuation allowance                 (1,570,187)       (16,703)
                                             -----------    -----------
     Net deferred tax asset                  $        --    $        --
                                             ===========    ===========

The ultimate  realization  of deferred tax assets depends upon the generation of
future  taxable income during the periods in which those  temporary  differences
become deductible. Based upon the Company's loss for the year ended December 31,
2005 the Company has provided a valuation allowance in the amount of $1,570,187,
an  increase  of  $1,553,484.  The  amount of  deferred  tax  assets  considered
realizable could change if future taxable income is realized. A component of the
Company's  deferred  tax  assets  are  federal  and  state  net  operating  loss
carryforwards of approximately $1,942,000 and $1,939,000 respectively.  Included
in the federal and state net operating loss  carryforwards are federal and state
net operating losses of Digicorp prior to the  recapitalization  (see note 3) of
approximately $554,000 and $144,000,  respectively. A greater than 50% change in
the ownership of the Company's  common stock can delay or limit the  utilization
of existing net operating loss  carryforwards  pursuant to the Internal  Revenue
Code Section 382. The Company  believes that such a change  occurred on December
29,  2005.  The  Company  is  evaluating  the net  operating  loss  carryforward
limitation imposed by Internal Revenue Code Section 382 for net operating losses
incurred  before the change date. The net operating  losses will begin to expire
in 2021 and 2011, respectively.


                                       28
<PAGE>

DIGICORP
Notes to Consolidated Financial Statements (continued)

At December 31, 2005 and 2004, the Company's tax provision consists of:

                          2005               2004
                       -----------        -----------
Current
       Federal         $        --        $        --
       State                   800                800
Deferred
       Federal                  --                 --
       State                    --                 --
                       -----------        -----------
Total                  $       800         $      800
                       ===========        ===========

For the years ended December 31, 2005 and 2004, a reconciliation  of the federal
statutory tax rate to the Company's effective tax rate is as follows:

                                                     2005        2004
                                                   -------     -------
Federal statutory tax rate                          (34.00)%    (34.00)%
State and local income taxes, net of federal tax      0.15        1.43
benefit
Non deductible items                                  0.39        0.75
Valuation allowance                                  33.70       33.99
                                                   -------     -------

            Total effective tax rate                  0.24%       2.17%
                                                   =======     =======

8. 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 December
31, 2005 to purchase 8,312,500 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  year  ended  December  31,  2005,  as  their   inclusion  would  have  been
antidilutive.  At December 31, 2004 there were no outstanding options,  warrants
or convertible notes.


                                       29
<PAGE>

DIGICORP
Notes to Consolidated Financial Statements (continued)

9. ACCRUED LIABILITIES

Accrued liabilities at December 31, 2005 and 2004 are
comprised of the following:

                                        December 31,             December 31,
                                            2005                     2004
                                       ---------------          --------------
   Obligations on license agreements   $       58,500           $           --
   Accrued salaries                            37,500                       --
   Accrued professional fees                   29,000                    4,625
   Income taxes payable                           800                    2,400
   Other                                        2,345                    2,675
                                       ---------------          --------------
                                       $      128,145           $        9,700
                                       ===============          ==============

10. 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
$556,307  principal  amount  loan  receivable  owed by Rebel Crew Films to Rebel
Holdings,  LLC in  exchange  for the  issuance  of a $556,307  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  $193,694  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.  Through  December  31,  2005,  no
interest expense had been recorded from the debt discount  amortization,  and as
of December 31, 2005, the remaining debt discount  balance  attributable  to the
beneficial conversion feature was $193,694.


                                       30
<PAGE>

DIGICORP
Notes to Consolidated Financial Statements (continued)

11. COMMITMENT AND CONTINGENCIES

During part of 2005 and all of 2004 the Company rented space on a month to month
basis.  Rent  expense  during the years  ended  December  31,  2005 and 2004 was
$36,400 and  $11,505,  respectively.  In August 2005 the Company  entered into a
commercial lease agreement for office space. The lease requires monthly payments
of base rent in the amount of $5,890 from August 21, 2005 through  September 30,
2012.  Further,  on each  anniversary  date the  base  rent is  subject  to a 3%
increase over the previous year.  Approximate future minimum rent payments under
this lease are as follows:

<TABLE>
<CAPTION>
                              Years ended December 31,
-------------------------------------------------------------------------------------     -----------
    2006           2007          2008         2009          2010         Thereafter         Total
-------------   -----------   -----------   ----------    ----------    -------------     -----------
<S>             <C>           <C>           <C>           <C>           <C>               <C>
$      71,400   $    73,500   $    75,700   $   78,000    $   80,400    $     139,000     $   518,000
</TABLE>

12. STOCK OPTION PLANS

Effective July 20, 2005, the Board of Directors of the Company approved the 2005
Stock  Option and  Restricted  Stock Plan (the "2005  SOP").  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.
As of December  31,  2005,  the Company has granted a total  11,325,000  shares,
3,012,500  of which were  subsequently  cancelled,  and of which  2,137,500  are
vested.

The following is a summary of the Stock Option Plan activity:

<TABLE>
<CAPTION>
                                                              Outstanding Options & Warrants
                                             Shares
                                          Available for        Number of       Weighted Average
                                              Grant             Shares         Exercise Price
                                         ---------------    ---------------    ----------------
  <S>                                        <C>                 <C>           <C>

  December 31, 2004                                   --                 --    $             --

  Adoption of 2005 SOP                        15,000,000
  Grants                                     (11,325,000)        11,325,000    $           0.62
  Cancellations                                3,012,500         (3,012,500)   $           0.25
                                         ---------------    ---------------    ----------------

  December 31, 2005                            6,687,500          8,312,500    $           0.75



  Options and warrants exercisable at:
    December 31, 2004                                                    --    $             --
    December 31, 2005                                             2,137,500    $           0.25
</TABLE>


                                       31
<PAGE>


DIGICORP
Notes to Consolidated Financial Statements (continued)

The  outstanding  options and  warrants,  all of which are issued under the 2005
SOP, have a remaining contractual life of approximately 8.4 years.

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.

The  following  table  summarizes   information   about  common  stock  warrants
outstanding at December 31, 2005:

<TABLE>
<CAPTION>
                    Outstanding                                     Exercisable
--------------------------------------------------------   -----------------------------
                               Weighted
                                Average
                               Remaining      Weighted                      Weighted
                              Contractual     Average                        Average
Exercise          Number         Life         Exercise       Number         Exercise
  Price         Outstanding     (Years)        Price       Exercisable        Price
-------------   -----------   -----------   ------------   -----------   ---------------
<S>             <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 December  31, 2005 and 2004,  the  Company  has a liability  of $556,307  and
$48,986,  respectively,  due  to  Rebel  Holdings,  LLC,  a  California  limited
liability company ("Rebel Holdings"),  an entity that owned approximately 52% of
the  outstanding  shares of the Company's  common stock at December 31, 2005. In
connection  with the  borrowings,  the Company issued a convertible  note in the
amount of $556,307 to Rebel  Holdings  (the "Rebel  Note") on December 29, 2005.
The monies  loaned by Rebel  Holdings  to the Company  were  utilized to pay for
certain  capitalized  license  agreements and operating expenses of the Company.
The Rebel Note has a term of five years from closing, bears 4.5% simple interest
and is  convertible  into shares of the  Company's  common stock at a conversion
price of $1.112614 per share (see note 10).

Additionally, at December 31, 2005 the Company has a liability of $73,000 due to
the sole  member of Rebel  Holdings.  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 December 31, 2005 includes  $35,794 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, William B. Horne, is also
Chief Financial Officer of AGB & Company.


                                       32
<PAGE>

DIGICORP
Notes to Consolidated Financial Statements (continued)

15. OTHER INCOME

Other income recognized during 2004 consists primarily of finder's fees received
by the  Company  from  a  distributor  of  the  Company's  licensed  content  as
consideration for the Company's efforts in assisting the distributor in securing
rights to other third party film distribution rights

16. SUBSEQUENT EVENTS

Acquisition

On  February 7, 2006,  the  Company  entered  into an asset  purchase  agreement
pursuant to which the Company purchased the following  Internet domain names and
all  materials,  intellectual  property,  goodwill  and  records  in  connection
therewith (the "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.  As  consideration  for the  Assets,  the  Company  issued an
aggregate of 100,000 shares of its common stock.

Subscription Agreement

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.

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.


                                       33
<PAGE>

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

      On October 25, 2005, we engaged the firm of Peterson & Co. to serve as our
independent  registered  public  accountants.  On October 27, 2005,  we notified
Jones Simkins,  P.C. ("Jones  Simkins") that we were terminating  Jones Simkins'
services. The decision to change accountants was recommended and approved by our
Board of Directors.

      During the two fiscal  years  ended June 30,  2005 and 2004,  and  through
October 27, 2005, (i) there were no  disagreements  between us and Jones Simkins
on any  matter  of  accounting  principles  or  practices,  financial  statement
disclosure  or  auditing  scope  or  procedure  which,  if not  resolved  to the
satisfaction  of Jones Simkins would have caused Jones Simkins to make reference
to the matter in its reports on our  financial  statements,  and (ii) except for
Jones Simkins' report on our June 30, 2004 financial  statements dated September
1,  2004  which  included  an  explanatory   paragraph  wherein  they  expressed
substantial  doubt  about our  ability to  continue  as a going  concern,  Jones
Simkins' reports on our financial  statements did not contain an adverse opinion
or  disclaimer  of opinion,  or was modified as to  uncertainty,  audit scope or
accounting principles.  During the two fiscal years ended June 30, 2005 and 2004
and through  October 27, 2005,  there were no reportable  events as described in
Item 304(a)(1)(iv) of Regulation S-B.

      During the two fiscal  years  ended June 30,  2005 and 2004,  and  through
October 27, 2005, we did not consult with Peterson & Co. regarding either:

      1.    The   application   of   accounting   principles   to  any  specific
            transaction,  either  completed  or  proposed,  or the type of audit
            opinion  that might be rendered  on our  financial  statements,  and
            neither a written  report was  provided  to  Peterson & Co. nor oral
            advice was provided that  Peterson & Co.  concluded was an important
            factor considered by us in reaching a decision as to the accounting,
            auditing or financial reporting issue; or

      2.    Any matter  that was either  subject of  disagreement  or event,  as
            defined in Item  304(a)(1)(iv)  of  Regulation  S-B and the  related
            instruction to Item 304 of Regulation S-B, or a reportable event, as
            that term is explained in Item 304(a)(1)(iv) of Regulation S-B.

ITEM 8A.        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  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 to 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.   However,  we  are  implementing  more  structured
procedures to improve our internal  control over the financial  reporting of our
subsidiary Rebel Crew Films,  Inc., a privately held company that we acquired on
December  29,  2005,  in  order  to  ensure  that its  disclosure  controls  and
procedures  continue to be effective in future  periods.  These  initiatives may
result in changes to our internal control over financial reporting.

      In  designing  and  evaluating   the  internal   controls  over  financial
reporting, management recognizes that any controls and procedures, no matter how
well designed and operated,  can provide only reasonable  assurance of achieving
the desired control objectives, and management is required to apply its judgment
in evaluating the cost-benefit relationship of possible controls and procedures.

ITEM 8B. OTHER INFORMATION.

      Between  September  2005 and October 2005,  Jay Rifkin loaned an aggregate
total  principal  amount of $73,000 to Rebel Crew Films. We have agreed to repay
this loan to Mr.  Rifkin  pursuant  to the terms of a $73,000  principal  amount
promissory note due June 30, 2006 which accrues interest at 5% per annum. In the
event of breach of the  promissory  note,  the interest rate will increase to 8%
per annum.


                                       34
<PAGE>

                                    PART III

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

      The  following  table sets forth the names and ages of the  members of our
Board of Directors and our executive officers and the positions held by each.

Name                                Age     Position
Jay Rifkin                          50      Chief Executive Officer, Director
William B. Horne                    37      Chief Financial Officer and Director
Philip Gatch                        41      Chief Technology Officer
Alice M. Campbell                   55      Director
Alan Morelli                        44      Director
David M. Kaye                       51      Director

      Officers are elected  annually by the Board of  Directors  (subject to the
terms of any  employment  agreement),  to hold such  office  until an  officer's
successor has been duly appointed and qualified,  unless an officer sooner dies,
resigns or is removed by the Board. Some of our directors, director nominees and
executive  officers also serve in various  capacities with our subsidiary  Rebel
Crew Films.  There are no family  relationships  among any of our  directors and
executive officers.

      Below is a brief  description  of the above persons'  business  experience
during the past five years based on information supplied by each of them.

      Jay Rifkin, Chief Executive Officer and Director.  Effective September 30,
2005,  our Board of Directors  appointed Mr. Rifkin  interim  President  pending
closing of the  acquisition of Rebel Crew Films.  Mr. Rifkin has been one of our
directors  since March 26, 2006. On December 29, 2005,  Mr.  Rifkin's  title was
changed to Chief Executive Officer effective as of September 30, 2005. From 2004
to Present, Mr. Rifkin has been the sole Managing Member of Rebel Holdings, LLC,
through which he is also the majority  shareholder of Rebel Crew Films,  Inc. In
1995, Mr. Rifkin founded Mojo Music,  Inc., a music publishing  company,  and he
has been  President  of Mojo Music,  Inc.  since it was founded.  Mr.  Rifkin is
Chairman and a founder of Media  Revolution,  a marketing agency founded in 1977
that has executed marketing  campaigns for major Hollywood  studios.  Mr. Rifkin
has served as Producer and Executive  Producer on various  motion  pictures with
his most recent production  "Waiting" (Lion's Gate) released on October 7, 2005.
Mr.  Rifkin  is also a music  producer,  engineer  and  songwriter.  Mr.  Rifkin
received a Grammy Award for Best  Children's  Album and an American  Music Award
for  Favorite  Pop/Rock  Album for his work on  Disney's  "The Lion  King,"  and
received a Tony  nomination for "The Lion King" on Broadway.  From 1988 to 2004,
Mr.  Rifkin,  through  Mojo Music,  Inc.,  served as a Managing  Member of Media
Ventures,  LLC, an entertainment  cooperative founded by Mr. Rifkin and composer
Hans Zimmer. In 1995, Mr. Rifkin founded Mojo Records, LLC, which in 1996 became
a joint venture with Universal  Records,  and was subsequently sold to Zomba/BMG
Records in 2001. Mr. Rifkin also serves as President of Cyberia  Holdings,  Inc.
which is the majority owner of Media Revolution. In 2004, Cyberia Holdings, Inc.
filed for bankruptcy under Chapter 7 which cased was dismissed in May 2005.

      William B. Horne, Chief Financial Officer and Director. Mr. Horne has been
our Chief  Financial  Officer and a director since July 20, 2005. From September
30, 2005 until December 29, 2005,  Mr. Horne also served as our Chief  Executive
Officer and Chairman of our Board of  Directors.  Since July 5, 2005,  Mr. Horne
has been the Chief  Financial  Officer and a director  of Ault  Glazer  Bodnar &
Company,  Inc.  Since July 5,  2005,  Mr.  Horne has also been  Chief  Financial
Officer of Patient Safety Technologies, Inc. and its subsidiaries. From May 2002
to April 2005, Mr. Horne held the position of Chief Financial  Officer of Alaska
Wireless  Communications,  a privately  held  advanced  cellular  communications
company.  Since January 2002,  Mr. Horne has also provided  strategic  financial
consulting services to both private and public companies.  From November 1996 to
December  2001,  Mr. Horne held the position of Chief  Financial  Officer of The
Phoenix  Partners,  a venture  capital limited  partnership  located in Seattle,
Washington.

      Philip  Gatch,  Chief  Technology  Officer.  Mr.  Gatch has been our Chief
Technology  Officer  since June 30, 2005.  From June 30, 2005 until  October 14,
2005,   Mr.  Gatch  was  also  Chief   Technology   Officer  of  Patient  Safety
Technologies, Inc. Since May 12, 2005, Mr. Gatch has been President and owner of
Cinapse   Digital  Media,   LLC,  a  company  that  operates  a  production  and
post-production  media content  facility.  From September 2003 to June 2005, Mr.
Gatch was Director of Technical  Services of The DR Group. From February 2002 to
April 2003,  Mr. Gatch was Director of Research and  Development  for Media.net.
From 1999 to 2002,  Mr.  Gatch was  Director of  Research  and  Development  for
Digital Entertainment Solutions.


                                       35
<PAGE>

      Alice M. Campbell,  Director.  Ms. Campbell has been a member of our Board
of Directors  since July 16, 2005.  Since June 23, 2005, Ms. Campbell has been a
director of IPEX, Inc., a public company quoted on the OTC Bulletin Board. Since
October  22,  2004,  Ms.   Campbell  has  been  a  director  of  Patient  Safety
Technologies,  Inc., a public  company  listed on the American  Stock  Exchange.
Since 2001,  Ms.  Campbell  has been,  and is  currently,  an  investigator  and
consultant,   specializing  in  research  and  litigation  services,   financial
investigations  and  computer  forensics,  for  major  companies  and law  firms
throughout the United States.  Ms. Campbell is a certified fraud specialist,  as
well as a certified  instructor for the Regional  Training  Center of the United
States Internal Revenue Service and for the National  Business  Institute.  From
1979 to 2001,  Ms.  Campbell  served as a special  agent for the  United  States
Treasury  Department  where she  conducted  criminal  investigations  and worked
closely  with the  United  States  Attorney's  Office and with  several  federal
agencies,   including  the  Internal   Revenue   Service,   Federal   Bureau  of
Investigation,   Secret  Service,   Customs  Service,  State  Department,   Drug
Enforcement  Agency,  Bureau of Alcohol,  Tobacco and Firearms  and U.S.  Postal
Service.

      Alan Morelli,  Director.  Mr. Morelli has been one of our directors  since
March 26, 2006. Mr. Morelli is a consultant who has served as Managing  Director
of Analog  Ventures,  LLC, a  consulting  firm  located  in  Pacific  Palisades,
California,  since 1997. Mr. Morelli is also currently  serving as a director of
Physical Therapy Holdings, Inc. and Precise Exercise Equipment. Physical Therapy
Holdings,  Inc. is a  development-stage  company.  Precise  develops  innovative
commercial  fitness  or  rehabilitation  technology  used in  health  clubs  and
consumer  equipment  since  1994.  Mr.  Morelli  received  a B.S.  from  Rutgers
University (1983) and a J.D. from Georgetown University Law Center (1986).

      David M. Kaye,  Director.  Mr.  Kaye has been one of our  directors  since
March 26,  2006.  Mr. Kaye is an attorney and has been a partner in the law firm
of Danzig Kaye Cooper  Fiore & Kay,  LLP  located in Florham  Park,  New Jersey,
since the firm's  inception in February  1996.  Since 1980,  Mr. Kaye has been a
practicing  attorney  in the New York City  metropolitan  area  specializing  in
corporate and securities matters. He is currently a director of Dionics, Inc., a
company which designs, manufactures and sells semiconductor electronic products.
Mr. Kaye received his B.A. from George Washington University (1976) and his J.D.
from the Benjamin N. Cardozo School of Law, Yeshiva University (1979).

AUDIT COMMITTEE

      The Audit  Committee is appointed by the Board of Directors in  fulfilling
its  responsibilities to oversee:  (1) the integrity of our financial statements
and  disclosure  controls;  (2)  the  qualifications  and  independence  of  our
independent accountants; (3) the performance of our independent accountants; and
(4)  compliance  with legal and  regulatory  requirements.  Alice M. Campbell is
presently  the only  member of our Audit  Committee  and she is  Chairman of the
Audit  Committee.  The  Board  has  determined  that Ms.  Campbell  is an "audit
committee  financial  expert"  as  defined  under  Item  401 of  Regulation  S-B
promulgated pursuant to the Securities Exchange Act of 1934, as amended.

COMPENSATION COMMITTEE

      The  Compensation  Committee  is  appointed  by the Board of  Directors to
discharge the  responsibilities  of the Board  relating to  compensation  of our
executive  officers.  Alice M.  Campbell  is  currently  the only  member of the
Compensation Committee and she is Chairman of the Compensation Committee.

CODE OF ETHICS

      We have adopted a Code of Ethics and Business  Conduct that applies to our
Chief Executive Officer and Chief Financial  Officer,  which is filed as Exhibit
14.1 to our annual  report on Form  10-KSB  for the  fiscal  year ended June 30,
2005.  Upon request,  we will provide to any person without charge a copy of our
Code of Ethics.  Any such request should be made to Attn:  Secretary,  Digicorp,
4143 Glencoe Avenue, Marina Del Rey, CA 90292. We are in the process of building
a website where our Code of Ethics will be available to investors.


                                       36
<PAGE>

SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE

      Section  16(a)  of the  Securities  Exchange  Act  of  1934  requires  our
directors and executive  officers and persons who beneficially own more than ten
percent  of a  registered  class of our equity  securities  to file with the SEC
initial  reports of ownership and reports of change in ownership of common stock
and other of our equity  securities.  Officers,  directors  and greater than ten
percent  stockholders  are required by SEC regulations to furnish us with copies
of all Section 16(a) forms they file. To our  knowledge,  the following  persons
have failed to file,  on a timely  basis,  the  identified  reports  required by
Section  16(a) of the  Exchange  Act during the most  recent  fiscal  year ended
December 31, 2005:

<TABLE>
<CAPTION>
                                                 Number              Transactions not   Known failures to
Name and Relationship                            of late reports     timely reported    file a required form
---------------------                            ----------------    ---------------    --------------------
<S>                                                    <C>                    <C>               <C>
Philip Gatch, Chief Technology Officer                 2                      2                 0
William B. Horne, Chief Financial Officer
     and Director                                      2                      2                 0
Patient Safety Technologies, Inc., Former
     10% Owner                                         1                      1                 0
Melanie Glazer, Former Director                        2                      2                 0
Milton "Todd" Ault, III, Former Officer,
     Former Director and Former 10% Owner              0                     17                 0
Kathryn Macenzie Queen, Former Officer                 3                      3                 0
Lynne Silverstein, Former Officer and
     Former Director                                   2                      2                 0
Alice M. Campbell, Former Director                     2                      2                 0
Darrell W. Grimsley, Jr., Former Director              2                      0                 2
Don J. Colton, Former Officer, Former Director
     and Former 10% Owner                              1                      3                 1
Gregg B. Colton, Former Officer, Former
     Director and Former 10% Owner                     1                      2                 1
Pioneer Oil and Gas, affiliate of Former
     Director                                          1                      1                 1
</TABLE>

ITEM 10. EXECUTIVE COMPENSATION.

      The  following   table  sets  forth   information   concerning  the  total
compensation  that we have  paid or that has  accrued  on  behalf  of our  chief
executive  officer  and  other  executive  officers  with  annual   compensation
exceeding  $100,000 during the years ended December 31, 2005, 2004 and 2003 (the
"named executive officers").

                           SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
                                                                                            Long-Term
                                                                                          Compensation
                                                                            ------------------------------------------
                                              Annual Compensation                      Awards               Payouts
                                      ------------------------------------- ------------------------------ -----------
                                                                  Other                       Securities                   All
                                                                 Annual     Restricted       Under-lying    LTIP         Other
         Name and                                                Compen-    Stock Award(s)    Options/     Payouts       Compen-
    Principal Position        Year     Salary ($)   Bonus ($)  sation ($)   ($)               SARs (#)        ($)      sation ($)
--------------------------- --------- ------------- ---------- ------------ ----------------- ------------ ----------- ------------
<S>                          <C>            <C>         <C>         <C>         <C>             <C>             <C>         <C>
Milton "Todd" Ault III (1)   2005           0           0           0           0               2,000,000       0           0
   Former CEO and            2004           0           0           0           0                       0       0           0
   Former Chairman           2003           0           0           0           0                       0       0           0

William B. Horne (2)         2005           0           0           0           0                 500,000       0           0
   CFO, Former CEO and       2004           0           0           0           0                       0       0           0
   Former Chairman           2003           0           0           0           0                       0       0           0

Philip Gatch (3)             2005   $  23,866           0           0   $  11,250                 250,000       0           0
   CTO                       2004           0           0           0           0                       0       0           0
                             2003           0           0           0           0                       0       0           0

Jay Rifkin (4)               2005           0           0           0           0               4,400,000       0           0
   CEO and President and     2004           0           0           0           0                       0       0           0
   Principal Executive       2003           0           0           0           0                       0       0           0
   Officer of Rebel Crew
   Films
</TABLE>

(1)   Mr. Ault was  appointed  Chief  Executive  Officer on April 26, 2005,  and
      director and Chairman of the Board of Directors on July 16, 2005. Mr. Ault
      resigned  from the positions of Chief  Executive  Officer and director and
      Chairman of the Board of Directors on September 30, 2005.

(2)   Mr. Horne was appointed Chief  Financial  Officer and director on July 20,
      2005, and Chief  Executive  Officer and Chairman of the Board of Directors
      on September  30,  2005.  Mr.  Horne  resigned  from the position of Chief
      Executive Officer on December 29, 2005.

(3)   Mr.  Gatch  was  hired as  Chief  Technology  Officer  of the  Company  on
      September  20,  2005.  As part of his  employment  agreement  Mr. Gatch is
      entitled to receive  restricted  stock awards of $45,000 per year.  During
      the year ended  December 31, 2005 Mr. Gatch was received  16,071 shares of
      restricted stock valued at $11,250.

(4)   Mr.  Rifkin was  appointed  President  on September  30,  2005,  and Chief
      Executive Officer and director nominee on December 29, 2005.

                               OPTIONS GRANT TABLE

      The  following  table sets  forth  information  with  respect to the named
executive officers  concerning the grant of stock options during the fiscal year
ended  December  31,  2005.  We did not have  during  such fiscal year any plans
providing for the grant of stock appreciation rights ("SARs").


                                       37
<PAGE>

<TABLE>
<CAPTION>
                                        Option/SAR Grants in Last Fiscal Year
-----------------------------------------------------------------------------------------------------------------------

                                                                                    Potential
                                                                               Realizable Value at
                                                                                  Assumed Annual
                                                                                  Rates of Stock      Alternative to
                                                                                Price Appreciation     (f) and (g):
                              Individual Grants                                  for Option Term     Grant Date Value
------------------------------------------------------------------------------  ------------------   -----------------
           (a)              (b)             (c)          (d)         (e)       (f)         (g)               (h)
                                         % of Total
                            Number of    Options/
                            Securities   SARs
                            Underlying   Granted to    Exercise
                            Options/     Employees     or Base                                          Grant Date
                            SARs         in Fiscal     Price      Expiration                             Present
           Name             Granted (#)  Year          ($/Sh)     Date          5% ($)     10% ($)      Value ($) (1)
--------------------------- ------------ ------------- ---------- ----------- ---------- ---------- -------------------
<S>                         <C>           <C>           <C>      <C>           <C>        <C>          <C>
Milton "Todd" Ault III (2)  2,000,000     2,000,000     $ 0.25   7/20/2015     ---        ---          $   494,200
William B. Horne (3)          500,000       500,000     $ 0.25   7/20/2015     ---        ---          $   123,550
Philip Gatch (4)              250,000       250,000     $ 0.25   7/20/2015     ---        ---          $    61,775
Jay Rifkin (5)              4,400,000     4,400,000     $ 0.85   9/30/2015     ---        ---          $ 3,696,620
</TABLE>

(1)   The value shown was calculated  utilizing the Black-Scholes option pricing
      model and are presented  solely for the purpose of comparative  disclosure
      in accordance  with certain  regulations  of the  Securities  and Exchange
      Commission.  This model is a  mathematical  formula  used to value  traded
      stock price  volatility.  The actual value that an  executive  officer may
      realize,  if any, is  dependent  on the amount by which the stock price at
      the time of exercise  exceeds the  exercise  price.  There is no assurance
      that the value  realized by an  executive  officer  will be at or near the
      value estimated by the Black-Scholes  model. In calculating the grant date
      present values, we used the following assumptions: (a) expected volatility
      of  approximately  155%;  (b)  risk-free  rate of return of  approximately
      3.75%;  (c) no  dividends  payable  during the  relevant  period;  and (d)
      exercise at the end of a 10 year period from the date of grant.

(2)   On July 20, 2005, as consideration for service as Chief Executive Officer,
      we granted Milton "Todd" Ault, III options to purchase 2,000,000 shares of
      common  stock  with an  exercise  price of $0.25 per  share.  These  stock
      options would have vested quarterly over two years,  however, on September
      30, 2005, the Board of Directors  accelerated  the vesting of such options
      such that options to purchase  475,000 shares of common stock  immediately
      vested and are  exercisable  for a period of 18 months from  December  29,
      2005. The remaining  options to purchase  1,525,000 shares of common stock
      were cancelled.

(3)   On July 20, 2005, as consideration  for service as Chief Financial Officer
      and  Director,  we granted  William B. Horne  options to purchase  500,000
      shares of common  stock with an exercise  price of $0.25 per share.  These
      stock  options would have vested  quarterly  over two years,  however,  on
      December 29, 2005, the Board of Directors  accelerated the vesting of such
      options  such that  options to  purchase  400,000  shares of common  stock
      immediately  vested and are exercisable for a period of 18 months from the
      date the  individual  no longer  performs  services  to us. The  remaining
      options to purchase 100,000 shares of common stock were cancelled.

(4)   On July 20,  2005,  as  consideration  for  service  as  Chief  Technology
      Officer, we granted Philip Gatch options to purchase 250,000 shares of our
      common  stock  with an  exercise  price of $0.25 per  share.  These  stock
      options would have vested quarterly over two years,  however,  on December
      29, 2005, the Board of Directors  accelerated  the vesting of such options
      such that options to purchase  250,000 shares of common stock  immediately
      vested  and are  exercisable  for a period of 18 months  from the date the
      individual no longer performs services to us.

(5)   On September 30, 2005, as consideration for service as Interim  President,
      we granted Jay Rifkin options to purchase 4,400,000 shares of common stock
      with an  exercise  price of $0.85 per  share.  These  stock  options  vest
      annually over three years from December 29, 2005.


                                       38
<PAGE>

Aggregate Option Exercises and Fiscal Year-End Option Values

         The following table sets forth information with respect to the named
executive officers concerning the year-end value of in-the-money options and the
value of unexercised options as of December 31, 2005. No options were exercised
by the named executive officers during the fiscal year ended December 31, 2005.

<TABLE>
<CAPTION>
                                                                       Number of
                                                                       securities        Value of
                                                                       underlying        unexercised
                                                                       unexercised       in-the-money
                                                                       options/SARs at   options/SARs at
                                                                       FY-end (#)        FY-end ($)
                                   Shares acquired on       Value      Exercisable/      Exercisable/
              Name                    exercise (#)      realized ($)   Unexercisable     Unexercisable
               (a)                         (b)               (c)             (d)                (e)
---------------------------------- -------------------- -------------- ----------------- ------------------
<S>                                                                     <C>              <C>
Milton "Todd" Ault, III                    ---               ---        475,000 /_---    $783,750/_---
---------------------------------- -------------------- -------------- ----------------- ------------------
William B. Horne                           ---               ---       400,000 /_---     $660,000/_---
---------------------------------- -------------------- -------------- ----------------- ------------------
Philip Gatch                               ---               ---       250,000 /_---     $412,500/_---
---------------------------------- -------------------- -------------- ----------------- ------------------
Jay Rifkin                                 ---               ---       --- /_4,400,000   --- / $4,620,000
---------------------------------- -------------------- -------------- ----------------- ------------------
</TABLE>

Benefit Plans

      Effective July 20, 2005, the Board of Directors  approved our Stock Option
and Restricted  Stock Plan. Under the Stock Option and Restricted Stock Plan, we
can issue  restricted  shares of common  stock,  options to  purchase  shares of
common stock (both incentive stock options and non-incentive  stock options) and
warrants  to  purchase  shares  of  common  stock to  employees,  directors  and
consultants.  The number of shares  subject to the Stock  Option and  Restricted
Stock Plan may not exceed  15,000,000  shares.  The Stock Option and  Restricted
Stock Plan is administered by our Compensation Committee.

Compensation of Directors

      The Company has adopted the following policy for Board compensation.  Each
director  will receive  $1,000 for each  meeting of the Board of Directors  that
each such director attends (either in person or by teleconference).  Such $1,000
may be paid at the  Company's  option  either in cash or in shares of restricted
common stock of the Company  valued at the closing  price of the common stock on
the date of the meeting  or, if such  meeting  date is a day that the  principal
trading market of the common stock is not open for business,  then valued at the
closing price of the common stock on the most recent date after the meeting date
on which the principal  trading  market is open for business.  In addition,  the
Chairman of the Audit Committee  receives  $6,000 annually paid in cash.  During
2005, the Company did not compensate any of its directors  pursuant to the above
policy;  however,  $6,000 has  accrued  and is payable  to the  Company's  Audit
Committee  Chairman for the 2005 fiscal year. All directors are also  reimbursed
for their reasonable  out-of-pocket  expenses  incurred in connection with their
duties to the Company. In addition, directors are eligible to receive restricted
shares of common stock and stock options pursuant to our Stock Option Restricted
Stock Plan  described  above.  Directors  were  issued  stock  options for there
service during 2005 as described under "Recent Sales of Unregistered Securities"
in "Item 5. Market for Common Equity and Related Stockholder Matters."

Employment Agreements with Executive Officers

      On September 20, 2005, we entered into an employment agreement with Philip
Gatch  documenting the terms of his employment as our Chief Technology  Officer.
The term of the  employment  continues for 36 months from September 20, 2005 and
automatically  renews for successive one-year terms unless either party delivers
to the other party written notice of termination at least 30 days before the end
of the then current term. Mr. Gatch's base  compensation  under the agreement is
$95,000 in cash per year and  $45,000 in a  restricted  stock  grants each year.
Prior to  signing  the  employment  agreement,  we  granted  Mr.  Gatch  options
entitling him to purchase  250,000 shares of common stock vesting  annually over
three  years with a strike  price of $0.25 per share,  which  stock  options are
reflected in the employment agreement.  Mr. Gatch is also eligible to receive an
annual performance bonus determined by our chief executive officer. In addition,
Mr.  Gatch was  granted  rights  for three  years to (a) veto a chief  executive
officer  candidate as a replacement to Milton "Todd" Ault,  III, which right has
expired   since  William  B.  Horne  was  appointed  to  replace  Mr.  Ault  and
subsequently  Mr. Rifkin was  appointed to replace Mr. Horne as chief  executive
officer,  and (b) veto a decision  to sell our company or any of our core assets
or technologies related to the iCodemedia domain names and intellectual property
in the event we are sold for less than $50,000,000. If Mr. Gatch's employment is
terminated for any reason, the veto rights will be forfeited. The agreement also
contains   customary   provisions  for   disability,   death,   confidentiality,
indemnification  and  non-competition.  If Mr. Gatch voluntarily  terminates the
agreement  or if we terminate  the  agreement  for cause,  Mr. Gatch will not be
entitled to any  compensation  for the period between the effective  termination
date and the end of the employment  term and all unvested  restricted  stock and
stock  options will be forfeited.  If we  voluntarily  terminates  the agreement
without  cause,  we must pay Mr.  Gatch a cash sum equal to (a) all accrued base
salary  through the date of termination  plus all accrued  vacation pay and cash
bonuses, if any, plus (b) as severance compensation, 500,000 unrestricted shares
of common  stock and  $250,000  cash.  In the event of a merger,  consolidation,
sale, or change of control,  the  surviving or resulting  company is required to
honor the terms of the agreement with Mr. Gatch.


                                       39
<PAGE>

      In connection  with the  acquisition of Rebel Crew Films,  on December 29,
2005,  we entered  into an  employment  agreement  with Jay Rifkin to employ Mr.
Rifkin as our Chief  Executive  Officer  effective as of September 30, 2005. The
term of the  employment  continues  for three years from  September 30, 2005 and
automatically  renews for successive one-year terms unless either party delivers
to the other party written notice of termination at least 30 days before the end
of the then current term. Mr.  Rifkin's base  compensation  in the first year of
the term is $150,000,  will increase at least 10% in the second year of the term
and at least 10% more in the third year of the  employment  term. Mr. Rifkin was
granted  options to purchase  4,400,000  shares of common stock with an exercise
price  equal to the FMV of the common  stock on  September  30, 2005 and vesting
annually over a period of three years from December 29, 2005. Mr. Rifkin is also
eligible to receive  shares of common stock and stock  options from time to time
and an annual bonus as determined by the Board of Directors.  The agreement also
contains   customary   provisions  for   disability,   death,   confidentiality,
indemnification and  non-competition.  If Mr. Rifkin voluntarily  terminates the
agreement  without good reason or if we terminate the  agreement  for cause,  we
must pay Mr. Rifkin all accrued compensation through the date of termination and
provide life, accident and disability  insurance,  and health, dental and vision
benefits to Mr.  Rifkin and his  dependents  for a period of three  months after
termination.  If we  terminate  the  agreement  without  cause,  if  Mr.  Rifkin
terminates the agreement for good reason or if the agreement is terminated  upon
the death or disability of Mr. Rifkin, then we must pay Mr. Rifkin or his estate
all unpaid compensation  through the duration of the three-year  employment term
and must  provide  insurance  and health  benefits  through the duration of such
term.  "Good Reason" is defined in the agreement as: (i) material  breach of the
agreement by us including,  without limitation, any diminution in title, office,
rights and  privileges of Mr. Rifkin or failure to receive base salary  payments
on a timely basis;  (ii)  relocation  of the  principal  place for Mr. Rifkin to
provide his services to any  location  more than 20 miles away from 100 Wilshire
Boulevard,  Santa Monica,  California 90401; (iii) failure to maintain in effect
directors'  and officers'  liability  insurance  covering Mr.  Rifkin;  (iv) any
assignment or transfer of any of our rights or obligations  under the agreement;
or (v) any change in control of our company including,  without  limitation,  if
Mr. Rifkin shall cease to own a majority of our outstanding voting securities.

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

      The following table sets forth certain  information,  as of March 27, 2006
with respect to the beneficial  ownership of the outstanding common stock by (i)
any  holder of more than five  (5%)  percent;  (ii) each of the named  executive
officers,  directors and director  nominees;  and (iii) our directors,  director
nominees and named executive officers as a group. Except as otherwise indicated,
each of the stockholders  listed below has sole voting and investment power over
the shares beneficially owned.

<TABLE>
<CAPTION>
                                             Common Stock                Percentage of
  Name of Beneficial Owner (1)               Beneficially Owned (2)     Common Stock (2)
  ----------------------------------------- ------------------------- ---------------------
<S>                                                 <C>                        <C>
  Patient Safety Technologies, Inc.                 2,750,361 (3)              7.4%
  Bodnar Capital Management, LLC                    2,941,176                  7.9%
  William B. Horne                                    400,000 (4)              1.1%
  Alice M. Campbell                                   350,000 (5)                 *
</TABLE>


                                       40
<PAGE>

<TABLE>
<S>                                                 <C>                       <C>
  Philip Gatch                                      1,250,000 (6)              3.4%
  Cesar Chatel                                      2,120,708 (7)              5.7%
  Jay Rifkin                                       19,586,372 (8)             52.2%
  Alan Morelli                                        600,000 (9)                 *
  David M. Kaye                                      350,000 (10)                 *
  ----------------------------------------- ------------------------- ---------------------
  All named executive officers and                22,536,372                  57.1%
  directors as a group (7 persons)
</TABLE>

      * Less than 1%
(1)   Except as otherwise indicated, the address of each beneficial owner is c/o
      Digicorp, 4143 Glencoe Avenue, Marina Del Rey, CA 90292.
(2)   Applicable  percentage  ownership is based on 37,028,320  shares of common
      stock  outstanding  as  of  March  27,  2006,   together  with  securities
      exercisable or  convertible  into shares of common stock within 60 days of
      March 27, 2006 for each stockholder. Beneficial ownership is determined in
      accordance  with the rules of the Securities  and Exchange  Commission and
      generally  includes voting or investment power with respect to securities.
      Shares of common  stock that a person has the right to acquire  beneficial
      ownership  of upon the  exercise or  conversion  of  options,  convertible
      stock,  warrants or other  securities  that are currently  exercisable  or
      convertible or that will become  exercisable or convertible within 60 days
      of March  27,  2006 are  deemed  to be  beneficially  owned by the  person
      holding such  securities  for the purpose of computing  the  percentage of
      ownership  of such  person,  but are not  treated as  outstanding  for the
      purpose of computing the percentage ownership of any other person.
(3)   Patient  Safety  Technologies,  Inc. has granted Mr. Rifkin an irrevocable
      proxy  to vote the  shares  of  common  stock  owned  by them for  certain
      directors.
(4)   Represents shares issuable upon exercise of stock options with an exercise
      price of $0.25 per share and an  expiration  date 18 months  from the date
      Mr.  Horne's  services  terminate.  Mr.  Horne has granted  Mr.  Rifkin an
      irrevocable  proxy  to vote the  shares  of  common  stock  issuable  upon
      exercise of such stock options for certain directors.
(5)   Represents shares issuable upon exercise of stock options with an exercise
      price of $0.25 per share and an  expiration  date 18 months  from the date
      Ms. Campbell's services terminate.  Ms. Campbell has granted Mr. Rifkin an
      irrevocable  proxy  to vote the  shares  of  common  stock  issuable  upon
      exercise of such stock options for certain directors.
(6)   Includes  250,000  shares  issuable upon exercise of stock options with an
      exercise  price of $0.25 per share and an  expiration  date 18 months from
      the date Mr. Gatch's services terminate.  Mr. Gatch has granted Mr. Rifkin
      an  irrevocable  proxy to vote the shares of common stock owned by him for
      certain directors.
(7)   Includes  400,000 shares which are held in escrow pending  satisfaction of
      certain  performance  milestones  through  March 31, 2007.  Mr. Chatel has
      granted Mr. Rifkin an irrevocable proxy to vote the shares of common stock
      owned by Mr. Chatel for certain directors.
(8)   Includes:   (a)  3,600,000   shares  which  are  held  in  escrow  pending
      satisfaction of certain performance milestones through March 31, 2007; and
      (b) 500,000  shares  issuable upon  conversion of a $556,306.53  principal
      amount secured  convertible  note with a conversion price of $1.112614 per
      share.  All of these  securities are held by Rebel Crew  Holdings,  LLC of
      which Mr.  Rifkin  is the sole  managing  member.  Mr.  Rifkin's  reported
      beneficial  ownership does not include  approximately  8,762,736 shares of
      common  stock  issued and issuable  for which  certain  shareholders  have
      granted Mr. Rifkin an irrevocable proxy to vote for certain directors.
(9)   Includes:  (a) options to purchase  350,000 shares of common stock with an
      exercise price of $1.50 per share,  which stock options vest annually over
      a period of three years from March 26, 2006; and (b) shares  issuable upon
      exercise  of warrants  with an  exercise  price of $0.145 per share and an
      expiration date of September 15, 2010.
(10)  Represents  options to  purchase  350,000  shares of common  stock with an
      exercise price of $1.50 per share,  which stock options vest annually over
      a period of three years from March 26, 2006.

Securities Authorized for Issuance Under Equity Compensation Plans

      The  following  table  shows  information  with  respect  to  each  equity
compensation  plan under which the  Company's  common  stock is  authorized  for
issuance as of the fiscal year ended December 31, 2005.


                                       41
<PAGE>

<TABLE>
<CAPTION>
                      EQUITY COMPENSATION PLAN INFORMATION
------------------------------------ ------------------------ ----------------------- ---------------------------
Plan category                         Number of securities       Weighted average        Number of securities
                                        to be issued upon       exercise price of      remaining available for
                                           exercise of         outstanding options,     future issuance under
                                      outstanding options,     warrants and rights    equity compensation plans
                                       warrants and rights                              (excluding securities
                                                                                       reflected in column (a)
------------------------------------ ------------------------ ----------------------- ---------------------------
                                               (a)                     (b)                       (c)
------------------------------------ ------------------------ ----------------------- ---------------------------
<S>                                            <C>                     <C>                       <C>
Equity compensation plans approved
by security holders                            -0-                     -0-                       -0-
------------------------------------ ------------------------ ----------------------- ---------------------------

------------------------------------ ------------------------ ----------------------- ---------------------------
Equity compensation plans not
approved by security holders                8,312,500                 $0.75                   6,687,500
------------------------------------ ------------------------ ----------------------- ---------------------------

------------------------------------ ------------------------ ----------------------- ---------------------------
Total                                       8,312,500                 $0.75                   6,687,500
------------------------------------ ------------------------ ----------------------- ---------------------------
</TABLE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      Our management  believes that all of the below  transactions were on terms
at least as favorable as could have been obtained from unrelated third parties.

Relationships with Patient Safety Technologies, Inc.

      On December 29, 2004, our then current  directors along with several other
shareholders  sold 2,229,527 shares of our common stock,  representing  22.3% of
the  outstanding  shares of our  common  stock on such date,  to Patient  Safety
Technologies,   Inc.  (formerly,  Franklin  Capital  Corporation)  ("PST").  Our
directors,  Gregg B. Colton, Don J. Colton,  Norman Sammis and Glenn W. Stewart,
sold 80% of their holdings to PST at $0.135 per share.  Another  shareholder who
was not a principal  shareholder  or  director  sold all of his shares to PST at
$0.145 per share.  The  aggregate  amount of funds of PST used to  purchase  the
shares of common stock was approximately $301,998. The source for such funds was
PST's  working  capital.  The  directors  and  shareholders  agreed  to  sell an
additional  1,224,000 shares (the "Additional Shares") of our common stock of to
PST upon the shares  being  registered  with the SEC by December  29,  2005.  In
addition,  prior to the  acquisition  and change of control,  PST owned  327,500
shares of our common stock.

      On December 28, 2005, PST assigned its right to purchase  1,000,000 of the
Additional  Shares to Alan  Morelli  (the  "Assignment  Agreement")  and amended
certain  terms of the stock  purchase  agreement  pursuant to which the Original
Purchase  Transaction  was  completed  (the  "Amendment   Agreement").   In  the
Assignment Agreement,  we granted the parties piggyback registration rights with
respect to the sale of the Additional  Shares.  In the Amendment  Agreement,  we
agreed  that if we do not  register  the resale of the  Additional  Shares on or
before June 30, 2005,  then we will redeem the  Additional  Shares at a price of
$0.145 per share and we will  thereupon  sell 224,000  shares of common stock to
PST and 1,000,000 shares of common stock to Mr. Morelli at a price of $0.145 per
share. Mr. Morelli is one of our current directors.

      Pursuant to the stock  purchase  agreement  with PST,  Melanie  Glazer was
appointed as Chairman of our Board of Directors on December 30, 2004,  following
the  resignation  of  Glenn W.  Stewart,  Norman  Sammis  and Don J.  Colton  as
directors. Effective April 26, 2005, Gregg B. Colton resigned from his positions
as President,  Chief Executive Officer and Chief Financial Officer. On April 26,
2005,  our Board of Directors  appointed the following  officers:  (a) Milton C.
Ault, III - Chief Executive  Officer;  (b) Kathryn Macenzie Queen - President of
Operations;  and (c)  Lynne  Silverstein  -  Secretary.  Mr.  Ault  subsequently
resigned on  September  30, 2005 and Ms. Queen and Ms.  Silverstein  resigned on
December 29, 2005.  Upon Mr.  Ault's  resignation  as Chief  Executive  Officer,
William B. Horne was appointed to succeed Mr. Ault as Chief  Executive  Officer.
Mr. Horne resigned as Chief Executive Officer upon completing the acquisition of
Rebel Crew Films on December 29, 2005.


                                       42
<PAGE>

      On June 30,  2005,  we  appointed  Philip  Gatch as our  Chief  Technology
Officer. On September 19, 2005, we entered into an asset purchase agreement with
Mr.  Gatch,  and thereby  purchased  certain  Internet  domain names and related
intellectual  property from Mr. Gatch.  As  consideration  for these assets,  we
issued Mr. Gatch 1,000,000 shares of common stock.

      Effective July 16, 2005,  Gregg B. Colton  resigned from his position as a
director. Effective July 16, 2005, we appointed Alice M. Campbell, Milton "Todd"
Ault, III and Darrell Grimsley as directors. Upon his appointment,  Mr. Ault was
named  Chairman of our Board of Directors.  Ms.  Campbell was appointed to chair
our Audit Committee and to chair our Compensation  Committee.  Mr. Ault resigned
as a director on September 30, 2005.

      Effective  July 20, 2005, we appointed  Lynne  Silverstein  and William B.
Horne as  directors.  Ms.  Silverstein  subsequently  resigned  as a director on
December 29, 2005.

      Effective  July 20,  2005,  we  appointed  William  B.  Horne as our Chief
Financial Officer.

      Each of Melanie Glazer, Milton C. Ault, III, Kathryn Macenzie Queen, Lynne
Silverstein,  Philip Gatch,  Alice M. Campbell,  Darrell Grimsley and William B.
Horne had and/or currently have employment positions, directorships and/or other
relationships  with Ault Glazer & Company  Investment  Management  LLC,  Patient
Safety Technologies,  Inc. and/or Ault Glazer & Company Investment  Management's
or Patient Safety Technologies' current officers and directors.

Acquisition of Rebel Crew Films

      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. Of
these shares,  19,086,372  shares were issued or are issuable to Rebel Holdings,
LLC as  consideration  for its 90%  ownership  interest  in Rebel Crew Films and
2,120,708 were issued or are issuable to Cesar Chatel as  consideration  for his
10% ownership  interest in Rebel Crew Films. Our present Chief Executive Officer
and Director Jay Rifkin is the sole managing member of Rebel Holdings,  LLC. Mr.
Chatel is one of our employees  and is President of our wholly owned  subsidiary
Rebel Crew Films.

      On December 29, 2005 we entered into a Securities  Purchase Agreement with
Rebel  Holdings,  LLC,  pursuant to which we purchased a  $556,306.53  principal
amount  loan  receivable  owed by Rebel  Crew  Films to Rebel  Holdings,  LLC in
exchange for the issuance of a $556,306.53  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 our assets now owned or hereafter  acquired.  The secured convertible note is
convertible  into 500,000  shares of common  stock at the rate of $1.112614  per
share. As described  above, Jay Rifkin,  our Chief Executive  Officer and one of
our directors, is the sole managing member of Rebel Holdings, LLC.

      Between  September  2005 and October 2005,  Jay Rifkin loaned an aggregate
total  principal  amount of $73,000 to Rebel Crew Films. We have agreed to repay
this loan to Mr.  Rifkin  pursuant  to the terms of a $73,000  principal  amount
promissory note due June 30, 2006 which accrues interest at 5% per annum. In the
event of breach of the  promissory  note,  the interest rate will increase to 8%
per annum.

      On December 29, 2005, we granted Alan Morelli warrants to purchase 250,000
shares  of common  stock  with an  exercise  price of $0.145  per  share,  which
warrants  vested  immediately.  These  warrants  were  issued to Mr.  Morelli as
compensation for advisory  services  rendered in connection with structuring the
acquisition of Rebel Crew Films. Mr. Morelli is presently one of our directors.

Ault Glazer Bodnar & Company Inc.

      Other current  assets at December 31, 2005 includes  $35,794 owed to us by
Ault Glazer Bodnar & Company,  Inc.  ("AGB & Company")  based on an agreement to
reimburse  us for  salaries  paid in  connection  with our  recapitalization  on
December 29, 2005. Our Chief Financial  Officer and director,  William B. Horne,
also Chief Financial Officer of AGB & Company.

ITEM 13. EXHIBITS.

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

2.1         Stock  Purchase  Agreement  dated  as of  December  20,  2005  among
            Digicorp,  Rebel Crew Films,  Inc.,  Rebel  Holdings,  LLC and Cesar
            Chatel  (Incorporated  by reference to the Company's  Form 8-K filed
            with the Securities and Exchange Commission on December 21, 2005)
2.2         Letter Agreement dated December 20, 2005 among Digicorp,  Rebel Crew
            Films, Inc., Rebel Holdings,  LLC and Cesar Chatel  (Incorporated by
            reference to the Company's  Form 8-K filed with the  Securities  and
            Exchange Commission on December 21, 2005)


                                       43
<PAGE>

2.3         Purchaser  and  Company  Disclosure   Schedules  to  Stock  Purchase
            Agreement dated as of December 20, 2005 among  Digicorp,  Rebel Crew
            Films, Inc., Rebel Holdings,  LLC and Cesar Chatel  (Incorporated by
            reference to the Company's  Form 8-K filed with the  Securities  and
            Exchange Commission on January 5, 2006)
2.4         Lock Up  Agreements  of Sellers in  connection  with Stock  Purchase
            Agreement dated as of December 20, 2005 among  Digicorp,  Rebel Crew
            Films, Inc., Rebel Holdings,  LLC and Cesar Chatel  (Incorporated by
            reference to the Company's  Form 8-K filed with the  Securities  and
            Exchange Commission on January 5, 2006)
2.5         Escrow  Agreement  dated  December  29, 2005 by and among  Digicorp,
            Rebel  Holdings,  LLC,  Cesar  Chatel and  Sichenzia  Ross  Friedman
            Ference  LLP as  Escrow  Agent  (Incorporated  by  reference  to the
            Company's Form 8-K filed with the Securities and Exchange Commission
            on January 5, 2006)
3.1         Articles  of   Incorporation   (Incorporated  by  reference  to  the
            Company's  registration statement on Form 10-SB (File No. 000-33067)
            filed with the Securities and Exchange Commission on August 9, 2001)
3.2         Bylaws  (Incorporated  by  reference to the  Company's  registration
            statement  on  Form  10-SB  (File  No.  000-33067)  filed  with  the
            Securities and Exchange  Commission on August 9, 2001) 3.3 Amendment
            No. 1 to Bylaws (Incorporated by reference to the Company's Form 8-K
            filed with the Securities and Exchange Commission on July 21, 2005)
4.1         Secured  Convertible  Note due  December  19, 2010 in the  principal
            amount  of   $556,306.53   issued  to  Rebel  Crew   Holdings,   LLC
            (Incorporated  by reference to the Company's Form 8-K filed with the
            Securities and Exchange Commission on January 5, 2006)
4.2         Promissory Note due June 30, 2006 in the principal amount of $73,000
            issued to Jay Rifkin  (Incorporated  by reference  to the  Company's
            Form 8-K  filed  with the  Securities  and  Exchange  Commission  on
            January 5, 2006)
9.1         Voting Agreement dated December 29, 2005 by and among Jay Rifkin and
            the  stockholders  of Digicorp listed on the signature pages thereto
            (Incorporated  by reference to the Company's Form 8-K filed with the
            Securities  and  Exchange   Commission  on  January  5,  2006)
10.1        Subscription  Agreement  dated May 18,  2005  between  Digicorp  and
            Bodnar Capital  Management,  LLC  (Incorporated  by reference to the
            Company's Form 8-K filed with the Securities and Exchange Commission
            on May 24, 2005)
10.2        Asset Purchase  Agreement dated  September 19, 2005,  among Digicorp
            and Philip Gatch  (Incorporated  by reference to the Company's  Form
            8-K filed with the Securities  and Exchange  Commission on September
            22, 2005)
10.3        Securities  Purchase  Agreement dated December 29, 2005 by and among
            Rebel Holdings,  LLC and Digicorp  (Incorporated by reference to the
            Company's Form 8-K filed with the Securities and Exchange Commission
            on January 5, 2006)
10.4        Assignment  Agreement  dated  December  29,  2005 by and among Rebel
            Holdings,  LLC, Digicorp and Rebel Crew Films, Inc. (Incorporated by
            reference to the Company's  Form 8-K filed with the  Securities  and
            Exchange Commission on January 5, 2006)
10.5        Security Agreement dated December 29, 2005 by and among Digicorp and
            Rebel Crew Holdings, LLC (Incorporated by reference to the Company's
            Form 8-K  filed  with the  Securities  and  Exchange  Commission  on
            January 5, 2006)
10.6        Digicorp Stock Option and  Restricted  Stock Plan  (Incorporated  by
            reference to the Company's  Form 8-K filed with the  Securities  and
            Exchange Commission on December 22, 2005)
10.7        Employment  Agreement dated  September 20, 2005,  among Digicorp and
            Philip Gatch  (Incorporated  by reference to the Company's  Form 8-K
            filed with the Securities  and Exchange  Commission on September 22,
            2005)
10.8        Employment  Agreement  effective  as of  September  30,  2005 by and
            between  Digicorp and Jay Rifkin  (Incorporated  by reference to the
            Company's Form 8-K filed with the Securities and Exchange Commission
            on January 5, 2006)
10.9        Standard  Industrial/Commercial  Multi-Tenant  Lease  dated July 18,
            2005  between  The Welk  Group,  Inc.  and Rebel  Crew  Films,  Inc.
            (Incorporated  by reference to the Company's Form 8-K filed with the
            Securities and Exchange Commission on January 5, 2006)


                                       44
<PAGE>

10.10       Videogram  License  Agreement  dated  August 19, 2003 by and between
            Rebel Crew Films and BCI Eclipse,  LLC (Incorporated by reference to
            the  Company's  Form 8-K  filed  with the  Securities  and  Exchange
            Commission on January 5, 2006)
10.11       Videogram  License  Agreement  dated  March 29,  2004 by and between
            Rebel Crew  Films and BCI  Eclipse  Company,  LLC  (Incorporated  by
            reference to the Company's  Form 8-K filed with the  Securities  and
            Exchange Commission on January 5, 2006)
10.12       Videogram  License Agreement dated May 26, 2004 by and between Rebel
            Crew Films and BCI Eclipse Company,  LLC  (Incorporated by reference
            to the  Company's  Form 8-K filed with the  Securities  and Exchange
            Commission  on  January  5,  2006)
10.13       License  Agreement  dated November 15, 2002 between Rebel Crew Films
            and VAS  Entertainment/Rise  Above  Entertainment  (Incorporated  by
            reference to the Company's  Form 8-K filed with the  Securities  and
            Exchange Commission on January 5, 2006)
10.14       License  Agreement  dated December 31, 2002 between Rebel Crew Films
            and VAS  Entertainment/Rise  Above  Entertainment  (Incorporated  by
            reference to the Company's  Form 8-K filed with the  Securities  and
            Exchange Commission on January 5, 2006)
14.1        Code of Ethics  (Incorporated  by reference to the Company's  annual
            report on Form 10-KSB for the fiscal year ended June 30, 2005, filed
            with the Securities and Exchange Commission on September 28, 2005)
16.1        Letter on change in  certifying  accountant  dated  October 31, 2005
            from Jones Simkins, P.C. (Incorporated by reference to the Company's
            Form 8-K  filed  with the  Securities  and  Exchange  Commission  on
            October 31, 2005)
21.1        Subsidiaries  (Incorporated  by reference to the Company's  Form 8-K
            filed with the  Securities  and  Exchange  Commission  on January 5,
            2006)
31.1        Certification by Chief Executive Officer, required by Rule 13a-14(a)
            or Rule 15d-14(a) of the Exchange Act
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

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Audit Fees

      The  aggregate  fees  billed for  professional  services  rendered  by our
principal accountants for the audit of our financial statements, for the reviews
of the financial  statements  included in our annual report on Form 10-KSB,  and
for other services  normally  provided in connection with statutory filings were
$11,235 and $0 for the years ended  December  31, 2005 and  December  31,  2004,
respectively.

Audit-Related Fees

      We did not  incur  any fees for the years  ended  December  31,  2005 and
December 31,  2004,  respectively,  for  professional  services  rendered by our
principal  accountants  that are  reasonably  related to the  performance of the
audit or review of our financial statements and not included in "Audit Fees."

All Other Fees

      We did not incur any fees for other professional  services rendered by our
principal  accountants during the years ended December 31, 2005 and December 31,
2004.

Audit Committee Pre-Approval Policies and Procedures

      Our Audit Committee was recently formed during the year ended December 31,
2005.  The fees for audit  services  were approved by our board of directors and
the full board  approved  the  financial  statements  filed on Forms  10-QSB and
10-KSB.  Management is required to  periodically  report to the Audit  Committee
regarding the extent of services provided by the independent auditor.


                                       45
<PAGE>

                                   SIGNATURES

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

                                               DIGICORP


      Date: April 6, 2006                      By: /s/ Jay Rifkin
                                                   -----------------------------
                                                   Jay Rifkin
                                                   Chief Executive Officer


      Date: April 6, 2006                      By: /s/ William B. Horne
                                                   -----------------------------
                                                   William B. Horne
                                                   Chief Financial Officer and
                                                   Principal Accounting Officer

      In accordance  with the Exchange Act, this report has been signed below by
the following  persons on behalf of the  registrant and in the capacities and on
the dates indicated.

          Signature                            Title               Date
          ---------                            -----               ----

                                    Chief Executive Officer     April 6, 2006
/s/ Jay Rifkin                      and Director
-------------------------------
Jay Rifkin


/s/ William B. Horne                Director                    April 6, 2006
-------------------------------
William B. Horne


/s/ Alice M.Campbell                Director                    April 6, 2006
-------------------------------
Alice M.Campbell


/s/ Alan Morelli                    Director                    April 5, 2006
-------------------------------
Alan Morelli


/s/ David M. Kaye                   Director                    April 5, 2006
-------------------------------
David M. Kaye


                                       46