<PAGE>

                       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, 2006

[ ]   TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
      ACT OF 1934

       For the transition period from _______________ to ________________

                        Commission File Number: 000-50222

                     DIGITAL LEARNING MANAGEMENT CORPORATION
                     ---------------------------------------
                 (Name of Small Business Issuer in its charter)

             Delaware                                  20-1661391
  -------------------------------                 -------------------
  (State or other jurisdiction of                  (I.R.S. Employer
   incorporation or organization)                 Identification No.)

                         680 Langsdorf Drive, Suite 203
                           Fullerton, California 92831
               (Address of principal executive offices)(Zip code)

Issuer's telephone number, including area code:  (310) 921-3444

Securities to be registered pursuant to Section 12(b) of the Act:

Title of each class            Name of each exchange on which each is registered
-------------------            -------------------------------------------------
       None                                           None

Securities to be registered pursuant to Section 12(g) of the Act:

                         Common Stock, $0.001 par value
                         ------------------------------
                                (Title of class)

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

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and will not 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]

The Issuer's revenues for the fiscal year ended December 31, 2006 were $ 93,856

      The number of shares of the registrant's common stock, $.001 par value per
share, outstanding as of April 12, 2007, was 65,862,072.

      The aggregate market value of the voting and non-voting common equity held
by non-affiliates of the registrant on April 12, 2007, based on the last sales
price on the OTC Bulletin Board as of such date, was approximately $2,504,589.

DOCUMENTS INCORPORATED BY REFERENCE: None

Transition Small Business Disclosure Format: Yes ___  No_X_

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                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

PART I

      ITEM 1.    BUSINESS................................................      3
      ITEM 2.    DESCRIPTION OF PROPERTY.................................     18
      ITEM 3.    LEGAL PROCEEDINGS.......................................     19
      ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....     19

PART II

      ITEM 5.    MARKET FOR COMMON EQUITY AND
                  RELATED STOCKHOLDER MATTERS............................     20
      ITEM 6.    MANAGEMENT'S DISCUSSION AND ANALYSIS....................     21
      ITEM 7.    FINANCIAL STATEMENTS....................................     30
      ITEM 8.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                  ON ACCOUNTING AND FINANCIAL DISCLOSURE.................     30
      ITEM 8A.   DISCLOSURE CONTROLS AND PROCEDURES......................     31
      ITEM 8B.   OTHER INFORMATION ......................................     31

PART III

      ITEM 9.    DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                  PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE
                  EXCHANGE ACT...........................................     31
      ITEM 10.   EXECUTIVE COMPENSATION..................................     32
      ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                  OWNERS AND MANAGEMENT..................................     34
      ITEM 12.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..........     35
      ITEM 13.   EXHIBITS................................................     36
      ITEM 14    PRINCIPAL ACCOUNTANT FEES AND SERVICES..................     37

SIGNATURES                                                                    38

                                       2
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                   NOTE CONCERNING FORWARD-LOOKING STATEMENTS

      This Report contains certain forward-looking statements, including the
plans and objectives of management for the business, operations, and economic
performance of Digital Learning Management Corporation (formerly
FreePCSQuote.Com, Inc.). These forward-looking statements generally can be
identified by the context of the statement or the use of words such as the
Company or its management "believes," "anticipates," "intends," "expects,"
"plans" or words of similar meaning. Similarly, statements that describe the
Company's future operating performance, financial results, plans, objectives,
strategies, or goals are forward-looking statements. Although management
believes that the assumptions underlying the forward-looking statements are
reasonable, these assumptions and the forward-looking statements are subject to
various factors, risks and uncertainties, many of which are beyond the control
of the Company. Accordingly, actual results could differ materially from those
contemplated by the forward-looking statements.

      Forward looking statements may involve known and unknown risks,
uncertainties, and other factors that may cause our actual results, performance,
or achievements to be materially different from the future results, performance,
or achievements expressed or implied by any forward-looking statements. Actual
events or results may differ materially from those discussed in forward-looking
statements as a result of various factors, including, without limitation, the
risks outlined under "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and matters described in this
Annual Report generally.

      Each forward-looking statement should be read in context with, and with an
understanding of, the various other disclosures concerning our company and our
business made elsewhere in this Annual Report as well as other pubic reports
filed with the United States Securities and Exchange Commission (the "SEC"). You
should not place undue reliance on any forward-looking statement as a prediction
of actual results or developments. We are not obligated to update or revise any
forward-looking statement contained in this Report to reflect new events or
circumstances unless and to the extent required by applicable law.

AVAILABLE INFORMATION

      Information regarding the Company's annual reports on Form 10-KSB,
quarterly reports on Form 10-QSB, current reports on Form 8-K, and any
amendments to these reports, are available to the public from the SEC's website
at http://www.sec.gov as soon as reasonably practicable after the Company
electronically files such reports with the Securities and Exchange Commission.
Any document that the Company files with the SEC may also be read and copied at
the SEC's public reference room located at 100 F Street, NE, Washington, DC
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
public reference room.


                                     PART I

ITEM 1. DESCRIPTION OF BUSINESS

HISTORY

      Digital Learning Management Corporation, a Delaware corporation
(hereinafter sometimes referred to as the "Company," "we," "us," and "our"),
incorporated on February 18, 1999, under the name FreePCSQuote.Com, Inc., as a
development stage company with a principal business objective to allow
businesses the opportunity to generate revenues through the use of our Internet
technology solutions and services. Through the use of our computer software,
network technology, and systems management, we provided our customers outsourced
web site and application hosting solutions.

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      An objective of management became the acquisition of an operating company
with experienced management and the potential for profitable growth in exchange
for our securities. Pursuant to this objective, on January 16, 2004, we entered
into an Agreement and Plan of Merger (the "Agreement") pursuant to which we,
through our wholly-owned subsidiary, FPQT Acquisition Corporation, a Nevada
corporation ("Merger Sub"), acquired Digital Learning Institute, Inc., a
privately held Delaware corporation ("DLI") in exchange for shares of our Common
Stock (the "Merger"). Upon consummation of the Merger, Aurangzeb Bhatti was
named President and a Director, Umesh Patel was named Vice President and a
Director and Al Jinnah was named Secretary. Eric Borgerson resigned as our
President and sole Director.

DESCRIPTION OF THE COMPANY POST-MERGER

      DLI is a for-profit continued education company that leverages existing
universities' (course credits) accreditations, and campuses to provide training
and education. The company enrolls active students though several different
Vocational Schools, Colleges and Universities. Our business strategy during 2004
was to grow our enrollment base under our existing course offerings and to
reduce the cost of learning through our proprietary Learning Management Software
called `CourseMate'.

      During 2004 we sought to increase our enrollment base, add to our
curriculum offerings and supplement our accreditations offerings through our
acquisition of McKinley University in 2003, as well as additional planned
acquisitions of small vocational schools. The acquisitions were based on our
belief that we would have more breadth in course offerings through the school's
accreditations and business class offerings while using our scaleable education
software application to conduct courses over the Internet. In March 2005 we
decided to discontinue and exit the traditional vocational training business and
direct a substantial proportion of our resources and concentrate our focus on
our proprietary On-Line learning solution products, training and education.

      On February 27, 2004, we completed a $3.0 million offering of convertible
notes through a private placement to affiliated entities of Renaissance Capital.

      On March 8, 2004, and in connection with the closing of the convertible
note transaction with Renaissance Capital, the following individuals were
appointed to our Board of Directors: Khalid Sheikh, Gregory J. Frazer, Richard
Rappaport, Robert Pearson and Al Jinnah.

      A major portion of the proceeds from the convertible notes were used to
complete the acquisition of two Vocational Training Schools, Software Education
of America, Inc. (SEA), and Global Computer systems, Inc. (Global). SEA and
Global discontinued all operations in 2005.

      DLI entered into an agreement to acquire SEA on January 13, 2004. The
transaction was subject to approval of the change-of-control of SEA from the
California Bureau for Private Postsecondary Vocational Education ("BPPVE") and
the Accrediting Commission of Career Schools and Colleges of Technology
("ACCSCT"). The BPPVE approval was received during the quarter ended June 30 and
as of May 1, 2004, DLI assumed responsibility for the marketing and managing of
SEA sales and providing working capital. DLI advanced funding to SEA pending
final closing of the transaction which occurred on July 1, 2004 after receipt of
the formal approval from ACCSCT on July 1, 2004. Effective July 1, 2004 SEA
became a wholly-owned subsidiary of DLI.

                                       4
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      We entered into an agreement to acquire Global on April 30, 2004. The
transaction was subject to approval of the change-of-control of Global from the
BPPVE. As of September 1, 2004, DLI assumed responsibility for the marketing and
managing of Global sales and providing working capital. DLI advanced funding to
Global pending final closing of the transaction, which occurred on November 15,
2004.

      On February 27, 2004, we raised a total of $3,000,000 from three
investors, all of which were affiliated with Renaissance Capital, in an offering
of 7% convertible debenture notes through a private placement. The terms of the
debentures are for a period of 7 years. Interest accrues at 7% per annum and is
due and payable monthly beginning April 1, 2004. The debentures mature on
February 27, 2011, at which time all remaining unpaid principal and interest
will be payable in full. If the debentures are not sooner redeemed or converted
as provided in the loan, commencing February 27, 2007 and continuing on the
first day of each successive month prior to maturity, we will pay to the lenders
monthly principal installments of $10 per $1,000 of the then remaining principal
balance. These debentures are convertible, at the holder's option, into common
stock at a rate of $0.4478 per share, entitling the holders to 6,699,833 shares
of our common stock. Renaissance Capital sold and assigned the debentures to a
third party in December 2006.

      On March 19, 2004, we effectuated a name change from FreePCSQuote.Com,
Inc. to Digital Learning Management Corporation and a 7.8680269:1 forward split
of our Common Stock. In connection with the name change, our trading symbol on
the Over-the-Counter Bulletin Board (the "OTCBB") changed from "FPQT" to "DGTL."

      In April 2004, the Company moved its state of domicile from Nevada to
Delaware.

      On February 22, 2005 the Company was served with notice of default under
its $3.0 million convertible notes.

      On February 22, 2005 Robert Pearson resigned as a director. On February
28, 2005, Richard Rappaport resigned as a director.

      On March 16, 2005, we decided to discontinue operations at our vocational
schools and our acquisition strategy of accredited vocational schools and
campuses. In connection with this change in business strategy, we decided to
close the operations of SEA and Global.

      SEA filed for bankruptcy in March of 2005 and is being accounted for as a
discontinued operation. The bankruptcy was dismissed by the court in January,
2006.

      In May 2005, the Company closed Global and returned all of its fixed
assets to the former shareholder of Global. Global is being accounted for as a
discontinued operation.

      On March 27, 2006 the Board of Directors of Digital Learning Management
Corporation (the "Company") voted to remove Aurangzeb Bhatti as a Director and
Chairman of the Board and as President and Chief Executive Officer effective as
of December 14, 2005. The Board acted because Mr. Bhatti had abandoned his
duties as an officer, Director and employee of the Company on December 14, 2005.

      In July 2006, we effected a 3:1 forward split of our Common Stock.

      As of December, 2006, the principal shareholders loaned the Company
$324,175 to keep the Company operating. These advances accrue interest at 6% per
annum and are payable upon demand. As of December 31, 2006 $431,048 is due to
these two officers of the Company, which includes accrued interest of $ 106,873.

      Interest expense of $19,450 and $11,883 was recorded on the related party
payables during the years ended December 31, 2006 and 2005.

                                       5
<PAGE>

RECENT EVENTS

      On December 21, 2006, we entered into an Exchange Agreement with Changchun
Yongxin Dirui Medical Co., Ltd, a China corporation ("Yongxin") and all of the
shareholder of Yongxin. In accordance with the Exchange Agreement, and subject
to certain preconditions to Closing, including the completion of an approximate
1:12 reverse split, appropriate shareholder consents, the filing of necessary
disclosures with the SEC, and the settlement of certain debt, we agreed to issue
51,000,000 shares of newly issued common stock to the Yongxin shareholders or
their designees. The 51,000,000 shares will represent, immediately following the
closing, 85% of the total issued and outstanding shares of common stock.

      We will remain a wholly owned operating subsidiary of Yongxin following
the Closing.

      In furtherance of the Exchange Agreement, on January 4, 2007, we filed a
preliminary Information Statement pursuant to Section 14C of the Exchange Act.
Following this filing the SEC has informed the Company that it is required to
file a proxy statement pursuant to Section 14A of the Exchange Act. The Company
is in the process of preparing such proxy statement.

BUSINESS AND OPERATIONS

      After the merger with FreePCSQuote.Com, we operated as a for-profit
continued education company that leveraged existing schools and university
accreditations (course credits), and campuses to provide vocational training and
education. We had enrolled active students though several different vocational
schools, colleges and universities. Our strategy was to grow our enrollment base
under our existing course offerings and to reduce the cost of learning through
implementing our proprietary Learning Management Software which we branded under
the name `CourseMate'.

      We were also looking to increase our enrollment base, add to our
curriculum offerings and supplement our accreditations offerings through
additional acquisitions of small vocational schools. The acquisitions were based
on our belief that the company would have more breadth in course offerings
through the school's accreditations and business class offerings while using its
scaleable education software application to conduct courses over the Internet.

      In March 2005 the Company closed its vocational schools and stopped
offering In-Class vocational training. We are now a provider of enterprise
e-learning solutions and related services to the education industry, government
agencies and corporate clients. Our patented Virtual University Appliance ("VU
Appliance") is a state-of-the-art hardware and software package which
incorporates our CourseMate Virtual University System.

      The VU Appliance product, which was introduced by the Company in October
2004, is a pre-packaged and "turn-key" hardware and software solution designed
to address the e-Learning needs of corporations and educational institutions. It
is a comprehensive "out-of-the-box" virtual learning solution that allows
customers to quickly create 100% web-based virtual learning environments. The
platform allows customers to create, publish and deliver courseware for
e-Learning in addition to managing their traditional classroom learning
environment. The Company utilizes its acquired United States Patent
(Provisional) in its VU Appliance. The Company believes its success in the
future lies in successfully marketing, selling and improving its VU Appliance
product and related services. The Company intends to remain focused on further
developing and adding to its intellectual property assets, utilizing its
expertise to help the online learning initiatives of its customers with
e-Learning systems solutions.

                                       6
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      The VU Appliance is feature-rich and allows corporations, educational
institutions and industry associations to create web-based virtual e-learning
environments very quickly and inexpensively. The appliance is a standard rack
mounted device and comes pre-configured with the following software:

      o     Course Builder - a software for creating/aggregating content for
            courses
      o     Courseware Repository - for storing all the courses and tracking
            their usage
      o     Learning Management and Registration System (LMS) - for registering
            and tracking Online as well as traditional in-class and web-cast
            students
      o     Online Exams Server - for creating comprehensive Exams, Quizzes and
            exercises
      o     Online Evaluations Server - for Students Evaluations, Instructor
            Evaluations, and other progress/quality tracking features
      o     Collaboration Server for Online Discussion Forums & Chat Sessions
      o     Online Marketing Server - for promoting new courses and recruiting
            Instructor/Mentors
      o     It has also e-commerce functionality built-in, so students can pay
            on-line using their credit card and take a self study course at
            their own space.

      The Appliance solution can accept content created in multiple formats and
presents that content over the Internet or Intranet. All interaction and
administration is performed with a web browser. The appliance can be placed at
the client's locations behind the fire wall or housed and managed at any remote
hosting location. Our clients can use our hard-software solution to integrate
technology into the education experience and campus life as well as in
government and corporate training environments. Our products support activities
such as professor or trainer assigned digital material on class or a corporate
website, student collaboration with peers or complete research online; an
administrator managing a departmental website; or a merchant conducting
cash-free transactions with students or employees and faculty through pre-funded
debit accounts. Our target clients include government agencies, colleges,
universities, vocation schools, other education providers and corporations, as
well as textbook publishers and education-focused merchants who serve these
education providers and training entities.

      We expect to generate revenues from sales of our VU Appliance product,
licensing of the product and professional services such as hosting,
customization, training, courseware development and third party course license
fees. Our product revenues consist of bundled hard-software product sales,
annual licensing fees, client hosting engagement. We typically sell our licenses
and hosting services under annually renewable agreements, and our clients
generally pay the annual fees in the beginning of the annual contract term..
Billing from these revenues are recognized as deferred revenues and are then
recognized ratably into revenue over the contract term. Our product sale
revenues are recognized upon the shipment of the product to our customers.

      We derive professional services revenues primarily from training,
implementation, installation and other consulting services. All our professional
services revenues are on time and material and are recognized as the services
are performed.

COMPETITION

      The market for e-Learning systems is very competitive and there are
several products in the market from large and well capitalized companies such as
SumTotal(TM), eCollege(TM), Blackboard(TM) and WebCT(TM) and several others.
These companies have far greater resources than us and therefore can make our
entry in the e-Learning systems marketplace difficult. With this in mind, there
can be no assurance that we will succeed in our business objectives.

                                       7
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PATENTS

      We have obtained a United States Provisional Patent on our Virtual
University Appliance product. The preliminary patent was granted on December 12,
2004. The patent is for a hardware and software combination designed to make
e-Learning easier to implement. We have capitalized the cost of the development
of this product at $360,000 for the past two years. We believe our patent is
designed to bring simplicity to complexity and make e-learning initiatives
easier to implement by packaging and tying all e-learning components and their
related processes together in our VU Appliance. However, due to the increasing
competition in the market and the continuous change in technology, we believe
our patents are impaired and we recognized an impairment loss of $327,369 during
the year ended December 31, 2005.

GROWTH STRATEGY

      We seek to capitalize on our position as a low-cost provider in our market
to grow our business by supporting several significant aspects of education,
including on-line teaching, on-line learning, commerce and faculty and student
affairs. Key elements of our growth strategy include:

INCREASING PENETRATION OF THE U.S. POSTSECONDARY EDUCATION AND CORPORATE MARKET.
As of December 31, 2004, we have packaged our suite of e-Learning products as a
`turn-key' appliance targeted towards mid-sized and smaller postsecondary
institutions and corporate accounts. We intend to capitalize on our ability to
rapidly deliver a fully functional e-Learning platform for under $30,000.

GROWING ANNUAL HOSTING REVENUES. We intend to increase annual hosting revenues
with clients by selling new hosting contracts and upgrading existing contracts,
cross-selling complementary applications and focusing on client satisfaction.

OFFERING NEW PRODUCTS TO OUR TARGET MARKETS. Using feedback gathered from our
clients and our sales and technical support groups, we intend to continue to
develop and offer new upgrades, applications and application suites to increase
our presence on campuses and expand the value provided to our clients.

INCREASING SALES TO INTERNATIONAL POSTSECONDARY EDUCATION INSTITUTIONS AND
CORPORATIONS. We intend to continue to expand sales and marketing efforts to
increase sales of our applications to international postsecondary education
institutions as well as Corporations.

PURSUING STRATEGIC RELATIONSHIPS AND ACQUISITION OPPORTUNITIES. We intend to
continue to pursue strategic relationships with, acquisitions of, and
investments in, companies that enhance the technological features of our
products, offer complementary products, services and technologies, or broaden
the scope of our product offerings into other areas.

INDUSTRY OVERVIEW

      We believe that the global education industry is large, complex and
changing rapidly, due in part to the accelerating adoption of information
technology. According to the U.S. Department of Education, overall annual
spending on education in the United States, including postsecondary and K-12
education, was $745 billion in the 2001-2002 school year. In addition, Gartner,
Inc., an independent market research firm, estimates that worldwide spending on
hardware, internal services, information technology services and software in the
education industry was $34.0 billion in 2003.

                                       8
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      Colleges, universities, schools, government agencies and other education
providers in the United States and many other countries are under increasing
pressure to accommodate the rising number of students and working adults seeking
education and to provide more flexible and efficient methods of delivering
education services. In response, we believe that many institutions are seeking
to utilize technology and Internet-based applications to improve learning,
flexibility and their overall competitiveness in attracting and serving
technology-oriented students. One such application is online distance learning.
Eduventures, Inc., an education consulting and research firm, estimates that
350,000 students, or slightly less than 2% of the total postsecondary student
population, were enrolled in online distance learning programs in 2002 and that
this market will grow from $2.5 billion in the 2002-2003 school year to more
than $4.2 billion in the 2004-2005 school year, representing a compound annual
growth rate of 31%.

EMPLOYEES AND LABOR RELATIONS

      We currently have two contract employees with whom our labor relations are
good.

LEGISLATIVE ACTIONS AND POTENTIAL NEW ACCOUNTING PRONOUNCEMENTS

      In order to comply with the newly adopted Sarbanes-Oxley Act of 2002 and
proposed accounting changes by the Securities and Exchange Commission, we may be
required to increase our internal controls, hire additional personnel and
additional outside legal, accounting and advisory services, all of which could
cause our general and administrative costs to increase. Proposed changes in the
accounting rules, including legislative and other proposals to account for
employee stock options as compensation expense among others, could increase the
expenses that we report under Generally Accepted Accounting Principles and could
adversely affect operating results.

RECENT EVENTS:

      On December 21, 2006, we entered into an Exchange Agreement with Changchun
Yongxin Dirui Medical Co., Ltd, a China corporation ("Yongxin") and all of the
shareholder of Yongxin. In accordance with the Exchange Agreement, and subject
to certain preconditions to Closing, including the completion of an approximate
1:12 reverse split, appropriate shareholder consents, the filing of necessary
disclosures with the SEC, and the settlement of certain debt, we agreed to issue
51,000,000 shares of newly issued common stock to the Yongxin shareholders or
their designees. The 51,000,000 shares will represent, immediately following the
closing, 85% of the total issued and outstanding shares of common stock.

      We will remain a wholly owned operating subsidiary of Yongxin following
the Closing.

      In the event we are able to satisfy the preconditions to closing and
subsequently close on the Exchange Agreement with Yongxin, Yongxin will become
our primary operating entity.

      Yongxin was established in 1993, for the purpose of engaging in the
business of medicines wholesale, retail and third-party medicine logistics.
Yongxin is located in Changchun City, Jilin Provincial with a staff of 358 of
which 18 are Licensed Pharmacist and 55% of which have a college education. As
of fiscal year end December 31, 2005 Yongxin had assets of $10,218,204 and
liabilities of $5,550,465. For the nine months ended September 30, 2006, Yongxin
had assets of $13,337,855 and liabilities of $7,373,424.

      With the business idea of "sustained operation, integrated innovation",
Yongxin has built a marketing network covering the whole Jilin province and
radiating the northeast region, and the brand image of "sustained innovation" of
Yongxin has firmly enjoyed popular support. In 2003, Yongxin passed Jilin
Provincial FSDA Quality Certification System, National GSP Certification and won
a number of honorary titles for several times such as "unit trusted by
government", and the development of Yongxin got strong support from national,
provincial and municipal governments.

                                       9
<PAGE>

      In 2004, Yongxin Medical established "Jilin procinceYongxin Chain
Drugstore Ltd."(Hereinafter referred to Yongxin Drugstore) with an investment of
RMB 2,500,000 (equivalent to $303,000) to focus on developing a terminal network
market. In July 2005, the company obtained the franchise right in Jilin province
from American Medicine Shoppe (Meixin International Medical Chains) and now has
developed 4 chains of "Meixino Yongxin". As of October 2006, Yongxin has
developed 11 retail chains in the name of Yongxin Drugstore which covers a
business area of 8,000 m2, scattered in key business region and large community
inside Changchun city.

RISK FACTORS

      You should carefully consider the risks described below before making an
investment decision. Investing in our common stock involves a high degree of
risk. Any of the following factors could harm our business and future results of
operation. As a result, the trading price of our common stock could decline and
result in a partial or complete loss of your investment.

RISKS RELATED TO OUR BUSINESS

WE HAVE ONLY HAD A FEW PROFITABLE QUARTERS AND MAY NEVER ACHIEVE SUSTAINED
PROFITABILITY.

      Although we were profitable in 2003 on a net income basis, we have not
been profitable in 2004, 2005 and 2006, and may not be profitable in future
periods, either on a short- or long-term basis. Our profitability was not
attributed to any sales of our products. We incurred a net loss of ($1,266,760)
for the year ended December 31, 2006. As of December 31, 2006, we had an
accumulated deficit of $10,372,574. We can give you no assurance that operating
losses will not recur in the future or that we will ever sustain profitability
on a quarterly or annual basis.

PROVIDING ENTERPRISE SOFTWARE APPLICATIONS TO THE EDUCATION INDUSTRY IS AN
EMERGING AND UNCERTAIN BUSINESS; IF THE MARKET FOR OUR PRODUCTS FAILS TO
DEVELOP, WE WILL NOT BE ABLE TO GROW OUR BUSINESS.

      Our success will depend on our ability to raise new capital and generate
revenues by providing enterprise software applications and services to colleges,
universities, schools, government agencies and other education providers. This
market has only recently developed and the viability and profitability of this
market is unproven. Our ability to grow our business will be compromised if we
do not develop and market products and services that achieve broad market
acceptance with our current and potential clients and their students and
employees. The use of online education, transactional or content management
software applications and services in the education industry may not become
widespread and our products and services may not achieve commercial success.
Even if potential clients decide to implement products of this type, they may
still choose to design, develop or manage all or a part of their system
internally.

      Given our clients' relatively early adoption of enterprise software
applications aimed at the education industry, they are likely to be less
risk-averse than most colleges, universities, schools, government agencies and
other education providers. Accordingly, the rate at which we have been able to
establish relationships with our clients in the past may not be indicative of
the rate at which we will be able to establish additional client relationships
in the future.

                                       10
<PAGE>

OUR CLIENTS USE OUR PRODUCTS TO FACILITATE ONLINE EDUCATION, WHICH IS A
RELATIVELY NEW FIELD; IF ONLINE EDUCATION DOES NOT CONTINUE TO DEVELOP AND GAIN
ACCEPTANCE, DEMAND FOR OUR PRODUCTS COULD SUFFER.

      Our success will depend in part upon the continued adoption by our clients
and potential clients of online education initiatives. Some academics and
educators are opposed to online education in principle and have expressed
concerns regarding the perceived loss of control over the education process that
can result from offering courses online. Some of these critics, particularly
college and university professors, have the capacity to influence the market for
online education, and their opposition could reduce the demand for our products
and services. In addition, the growth and development of the market for online
education may prompt some members of the academic community to advocate more
stringent protection of intellectual property associated with course content,
which may impose additional burdens on clients and potential clients offering
online education. This could require us to modify our products, or could cause
these clients and potential clients to abandon their online education
initiatives.

OUR LEVEL OF FIXED EXPENSES MAY CAUSE US TO INCUR OPERATING LOSSES IF WE ARE
UNSUCCESSFUL IN ACHIEVING REVENUE GROWTH.

      Our expense levels are based, in significant part, on our estimates of
future revenues and are largely fixed in the short term. As a result, we may be
unable to adjust our spending in a timely manner if our revenues fall short of
our expectations. Accordingly, any significant shortfall of revenues in relation
to our expectations would have an immediate and material effect on our results
of operations. In addition, as our business grows, we anticipate increasing our
operating expenses to expand our product development, technical support, sales
and marketing and administrative organizations. Any such expansion could cause
material losses to the extent we do not generate additional revenues sufficient
to cover the additional expenses.

BECAUSE MOST OF OUR HOSTING AND SUPPORT SERVICES ARE RENEWABLE ON AN ANNUAL
BASIS, A REDUCTION IN OUR LICENSE RENEWAL RATE COULD SIGNIFICANTLY REDUCE OUR
REVENUES.

      Our clients have no obligation to renew their hosting or support contracts
for our products after the expiration of the initial license period, which is
typically one year, and some clients have elected not to do so. A decline in
license renewal rates could cause our revenues to decline. Although we have
experienced favorable license renewal rates in recent periods, we have limited
historical data with respect to rates of renewals, so we cannot accurately
predict future renewal rates. Our license renewal rates may decline or fluctuate
as a result of a number of factors, including client dissatisfaction with our
products and services, our failure to update our products to maintain their
attractiveness in the market or budgetary constraints or changes in budget
priorities faced by our clients.

IF OUR PRODUCTS AND SERVICES DO NOT GAIN WIDESPREAD MARKET ACCEPTANCE, OUR
FINANCIAL RESULTS COULD SUFFER.

      We introduced our newest software application suite as an `Appliance'
called the "Virtual University Appliance" in October 2004. Our ability to grow
our business will depend, on client acceptance of this product, which is
currently unproven. If we are not successful in gaining widespread market
acceptance of this product, our revenues may fall below our expectations, which
could cause our stock price to decline.

BECAUSE WE GENERALLY RECOGNIZE CERTAIN TYPES OF REVENUES WHICH ARE RATABLY OVER
THE TERM OF OUR CONTRACT WITH A CLIENT, DOWNTURNS OR UPTURNS IN SALES WILL NOT
BE FULLY REFLECTED IN OUR OPERATING RESULTS UNTIL FUTURE PERIODS.

      We recognize most of our hosting and support revenues from clients monthly
over the terms of their agreements, which are typically 12 months, although
terms can range from one month to 48 months. As a result, much of the revenue we
report in each quarter is attributable to agreements entered into during
previous quarters. Consequently, a decline in sales, client renewals, or market
acceptance of our products in any one quarter will not necessarily be fully
reflected in the revenues in that quarter, and will negatively affect our
revenues and profitability in future quarters. This ratable revenue recognition
also makes it difficult for us to rapidly increase our revenues through
additional sales in any period, as revenues from new clients must be recognized
over the applicable agreement term.

                                       11
<PAGE>

OUR OPERATING MARGINS MAY SUFFER IF OUR PROFESSIONAL SERVICES REVENUES INCREASE
IN PROPORTION TO TOTAL REVENUES BECAUSE OUR PROFESSIONAL SERVICES REVENUES HAVE
LOWER GROSS MARGINS.

      Because our professional services revenues typically have lower gross
margins than our product revenues, an increase in the percentage of total
revenues represented by professional services revenues could have a detrimental
impact on our overall gross margins, and could adversely affect our operating
results. In addition, we sometimes subcontract professional services to third
parties, which further reduce our gross margins on these professional services.
As a result, an increase in the percentage of professional services provided by
third-party consultants could lower our overall gross margins.

IF OUR PRODUCTS CONTAIN ERRORS OR IF NEW PRODUCT RELEASES ARE DELAYED, WE COULD
LOSE NEW SALES AND BE SUBJECT TO SIGNIFICANT LIABILITY CLAIMS.

      Because our systems and software products are complex, they may contain
undetected errors or defects, known as bugs. Bugs can be detected at any point
in a product's life cycle, but are more common when a new product is introduced
or when new versions are released. In the past, we have encountered product
development delays and defects in our products. We would expect that, despite
our testing, errors will be found in new products and product enhancements in
the future. Significant errors in our products could lead to delay in sales and
subject us to some liability claims.

OUR SUCCESS DEPENDS IN PART ON OUR ABILITY TO EXPAND THE CONTENT OF OUR EXISTING
PROGRAMS AND DEVELOP NEW PROGRAMS IN A COST-EFFECTIVE MANNER AND ON A TIMELY
BASIS.

      Our success depends in part on our ability to expand the content of our
programs, develop new programs in a cost-effective manner, and meet our
customer's needs in a timely manner. The expansion of our existing programs and
the development of new programs may not be accepted by our customers or the
online education market. Even if we are able to develop acceptable new programs,
we may not be able to introduce these new programs as quickly as our customers
require or as quickly as our competitors.

FAILURE TO ADEQUATELY RESPOND TO CHANGES IN MARKET NEED AND TECHNOLOGIES COULD
HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS AND RESULTS OF OPERATIONS.

      Many of our customers must keep pace with such shifting technological
requirements and our inability to adequately respond to such needs in market
requirements because of financial constraints, technological change or other
factors could have a material adverse effect on our business and results of
operations.

CAPACITY CONSTRAINTS OR SYSTEM DISRUPTIONS TO OUR COMPUTER NETWORKS COULD DAMAGE
OUR REPUTATION AND LIMIT OUR ABILITY TO ATTRACT AND RETAIN STUDENTS.

      The performance and reliability of our program infrastructure is critical
to our reputation and our ability to attract and retain customers. Any system
error or failure, or a sudden and significant increase in traffic, may result in
the unavailability of our computer networks. We have experienced system failures
due to both software defects and operational errors. Most failures resulted in
brief periods of slow performance rather than interruptions in service.
Individual, sustained, or repeated occurrences could significantly damage our
reputation and result in a loss of potential or existing customers. We cannot
assure anyone that we will be able to expand our program infrastructure on a
timely basis sufficient to meet demand for our programs.

                                       12
<PAGE>

      Our computer systems and operations are vulnerable to interruption or
malfunction due to events beyond our control, including natural disasters and
telecommunications failures. We presently have a limited amount of redundant
facilities, and our formal disaster recovery plan has never been tested. Any
interruption to our computer systems or operations could have a material adverse
effect on our ability to attract and retain students.

OUR COMPUTER NETWORKS MAY BE VULNERABLE TO SECURITY RISKS THAT COULD DISRUPT
OPERATIONS AND REQUIRE US TO EXPEND SIGNIFICANT RESOURCES.

      Our computer networks may be vulnerable to unauthorized access, computer
hackers, computer viruses, and other security problems. A user who circumvents
security measures could misappropriate proprietary information or cause
interruptions or malfunctions in operations. Due to the sensitive nature of the
information contained on our networks, such as students' grades, our networks
may be targeted by hackers. As a result, we may be required to expend
significant resources to protect against the threat of these security breaches
or to alleviate problems caused by these breaches.

WE CANNOT PREDICT OUR FUTURE CAPITAL NEEDS, AND MAY NOT BE ABLE TO SECURE
ADDITIONAL FINANCING.

      We will likely need to raise additional funds in the future to fund our
operations, to expand our markets and product offerings, or to respond to
competitive pressures or perceived opportunities. We cannot assure that
additional financing will be available on favorable terms, or at all. If
adequate funds are not available when required or on acceptable terms, we may be
forced to cease our operations, and even if we are able to continue operations,
our ability to increase revenues may be adversely affected.

WE DEPEND ON THE CONTINUED SERVICES OF OUR EXECUTIVE OFFICERS AND THE LOSS OF A
KEY EXECUTIVE COULD SEVERELY IMPACT OUR OPERATIONS.

      The execution of our present business plan depends on the continued
services of Umesh Patel. While we have an employment agreement with him, the
loss of his services would be detrimental to us and could have a material
adverse effect on our business, financial condition and results of operations.

OUR FUTURE SUCCESS DEPENDS IN PART UPON OUR ABILITY TO RECRUIT AND RETAIN KEY
PERSONNEL.

      Our success to date has been, and our continuing success will be,
substantially dependent on the continued services of our executive officers and
other key personnel, who generally have extensive experience in the industry and
have been employed by us for substantial periods of time. If we ceased to employ
any of these integral personnel and failed to manage a smooth transition to new
personnel, our business could suffer.

      Our success also depends, in large part, upon our ability to attract and
retain highly qualified marketing personnel. Due to the nature of our business,
we may have difficulty locating and hiring qualified personnel to fill open
positions, and retaining such personnel once hired. The loss of the services of
any key employees, or our failure to attract and retain other qualified and
experienced personnel on acceptable terms, could have an adverse effect on our
business and results of operations.

                                       13
<PAGE>

OUR BUSINESS IS SUBJECT TO SEASONAL FLUCTUATIONS, WHICH MAY CAUSE OUR OPERATING
RESULTS TO FLUCTUATE FROM QUARTER TO QUARTER. THIS FLUCTUATION MAY RESULT IN
VOLATILITY OR HAVE AN ADVERSE EFFECT ON THE MARKET PRICE OF OUR COMMON STOCK.

      We experience, and expect to continue to experience, seasonal fluctuations
in our revenue because the bulk of our customers tailor their purchase of our
products to student enrollment and these enrollments decrease during the summer
months. These seasonal fluctuations can effect in our operating results which
could result in volatility or have an adverse effect on the market price of our
Common Stock. In addition, as our revenues continue to grow, these seasonal
fluctuations may become more evident.

OUR FUTURE SUCCESS DEPENDS SUBSTANTIALLY ON OUR ABILITY TO SUCCESSFULLY SELL AND
DELIVER OUR VIRTUAL UNIVERSITY APPLIANCE PRODUCT.

      We have invested substantial human and capital resources in the
development of our proprietary Virtual University Appliance product. We can
provide no assurance that this product will be well received by our target
market. If the product is not well received, our operating results will be
adversely affected.

WE MAY FAIL TO PROTECT ADEQUATELY OUR PROPRIETARY TECHNOLOGY, WHICH WOULD ALLOW
COMPETITORS TO TAKE ADVANTAGE OF OUR EFFORTS.

      We rely upon proprietary know-how and continuing technological innovation
to remain competitive. We protect this information with reasonable security
measures, including the use of confidentiality agreements with our consultants
and corporate collaborators. It is possible that these individuals will breach
these agreements and that any remedies for a breach will be insufficient to
allow us to recover our costs. Furthermore, our know-how and other technology
may otherwise become known or be independently discovered by our competitors.

OUR PRODUCTS AND SERVICES COULD INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF
OTHERS, WHICH MAY CAUSE US TO ENGAGE IN COSTLY LITIGATION AND, IF IS NOT
SUCCESSFUL, COULD CAUSE US TO PAY SUBSTANTIAL DAMAGES AND PROHIBIT US FROM
SELLING OUR PRODUCTS OR SERVICING OUR CLIENTS.

      We cannot be certain that our technology and other intellectual property
do not infringe upon the intellectual property rights of others. Authorship and
priority of intellectual property rights may be difficult to verify. We may be
subject to legal proceedings and claims from time to time in the ordinary course
of our business, including claims of alleged infringement of the trademarks and
other intellectual property rights of third parties.

      If our products violate third-party proprietary rights, we cannot assure
you that we would be able to arrange licensing agreements or other satisfactory
resolutions on commercially reasonable terms, if at all. Any claims made against
us relating to the infringement of third-party propriety rights could result in
the expenditure of significant financial and managerial resources and
injunctions preventing us from providing services. Such claims could severely
harm our financial condition and ability to compete.

IF WE FAIL TO MAINTAIN EFFECTIVE INTERNAL CONTROLS OVER FINANCIAL REPORTING, THE
PRICE OF OUR COMMON STOCK MAY BE ADVERSELY AFFECTED.

      Our internal controls over financial reporting may have weaknesses and
conditions that need to be addressed, the disclosure of which may have an
adverse impact on the price of our Common Stock. We are required to establish
and maintain appropriate internal controls over financial reporting. Failure to
establish those controls, or any failure of those controls once established,
could adversely impact our public disclosures regarding our business, financial
condition or operating results. In addition, management's assessment of our
internal controls over financial reporting may identify weaknesses and
conditions that need to be addressed in our internal controls over financial
reporting or other matters that may raise concerns for investors. Any actual or
perceived weaknesses and conditions that need to be addressed in our internal
controls over financial reporting, disclosure of management's assessment of our
internal controls over financial reporting or disclosure of our public
accounting firm's attestation to or report on management's assessment of our
internal controls over financial reporting may have an adverse impact on the
price of our Common Stock.

                                       14
<PAGE>

OUR BUSINESS IS SUBJECT TO REPORTING REQUIREMENTS THAT ARE CURRENTLY EVOLVING
AND, ONCE ESTABLISHED COULD SUBSTANTIALLY INCREASE OUR OPERATING EXPENSES AND
DIVERT MANAGEMENT'S ATTENTION FROM THE OPERATION OF OUR BUSINESS.

      Because our Common Stock is publicly traded, we are subject to a variety
of rules and regulations of federal, state and financial market exchange
entities charged with the protection of investors and the oversight of companies
whose securities are publicly traded. These entities, including the Securities
and Exchange Commission, the Public Company Accounting Oversight Board and the
OTC Bulletin Board, have recently issued new requirements and regulations and
are currently developing additional regulations and requirements in response to
recent laws enacted by Congress, most notably the Sarbanes-Oxley Act of 2002. As
certain rules are not yet finalized, we do not know the level of resources we
will have to commit in order to be in compliance. Our compliance with current
and proposed rules is likely to require the commitment of significant financial
and managerial resources. As a result, our management's attention might be
diverted from other business concerns, which could negatively affect our
business.

RISKS RELATED TO OUR INDUSTRY

THE MARKET FOR ONLINE LEARNING MAY NOT CONTINUE TO DEVELOP.

      The use of online education and training may not increase as anticipated
and our programs may not be accepted by working adult students. Also, some
educators are opposed to online education and have the capacity to negatively
influence the market for our programs. Some critics have also expressed concerns
regarding the perceived loss of control over the educational process that can
result from the outsourcing of online campuses and courses. We may be unable to
continue to increase the number of students and revenues if the higher education
and training market does not more generally accept online learning.

WE OPERATE IN A HIGHLY COMPETITIVE MARKET WITH RAPID TECHNOLOGY CHANGES AND WE
MAY NOT HAVE THE RESOURCES NEEDED TO COMPETE SUCCESSFULLY.

      Online education is a highly fragmented and competitive market that is
subject to rapid technological change. Competitors vary in size and organization
from traditional colleges and universities, many of which have some form of
online education programs, to for-profit schools, corporate universities, and
software companies providing online education and training software. We expect
the online education and training market to be subject to rapid changes in
technologies. We may not have the resources necessary to compete with the
rapidly changing technologies being developed by our competitors and our success
will depend on our ability to adapt to these changing technologies.

COMPETITORS MAY HARM OUR BUSINESS BY OPERATING MORE EFFECTIVELY OR MORE
EFFICIENTLY IN ITS MARKET.

      The postsecondary education market is highly competitive. Our schools
compete with traditional public and private two-year and four-year colleges and
universities and other for-profit schools, including those that offer
distance-learning programs. Certain public and private colleges and universities
may offer programs similar to those offered by us. Public institutions are often
able to charge lower tuition, due in part to government subsidies, government
and foundation grants, tax-deductible contributions and other financial
resources not available to for-profit schools like those operated by us. Some of
our competitors, in both the public and private sectors, have substantially
greater financial and other resources, which may allow them to have greater
success in the market.

                                       15
<PAGE>

CHANGES IN THE EXTENSIVE REGULATIONS TO WHICH WE ARE SUBJECT COULD INCREASE OUR
COST OF DOING BUSINESS OR AFFECT OUR ABILITY TO GROW.

STATE REGULATIONS FOR DISTANCE EDUCATION ARE CURRENTLY UNCERTAIN AND MAY REQUIRE
US TO EXPEND SIGNIFICANT RESOURCES AND SIGNIFICANTLY LIMIT OUR ABILITY TO EXPAND
OUR BUSINESS.

      State regulations for distance education providers are uncertain. We may
have to devote significant time and financial resources in order to comply with
various state laws and regulations if states determine to regulate online
education. We may not have sufficient resources to comply with any new laws and
regulations that may be enacted, which could preclude us from operating in one
or more states and could significantly limit the ability to expand our business.
Schools would not buy our VUS if state or federal governmental agencies restrict
them from enrolling students for online education.

RISKS RELATED TO OUR CAPITAL STRUCTURE

THERE IS NO ASSURANCE OF AN ESTABLISHED PUBLIC TRADING MARKET.

      Although our Common Stock trades on the OTCBB a regular trading market for
the securities may not be sustained in the future. The NASD has enacted recent
changes that limit quotations on the OTCBB to securities of issuers that are
current in their reports filed with the Securities and Exchange Commission. The
effect on the OTCBB of these rule changes and other proposed changes cannot be
determined at this time. The OTCBB is an inter-dealer, Over-The-Counter market
that provides significantly less liquidity than the NASD's automated quotation
system (the "NASDAQ Stock Market"). Quotes for stocks included on the OTCBB are
not listed in the financial sections of newspapers as are those for the NASDAQ
Stock Market. Therefore, prices for securities traded solely on the OTC Bulletin
Board may be difficult to obtain and holders of common stock may be unable to
resell their securities at or near their original offering price or at any
price. Market prices for our Common Stock will be influenced by a number of
factors, including:

      o     the issuance of new equity securities;

      o     changes in interest rates;

      o     competitive developments, including announcements by competitors of
            new products or services or significant contracts, acquisitions,
            strategic partnerships, joint ventures or capital commitments;

      o     variations in quarterly operating results;

      o     change in financial estimates by securities analysts;

      o     the depth and liquidity of the market for our Common Stock;

      o     investor perceptions of our company and the technologies industries
            generally; and

      o     general economic and other national conditions.

                                       16
<PAGE>

OUR STOCK PRICE IS VOLATILE AND COULD DECLINE IN THE FUTURE.

      The price of our Common Stock has been volatile in the past and will
likely continue to fluctuate in the future. We believe that a number of factors,
both within and outside our control, could cause the price of our Common Stock
to fluctuate, perhaps substantially. Factors such as the following could have a
significant adverse impact on the market price of our Common Stock:

      o     our ability to obtain additional financing and, if available, the
            terms and conditions of the financing;

      o     our financial position and results of operations;

      o     developments with our collaborators, if any;

      o     developments concerning our intellectual property rights or those of
            our competitors (including litigation);

      o     status of litigation, if any;

      o     period-to-period fluctuations in our operating results;

      o     changes in estimates of our performance by any securities analysts;

      o     new regulatory requirements and changes in the existing regulatory
            environment; and

      o     market conditions for education stocks in general.

PENNY STOCK REGULATIONS MAY IMPOSE CERTAIN RESTRICTIONS ON THE MARKETABILITY OF
OUR SECURITIES.

      Our Common Stock is considered to be a "penny stock". The Securities and
Exchange Commission (the "Commission") has adopted regulations which generally
define a "penny stock" to be any equity security that has a market price (as
defined) of less than $5.00 per share or an exercise price of less than $5.00
per share, subject to certain exceptions. As a result, our Common Stock is
subject to rules that impose additional sales practice requirements on
broker-dealers who sell such securities to persons other than established
customers and accredited investors (generally those with assets in excess of
$1,000,000 or annual income exceeding $200,000, or $300,000 together with their
spouse). For transactions covered by these rules, the broker-dealer must make a
special suitability determination for the purchase of such securities and have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the transaction, of a risk
disclosure document mandated by the Commission relating to the penny stock
market. The broker-dealer must also disclose the commission payable to both the
broker-dealer and the registered representative, current quotations for the
securities ad, if the broker-dealer is the sole market maker, the broker-dealer
must disclose this fact and the broker-dealer's presumed control over the
market. Finally, monthly statements must be sent disclosing recent price
information for the penny stock held in the account and information on the
limited market in penny stocks. Consequently, the "penny stock" rules may
restrict the ability of broker-dealers to sell our securities and may affect the
ability of investors to sell our securities in the secondary market and the
price at which such purchasers can sell any such securities.


                                       17
<PAGE>

      Stockholders should be aware that, according to the Securities and
Exchange Commission, the market for penny stocks has suffered in recent years
from patterns of fraud and abuse. Such patterns include:

      o     control of the market for the security by one or a few
            broker-dealers that are often related to the promoter or issuer;

      o     manipulation of prices through prearranged matching of purchases and
            sales and false and misleading press releases;

      o     "boiler room" practices involving high pressure sales tactics and
            unrealistic price projections by inexperienced sales persons;

      o     excessive and undisclosed bid-ask differentials and markups by
            selling broker-dealers; and

      o     the wholesale dumping of the same securities by promoters and
            broker-dealers after prices have been manipulated to a desired
            level, along with the inevitable collapse of those with consequent
            investor losses.

BROKER-DEALER REQUIREMENTS MAY AFFECT TRADING AND LIQUIDITY.

      Section 15(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and Rule 15g-2 promulgated thereunder by the SEC require
broker-dealers dealing in penny stocks to provide potential investors with a
document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document before effecting any transaction in a
penny stock for the investor's account.

      Potential investors in our Common Stock are urged to obtain and read such
disclosure carefully before purchasing any shares that are deemed to be "penny
stock." Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve
the account of any investor for transaction in such stocks before selling any
penny stock to that investor. This procedure requires the broker-dealer to (i)
obtain from the investor information concerning his or her financial situation,
investment experience and investment objectives; (ii) reasonably determine,
based on that information, that transactions in penny stocks are suitable for
the investor and that the investor has sufficient knowledge and experience as to
be reasonably capable of evaluating the risks of penny stock transactions; (iii)
provide the investor with a written statement setting forth the basis on which
the broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming that it
accurately reflects the investor's financial situation, investment experience
and investment objectives. Compliance with these requirements may make it more
difficult for holders of our Common Stock to resell their shares to third
parties or to otherwise dispose of them in the market or otherwise.


ITEM 2. DESCRIPTION OF PROPERTY

      We lease office space and a repair facility at 680 Langsdorf Drive, Suite
203, Fullerton, California pursuant to a Lease expires April 2008. The current
annual rent is approximately $44,400. We believe that our current space is
adequate for our immediate and near term requirements and that additional space
is available on commercially reasonable terms.

                                       18
<PAGE>

ITEM 3. LEGAL PROCEEDINGS

      As of December 31, 2006, the Company is not a party to any pending or
threatened litigation, claim or assessment except for the following. After
dismissal of SEA's petition in Bankruptcy the previously stayed litigation
against it has been revived. It is anticipated that SEA will consent to judgment
on this claim in the amount of $219,000. This claim is duplicative and not
additional to the Judgment previously entered against Digital Learning
Institute, Inc. The claim arises out of the same circumstances under which
judgment was obtained against Digital Learning Institute, Inc.

      On April 27, 2005, Global Computer Systems, Inc. settled its litigation
with its landlord. Global has agreed to pay the equivalent of two months rent
and to vacate the rented premises. The cost of the settlement was $24,950 and is
payable in four monthly installments commencing May 20, 2005. The Company has
not made any of these payments

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

      No matters were put before our shareholders for a vote during the last
quarter of our fiscal year.

                                       19
<PAGE>

                                     PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

MARKET FOR COMMON STOCK; RELATED INFORMATION

      Our Common Stock is traded on the OTCBB under the symbol "DGTL". Prior to
March 19, 2004, our Common Stock traded under the symbol "FPQT". The following
table sets forth, for the fiscal quarter indicated, the high and low closing
price per share sales prices for the Common Stock, as reported by OTCBB:
=
                                    BID PRICE
                           ----------------------------
PERIOD (1)                     HIGH            LOW

2005:
First Quarter                  $0.73          $0.08
Second Quarter                 $0.09          $0.03
Third Quarter                  $0.14          $0.06
Fourth Quarter                 $0.25          $0.01


2006:
First Quarter                  $0.19          $0.02
Second Quarter                 $0.70          $0.17
Third Quarter                  $0.25          $0.02
Fourth Quarter                 $0.12          $0.01

2007:
First Quarter                  $0.07          $0.06

HOLDERS

      As of April 12,, 2007, there were 46 holders of record of our Common Stock
and no holders of record of our Preferred Stock. For information concerning
historical dividends and our dividend policy, see "Item 6--Management's
Discussion and Analysis or Plan of Operation--Dividends and Distributions."

DIVIDEND POLICY

      We have never paid any cash dividends on our common shares, and we do not
anticipate that we will pay any dividends with respect to those securities in
the foreseeable future.

EQUITY COMPENSATION PLAN INFORMATION

      The following table provides information as of December 31, 2006 regarding
compensation plans (including individual compensation arrangements) under which
equity securities of our company are authorized for issuance. Pursuant to the
terms of our merger with Digital Learning Institute, Inc., we will issue options
to purchase an aggregate of 595,500 shares of our common stock to certain former
Digital Learning Institute, Inc. option holders.

                                       20
<PAGE>
<TABLE>
<CAPTION>

                                     Number of securities                              Number of securities
                                       to be issued upon        Weighted-average     remaining available for
                                          exercise of          exercise price of      future issuance under
                                      outstanding options     outstanding options      equity compensation
Plan Category                            and warrants             and warrants                plans
----------------------------------- ------------------------ ----------------------- -------------------------
<S>                                 <C>                      <C>                     <C>
Equity compensation plans                               -0-                     N/A             2,000,000 (1)
approved by security holders
Equity compensation plan
not approved by security holders                        N/A                     N/A                       N/A
</TABLE>

(1) Refers to shares underlying our 2004 Stock Option, Deferred Stock and
Restricted Stock Plan. As of December 31, 2006, no options, deferred stock or
restricted stock have been issued under the plan


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

OVERVIEW

      Digital Learning Management Corporation, a Delaware corporation
(hereinafter sometimes referred to as the "Company," "we," and "us"),
incorporated on February 18, 1999, under the name FreePCSQuote.Com, Inc., was a
development stage company with a principal business objective to allow
businesses the opportunity to generate revenues through the use of our Internet
technology solutions and services. Through the use of our computer software,
network technology, and systems management, we provided our customers outsourced
web site and application hosting solutions. We had yet to generate significant
revenues from operations through the end of fiscal 2004.

CHANGE IN BUSINESS STRATEGY AND RECENT EVENTS

      Effective March 16, 2005, the Company decided to discontinue its
vocational schools and will no longer pursue acquisitions of accredited
vocational schools and campuses going forward. The Company will continue to
focus on its online e-Learning systems and related services strategy, with sales
and services focused around its VU Appliance product, training and education.

      The VU Appliance product, which was introduced by the Company in October
2004, is a pre-packaged and "turn-key" hardware and software solution designed
to address the e-Learning needs of corporations and educational institutions. It
is a comprehensive "out-of-the-box" virtual learning solution that allows
customers to quickly create 100% web-based virtual learning environments. The
platform allows customers to create, publish and deliver courseware for
e-Learning in addition to managing their traditional classroom learning
environment. The Company utilizes its United States Patent in its VU Appliance.
The Company believes its success in the future lies in successfully marketing,
selling and improving its VU Appliance product and related services. The Company
intends to remain focused on further developing and adding to its intellectual
property assets, utilizing its expertise to help the online learning initiatives
of its customers with e-Learning systems solutions.

      Our strategy is to grow our business utilizing our patented proprietary
learning management software by selling our learning management system to other
schools, colleges and businesses.

                                       21
<PAGE>

CRITICAL ACCOUNTING POLICIES

      We prepare our financial statements in accordance with accounting
principles generally accepted in the United States. The preparation of these
financial statements requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Management's estimates and judgments are based on historical experience and
various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

      We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our condensed
consolidated financial statements:

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its majority owned entities, collectively referred to as "Company" or "DGTL".
All significant inter-company transactions have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions. Such estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from estimated amounts.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist primarily of cash in banks and highly liquid
investments with original maturities of 90 days or less.

MARKETING AND ADVERTISING COSTS

Marketing and advertising costs are charged to expense during the period
incurred. These costs arise primarily from training vouchers offered to
students.

REVENUE RECOGNITION

Revenues from sales of the Company's VU Appliance include product, licensing of
the product and professional services such as hosting, customization, training,
courseware development and third party course license fees. Product revenues
consist of bundled hard-software product sales, annual licensing fees, and
client hosting engagement. The Company intends to sell its licenses, training
and hosting services under annually renewable agreements, which the clients will
generally pay annual fees in the beginning of the annual contract term. Billings
from these revenues are recognized as deferred revenues and are then recognized
ratably over the contract term. Product sale revenues are recognized upon the
shipment of the product to customers.

                                       22
<PAGE>

Tuition revenue and fees are derived from courses taught in the Company's
schools. Tuition and fee revenues are recognized pro-rata (on a straight-line
basis) over the term of the applicable course (usually two to four weeks for
DLI). Tuition is billed after the course has been completed for DLI. If a
student withdraws from a course or program, the paid but unearned portion of the
student tuition is refunded.

ALLOWANCES FOR DOUBTFUL ACCOUNTS

The Company maintains an allowance for doubtful accounts resulting from the
inability, failure or refusal of our students to make required payments. The
Company determines the adequacy of this allowance by regularly reviewing the
accounts receivable aging and applying various expected loss percentages to
certain student accounts receivable categories based upon historical bad debt
experience. The Company generally writes-off accounts receivable balances deemed
uncollectible as they are sent to collection agencies. As of December 31, 2006
the Company has an allowance for bad debts amounting $235,506, representing 100%
of accounts receivable.

EDUCATIONAL SERVICES

Educational services include direct operating expenses of the schools consisting
primarily of contract salaries, occupancy and supplies.

EARNINGS PER COMMON SHARE

The Company computes earnings per common share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128). The
Statement requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Basic loss per
share is computed by dividing loss available to common shareholders by the
weighted average number of common shares outstanding. The computation of diluted
loss per share is similar to the basic loss per share computation except the
denominator is increased to include the number of additional shares that would
have been outstanding if the dilutive potential common shares had been issued.
In addition, the numerator is adjusted for any changes in income or loss that
would result from the assumed conversions of those potential shares. However,
such presentation is not required if the effect is antidilutive. Accordingly,
the diluted per share amounts do not reflect the impact of warrants and options
because the effect of each is antidilutive.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation expense is provided on
a straight-line basis using estimated useful lives of 3-7 years. Expenditures
for maintenance and repairs are charged to operations as incurred while renewals
and betterments are capitalized. Gains and losses on disposals are included in
the results of operations. Depreciation expense was $13,408 and $85,579 for the
years ended December 31, 2006 and 2005, respectively. During the year ended
December 31, 2005, the Company wrote off certain property and equipment that was
not longer being used and took an impairment charge of $75,414.

                                       23
<PAGE>

FACILITIES

The Company leases office space owned by a related party as well as additional
office space from unrelated parties. Rent expense was $33,338 and $140,655 for
the years ended December 31, 2006 and 2005, respectively.

INCOME TAXES

The Company accounts for income taxes under the asset and liability method.
Under this method, deferred income taxes are recorded to reflect the tax
consequences in future years of temporary differences between the tax basis of
assets and liabilities and their financial statement amounts at the end of each
reporting period. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense
represents the tax payable for the current period and the change during the
period in deferred tax assets and liabilities. Deferred tax assets and
liabilities have been netted to reflect the tax impact of temporary differences.

Deferred tax assets arise primarily from the net operating loss carry-forward
and expenses accrued for book basis but not for tax basis. Deferred tax
liabilities primarily result from revenues recognized for book basis but not for
tax basis.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash, accounts receivable, notes payable, accounts payable
and accrued expenses approximate fair value because of the short maturity of
these items.

CONCENTRATIONS OF RISK

The Company maintains all cash and cash equivalents in financial institutions,
which at times may exceed federally insured limits. The Company has not
experienced a loss in such accounts.

Four customers accounted for 96% and two customers accounted for 60% of sales
during the years ended December 31, 2006 and 2005, respectively. The three
customers accounted for 21% of accounts receivable at December 31, 2006.

The Company performs regular evaluations concerning the ability of its customers
to satisfy their obligations and records a provision for doubtful accounts based
upon these evaluations, when necessary.

STOCK BASED COMPENSATION

THE COMPANY ADOPTED SFAS NO. 123-R EFFECTIVE JANUARY 1, 2006 USING THE MODIFIED
PROSPECTIVE METHOD. UNDER THIS TRANSITION METHOD, STOCK COMPENSATION EXPENSE
INCLUDES COMPENSATION EXPENSE FOR ALL STOCK-BASED COMPENSATION AWARDS GRANTED ON
OR AFTER JANUARY 1,2006, BASED ON THE GRANT-DATE FAIR VALUE ESTIMATED IN
ACCORDANCE WITH THE PROVISIONS OF SFAS NO. 123-R.

PRIOR TO JANUARY 1, 2006, THE COMPANY MEASURED STOCK COMPENSATION EXPENSE USING
THE INTRINSIC VALUE METHOD OF ACCOUNTING IN ACCORDANCE WITH ACCOUNTING
PRINCIPLES BOARD (APB) OPINION NO. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES," AND RELATED INTERPRETATIONS (APB NO. 25) AND HAS OPTED FOR THE
DISCLOSURE PROVISIONS OF SFAS NO. 123. THUS, EXPENSE WAS GENERALLY NOT
RECOGNIZED FOR THE COMPANY'S EMPLOYEE STOCK OPTION AND PURCHASE PLANS.

                                       24
<PAGE>

THERE WERE NO OUTSTANDING AND UNVESTED STOCK OPTIONS AS OF DECEMBER 31, 2005.
THE COMPANY DID NOT GRANT ANY NEW OPTIONS DURING THE YEAR ENDED DECEMBER 31,
2006.

VALUATION OF THE COMPANY'S COMMON STOCK

Unless otherwise disclosed, all stock based transactions entered into by the
Company have been valued at the market value of the Company's common stock on
the date the transaction was entered into or have been valued using the Modified
Black-Scholes Model to estimate the fair market value.

SOFTWARE DEVELOPMENT COSTS

The Company has developed software to enable students to access and take online
classes. The software development costs were expensed as research and
development costs as incurred until the software reached technological
feasibility in accordance with Statement of Financial Accounting Standards No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed" ("SFAS 86"). During the year ended December 31, 2005, the
Company wrote off development costs and took an impairment charge of $327,369.

RECLASSIFICATION

Certain amounts reported in the Company's financial statements for the year
ended December 31, 2005 have been reclassified to conform to current year
presentations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
years beginning after November 15, 2007. Early adoption is permitted subject to
specific requirements outlined in the new Statement. Therefore, calendar-year
companies may be able to adopt FAS 159 for their first quarter 2007 financial
statements.

The new Statement allows entities to choose, at specified election dates, to
measure eligible financial assets and liabilities at fair value that are not
otherwise required to be measured at fair value. If a company elects the fair
value option for an eligible item, changes in that item's fair value in
subsequent reporting periods must be recognized in current earnings. FAS 159
also establishes presentation and disclosure requirements designed to draw
comparison between entities that elect different measurement attributes for
similar assets and liabilities. The management is currently evaluating the
effect of this pronouncement on financial statements.

In September 2006, FASB issued SFAS 158 `Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans--an amendment of FASB Statements
No. 87, 88, 106, and 132(R)' This Statement improves financial reporting by
requiring an employer to recognize the over funded or under funded status of a
defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity or changes in unrestricted net assets
of a not-for-profit organization. This Statement also improves financial
reporting by requiring an employer to measure the funded status of a plan as of
the date of its year-end statement of financial position, with limited
exceptions. An employer with publicly traded equity securities is required to
initially recognize the funded status of a defined benefit postretirement plan
and to provide the required disclosures as of the end of the fiscal year ending
after December 15, 2006. An employer without publicly traded equity securities
is required to recognize the funded status of a defined benefit postretirement
plan and to provide the required disclosures as of the end of the fiscal year
ending after June 15, 2007. However, an employer without publicly traded equity

                                       25
<PAGE>

securities is required to disclose the following information in the notes to
financial statements for a fiscal year ending after December 15, 2006, but
before June 16, 2007, unless it has applied the recognition provisions of this
Statement in preparing those financial statements:

      a.    A brief description of the provisions of this Statement
      b.    The date that adoption is required
      c.    The date the employer plans to adopt the recognition provisions of
            this Statement, if earlier.

The requirement to measure plan assets and benefit obligations as of the date of
the employer's fiscal year-end statement of financial position is effective for
fiscal years ending after December 15, 2008. The management is currently
evaluating the effect of this pronouncement on financial statements.

In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The management is currently
evaluating the effect of this pronouncement on financial statements.

In March 2006 FASB issued SFAS 156 'Accounting for Servicing of Financial
Assets' this Statement amends FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, with
respect to the accounting for separately recognized servicing assets and
servicing liabilities. This Statement:

      1.    Requires an entity to recognize a servicing asset or servicing
      liability each time it undertakes an obligation to service a financial
      asset by entering into a servicing contract.

      2.    Requires all separately recognized servicing assets and servicing
      liabilities to be initially measured at fair value, if practicable.

      3.    Permits an entity to choose 'Amortization method' or 'Fair value
      measurement method' for each class of separately recognized servicing
      assets and servicing liabilities.

      4.    At its initial adoption, permits a one-time reclassification of
      available-for-sale securities to trading securities by entities with
      recognized servicing rights, without calling into question the treatment
      of other available-for-sale securities under Statement 115, provided that
      the available-for-sale securities are identified in some manner as
      offsetting the entity's exposure to changes in fair value of servicing
      assets or servicing liabilities that a servicer elects to subsequently
      measure at fair value.

      5.    Requires separate presentation of servicing assets and servicing
      liabilities subsequently measured at fair value in the statement of
      financial position and additional disclosures for all separately
      recognized servicing assets and servicing liabilities.

                                       26
<PAGE>

      This Statement is effective as of the beginning of the Company's first
      fiscal year that begins after September 15, 2006. Management believes that
      this statement will not have a significant impact on the consolidated
      financial statements.

      In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
      Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
      Derivative Instruments and Hedging Activities", and SFAF No. 140,
      "Accounting for Transfers and Servicing of Financial Assets and
      Extinguishments of Liabilities". SFAS No. 155, permits fair value
      remeasurement for any hybrid financial instrument that contains an
      embedded derivative that otherwise would require bifurcation, clarifies
      which interest-only strips and principal-only strips are not subject to
      the requirements of SFAS No. 133, establishes a requirement to evaluate
      interest in securitized financial assets to identify interests that are
      freestanding derivatives or that are hybrid financial instruments that
      contain an embedded derivative requiring bifurcation, clarifies that
      concentrations of credit risk in the form of subordination are not
      embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition
      on the qualifying special-purpose entity from holding a derivative
      financial instrument that pertains to a beneficial interest other than
      another derivative financial instrument. This statement is effective for
      all financial instruments acquired or issued after the beginning of the
      Company's first fiscal year that begins after September 15, 2006. The
      Company has in the process of evaluating the impact of this pronouncement
      on its financial statements.

      In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
      Corrections." This statement applies to all voluntary changes in
      accounting principle and requires retrospective application to prior
      periods' financial statements of changes in accounting principle, unless
      this would be impracticable. This statement also makes a distinction
      between "retrospective application" of an accounting principle and the
      "restatement" of financial statements to reflect the correction of an
      error. This statement is effective for accounting changes and corrections
      of errors made in fiscal years beginning after December 15, 2005. We are
      evaluating the effect the adoption of this interpretation will have on its
      financial position, cash flows and results of operations.

RESULTS OF OPERATIONS - YEARS ENDED DECEMBER 31, 2006 AND 2005

                                                            YEAR ENDED
                                                  ------------------------------
                                                   DECEMBER 31,    DECEMBER 31,
                                                       2006            2005
                                                  --------------  --------------

REVENUES                                          $      93,856   $     163,653

OPERATING EXPENSES:
       Educational services                                   -         135,481
       General and administrative                       645,482       1,511,379
       Depreciation expense                              13,408          85,579
       Marketing and advertising                              -         121,359
       Impairment expense                                     -         402,783
                                                  --------------  --------------
TOTAL EXPENSES                                          658,890       2,256,581
                                                  --------------  --------------

LOSS FROM OPERATIONS                                   (565,034)     (2,092,928)

OTHER INCOME (EXPENSES):
       Other income                                       3,682               -
       Interest expense                                (559,271)       (570,101)
       Loss on settlement of debt                      (148,750)              -
                                                  --------------  --------------
TOTAL OTHER EXPENSES                                   (704,339)       (570,101)
                                                  --------------  --------------

LOSS BEFORE PROVISION FOR INCOME TAXES
       AND DISCONTINUED OPERATIONS                   (1,269,373)     (2,663,029)

DISCONTINUED OPERATIONS
       Gain (Loss) from discontinued operations           3,413        (458,522)

LOSS BEFORE INCOME TAX                               (1,265,960)     (3,121,551)
                                                  --------------  --------------
PROVISION FOR INCOME TAXES                                  800               -
                                                  --------------  --------------

                                                  --------------  --------------
NET LOSS                                          $  (1,266,760)  $  (3,121,551)
                                                  ==============  ==============

                                       27
<PAGE>

REVENUES

      Revenues decreased by $69,797 or 42.6% to $93,856 for the year ended
December 31, 2006 from $163,653 for the year ended December 31, 2005. The
decrease was due to the fact that the company could not close any sales during
the last six months of the year.

OPERATING EXPENSES

      Operating expenses consist primarily of educational services expenses,
general and administrative expenses, and marketing and advertising expenses.
Operating expenses decreased by $1,597,691 or 71% to $658,890 for the year ended
December 31 2006 from $2,256,581 for the year ended December 31, 2005. The
decrease is principally due to a decrease in marketing and advertising,
educational, general and administrative expenses and impairment expense. The
overall decrease is a result of lesser operations change in focus of our
business as described above which resulted in significant downsizing.

      EDUCATIONAL SERVICES. Educational services expenses include direct
operating expense of our schools consisting primarily of contract salaries,
occupancy and supplies expenses, and bad debt expense. The Company did not incur
any educational service expenses in the year ended December 31, 2006 as the
Company discontinued the educational services.

      GENERAL AND ADMINISTRATIVE. General and administrative expenses include
corporate payroll related expenses, office occupancy expenses, professional fees
and other support related expenses. As a percentage of revenues, general and
administrative expenses reduced to 688% of revenues for the year ended December
31, 2006 from 924% for the year ended December 31, 2005. General and
administrative expenses decreased by $865,897 or 57% to $645,482 for the year
ended December 31, 2006 from $1,511,379 for the year ended December 31, 2005.
The decrease was primarily due to our cost cutting measures in 2006.

      MARKETING AND ADVERTISING. The Company did not incur any marketing and
advertising expenses during the year ended December 31, 2006 due to lack of
funds to spend on marketing and advertising. The marketing and advertising
expenses incurred in the year ended December 31, 2005 were $121,359.

      IMPAIRMENT EXPENSE. There were no impairment expenses during the year
ended December 31, 2006. During the year ended December 31, 2005, we wrote off
assets with a net book value of $402,783 that were no longer being used for in
the current business model.

      DEPRECIATION EXPENSE .The depreciation expense reduced by 84% in the year
ended December 31, 2006 to $13,408 as significant assets were impaired as of
December 31, 2005.

      LOSS FROM OPERATIONS. Loss from operations was $565,034 for the year ended
December 31, 2006, as compared to $2,092,928 for the year ended December 31,
2005. This loss from operations constituted 602% of gross revenues for the year
ended December 31, 2006 compared to 1,278.9% of revenues for the year ended
December 31, 2005. The increase in loss from operations resulted primarily from
a significant revenue decline in our telecom seminar classroom business because
of change in business strategy offset by lower operating expenses.

      INTEREST EXPENSE. Interest expenses decreased by $10,830 or 1.9% to
$559,271 for the year ended December 31, 2006 from $570,101 for the year ended
December 31, 2005. The interest expense was higher in 2005 as the Company used a
line of credit for part of the year 2005.

      NET LOSS FROM CONTINUING OPERATIONS. We incurred a net loss from
continuing operations of $1,269,373 during the year ended December 31 2006, as
compared to $2,663,029 during the same period in 2005. The loss for the year
ended December 31 2006 relates primarily to a revenue loss for the Company. The
loss for the year ended December 31 2005 relates primarily to a $402,783
impairment charge related to write down of assets and other marketing and
advertising costs.

DISCONTINUED OPERATIONS

      On March 30, 2005, Software Education of America, Inc., filed a petition
in bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. The petition was
necessitated because SEA was unable to continue to meet its financial
obligations. Also, in March 2005, the Company decided to discontinue the
operations of Global. SEA and Global are presented in the accompanying financial
statements as discontinued operations.

                                       28
<PAGE>

      Statement of operations information for SEA and Global for the years ended
December 31, 2006 and 2005 are below:

                                                       2006            2005
                                                  --------------  --------------
      Revenue                                     $           -   $      38,144
      Operating expenses                                      -         495,344
      Interest expense                                        -           1,322
      Other income                                        3,413               -
      Net income (loss)                                   3,413        (458,522)

Balance Sheet information for SEA and Global as of December 31, 2006 is as
follows:

                                                         December 31, 2006
                                                       ---------------------
Total assets                                           $                  -

Liabilities:
      Accounts payable                                 $            227,422
      Accrued expenses                                              238,581
      Notes payable                                                 162,666
                                                       ---------------------
Total liabilities                                      $            628,669
                                                       ---------------------

Net liabilities of discontinued operations             $            628,669
                                                       =====================

LIQUIDITY AND CAPITAL RESOURCES

      We have financed our cash flow requirements through the issuance of debt
and equity securities, advances from officers and cash generated from
operations. As of December 31, 2006 we had cash and cash equivalents of $4,252.

      Cash flows used in operating activities amounted to $27,106 for the year
ended December 31, 2006 compared to $221,211 for the year ended December 31,
2005.

      Cash flows used in investing activities amounted to $0 for the year ended
December 31, 2006 compared to $86,947 for the year ended December 31, 2005. The
significant decrease is because no purchases of equipment or software
development were made in the year 2006.

      Cash flows used in financing activities for the year ended December 31,
2006 was $25,433 compared to cash flows provided by financing activities of
$145,279 for the year ended December 31, 2005. The decrease was due primarily
because in 2005, the directors advanced some money to the Company, whereas, no
money was advanced by the directors in 2006. Third party loans were raised in
2006.

      We do not believe that our current cash and cash equivalents, together
with cash generated by operations, will be sufficient to meet our anticipated
cash requirements though 2007. We will need to raise additional capital through
public or private equity offerings or debt financings. If cash generated from
operations is insufficient to satisfy our liquidity requirements and we cannot
raise needed funds on acceptable terms or at all, we may not be able to develop
or enhance our products, take advantage of future opportunities or respond to
competitive pressures or unanticipated requirements. A material shortage of
capital may require us to take drastic steps such as reducing our level of
operations, disposing of selected assets or seeking an acquisition partner.

OFF-BALANCE SHEET ARRANGEMENTS

      We do not have any off-balance sheet arrangements.

                                       29
<PAGE>

ITEM 7. FINANCIAL STATEMENTS

The financial statements, together with the report of our independent registered
public accounting firm, appear beginning on page F-1 of this report.


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

DISMISSAL OF INDEPENDENT AUDITORS

      On December 5, 2005, we were notified by AJ. Robbins, P.C. ("AJ. ROBBINS")
that they were resigning as our independent auditors.

      AJ. Robbins audited our financial statements for our two fiscal years
ended December 31, 2004. AJ. Robbins's reports on these financial statements
were qualified as to uncertainty that the Company would continue as a going
concern. Other than the foregoing, AJ. Robbins's reports on the financial
statements for those fiscal years did not contain an adverse opinion or
disclaimer of opinion and was not otherwise qualified or modified as to any
other uncertainty, audit scope or accounting principles. During those two fiscal
years and also during the subsequent period through the date of AJ. Robbins's
replacement as indicated above: (1) there were no disagreements between Digital
Learning Management Corporation and AJ. Robbins on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure; and (2) AJ. Robbins provided no advice to Digital Learning Management
Corporation that (i) internal controls necessary to develop reliable financial
statements did not exist, (ii) information had come to the attention of AJ.
Robbins which made it unwilling to rely on management's representations, or
unwilling to be associated with the financial statements prepared by management,
or (iii) the scope of the audit should be expanded significantly, or information
had come to the attention of AJ. Robbins that it concluded will, or if further
investigated might, materially impact the fairness or reliability of a
previously issued audit report or the underlying financial statements, or the
financial statements issued or to be issued covering the fiscal periods
subsequent to the date of the most recent audited financial statements.

      AJ. Robbins has been provided a copy of this form 8-K with respect to the
aforesaid disclosure and has been provided the opportunity to furnish a letter
with respect thereto. We will file this letter upon receipt.

ENGAGEMENT OF NEW INDEPENDENT AUDITORS

      On December 8, 2005, we formally appointed Kabani & Company, Inc. ("KABANI
& CO."). The decision to engage Kabani & Co. was recommended by management and
approved by our board of directors.

      During our two most recent fiscal years ended December 31, 2004, and also
during the subsequent interim period through the date of AJ. Robbins's
termination, we did not consult with Kabani & Co. regarding the application of
accounting principles to a specified completed or contemplated transaction, or
the type of opinion that might be rendered regarding our financial statements,
nor did we consult Kabani & Co. with respect to any accounting disagreement or
any reportable event at any time prior to the appointment of that firm.

                                       30
<PAGE>

ITEM 8A. DISCLOSURE CONTROLS AND PROCEDURES

As of the end of the period covered by this report, our president officer and
chief financial officer (who is the same individual) evaluated the effectiveness
of our disclosure controls and procedures. Based on his evaluation, the chief
executive officer and chief financial officer concluded that our disclosure
controls and procedures are effective in alerting him to material information
that is required to be included in the reports that we file or submit under the
Securities Exchange Act of 1934.

INTERNAL CONTROL OVER FINANCIAL REPORTING

There has been no change in our internal control over financial reporting that
occurred during our last fiscal quarter that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.

ITEM 8B. OTHER INFORMATION

NONE


                                    PART III

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

      The names, ages and positions of our directors and executive officers as
of April 14, 2007, are listed below:

    Name           Positions                                                Age
    ----           ---------                                                ---
Umesh I Patel      Chairman, President and Chief Financial Officer
                     and director                                            50

Craig Nagasugi     Chief Executive Officer                                   49
Al Jinnah,         General Counsel and Secretary                             67
Gregory Frazer     Director                                                  53
Khalid Sheikh      Director                                                  67

      Mr. Patel has over 15 years experience in business development and sales.
From 1990 to 2001, Mr. Patel served as the President of Tech Med Billing
Services, where he was responsible for managing and projecting financials for
the company. In 2001, Mr. Patel co-founded School of I.T. Mr. Patel served as
its Vice President and was responsible for marketing.

      Mr. Nagasugi has been President, Chief Executive Officer and Chairman of
the Board of Precision Direct, Inc. of Irvine, California since 1994.

      Mr. Jinnah has been a practicing attorney for over 35 years. He has wide
experience in business law and civil litigation, having served as in-house
counsel in various industries. He has operated his own private practice for the
past 5 years.

      From 1996 to 2001, Dr. Frazer was Vice-President of Business Development
and on the Board of Directors of Sonus-USA, Inc., a publicly traded corporation.
From 2001 to 2003, Dr. Frazer was a professor at Arizona School for Health
Sciences in the Au.D. Program. In 2003 , Dr. Frazer entered private practice and
is now the Director of Audiology at Pecific Eye & Ear Specialists, Inc. in
Brentwood, California.

                                       31
<PAGE>

      Dr. Sheik has a Doctorate degree in Physiology from the University of
London. His entire career has been devoted to the hospital environment. Since
1985, he has been a consultant in the Radiation Oncology department at Long
Beach Memorial Medical center. In his career Dr. Sheik has served on numerous
Boards in the medical field. At present, he serves on the Board of
Endocurietherapy research Foundation, Long Beach, California.

      None of our directors were selected pursuant to any arrangement or
understanding other than with our directors and executive officers acting within
their capacities as such. There are no family relationships between any of our
directors.

THE BOARD OF DIRECTORS AND COMMITTEES

      Our Board does not maintain a separate audit, nominating or compensation
committee. Functions customarily performed by such committees are performed by
the Board as a whole. We are not required to maintain such committees under the
applicable rules of the Over-the-Counter Bulletin Board. None of our independent
directors qualify as an "audit committee financial expert."

CODE OF ETHICS

      We adopted a Code of Ethics that applies to our principal executive
officer, principal financial officer, principal accounting officer or controller
or persons performing similar functions.

SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE

      Section 16(a) of the Securities Exchange Act of 1934 requires our
directors and certain executive officers and persons who own more than ten
percent (10%) of a registered class of our equity securities (collectively, the
"Reporting Persons"), to file reports of ownership and changes in ownership with
the Securities and Exchange Commission. The Reporting Persons are required by
Securities and Exchange Commission regulation to furnish us with copies of all
Section 16(a) forms they file.

      To our knowledge, based solely on our review of the copies of such forms
received by it, or written representations from the Reporting Persons, all of
our insiders complied with all filing requirements during 2006.

ITEM 10. EXECUTIVE COMPENSATION

The following table shows the compensation we paid to our chief executive
officer and the only executive officers, other than the chief executive officer,
whose salary and bonus earned exceeded $100,000 for the year ended December 31,
2006.

                                       32
<PAGE>

                           SUMMARY COMPENSATION TABLE

                                             Annual Compensation
                                             -------------------

                                                                        Options/
Name and Principal Position             Year         Salary    Bonus      Sars
---------------------------             ----         ------    -----      ----
Umesh  Patel, Chairman,                 2006   (1) $240,000     $--         --
President and                           2005   (1)   240,00      --         --
Chief Financial Officer                 2004        120,000      --         --

Craig Nagasugi,                         2006    (1) $67,500      --         --
Chief Executive Officer                 2005             --      --         --
                                        2004             --      --         --

Al, Jinnah,                             2006             --      --         --
Corporate Secretary                     2005   (1) $110,000      --         --
                                        2004         90,000      --         --

Aurangzeb Bhatti,                       2006             --      --        --
former Chief Executive Officer (2)      2005   (1) $180,000      --        --
                                        2004        120,000      --        --

(1)   amounts were accrued but were not paid.
(2)   Mr. Bhatti is no longer an officer or director.

OPTION/SAR GRANTS IN LAST FISCAL YEAR

      No stock options were granted to the Named Executive Officer during the
last fiscal year.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND YEAR END OPTION/SAR
VALUE

      No stock options were granted to or held by the Named Executive Officer
during the last fiscal year.

EMPLOYMENT CONTRACTS

      Mr. Patel had an employment agreement with us that expired on December 13,
2005 that was extended automatically for next 2 years, as per agreement.

DIRECTOR COMPENSATION

      Our outside directors are reimbursed reasonable expenses incurred in
connection with their attendance at Board meetings.

                                       33
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

SHAREHOLDINGS OF CERTAIN BENEFICIAL OWNERS, DIRECTORS AND EXECUTIVE OFFICERS

      We know of no person who owns, beneficially or of record, either
individually or together with associates, five percent (5%) or more of the
outstanding shares of Common Stock, except as set forth in the table below. The
following table sets forth, as of April 12, 2007, the number and percentage of
shares of Common Stock beneficially owned, directly or indirectly, by each of
our directors, the Named Executive Officer and principal shareholders and by our
current directors and executive officers as a group. The shares "beneficially
owned" are determined under applicable Securities and Exchange Commission rules,
and do not necessarily indicate ownership for any other purpose. In general,
beneficial ownership includes shares over which the director, principal
shareholder or executive officer has sole or shared voting or investment power
and shares which such person has the right to acquire within 60 days of April
12, 2007. Each person in the table, except as noted has sole voting and
investment powers over the shares beneficially owned.

                                          SHARES OF COMMON       PERCENTAGE OF
                                        STOCK BENEFICIALLY         OUTSTANDING
       NAME                                          OWNED        COMMON STOCK
       ----                                          -----        ------------
Umesh Patel                                     18,820,558  (1)         25.92%
680 Langsdorf Drive
Suite 203
Fullerton, CA  92831

Craig Nagasugi                                   1,650,000               2.27%
680 Langsdorf Drive
Suite 203
Fullerton, CA  92831

Al Jinnah                                        3,306,117               4.55%
680 Langsdorf Drive
Suite 203
Fullerton, CA  92831

Gregory Frazer                                      50,000               0.07%
680 Langsdorf Drive
Suite 203
Fullerton, CA  92831

Khalid Sheikh                                       50,000               0.07%
680 Langsdorf Drive
Suite 203
Fullerton, CA  92831

RENN Capital Group, Inc.                         7,032,752  (2)          9.69%
8080 N. Central Expressway
Suite 210 LB-59
Dallas, TX  75206

Faisel H. Khan                                   4,845,000               6.67%

Linear Group, LLC                                4,500,000               6.20%
1900 Avenue of The Stars
Suite 310
Los Angeles, CA 90067

CEDE & Co                                       15,198,550              20.93%
PO Box 222
Bowling Green Station
New York, NY 10274

All directors and executive                                             32.89%
officers as a group (2  individuals)

(1)   includes options to purchase 42,750 shares of common stock, all of which
      are held by the Patel Family Trust.
(2)   Based on Schedule 13D filed April 13, 2004. The shares of Common Stock
      deemed to be beneficially owned by RENN Capital Group, Inc. are comprised
      of shares issuable upon the conversion of $3,000,000 7.00% Convertible
      Debentures.

                                       34
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      We have entered into indemnification agreements with certain of our
directors and executive officers pursuant to which we have agreed to indemnify
any officer or director against all costs associated with the defense of any
action brought against him or her in his/her capacity as an officer or director.

      Each of Messrs. Bhatti, Patel and Jinnah were shareholders of Digital
Learning, Inc. prior to the Merger referenced in Item 1. The three individuals
acquired approximately 74.0% of our outstanding common stock as of January 20,
2004.

      As of April, 2005 Messrs. Bhatti and Patel had advanced $264,000 to the
Company to meet some of the Company obligations.

      During the year ended December 31, 2004, the Company paid rent to a
company owned by Messrs. Bhatti and Patel in the amount of $222,000.

      During the year ended December 31, 2005, Messrs. Bhatti and Patel advanced
the Company $324,175 to pay operating expenses. These advances accrue interest
at 6% per annum and are payable upon demand. As of December 31, 2006 of $431,048
is due to Messrs. Bhatti and Patel, which includes accrued interest.

                                       35
<PAGE>

ITEM 13. EXHIBITS

(a)   Exhibits

   EXHIBIT
    NUMBER
----------------  --------------------------------------------------------------

      3.1         Articles of Incorporation & Bylaws (a) Articles of
                  Incorporation of the Registrant filed February 18, 1999 and
                  (b) By-Laws of the Company adopted March 12, 1999
                  (incorporated by reference to Exhibit 3 to the Registrant's
                  General Form For Registration Of Securities Of Small Business
                  Issuers on Form 10-SB, filed with the SEC on November 5,
                  1999).

     3.1(a)       Certificate of Amendment of Articles of Incorporation of the
                  Registrant (incorporated by reference to Exhibit A of the
                  Registrant's definitive information statement on Schedule 14C
                  filed with the SEC on February 25, 2004).

      2.1         Agreement and Plan of Merger, dated as of January 16, 2004, by
                  and among FreePCSQuote.Com, Inc., FPQT Acquisition Corporation
                  and Digital Learning Institute, Inc. (incorporated by
                  reference to Exhibit 2.1 to the Registrant's current report on
                  Form 8-K filed with the SEC on January 30, 2004).

      4.1         7.00% Convertible Debenture issued on February 27, 2004 to The
                  Frost National Bank, Custodian FBO Renaissance US Growth
                  Investment Trust PLC, Trust No. W00740100 (incorporated by
                  reference to Exhibit 4.1 to the Registrant's current report on
                  Form 8-K filed with the SEC on March 11, 2004).

      4.2         7.00% Convertible Debenture issued on February 27, 2004 to The
                  Frost National Bank, Custodian FBO Renaissance Capital Growth
                  & Income Fund III, Inc., Trust No. W00740000 (incorporated by
                  reference to Exhibit 4.2 to the Registrant's current report on
                  Form 8-K filed with the SEC on March 11, 2004).

      4.3         7.00% Convertible Debenture issued on February 27, 2004 to
                  HSBC Global Custody Nominee (U.K.) Limited, Designation No.
                  896414 (incorporated by reference to Exhibit 4.3 to the
                  Registrant's current report on Form 8-K filed with the SEC on
                  March 11, 2004).

      10.1        Convertible Loan Agreement dated as of February 27, 2004, by
                  and among Digital Learning Institute, Inc., FreePCSQoute.com,
                  Inc., Digital Learning Management Corporation, Renaissance
                  Capital Growth & Income Fund, III, Inc., Renaissance US Growth
                  Investment Trust PLC, BFSUS Special Opportunities Trust PLC,
                  and Renn Capital Group, Inc. (incorporated by reference to
                  Exhibit 10.1 to the Registrant's current report on Form 8-K
                  filed with the SEC on March 11, 2004).

      10.2        Exchange Agreement by and between Digital Learning Management
                  Corporation and Changchun Yongxin Dirui Medical Co., Ltd dated
                  December 21, 2006.

      14.1        Code of Ethics (incorporated by reference to Exhibit 14.1 to
                  the Registrant's Amendment No. 1 to its annual report on Form
                  10-KSB for the year ended December 31, 2003).

      16.1        Letter regarding change in certifying accountant (incorporated
                  by reference to Exhibit 16.1 to the Registrant's current
                  report on Form 8-K filed with the SEC on November 18, 2003).

       24         Power of Attorney (included on the signature page).

      31.1        Certification of Chief Executive Officer pursuant to Item
                  601(b)(31) of Regulation S-B, as adopted pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002.

      31.2        Certification of Chief Financial Officer pursuant to Item
                  601(b)(31) of Regulation S-B, as adopted pursuant to Section
                  302 of the Sarbanes-Oxley Act of 2002.

      32.1        Certifications of Chairman, President and Chief Financial
                  Officer pursuant to 18 U.S.C. Section 1350 as adopted pursuant
                  to Section 906 of the Sarbanes-Oxley Act of 2002.*

*     This exhibit shall not be deemed "filed" for purposes of Section 18 of the
      Securities Exchange Act of 1934 or otherwise subject to the liabilities of
      that section, nor shall it be deemed incorporated by reference in any
      filing under the Securities Act of 1933 or the Securities Exchange Act of
      1934, whether made before or after the date hereof and irrespective of any
      general incorporation language in any filings.

                                       36
<PAGE>

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

                  The following table sets forth fees billed to us by our
                  independent registered accounting firm, Kabani & Company
                  during the fiscal years ended December 31, 2006 and 2005 for:
                  (i) services rendered for the audit of our annual financial
                  statements and the review of our quarterly financial
                  statements, (ii) services by our auditor that are reasonably
                  related to the performance of the audit or review of our
                  financial statements and that are not reported as Audit Fees,
                  and (iii) services rendered in connection with tax compliance,
                  tax advice and tax planning. We did not engage our auditors
                  for any other services during 2006 and 2005.

                                December 31, 2006         December 31, 2005
                                -----------------         -----------------

Audit Fees                      $          30,000         $          90,830
Audit Related Fees              $               -         $               -
Tax Fees                        $               -         $               -
All Other Fees                  $               -         $               -


                                       37
<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.


                                        DIGITAL LEARNING MANAGEMENT CORPORATION



                                        By: /s/ Umesh Patel
                                            ------------------------------------
                                            Umesh Patel
                                            Chairman, President and
                                            Chief Financial Officer and Director
Dated: April 12, 2007

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


/s/ Umesh Patel         Chairman, President and                  April 12, 2007
---------------------   Chief Financial Officer,
Umesh Patel             (Principal executive, financial and
                        accounting officer) and director

                                       38
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                        CONSOLIDATED FINANCIAL STATEMENTS
                          YEARS ENDED DECEMBER 31, 2006


                                    CONTENTS

REPORTS OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMS

CONSOLIDATED FINANCIAL STATEMENTS:

   Consolidated Balance Sheet as of December 31, 2006                        F-3

   Consolidated Statements of Operations for the years ended
      December 31, 2006 and 2005                                             F-4

   Consolidated Statement of Stockholders' Deficit for the
      years ended December 31, 2006 and 2005                                 F-5

   Consolidated Statements of Cash Flows for the years ended
      December 31, 2006 and 2005                                             F-6

   Notes to Consolidated Financial Statements                                F-7

<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders
Digital Learning Management Corporation
Fullerton, California

We have audited the accompanying consolidated balance sheet of Digital Learning
Management Corporation and subsidiaries as of December 31, 2006, and the related
consolidated statements of operations, stockholders' deficit and cash flows for
the years ended December 31, 2006 and 2005. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe 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 Digital Learning Management
Corporation and subsidiaries as of December 31, 2006, and the results of their
operations and their cash flows for the years ended December 31, 2006 and 2005,
in conformity with accounting principles generally accepted in the United States
of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has incurred a significant loss for the year
ended December 31, 2006 and at December 31, 2005, had a stockholders' deficit
and a working capital deficit. In addition, the Company is in default on its
convertible debentures. Management's plans in regard to these matters are also
described in Note 1. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.

/s/ Kabani & Company, Inc.
CERTIFIED PUBLIC ACCOUNTANTS

Los Angeles, California
March 24, 2007

                                      F-2

<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET


                                                                  DECEMBER 31,
                                                                     2006
                                                                ---------------

                                 ASSETS

CURRENT ASSETS:
   CASH AND CASH EQUIVALENTS                                    $         4,252
                                                                ---------------
PROPERTY AND  EQUIPMENT, net                                             10,664
INTANGIBLE ASSETS, net                                                    2,580
                                                                ---------------
TOTAL ASSETS                                                    $        17,496
                                                                ===============


                 LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
   Convertible notes payable                                    $     3,000,000
   Accounts payable and accrued expenses                              1,729,220
   Accrued compensation                                               1,044,269
   Due to related party                                                 431,048
   Shares to be issued                                                   35,000
   Loan payable                                                          25,433
   Net liabilities of discontinued operations                           628,669
                                                                ---------------
TOTAL CURRENT LIABILITIES                                             6,893,638
                                                                ---------------

COMMITMENTS                                                                   -

STOCKHOLDERS' DEFICIT
   Preferred stock, $0.001 par value; 5,000,000 shares
   authorized; 0 shares issued and outstanding                                -
   Common stock; $0.001 par value; 75,000,000 shares
   authorized; 65,862,072 shares issued and outstanding                  65,862
   Additional paid-in capital                                         3,458,069
   Prepaid consulting                                                   (27,500)
   Accumulated deficit                                              (10,372,574)
                                                                ---------------
TOTAL STOCKHOLDERS' DEFICIT                                          (6,876,143)
                                                                ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT                     $        17,496
                                                                ===============

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


                                      F-3
<PAGE>
<TABLE>
<CAPTION>
                        DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIRIES
                                 CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                            FOR THE YEARS ENDED
                                                                                DECEMBER 31
                                                                           2006              2005
                                                                      --------------    --------------
<S>                                                                   <C>               <C>
NET REVENUES                                                          $      93,856     $     163,653

OPERATING EXPENSES
     Educational services                                                         -           135,481
     General and administrative                                             645,482         1,511,379
     Depreciation expense                                                    13,408            85,579
     Marketing and advertising                                                    -           121,359
     Impairment expense                                                           -           402,783
                                                                      --------------    --------------
             Total operating expenses                                       658,890         2,256,581

                                                                      --------------    --------------
LOSS FROM CONTINUING OPERATIONS BEFORE OTHER INCOME AND EXPENSES           (565,034)       (2,092,928)

Other income (expense)
     Other income                                                             3,682                 -
     Loss on settlement of debt                                            (148,750)                -
     Interest expense                                                      (559,271)         (570,101)
                                                                      --------------    --------------
             Total other income (expenses)                                 (704,339)         (570,101)

                                                                      --------------    --------------
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES                      (1,269,373)       (2,663,029)

DISCONTINUED OPERATIONS
     Gain/(Loss) from discontinued operations                                 3,413          (458,522)
                                                                      --------------    --------------

Loss before income tax                                                   (1,265,960)       (3,121,551)

Provision for taxes                                                             800                 -
                                                                      --------------    --------------
NET LOSS                                                              $  (1,266,760)    $  (3,121,551)
                                                                      ==============    ==============

EARNINGS(LOSS) PER SHARE - BASIC & DILUTED:
CONTINUING OPERATIONS                                                 $       (0.02)    $       (0.04)
                                                                      ==============    ==============
DISCONTINUED OPERATIONS                                               $        0.00     $       (0.01)
                                                                      ==============    ==============
NET LOSS                                                              $       (0.02)    $       (0.05)
                                                                      ==============    ==============

BASIC & DILUTED WEIGHTED AVERAGE NUMBER OF
   COMMON STOCK OUTSTANDING*                                             61,685,086        60,612,072
                                                                      ==============    ==============


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

*     Weighted average number of shares used to compute basic and diluted loss per share is the same
      since the effect of dilutive securities is anti-dilutive.

*     The basic and diluted net loss per share has been stated to retroactively effect 1:3 forward
      split in July, 2006.

                                                  F-4

<PAGE>

                                   DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
                                         FOR THE YEARS ENDED DECEMBER 31, 2006 & 2005


                                                                  ADDITIONAL                                      TOTAL
                                           COMMON STOCK            PAID-IN        PREPAID       ACCUMULATED    STOCKHOLDERS'
                                        SHARES       AMOUNT         CAPITAL      CONSULTING       DEFICIT         DEFICIT
                                        ------       ------         -------      ----------       -------         -------

BALANCE, DECEMBER 31, 2004            60,612,072   $    60,612  $    3,171,569  $   (24,750)  $   (5,984,263) $  (2,776,832)

Issuance of shares for services                -             -               -            -                -              -

Amortization of prepaid consulting             -             -               -       24,750                -         24,750

Net loss                                       -             -               -            -       (3,121,551)    (3,121,551)
                                    ------------   -----------  --------------  ------------  ---------------  --------------

BALANCE, DECEMBER 31, 2005            60,612,072        60,612       3,171,569            -       (9,105,814)    (5,873,633)

Issuance of shares for services        4,000,000         4,000         219,000                             -        223,000

Issuance of shares for services                -             -               -      (27,500)               -        (27,500)

Issuance of shares for debt set        1,250,000         1,250          67,500            -                -         68,750

Net loss                                       -             -               -            -       (1,266,760)    (1,266,760)
                                    ------------   -----------  --------------  ------------  ---------------  --------------
BALANCE, DECEMBER 31, 2006            65,862,072   $    65,862  $    3,458,069  $   (27,500)  $  (10,372,574)  $  (6,876,143)
                                    ============   ===========  ==============  ============  ===============  ==============


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

                                                             F-5

<PAGE>

                              DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                                                        FOR THE YEARS ENDED
                                                                                             DECEMBER 31
                                                                                -----------------------------------
                                                                                      2006               2005
                                                                                ----------------   ----------------
CASH FLOW FROM OPERATING ACTIVITIES:
   Net loss                                                                     $    (1,266,760)   $    (3,121,551)
   Adjustment to reconcile net loss to net cash
     used in operating activities:
       Depreciation and amortization expense                                             13,408             85,579
       Common stock issued for services rendered                                        223,000             35,000
       Bad debts                                                                         33,148                  -
       Amortization of prepaid consulting                                                     -             24,750
       (Gain)/Loss on settlement of debt                                                148,750                  -
       Writedown of assets                                                                    -            402,783
   Changes in operating assets and liabilities:
     Accounts receivable                                                                 10,740            205,952
     Prepaid expenses                                                                   (27,500)            20,009
     Income tax refund receivable                                                             -            135,000
     Other current assets                                                                     -            132,826
     Accounts payable and accrued expenses                                              446,152            738,959
     Accounts payable, related party                                                     62,350            336,058
     Due to factor                                                                            -           (124,424)
     Accrued compensation                                                               338,850            513,219
     Unearned Revenue                                                                    (8,330)             8,330
                                                                                ----------------   ----------------
Net cash used in operating activities from continuing operations                        (26,192)          (607,510)
Net cash provided by (used in) operating activities of discontinued operations             (914)           386,299
                                                                                ----------------   ----------------
Net cash used in operating activities                                                   (27,106)          (221,211)
                                                                                ----------------   ----------------

CASH FLOW FROM INVESTING ACTIVITIES:
   Purchase of equipment and software development                                             -               (612)
                                                                                ----------------   ----------------
   Cash advanced to discontinued business                                                     -            (86,335)
                                                                                ----------------   ----------------
Net cash used in investing activities from continuing operations                              -            (86,947)
                                                                                ----------------   ----------------
Net cash used in investing activities                                                         -            (86,947)
                                                                                ----------------   ----------------

CASH FLOW FROM FINANCING ACTIVITIES:
   Loans raised                                                                          25,433                  -
                                                                                ----------------   ----------------
Net cash provided by financing activities from continuing operations                     25,433                  -
Net cash provided by financing activities of discontinued operations                          -            145,279
                                                                                ----------------   ----------------
Net cash provided by financing activities                                                25,433            145,279
                                                                                ----------------   ----------------

CHANGE IN CASH AND CASH EQUIVALENTS OF DISCONTINUED OPERATIONS                                -             (2,056)

DECREASE IN CASH AND CASH EQUIVALENTS                                                    (1,673)          (164,935)

CASH AND CASH EQUIVALENTS, Beginning of period                                            5,925            170,860
                                                                                ----------------   ----------------

CASH AND CASH EQUIVALENTS, End of period                                        $         4,252    $         5,925
                                                                                ================   ================

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

   Interest paid                                                                $             -    $        28,915
                                                                                ================   ================
   Income taxes paid                                                            $             -    $             -
                                                                                ================   ================

   SUPPLEMENTAL DISCLOSURES OF NON-CASH
   INVESTING AND FINANCING ACTIVITIES

   Shares issued for settlement of debt                                         $        68,750    $             -
                                                                                ================   ================

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


                                                        F-6
</TABLE>

<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 1 - ORGANIZATION, NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

ORGANIZATION

Digital Learning Management Corporation (the "Company" or "DGTL"), formerly
FreePCSQuote.com, Inc. acquired Digital Learning Institute, Inc. on January 16,
2004 in a transaction accounted for as a reverse merger. The financial
statements in the filings of FreePCSQuote.com, Inc. became those of Digital
Learning Institute, Inc. In addition on March 19, 2004, FreePCSQuote.com, Inc.
changed its name to Digital Learning Management Corporation. Thus, the
historical financial statements are still those of "Digital Learning Institute,
Inc."

On January 16, 2004, Digital Learning Institute, Inc. ("DLI"), FPQT Acquisition
Corporation, a Nevada corporation ("Merger Sub") and FreePCSQuote.com, Inc., a
publicly held Nevada corporation ("Free"), entered into an Agreement and Plan of
Merger (the "Agreement"). Free, through its wholly-owned subsidiary, Merger Sub,
acquired DLI in exchange for shares of Free's common stock (the "Merger");
17,372,839 shares were issued to the stockholders of DLI and 300,000 shares were
issued into escrow to cover indemnification obligations, if any, of DLI. Merger
Sub was merged with and into DLI. The separate existence of Merger Sub ceased,
and DLI continued as the surviving corporation (the "Surviving Corporation")
under the name Digital Learning Institute, Inc. Immediately after the Merger was
consummated and further to the Agreement, the controlling stockholder of Free
cancelled 19,670,000 shares of Free's Common Stock held by him (the
"Cancellation"). In addition, the Company issued an aggregate of 819,984 shares
of its common stock to certain individuals identified by the Company's
investment banker.

The stockholders of DLI as of the closing date of the Merger and after giving
effect to the Cancellation, owned approximately 86.8% of the Company's common
stock outstanding as of January 16, 2004. Each share of DLI's common stock (an
aggregate of 5,000,000 shares) was converted into one share of the Company's
common stock in the Merger at an exchange ratio of 1 to .441606 (the "Exchange
Ratio").

For accounting purposes, this transaction is being accounted for as a reverse
merger, since the stockholders of DLI own a majority of the issued and
outstanding shares of common stock of the Company, and the directors and
executive officers of DLI became the directors and executive officers of the
Company.

STOCK SPLIT

In March 2004, the Company enacted a 7.8680269-for-1 forward stock split. All
per share amounts and number of shares outstanding have been retroactively
restated for this adjustment. In July 2006, the Company enacted a 3-for-1
forward stock split. All per share amounts and number of shares outstanding have
been retroactively restated for this adjustment.

NATURE OF BUSINESS

The Company is a provider of enterprise e-learning solutions and related
services to the education industry, government agencies and corporate clients.
Its patented Virtual University Appliance ("VU Appliance") is a hardware and
software package, which incorporates its CourseMate Virtual University System.

                                      F-7
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

The Company operates post-secondary education training primarily in the
business, information technology, telecommunications and other trade fields,
offering certificates, degrees and college credits through strategic partners.
Revenues generated from these schools consist primarily of tuition and fees paid
by students or their employers, generally from public universities and large
corporations. The Company did not have any operation from October 1, 2006
through December 31, 2006.

DLI entered into an agreement to acquire Software Education of America, Inc.
("SEA") on January 13, 2004. The transaction was subject to approval of the
change-of-control of SEA from the California Bureau for Private Postsecondary
Vocational Education ("BPPVE") and the Accrediting Commission of Career Schools
and Colleges of Technology ("ACCSCT"). The BPPVE approval was received during
the quarter ended June 30, 2004 and as of May 1, 2004, DLI assumed
responsibility for the marketing and managing of SEA sales and providing working
capital. DLI advanced funding to SEA pending final closing of the transaction
which occurred on July 1, 2004 after receipt of the formal approval from ACCSCT
on July 1, 2004. Effective July 1, 2004 SEA became a wholly-owned subsidiary of
DLI. SEA filed for bankruptcy in March of 2005 and is being accounted for as a
discontinued operation. The bankruptcy was dismissed by the court in January,
2006.

DLI entered into an agreement to acquire Global Computer Systems, Inc.
("Global") on April 30, 2004. The transaction was subject to approval of the
change-of-control of Global from the BPPVE and the ACCSCT. As of September 1,
2004, DLI assumed responsibility for the marketing and managing of Global sales
and providing working capital. DLI advanced funding to Global pending final
closing of the transaction. Effective November 15, 2004 Global became a
wholly-owned subsidiary of DLI. In May 2005, the Company closed Global and
returned all of its fixed assets to the former shareholder of Global. Global is
being accounted for as a discontinued operation.

GOING CONCERN

The accompanying consolidated financial statements have been prepared in
conformity with accounting principles generally accepted in the United States of
America, which contemplate continuation of the Company as a going concern. The
Company incurred a net loss of $1,266,760 for the year ended December 31, 2006,
had an accumulated deficit of $10,372,574 and a working capital deficit of
$6,854,386. In addition, the Company is in default on its convertible debenture
obligations, its SEA subsidiary is in bankruptcy and it has closed its Global
subsidiary. These conditions raise substantial doubt as to the Company's ability
to continue as a going concern. These consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
These consolidated financial statements do not include any adjustments relating
to the recoverability and classification of recorded asset amounts, or amounts
and classification of liabilities that might be necessary should the Company be
unable to continue as a going concern.

The Company is in the process of restructuring its capital structure (See note
12 for details).

                                      F-8
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

BANKRUPTCY OF SUBSIDIARY

On March 30, 2005, Software Education of America, Inc., filed a petition in
bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. The petition was
necessitated because SEA was unable to continue to meet its financial
obligations. On January 12, 2006, SEA's bankruptcy petition was dismissed by the
court due to failure of the debtor to appear before the court for examination.
Any discharge entered in the case was vacated in entirety.

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company and
its majority owned entities, collectively referred to as "Company" or "DGTL".
All significant inter-company transactions have been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions. Such estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from estimated amounts.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist primarily of cash in banks and highly liquid
investments with original maturities of 90 days or less.

MARKETING AND ADVERTISING COSTS

Marketing and advertising costs are charged to expense during the period
incurred. These costs arise primarily from training vouchers offered to
students.

REVENUE RECOGNITION

Revenues from sales of the Company's VU Appliance include product, licensing of
the product and professional services such as hosting, customization, training,
courseware development and third party course license fees. Product revenues
consist of bundled hard-software product sales, annual licensing fees, and
client hosting engagement. The Company intends to sell its licenses, training
and hosting services under annually renewable agreements, which the clients will
generally pay annual fees in the beginning of the annual contract term. Billings
from these revenues are recognized as deferred revenues and are then recognized
ratably over the contract term. Product sale revenues are recognized upon the
shipment of the product to customers.

Tuition revenue and fees are derived from courses taught in the Company's
schools. Tuition and fee revenues are recognized pro-rata (on a straight-line
basis) over the term of the applicable course (usually two to four weeks for
DLI). Tuition is billed after the course has been completed for DLI. If a
student withdraws from a course or program, the paid but unearned portion of the
student tuition is refunded.

                                      F-9
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

ALLOWANCES FOR DOUBTFUL ACCOUNTS

The Company maintains an allowance for doubtful accounts resulting from the
inability, failure or refusal of our students to make required payments. The
Company determines the adequacy of this allowance by regularly reviewing the
accounts receivable aging and applying various expected loss percentages to
certain student accounts receivable categories based upon historical bad debt
experience. The Company generally writes-off accounts receivable balances deemed
uncollectible as they are sent to collection agencies. As of December 31, 2006
the Company has an allowance for bad debts amounting $235,506, representing 100%
of accounts receivable.

EDUCATIONAL SERVICES

Educational services include direct operating expenses of the schools consisting
primarily of contract salaries, occupancy and supplies.

EARNINGS PER COMMON SHARE

The Company computes earnings per common share in accordance with Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS No. 128). The
Statement requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation. Basic loss per
share is computed by dividing loss available to common shareholders by the
weighted average number of common shares outstanding. The computation of diluted
loss per share is similar to the basic loss per share computation except the
denominator is increased to include the number of additional shares that would
have been outstanding if the dilutive potential common shares had been issued.
In addition, the numerator is adjusted for any changes in income or loss that
would result from the assumed conversions of those potential shares. However,
such presentation is not required if the effect is antidilutive. Accordingly,
the diluted per share amounts do not reflect the impact of warrants and options
because the effect of each is antidilutive.

PROPERTY AND EQUIPMENT

Property and equipment are recorded at cost. Depreciation expense is provided on
a straight-line basis using estimated useful lives of 3-7 years. Expenditures
for maintenance and repairs are charged to operations as incurred while renewals
and betterments are capitalized. Gains and losses on disposals are included in
the results of operations. Depreciation expense was $13,408 and $85,579 for the
years ended December 31, 2006 and 2005, respectively. During the year ended
December 31, 2005, the Company wrote off certain property and equipment that was
not longer being used and took an impairment charge of $75,414.

                                      F-10
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

FACILITIES

The Company leases office space owned by a related party as well as additional
office space from unrelated parties. Rent expense was $33,338 and $140,655 for
the years ended December 31, 2006 and 2005, respectively.

INCOME TAXES

The Company accounts for income taxes under the asset and liability method.
Under this method, deferred income taxes are recorded to reflect the tax
consequences in future years of temporary differences between the tax basis of
assets and liabilities and their financial statement amounts at the end of each
reporting period. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense
represents the tax payable for the current period and the change during the
period in deferred tax assets and liabilities. Deferred tax assets and
liabilities have been netted to reflect the tax impact of temporary differences.

Deferred tax assets arise primarily from the net operating loss carry-forward
and expenses accrued for book basis but not for tax basis. Deferred tax
liabilities primarily result from revenues recognized for book basis but not for
tax basis.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying value of cash, accounts receivable, notes payable, accounts payable
and accrued expenses approximate fair value because of the short maturity of
these items.

CONCENTRATIONS OF RISK

The Company maintains all cash and cash equivalents in financial institutions,
which at times may exceed federally insured limits. The Company has not
experienced a loss in such accounts.

Four customers accounted for 96% and two customers accounted for 60% of sales
during the years ended December 31, 2006 and 2005, respectively. The three
customers accounted for 21% of accounts receivable at December 31, 2006.

The Company performs regular evaluations concerning the ability of its customers
to satisfy their obligations and records a provision for doubtful accounts based
upon these evaluations, when necessary.

STOCK BASED COMPENSATION

THE COMPANY ADOPTED SFAS NO. 123-R EFFECTIVE JANUARY 1, 2006 USING THE MODIFIED
PROSPECTIVE METHOD. UNDER THIS TRANSITION METHOD, STOCK COMPENSATION EXPENSE
INCLUDES COMPENSATION EXPENSE FOR ALL STOCK-BASED COMPENSATION AWARDS GRANTED ON
OR AFTER JANUARY 1,2006, BASED ON THE GRANT-DATE FAIR VALUE ESTIMATED IN
ACCORDANCE WITH THE PROVISIONS OF SFAS NO. 123-R.

PRIOR TO JANUARY 1, 2006, THE COMPANY MEASURED STOCK COMPENSATION EXPENSE USING
THE INTRINSIC VALUE METHOD OF ACCOUNTING IN ACCORDANCE WITH ACCOUNTING
PRINCIPLES BOARD (APB) OPINION NO. 25, ACCOUNTING FOR STOCK ISSUED TO
EMPLOYEES," AND RELATED INTERPRETATIONS (APB NO. 25) AND HAS OPTED FOR THE
DISCLOSURE PROVISIONS OF SFAS NO. 123. THUS, EXPENSE WAS GENERALLY NOT
RECOGNIZED FOR THE COMPANY'S EMPLOYEE STOCK OPTION AND PURCHASE PLANS.

                                      F-11
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

THERE WERE NO OUTSTANDING AND UNVESTED STOCK OPTIONS AS OF DECEMBER 31, 2005.
THE COMPANY DID NOT GRANT ANY NEW OPTIONS DURING THE YEAR ENDED DECEMBER 31,
2006.

VALUATION OF THE COMPANY'S COMMON STOCK

Unless otherwise disclosed, all stock based transactions entered into by the
Company have been valued at the market value of the Company's common stock on
the date the transaction was entered into or have been valued using the Modified
Black-Scholes Model to estimate the fair market value.

SOFTWARE DEVELOPMENT COSTS

The Company has developed software to enable students to access and take online
classes. The software development costs were expensed as research and
development costs as incurred until the software reached technological
feasibility in accordance with Statement of Financial Accounting Standards No.
86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed" ("SFAS 86"). During the year ended December 31, 2005, the
Company wrote off development costs and took an impairment charge of $327,369.

RECLASSIFICATION

Certain amounts reported in the Company's financial statements for the year
ended December 31, 2005 have been reclassified to conform to current year
presentations.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In February 2007, FASB issued FASB Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities. FAS 159 is effective for fiscal
years beginning after November 15, 2007. Early adoption is permitted subject to
specific requirements outlined in the new Statement. Therefore, calendar-year
companies may be able to adopt FAS 159 for their first quarter 2007 financial
statements.

The new Statement allows entities to choose, at specified election dates, to
measure eligible financial assets and liabilities at fair value that are not
otherwise required to be measured at fair value. If a company elects the fair
value option for an eligible item, changes in that item's fair value in
subsequent reporting periods must be recognized in current earnings. FAS 159
also establishes presentation and disclosure requirements designed to draw
comparison between entities that elect different measurement attributes for
similar assets and liabilities. The management is currently evaluating the
effect of this pronouncement on financial statements.

In September 2006, FASB issued SFAS 158 `Employers' Accounting for Defined
Benefit Pension and Other Postretirement Plans--an amendment of FASB Statements
No. 87, 88, 106, and 132(R)' This Statement improves financial reporting by
requiring an employer to recognize the over funded or under funded status of a
defined benefit postretirement plan (other than a multiemployer plan) as an
asset or liability in its statement of financial position and to recognize
changes in that funded status in the year in which the changes occur through
comprehensive income of a business entity or changes in unrestricted net assets
of a not-for-profit organization. This Statement also improves financial
reporting by requiring an employer to measure the funded status of a plan as of
the date of its year-end statement of financial position, with limited
exceptions. An employer with publicly traded equity securities is required to
initially recognize the funded status of a defined benefit postretirement plan
and to provide the required disclosures as of the end of the fiscal year ending
after December 15, 2006. An employer without publicly traded equity securities
is required to recognize the funded status of a defined benefit postretirement
plan and to provide the required disclosures as of the end of the fiscal year
ending after June 15, 2007. However, an employer without publicly traded equity
securities is required to disclose the following information in the notes to
financial statements for a fiscal year ending after December 15, 2006, but
before June 16, 2007, unless it has applied the recognition provisions of this
Statement in preparing those financial statements:

                                      F-12
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

      a.    A brief description of the provisions of this Statement
      b.    The date that adoption is required
      c.    The date the employer plans to adopt the recognition provisions of
            this Statement, if earlier.

The requirement to measure plan assets and benefit obligations as of the date of
the employer's fiscal year-end statement of financial position is effective for
fiscal years ending after December 15, 2008. The management is currently
evaluating the effect of this pronouncement on financial statements.

In September 2006, FASB issued SFAS 157 `Fair Value Measurements'. This
Statement defines fair value, establishes a framework for measuring fair value
in generally accepted accounting principles (GAAP), and expands disclosures
about fair value measurements. This Statement applies under other accounting
pronouncements that require or permit fair value measurements, the Board having
previously concluded in those accounting pronouncements that fair value is the
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practice. This Statement is effective for
financial statements issued for fiscal years beginning after November 15, 2007,
and interim periods within those fiscal years. The management is currently
evaluating the effect of this pronouncement on financial statements.

In March 2006 FASB issued SFAS 156 'Accounting for Servicing of Financial
Assets' this Statement amends FASB Statement No. 140, Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities, with
respect to the accounting for separately recognized servicing assets and
servicing liabilities. This Statement:

      1. Requires an entity to recognize a servicing asset or servicing
      liability each time it undertakes an obligation to service a financial
      asset by entering into a servicing contract.

      2. Requires all separately recognized servicing assets and servicing
      liabilities to be initially measured at fair value, if practicable.

      3. Permits an entity to choose 'Amortization method' or 'Fair value
      measurement method' for each class of separately recognized servicing
      assets and servicing liabilities.

      4. At its initial adoption, permits a one-time reclassification of
      available-for-sale securities to trading securities by entities with
      recognized servicing rights, without calling into question the treatment
      of other available-for-sale securities under Statement 115, provided that
      the available-for-sale securities are identified in some manner as
      offsetting the entity's exposure to changes in fair value of servicing
      assets or servicing liabilities that a servicer elects to subsequently
      measure at fair value.

                                      F-13
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

      5. Requires separate presentation of servicing assets and servicing
      liabilities subsequently measured at fair value in the statement of
      financial position and additional disclosures for all separately
      recognized servicing assets and servicing liabilities.

      This Statement is effective as of the beginning of the Company's first
      fiscal year that begins after September 15, 2006. Management believes that
      this statement will not have a significant impact on the consolidated
      financial statements.

In February 2006, FASB issued SFAS No. 155, "Accounting for Certain Hybrid
Financial Instruments". SFAS No. 155 amends SFAS No 133, "Accounting for
Derivative Instruments and Hedging Activities", and SFAF No. 140, "Accounting
for Transfers and Servicing of Financial Assets and Extinguishments of
Liabilities". SFAS No. 155, permits fair value remeasurement for any hybrid
financial instrument that contains an embedded derivative that otherwise would
require bifurcation, clarifies which interest-only strips and principal-only
strips are not subject to the requirements of SFAS No. 133, establishes a
requirement to evaluate interest in securitized financial assets to identify
interests that are freestanding derivatives or that are hybrid financial
instruments that contain an embedded derivative requiring bifurcation, clarifies
that concentrations of credit risk in the form of subordination are not embedded
derivatives, and amends SFAS No. 140 to eliminate the prohibition on the
qualifying special-purpose entity from holding a derivative financial instrument
that pertains to a beneficial interest other than another derivative financial
instrument. This statement is effective for all financial instruments acquired
or issued after the beginning of the Company's first fiscal year that begins
after September 15, 2006. The Company has in the process of evaluating the
impact of this pronouncement on its financial statements.

In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections." This statement applies to all voluntary changes in accounting
principle and requires retrospective application to prior periods' financial
statements of changes in accounting principle, unless this would be
impracticable. This statement also makes a distinction between "retrospective
application" of an accounting principle and the "restatement" of financial
statements to reflect the correction of an error. This statement is effective
for accounting changes and corrections of errors made in fiscal years beginning
after December 15, 2005. We are evaluating the effect the adoption of this
interpretation will have on its financial position, cash flows and results of
operations.


                                      F-14
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 2 - PROPERTY AND EQUIPMENT

The cost of property and equipment at December 31, 2006 consisted of the
following:

       Computers and office equipment                            $   102,298

       Furniture and fixtures                                         11,550
                                                                -------------
                                                                     113,848

       Less accumulated depreciation                                (103,184)
                                                                -------------
                                                                 $    10,664
                                                                =============

The cost of intangible assets at December 31, 2006 consisted of the following:

       Software                                                  $    32,376

       Less accumulated amortization                                  29,796
                                                                -------------

                                                                 $     2,580
                                                                =============

The amortization schedule is as follows:

            2007             $2,580

NOTE 3 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

As of December 31, 2006, accounts payable and accrued expenses, comprised of the
following:

Accounts Payable                                $     595,893
Other accrued payables                                109,524
Sales tax payable                                      13,072
Accrued promotional expense                            11,121
Accrued interest                                      999,610
                                               --------------
Total                                               1,729,220

NOTE 4 - LOAN PAYABLE

Loan payable of $25,433 as of December 31, 2006 comprises of non- interest
bearing, unsecured, due on demand advances from unrelated parties.

                                      F-15
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 5 -ACCRUED COMPENSATION

As of December 31, 2006 the accrued compensation comprised of $1,044,269 of
accrued employee and officer compensation.

NOTE 6 - CONVERTIBLE NOTES PAYABLE AND THE RESULTING NON-CASH BENEFICIAL
CONVERSION FEATURE CHARGE

On February 27, 2004, the Company raised a total of $3,000,000 from three
investors in an offering of 7% convertible debenture notes through a private
placement. The terms of the debentures are for a period of seven years. Interest
accrues at 7% per annum and is due and payable monthly beginning April 1, 2004.
The debentures mature on February 27, 2011, at which time all remaining unpaid
principal and interest will be payable in full. If the debentures are not sooner
redeemed or converted, as provided in the loan, commencing February 27, 2007 and
continuing on the first day of each successive month prior to maturity, the
Company will pay to the lenders monthly principal installments of $10 per $1,000
of the then remaining principal balance. These debentures are convertible, at
the holder's option, into common stock at a rate of $0.4478 per share, entitling
the holders to 6,699,833 shares of the Company's common stock.

These debentures are immediately convertible and therefore the Company has
expensed the calculated value of the beneficial conversion feature, as a
one-time non-cash debenture interest expense of $3,000,000 and a one time
non-cash increase in additional paid-in capital during the three months ended
March 31, 2004. Management believes that the value assigned to the beneficial
conversion feature is the result of assuming that the closing market price on
the day of issuance reflects the true fair value of the Company's common stock.

The Company accounted for the beneficial conversion feature of these convertible
notes in accordance with Emerging Issues Task Force 98-5 "Accounting For
Convertible Securities With Beneficial Conversion Features Or Contingently
Adjustable Conversion Ratios" ("EITF 98-5"). This value, calculated as the
difference between the conversion price of $ 0.4478 and the fair value of $0.92
(adjusted closing price on the day of the debenture issue) of the common stock
multiplied by the number of shares (6,699,833) into which the debenture is
convertible, amounts to $3,163,846. According to EITF 98-5 the value of the
beneficial conversion feature cannot exceed the value of the proceeds received
from the debt issuance of $3,000,000.

On February 22, 2005, the Company received a notice of default from the holders
of the convertible debentures. The notice states that the Company has failed to
make interest payments in the amount of $5,945 to each debenture holder and that
such failure to pay has remained un-remedied for more than three days.
Consequently, the debentures holders have declared the unpaid principal amount
of and all interest accrued but unpaid on, the debentures due and payable.
Pursuant to the terms of the Convertible Loan Agreement, the debenture holders
have further demanded that the Company redeem all the unpaid principal amount of
the debentures, together with an amount equal to an 18% annual yield on the
principal amount through the redemption date of the debentures.

The Company had accrued interest of $1,030,945 as of December 31, 2006. Interest
expense on the notes for the years ended December 31, 2006 and 2005 amounted to
$540,000 and $485,000, respectively.

                                      F-16
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

NOTE 7 - COMMON STOCK

COMMON STOCK

The Company amended its articles of incorporation to change its number of
authorized common stock shares from 20,000,000 to 75,000,000. The Company is
also authorized to issue 5,000,000 shares of preferred stock with a $.001 par
value.

In July 2006, the Company enacted a 3-for-1 forward stock split. All per share
amounts and number of shares outstanding have been retroactively restated for
this adjustment.

Following is the summary of stock issuance activity during the year ended
December 31, 2006 and 2005.

During the year ended December 31, 2006 the Company agreed with certain debtors
to settle the outstanding debts, by issuing the shares of the Company. In that
regard, the Company issued 3,500,000 shares for the settlement. These shares
were recorded at the fair marked value of shares at the date of issuance. The
Company recorded net loss on settlement of debt of $90,000.

The Company has prepaid consulting of $27,500 paid to consultant through
issuance of 500,000 shares to be amortized over the period of service and
recorded at the fair market value at the date of signing of agreement.

The Company also issued 1,250,000 shares to settle loan payable amounting to
$10,000 and recorded $58,750 as loss on settlement of debt.

On April 20, 2005, the Company entered an agreement with a software consultant
whereby the Company issued the consultant 500,000 shares of the Company's common
stock for services performed and to be performed. The stock was valued at
$35,000, the fair market value of the stock on the date the agreement was
signed. As of December 31, 2006 these shares are not yet issued and recorded as
shares to be issued. The shares to be issued are being reflected under the
current liabilities in the accompanying financial statements.

OPTIONS AND WARRANTS

The following table summarizes all warrants granted by the Company:


                                      F-17
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

                                                                    WEIGHTED
                                                                    AVERAGE
                                                    WARRANTS        EXERCISE
                                                                     PRICE
                                                 ---------------  -------------

        Balance, December 31, 2005                    3,796,500    $     0.20
           Granted                                            -    $        -
                                                 ---------------

        Balance, December 31, 2006                    3,796,500    $     0.20
                                                 ===============

           Granted                                            -    $        -
                                                 ===============

        Exercisable, December 31, 2006                3,796,500    $     0.20
                                                 ===============

The weighted average remaining contractual life of warrants outstanding is 1.40
years at December 31, 2006. The exercise price of warrants outstanding at
December 31, 2006 were as follows:

                    NUMBER OF           EXERCISE       INTRINSIC VALUE
                    WARRANTS             PRICE
                 --------------   -------------------------------------
                     1,230,000                $0.83       $        -
                     2,010,000                $0.15                -
                       150,000                $0.33                -
                       256,500                $0.67                -
                       150,000                $1.00                -
                 --------------
                     3,796,500                            $        -
                 ==============

NOTE 8 - INCOME TAXES

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial statement
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31, 2006 are as
follows:

                                      F-18
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

       Deferred tax assets:
          Accrued compensation                                 $     392,645
          Accounts payable and accrued expenses                      650,187
          Accounts payable, related party                            162,074
          Net operating loss carry forwards                        1,265,374
          Less valuation allowance                                (2,470,280)
                                                              ---------------
                                                                          --
                                                              ---------------

The components of deferred income tax expense (benefit) are as follows:

                                               DECEMBER 31,     DECEMBER 31,
                                                   2006             2005
                                             ---------------  ---------------

       Property and equipment                 $    (128,265)   $     168,202
       Accrued compensation                        (163,116)        (157,920)
       Accounts receivable                          (16,502)         (77,438)
       Prepaid expense                                   --            7,523
       Accounts payable and accrued expense        (159,344)        (318,483)
       Accounts payable, related party             (145,453)          (4,468)
       Net operating loss carry forward            (476,302)        (375,600)
       Increase in valuation allowance            1,088,981          758,184
                                             ---------------  ---------------
       Income tax expense                     $          --    $          --
                                             ===============  ===============

Following is a reconciliation of the amount of income tax expense (benefit) that
would result from applying the statutory federal income tax rates to pre-tax
income and the reported amount of income tax expense (benefit):


                                      F-19
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

                                                  DECEMBER 31,     DECEMBER 31,
                                                      2006             2005
                                                ---------------  ---------------
       Tax benefit at federal statutory rates    $  (2,470,280)   $  (1,061,327)
       Depreciation expense                                  -             (461)
       California income tax expense                         -                -
       Meals and entertainment                               -                -
       Officers life insurance                               -            1,636
       Shell Acquisition Costs                               -                -
       Asset Impairment                                      -          188,542
       Accrual to cash conversion                    1,204,906          520,071
       Beneficial Conversion Feature                         -                -
       Stock based compensation                              -           11,900
       Net operating loss carry forward              1,265,374          339,639
                                                ---------------  ---------------
       Income tax (benefit) expense              $           -    $           -
                                                ===============  ===============

At December 31, 2006, the Company has provided a valuation allowance for the
deferred tax assets since management has not been able to determine that the
realization of that asset is more likely than not. The net change in valuation
allowance for the years ended December 31, 2006 and 2005 was an increase of
$1,712,096 and $758,184. Net operating loss carry forwards of approximately
$3,400,000 expire starting in 2019.

NOTE 9 - RELATED PARTY TRANSACTIONS

During the year ended December 31, 2005, two of the Company's officers advanced
the Company $324,175 to pay operating expenses. These advances accrue interest
at 6% per annum and are payable upon demand. As of December 31, 2006 of $431,048
is due to these two officers of the Company, which includes accrued interest.

Interest expense of $19,450 and $11,883 was recorded on the related party
payables during the years ended December 31, 2006 and 2005.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

LITIGATION

As of December 31, 2006, the Company is not a party to any pending or threatened
litigation, claim or assessment except for the following. After dismissal of
SEA's petition in Bankruptcy the previously stayed litigation against it has
been revived. It is anticipated that SEA will consent to judgment on this claim
in the amount of $219,000. This claim is duplicative and not additional to the
Judgment previously entered against Digital Learning Institute, Inc. The claim
arises out of the same circumstances under which judgment was obtained against
Digital Learning Institute, Inc

                                      F-20
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

CONTRACTS

The Company has entered into employment agreements with two members of its
management for two years commencing April 1, 2003. The agreements allow for
participation in any annual incentive plan. The Company is required to pay base
salaries of $240,000 each. The employment agreements expired on December 13,
2005. One of these employment agreements that expired on December 13, 2005 was
automatically extended for next 2 years, as per the agreement.

On April 27, 2005, Global Computer Systems, Inc. settled its litigation with its
landlord. Global has agreed to pay the equivalent of two months rent and to
vacate the rented premises. The cost of the settlement was $24,950 and is
payable in four monthly installments commencing May 20, 2005. The Company has
not made any of these payments

LEASES

The Company currently leases office space in Fullerton, California on a
month-to-month basis.

NOTE 11 - DISCONTINUED OPERATIONS

On March 30, 2005, Software Education of America, Inc., filed a petition in
bankruptcy under Chapter 7 of the U.S. Bankruptcy Code. The petition was
necessitated because SEA was unable to continue to meet its financial
obligations. SEA is presented in the accompanying financial statements as a
discontinued operation.

Statement of operations information for SEA and Global for the years ended
December 31, 2006 and 2005 are below:

                                                Years Ended December 31,
                                          ------------------------------------
                                                  2006             2005
                                             -------------    -------------
    Revenue                                  $           -    $      38,144
    Operating expenses                                   -          495,344
    Interest expense                                     -            1,322
    Other income                                     3,413                -
    Net income (loss)                                3,413         (458,522)


                                      F-21
<PAGE>

            DIGITAL LEARNING MANAGEMENT CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                 FOR THE YEARS ENDED DECEMBER 31, 2006 AND 2005

Balance Sheet information for SEA and Global as of December 31, 2006 is as
follows:

                                                           December 31,
                                                               2006
                                                          --------------
          Total assets                                     $          -

          Liabilities:
             Accounts payable                              $    227,422
             Accrued expenses                                   238,581
             Notes payable                                      162,666
                                                          --------------
          Total liabilities                                $    628,669
                                                          --------------

          Net liabilities of discontinued operations       $    628,669
                                                          ==============

Notes payable consist of two unsecured, non-interest bearing notes payable to
two former stockholders of SEA totaling $16,666 due January 15, 2005. No
payments have been made.

Notes payable also include a $146,000 line of credit acquired from SEA and
converted into a term loan payable with interest at the prime rate plus 3.5%
secured by all assets of SEA of approximately $83,000 and guaranteed by the
former stockholders of SEA. This loan is payable in monthly principal payments
of $6,083 plus interest until November 15, 2006, at which time all unpaid
principal and accrued interest is due. A technical event of default occurred
with this note.

NOTE 11 - EARNINGS PER SHARE

The Company reports earnings (loss) per share in accordance with SFAS No. 128,
"Earnings per Share." Basic earnings (loss) per share are computed by dividing
income (loss) available to common stockholders by the weighted average number of
common shares available. Diluted earnings (loss) per share is computed similar
to basic earnings (loss) per share except that the denominator is increased to
include the number of additional common shares that would have been outstanding
if the potential common shares had been issued and if the additional common
shares were dilutive. Diluted earnings (loss) per share have not been presented
since the effect of the assumed conversion of warrants to purchase common shares
would have an anti-dilutive effect. The following potential common shares have
been excluded from the computation of diluted net loss per share for the years
ended December 31, 2006 and 2005 were 3,795,000 and 3,795,000, respectively.

NOTE 12 - SUBSEQUENT EVENTS

The board of directors on December 21, 2006 adopted a resolution, by unanimous
written consent, to approve and ratify entering into a Share Exchange Agreement
with Changchun Yongxin Dirui Medical Co., Ltd, a China corporation ("Yongxin")
and its shareholders, pursuant to which the parties agreed that the Company will
acquire all of the issued and outstanding shares of stock of Yongxin in exchange
for the issuance in the aggregate of 51,000,000 of the Company's shares of
common stock to the shareholders. Yongxin's wholly-owned subsidiary, Jilin
province Yongxin Chain Drugstore Ltd, is a company formed under the laws of the
People's Republic of China. Yongxin and its subsidiary are hereafter referred to
as "Yongxin".

The closing of the transaction is subject to numerous preconditions. As a result
of the preconditions to Closing, a Closing date has not been set.

                                      F-22