**SECURITIES
      AND EXCHANGE COMMISSION**


**Washington,
      D.C. 20549**





**FORM
      10-KSB**





**(Mark
      One)**





**x**
            **ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934**





For
      the
      Fiscal Year Ended December 31, 2005





**o**
            **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
            
            (I.R.S.
                Employer Identification No.)of
                incorporation or organization)





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 registeredNone
            
            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 o





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.
      o





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





The
      Issuer’s revenues for the fiscal year ended December 31, 2005 were
      $163,653





The
      number of shares of the registrant’s common stock, $.001 par value per share,
      outstanding as of December 31, 2005, was 20,204,024. The aggregate market value
      of the voting and non-voting common equity held by non-affiliates of the
      registrant on December 31, 2005, based on the last sales price on the OTC
      Bulletin Board as of such date, was approximately $187,250





DOCUMENTS
      INCORPORATED BY REFERENCE: None





Transition
      Small Business Disclosure Format:  Yes
o
      No x




1




**TABLE
      OF CONTENTS**





PagePART IITEM
                1.
            DESCRIPTION
                OF BUSINESS
            3ITEM
                2.
            DESCRIPTION
                OF PROPERTY
            17ITEM
                3.
            LEGAL
                PROCEEDINGS
            17ITEM
                4.
            SUBMISSION
                OF MATTERS TO A VOTE OF SECURITY
                HOLDERS
            17PART
                IIITEM
                5.
            MARKET
                FOR COMMON EQUITY AND RELATED
                STOCKHOLDER MATTERS
            18ITEM
                6.
            MANAGEMENT’S
                DISCUSSION AND ANALYSIS
            19ITEM
                7.
            FINANCIAL
                STATEMENTS
            24ITEM
                8.
            CHANGES
                IN AND DISAGREEMENTS WITH ACCOUNTANTS21 ON
                ACCOUNTING AND FINANCIAL DISCLOSURE
            24ITEM
                8A.
            DISCLOSURE
                CONTROLS AND PROCEDURES
            25ITEM
                8B
            OTHER
                INFORMATION
            26PART
                IIIITEM
                9.
            DIRECTORS,
                EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
                PERSONS; COMPLIANCE WITH SECTION
                16(a) OF THE EXCHANGE ACT
            26ITEM
                10.
            EXECUTIVE
                COMPENSATION
            27ITEM
                11.
            SECURITY
                OWNERSHIP OF CERTAIN BENEFICIALOWNERS
                AND MANAGEMENT
            28ITEM
                12.
            CERTAIN
                RELATIONSHIPS AND RELATED TRANSACTIONS
            30ITEM
                13.
            EXHIBITS
            31ITEM
                14
            PRINCIPAL
                ACCOUNTANT FEES AND SERVICES
            32SIGNATURES




2





**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., 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 2003.





3




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 leveraged 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
      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 March 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




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.





4





On
      February 27, 2004, we 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 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.




On
      March 19, 2004, we effectuated our 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 changed from Nevada to Delaware as its place of
      incorporation.




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.





In
      April
      2005, the principal shareholders have loaned the Company $264,000 to keep the
      Company operating.




**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.





5




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.




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:





·
            Course
                Builder - a software for creating/aggregating content for
                courses·
            Courseware
                Repository - for storing all the courses and tracking their
                usage·
            Learning
                Management and Registration System (LMS) - for registering and tracking
                Online as well as traditional in-class and web-cast
                students·
            Online
                Exams Server - for creating comprehensive Exams, Quizzes and
                exercises·
            Online
                Evaluations Server - for Students Evaluations, Instructor Evaluations,
                and
                other progress/quality tracking features·
            Collaboration
                Server for Online Discussion Forums & Chat Sessions·
            Online
                Marketing Server - for promoting new courses and recruiting
                Instructor/Mentors·
            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.





6




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 SumTotalTM,
      eCollegeTM, BlackboardTM and WebCTTM 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.




**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.




**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.





7





**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.





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 full-time employees and three 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.





**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 and 2005, 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 ($3,121,551) for the year ended December
      31,
      2005. As of December 31, 2005, we had an accumulated deficit of $9,105,814.
      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. These
      conditions raise substantial doubt as to our 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 we be unable to
      continue as a going concern.





8




**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.





**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.**





9





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.





**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.





10





**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.




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.




11




**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.




**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.





12





**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.




**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**





13





**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.




**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.**





14




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:




·
            the
                issuance of new equity securities;·
            changes
                in interest rates;·
            competitive
                developments, including announcements by competitors of new products
                or
                services or significant contracts, acquisitions, strategic partnerships,
                joint ventures or capital commitments;·
            variations
                in quarterly operating results;·
            change
                in financial estimates by securities analysts;·
            the
                depth and liquidity of the market for our Common Stock;·
            investor
                perceptions of our company and the technologies industries generally;
                and·
            general
                economic and other national
                conditions.




**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:





·
            our
                ability to obtain additional financing and, if available, the terms
                and
                conditions of the financing;·
            our
                financial position and results of operations;·
            developments
                with our collaborators, if any;·
            developments
                concerning our intellectual property rights or those of our competitors
                (including litigation);·
            status
                of litigation, if any;·
            period-to-period
                fluctuations in our operating results;·
            changes
                in estimates of our performance by any securities
                analysts;·
            new
                regulatory requirements and changes in the existing regulatory
                environment; and·
            market
                conditions for education stocks in
                general.




15





**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.





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:





·
            control
                of the market for the security by one or a few broker-dealers that
                are
                often related to the promoter or issuer;·
            manipulation
                of prices through prearranged matching of purchases and sales and
                false
                and misleading press releases;·
            “boiler
                room” practices involving high pressure sales tactics and unrealistic
                price projections by inexperienced sales persons;·
            excessive
                and undisclosed bid-ask differentials and markups by selling
                broker-dealers; and·
            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.





16




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 which expires in April 2008 with a renewal
      option. The current annual rent is approximately $3,200. 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.





**ITEM
      3.**  **LEGAL
      PROCEEDINGS**




As
      of
      December 31, 2005, and as of the date of this filing, the Company is not a
      party
      to any pending or threatened litigation, claim or assessment except for the
      following. After dismissal of Software Education of America, Inc.’s petition in
      Bankruptcy the previously stayed litigation against it has been revived. It
      is
      anticipated that Software Education 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. Trial on this claim is set to be heard in
      the
      Superior Court for Orange County in July 2006.





**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.





17





**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****2004:**First
                Quarter
            
            $
            9.00
            
            $
            3.05Second
                Quarter
            
            $
            2.00
            
            $
            1.15Third
                Quarter
            
            $
            1.25
            
            $
            0.30Fourth
                Quarter
            
            $
            0.96
            
            $
            0.33**2005:**First
                Quarter
            
            $
            0.73
            
            $
            0.08Second
                Quarter
            
            $
            0.09
            
            $
            0.03Third
                Quarter
            
            $
            0.14
            
            $
            0.06Fourth
                Quarter
            
            $
            0.25
            
            $
            0.01**2006**First
                Quarter
            
            $
            0.19
            
            $
            0.02





**Holders**





As
      of
      April 17,, 2006, there were 80 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."





In
      April
      2005, the Company issued to Daniel Madoni 500,000 fully paid common shares
      as a
      bonus for software consultancy work performed in the future and as an incentive
      for consulting work to be performed in the future.





**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.





18





**Equity
      Compensation Plan Information**





The
      following table provides information as of December 31, 2005 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.





Plan
                Category
            
            Number
                of securities to be issued upon exercise of outstanding options and
                warrants
            
            Weighted-average
                exercise price of outstanding options and warrants
            
            Number
                of securities remaining available for future issuance under equity
                compensation plansEquity
                compensation plans approved by security holders
            
            
            -0-
            
            
            N/A
            
            
            2,000,000
                (1
            )Equity
                compensation plannot
                approved by security holders
            
            
            N/A
            
            
            N/A
            
            
            N/A




(1)
      Refers to shares underlying our 2004 Stock Option, Deferred Stock and Restricted
      Stock Plan. As of December 31, 2005, 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.





19





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.





**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:




*Revenue
      Recognition.* Revenues
      consist primarily from the marketing and hosting our proprietary VUS system.
      These revenues are recognized when the sale is consummated and the product
      delivered. Revenue from tuition and fees from courses taught in our one school
      remaining is recognized pro-rata (on a straight-line basis) over the relevant
      period attended by the student of the applicable course or program. If a student
      withdraws from a course or program, the paid but unearned portion of the student
      tuition is refunded. Textbook sales and other revenues are recognized as sales
      occur or services are performed and represent less than 10% of total revenues.
      In the first two quarters of 2005 we received no prepaid tuition. Prepaid
      tuition is the portion of payments received but not earned. This prepaid tuition
      would have been reflected as a current liability in our consolidated balance
      sheets as this amount would be expected to be earned within the next 12 months
      from the date of prepayment.




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.





*Marketing
      and Advertising Expense.* Marketing and advertising costs are generally expensed as incurred. Marketing
      and advertising expenses consist primarily of training vouchers and other
      promotional items offered to students and/or third party organizations that
      we
      have retained to administer marketing activities.




*Allowance
      for Doubtful Accounts.* We
      maintain an allowance for doubtful accounts resulting from the inability,
      failure or refusal of our students to make required payments. We determine
      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. We generally
      write-off accounts receivable balances deemed uncollectible as they are sent
      to
      collection agencies.





20




*Deferred
      Taxes.* We
      currently have deferred income tax assets, which are subject to periodic
      recoverability assessments. Realization of our deferred income tax assets is
      principally dependent upon achievement of projected future taxable income
      reduced by deferred income tax liabilities. We evaluate the realizability of
      our
      deferred tax assets periodically and have recorded a full valuation allowance.




*Stock-based
      Compensation.* We
      account for stock-based compensation using the intrinsic value method of APB
      Opinion No. 25, “Accounting for Stock Issued to Employees”, and have adopted the
      disclosure-only provisions of SFAS No. 123, “Accounting for Stock-Based
      Compensation,” related to options issued to employees and SFAS No. 148,
“Accounting for Stock-Based Compensation Transition and Disclosure.” No
      stock-based employee compensation cost is reflected in net income. All stock
      options, stock appreciation rights or other common stock based securities
      granted are accounted for under fixed accounting and have an exercise price
      equal to the market value of the underlying common stock on the date of
      grant.




**Results
      of Operations - Years Ended December 31, 2005 and 2004**





**Year
                Ended****December**
            
            **December****31,
                2005**
            
            **31,
                2004**REVENUES
            
            $
            163,653
            
            $
            3,130,355OPERATING
                EXPENSES:Educational
                services
            
            
            135,481
            
            
            875,912General
                and administrative
            
            
            1,511,379
            
            
            1,750,956Depreciation
                expense
            
            
            85,579
            
            
            44,174Marketing
                and advertising
            
            
            121,359
            
            
            1,060,782Impairment
                expense
            
            
            402,783
            
            
            87,000TOTAL
                EXPENSES
            
            
            2,256,581
            
            
            3,818,824INCOME
                (LOSS) FROM OPERATIONS
            
            
            (2,092,928
            )
            
            (688,469
            )OTHER
                INCOME (EXPENSES):Shell
                acquisition costs
            
            
            -
            
            
            (213,362
            )Interest
                expense
            
            
            (570,101
            )
            
            (554,103
            )Interest
                  expense - non-cash beneficialconversion feature
                  charge
            
            
            -
            
            
            (3,000,000
            )TOTAL
                OTHER INCOME (EXPENSES)
            
            
            (570,101
            )
            
            (3,767,465
            )LOSS
                  BEFORE PROVISION (BENEFIT) FOR INCOME TAXESAND DISCONTINUED
                  OPERATIONS
            
            
            (2,663,029
            )
            
            (4,455,934
            )PROVISION
                (BENEFIT) FOR INCOME TAXES
            
            
            -
            
            
            (135,000
            )NET
                LOSS FROM CONTINUING OPERATIONS
            
            
            (2,663,029
            )
            
            (4,320,934
            )DISCONTINUED
                OPERATIONSLoss
                from operations of discontinued operations
            
            
            (458,522
            )
            
            (2,015,543
            )(458,522
            )
            
            (2,015,543
            )NET
                LOSS
            
            $
            (3,121,551
            )
            $
            (6,336,477
            )




21




**Revenues**




Revenues
      decreased by $2,966,702 or 94.8% to $163,653 for the year ended December 31,
      2005 from $3,130,355 for the year ended December 31, 2004. The decrease was
      due
      in part to a significant revenue loss for our telecom seminar classroom business
      resulting from policy changes implemented by customers of one of our major
      partners who was no longer able to outsource work to us. During 2005, we shifted
      our focus from providing traditional education services through a classroom
      setting to selling our patented Virtual University Appliance (“VU Appliance”) is
      a hardware and software package, which incorporates our CourseMate Virtual
      University System.




**Operating
      Expenses**





Operating
      expenses consist primarily of educational services expenses, general and
      administrative expenses, and marketing and advertising expenses. Operating
      expenses decreased by $1,562,243 or 40.9% to $2,256,581 for the year ended
      December 31 2005 from $3,818,824 for the year ended December 31, 2004. 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 the 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. As a percentage of revenues, educational services expenses increased
      to
      82.8% of revenues for the year ended December 31 2005 from 28.0% of revenues
      for
      the year ended December 31, 2004. Educational services expenses decreased by
      $740,431 or 84.5% to $135,481 for the year ended December 31, 2005 from $875,912
      for the year ended December 31, 2004. The decrease in educational expenses
      is
      directly related to the decrease in revenue.




*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 increased to 923.5%
      of revenues for the year ended December 31, 2005 from 55.9% for the year ended
      December 31, 2004. General and administrative expenses decreased by $239,577
      or
      13.7% to $1,511,379 for the year ended December 31, 2005 from $1,750,956 for
      the
      year ended December 31, 2004. The decrease was primarily due to our corporate
      downsizing in 2005.




*Marketing
      and advertising.* Marketing
      and advertising expenses as a percentage of revenue increased to 74.2% for
      the
      year ended December 31, 2005 from 33.9% for the year ended for the year ended
      December 31, 2004. Marketing and advertising expenses decreased by $939,423
      or
      88.6% to $121,359 for the year ended December 31, 2005 from $1,060,782 for
      the
      year ended December 31, 2004. The decrease was primarily due to the lack of
      funds to spend on marketing and advertising.




*Impairment
      expense.* Impairment expenses increased by $315,783 or 363.0% to $402,783 for the year
      ended December 31, 2005 from $87,000 for the year ended December 31, 2004.
      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. During the year ended December 31, 2004, we determined that goodwill
      was
      not recoverable and wrote it off.




*Loss
      from operations.* Loss
      from
      operations was $2,092,928 for the year ended December 31, 2005, as compared
      to
      $688,469 for the year ended December 31, 2004. This loss from operations
      constituted 1,278.9% of gross revenues for the year ended December 31, 2005
      compared to 22.0% of revenues for the year ended December 31, 2004. 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.





22




*Interest
      expense.* Interest
      expenses increased by $15,898 or 2.9% to $570,101 for the year ended December
      31, 2005 from $554,103 for the year ended December 31, 2004. The increase is
      due
      to the interest being accrued on the $3,000,000 convertible debentures is begin
      accrued at the default rate in 2005 compared to the stated rate in
      2004.




*Net
      loss from continuing operations.* We
      incurred a net loss from continuing operations of $2,663,029 during the year
      ended December 31 2005, as compared to $4,455,934 during the same period in
      2004. The loss for the year ended December 31 2005 relates primarily to a
      significant revenue loss for our telecom seminar classroom business resulting
      from policy changes implemented by customers of one of our major partners who
      was no longer able to outsource work to us. The loss for the year ended December
      31 2004 relates primarily to a $213,362 charge related to the acquisition costs
      of FreePCSQuote.com, Inc. and a $3,000,000 non-cash beneficial conversion
      feature charge related to the convertible debentures issued during the first
      quarter of 2004.




**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 divided to discontinue the operations of Global. SEA
      and
      Global are presented in the accompanying financial statements as discontinued
      operations.





Statement
      of operations information for SEA and Global for the years ended December 31,
      2005 and 2004 are below:





2005
            
            2004Revenue
            
            $
            38,144
            
            $
            581,085Operating
                expenses
            
            
            495,344
            
            
            2,586,573Interest
                expense
            
            
            1,322
            
            
            10,055Net
                loss
            
            
            458,522
            
            
            2,015,543





Balance
      Sheet information for SEA and Global as of December 31, 2005 is as
      follows:





December
                31, 2005Total
                assets
            
            
            
            
            $
            -Liabilities:Accounts
                payable
            
            
            
            
            $
            227,636Accrued
                expenses
            
            
            
            
            
            239,281Notes
                payable
            
            
            
            
            
            162,666Total
                liabilities
            
            
            
            
            $
            629,583Net
                liabilities of discontinued operations
            
            
            
            
            $
            629,583





**Seasonality
      and Other Factors Affecting Quarterly Results**




Our
      revenues normally fluctuate as a result of seasonal variations in our business.
      Historically, our customer schools and business’ have lower student educational
      enrolments in the first fiscal quarter than in the remainder of the year. We
      expect quarterly fluctuations in operating results as a result of many factors
      and operating results for any quarter are not necessarily indicative of the
      results for any future period.





23




**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, 2005 we had cash and cash equivalents of $5,925.




Cash
      flows used in operating activities amounted to $221,211 for the year ended
      December 31, 2005 compared to $479,935 for the year ended December 31,
      2004.




Cash
      flows used in investing activities amounted to $86,947 for the year ended
      December 31, 2005 compared to $2,127,626 for the year ended December 31, 2004.
      The significant decrease is due to a significant reduction in the purchase
      of
      equipment and software development and advances made to entities we were
      acquiring.




Cash
      flows used in financing activities for the year ended December 31, 2005 was
      $145,279 compared to cash flows provided by financing activities of $2,638,987
      for the year ended December 31, 2004. The decrease was due primarily to proceeds
      of $3,000,000 from the sale of convertible debentures in February
      2004.




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 2006. 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.





**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**





**Resignation 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.





24





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.





**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.





**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.





25





**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, 2006, are listed below:





Name
            
            Positions
            
            AgeUmesh
                I Patel
            
            Chairman,
                President and Chief Financial Officer and director
            
            48Craig
                Nagasugi
            
            Chief
                Executive Officer
            
            48Al
                Jinnah,
            
            General
                Counsel and Secretary
            
            66Gregory
                Frazer
            
            Director
            
            52Khalid
                Sheikh
            
            Director
            
            66Gerald
                R. Newman
            
            Director
            
            60





Mr.
      Patel
      has over 14 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.





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.





26





For
      the
      past five years Mr. Newman has been the Managing Director of M&A Associate
      Network, a company that uses its worldwide finder's network to help private
      equity groups and other business buyers to locate business sellers meeting
      their
      particular criteria. Mr. Newman also provides business consulting to early
      stage
      companies seeking to be publicly traded, raise capital or enter into strategic
      relationships. He is the founder, Chairman and Chief Executive Officer of Patent
      Venture Fund. Mr. Newman has been an attorney licensed to practice in California
      for the past 30 years and has been involved in various capacities with a number
      of private and public companies both domestic and foreign.





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.





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.




**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 2005.





**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,
      2005.





27





Summary
      Compensation Table


Annual
                CompensationName
                and Principal Position
            
            Year
            
            Salary
            
            Bonus
            
            Options/
              SARsUmesh
                Patel, Chairman,
              President
                and Chief Financial Officer
            
            
            2005
              2004
              2003
            
            
            (1)
                $240,000
              120,000
              90,000
            
            $
            --
              --
              --
            
            
            --
              --
              42,750Craig
                Nagasugi ,
              Chief
                Executive Officer
            
            
            2005
              2004
              2003
            
            
            --
              --
              --
            
            
            --
              --
              --
            
            
            --
              --
              --Al,
                Jinnah,
              Corporate
                Secretary
            
            
            2005
              2004
              2003
            
            
            (1)
                90,000
              110,000
              72,500
            
            
            --
              --
              --
            
            
            --
              --
              --Aurangzeb
                Bhatti,
              former
                Chief Executive Officer (2)
            
            
            2005
              2004
              2003
            
            
            (1)
                180,000
              120,000
              90,000
            
            
            --
              --
              --
            
            
            --
              --
              42,750





(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.





**ITEM
      11.**  **SECURITY
      OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND** **MANAGEMENT**





28





**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 14, 2006, 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 14, 2006. Each
      person in the table, except as noted has sole voting and investment powers
      over
      the shares beneficially owned.





**Name******
            
            **Shares
                of Common**
              **Stock
                Beneficially**
              **Owned**
            
            **Percentage
                of**
              **Outstanding**
              **Common
                Stock**Umesh
                Patel
              680
                Langsdorf Drive
              Suite
                203
              Fullerton,
                CA 92831
            
            
            6,668,680
                (1
            )
            
            32.94
            %Craig
                Nagasugi
              680
                Langsdorf Drive
              Suite
                203
              Fullerton,
                CA 92831
            
            
            -
            
            
            -Al
                Jinnah
              680
                Langsdorf Drive
              Suite
                203
              Fullerton,
                CA 92831
            
            
            1,052,040
            
            
            5.21
            %Gregory
                Frazer
              680
                Langsdorf Drive
              Suite
                203
              Fullerton,
                CA 92831
            
            
            -
            
            
            -Khalid
                Sheikh
              680
                Langsdorf Drive
              Suite
                203
              Fullerton,
                CA 92831
            
            
            -
            
            
            -Gerald
                R. Newman
              680
                Langsdorf Drive
              Suite
                203
              Fullerton,
                CA 92831
            
            
            -
            
            
            -





29





RENN
                Capital Group, Inc.
              8080
                N. Central Expressway
              Suite
                210 LB-59
              Dallas,
                TX 75206
            
            
            6,669,834
                (2
            )
            
            24.82Faisel
                H. Khan
            
            
            1,615,000
            
            
            7.99
            %All
                directors and executive
              officers
                as a group (2individuals)
            
            
            
            
            
            38.13
            %





(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.





**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, 2005 of $368,698 is due
      to
      Messrs. Bhatti and Patel, which includes accrued interest.





30





**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).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





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.





**ITEM
      14. PRINCIPAL ACCOUNTANT FEES AND SERVICES**





The
      following table sets forth fees billed to us by our independent registered
      accounting firm, Kabani & Company (2005) and AJ. Robbins, PC (2004) during
      the fiscal years ended December 31, 2005 and 2004 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 2005 and 2004.





December
              31, 2005
            
            
            December
              31, 2004Audit
                Fees
            
            $
            90,830
            
            $
            140,000Audit
                Related Fees
            
            $
            -
            
            $
            -Tax
                Fees
            
            $
            15,000
            
            $
            13,000All
                Other Fees
            
            $
            -
            
            $
            -




32





**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**Dated:April
                19, 2006
              By:
              /s/
                Umesh PatelUmesh PatelChairman,
                President and Chief Financial Officer and
                Director


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 Chief Financial
              Officer,
            
            April 19, 2006Umesh Patel
            
            (Principal
              executive, financial and
              accounting
                officer) and director




33


**Digital
        Learning Management Corporation and Subsidiaries**
 **Consolidated
        Financial Statements**
 **Years
        Ended December 31, 2005 and 2004**
 
 
 **Contents**
 
 **Reports
                  of Independent Registered Public Accounting Firms**Report
                  on 2005 consolidated financial statements
              F-1Report
                  on 2004 consolidated financial statements
              F-2**Consolidated
                  Financial Statements:**Consolidated
                  Balance Sheet as of December 31, 2005
              F-3Consolidated
                    Statements of Operations for the years endedDecember
                    31, 2005 and 2004
              F-4Consolidated
                    Statement of Stockholders’ deficit for the years endedDecember
                    31, 2005 and 2004
              F-5Consolidated
                    Statements of Cash Flows for the years endedDecember
                    31, 2005 and 2004
              F-6Notes
                  to ConsolidatedFinancial Statements
              F-8
  
 
 **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, 2005, and the
        related
        consolidated statements of operations, stockholders’ (deficit) and cash flows
        for the year then ended. These consolidated financial statements are the
        responsibility of the Company's management. Our responsibility is to express
        an
        opinion on these consolidated financial statements based on our
        audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the
        consolidated financial statements are free of material misstatement. An audit
        includes examining, on a test basis, evidence supporting the amounts and
        disclosures in the consolidated financial statements. An audit also includes
        assessing the accounting principles used and significant estimates made by
        management, as well as evaluating the overall consolidated financial statements
        presentation. We believe that our audit provides a reasonable basis for our
        opinion.
 
 In
        our
        opinion, the consolidated financial statements referred to above present
        fairly,
        in all material respects, the consolidated financial position of Digital
        Learning Management Corporation and subsidiaries as of December 31, 2005,
        and
        the results of their operations and their cash flows for the year then
        ended, in conformity with accounting principles generally accepted in the
        United
        States of America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        the Company will continue as a going concern. As discussed in Note 1 to the
        consolidated financial statements, the Company has incurred a net loss of
        $3,121,551 for the year ended December 31, 2005 and has a stockholders’ deficit
        of $5,838,633 and a working capital deficit of $5,865,285. 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 consolidated 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
 April
        10,
        2006
  F-1
  **A
        J. ROBBINS, P.C.**
 **CERTIFIED
        PUBLIC ACCOUNTANTS**
 **216
        16th STREET SUITE 600**
 **DENVER,
        COLORADO 80202**
  **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 Board
        of
        Directors and Stockholders
 Digital
        Learning Management Corporation
 Torrance,
        California
 
 We
        have
        audited the accompanying consolidated balance sheet of Digital Learning
        Management Corporation and subsidiaries as of December 31, 2004, and the
        related
        consolidated statements of operations, stockholders’ (deficit) and cash flows
        for the year then ended. 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 audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. An audit also includes assessing the accounting principles used
        and
        significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audit provides 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, 2004, and the results of
        their
        operations and their cash flows for the year then ended, 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, 2004 and at December 31, 2004 has 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/
        A J. ROBBINS,
        P.C.**
 **CERTIFIED
        PUBLIC ACCOUNTANTS**
  Denver,
        Colorado
 April
        29,
        2005
  F-2
 
 **Digital
                  Learning Management Corporation and Subsidiaries****Consolidated
                  Balance Sheet****December
                  31,****31,
                  2005****ASSETS**CURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              5,925Accounts
                  receivable, net of allowance for doubtful accounts of
                  $157,828
              
              
              43,888TOTAL
                  CURRENT ASSETS
              
              
              49,813PROPERTY
                  AND EQUIPMENT, net
              
              
              20,249INTANGIBLE
                  ASSETS, net
              
              
              6,403TOTAL
                  ASSETS
              
              $
              76,465**LIABILITIES
                  AND STOCKHOLDERS' DEFICIT**CURRENT
                  LIABILITIES:Convertible
                  notes payable
              
              $
              3,000,000Accounts
                  payable and accrued expenses
              
              
              1,204,818Unearned
                  revenue
              
              
              8,330Accrued
                  compensation
              
              
              703,669Accounts
                  payable, related party
              
              
              368,698Net
                  liabilities of discontinued operations
              
              
              629,583TOTAL
                  CURRENT LIABILITIES
              
              
              5,915,098COMMITMENTS
                  AND CONTINGENCIES
              
              
              -STOCKHOLDERS'
                  DEFICITPreferred
                    stock, $0.001 par value; 5,000,000 sharesauthorized;
                    0 shares issued and outstanding
              
              
              -Common
                    stock; $0.001 par value; 75,000,000 sharesauthorized;
                    20,204,024 shares issued and outstanding
              
              
              20,204Additional
                  paid-in capital
              
              
              3,211,977Shares
                  to be issued
              
              
              35,000Accumulated
                  deficit
              
              
              (9,105,814
              )TOTAL
                  STOCKHOLDERS' DEFICIT
              
              
              (5,838,633
              )TOTAL
                  LIABILITIES AND STOCKHOLDERS' DEFICIT
              
              $
              76,465The
                  accompanying notes are an integral part of these consolidated financial
                  statements
  F-3
 
 **Digital
                  Learning Management Corporation and Subsidiaries****Consolidated
                  Statements of Operations****For
                  the Years Ended****December
                  31,****2005**
              
              **2004**REVENUES
              
              $
              163,653
              
              $
              3,130,355OPERATING
                  EXPENSES:Educational
                  services
              
              
              135,481
              
              
              875,912General
                  and administrative
              
              
              1,511,379
              
              
              1,750,956Depreciation
                  expense
              
              
              85,579
              
              
              44,174Marketing
                  and advertising
              
              
              121,359
              
              
              1,060,782Impairment
                  expense
              
              
              402,783
              
              
              87,000TOTAL
                  EXPENSES
              
              
              2,256,581
              
              
              3,818,824LOSS
                  FROM OPERATIONS
              
              
              (2,092,928
              )
              
              (688,469
              )OTHER
                  EXPENSES:Shell
                  acquisition costs
              
              
              -
              
              
              (213,362
              )Interest
                  expense
              
              
              (570,101
              )
              
              (554,103
              )Interest
                  expense - non-cash beneficial conversion
                  feature charge
              
              
              -
              
              
              (3,000,000
              )TOTAL
                  OTHER EXPENSES
              
              
              (570,101
              )
              
              (3,767,465
              )LOSS
                    BEFORE BENEFIT FOR INCOME TAXESAND
                    DISCONTINUED OPERATIONS
              
              
              (2,663,029
              )
              
              (4,455,934
              )BENEFIT
                  FOR INCOME TAXES
              
              
              -
              
              
              (135,000
              )NET
                  LOSS FROM CONTINUING OPERATIONS
              
              
              (2,663,029
              )
              
              (4,320,934
              )DISCONTINUED
                  OPERATIONSLoss
                  from operations of discontinued operations
              
              
              (458,522
              )
              
              (2,015,543
              )(458,522
              )
              
              (2,015,543
              )NET
                  LOSS
              
              $
              (3,121,551
              )
              $
              (6,336,477
              )LOSS
                  PER COMMON SHARE - BASIC AND DILUTEDContinuing
                  operations
              
              $
              (0.13
              )
              $
              (0.22
              )Discontinued
                  operations
              
              
              (0.02
              )
              
              (0.10
              )Net
                  loss
              
              $
              (0.15
              )
              $
              (0.32
              )WEIGHTED
                    AVERAGE NUMBER OFCOMMON
                    SHARES OUTSTANDING -BASIC
                  AND DILUTED
              
              
              20,204,024
              
              
              19,784,901Weighted
                  average number of shares used to compute basic and diluted loss
                  per share
                  is the same since the effect of dilutive securities is anti-dilutiveThe
                  accompanying notes are an integral part of these consolidated financial
                  statements
  F-4
 
 **Digital
                  Learning Management Corporation and Subsidiaries****Consolidated
                  Statement of Stockholders' Deficit****For
                  the Years Ended December 31, 2005 and 2004****Retained**
              
              **Total****Additional**
              
              **Shares**
              
              
              
              **Earnings/**
              
              **Stockholders'****Common
                  Stock**
              
              **Paid-in**
              
              **To
                  Be**
              
              **Prepaid**
              
              **(Accumulated**
              
              **Equity/****Shares**
              
              **Amount**
              
              **Capital**
              
              **Issued**
              
              **Consulting**
              
              **Deficit)**
              
              **(Deficit)****Balance,
                  December 31, 2003**
              
              
              **17,372,839**
              
              **$**
              **17,373**
              
              **$**
              **(872**
              **)**
              **$**
              **-**
              
              **$**
              **-**
              
              **$**
              **352,214**
              
              **$**
              **368,715**Shares
                  issued in connection with merger with FREEPCSQUOTE.COM,
                  Inc.
              
              
              2,431,185
              
              
              2,431
              
              
              (2,431
              )
              
              -
              
              
              -
              
              
              -
              
              
              -Common
                  stock issued for services
              
              
              300,000
              
              
              300
              
              
              32,700
              
              
              -
              
              
              (33,000
              )
              
              -
              
              
              -Common
                  stock issued for acquisition of Global Computer Systems,
                  Inc.
              
              
              100,000
              
              
              100
              
              
              61,900
              
              
              -
              
              
              -
              
              
              -
              
              
              62,000Warrants
                  issued with merger with FREEPCSQUOTE.COM, Inc.
              
              
              -
              
              
              -
              
              
              109,880
              
              
              -
              
              
              -
              
              
              -
              
              
              109,880Warrants
                  issued with acquisition of Software Education of America,
                  Inc.
              
              
              -
              
              
              -
              
              
              10,800
              
              
              -
              
              
              -
              
              
              -
              
              
              10,800Value
                  of beneficial conversion feature on convertible debenture
              
              
              -
              
              
              -
              
              
              3,000,000
              
              
              -
              
              
              -
              
              
              -
              
              
              3,000,000Amortization
                  of prepaid consulting
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              8,250
              
              
              -
              
              
              8,250Net
                  loss for the year ended December 31, 2004
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (6,336,477
              )
              
              (6,336,477
              )**Balance,
                  December 31, 2004**
              
              
              **20,204,024**
              
              
              **20,204**
              
              
              **3,211,977**
              
              
              **-**
              
              
              **(24,750**
              **)**
              
              **(5,984,263**
              **)**
              
              **(2,776,832**
              **)**Common
                  stock issued for services
              
              
              -
              
              
              -
              
              
              -
              
              
              35,000
              
              
              -
              
              
              -
              
              
              35,000Amortization
                  of prepaid consulting
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              24,750
              
              
              -
              
              
              24,750Net
                  loss for the year ended December 31, 2005
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              (3,121,551
              )
              
              (3,121,551
              )**Balance,
                  December 31, 2005**
              
              
              **20,204,024**
              
              **$**
              **20,204**
              
              **$**
              **3,211,977**
              
              **$**
              **35,000**
              
              **$**
              **-**
              
              **$**
              **(9,105,814**
              **)**
              **$**
              **(5,838,633**
              **)**The
                  accompanying notes are an integral part of these consolidated financial
                  statements
  F-5
 **Digital
                    Learning Management Corporation and Subsidiaries****Consolidated
                    Statements of Cash Flows****For
                    the Years Ended December 31, 2005 and 2004****For
                    the Years Ended****December
                    31,****2005**
                
                **2004**CASH
                    FLOW FROM OPERATING ACTIVITIES:Net
                    loss
                
                $
                (3,121,551
                )
                $
                (6,336,477
                )Adjustment
                    to reconcile net loss to net cash used
                    in operating activities:Depreciation
                    and amortization expense
                
                
                85,579
                
                
                44,154Common
                    stock issued for services rendered
                
                
                35,000
                
                
                -Amortization
                    of prepaid consulting
                
                
                24,750
                
                
                8,250Warrants
                    issued in shell acquisition
                
                
                -
                
                
                109,880Beneficial
                    conversion feature
                
                
                -
                
                
                3,000,000Deferred
                    income taxes
                
                
                -
                
                
                (80,842
                )Impairment
                    expense
                
                
                402,783
                
                
                87,000Write
                    off of offering costs
                
                
                -
                
                
                72,220Write
                    off of prepaid loan fees
                
                
                -
                
                
                329,479Changes
                    in operating assets and liabilities:Accounts
                    receivable
                
                
                205,952
                
                
                390,966Prepaid
                    expenses
                
                
                20,009
                
                
                60,321Income
                    tax refund receivable
                
                
                135,000
                
                
                (135,000
                )Other
                    current assets
                
                
                132,826
                
                
                (99,599
                )Accounts
                    payable and accrued expenses
                
                
                738,959
                
                
                280,069Accounts
                    payable, related party
                
                
                336,058
                
                
                29,631Due
                    to
                    factor
                
                
                (124,424
                )
                
                124,424Accrued
                    compensation
                
                
                513,219
                
                
                (59,550
                )Unearned
                    Revenue
                
                
                8,330
                
                
                -Income
                    taxes
                
                
                -
                
                
                (151,407
                )Net
                    cash used in operating activities from continuing
                    operations
                
                
                (607,510
                )
                
                (2,326,481
                )Net
                    cash provided by operating activities of discontinued
                    operations
                
                
                386,299
                
                
                1,846,546Net
                    cash used in operating activities
                
                
                (221,211
                )
                
                (479,935
                )CASH
                    FLOW FROM INVESTING ACTIVITIES:Purchase
                    of
                    equipment and software development
                
                
                (612
                )
                
                (441,877
                )Cash
                    advanced to discontinued businesses
                
                
                (86,335
                )
                
                (1,685,749
                )Net
                    cash used in investing activities from continuing
                    operations
                
                
                (86,947
                )
                
                (2,127,626
                )Net
                    cash used in investing activities of discontinued
                    operations
                
                
                -
                
                
                -Net
                    cash used in investing activities
                
                
                (86,947
                )
                
                (2,127,626
                )CASH
                    FLOW FROM FINANCING ACTIVITIES:Proceeds
                    from
                    convertible notes payable
                
                
                -
                
                
                3,000,000Payment
                    for deferred offering costs
                
                
                -
                
                
                (72,220
                )Payment
                    for prepaid loan fees
                
                
                -
                
                
                (329,479
                )Net
                    cash provided by financing activities from continuing
                    operations
                
                
                -
                
                
                2,598,301Net
                    cash provided by financing activities of discontinued
                    operations
                
                
                145,279
                
                
                40,686Net
                    cash provided by financing activities
                
                
                145,279
                
                
                2,638,987CHANGE
                    IN CASH OF DISCONTINUED OPERATIONS
                
                
                (2,056
                )
                
                (4,287
                )INCREASE
                    (DECREASE) IN CASH AND CASH EQUIVALENTS
                
                
                (164,935
                )
                
                27,139CASH
                    AND CASH EQUIVALENTS, Beginning of year
                
                
                170,860
                
                
                143,721CASH
                    AND CASH EQUIVALENTS, End of year
                
                $
                5,925
                
                $
                170,860SUPPLEMENTAL
                    DISCLOSURES OF CASH FLOW INFORMATION:Interest
                    paid
                
                $
                28,915
                
                $
                101,293Income
                    taxes paid
                
                $
                -
                
                $
                203,874The
                    accompanying notes are an integral part of these consolidated
                    financial
                    statements
  F-6
 
 **Digital
        Learning Management Corporation and Subsidiaries**
 **Consolidated
        Statements of Cash Flows, continued**
 
 
 *Supplemental
        non-cash investing and financing activities:*
 
 During
        the year ended December 31, 2004, the Company issued: 1) 300,000 shares if
        its
        common stock for services rendered valued at $33,000 and 2) 100,000 shares
        of
        its common stock in connection with the acquisition of Global Computer Systems,
        Inc.
  F-7
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 **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.
 
 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-8
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 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.
 
 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.
 
 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 $3,121,551 for the year ended December 31, 2005. As
        of
        December 31, 2005, the company had an accumulated deficit of $9,105,814 and
        a
        working capital deficit of $5,865,285. In addition, subsequent to December
        31,
        2005, the Company was in default on its convertible debenture obligations,
        its
        SEA subsidiary filed for bankruptcy and it made the decision to close 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.
  F-9
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 The
        Company plans to take the following steps that it believes will be sufficient
        to
        provide the Company with the ability to continue in existence. In March 2005
        the
        Company closed its vocational schools and stopped offering In-Class vocational
        training. The Company is now 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. 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 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. The Company expects that sales from its VU Appliance product and
        related services will be sufficient to sustain operations for the foreseeable
        future. Management believes it needs to arrange new financing in the minimum
        amount of $2.0 million through the issuance of additional equity or convertible
        notes through a private placement, in order to have sufficient capital to
        finance its operations for the next 12 months.
 
 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 following
        entities, collectively referred to as "Company" or "DGTL". All significant
        inter-company transactions have been eliminated.
 
 Digital
        Learning Management Corporation
 Digital
        Learning Institute, Inc.
 Webvision
        Internet Works, Inc.
 McKinley
        Educational Services, Inc.
 Digital
        Knowledge Works, Inc.
 Coursemate,
        Inc.
 Software
        Education of America, Inc.
 Global
        Computer Systems, Inc.
  F-10
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
  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.
 
 Goodwill
 
 Goodwill
        was recorded at its purchase price and is not being amortized. Pursuant to
        SFAS
        142 ("Goodwill and Other Intangible Assets") and SFAS 144 ("Accounting for
        the
        Impairment or Disposal of Long-Lived Assets"), the Company has evaluated
        its
        goodwill for impairment and has determined as of December 31, 2004 that an
        impairment charge should be recognized for the full amount of the goodwill
        of
        $1,187,853. Of this amount $1,100,853 related to the goodwill purchased in
        the
        SEA and Global acquisitions, which have been presented in the accompanying
        financial statements as discontinued operations.
 
 Marketing
        and Advertising Costs
  Marketing
        and advertising costs are charged to expense during the period incurred.
        The
        company incurred advertising costs of $35,807 during the year ended December
        31,
        2005.
 
 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.
  F-11
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 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 and
        up to
        six months for SEA and Global). 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. Textbook sales and other
        revenues are recognized as sales occur or services are performed and represent
        less than 10% of total revenues. SEA and Global bill tuition as students
        register for classes. In the second quarter of 2004, the Company began to
        receive unearned tuition. Unearned tuition is the portion of payments received
        but not earned or receivables not yet collected. This unearned tuition will
        be
        reflected as a current liability in the Company's consolidated balance sheet
        as
        this amount would be expected to be earned within the next 12 months from
        the
        date of prepayment or recording of receivable.
 
 Allowances
        for Doubtful Accounts
 
 The
        Company maintains an allowance for doubtful accounts resulting from the
        inability, failure or refusal of the students or customers 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.
 
 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.
  F-12
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 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 $85,579 and $44,174 for the
        years ended December 31, 2005 and 2004, 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.
 
 Facilities
 
 The
        Company leases office space owned by a related party as well as additional
        office space from unrelated parties. Rent expense was $140,655 and $221,843
        for
        the years ended December 31, 2005 and 2004, respectively.
 
 The
        Company also rented classrooms from an unrelated university on an "as needed
        basis." Rent expense was $0 and $38,150 for the years ended December 31,
        2005
        and 2004, 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.
  F-13
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 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.
 
 Three
        customers accounted for 69% and two customers accounted for 60% of sales
        during the years ended December 31, 2005 and 2004, respectively. The
        same three customers accounted for 86% of accounts receivable at December
        31, 2005.
 
 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 accounts for stock based compensation in accordance with Statement
        of
        Financial Accounting Standards No. 123, "Accounting for Stock-Based
        Compensation" ("SFAS 123"). This standard requires the Company to adopt the
        "fair value" method with respect to stock-based compensation of consultants
        and
        other non-employees. The Company did not change its method of accounting
        with
        respect to employee stock options; the Company continues to account for these
        under the "intrinsic value" method, and to furnish the pro-forma disclosures
        required by SFAS 123.
 
 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"). The Company capitalized $359,691 of software
        development costs at December 31, 2004. During the year ended December 31,
        2005,
        the Company amortized $32,322 and as of December 31, 2005 wrote off these
        development costs and took an impairment charge of $327,369.
 
 Inventory
 
 Inventory
        primarily consists of books and course material purchased for resale to
        students. Inventory is accounted for on a first-in-first-out basis. As of
        December 31, 2005, the Company did not have any inventory.
  F-14
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 Reclassification
 
 Certain
        amounts reported in the Company’s financial statements for the year ended
        December 31, 2004 have been reclassified to conform to current year
        presentations.
 
 Recently
        Issued Accounting Pronouncements
 
 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. SFAS No. 154 is not expected to have a material effect on the consolidated
        financial position or results of operations of the Company.
 
 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 SFAS 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. SFAS No. 155 is not expected to have a material
        effect
        on the consolidated financial position or results of operations of the
        Company.
  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:
  F-15
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 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.
  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
        December 2004, the FASB issued SFAS No. 123 (Revised), entitled *Share-Based
        Payment* .
        This
        revised Statement eliminates the alternative to use APB Opinion No. 25’s
        intrinsic value method of accounting that was provided in SFAS No. 123 as
        originally issued. Under Opinion 25, issuing stock options to employees
        generally resulted in recognition of no compensation cost. This Statement
        requires entities to recognize the cost of employee services received in
        exchange for awards of equity instruments based on the grant-date fair value
        of
        those awards. For public companies that file as a small business issuer,
        this
        Statement is effective as of the beginning of the first interim or annual
        reporting period that begins after December 15, 2005. The adoption of SFAS
        123
        (Revised) will not impact the consolidated financial statements as the Company
        has not granted any equity instruments to employees.
 
 In
        June
        2005, the EITF reached consensus on Issue No. 05-6, Determining the Amortization
        Period for Leasehold Improvements ("EITF 05-6.") EITF 05-6 provides guidance
        on
        determining the amortization period for leasehold improvements acquired in
        a
        business combination or acquired subsequent to lease inception. The guidance
        in
        EITF 05-6 will be applied prospectively and is effective for periods beginning
        after June 29, 2005. EITF 05-6 is not expected to have a material effect
        on its
        consolidated financial position or results of operations.
  **NOTE
        2 - PROPERTY AND EQUIPMENT**
 
 The
        cost
        of property and equipment at December 31, 2005 consisted of the
        following:
 
 Computers
                  and office equipment
              
              $
              102,298Furniture
                  and fixtures
              
              
              11,550113,848Less
                  accumulated depreciation
              
              
              (93,599
              )$
              20,249
  F-16
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 The
        cost
        of intangible assets at December 31, 2005 consisted of the following:
  Software
              
              $
              32,376Less
                  accumulated depreciation
              
              
              (25,973
              )$
              6,403
 
 **NOTE
        3 - 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 year 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.
  F-17
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
  As
        a
        result of the Company being in default on its convertible debentures, as
        of
        December 31, 2004, the Company wrote off the deferred loan costs of $329,479
        to
        interest expense.
  The
        company accrued interest of $ 485,000 on the debentures during the year ended
        December 31, 2005.
  **NOTE
        4 - LINES OF CREDIT**
 
 DLI
        had a
        factoring agreement with PM Factors Bancorp to factor its accounts receivable
        up
        to $500,000. PM Factors Bancorp advanced to DLI 80% of the accounts receivable
        that PM Factors Bancorp believed were eligible for factoring. The remaining
        balance was withheld as a reserve against possible non-collectible accounts.
        A
        finance fee of 0.76% per ten day period on the face value of each account
        was
        charged as long as the account remains unpaid, accruing on the purchase date.
        Factored receivables at September 30, 2005 were $187,644, of which $115,932
        had
        been loaned against. During the three months ended September 30, 2005, the
        Company made a $14,000 payment to PM Factors Bancorp.
 
 On
        June
        14, 2005 PM Factors, Inc. (PM Factors Bancorp), filed a law suit against
        DLI and
        two of its officers. The law suit claimed Breach of Contract in failing to
        pay
        approximately $130,000 on factored accounts. The claim also seeks relief
        based
        on fraud and fraudulent transfer. On August 11, 2005 DLI filed its answer
        to the
        law suit denying the debt and any wrongful conduct and at the same time filed
        a
        cross claim for breach of fiduciary duty, misappropriation of funds and
        accounting. This law suit is filed in the Superior Court of California, for
        the
        county of Los Angeles, Central District .
        In
        September 2005, PM Factors obtained a court order and was able to take
        approximately $83,000 from the Company’s bank account. This amount was held in
        escrow by the court. In order for the Company to continue its lawsuit against
        PM
        Factors the Company was required to put an additional $70,000 on deposit
        with
        the court. In November 2005, the Company settled its dispute with PM Factors
        by
        paying approximately $153,000 which included the principal and interest
        outstanding on the line of credit plus fees. The settlement was paid from
        the
        amount held by the court.
 
 The
        Company assumed a line of credit with the Union Bank of California as part
        of
        its acquisition of Global. The line of credit provides for borrowings for
        an
        amount up to $100,000 with interest at 6.75% annually. Interest only payments
        are due monthly.
 
 On
        May 2,
        2005 the Company reached agreement with a previous shareholder of Global,
        whereby the shareholder agreed to relieve the Company of liability for the
        line
        of credit with Union Bank of California. This loan was initiated by Global
        and
        the Company had agreed as part of the acquisition to assume the loan in its
        own
        name but the agreement was not reached with The Union Bank of California
        to do
        so. DLMC has no further liability for this line of credit loan as the former
        shareholder of Global has agreed to assume responsibility for the line of
        credit. As a result of the previous shareholder releasing the Company from
        this
        line of credit, the Company has recorded a gain on release of debt of $74,793.
        In addition, as part of this agreement, the Company agreed to sell to the
        former
        shareholder, all furniture, fixtures, inventory and equipment of Global for
        $1.
        This agreement also includes a value added reseller opportunity for the
        former shareholder to sell the Company's Virtual University Appliance System
        on
        a commission basis.  As a result of the sale of the fixed assets, the
        Company has recorded a loss on the sale of fixed assets of
        $28,465.
  F-18
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 As
        of
        December 31, 2005, the Company does not have any line of credit
        facility.
 
 **NOTE
        5 - 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
        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.
 
 On
        April
        20, 2005, the Company entered an agreement with a software consultant whereby
        the Company agreed to issue to 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.
 
 Options
        and Warrants
 
 The
        following table summarizes all options and warrants granted by the
        Company:
 **Options/
                  Warrants**
              
              **Weighted**
                **Average**
                **Exercise**
                **Price**Balance,
                  December 31, 2004
              
              
              1,265,500
              
              $
              0.61Granted
              
              
              -
              
              
              -Balance,
                  December 31, 2005
              
              
              1,265,500
              
              
              0.61Exercisable,
                  December 31, 2005
              
              
              1,265,500
              
              $
              0.61
 
 The
        weighted average remaining contractual life of options and warrants outstanding
        is 2.40 years at December 31, 2005. The exercise price for
        options and warrants outstanding at December 31, 2005 were as
        follows:
  F-19
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 **Number
                  of**
                **Options**
              
              **Exercise**
                **Price**410,000
              
              $
              0.25670,000
              
              $
              0.4550,000
              
              $
              1.0085,500
              
              $
              2.0050,000
              
              $
              3.001,265,500
 **NOTE
        6 - 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, 2005 are
        as
        follows:
 
 Deferred
                  tax assets:Accrued
                  compensation
              
              $
              229,529Accounts
                  payable and accrued expenses
              
              
              490,843Accounts
                  payable, related party
              
              
              16,621Net
                  operating loss carryforwards
              
              
              789,072Less
                  valuation allowance
              
              
              (1,381,298
              )(144,767
              )Deferred
                  tax liabilities -Property
                  and equipment
              
              
              (128,265
              )Accounts
                  receivable
              
              
              (16,502
              )(144,767
              )Net
                  deferred tax liability
              
              $
              —
  F-20
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 The
        components of deferred income tax expense (benefit) are as follows:
 
 **December
                  31,**
                **2005**
              
              **December
                  31,**
                **2004**Property
                  and equipment
              
              $
              168,202
              
              $
              (48,805
              )Accrued
                  compensation
              
              
              (157,920
              )
              
              22,391Accounts
                  receivable
              
              
              (77,438
              )
              
              (147,003
              )Prepaid
                  expense
              
              
              7,523
              
              
              (3,423
              )Accounts
                  payable and accrued expense
              
              
              (318,483
              )
              
              (102,503
              )Accounts
                  payable, related party
              
              
              (4,468
              )
              
              (11,142
              )Application
                  of NOL carryback
              
              
              -
              
              
              80,842Net
                  operating loss carryforward
              
              
              (375,600
              )
              
              (413,472
              )Increase
                  in valuation allowance
              
              
              758,184
              
              
              623,115Income
                  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):
 
 **December
                  31,**
                **2005**
              
              **December
                  31,**
                **2004**Tax
                  benefit at federal statutory rates
              
              $
              (1,061,327
              )
              $
              (2,234,858
              )Depreciation
                  expense
              
              
              (461
              )
              
              (416
              )California
                  income tax expense
              
              
              -
              
              
              (27,481
              )Meals
                  and entertainment
              
              
              -
              
              
              2,040Officers
                  life insurance
              
              
              1,636
              
              
              10,451Shell
                  Acquisition Costs
              
              
              -
              
              
              72,543Asset
                  Impairments
              
              
              188,542
              
              
              403,870Accrual
                  to cash conversion
              
              
              520,071
              
              
              203,935Beneficial
                  Conversion Feature
              
              
              -
              
              
              1,020,000Stock
                  based compensation
              
              
              11,900
              
              
              41,032Net
                  operating loss carryforward
              
              
              339,639
              
              
              373,884Income
                  tax (benefit) expense
              
              $
              -
              
              $
              (135,000
              )
  F-21
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 Income
        tax expense (benefit) consists of the following for the years
        ended:
 
 **December
                  31,**
                **2005**
              
              **December
                  31,**
                **2004**Current
              
              $
              -
              
              $
              (135,000
              )Deferred
              
              
              -
              
              
              -Income
                  tax expense
              
              $
              -
              
              $
              (135,000
              )
 
 At
        December 31, 2005, 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, 2005 and 2004 was an increase
        of
        $758,184 and $623,115. Net operating loss carryforwards of approximately
        $2,100,000 expire starting in 2019.
 
 **NOTE
        7 - RELATED PARTY TRANSACTIONS**
 
 During
        the year ended December 31, 2004, the Company paid rent to a related party
        in
        the amount of $222,000.
  During
        the year ended December 31, 2004, DLI paid a
        related party $481,655 for commissions and contract services. These related
        parties advanced $32,640 during 2004.
  During
        the year ended December 31, 2004, DLI paid
        a former party related party $56,699 for marketing and advertising
        services.
  During
          the year ended December 31, 2004, DLI paid a
          related party $92,500 for legal services.
 
 During
        the year ended December 31, 2005, the Company paid rent to a related party
        in
        the amount of $74,000.
 
 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, 2005, $368,698
        is due
        to these two officers of the Company, which includes accrued
        interest.
 
 **NOTE
        8 - COMMITMENTS AND CONTINGENCIES**
 
 Litigation
  As
        of
        December 31, 2005, the Company is not a party to any pending or threatened
        litigation, claim or assessment except for the following. After dismissal
        of Software Education of America, Inc.’s petition in Bankruptcy the previously
        stayed litigation against it has been revived. It is anticipated that Software
        Education 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. Trial on this claim is set to be heard in the Superior Court
        for
        Orange County in July 2006.
  F-22
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
  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.
 
 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.
 
 During
        2004 the Company deposited $100,000 with WestPark Capital Market Inc.
        (“Westpark”). The Company’s understanding was this was a term deposit for eight
        months, and the funds were to be refunded on April 6, 2005. In February 2005
        Westpark indicated the funds forwarded to them in 2004 were not for a deposit
        but for the purchase of the Company’s common stock. On May 16, 2005, the Company
        received written notification from Westpark that it would not repay the
        $100,000. A dispute exists between the two parties on this issue. The Company
        is
        contemplating commencing litigation to recover the funds. The Company has
        established a $100,000 reserve against this deposit due from
        Westpark.
 
 Leases
 
 The
        Company entered into an operating lease with a related party for office space.
        During 2005, the office building was sold by the related party and the lease
        was
        canceled. The Company currently leases office space in Fullerton, California
        under an operating lease that expires in April 2008.
 
 Future
        minimum lease payments under non-cancelable operating leases with initial
        or
        remaining terms of one year or more are as follows:
 **Operating**
                **Leases**Year
                  ending December 31,2006
              
              $
              39,9482007
              
              
              42,3482008
              
              
              14,916$
              97,212
  F-23
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
  **NOTE
        9 - ACQUISTIONS**
 
 Software
        Education of America, Inc.
 
 On
        January 13, 2004, DLI entered into an agreement to acquire Software Education
        of
        America, Inc. ("SEA"). The final closing of this transaction occurred on
        July 1,
        2004. In accordance with the agreement, DLI assumed liabilities totaling
        $744,798. In addition, DLI guaranteed the release to the original shareholders
        for collateral provided by the original shareholders for securing a $70,000
        letter of credit used instead of a bond per the requirements of the U.S.
        Department of Education. In addition, the Company granted to the original
        shareholders of SEA warrants to purchase 50,000 shares of common stock at
        $3.00
        per share. These warrants were valued at $10,800 using the Black Scholes
        Pricing
        Model with volatility of 50%, interest rate of 3.71% and estimate life of
        five
        years. These warrants will expire on July 1, 2009. After the approval to
        the
        change-of-control by the Bureau of Private Postsecondary Vocational Education,
        and to secure the funding advanced to SEA, DLI by agreement with SEA assumed
        responsibility for all SEA sales and expenses pending final closing of the
        Agreement after formal approval to the acquisition was forthcoming from ACCSCT.
        This approval was granted on July 1, 2004 and the formal closing was completed
        on the same day. The Company recorded $990,076 of goodwill. Listed below
        is a
        list of the fair value of assets purchased and liabilities assumed and the
        allocation of the excess purchase price to goodwill, which was subsequently
        impaired.
 
 Assets
                  purchased:Cash
              
              $
              4,632Restricted
                  cash
              
              
              70,000Accounts
                  receivable
              
              
              311,958Prepaid
                  expenses
              
              
              739Other
                  current assets
              
              
              15,675Fixed
                  assets
              
              
              54,563Other
                  assets
              
              
              23,770Inventory
              
              
              12,220493,557Less
                  liabilities assumed:Accounts
                  payable and accrued expenses
              
              
              (183,226
              )Notes
                  payable
              
              
              (128,333
              )Accrued
                  compensation
              
              
              (44,969
              )Line
                  of credit
              
              
              (182,500
              )Unearned
                  revenue
              
              
              (205,730
              )(744,798
              )Net
                  liabilities
              
              
              (251,241
              )Advances
                  from DLI
              
              
              (776,214
              )Value
                  of warrants issued
              
              
              (10,800
              )Goodwill
              
              
              1,038,255Less
                  income attributed to DLI prior to acquisition
              
              
              (48,179
              )Net
                  goodwill
              
              $
              990,076
 
 Global
        Computer Systems, Inc.
 
 On
        September 1, 2004, DLI entered into an agreement to acquire Global Computer
        Systems, Inc. (“Global”). The final closing of this transaction occurred on
        November 15, 2004. In accordance with the agreement, DLI assumed liabilities
        totaling $97,528. In addition, the Company granted to the shareholders of
        Global
        100,000 shares of the Company’s common stock valued at $62,000. The Company
        recorded $172,777 of goodwill related to this acquisition. Listed below is
        a
        list of the fair value of assets purchased and liabilities assumed and the
        allocation of the excess purchase price to goodwill, which was subsequently
        impaired.
  F-24
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 Assets
                  purchased:Cash
              
              $
              2,974Accounts
                  receivable
              
              
              173,743Fixed
                  assets
              
              
              66,488243,205Less
                  liabilities assumed:Accounts
                  payable and accrued expenses
              
              
              (6,567
              )Line
                  of credit
              
              
              (90,961
              )(97,528
              )Net
                  assets
              
              
              145,677Advances
                  from DLI
              
              
              (257,325
              )Value
                  of 100,000 common shares issued
              
              
              (62,000
              )Goodwill
              
              
              173,648Less
                  income attributed to DLI prior to acquisition
              
              
              (871
              )Net
                  goodwill
              
              $
              172,777
  **NOTE
        10 - 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. The
        bankruptcy was dismissed by court on January 12, 2006.
 
 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.
 
 Statement
        of operations information for SEA and Global for the years ended December
        31,
        2005 and 2004 are below:
 
 2005
              
              2004Revenue
              
              $
              38,144
              
              $
              581,085Operating
                  expenses
              
              
              495,344
              
              
              2,586,573Interest
                  expense
              
              
              1,322
              
              
              10,055Net
                  loss
              
              
              458,522
              
              
              2,015,543
  F-25
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**
 
 Balance
        Sheet information for SEA and Global as of December 31, 2005 is as
        follows:
 
  December
                  31, 2005Total
                  assets
              
              $
              -Liabilities:Accounts
                  payable
              
              
              227,636Accrued
                  expenses
              
              
              239,281Notes
                  payable
              
              
              162,666Total
                  liabilities
              
              
              629,583Net
                  liabilities of discontinued operations
              
              $
              629,583
 
 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 options and 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, 2005 and 2004 were 1,265,000 and 1,265,000,
        respectively.
  **NOTE
        12 - SUBSEQUENT EVENTS**
 
 On
        March
        30, 2006, the Company issued 200,000 shares of common stock to a consultant
        for
        services rendered value at $36,000.
  F-26
 **Digital
            Learning Management Corporation and Subsidiaries**
 **Notes
            to Consolidated Financial Statements**
 **For
            the Years Ended December 31, 2005 and 2004**