U.S. 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, 2007

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

        For the transition period from ______________ to ______________

                        COMMISSION FILE NUMBER 000-51721
                 _____________________________________________

                               LIBERATOR BDC INC.

                  (FORMERLY BLACK NICKEL ACQUISITION CORP. II)

             (Exact name of registrant as specified in its charter)

                _______________________________________________


                 Delaware                              83-0432182
----------------------------------------        --------------------------
     (State or other jurisdiction of                (I.R.S. Employer
      incorporation or organization)               Identification No.)


              1 Dock Street
               Suite 525
          Stamford, Connecticut                           06902
----------------------------------------        --------------------------
 (Address of principal executive offices)              (zip code)


              Registrant's telephone number, including area code:
                                 (203) 509-3330

                _______________________________________________

         Securities registered under Section 12(b) of the Exchange Act:

                                     None.

         Securities registered under Section 12(g) of the Exchange Act:

                   Common Stock, $0.0001 par value per share
                             ______________________
                                (Title of Class)


<PAGE>

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

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

Check  if there is no disclosure of delinquent filers in response to Item 405 of
Regulation  S-B  ({section}229.405  of  this  chapter)  contained herein, and no
disclosure  will  be  contained,  to  the  best  of registrant's  knowledge,  in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-KSB. [ ]

Check whether the issuer is a shell company (as defined  in  Rule  12b-2  of the
Exchange Act). Yes [X] No [ ].

The Company's revenues for fiscal year end December 31, 2007 were $0.

As of March 28, 2008, there were 3,544,117 shares of common stock outstanding.

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                      NONE



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


<PAGE>

                               Table of Contents


Part I
ITEM 1. Description of Business.............................................1
ITEM 2. Description of Property............................................14
ITEM 3. Legal Proceedings..................................................14
ITEM 4. Submission of Matters to a Vote of Security Holders................14
Part II
ITEM 5. Market for Common Equity, Related Stockholder Matters and Issuer
        Purchases of Equity Securities.....................................14
ITEM 6. Management's Discussion and Analysis or Plan of Operation..........15
ITEM 7. Financial Statements...............................................F-1
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
        Financial Disclosure...............................................16
Part III
ITEM 9.  Directors and Executive Officers of the Registrant................17
ITEM 10. Executive Compensation............................................21
ITEM 11. Security Ownership of Certain Beneficial Owners and Management
         and Related Stockholder Matters...................................21
ITEM 12. Certain Relationships and Related Transactions, and Director
         Independence......................................................22
ITEM 13. Exhibits..........................................................23
ITEM 14. Principal Accountant Fees and Services............................24


<PAGE>

                           FORWARD-LOOKING STATEMENTS

Certain  statements  made  in this Annual Report on Form  10-KSB  are  "forward-
looking statements" (within  the  meaning  of  the Private Securities Litigation
Reform Act of 1995) regarding the plans and objectives  of management for future
operations. Such statements involve known and unknown risks,  uncertainties  and
other  factors  that  may  cause  actual results, performance or achievements of
Liberator BDC, Inc. (the "Company")  to  be materially different from any future
results,  performance or achievements expressed  or  implied  by  such  forward-
looking statements.  The forward-looking statements included herein are based on
current  expectations  that   involve  numerous  risks  and  uncertainties.  The
Company's plans and objectives  are based, in part, on assumptions involving the
continued expansion of business.  Assumptions  relating to the foregoing involve
judgments with respect to, among other things, future  economic, competitive and
market conditions and future business decisions, all of  which  are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes its assumptions underlying  the  forward-
looking statements are reasonable, any of the assumptions could prove inaccurate
and,  therefore,  there  can  be  no  assurance  the  forward-looking statements
included in this Report will prove to be accurate. In light  of  the significant
uncertainties  inherent in the forward-looking statements included  herein,  the
inclusion of such  information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.


                                     PART I

ITEM 1.  DESCRIPTION OF BUSINESS.

INTRODUCTION

      Liberator BDC, Inc. ("we", "us", "our", the "Company" or the "Registrant")
is a domestic closed-end investment company that elected, pursuant to the filing
of a Form N-54A on January  7,  2008  with  the  U.S.  Securities  and  Exchange
Commission  (the  "SEC"),  to  be  regulated  as  a business development company
("BDC").  As defined under the Investment Company Act  of  1940, as amended (the
"1940 Act"), a BDC is a domestic closed-end investment company which is operated
for the purpose of making certain types of investments and which makes available
significant managerial assistance to the companies in which it invests.

      As a BDC, Registrant's investment objective is to seek  attractive returns
by generating current income from its debt investments and capital  appreciation
from  its  equity-related  investments.   Registrant will operate as a specialty
finance company that provides customized financing  to  lower  and middle market
companies within the defense, aerospace and homeland defense industries, as well
as  technology  or biotechnology companies that are producing technologies  that
have a market within  any  of  these  industries,  located throughout the United
States  and,  in  some cases, abroad. Registrant will seek  out  companies  that
create  or  employ  novel   technologies   or   possess   other  competitive  or
technological  advantages.  Although Registrant generally intends  to  focus  on
lower middle market companies, which it defines as those having revenues between
$10 and $100 million, it may also invest in companies which are in a pre-revenue
stage, or companies  that  have  revenues greater than $100 million or less than
$10 million.  Registrant intends to invest primarily in senior subordinated debt
securities of a company secured by  first-  or second-lien security interests on
its  assets,  coupled  with  equity  interests.   Registrant   anticipates   its
investments  in  portfolio  companies  will  normally  range  from  $250,000  to
$2,000,000.   In  certain  situations,  Registrant  may provide larger financing
commitments, either individually or in partnership with other finance providers,
and in certain situations, Registrant may provide small financing commitments.

      Registrant has elected to focus its efforts primarily in the aerospace and
defense industries, which Liberator expects to be two of the largest and fastest
growing  sectors  of  the  U.S.  economy.   These  two  industry   sectors   are
interrelated, with companies selling to both government and commercial users for
both  defense  and  commercial aviation related uses.  Some large private equity
funds have generated excellent investor returns through the acquisition of large
defense and aerospace  companies, including airlines, larger armored vehicle and
artillery manufacturers, aircraft manufacturers, aircraft leasing companies, and
major avionics and airframe  system  manufacturers.  Liberator will focus on the
companies which supply these larger companies  with  sub-assemblies  of aircraft
and  weapons  systems,  or  provide logistics support and other services.  These
companies are generally too small  in  terms  of  revenue or acquisition size to


                                       1
<PAGE>

gain the attention of the larger equity funds, but  need  access to the types of
investments  that Liberator can make - senior and mezzanine  debt  and  minority
equity stakes  -  to  allow  them  to  grow  and  gain  market  share, bring new
technologies  to  the  market,  add  capacity to their networks and systems  and
become an attractive buyout candidate or add-on acquisition for larger aerospace
and defense companies. Liberator's focus  will  be  a  24-36 month exit from its
portfolio  companies.   Registrant  will  leverage  the unique  and  high  level
contacts  of its Directors and the Executive Officer to  identify  companies  in
need of debt and equity capital to execute their business plans.

      As a  BDC,  Liberator  will  offer managerial assistance to certain of its
portfolio  companies.   This assistance  will  typically  involve,  among  other
things, monitoring the operations  of  the portfolio companies, participating in
board  and  management  meetings,  consulting  with  and  advising  officers  of
portfolio companies and providing other  organizational  and financial guidance.
In addition, Liberator can identify and recruit high-quality  board  members and
management to its portfolio companies as part of the investment process.   Based
on  the  Directors' and the Executive Officer's combined experience, the Company
believes it  can  offer  this  assistance  effectively.  Liberator may offer its
managerial  assistance  in exchange for a fee  rather  than  making  an  initial
investment in certain companies.  This fee may include securities of the company
employing the expertise and  business relationships of the Executive Officer and
the Board.

      The Registrant was incorporated  in  the State of Delaware on May 26, 2005
and maintains its principal executive offices  at  1  Dock  Street,  Suite  525,
Stamford,  Connecticut,  06902. Formerly known as Black Nickel Acquisition Corp.
II, the Company filed a registration  statement  on  Form  10-SB with the SEC on
January  12,  2006.   Black  Nickel  was  initially  organized as a  vehicle  to
investigate and, if such investigation warrants, acquire  a  target  company  or
business  seeking the perceived advantages of being a publicly held corporation.
Consequently,  Black  Nickel  was a "blank check" company. The SEC defines blank
check companies as "any development stage company that is issuing a penny stock,
within the meaning of Section 3  (a)(51) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and  that  has  no  specific  business  plan or
purpose,  or  has  indicated  that  its  business  plan  is  to  merge  with  an
unidentified company or companies."

      On  November  28, 2007, Black Nickel purchased 100 shares of common stock,
par value $.0001 per  share  of  Liberator BDC Inc. ("Liberator") for a purchase
price equal to $1.00. As a result, Liberator became a wholly-owned subsidiary of
Black Nickel. On November 29, 2007,  the  Board  of  Directors  of  Black Nickel
approved and authorized the filing of a Certificate of Ownership with  the State
of Delaware, pursuant to which Liberator merged with and into Black Nickel, with
Black  Nickel  as  the  surviving  corporation of the merger (the "Merger").  In
connection with the Merger, Black Nickel  adopted  Liberator's corporate name as
its  own.  Black Nickel filed the Certificate of Ownership  with  the  State  of
Delaware on  December  4,  2007. Effective on that date, Black Nickel's name was
changed to Liberator BDC Inc.

      Registrant has been and  remains  a  "shell company."  A shell company, as
defined in Rule 12b-2 under the Exchange Act,  is  a  company with no or nominal
assets (other than cash) and no or nominal operations.   Registrant has been and
remains engaged in organizational efforts and obtaining initial financing.

COMPETITION

      After   completing  our  organizational  efforts  and  obtaining   initial
financing, we will  compete for investments with a number of BDCs and investment
funds  (including  private  equity  funds  and  mezzanine  funds),  as  well  as
traditional financial  services  companies  such  as  commercial banks and other
sources  of  financing.   Many  of  these  entities have greater  financial  and
managerial resources than we do and likely will.   We  believe  we  will compete
with  these  entities primarily on the basis of our willingness to make  smaller
investments, the  experience  and contacts of our management, our responsive and
efficient investment analysis and  decision-making  processes, our comprehensive
suite of customized financing solutions and the investment  terms  we  offer. We
believe  that  some of our competitors make senior secured loans, junior secured
loans and subordinated  debt investments with interest rates that are comparable
to or lower than the rates we will offer.  Therefore, we may not seek to compete
primarily on the interest  rates  we offer to potential portfolio companies. Our
competitors also do not always require equity components in their investments.

                                       2
<PAGE>

EMPLOYEES

      On December 4, 2007, Mr. Paul  T.  Mannion,  Jr.  and  Mr.  Andrew Reckles
voluntarily   resigned   from   their  positions  as  President  and  Secretary,
respectively. These resignations  did  not  involve  any  disagreement  with the
Company  on  any  matter  relating  to  the  Company's  operations,  policies or
practices.

      Edward  J.  Wegel  is  currently  our  only  employee  and serves as Chief
Executive Officer and Chief Compliance Officer.

RISK FACTORS

      An  investment  in  our  securities is highly speculative and  subject  to
numerous and substantial risks.  These  risks  include those set forth below and
elsewhere  in this Form 10-KSB. Readers are encouraged  to  review  these  risks
carefully before making any investment decision.

     This  report  on  Form  10-KSB  contains  forward-looking   statements  and
     ---------------------------------------------------------------------------
     information relating to us, our industry and to other businesses.
     -----------------------------------------------------------------

      These   forward-looking  statements  are  based  on  the  beliefs  of  our
management, as  well  as assumptions made by and information currently available
to our management. When  used  in  this  annual  report,  the  words "estimate,"
"project,"  "believe," "anticipate," "intend," "expect" and similar  expressions
are intended  to  identify  forward-looking statements. These statements reflect
our current views with respect  to  future  events  and are subject to risks and
uncertainties that may cause our actual results to differ  materially from those
contemplated  in  our forward-looking statements. We caution you  not  to  place
undue reliance on these  forward-looking  statements, which speak only as of the
date  of  this annual report. We do not undertake  any  obligation  to  publicly
release any  revisions  to these forward-looking statements to reflect events or
circumstances after the date  of this annual report or to reflect the occurrence
of unanticipated events.

RISKS RELATING TO THE COMPANY'S BUSINESS AND STRUCTURE

     The Company's  financial condition and results of operations will depend on
     ---------------------------------------------------------------------------
     its ability to raise, manage, and deploy capital effectively.
     -------------------------------------------------------------

      The Company's ability to  achieve  its investment objective will depend on
its ability to raise, manage, and deploy capital effectively, which will depend,
in turn, on the executive officer's ability  to  identify, evaluate and monitor,
and  the Company's ability to finance and invest in,  companies  that  meet  its
investment criteria.

      Accomplishing  this  result  on  a  cost-effective basis will be largely a
function of the executive officer's handling  of  the  investment  process,  his
ability to provide competent, attentive and efficient services, and on access to
investments offering acceptable terms. In addition to monitoring the performance
of  the  Company's investments, the executive officer of the Company may also be
called  upon  to  provide  managerial  assistance  to  the  Company's  portfolio
companies.  These  demands  on  the executive officer's time may distract him or
slow the rate of investment.

      Even if the Company is able  to  begin operations, grow and build upon its
investment operations in a manner commensurate with the capital available to it,
any failure to manage the Company's growth  effectively  could  have  a material
adverse  effect on its business, financial condition, results of operations  and
prospects.  The results of the Company's operations will depend on many factors,
including the  availability  of opportunities for investment, readily accessible
short and long-term funding alternatives  in  the financial markets and economic
conditions.  Furthermore,  if  the  board of directors  (the  "Board")  and  the
executive  officer  cannot  successfully   operate  the  Company's  business  or
implement the Company's investment policies  and strategies, it could negatively
impact the Company's ability to pay dividends  (if  any)  and cause investors to
lose all or part of their investment.

                                       3
<PAGE>

      There may be uncertainty as to the value of the Company's investments.
      ----------------------------------------------------------------------

      Under  the 1940 Act, the Company will be required to carry  its  portfolio
investments at  market  value or, if there is no readily available market value,
at fair value as determined  by  the  Board.   Typically  there  is not a public
market for the securities of the privately-held companies in which  the  Company
will invest.  As a result, the Company will value these securities quarterly  at
fair  value  as  determined  in  good faith by the Board based on input from the
executive officer and, potentially, a third-party independent valuation firm.

      The  Board  may,  but is not required  to,  utilize  the  services  of  an
independent valuation firm  to  assist  in  determining  the  fair  value of any
securities.  Certain  factors  that may be considered in fair value pricing  the
Company's investments include the nature and realizable value of any collateral,
the portfolio company's earnings  and  its  ability  to  make  payments  on  its
indebtedness,  the  markets  in  which  the  portfolio  company  does  business,
comparison  to  comparable  publicly-traded companies, discounted cash flow  and
other relevant factors. Because  such valuations, and particularly valuations of
private  securities  and  private  companies,   are  inherently  uncertain,  may
fluctuate over short periods of time and may be based  on estimates, the Board's
determinations of fair value may differ materially from  the  values  that would
have  been  used  if  a ready market for these securities existed.  Due to  this
uncertainty, the Board's  fair  value  determination may cause the Company's net
asset value on a given date to materially understate or overstate the value that
it may ultimately realize upon one or more  of  its  investments.   As a result,
investors purchasing the shares based on an overstated net asset value would pay
a  higher  price  than  the  value  of  the Company's investments might warrant.
Conversely, investors selling shares during  a  period  in  which  the net asset
value  understates the value of the Company's investments will receive  a  lower
price for their shares than the value its investment portfolio might warrant.

      The Company will operate in a highly competitive market for investment
      ----------------------------------------------------------------------
      opportunities.
      --------------

      The  Company  will  compete  for  investments  with  other  BDCs and other
investment funds (including private equity funds and mezzanine funds),  as  well
as  traditional  financial services companies such as commercial banks and other
sources of funding.  Many  of the Company's competitors are substantially larger
and have considerably greater  financial, technical and marketing resources than
the Company does. For example, some  competitors  may have a lower cost of funds
and  access  to  funding  sources  that are not available  to  the  Company.  In
addition, some of the Company's competitors  may  have higher risk tolerances or
different  risk  assessments. These characteristics could  allow  the  Company's
competitors  to  consider   a  wider  variety  of  investments,  establish  more
relationships and offer better  pricing  and  more flexible structuring than it.
The  Company  may  lose  investment  opportunities if  it  does  not  match  its
competitors' pricing, terms and structure. If the Company is forced to match its
competitors' pricing, terms and structure,  the  Company  may  not  be  able  to
achieve  acceptable  returns  on its investments or may bear substantial risk of
capital loss.   A significant increase  in  the  number  and/or  the size of the
Company's  competitors  in  our  target  market  and industries could force  the
Company to accept less attractive investment terms.

      Furthermore,  many of the Company's competitors  have  greater  experience
operating under, or are  not  subject  to,  the regulatory restrictions that the
1940 Act will impose on the Company as a BDC.

      The Company cannot assure investors that  the  competitive  pressures  its
faces  will  not  have  a  material  adverse  effect  on its business, financial
condition and results of operations. Also, as a result  of this competition, the
Company may not be able to take advantage of attractive investment opportunities
from time to time, and the Company cannot assure investors that it will continue
to  be  able  to  identify  and  make investments that are consistent  with  its
investment objective.

       Reliance on management.
       -----------------------

      All decisions regarding the  management and affairs of the Company will be
made exclusively by the executive officer  subject to the approval of the Board.
There  is  no assurance that the executive officer  or  Board  members  will  be
effective in executing the Company's investment objectives.

                                       4
<PAGE>

       The  Company is  dependent  upon  certain  key  personnel  for its future
       -------------------------------------------------------------------------
       success.
       --------

      The Company  depends  on  the  Board  and  the  executive  officer for the
identification,  final  selection,  structuring, closing and monitoring  of  the
Company's investments. These executives  have  critical  industry experience and
relationships that the Company relies upon to implement its  business  plan.  If
the  Company  lost  the  services  of  these  individuals, it may not be able to
operate its business as expected, and the Company's  ability to compete could be
harmed, causing its operating results to suffer.

      Additionally,  future increases in available capital  for  investment  may
require that the Company  hire  new  investment and/or administrative personnel.
The Company believes its future success  will  depend, in part, on the executive
officer's ability to identify, attract and retain  sufficient  numbers of highly
skilled  employees.  If  the executive officer does not succeed in  identifying,
attracting and retaining these personnel, the Company may not be able to operate
its business as expected.

     The Company's  business  model depends to a significant  extent upon strong
     ---------------------------------------------------------------------------
     referral  relationships,  and its  inability  to maintain or develop  these
     ---------------------------------------------------------------------------
     relationships,  as well as the failure of these  relationships  to generate
     ---------------------------------------------------------------------------
     investment  opportunities,  could adversely affect the Company's  business.
     ---------------------------------------------------------------------------

      The Company expects  that  members  of its Board and the executive officer
will   maintain   their   relationships   with  industry   contacts,   financial
institutions, private equity and other non-bank  investors,  investment bankers,
attorneys,  accountants  and consultants, and will rely to a significant  extent
upon  these relationships to  provide  the  Company  with  potential  investment
opportunities.  If  the  Board  or  the executive officer fail to maintain their
existing  relationships or develop new  relationships  with  other  sponsors  or
sources of  investment  opportunities,  the Company will not be able to grow its
investment portfolio. In addition, individuals with whom the Company's Board and
executive officer have relationships are  not  obligated  to provide the Company
with investment opportunities, and, therefore, there is no  assurance  that such
relationships will generate investment opportunities for the Company.

      The Company has no operating  history as, and the executive officer has no
      --------------------------------------------------------------------------
      experience  operating,  a BDC,  which may  impair a  potential  investor's
      --------------------------------------------------------------------------
      ability to assess the Company's prospects.
      ------------------------------------------

      Liberator (formerly Black Nickel Acquisition Corp. II) was formed  in 2005
as  a vehicle to pursue a business combination.  On January 7, 2008, the Company
elected  to  be  regulated  as  a BDC.  The Company has not operated as, and the
executive officer has no experience  operating,  a  BDC under the 1940 Act. As a
result, the Company has no operating results under the  BDC regulatory framework
that  can  demonstrate  either  its  effect  on  the Company's business  or  the
executive  officers'  ability  to manage the Company's  investments  under  this
framework.  If the Board or the  executive  officer fails to operate the Company
so as to maintain its status as a BDC, the Company's  operating flexibility will
be significantly reduced.

      Because the Company may borrow  money,  the  potential for gain or loss on
      --------------------------------------------------------------------------
      amounts  invested in Liberator  may be magnified and may increase the risk
      --------------------------------------------------------------------------
      of any investment in the Company's securities.
      ----------------------------------------------

      Borrowings, also known as leverage, magnify the potential for gain or loss
on  amounts  invested  and,  therefore,  increases  the  risks  associated  with
investing  in us.  The Company may borrow from banks and other  lenders  in  the
future, to the  extent permitted by applicable law and regulation.  If the value
of the Company's  assets  increases,  then  leveraging would cause the net asset
value attributable to its common stock to increase  more  sharply  than it would
have  had  it  not leveraged.  Conversely, if the value of the Company's  assets
decreases, leveraging  would  cause net asset value to decline more sharply than
it otherwise would have had it  not  leveraged.  Similarly,  any increase in the
Company's income in excess of interest payable on the borrowed funds would cause
its  net income to increase more than it would without the leverage,  while  any
decrease  in the Company's income would cause net income to decline more sharply
than it would  have  had it not borrowed. Such a decline could negatively affect
the Company's ability  to  make  common  stock dividend payments, if the Company
elects to make such payments in the future.  Leverage  is generally considered a
speculative investment technique.

                                       5
<PAGE>

      The  Company  may  experience   fluctuations  in  its  quarterly  results.
      --------------------------------------------------------------------------

      The  Company  could  experience  fluctuations  in our quarterly  operating
results due to a number of factors, including its ability  or  inability to make
investments  in  portfolio  companies  that  meet  its investment criteria,  the
interest  rate  payable on the debt securities it acquires,  the  level  of  the
Company's expenses,  variations in and the timing of the recognition of realized
and unrealized gains or  losses,  the  degree  to  which  the Company encounters
competition   in  its  markets  and  target  industries  and  general   economic
conditions. As  a  result of these factors, results for any period should not be
relied upon as being indicative of performance in future periods.

      The  Company  does  not   currently   intend  to  pay  dividends  or  make
      --------------------------------------------------------------------------
      distributions.
      --------------

      The  Company  does   not   initially  intend  to  pay  dividends  or  make
distributions with respect to shares,  but intends to reinvest substantially all
of its income and gain.

      Lack of liquidity.
      ------------------

      There is no public or other market for the Company's shares.  As a result,
the Company's shares would not be suitable  for an investor who needs liquidity.
In the future, the Company anticipates that its  shares  will trade on the over-
the-counter bulletin board or become listed on the Pink Sheets, but there can be
no  assurance  that such trading or listing will occur.  In  the  event  that  a
market for the Company's  shares  is available in the future, that market may be
very limited, and the Company can give  no assurances that an active market will
ever  develop.   The lack of an active trading  market  could  adversely  affect
shareholders' ability  to  sell the Company's shares, make it more difficult for
shareholders to find buyers  for the Company's shares and have a negative affect
on the price shareholders could receive pursuant to a sale.

      If a market were to develop,  shares  of  closed-end investment companies,
including BDCs, often trade at a discount from net  asset  value per share.  The
Company cannot predict whether shares would trade at, above  or  below Net Asset
Value per share.

      The Company is currently subject to an entity level tax as a corporation.
      -------------------------------------------------------------------------

      The  corporation  is  currently  subject  to  entity-level taxation  as  a
corporation under Subchapter C of the Internal Revenue  Code of 1986, as amended
(the  "Code").   Any  tax  paid  by  the  Company will reduce amounts  that  are
available  for  investment and reinvestment in  portfolio  companies,  lessening
returns to investors.

      The Company may elect to be taxed as a RIC in the future.
      ---------------------------------------------------------

      In the future, the Company may elect to be taxed as a regulated investment
company ("RIC") under  Subchapter  M  of  the  Code.  RIC status would allow the
Company  to  avoid  being  subject  to the normal entity-level  tax  applied  to
corporations if the Company meets certain  distribution, income source and asset
diversification requirements.   However, following its conversion to RIC status,
the Company may be required to pay corporate-level  income  tax  on any built-in
gain  in  its  assets at the time of the conversion.  Although RIC status  would
permit  the Company  to  avoid  entity-level  taxation,  attempts  to  meet  the
requirements  of  RIC  status  could  significantly  affect the operation of the
Company.  There is no guarantee that the Company will ever be able to qualify as
a RIC.

      The Company's  ability to enter into transactions with its affiliates will
      --------------------------------------------------------------------------
      be restricted.
      --------------

      Except in those instances where we have received  prior  exemptive  relief
from  the  SEC, the Company will be prohibited under the 1940 Act from knowingly
participating  in  certain  transactions  with  its affiliates without the prior
approval  of  its  independent  directors. Any person  that  owns,  directly  or
indirectly, 5% or more of the Company's outstanding voting securities will be an
affiliate  for purposes of the 1940  Act  and  the  Company  will  generally  be
prohibited from buying or selling any security from or to such affiliate, absent
the prior approval  of  the  independent  directors. The 1940 Act also prohibits
"joint" transactions with an affiliate, which  could  include investments in the
same portfolio company (whether at the same or different  times),  without prior
approval of the independent directors. If a person acquires more than 25% of the
Company's  voting  securities,  the  Company  will be prohibited from buying  or


                                       6
<PAGE>

selling any security from or to such person, or entering into joint transactions
with such person, absent the prior approval of the SEC. These restrictions could
limit or prohibit the Company from making certain attractive investments that it
might otherwise make absent such restrictions.

      Proceeds  from any  offering and from  investments  may be used to pay off
      --------------------------------------------------------------------------
      loans of significant shareholders.
      ----------------------------------

      Prior to this offering, Messrs. Andrew S.  Reckles,  Paul T. Mannion, Jr.,
Robert Prag, all significant shareholders of the Company, each loaned $23,500 to
the  Company.   The Company received aggregate proceeds equal  to  $70,500  from
these loans.  The  Company  issued promissory notes (each a "Note" and together,
the "Notes") to Messrs. Reckles,  Mannion,  and  Prag,  pursuant  to  which  the
principal  amounts  will  accrue  interest  at  an annual rate of 8.25%, and the
principal and all accrued interest will be due and  payable  on  or  before  the
earlier  of  (i)  the first anniversary of the date of the Note or (ii) the date
that the Company (or  a  wholly  owned  subsidiary  of the Company) completes an
offering  of  securities  for  gross  proceeds  exceeding  two  million  dollars
($2,000,000).   Based upon these terms, the proceeds from any  offering  or  the
proceeds from Company investments may be used to pay off these Notes.

      The Board may change  the  Company's  operating  policies  and  strategies
      --------------------------------------------------------------------------
      without prior notice or stockholder approval,  the effects of which may be
      --------------------------------------------------------------------------
      adverse.
      --------

      The Board has  the  authority  to  modify  or  waive our current operating
policies and strategies without prior notice and without  shareholder  approval.
The  Company  cannot  predict  the  effect  any changes to its current operating
policies and strategies would have on its business,  operating results and value
of  the  Company's shares. However, the effects might be  adverse,  which  could
negatively  affect the Company's value of the shares and cause investors to lose
all or part of their investments.

      Changes in laws or  regulations  governing  the Company's  operations  may
      --------------------------------------------------------------------------
      adversely  affect its  business or cause the Company to alter its business
      --------------------------------------------------------------------------
      strategy.
      ---------

      The Company  and  its portfolio companies will be subject to regulation at
the local, state and federal  level.  New  legislation  may  be  enacted  or new
interpretations,  rulings  or  regulations  could  be  adopted,  including those
governing  the  types  of investments the Company is permitted to make,  any  of
which could harm the Company  and its shareholders, potentially with retroactive
effect.

      Additionally, any changes  to  the  laws  and  regulations  governing  the
Company's  operations relating to permitted investments may cause the Company to
alter its investment  strategy  in  order  to  avail  itself of new or different
opportunities.  Such  changes  could  result  in  material  differences  to  the
strategies  and plans of the Company and may result in the Company's  investment
focus shifting  from  the  areas  of  expertise of the executive officer and the
Board to other types of investments in which the executive officer and the Board
may have less expertise or little or no  experience.  Thus, any such changes, if
they occur, could have a material adverse effect on our  results  of  operations
and the value of your investment.

      Efforts to comply with the  Sarbanes-Oxley  Act will  involve  significant
      --------------------------------------------------------------------------
      expenditures, and non-compliance with the Sarbanes-Oxley Act may adversely
      --------------------------------------------------------------------------
      affect us.
      ----------

      As  a reporting company under the Securities and Exchange Act of 1934,  as
amended ("Exchange  Act"), the Company will be subject to the Sarbanes-Oxley Act
of 2002, and the related  rules  and  regulations promulgated by the SEC.  Under
current SEC rules, the Company's directors  will  be  required  to report on the
Company's internal controls over financial reporting pursuant to  Section 404 of
the Sarbanes-Oxley Act of 2002 and rules and regulations of the SEC  thereunder.
The Company will be required to review on an annual basis its internal  controls
over  financial  reporting, and on a quarterly and annual basis to evaluate  and
disclose changes in its internal controls over financial reporting. As a result,
the Company expects  to  incur significant additional expenses in the near term,
which may negatively impact  the Company's financial performance and its ability
to make distributions in the future,  should  it  choose to do so.  This process
also will result in a diversion of the directors' and  the  executive  officer's
time  and  attention.   The  Company  cannot  be  certain  as  to  the timing of
completion of its evaluation, testing and remediation actions or the  impact  of
the  same  on  the  Company's  operations and may not be able to ensure that the
process is effective or that the internal controls are or will be effective in a
timely manner.  There can be no  assurance  that  the  Company will successfully

                                       7
<PAGE>

identify and resolve all issues required to be disclosed  or  that its quarterly
reviews will not identify additional material weaknesses. In the  event that the
Company is unable to maintain or achieve compliance with the Sarbanes-Oxley  Act
and related rules, it may be adversely affected.

      Limitations  on  the  directors'  liability  and  indemnification  of  the
      --------------------------------------------------------------------------
      directors and the executive officer.
      ------------------------------------

      The Company's Articles of Incorporation provide that the directors and the
executive  officer  will  have  limited  liability  to  the  Company and will be
entitled to indemnification under certain circumstances.  Neither  the directors
nor the executive officer, nor any of the Company's employees or agents  will be
indemnified,  however,  for conduct constituting willful misfeasance, bad faith,
gross negligence or reckless disregard of such person's duties to the Company.

RISKS RELATED TO THE COMPANY'S INVESTMENTS

      The Company's  investments  in portfolio  companies  may be risky,  and it
      --------------------------------------------------------------------------
      could lose all or part of its investment.
      -----------------------------------------

      Investing  in  lower   middle   market  companies  involves  a  number  of
significant risks. Among other things, these companies:

      o     may have limited financial resources and may be unable to meet their
            obligations under their debt  instruments that we hold, which may be
            accompanied by a deterioration  in the value of any collateral and a
            reduction  in the likelihood of us  realizing  any  guarantees  from
            subsidiaries  or  affiliates  of our portfolio companies that we may
            have obtained in connection with our investment;

      o     may  have  shorter  operating  histories,  narrower  product  lines,
            smaller  market  shares  and/or significant  customer  concentration
            relative  to larger businesses,  which  tend  to  render  them  more
            vulnerable to competitors' actions and market conditions, as well as
            general economic downturns;

      o     are more likely to depend on the management talents and efforts of a
            small  group   of   persons;   therefore,   the  death,  disability,
            resignation  or termination of one or more of  these  persons  could
            have a material  adverse impact on a portfolio company and, in turn,
            on the Company;

      o     generally have less  predictable operating results, may from time to
            time be parties to litigation,  may  be  engaged in rapidly changing
            businesses   with  products  subject  to  a  substantial   risk   of
            obsolescence,  and  may  require  substantial  additional capital to
            support  their  operations,  finance  expansion  or  maintain  their
            competitive position; and

      o     generally  have  less  publicly  available  information about  their
            businesses, operations and financial condition.   If  the  executive
            officer  is  unable to uncover all material information about  these
            companies, the  officers  may  not  make a fully informed investment
            decision, and may lose all or part of the Company's investment.

      In addition, in the course of providing significant  managerial assistance
to  certain  of  the  Company's  portfolio companies, certain of  the  Company's
directors or the executive officer  may serve as directors on the boards of such
companies. To the extent that litigation arises out of the Company's investments
in these companies, such persons may  be named as defendants in such litigation,
which  could  result  in  an  expenditure  of   funds   (through  the  Company's
indemnification of such officers and directors) and the diversion  of management
time and resources.

      The lack of liquidity in the Company's  investments  may adversely  affect
      --------------------------------------------------------------------------
      its business.
      -------------

      The  Company  will  invest in companies whose securities are not  publicly
traded, and whose securities  will be subject to legal and other restrictions on
resale or will otherwise be less  liquid  than  publicly-traded  securities. The
illiquidity of these investments may make it difficult for the Company  to  sell
these  investments  when  desired.  In  addition,  if the Company is required to
liquidate  all  or  a  portion  of  our  portfolio  quickly,   it   may  realize
significantly  less  than  the  value at which it had previously recorded  these


                                       8
<PAGE>

investments. As a result, the Company  does  not  expect to achieve liquidity in
its investments in the near-term. The Company's investments  are usually subject
to contractual or legal restrictions on resale or are otherwise illiquid because
there  is  usually  no  established  trading  market  for such investments.  The
illiquidity of most of the Company's investments may make it difficult for it to
dispose of them at a favorable price, and, as a result,  the  Company may suffer
losses.

      The Company's portfolio will not be diversified.
      ------------------------------------------------

      At any given time, and particularly in the early stages of  the  Company's
operation, the Company's holdings will likely be concentrated in a small  number
of  portfolio  companies.   In  addition,  the Company's holdings will likely be
concentrated in a small number of industry sectors.   As a result, a decrease in
the  value  of one position would have a significant negative  effect  upon  the
Company's returns  and  the value of shares.   Also, because the Company focuses
on a small segment of lower  middle  market  companies,  the Company's portfolio
holdings may be highly correlated.  Therefore, the portfolio  companies are more
likely  to be simultaneously and similarly affected by market conditions,  which
could cause a significant loss to the Company in the event of a downturn.

      The Company may not have the funds to make  additional  investments in its
      --------------------------------------------------------------------------
      portfolio companies.
      --------------------

      The  Company  may not have the funds to make additional investments in its
portfolio companies.   After  the  Company's  initial  investment in a portfolio
company, it may be called upon from time to time to provide  additional funds to
such  company  or  have the opportunity to increase its investment  through  the
exercise of a warrant  to  purchase common stock. There is no assurance that the
Company will make, or will have sufficient funds to make, follow-on investments.
Any  decisions not to make a  follow-on  investment  or  any  inability  on  the
Company's  part  to  make  such  an  investment  may have a negative affect on a
portfolio  company  in  need  of  such an investment, may  result  in  a  missed
opportunity  for  the Company to increase  its  participation  in  a  successful
operation or may reduce the expected yield on the investment.

      The Company's  portfolio companies may incur debt that ranks equally with,
      --------------------------------------------------------------------------
      or senior to, the Company's investment.
      ---------------------------------------

      The Company will  invest  primarily in senior subordinated debt as well as
equity  issued  by  lower  middle  market  companies.  The  Company's  portfolio
companies may have, or may be permitted  to incur, other debt that ranks equally
with, or senior to, the debt in which the Company invests.  By their terms, such
debt  instruments may entitle the holders to  receive  payment  of  interest  or
principal  on  or  before  the dates on which the Company is entitled to receive
payments with respect to the  debt instruments in which it invests. Also, in the
event of insolvency, liquidation, dissolution, reorganization or bankruptcy of a
portfolio company, holders of debt  instruments ranking senior to our investment
in that portfolio company would typically be entitled to receive payment in full
before  the  Company  receives  any distribution.  After  repaying  such  senior
creditors, such portfolio company  may  not have any remaining assets to use for
repaying its obligation to the Company. In the case of debt ranking equally with
debt instruments in which the Company invests,  the  Company would have to share
on an equal basis any distributions with other creditors  holding  such  debt in
the   event  of  an  insolvency,  liquidation,  dissolution,  reorganization  or
bankruptcy of the relevant portfolio company.

      Risks Associated with Bankruptcy Cases.
      ---------------------------------------

      The  Company's  investment  and lending activities, particularly involving
companies in distressed situations,  may  result  in  it  becoming involved as a
creditor in bankruptcy cases. In addition, the Company may  purchase  securities
or assets of, or claims against, companies in bankruptcy.

      Many  of  the  events  within  a bankruptcy case are adversarial and often
beyond the control of the creditors. While  creditors  generally are afforded an
opportunity to object to significant actions, there can  be  no assurance that a
bankruptcy  court  would  not  approve  actions  which  may be contrary  to  the
interests of the Company.

      Generally,  the  duration  of  a  bankruptcy  case  can  only  be  roughly
estimated. The reorganization of a company usually involves the  development and
negotiation  of  a  plan  of  reorganization,  plan  approval  by creditors  and

                                       9
<PAGE>

confirmation  by  the  bankruptcy  court.  This  process can involve substantial
legal, professional and administrative costs to the  company.   The  process  is
subject  to  unpredictable  and  lengthy  delays,  and  during  the  process the
company's  competitive  position  may  erode, key management may depart and  the
company may not be able to reorganize and may be required to liquidate assets.

      The debt of companies in financial  reorganization  will in most cases not
pay current interest, may not accrue interest during the reorganization  and may
be  adversely  affected  by  an erosion of the issuer's fundamental values. Such
investments can result in a total loss of principal.

      Bankruptcy  by a portfolio  company is likely to cause a total loss of the
Company's  investment or result in the Company receiving back only a fraction of
the principal invested.

      There may be circumstances  where the Company's debt investments  could be
      --------------------------------------------------------------------------
      subordinated  to claims of other creditors or the Company could be subject
      --------------------------------------------------------------------------
      to lender liability claims.
      ---------------------------

      Even though the Company  may have structured certain of its investments as
senior loans, if one of its portfolio  companies  were to go bankrupt, depending
on  the  facts  and circumstances, including the extent  to  which  the  Company
actually provided  managerial assistance to that portfolio company, a bankruptcy
court might recharacterize  the Company's debt investment and subordinate all or
a portion of its claim to that  of  other  creditors.  The  Company  may also be
subject  to  lender liability claims for actions taken by it with respect  to  a
borrower's business  or  instances  where the Company exercises control over the
borrower. It is possible that the Company  could  become  subject  to a lender's
liability claim, including as a result of actions taken in rendering significant
managerial assistance.

      Second priority liens on collateral  securing loans that the Company makes
      --------------------------------------------------------------------------
      to its portfolio  companies may be subject to control by senior  creditors
      --------------------------------------------------------------------------
      with  first  priority  liens.  If there  is a  default,  the  value of the
      --------------------------------------------------------------------------
      collateral  may not be sufficient to repay in full both the first priority
      --------------------------------------------------------------------------
      creditors and the Company.
      --------------------------

      Certain  loans  that the Company may make to portfolio companies  will  be
secured on a second priority  basis  by  the  same  collateral  securing  senior
secured debt of such companies. The first priority liens on the collateral  will
secure the portfolio company's obligations under any outstanding senior debt and
may secure certain other future debt that may be permitted to be incurred by the
portfolio  company  under  the  agreements  governing  the loans. The holders of
obligations  secured  by  the  first  priority liens on the collateral  will  be
entitled to receive proceeds from any realization  of  the  collateral  to repay
their  obligations  in  full  before  the Company. In addition, the value of the
collateral  in the event of liquidation  will  depend  on  market  and  economic
conditions, the  availability  of  buyers  and  other  factors.  There can be no
assurance  that  the  proceeds,  if  any, from the sale or sales of all  of  the
collateral would be sufficient to satisfy  the  loan  obligations secured by the
second priority liens after payment in full of all obligations  secured  by  the
first  priority  liens on the collateral. If such proceeds are not sufficient to
repay amounts outstanding  under  the  loan  obligations  secured  by the second
priority liens, then the Company, to the extent not repaid from the  proceeds of
the  sale  of  the  collateral,  will  only have an unsecured claim against  the
portfolio company's remaining assets, if any.

      The rights the Company may have with  respect  to  the collateral securing
the loans it makes to portfolio companies with senior debt  outstanding may also
be  limited pursuant to the terms of one or more intercreditor  agreements  that
the Company  enters  into  with  the  holders  of  senior  debt.  Under  such an
intercreditor  agreement, at any time that obligations that have the benefit  of
the first priority  liens are outstanding, any of the following actions that may
be taken in respect of the collateral will be at the direction of the holders of
the obligations secured  by  the  first priority liens: the ability to cause the
commencement of enforcement proceedings  against  the collateral; the ability to
control  the  conduct  of  such  proceedings;  the  approval  of  amendments  to
collateral documents; releases of liens on the collateral;  and  waivers of past
defaults  under  collateral documents. The Company may not have the  ability  to
control or direct such actions, even if its rights are adversely affected.

                                       10
<PAGE>

      The Company generally will not control its portfolio companies.
      ---------------------------------------------------------------

      The Company  does  not  expect to control many of its portfolio companies,
even though it may have board representation  or  board  observation  rights and
will offer to provide significant managerial assistance, and the Company's  debt
agreements  may  contain certain restrictive covenants. As a result, the Company
is subject to the  risk  that  a  portfolio company in which it invests may make
business decisions with which it disagrees  and  the management of such company,
as representatives of the holders of their common  equity,  may  take  risks  or
otherwise  act  in  ways  that  do  not  serve the Company's interests as a debt
investor.  Due  to  the  lack of liquidity for  our  investments  in  non-traded
companies, the Company may  not  be  able  to  dispose  of  its interests in its
portfolio companies as readily as it would like or at an appropriate  valuation.
As  a  result,  a  portfolio company may make decisions that could decrease  the
value of the Company's portfolio holdings.

      Economic  recessions  or downturns  could impair the  Company's  portfolio
      --------------------------------------------------------------------------
      companies and harm its operating results.
      -----------------------------------------

      Many of the Company's  portfolio  companies may be susceptible to economic
slowdowns or recessions and may be unable  to  repay our debt investments during
these  periods. Therefore, the Company's non-performing  assets  are  likely  to
increase,  and  the  value  of  our portfolio is likely to decrease during these
periods. Adverse economic conditions  also  may decrease the value of collateral
securing some of the Company's debt investments  and  the  value  of  its equity
investments. Economic slowdowns or recessions could lead to financial losses  in
the  Company's  portfolio  and  a  decrease  in revenues, net income and assets.
Unfavorable economic conditions also could increase the Company's funding costs,
limit its access to the capital markets or result  in  a decision by lenders not
to  extend credit to the Company. These events could prevent  the  Company  from
increasing investments and harm its operating results.

      Defaults by the  Company's  portfolio  companies  will harm our  operating
      --------------------------------------------------------------------------
      results.
      --------

      A  portfolio company's failure to satisfy financial or operating covenants
imposed by the Company or other lenders could lead to defaults and, potentially,
termination  of  its  loans  and  foreclosure on its secured assets, which could
trigger  cross-defaults  under  other  agreements  and  jeopardize  a  portfolio
company's ability to meet its obligations  under  the  debt or equity securities
that the Company holds. The Company may incur expenses to  the  extent necessary
to seek recovery upon default or to negotiate new terms, which may  include  the
waiver of certain financial covenants, with a defaulting portfolio company.

      Many of the customers of the Company's portfolio  companies' products have
      --------------------------------------------------------------------------
      fluctuating  budgets  which  may  cause  substantial  fluctuations  in the
      --------------------------------------------------------------------------
      results of a portfolio company's operations.
      --------------------------------------------

      Customers for the Company's portfolio companies' products and technologies
include  federal,  state,  municipal,  foreign and military, law enforcement and
other governmental agencies. Government  tax revenues and budgetary constraints,
which fluctuate from time to time, can affect  budgetary  allocations  for these
customers.  Many  domestic  and  foreign  government  agencies  have in the past
experienced budget deficits that have led to decreased spending in  defense, law
enforcement  and  other  military  and  security areas. The portfolio companies'
results   of   operations   may  be  subject  to  substantial   period-to-period
fluctuations  because  of  these  and  other  factors  affecting  military,  law
enforcement and other governmental spending. A reduction of funding for federal,
state, municipal, foreign and  other governmental agencies could have a material
adverse effect on sales of the portfolio companies' products and their business,
financial condition and results of operations.

      The loss of or a significant  reduction in U.S.  military  business  could
      --------------------------------------------------------------------------
      have a material adverse affect on the Company's portfolio companies.
      --------------------------------------------------------------------

      U.S. military contracts may  account  for  a significant portion of one or
more of the Company's portfolio companies' business.  The  U.S.  military  funds
these  contracts  in  annual  increments.  These  contracts  require  subsequent
authorization  and appropriation that may not occur or that may be greater  than
or less than the  total  amount  of the contract. Changes in the U.S. military's
budget, spending allocations, and  the  timing  of such spending could adversely
affect the portfolio companies' ability to receive future contracts.

                                       11
<PAGE>

      The Company may maintain  some of its assets in cash and cash  equivalents
      --------------------------------------------------------------------------
      pending investment or as a reserve.
      -----------------------------------

      A portion of the Company's assets may, from time to time, be maintained in
cash or in cash-equivalent securities or instruments  either  pending investment
in a portfolio company or to act as a reserve for expenses or for  unexpected or
contingent  liabilities.   The  assumption of cash positions for any significant
time and in any significant amount may impact overall investment return.

      Risks related to investments in securities.
      -------------------------------------------

            EQUITY  INVESTMENTS.  The Company  will invest in equity  securities
including  warrants  and  options.  The Company  may not realize  gains from its
equity  investments.  Investments  in  equity  securities  involve  a number  of
significant  risks,  including  the risk of  further  dilution  as a  result  of
additional issuances,  inability to access additional capital and failure to pay
current  distributions.  Investments  in preferred  securities  involve  special
risks, such as the risk of deferred distributions,  credit risk, illiquidity and
limited  voting  rights.  In  addition,  the  Company may from time to time make
non-control,  equity  co-investments  in companies in  conjunction  with private
equity  sponsors.  The  Company's  goal is  ultimately to realize gains upon the
disposition of such equity interests.  However, the equity interests the Company
receives  may not  appreciate  in value  and,  in fact,  may  decline  in value.
Accordingly,  the  Company  may not be able to  realize  gains  from its  equity
interests,  and any gains that it does realize on the  disposition of any equity
interests  may  not be  sufficient  to  offset  any  other  losses  the  Company
experiences.  Liberator  also may be unable to realize  any value if a portfolio
company  does  not  have a  liquidity  event,  such as a sale  of the  business,
recapitalization  or public offering,  which would allow the Company to sell the
underlying equity  interests.  The Company often seeks puts or similar rights to
give it the right to sell its equity  securities  back to the portfolio  company
issuer.  Liberator  may  be  unable  to  exercise  these  puts  rights  for  the
consideration provided in its investment documents if the issuer is in financial
distress.

            PIPES  INVESTMENTS.  The  Company  may from  time to time  invest in
private investments in public equity ("PIPE"). PIPE strategies have historically
been  significantly more likely to be successful during periods of rising equity
prices.  In such  conditions,  not only is it easier  to  liquidate  the  equity
acquired upon  conversion of the Company's  illiquid and restricted  securities,
but also the equity price may increase from the date of liquidation,  increasing
the  profit  of  conversion.   PIPE  investing  also  involves   making  capital
commitments  to  issuers  without  access  to  traditional  capital  markets  in
situations in which the bankruptcy of the issuer could result in a total loss of
the  investment.  Analysis  of the  financial  condition  of each  issuer  is an
important component of determining whether to make any such investment.

            DEBT AND  OTHER  INCOME  SECURITIES.  The  Company  will  invest  in
fixed-income  and adjustable rate securities.  Debt and other income  securities
are subject to interest rate, market and credit risk. Interest rate risk relates
to  changes in a  security's  value as a result of  changes  in  interest  rates
generally.  Even  though such  instruments  are  investments  that may promise a
stable stream of income, the prices of such securities are inversely affected by
changes in  interest  rates and,  therefore,  are  subject to the risk of market
price fluctuations.  In general,  the values of fixed income securities increase
when  prevailing  interest  rates fall and decrease  when  interest  rates rise.
Because of the resetting of interest rates,  adjustable rate securities are less
likely than non-adjustable rate securities of comparable quality and maturity to
increase or decrease  significantly  in value when market interest rates fall or
rise, respectively.  Market risk relates to the changes in the risk or perceived
risk of an issuer,  country or region. Credit risk relates to the ability of the
issuer  to make  payments  of  principal  and  interest.  The  values  of income
securities  may be  affected  by  changes  in the  credit  rating  or  financial
condition of the issuing  entities.  Income  securities  denominated in non-U.S.
currencies  are  also  subject  to the  risk of a  decline  in the  value of the
denominating currency relative to the U.S. dollar.

            ASSET-BACKED  SECURITIES  RISK.  The  Company  may from time to time
invest  in  asset-backed  securities.  Asset  backed  securities  are a form  of
derivative  securities.  Asset-backed  securities may be  asset-backed  notes or
pass-through  certificates,  in each case  issued  by a trust or other  special-
purpose entity. Asset-backed notes are secured by, and pass-through certificates
represent an interest in, a fixed or revolving  pool of financial  assets.  Such
financial  assets  may  consist  of  secured  or  unsecured  consumer  or  other
receivables,  such as automobile loans or contracts,  automobile leases,  credit
card receivables, home equity or other mortgage loans, trade receivables,  floor
plan (inventory) loans,  automobile  leases,  equipment leases, and other assets
that produce streams of payments.  Asset-backed securities are subject to credit
risks associated with the performance of the underlying assets.

                                       12
<PAGE>

      Asset-backed  notes  generally  are issued  pursuant  to  indentures,  and
pass-through certificates generally are issued pursuant to pooling and servicing
agreements.  A separate servicing  agreement typically is executed in connection
with asset-backed notes (such servicing  agreements,  indentures and pooling and
servicing   agreements,   the  "Asset-Backed   Agreements").   The  Asset-Backed
Agreements  provide for the  appointment of a trustee and the segregation of the
transferred  pool of  assets  from the  other  assets  of the  transferor.  Such
segregation  generally is only  required to the extent  necessary to perfect the
interest of the trustee in the assets against  claims of unsecured  creditors of
the transferor of the assets.  Where so required by the Uniform  Commercial Code
(the "UCC") (for  instance,  home  equity loan notes)  certain of the  documents
evidencing  the  underlying  receivables  are delivered to the possession of the
trustee or other custodian for the holders of the  Asset-backed  Securities.  In
the case of most assets,  either no  documents  evidence  the  receivables  (for
instance,  credit card  receivables)  or documents  exist,  but the UCC does not
require  their  possession  to  perfect a  transfer  (for  instance,  automobile
installment  sales  contracts).  In these cases,  the transferor  segregates the
assets only on its own books and records, such as by marking its computer files,
and perfects the trustee's  interest by filing a financing  statement  under the
UCC.  This  method of  segregation  and  perfection  presents  the risk that the
trustee's  interest  in the assets  could be lost as a result of  negligence  or
fraud,  such that the  trustee  and the  asset-backed  security  holders  become
unsecured creditors of the transferor of the assets.

            DISTRESSED  AND EVENT DRIVEN  SECURITIES.  The Company may invest in
"distressed"   securities,   claims  and  obligations  of  companies  which  are
experiencing  significant financial or business  difficulties.  Such investments
may include loans,  commercial paper, loan participations,  trade claims held by
trade or other creditors,  stocks,  partnership  interests and similar financial
instruments,  executory  contracts  and  options or  participations  therein not
publicly traded.  Distressed  securities may result in significant  returns, but
also involve a  substantial  degree of risk.  The Company may lose a substantial
portion or all of its investment in a distressed  environment or may be required
to accept cash or securities  with a value less than the  Company's  investment.
Among the risks  inherent in investments  in entities  experiencing  significant
financial  or  business  difficulties  is the  fact  that it  frequently  may be
difficult to obtain  information as to the true condition of such issuers.  Such
investments  also may be adversely  affected by state and federal laws  relating
to, among other things,  fraudulent  conveyances,  voidable preferences,  lender
liability  and  the  bankruptcy   court's   discretionary   power  to  disallow,
subordinate  or  disenfranchise  particular  claims.  The market  prices of such
instruments  are also subject to abrupt and erratic  market  movements and above
average price volatility and the spread between the bid and asked prices of such
instruments  may be  greater  than  normally  expected.  In  trading  distressed
securities,  litigation  is sometimes  required.  Such  litigation  can be time-
consuming  and  expensive,  and can  frequently  lead to  unpredicted  delays or
losses.

            HIGH-YIELD  SECURITIES.  The  Company  may  invest in bonds or other
fixed income securities,  including, without limitation,  "higher yielding" (and
therefore, higher risk) debt securities when the executive officer believes that
such securities offer  opportunities for capital growth.  Such securities may be
below "investment grade" and face ongoing  uncertainties and exposure to adverse
business,  financial  or  economic  conditions  that could lead to the  issuer's
inability to meet timely  interest and principal  payments.  It is likely that a
major economic  recession could severely  disrupt the market for such securities
and may have an adverse impact on the value of such securities.  In addition, it
is likely that any such economic  downturn could adversely affect the ability of
the issuers of such securities to repay  principal and pay interest  thereon and
increase the incidence of default for such securities.

      Prepayments of the Company's debt  investments by its portfolio  companies
      --------------------------------------------------------------------------
      could adversely impact the Company's  results of operations and reduce its
      --------------------------------------------------------------------------
      return on equity.
      -----------------

      The  Company  is subject to the risk that the debt investments it makes in
its portfolio companies  may  be repaid prior to maturity. When this occurs, the
Company will generally reinvest these proceeds in temporary investments, pending
their future investment in new  portfolio companies. These temporary investments
will typically have substantially  lower  yields than the debt being prepaid and
the Company could experience significant delays  in  reinvesting  these amounts.
Any  future  investment  in a new portfolio company may also be at lower  yields
than the debt that was repaid.  As a result, the Company's results of operations
could be materially adversely affected if one or more of its portfolio companies


                                       13
<PAGE>

elect to prepay amounts owed to it.  Additionally,  prepayments could negatively
impact the Company's return on equity, which could result  in  a  decline in the
value of your investment.

      Changes in interest rates may affect the Company's cost of capital and net
      --------------------------------------------------------------------------
      investment income.
      ------------------

      Most of the Company's debt investments will bear interest at  fixed  rates
and the value of these investments could be negatively affected by increases  in
market  interest rates. In addition, an increase in interest rates would make it
more expensive  to use debt to finance the Company's investments. As a result, a
significant increase in market interest rates could both reduce the value of the
Company's portfolio  investments  and  increase its cost of capital, which would
reduce the Company's net investment income.   Conversely, a decrease in interest
rates may have an adverse impact on the Company's  returns  by  requiring  it to
seek  lower  yields  on its debt investments and by increasing the risk that the
Company's portfolio companies  will  prepay  debt  investments, resulting in the
need to redeploy capital at potentially lower rates.

ITEM 2.  DESCRIPTION OF PROPERTY.

      The Company neither rents nor owns any properties.  The  Company  utilizes
the  office  space  and  equipment  of  its  management  at  no cost. Management
estimates  such amounts to be immaterial. The Company currently  has  no  policy
with respect  to  investments or interests in real estate, real estate mortgages
or securities of, or  interests  in,  persons  primarily  engaged in real estate
activities.

ITEM 3.  LEGAL PROCEEDINGS.

      Presently, there are not any material pending legal proceedings  to  which
the Registrant is a party or as to which any of its property is subject, and  no
such  proceedings  are  known to the Registrant to be threatened or contemplated
against it.

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

      None.

                                    PART II

ITEM 5.  MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
         PURCHASES OF EQUITY SECURITIES.

COMMON STOCK

      Our  Certificate  of  Incorporation  authorizes  the  issuance  of  up  to
75,000,000 shares of common  stock,  par  value  $.0001  per  share (the "Common
Stock"). The Common Stock is not listed on a publicly-traded market. As of March
28, 2008, there were seven holders of record of the Common Stock.

PREFERRED STOCK

      Our  Certificate  of  Incorporation  authorizes  the  issuance  of  up  to
10,000,000 shares of preferred stock, par value $.0001 per share (the "Preferred
Stock"). The Company has not yet issued any of its Preferred Stock.

DIVIDEND POLICY

      The  Company  has not declared or paid any cash dividends  on  its  Common
Stock and does not intend to declare or pay any cash dividend in the foreseeable
future. The payment of  dividends, if any, is within the discretion of the Board
of Directors and will depend  on  the  Company's  earnings,  if any, its capital
requirements  and  financial condition and such other factors as  the  Board  of
Directors may consider.

                                       14
<PAGE>

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

      None.

RECENT SALES OF UNREGISTERED SECURITIES

      Since the sales  reported  in the Company's Form 8-K, which was filed with
the  SEC  on  October  19,  2007, the Company  has  not  sold  any  unregistered
securities.  As of the date hereof,  the  Company has 3,544,117 shares of Common
Stock issued and outstanding.

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

PLAN OF OPERATION

      The Company has not realized any revenues from operations since inception,
and its plan of operation for the next twelve  months  is  to  raise capital and
locate  suitable investment opportunities. The Company may need additional  cash
advances  from  stockholders  or  loans  from other parties to pay for operating
expenses until the Company consummates successful  investments.  Although  it is
currently  anticipated  that  the Company can satisfy its cash requirements with
additional cash advances or loans  from  other  parties, if needed, for at least
the  next  twelve  months,  the Company can provide no  assurance  that  it  can
continue to satisfy its cash requirements for such period.

RESULTS OF OPERATIONS

      The  Company has not conducted  any  active  operations  since  inception,
except for its  efforts  to  locate a suitable acquisition or merger transaction
and investment opportunities.  No  revenue  has  been  generated  by the Company
during such period, and it is unlikely the Company will have any revenues unless
it is able to commence successful investment opportunities, of which  there  can
be no assurance.


OFF-BALANCE SHEET ARRANGEMENTS

      None.



                                       15
<PAGE>

ITEM 7.  FINANCIAL STATEMENTS.


                               LIBERATOR BDC INC.
                         INDEX TO FINANCIAL STATEMENTS
                               DECEMBER 31, 2007


                                                                PAGE
                                                                ----

 Report of Independent Registered Public Accounting Firm          F-2

 Balance Sheet                                                    F-3

 Statement of Operations                                          F-4

 Statement of Changes in Stockholders' Equity (Deficiency)        F-5

 Statements of Cash Flows                                         F-6

 Notes to Financial Statements                             F-7 - F-10


                                      F-1

<PAGE>

            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the Board of Directors
Liberator BDC, Inc.


We  have audited the accompanying balance sheet of Liberator BDC, Inc. (formerly
Black  Nickel  Acquisition  Corp.  II)  (a  development  stage enterprise) ("the
Company")  as  of December 31, 2007, and the related statements  of  operations,
changes in stockholders' equity (deficiency), and cash flows for the years ended
December 31, 2007  and  2006,  and  the  cumulative  period  from  May  26, 2005
(inception)  through  December 31, 2007. The Company's management is responsible
for these financial statements.   Our responsibility is to express an opinion on
these financial statements based on our audits.

We conducted our audits in accordance  with  standards  of  the  Public  Company
Accounting  Oversight  Board  (United States).  Those standards require that  we
plan and perform the audits to  obtain  reasonable  assurance  about whether the
financial  statements  are  free of material misstatement.  The Company  is  not
required to have, nor were we  engaged  to  perform,  an  audit  of its internal
control over financial reporting. Our audits included consideration  of internal
control  over  financial  reporting as a basis for designing auditing procedures
that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we  express  no  such  opinion.  An  audit also includes
examining, on a test basis, evidence supporting the amounts and  disclosures  in
the   financial   statements,  assessing  the  accounting  principles  used  and
significant estimates  made  by  management,  as  well as evaluating the overall
financial  statement  presentation.   We  believe  that  our  audits  provide  a
reasonable basis for our opinion.

In our opinion, the financial statements referred to  above  present  fairly, in
all material respects, the financial position of the Company as of December  31,
2007  and  the  results of its operations and its cash flows for the years ended
December 31, 2007  and  2006,  and  the  cumulative  period  from  May  26, 2005
(inception)  through December 31, 2007, 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 is in the development  stage  and has suffered
recurring losses. This raises substantial doubt about its ability to continue as
a  going  concern.  Management's  plans  in  regards  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/ Raich Ende Malter & Co. LLP

RAICH ENDE MALTER & CO. LLP
New York, New York
March 28, 2008


                                      F-2

<PAGE>

                               LIBERATOR BDC INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                                 BALANCE SHEET
                               DECEMBER 31, 2007


ASSETS
   Current Assets
      Cash                                                    $  41,526
      Prepaid expenses                                            5,926
                                                              ---------
      Total current assets                                       47,452

   Property and equipment, net of accumulated
      depreciation of $40                                         2,361
                                                              ---------

                                                              $  49,813
                                                              =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
   Current Liabilities
      Accounts payable                                        $  11,676
      Notes payable - related parties                            94,500
      Accrued expenses                                           15,062
                                                              ---------
      Total current liabilities                                 121,238
                                                              ---------

   Stockholders' Equity (Deficiency)
      Preferred stock, $.0001 par value; 10,000,000 shares
         authorized, no shares issued                                --
      Common stock, $.0001 par value; 75,000,000 shares
         authorized, 3,544,117 shares issued and outstanding        354
      Additional paid-in capital                                119,158
      Deficit accumulated during the development stage        (190,937)
                                                              ---------
      Total stockholders' equity (deficiency)                  (71,425)
                                                              ---------

                                                              $  49,813
                                                              =========


                                      F-3

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

<PAGE>

                               LIBERATOR BDC INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                     Cumulative
                                                                                     Period from
                                                                                    May 26, 2005
                                             Year                 Year               (Inception)
                                            Ended                Ended                through
                                        December 31,           December 31,         December 31,
                                           2007                  2006                  2007
                                       ----------------      ----------------     -----------------
<S>                                    <C>                   <C>                  <C>
Net sales                              $             --      $             --     $              --

Cost of sales                                        --                    --                    --
                                       ----------------      ----------------     -----------------

Gross profit                                         --                    --                    --

Expenses:
     General and Administrative                 135,333                34,462               187,628
                                       ----------------      ----------------     -----------------

Loss before other expenses                     (135,333)              (34,462)             (187,628)

Other Expenses:
     Interest                                     3,309                    --                 3,309
                                       ----------------      ----------------     -----------------

Net (loss)                             $       (138,642)     $        (34,462)     $       (190,937)
                                       ================      ================     =================

Basic and Diluted
     Loss per Share                    $           (.07)     $           (.02)
                                       ================      =================

Basic and diluted weighted
average number of common
 shares outstanding                           2,020,332             1,500,000
                                       ================      ================
</TABLE>

                                      F-4

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.


<PAGE>
                               LIBERATOR BDC INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
           STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
<TABLE>
<CAPTION>
                                                                                               Deficit
                                                                                             Accumulated
                                   Preferred Stock          Common Stock        Additional    During the
                               ---------------------   ------------------------  Paid-in     Development
                                  Shares      Amount      Shares        Amount   Capital        Stage     Total
                               ------------  -------   -----------    --------- -----------  -----------  -------

<S>                             <C>        <C>          <C>         <C>        <C>        <C>        <C>
Balance, May 26, 2005                 --   $      --           --   $     --   $     --           --     $     --

  Issuance of common stock
      on June 24, 2005                --          --    1,500,000        150     49,850           --       50,000
  Net loss                            --          --           --         --         --      (17,833)     (17,833)
                                --------    --------     --------    -------    -------      --------     --------

Balance, December 31, 2005            --          --    1,500,000        150     49,850      (17,833)      32,167
     Net loss                         --          --           --         --         --      (34,462)     (34,462)
                                --------    --------     --------    -------    -------      --------     --------

Balance, December 31, 2006            --          --    1,500,000        150     49,850      (52,295)      (2,295)

  Issuance of common stock
    in April 2007                     --          --        1,500          1      1,499           --        1,500
    in September 2007                 --          --    1,400,000        140     18,060           --       18,200
    Compensatory charge for
    shares issued in September 2007   --          --           --         --     38,100           --       38,100
    in October 2007                   --          --      629,117         63     11,649           --       11,712
  Net loss                            --          --           --         --         --     (138,642)    (138,642)
                                --------    --------     --------    -------    -------      --------     --------

Balance, December 31, 2007            --   $      --    3,544,117   $    354   $119,158   $ (190,937) $   (71,425)
                                ========   =========    =========   ========   ========   =========== ============
</TABLE>


                                      F-5

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

<PAGE>



                               Liberator BDC Inc.
                        (A Development Stage Enterprise)
                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                   Cumulative
                                                                                                   Period from
                                                                                                  May 26, 2005
                                                            Year                Year                (Inception)
                                                            Ended               Ended               through
                                                        December 31,       December 31,          December 31,
                                                            2007                2006                 2007
                                                     ----------------      -------------       ---------------

<S>                                                         <C>                <C>                   <C>
Cash Flows from Operating Activities
   Net loss                                                 $(138,642)         $ (34,462)            $(190,937)
   Adjustments to reconcile net loss to
         net cash used in operating activities:
           Depreciation                                            40                 --                    40
           Compensatory element of stock issuances             38,100                 --                38,100
           Prepaid expenses                                    (5,926)                --                (5,926)
           Accounts payable and accrued expenses               21,288                176                26,738
                                                         ------------      -------------         -------------
Cash Used in Operations                                       (85,140)           (34,286)             (131,985)

Cash Flows from Investing Activities
   Purchase of property and equipment                          (2,401)                --                (2,401)
                                                        -------------   ----------------        --------------
Cash Used in Investing Activities                              (2,401)                --                (2,401)

Cash Flows from Financing Activities
   Proceeds from notes payable - related parties               94,500                 --                94,500
   Proceeds from sales of common stock                         31,412                 --                81,412
                                                        -------------   ----------------        --------------
Cash Provided by Financing Activities                         125,912                 --               175,912
                                                         ------------   ----------------         -------------

Net Increase (Decrease) in Cash and Cash Equivalents           38,371            (34,286)               41,526
Cash and Cash Equivalents, beginning                            3,155             37,441                    --
                                                       --------------       ------------    ------------------

Cash and Cash Equivalents, ending                         $    41,526       $      3,155          $     41,526
                                                          ===========       ============          ============
</TABLE>

                                      F-6

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.

<PAGE>
                               LIBERATOR BDC INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                         NOTES TO FINANCIAL STATEMENTS



1. ORGANIZATION, BUSINESS AND OPERATIONS

   Black  Nickel  Acquisition  Corp.  II  ("Black  Nickel"), a development stage
   enterprise was incorporated in the state of Delaware  on  May  26,  2005  and
   maintains principal offices in Roswell, Georgia.  On November 28, 2007, Black
   Nickel   purchased   100  shares  of  common  stock  of  Liberator  BDC  Inc.
   ("Liberator")  for  $1.    As  a  result,  Liberator  became  a  wholly-owned
   subsidiary of Black Nickel.   On November 29, 2007, the Board of Directors of
   Black Nickel approved and authorized  that Liberator would be merged with and
   into Black Nickel, with Black Nickel as  the  surviving  corporation  of  the
   merger.   In  connection  with  the  merger, Black Nickel adopted Liberator's
   corporate  name.  On December 4, 2007 Black  Nickel's  name  was  changed  to
   Liberator BDC  Inc.  (the  "Company").  Since inception, the Company has been
   engaged  in  organizational  efforts and obtaining  initial  financing.   The
   Company was formed as a vehicle to pursue a business combination.

   On January 7, 2008, the company  elected, pursuant to the filing of a Form N-
   54A  with the U.S. Securities and Exchange  Commission  (the  "SEC"),  to  be
   regulated  as  a  business development company ("BDC").  As defined under the
   Investment Company  Act of 1940, as amended ("1940 Act"), a BDC is a domestic
   closed-end investment  company  which  is  operated for the purpose of making
   certain types of investments and which makes available significant managerial
   assistance to the companies in which it invests.

   The accompanying financial statements have been  prepared  assuming  that the
   Company   will   continue   as   a  going  concern,  which  contemplates  the
   recoverability of assets and the satisfaction  of  liabilities  in the normal
   course  of  business.   The  Company  incurred  net losses from May 26,  2005
   (inception)  through  the period ended December 31,  2007  of  $190,937.   In
   addition, the Company's  development  activities  since  inception  have been
   financially sustained through equity and debt financing.  These factors raise
   substantial doubt about the Company's ability to continue as a going concern.
   The  ability of the Company to continue as a going concern is dependent  upon
   management's  plan  to find a suitable acquisition or merger candidate, raise
   additional capital from the sale of stock, receive additional paid in capital
   from its existing stockholders  and  ultimately, income from operations.  The
   accompanying financial statements do not  include  any adjustments that might
   result from the outcome of this uncertainty.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   The  accompanying  financial  statements  are  prepared  in  accordance  with
   accounting  principles generally accepted in the United States.   Significant
   accounting policies follow:

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

   LOSS  PER COMMON SHARE Basic loss per share is calculated using the weighted-
   average  number  of  common  shares outstanding during each reporting period.
   Diluted  loss per share includes  potentially  dilutive  securities  such  as
   outstanding  options and warrants, using various methods such as the treasury
   stock or modified  treasury  stock  method  in  the determination of dilutive
   shares outstanding during each reporting period.   The  Company does not have
   any potentially dilutive securities.

   FAIR  VALUE  OF FINANCIAL INSTRUMENTS Current assets and current  liabilities
   are carried at  cost,  which  approximates  their fair value because of their
   short-term  maturity.   The note payable approximates  fair  value  based  on
   market rates available to the Company for financing with similar terms.

                                       F-7
<PAGE>

                               LIBERATOR BDC INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                           NOTES TO FINANCIAL STATEMENTS


   PROPERTY  AND  EQUIPMENT   Property   and   equipment  are  stated  at  cost.
   Depreciation  is  provided by the straight-line  method  over  the  estimated
   useful lives of the  related  assets.   As of December 31, 2007, property and
   equipment of $2,361 consists of computer equipment of $2,401 less accumulated
   depreciation of $40.

   INCOME TAXES the Company accounts for income  taxes  in  accordance with SFAS
   No. 109, Accounting for Income Taxes, which requires recognition  of deferred
   tax liabilities and assets for the expected future tax consequences of events
   that  have  been included in the financial statements or tax returns.   Under
   this method,  deferred tax liabilities and assets are determined based on the
   temporary differences between the financial statement and tax basis of assets
   and liabilities  using  presently  enacted  tax  rates  in effect.  Valuation
   allowances are established when necessary to reduce deferred  tax  assets  to
   the amounts expected to be realized.

   The  Company  has  approximately  $74,000  in  gross  deferred  tax assets at
   December  31,  2007 resulting from deferred start-up costs of $190,937  which
   are capitalized  and  amortized  for  income  tax  purposes  and expensed for
   financial  reporting  purposes,  a  change of $53,000 for 2007.  A  valuation
   allowance has been recorded to fully  offset these deferred tax assets as the
   future realization of the related tax benefits  is uncertain.  The difference
   between the statutory federal income tax rate of  34%,  state  taxes  net  of
   federal  benefits  of  4.6%,  and  the  effective  rate  of  0% is due to the
   capitalization of the Company's start-up costs for tax purposes.

   On January 1, 2007, the Company adopted Financial Accounting Standards  Board
   (FASB)  Interpretation  No. 48, "Accounting for Uncertainty in Income Taxes -
   an interpretation of FASB Statement No. 109" (FIN 48). There was no impact on
   the Company's financial position,  results  of  operations  or  cash flows at
   December 31, 2007 and for the year then ended as a result of implementing FIN
   48.  At  the  adoption date of January 1, 2007 and at December 31, 2007,  the
   Company did not have any unrecognized tax benefits. The Company's practice is
   to recognize interest  and/or  penalties  related  to  income  tax matters in
   income tax expense. As of January 1, 2007 and December 31, 2007,  the Company
   had no accrued interest or penalties. The Company currently has no federal or
   state  tax  examinations in progress nor has it had any federal or state  tax
   examinations  since its inception. All of the Company's tax years are subject
   to federal and state tax examination.

3. NOTES PAYABLE - RELATED PARTIES

   In March and April  2007,  the  Company  entered  into  two  loan agreements,
   consisting of an $8,000 loan with a stockholder and a $16,000  loan  with  an
   entity owned by certain stockholders of the Company.  Any amounts outstanding
   under  the  loan  accrue  interest  at  10%  per year computed on actual days
   outstanding in a 365 day year.  On September 5,  2007,  the  $16,000 loan and
   the  related  accrued  interest  was  due.   The $8,000 loan and the  related
   accrued interest was due on October 27, 2007.   As  of  March 28, 2008, these
   loans remain unpaid.

   On September 28, 2007, the Company entered into two separate  loan agreements
   of $23,500 each with two stockholders of the Company.  On October  12,  2007,
   the  Company  entered  into  a  separate  loan  agreement  of $23,500, with a
   stockholder  of the Company.  Amounts outstanding under these  loans  accrued
   interest at the rate of 8.25% per year computed on actual days outstanding in
   a 360 day year.  These loans are due on the earlier of one year from issuance
   or on the completion  of  a  security  offering with gross proceeds exceeding
   $2,000,000.

   As of December 31, 2007, accrued expenses  include  accrued  interest  on the
   notes payable to related parties of $3,309.

                                      F-8
<PAGE>

                               LIBERATOR BDC INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                         NOTES TO FINANCIAL STATEMENTS

4. RELATED PARTY TRANSACTIONS

   The Company utilizes the office space and equipment of its management and one
   of  its  stockholders  at  no  cost.  Management estimates such amounts to be
   immaterial.

   During 2007, the Company sold an  aggregate of 1,400,000 shares of its common
   stock to four officers and directors  of  the  Company  for  an  aggregate of
   $9,500.   The  fair  value  of  the securities sold was based upon concurrent
   sales of common stock to unaffiliated  investors was $47,600 and accordingly,
   $38,100 was charged to operations as compensation  in  the  current year with
   corresponding increase to additional paid in capital.

5. RECENT ACCOUNTING PRONOUNCEMENTS

   During  2006,  the  Financial  Accounting  Standards  Board  ("FASB")  issued
   Statement   of   Financial   Standards  No.  157  ("FAS  157"),  "Fair  Value
   Measurements," that defines fair value, establishes a framework for measuring
   fair value in generally accepted  accounting  principles  (GAAP), and expands
   disclosures  about  fair  value measurements.  This Statement  applies  under
   other  accounting  pronouncements   that   require   or   permit  fair  value
   measurements.  Prior to this Statement, there were different  definitions  of
   fair  value  and  limited  guidance  for  applying those definitions in GAAP.
   Moreover, that guidance was dispersed among  many  accounting  pronouncements
   that  require fair value measurements.  Differences in that guidance  created
   inconsistencies  that  added to the complexity in applying GAAP.  The changes
   to current practice resulting  from  the application of this Statement relate
   to the definition of fair value, the methods  used to measure fair value, and
   the expanded disclosures about fair value measurements.  FAS 157 is effective
   for financial statements issued for fiscal years beginning after November 15,
   2007, and interim periods within those fiscal years.   The  Company  does not
   expect the adoption of FAS 157 to have an effect on its financial statements.

   In  February  2007, the FASB issued Statement of Financial Standards No.  159
   ("FAS 159"), "The  Fair  Value  Option  for  Financial  Assets  and Financial
   Liabilities,"  which  permits  entities  to  choose to measure many financial
   instruments and certain other items at fair value  which  are  not  currently
   required  to  be  measured at fair value.  FAS 159 is effective for financial
   statements issued for  fiscal  years  beginning  after November 15, 2007, and
   interim periods within those fiscal years.  The Company  does  not expect the
   adoption of FAS 159 to have an effect on its financial statements.

   In December 2007, the FASB issued Statement of Financial Accounting Standards
   141(revised) ("FAS 141R") which retains the purchase method of accounting for
   acquisitions, but requires a number of changes, including changes  in the way
   assets  and  liabilities  are recognized in the purchase accounting. It  also
   changes the recognition of  assets  acquired  and liabilities assumed arising
   from contingencies, requires the capitalization  of  in-process  research and
   development  at fair value, and requires the expensing of acquisition-related
   costs as incurred.  FAS  141R is effective for annual periods beginning on or
   after December 15, 2008. The Company does not expect the adoption of FAS 141R
   to have an effect on its financial statements.

   In December 2007, the FASB issued Statement of Financial Accounting Standards
   160 ("FAS 160") which changes  the  accounting  and  reporting  for  minority
   interests.  Minority  interests  will  be  recharacterized  as noncontrolling
   interests  and  will be reported as a component of equity separate  from  the
   parent's equity,  and  purchases  or  sales  of  equity interests that do not
   result in a change in control will be accounted for  as  equity transactions.
   In addition, net income attributable to the noncontrolling  interest  will be
   included in consolidated net income on the face of the income statement  and,
   upon  a loss of control, the interest sold, as well as any interest retained,
   will be  recorded at fair value with any gain or loss recognized in earnings.
   FAS 160 is  effective  for  annual periods beginning on or after December 15,
   2008. The Company does not expect  the  adoption of FAS 160 to have an effect
   on its financial statements.


                                      F-9
<PAGE>

                               LIBERATOR BDC INC.
                        (A DEVELOPMENT STAGE ENTERPRISE)
                           NOTES TO FINANCIAL STATEMENTS

   In March 2008, the FASB issued Statement  of  Financial  Accounting Standards
   161  ("FAS  161"),  "Disclosures  about  Derivative Instruments  and  Hedging
   Activities-an amendment of FASB Statement  No.  133." FAS 161 gives financial
   statement  users better information about the reporting  entity's  hedges  by
   providing for qualitative disclosures about the objectives and strategies for
   using derivatives,  quantitative  data  about the fair value of and gains and
   losses on derivative contracts, and details of credit-risk-related contingent
   features  in  their  hedged positions. FAS 161  is  effective  for  financial
   statements issued for  fiscal  years  beginning  after  November 15, 2008 and
   interim periods within those years. The Company does not  expect the adoption
   of FAS 161 to have a material effect on the Company's financial statements.

   Management  does  not  believe that any other recently issued,  but  not  yet
   effective accounting pronouncements, if adopted, would have a material effect
   on the accompanying financial statements.

6. STOCKHOLDERS' EQUITY

   The Company's common stock  stockholders  shall  be entitled to cast one vote
   for each common share held at all stockholders' meetings  for  all  purposes,
   including  the  election  of  directors.   The  common  stock  does  not have
   cumulative voting rights.

   The  Board  of Directors may issue the preferred stock in one or more classes
   or one or more  series within any class and such classes or series shall have
   such  voting  powers,  full  or  limited,  or  no  voting  powers,  and  such
   designations, preferences,  limitations  or  restrictions  as  the  Board  of
   Directors may determine.

   In  addition  to the shares of common stock referenced in Note 4, the Company
   sold an additional 644,117 shares for $21,912 during 2007.

7. COMMITMENTS

   The Company has  entered  into  an  informal  employment arrangement with the
   chief executive officer for a minimum base salary of $60,000.







                                      F-10
<PAGE>


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

         None.

ITEM 8A. CONTROLS AND PROCEDURES.

      The Company's management is responsible for establishing and maintaining a
system of disclosure controls and procedures (as defined  in  Rule 13a-15(e) and
15d-15(e)  under  the Exchange Act) that is designed to ensure that  information
required to be disclosed by the Company in the reports that the Company files or
submits under the Exchange  Act is recorded, processed, summarized and reported,
within the time periods specified  in  the  SEC's  rules  and  forms. Disclosure
controls  and  procedures  include, without limitation, controls and  procedures
designed to ensure that information required to be disclosed by an issuer in the
reports that it files or submits  under  the  Exchange  Act  is  accumulated and
communicated  to  the  issuer's  management,  including  its principal executive
officer  or  officers  and principal financial officer or officers,  or  persons
performing similar functions, as appropriate to allow timely decisions regarding
required disclosure.

MANAGEMENT'S ANNUAL REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

      Our management is  responsible  for  establishing and maintaining adequate
internal control over financial reporting (as  defined  in  Rules  13a-15(f) and
15d-5(f) under the Exchange Act).  Our management assessed the effectiveness  of
our  internal  control  over  financial  reporting  as of December 31, 2007.  In
making  this  assessment,  our management used the criteria  set  forth  by  the
interpretive guidance issued  by  the  Securities  and  Exchange  Commission  in
Release  No.  34-55929.   Our  management has concluded that, as of December 31,
2007, our internal control over  financial reporting is effective based on these
criteria.  This annual report does  not  include  an  attestation  report of the
Company's  registered  public  accounting  firm regarding internal control  over
financial reporting.  Management's report was  not subject to attestation by the
Company's independent registered public accounting  firm  pursuant  to temporary
rules  of  the  Securities  and  Exchange Commission that permit the Company  to
provide only management's report in this annual report.

      Our management, including the  Company's  Principal  Executive Officer and
Principal  Financial  Officer,  does not expect that our internal  control  over
financial reporting will prevent  all error and all fraud.  A control system, no
matter  how  well  conceived and operated,  can  provide  only  reasonable,  not
absolute, assurance that the objectives of the control system are met.  Further,
the design of a control  system  must  reflect  the fact that there are resource
constraints, and the benefits of controls must be  considered  relative to their
costs.   Because  of  the  inherent  limitations  in  all  control  systems,  no
evaluation  of  controls can provide absolute assurance that all control  issues
and instances of  fraud,  if  any,  within  the Company have been detected.  The
Company's internal control over financial reporting,  however,  are  designed to
provide  reasonable  assurance  that  the  objectives  of  internal control over
financial reporting are met.

ITEM 8B. OTHER INFORMATION.

      None.

                                       16


<PAGE>
                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

(a) Identification of Directors and Executive Officers.

On December 4, 2007, Mr. Paul T. Mannion, Jr. and Mr. Andrew Reckles voluntarily
resigned from their positions as President and Secretary, respectively,  and  as
directors  of  the  Company. These resignations did not involve any disagreement
with the Company on any matter relating to the Company's operations, policies or
practices. Edward J.  Wegel  currently serves as our Chief Executive Officer and
Chief Compliance Officer.  Mr. Wegel is also a director of the Company.

The  following table sets forth  certain  information  regarding  the  Company's
directors and executive officers for the fiscal year ended December 31, 2007:

NAME                   AGE    POSITION                   TERM
--------------------------------------------------------------------------------
Edward J. Wegel        50     Chief Executive Officer    October 9, 2007 thru
                              and Director               Present (CEO)
                                                         December 4, 2007 thru
                                                         Present (Director)

Paul T. Mannion, Jr.   44     President and Director     May 26, 2005 thru
                                                         December 4, 2007

Andrew Reckles         37     Secretary and Director     May 26, 2005 thru
                                                         December 4, 2007


The following  table  sets  forth certain information regarding directors of the
Company not listed above because  they  began  serving  as  directors  after the
fiscal year ended December 31, 2007:

 NAME                            AGE    POSITION    TERM
--------------------------------------------------------------------------------

 General Ronald R. Fogleman      66     Director    January 7, 2008 thru Present

 Honorable Joe R. Reeder         60     Director    January 7, 2008 thru Present


EDWARD  J.  WEGEL,  CHIEF  EXECUTIVE  OFFICER  AND DIRECTOR. Edward J. Wegel has
served  as Chief Executive Officer of the Company  since  October  9,  2007  and
Director  of  the Company since December 4, 2007. Mr. Wegel has over 25 years of
experience in the  airline/aerospace  industry  and  in  investment  banking and
restructuring. From 1985-1987, after five years of active military service as an
armor company commander he served as Director of Finance for Eastern Airlines in
New York.

Mr. Wegel was a Vice President in the investment banking/restructuring  division
of Lehman Brothers in New York from 1987-1991, where he worked on several  major
airline  restructurings and ran Lehman's portfolio of 45 commercial jet aircraft
on lease to  major  US airlines. During that time he also served on the board of
Polaris Industries and  managed  several  major  publicly  traded master limited
partnerships.

From 1991- 1996, Mr. Wegel was a co-founder and member of the board of directors
of Atlantic Coast Airlines (United Express) where he helped arrange the original
acquisition financing and coordinated its successful IPO in  1993.   In 1993, he
originated  and  led  the acquisition of MartinAire, a cargo feeder airline  for
FedEx and UPS. From 1994-1996 he was President, CEO and a member of the board of
directors  of  BWIA  International   Airways  after  leading  the  privatization
negotiations with the Government of Trinidad  and  the  major  trade unions, and
raising funding from major international financial institutions.  While at BWIA,
he  negotiated  alliance  agreements with major airlines including American  and
British Airways and led the  airline  to its first operating profit in 57 years.
From 1997-1999 he was President, CEO and  a  member of the board of directors of
Chautauqua Airlines/US Airways Express. He led the acquisition of the airline on
behalf  of  a  major  private  equity fund and was  responsible  for  converting


                                      17
<PAGE>

Chautauqua  to  an all-regional jet  fleet,  with  orders  for  several  hundred
aircraft. In 2000,  he served as President and COO of Tower Airlines, a New York
based international scheduled  airline  with  15  747 aircraft flying for the US
military and in scheduled service to points around the world.

From  2003-2005  he  served as SVP-Corporate Development  for  Mesa  Air  Group,
leading the acquisition  of  Midway  Airlines.  Since  2006 he has served as the
Chief Restructuring Officer and subsequently the Chairman and CEO of Travelogix,
Inc.,  a  major  internet  travel  company  based n Atlanta, GA,  on  behalf  of
Palisades Master Fund. He has also served over  the past ten years as an advisor
on potential airline/aerospace transactions to major investment funds, including
the  Carlyle  Group,  Clayton  Dubilier, Giuliani Capital  Advisers  and  Apollo
Management.

He graduated from the United States  Military  Academy,  West  Point in 1980 and
received  his  MBA  in Finance from the Univ. of N. Colorado in 1982.  He  is  a
member of The Wings Club  in  New  York  (a  business  organization  of  airline
executives).

GENERAL RONALD R. FOGLEMAN, DIRECTOR. General Ronald R. Fogleman, U.S. Air Force
(Ret.),  is  currently  chairman of the Durango Group, an international aviation
consulting firm. He is also  executive vice president of Projects International,
an international business development  and  merchant  banking  firm  located  in
Washington,  D.C.,  and  on  the  board of directors of several aviation-related
corporations and airlines.

He devotes considerable time to national  security  and  community  affairs.  He
currently  chairs  the  Falcon  Foundation  and  the Airlift/Tanker Association.
Since retiring from the U.S. Air Force, he has chaired  an  Air Force Laboratory
study  on directed energy weapons and a National Research Council  Committee  on
Aeronautics   Research   and   Technology   for   Vision   2050:  An  Integrated
Transportation  System.   He  has  served  on the NASA Mars Program  Independent
Assessment Team, the congressionally directed Commission to Assess United States
National Security Space Management and Organization,  the NASA Shuttle Return to
Flight Task Group, and is currently serving on an Independent  Assessment  Panel
on Space Management or Organization.

General Fogleman retired from the U.S. Air Force on September 1, 1997, after  34
years  of  active  commissioned service. On his final tour of duty, he served as
the 15th chief of staff  of  the U.S. Air Force and a member of the Joint Chiefs
of Staff, and as a military advisor  to  the  Secretary of Defense, the National
Security Council, and the President of the United  States.  His staff experience
and  time as chief of staff saw a heavy emphasis on long-range  programming  and
strategic planning.

General  Fogleman  graduated  from  the  U.S.  Air  Force  Academy  in  1963 and
subsequently  earned a master's degree in military history and political science
from Duke University.  An  active pilot with more than 7,000 total hours, he has
an extensive background in fighters, mobility aircraft, and general aviation. He
served two tours in Southeast  Asia  during  the  Vietnam War, flying 315 combat
missions and logging 806 hours of combat fighter time.  He  has  flown  mobility
aircraft in support of humanitarian and contingency operations.

General  Fogleman  served  as  commander  in  chief  of  the U.S. Transportation
Command; as commander of Air Mobility Command; deputy commander  in  chief, U.S.
Forces,  Korea; and commander 7th Air Force and Commander Air Component  Command
of the US/ROK  Combined  Forces  Command.  He  was  also  director, Programs and
Evaluation, and chairman, Air Staff Board, at Headquarters U.S. Air Force.

Among his numerous decorations are the Defense Distinguished  Service Medal, the
Air Force Distinguished Service Medal, the Army Distinguished Service Medal, the
Navy  Distinguished  Service  Medal, the Silver Star, the Legion of  Merit,  the
Distinguished Flying Cross, the  Purple  Heart,  and  awards  from eight foreign
countries.

General  Fogleman has served as a member of the Defense Policy Board,  the  NASA
Advisory Council  and  the  Jet  Propulsion  Laboratory Advisory Board.  He is a
member of the Council on Foreign Relations, the  Fort  Lewis College Foundation,
and the Air Force Association.

HONORABLE JOE R. REEDER, DIRECTOR. Honorable Joe R. Reeder,  who  for nine years
has  served  as  Washington,  D.C.  Managing Shareholder and one of the  leading
attorneys of the national law firm of  Greenberg Traurig, was recognized in 2007
in  the prestigious "Washington, D.C. Super  Lawyers."   Greenberg  Traurig  was
honored by Chambers as the "USA Law Firm of the Year" in a ceremony in London at


                                       18
<PAGE>

the 2007  Chambers  Global  Awards.  The firm is also the largest U.S.-based law
firm measured by attorneys practicing in the U.S.

Formerly a partner at Patton Boggs, he served four years as the U.S. Army's 14th
Under Secretary (1993-1997) where  he served essentially as the Army's COO, with
specific  responsibilities  for  long-range   planning,  material  requirements,
readiness,   acquisition   reform,  infrastructure  reduction,   and   financial
management of the Army.  He  served  as the Army's focal point for international
affairs, with specific focus on NATO, Panama and Latin America.  Mr. Reeder also
served for three years as Chairman of  the  Panama  Canal  Commission's board of
directors  where  he  oversaw  a  massive,  multibillion  dollar  infrastructure
program.   As  Army  Undersecretary  he also oversaw military support to  local,
state  and  federal  agencies  related  to   civilian   law  enforcement,  civil
disturbance, disaster relief, and emergency planning.  He  also  served  on  the
five-member DOD Base Realignment Closure (BRAC) Council.

In  the  public sector, Mr. Reeder has served as a Trustee of the Association of
the United  States  Army  ("AUSA"),  and  currently is on the National Boards of
Governors for the USO, Our Military Kids ("OMK")  and  Armed  Services YMCA.  He
also  serves  on  several other public service boards:  he chairs  the  Virginia
National Defense Industry  Authority ("VNDIA"), and serves on the National Board
of the National Defense Industry  Association  ("NDIA")  where  he chairs NDIA's
Ethics Committee.  In the private sector, he serves on the Board of Directors of
Elbit Systems of America, Perma-Fix, the U.S. subsidiary of Israel-based defense
contractor,  Elbit  Systems of America, ICx and German based company,  OWR.   He
also serves on the Board of Advisors for ICX.

A 1970 graduate of the United States Military Academy West Point, Mr. Reeder
served in the 82d Airborne Division, received his J.D. from the University of
Texas (1975) and his L.L.M. from Georgetown University (1981).  He serves on the
International Advisory Board of the Panama Canal.

PAUL T. MANNION, JR., PRESIDENT AND DIRECTOR. Paul T. Mannion, Jr. served as the
President and Director  of  the  Company  from  May 26, 2005 through December 4,
2007.  Mr.  Mannion  has been a Managing Director with  HPC  Capital  Management
Corp., an investment banking  firm  with  locations in Georgia and New York City
since May of 2001. Since 2001, Mr. Mannion  has  served  as a General Partner of
PEF Advisors, LLC, an investment advisory firm based in Atlanta  Georgia.  Prior
to  his position at HPC Capital Management Corp., Mr. Mannion served as Managing
Director  of  the  Investment  Banking  Division at vFinance Capital (previously
known as Union Atlantic Capital, L.C.), an  investment  banking  firm located in
Miami, Florida, from January 2000 through June 2001. Mr. Mannion also  served as
President of Union Atlantic Capital, L.C. between May 2000 and April 2001.  From
November  1995  to  September  1999, Mr. Mannion was Senior Vice President of JW
Genesis Securities, Inc, a NYSE  member  firm.  Mr.  Mannion  held a Senior Vice
President  position with Josephthal & Co., Inc. (previously Josephthal,  Lyon  &
Ross, Inc.),  another  NYSE  member firm, for five years and was also associated
with the following firms, First  Atlanta  Securities, LLC, Oppenheimer & Co. and
Paine Webber, Inc. Mr. Mannion also serves  as  President  and director of Black
Nickel  Acquisition  Corp. III, which is also a blank check, publicly  reporting
and non-trading shell  company.  Mr.  Mannion  formerly  served as President and
director of Black Nickel Acquisition Corp. I from May 25, 2005 until October 24,
2006,  at  which time he resigned in connection with a merger  transaction.  Mr.
Mannion received a degree with a double major in finance and accounting from the
E. Claiborne Robins School of Business at the University of Richmond.

ANDREW RECKLES,  SECRETARY  AND DIRECTOR. Andrew Reckles served as the Secretary
and Director of the Company from  May  26,  2005  through  December 4, 2007. Mr.
Reckles  has  been  a  Registered  Person  at HPC Capital Management  Corp.,  an
investment banking firm with locations in Georgia and New York City since May of
2001. Since 2001, Mr. Reckles has served as  a  General Partner of PEF Advisors,
LLC, an investment advisory firm based in Atlanta Georgia. Mr. Reckles served as
Managing  Director  of  the  Investment  Banking Division  at  vFinance  Capital
(previously known as Union Atlantic Capital,  L.C.),  an investment banking firm
located in Miami, Florida, from January 2000 through June  2001. Mr. Reckles was
Managing Director of Corporate Finance at First Atlanta Securities,  LLC between
August  1999  and December 1999. From November 1995 to August 1999, Mr.  Reckles
was a Senior Vice President for JW Genesis Securities, Inc. Mr. Reckles was also
associated with  Prudential  Securities Incorporated and Josephthal. & Co., Inc.
(previously Josephthal, Lyon & Ross, Inc.). Mr. Reckles also serves as Secretary
and director of Black Nickel Acquisition Corp. III, which is also a blank check,
publicly reporting and non-trading shell company. Mr. Reckles formerly served as
Secretary and director of Black  Nickel  Acquisition  Corp.  I from May 25, 2005
until October 24, 2006, at which time he resigned in connection  with  a  merger
transaction. Mr. Reckles attended Arizona State University.



                                       19
<PAGE>

      The  term  of  office  of  each  director  expires at the Company's annual
meeting  of  stockholders  or  until  their  successors  are  duly  elected  and
qualified. Officers serve at the discretion of the Board of Directors.

(b) Significant Employees.

      As of the date hereof, other than Edward  J.  Wegel,  the  Company  has no
significant employees.

(c) Family Relationships.

      None.

(d) Involvement in Certain Legal Proceedings.

      There   have  been  no  events  under  any  bankruptcy  act,  no  criminal
proceedings and  no  judgments,  injunctions,  orders or decrees material to the
evaluation  of  the  ability and integrity of any director,  executive  officer,
promoter or control person of Registrant during the past five years.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

      Section 16(a) of  the  Exchange  Act  requires the Company's directors and
officers, and persons who beneficially own more  than  10% of a registered class
of the Company's equity securities, to file reports of beneficial  ownership and
changes  in  beneficial  ownership of the Company's securities with the  SEC  on
Forms 3, 4 and 5. Officers,  directors  and  greater  than  10% stockholders are
required  by  SEC  regulation  to  furnish  the  Company  with  copies   of  all
Section 16(a) forms they file.

      Based  solely  on the Company's review of the copies of the forms received
by it during the fiscal year ended December 31, 2007 and written representations
that no other reports  were  required,  the  Company believes that the following
persons who, at any time during such fiscal year,  was  a  director,  officer or
beneficial owner of more than 10% of the Company's Common Stock failed to comply
with all Section 16(a) filing requirements during such fiscal years:

                                                 Number of Transactions Not
        Name         Number of Late Reports      Reported on a Timely Basis
--------------------------------------------------------------------------------
Edward J. Wegel                1                                      1

Paul T. Mannion, Jr.           1                                      1

Andrew Reckles                 1                                      1

Robert B. Prag                 1                                      1


CODE OF ETHICS

      Because the Company has not yet commenced investment activities,  we  have
not  adopted a Code of Business Conduct and Ethics that applies to our principal
executive  officer, principal financial officer, principal accounting officer or
controller,  or  persons  performing  similar functions in that our sole officer
serves in all the above capacities.  We  expect,  however,  that  our  board  of
directors at its next meeting will approve the adoption of a Code of Ethics that
meets  the requirements of Rule 17j-1 under the 1940 Act.   In the meantime, our
management intends to comply with the provisions of its draft Code of Ethics.



                                       20
<PAGE>

NOMINATING COMMITTEE

      We have not adopted any procedures by which security holders may recommend
nominees to our Board of Directors.

AUDIT COMMITTEE

      The  Board  of Directors acts as the audit committee. The Company does not
have a qualified financial  expert  at this time because it has not been able to
hire a qualified candidate. Further, the Company believes that it has inadequate
financial resources at this time to hire  such an expert. The Company intends to
continue to search for a qualified individual for hire.

ITEM 10.  EXECUTIVE COMPENSATION.

      The following table sets forth the cash  compensation  paid by the Company
to  its  President and Chief Executive Officer and all other executive  officers
who earned  annual  compensation exceeding $100,000 for services rendered during
the fiscal years ended December 31, 2006 and December 31, 2007.

 Name and Position                            Year          Other Compensation
------------------------------------------------------------------------------

Paul T. Mannion Jr., President                2007                None
                                              2006                None

Edward J. Wegel, Chief Executive Officer      2007                None


DIRECTOR COMPENSATION

      As of the end of  the fiscal year ended December 31, 2007, the Company did
not pay any cash fees to  its  directors,  except  the  directors'  expenses  in
attending board meetings.  Since December 31, 2007, the Company will pay each of
the  directors  who  is  not  an employee or executive officer of the Company an
annual  fee of $9,000 for services  as  a  director,  payable  quarterly.   Each
director  will receive a fee of $1,000 for each board meeting attended in person
and $500 for  each  board  meeting  attended  by conference telephone or similar
communications equipment.  We will reimburse the  directors  for  all reasonable
expenses incurred in connection with their service on the Board.  A director who
is also an executive officer of the Company (which presently includes  only  Mr.
Wegel)  will  not  receive  compensation  for  his or her service as a director.
During the year ended December 31, 2007 no director expenses were reimbursed.

EMPLOYMENT AGREEMENTS

      The Company has an employment arrangement  with  Mr.  Wegel.   The initial
base  salary  under  the  employment arrangement for Mr. Wegel is $60,000.   The
Board has the right to increase  the  base  salary  of  the Executive Officer if
certain  conditions  are  satisfied and also to decrease it.   Pursuant  to  his
employment arrangement with  the Company, Mr. Wegel is entitled, as an executive
officer, to receive an annual  bonus  of  up  to  a  maximum of 100% of his then
current base salary for achieving certain performance  objectives.  The Board of
Directors  will  establish such performance objectives, as  well  as  the  bonus
awarded to Mr. Wegel, if any, annually.

      The Company  did  not have an employment agreement or arrangement with Mr.
Mannion.

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

      The following tables  set  forth  certain information as of March 28, 2008
regarding (i) each person known by the Company  to  be  the  beneficial owner of
more  than  5%  of  the outstanding shares of Common Stock, (ii) each  director,
nominee and executive  officer  of  the  Company  and  (iii)  all  officers  and
directors as a group.

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<PAGE>

                                       Amount and Nature of      Percentage
Name and Address                       Beneficial Ownership       of Class
--------------------------------------------------------------------------------

Paul T. Mannion Jr. (1)                      800,000               22.6%
300 Colonial Center Parkway
Suite 260
Roswell, Georgia 30076

Andrew Reckles (2)                           800,000               22.6%
300 Colonial Center Parkway
Suite 260
Roswell, Georgia 30076

Robert Prag                                  800,000               22.6%
c/o The Del Mar Consulting Group, Inc.
12220 El Camino Real, Suite 400
San Diego, CA 92130

Edward J. Wegel (3)                          500,000               14.1%

General Ronald R. Fogleman (4)               300,000                8.5%

Honorable Joe R. Reeder (5)                  300,000                8.5%

All Directors and Officers as a Group      2,700,000               76.2%
(5 individuals)


(1)   Mr.  Mannion was the President and director of the Company until  December
      4, 2007.
(2)   Mr.  Reckles was the Secretary and director of the Company until  December
      4, 2007.
(3)   Mr. Wegel is the Chief Executive Officer and director of the Company.
(4)   General Fogleman is a director of the Company.
(5)   Mr. Reeder is a director of the Company.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
         INDEPENDENCE.

TRANSACTIONS WITH RELATED PERSONS

      Prior to October 1, 2007, Messrs. Andrew S. Reckles, Paul T. Mannion, Jr.,
Robert  Prag,  and  one  other investor, owned 100% of the Shares of the Company
(then called Black Nickel  Acquisition  Corp.  II).  As noted above, the Company
was created as a vehicle to pursue a business combination  and had no operations
and  only minimal capitalization.  Prior to its election to be  regulated  as  a
BDC, the  Company issued shares to the following people.  On September 27, 2007,
Liberator issued  500,000  shares  to  Mr.  Wegel  at a price of $ .01 per share
pursuant to an offering under Regulation D of the 1933  Act.   On  September 28,
2007, Liberator issued 300,000 shares to each of Messrs. Mannion and  Reckles at
a price of $ .005 per share and 300,000 shares to Mr. Fogleman at a price  of  $
..034  per  share pursuant to an offering under Regulation D of the 1933 Act.  On
October 5, 2007  Liberator  issued  300,000 shares to Mr. Reeder at a price of $
..034 per share pursuant to an offering  under  Regulation D of the 1933 Act.  On
October 12, 2007, Liberator issued 300,000 shares  to  Mr.  Prag at a price of $
..005 per share pursuant to an offering under Regulation D of the 1933 Act.  As a
result,  as  of  October  13,  2007,  Messrs. Fogleman, Reeder and  Wegel  owned
approximately 31% of the Shares of Liberator,  with  the balance held by Messrs.
Reckles, Mannion, and Prag, and one other investor.

      On September 28, 2007, Paul T. Mannion, Jr., former  President  and former
director  of  the  Company,  and  Andrew  Reckles,  former  Secretary and former
director  of the Company, each loaned the Company $23,500, and  on  October  12,
2007, Robert  Prag  loaned  the  Company $23,500. The Company received aggregate
proceeds equal to $70,500 from these  loans. The Company issued promissory notes
(each a "Note" and together, the "Notes")  to  Messrs Mannion, Reckles and Prag,
pursuant to which the principal amounts thereunder  accrue interest at an annual


                                       22
<PAGE>

rate  of 8.25%, and such principal and all accrued interest  shall  be  due  and
payable on or before the earlier of (i) the first anniversary of the date of the
Note or  (ii)  the  date  that  the Company (or a wholly owned subsidiary of the
Company) completes an offering of  securities  for  gross proceeds exceeding two
million dollars ($2,000,000).

DIRECTOR INDEPENDENCE

      We utilize section 2(a)(19) of the 1940 Act, for  determining which of our
directors  are  independent.   General Fogleman and Mr. Reeder  are  independent
directors pursuant to section 2(a)(19) of the 1940 Act.

ITEM 13.  EXHIBITS.

Index to Exhibits


Exhibit  Description
-------  -----------

*3.1     Certificate of Incorporation, as filed with the State of Delaware on
         May 26, 2005.

*3.2     By-Laws.

**3.3    Certificate of Ownership, as filed with the State of Delaware on
         December 4, 2007.

***4.1   Promissory Note issued by Black Nickel Acquisition Corp. II to Paul T.
         Mannion, Jr., dated September 28, 2007.

***4.2   Promissory Note issued by Black Nickel Acquisition Corp. II to Andrew
         Reckles, dated September 28, 2007.

***4.3   Promissory Note issued by Black Nickel Acquisition Corp. II to Robert
         Prag, dated October 12, 2007.

***10.1  Registration Rights Agreement, by and among Black Nickel Acquisition
         Corp. II, Paul T. Mannion, Jr., Andrew Reckles and Robert Prag, dated
         October 15, 2007.

31.1     Certification of the Company's Principal Executive Officer pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the
         registrant's Annual Report on Form 10-KSB for the year ended
         December 31, 2007.

31.2     Certification of the Company's Principal Financial Officer pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the
         registrant's Annual Report on Form 10-KSB for the year ended
         December 31, 2007.

32.1     Certification of the Company's Principal Executive Officer pursuant to
         18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
         Sarbanes Oxley Act of 2002.

32.2     Certification of the Company's Principal Financial Officer pursuant to
         18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the
         Sarbanes Oxley Act of 2002.

*        Filed as an exhibit to the Company's  registration  statement on Form
         10-SB, as filed with the SEC on January 12, 2006, and incorporated
         herein by this reference.

**       Filed as an exhibit to the Company's Form 8-K, as filed  with  the SEC
         on December 6, 2007, and incorporated herein by this reference.

***      Filed as an exhibit to the Company's Form 8-K, as filed with the SEC on
         October 19, 2007, and incorporated herein by this reference.

                                       23
<PAGE>

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

      Raich  Ende  Malter  & Co. LLP ("Raich Ende") is the Company's independent
registered public accounting firm.

AUDIT FEES

      The aggregate fees billed by Raich Ende for professional services rendered
for the audits of our annual  financial  statements  and  reviews  of  financial
statements included in our quarterly reports on Form 10-QSB or services that are
normally  provided  in  connection  with  statutory  and regulatory filings were
$17,000 for the fiscal year ended December 31, 2006 and  $17,500  for the fiscal
year ended December 31, 2007.

AUDIT-RELATED FEES

      There were no fees billed by Raich Ende for assurance and related services
that  are  reasonably related to the performance of the audit or review  of  the
Company's financial  statements for the fiscal years ended December 31, 2006 and
December 31, 2007.

TAX FEES

      The aggregate fees  billed by Raich Ende for professional services for tax
compliance, tax advice, and  tax  planning were $1,000 for the fiscal year ended
December 31, 2006 and $500 for the fiscal year ended December 31, 2007.

ALL OTHER FEES

      There were no fees billed by  Raich  Ende  for other products and services
for the fiscal years ended December 31, 2006 and December 31, 2007.

PRE-APPROVAL POLICY

      The Board of Directors acts as the audit committee.   The Company does not
have  an audit committee pre-approval policy, however, all audit  and  non-audit
services  by  the  independent  registered  public  accounting firm must be pre-
approved by the Board of Directors.

                                       24
<PAGE>

                                   SIGNATURES

In accordance with Section 13 or 15(d) of the Securities  Exchange  Act of 1934,
the  registrant  has duly caused this report to be signed on its behalf  by  the
undersigned, thereunto duly authorized.

                                         LIBERATOR BDC, INC.


 Date: March 28, 2008                    By:/s/ Edward J. Wegel
                                         Edward J. Wegel
                                         Chief Executive Officer

In accordance with  Section  13 or 15(d) of the Securities Exchange Act of 1934,
this report has been signed below  by  the  following  persons  on behalf of the
registrant and in the capacities and on the dates indicated.


                                 Title                           Date

                                 Director, Principal Executive
                                 Officer, Principal Financial
/s/ Edward J. Wegel              Officer, and Principal          March 28, 2008
-------------------              Accounting Officer
Edward J. Wegel

/s/ General Ronald R. Fogleman   Director                        March 28, 2008
------------------------------
General Ronald R. Fogleman

/s/ Honorable Joe R. Reeder      Director                        March 28, 2008
---------------------------
Honorable Joe R. Reeder


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